Economic Crisis Has Put a Damper on Tourism in Hawaii

The current economic crisis has put a damper on tourism across the nation. Some areas are hit particularly hard, as their major economic growth and standard of living is based on tourism, such as on the Hawaiian Islands.

Since the early 1950s, Hawaii has been one of America’s top ten national getaways. The year 2008 brought many challenges for the Hawaii tourist industry. The number of visitors to Hawaii has sharply decreased, about 20% compared to 2007, and the amount of visitor spending has dropped by about 12% since March of 2008.

Although the 2008 third quarter economic outlook by the Hawaiian Department of Business, Economic Development & Tourism (DBEDT) forecast moderate growth for most of Hawaii’s economy, visitor arrivals and visitor spending continue to decrease.

As the sun always shines upon the State of Hawaii, the economic future for all the Hawaiian Islands looks uncertain, and the standard of living for most Hawaiian residents will be lowered if the market does not recover and tourism to Hawaii does not return to its previous high.

Oahu, home to Honolulu and Waikiki Beach, is the most visited of the Hawaiian Islands. Maui - mostly known as a Surfers Paradise - is second, while the Garden Island of Kauai ranks third. Kauai is best known for its rural character, secluded beaches, and Aloha spirit.

According to the Kauai Visitor’s Bureau about 70% of visitors to Kauai are staying at Hotels and Resorts, whereas 30% of visitors to Kauai choose alternative vacation accommodations. The trend to eco-lodges and back-to-nature-vacations is sprouting all over the world, and tighter budgets make the alternative vacation model a more affordable choice.

We spoke with Rike Burmeister, who manages the acclaimed Hale Makai Beach Cottages in Haena, an alternative vacation rental since the 1970s. The family-owned beachfront estate is a picture perfect tropical vacation getaway. All of the five cottages are equipped with lavish bathrooms and gourmet kitchens. The meticulous interior design of the cottages provides inside comfort and a fluid connection to the natural splendor of the immediate surroundings.

Q: Rike, you are doing business is on Kauai. How do you think the economic crisis described by Alan Greenspan as “a once in a century financial tsunami” will affect tourism on Hawaii?

A: Kevin, unfortunately we do feel the economic crisis on Kauai as well, and I believe the consequences for the tourist industry will be dire for a while. Consumer confidence is low, and people are holding on to their money. 2008 has been difficult for the Kauai tourist industry even before Wall Street collapsed. When Aloha Airlines and ATA Airlines went bankrupt this spring, the number of visitors to Kauai decreased drastically. During the summer of 2008, airline tickets to Kauai were at an all time high, whereas cheap tickets to Mexico were still available. Consequently, Kauai lost a lot of potential visitors to cheaper vacation destinations.

Q: Will the Kauai tourist industry survive this financial tsunami in addition to declining numbers of visitors?

A: I certainly hope so, but as I said, it will be a long haul. I know the Hawaii Visitor Bureau is working hard on strategies to promote business to Hawaii and Kauai. One of the major concerns was the lower number of available airline seats since the spring of 2008. The good news is that Delta Airlines and Alaska Airlines are increasing their flights to Honolulu and Kona again. I am also hoping that the Delta- Northwest Airlines merger will bring additional non-stop flights to Kauai.

Q: Will the current economy advance the alternative vacation industry on Kauai, and what changes for the Kauai economy can be expected?

A: I believe the current economy crisis will hurt tourism in general. If people have less spending money, they start cutting back where it hurts the least. Often the easiest way to save money is to stop spending it. So cutting back on fine dining and travel is often the first step in downsizing. But it’s hard for all of us not to take any vacation at all. To the extent people do decide to travel, I think a higher percentage of visitors will choose alternative vacation accommodations over hotel stays. I do think we have an edge there.

The good news is that, at least historically, alternative travelers have spent a much larger percentage of their money on small, local businesses as compared to hotel and resort guests. A trend towards alternative tourism should therefore boosts local Kauai businesses, which are hurting the most.

Q: Alternative vacation rentals are not per se low budget accommodations. Would the trend towards alternative vacations accommodations also apply to the upscale vacation rentals like the Hale Makai Beach Cottages and, if so, why?

