Let the Free Market Guide Tourism Policies

Reviewing our history over the past few decades reveals one simple conclusion -- when visitor arrivals are up, tax collections are strong, unemployment is down and the economy is generally sound. When visitor arrivals are down, the opposite is true. Given this undeniable truth, there are a few fundamentals of free market enterprise that should guide policy in order to maximize our state’s economic performance.

I. Short Term: Maintain or lower visitor costs while adding value to their experience.

Given the difficulties of American and global economies, common business sense should prevail. When your prospective customer is hurting financially, you don’t raise prices and give them another reason to choose lower cost alternatives. Raising visitor taxes does just that. For every incremental tax dollar gained, the economy loses $99 in expenditure as a percentage of prospects opt for other destinations or not to spend as much in these islands as they would have otherwise. This is money that would have directly supported employment as well as those residents who supply goods and services to hospitality industry employees. The lost revenue would also have been taxed on a multitude of levels so even the seemingly beneficial tax increase yields a net loss for government coffers.
The private sector has been responding to realities of the travel marketplace for over a year now. Advantageous airfares, added-value hotel stays, dining and activity savings abound. A Hawaii vacation has become more attainable by a larger segment of the market as a result. To counter this necessary business strategy with increased taxes on potential customers who have a multitude of options is damaging to our already challenged economy.

II. Medium Term: Increase visitor marketing resources and programs.

Hawaii is extremely dependent on tourism revenue and we are competing with much larger destinations located closer to the source markets. Anyone who has lived on the mainland for a period of time can attest to the fact that Hawaii is drowned in a voluminous sea of Mexico, Caribbean and other destination communications. Given these realities, it is appropriate for Hawaii to invest a significantly higher percentage of its gross tax revenue on tourism product development, maintenance and marketing than other states and countries.
Our state must promote its new level of affordability every way possible. Otherwise we are just decreasing revenue from visitors who would have come anyway. A Hawaii vacation will always cost more in relative terms of travel time and investment so it is also critical we continue to differentiate our destination from the competition with its superior geography, history, culture and diversity of experience. A daunting task such as this requires more marketing resources than those currently being made available.

III. Long Term: Diversify our tourism product and visitor source markets.

Continued diversification of our leading industry is an attainable goal that grows our economy and minimizes losses during inevitable tourism downturns. Hawaii’s dependence on visitors will continue for the foreseeable future so the best course of action is to spread our eggs over as many baskets as possible. Hawaii’s private sector is already striving for this as a significant portion of traditional hotel accommodations convert to full-service spa resorts, resort condominiums and vacation ownership. The state has also developed critical meeting, convention and incentive facilities.

Air service is the primary component that controls growth of new geographic source markets. Mainland Chinese tour operators advise that visas are less of an issue because those with the means for US travel are usually able to secure the necessary paper work. Lack of convenient air service is the barrier. Chinese travelers can get to a number of alternative destinations in a fraction of the time it takes to get to Honolulu. Hong Kong has the hemisphere’s most important airport and it serves as the primary hub for outbound travel from Pan China. If we are serious about developing new visitor source markets, defraying the financial risk for a carrier to initiate Hong Kong-Honolulu direct service is the most prudent investment Hawaii can make.