The Brancatelli File



August 2, 1984 -- It may surprise frequent flyers, who are hopelessly outnumbered and completely nonplussed by the tourists at Hawaii’s major airports, but tourism wasn’t always the lifeblood of the Hawaiian economy.

Back in 1959, the year statehood and commercial jetliners first came to Hawaii, tourism was only a $100 million business. As a revenue-producing industry, it ranked a distant third behind agriculture and military spending. Hawaii offered only 6,800 hotel rooms--all but a thousand of them on the island of Oahu--and only one overseas airport, a jerry-built, hand-me-down operation donated to Honolulu by the U.S. Navy. Fewer than a quarter of a million tourists visited Hawaii that year.

Twenty-five years later, of course, the Hawaiian economy is almost totally dependent on the tourist trade. It pumps about $4 billion into the local economy, almost twice the combined revenue generated by agricultural and military operations. Tourism ultimately accounts for a third of the islands’ civilian jobs and more than half of its gross product. With major tourist destinations on six different islands, Hawaii now boasts more than 60,000 guestrooms and four airports that accommodate direct overseas flights. The Hawaiian Visitors Bureau (HVB) says more than 4.3 million tourists visited the state in 1983. It expects almost 5 million visitors this year.

Most impressive of all, Hawaii has managed the explosive growth of its tourism industry with remarkable aplomb. More than 90 percent of the visitors responding to HVB surveys say they are satisfied with Hawaii and would like to return. And even though the state’s population has reached the one-million mark and Honolulu is now the 11th largest city in the nation, Hawaii is still very much the lush, tropical Pacific paradise it was in 1959. Less than 1,400 of Hawaii’s four million acres of real estate are used for hotel and recreational facilities. Almost half the state is reserved for conservation; most of the rest of Hawaii is zoned for agriculture.

“Tourists still see Hawaii as a magical paradise," says Richard Post, United Airlines’ Hawaii region vice president. “They think Hawaii is great before they come. They still think Hawaii is great when they leave."

But while Hawaii’s tourists seem as enamored of the Islands as ever, the state’s tourism industry is not without its troubles. Although the long-term growth and prosperity of Hawaiian tourism seems secure, the industry nevertheless faces a series of vexing, and sometimes conflicting, problems.

First and foremost, the mega-growth boom years of the Hawaiian travel industry are over. After expanding 20 percent annually between 1962 and 1972, the industry’s growth rate slowed during the 1970s. In 1980, the visitor total actually declined for the first time in the state’s history. Tourism growth resumed during the last three years, but slowly; last year’s record 4.3 million visitors, for example, was 2.7 percent higher than 1982’s tourist count. And while business is booming again this year--the HVB charted growth in the 15 percent range during the first quarter--nobody in Hawaii is really expecting a return to the days of a continuous, double-digit expansion of the tourism industry.

“Tourism this year is stronger than I’ve ever seen it, but I’m not really sure why," admits Teney Takahashi, the vice president of Amfac Properties, the developer of the Kaanapali Beach Resort on Maui. “The things that depressed tourism in Hawaii during the last few years--a weak economy and strong competition--are still there. It may be that people are just getting tired of staying home, so they’ve started to travel again. But it would be a serious mistake to assume that Hawaii can resume the huge growth we had several years ago. We’ve got to be more realistic, more willing to accept a more reasonable growth rate, and more aware of the fact that we’re going to have to fight for all the growth we do get."

Fighting for growth may be difficult, however. Hawaii’s travel boom--predominately fueled by upscale Oriental visitors and American and Canadian tourists--came without much organized effort. In the past, almost all of the promotions touting Hawaii as a premier tourist destination have been mounted by the Islands’ hotels, the major airlines and travel agents. The state government’s contribution to its leading industry always has been negligible.

“The people of Hawaii have always felt that the travel industry itself spends millions, so there’s no reason to spend state money," says Paul Tomonari, the director of marketing of Stouffer’s Wailea Beach Resort on Maui. “I don’t think the locals ever really understood the importance of tourism. They just took it for granted."