A: You are correct, not all alternative vacations rentals are low budget and not all hotels are luxury resorts. In order to compare their pricing, you need to look at the facilities, locations, services, etc. offered by traditional hotels and competing alternative accommodations. Essentially, you should calculate the total expenditure for a family vacation at the Hale Makai Beach Cottages or similar TVRs versus a stay at a high-end Kauai hotel or resort.

Q: Other than the room rates, are there any other price factors that distinguish alternative vacation accommodations from hotels or resorts?

A: Yes. For example, the cost for a stay at the Hale Makai Beach Cottages can be calculated in advance. There are no hidden costs or unexpected surprises, which is incredibly important for cost conscious families. While the basic daily rate for the accommodation is fixed in either case, the big difference is in the ancillary costs. In a hotel, you typically pay extra for meals, drinks, laundry, communication, and other services at high resort rates. Often, guests end up paying more for their meals and (mini)bar bill than for the actual room rental. Conversely, staying at an alternative vacations accommodation is similar to living in your own house at a different location, meaning you can limit your living expenses to something roughly the same as at home. You can choose to go to a restaurant, but you don’t have to if your budget does not allow for it.

Q: How has your own business been affected by the recent economic downturn?

A: We are dealing with a very soft market and are also seeing a decline in bookings since September of 2008. Luckily, our overall occupancy rate for the year 2008 is still strong and fairly stable.

Q: What do you think helped stabilize your occupancy rate?

A: Mostly, it has been our long-term guests, who have kept us afloat through thick and thin over the years. Our return guests are the foundation of our business and part of the Hale Makai Ohana, going way back. There are some Hale Makai guests who visit not just once but twice a year. Other guests return with their entire family year after year to celebrate family reunions. Also, we have had many newly-weds who are returning for their wedding anniversaries. Other contributing factors are our informative website, the incomparable scenic beauty, the high quality of our facilities, and finally our business integrity and passion in providing a safe, healthy and truly relaxing experience to our guests.

Q: How much of your success is based on the location of the Hale Makai Beach Cottages?

A: Our cottages are located on one of the most beautiful beaches in the world. There is only a limited number of beachfront properties on the North Shore of Kauai, and we are one of the very few. You cannot get any closer to the magnificent surf than staying at our cottages. Without question, the proximity to the ocean is a major draw for our property.

Q: How much of your success is based on the time you have been in business and your particular approach?

The Hale Makai Beach Cottages have been among the first vacation rentals on the North Shore. Our roots on the island and our guest base go way back. Some of our current guests have visited as children some 30 years ago. It’s pretty neat. Of course, there have been significant changes over the years. Today, our main focus clearly is to live and act “green.” We are working very hard on protecting and preserving the sensitive local ecosystem and are encouraging our guests to enjoy and share, but also deeply respect, the unique coastal environment. Most of our guests feel very similarly and find our philosophy and approach very attractive.

Q: Rike, do you think the alternative vacations model will become the next big trend in tourism?

A: Yes, I believe alternative travel will continue to grow and, as you say, may become the next big trend in tourism. Alternative vacation sites have been more flexible and pro-active than most hotels in responding to environmental issues. With eco-tourism expanding all over the world, we are seeing a growing number of guests with strong environmental convictions and interests in connecting with the local community. Most alternative visitors want to connect to the places they are visiting; they are interested in the local history and culture and want to preserve the natural beauty of the world.

The Hale Makai Beach Cottages fit the profile for alternative- and eco-travel very well. Our mission and business model is to keep Kauai green, which you can easily see when you look around here, check our website and talk to our representatives. We are up-scale and down- to- earth at the same time. Our cottages still have the same character as at the time when they were build. So in a way, the Hale Makai Beach Cottages are the perfect place to rediscover how little it takes to be in touch with nature and yourself, how wonderful it is to sleep to sound of the surf, and to wake with the rise of the sun. Our motto is “Live like a local”, meaning that we encourage our guests to treat the island and its residents with respect, to learn about the true Kauai, and to experience the Aloha spirit which expresses the charm, warmth and sincerity of Hawaii's people.