The state’s major annual expenditure on tourism--about $4 million appropriated to the quasi-public HVB--ranks it 37th in the nation. “Do you know that the state of Montana spends more money promoting tourism than the state of Hawaii?" complains Takahashi.

“I’m just worried about holding on to that $4 million," says retiring HVB president Kenneth F.C. Char. “We really need twice that much to mount any kind of creditable promotion, but I’m concerned about maintaining what we’ve got. Every time I go back to the legislature, I’ve got to respond to the criticism that we’ve already got too much tourism here."

Char’s assessment of the political situation highlights one of the odd realities of Hawaii. Many Hawaiians believe the travel industry has grown too big. Too big for the state’s small population base. Too big for the state’s fragile natural resources. Too big for the state’s economic stability. But even the critics admit tourism is the state’s only truly viable growth business for the future.

“The only thing we have going for us right now is tourism," admits Henry A. Walker Jr., the chairman of Amfac Inc., Hawaii’s largest company. “As a business, tourism is an unreliable industry on which to base an economy. And I worry about it harming what is one of the most beautiful natural paradises on earth. But we are left with the scary process of depending on tourism because, for the foreseeable future, I don’t really see what else Hawaii can rely on for economic growth."

“The public criticism of tourism isn’t all bad," adds Char. “Hawaii is a physically beautiful place and nobody wants to destroy it. And everybody worries about how large a tourist industry Hawaii can sustain without destroying the ‘Aloha spirit’ of the people. It’s just that the economic alternatives to the growth of tourism are grim. We support a relatively high lifestyle. If we didn’t have the jobs and the income that tourism provides, Hawaii would be a disaster area."

The public debate over the future of tourism in Hawaii is likely to continue for the rest of the decade. By most mainland U.S. standards, tourism is a relatively harmless and socially acceptable service industry. It is the kind of high-growth, low-cost business many other states want to cultivate as an alternative to “smokestack" industries. But Hawaii remains a society largely based on agrarian values. It has yet to come to grips with the reality that tourism is now the major cog in a state economy that offers one of the nation’s highest standards of living and one of the country’s lowest rates of unemployment.

“Even now there’s more emphasis on the needs of agriculture in Hawaii than on tourism," says Gerald D. Wolsburn, the general manager of the Westin Ilikai in Honolulu. “But if you look at the numbers, it’s tourism that drives this state. Agriculture as a business is maybe one sixth the size of tourism. But you still don’t see the industry taking its legitimate place in the business community. What we really need is some leadership from the travel industry to educate Hawaii about how important the tourists are to this state. You have to wonder when Hawaii is going to start holding the travel industry in more esteem."

Even as the debate over the economic role of tourism continues, the nature of the Hawaiian travel industry is changing. A “Hawaiian vacation" no longer means only a trip to Honolulu and Waikiki. It has become more diversified geographically, more segmented financially, and more varied stylistically. In many ways, Hawaii has become the Caribbean of the Pacific. Like the myriad of tourism experiences offered by the Caribbean islands, each of Hawaii’s tourist destinations appeals to a different kind of traveler.

Much of the credit for the diversification of Hawaiian travel goes to United. The carrier, which controls about half of all the overseas traffic to and from Hawaii, also pioneered every major expansion of Hawaiian air travel beyond Honolulu. United was the first mainland carrier to provide direct service to Hilo (on the Big Island of Hawaii), Kahului (on Maui), and Kailua-Kona (on the Big Island). United also wants to begin direct mainland service to Lihue on the island of Kauai.

In this new, balkanized era of Hawaiian travel, Honolulu, Waikiki and the rest of Oahu remain the dominant destination. More than half of the state’s guestrooms are on Oahu, as are more than 75 percent of Hawaii’s residents and most of the Island’s business headquarters. Honolulu International--the eleventh busiest airport in the nation--continues to be the state’s major hub for interisland, mainland and international travel.

Less than a mile wide, Waikiki is still a major drawing card, especially for first-time visitors to Hawaii. Dominated by high-rise hotels, fast-food restaurants and souvenir shops, Waikiki is regularly denigrated by local Hawaiians. They blithely dismiss it as overcrowded, overbuilt, troubled by crime and prostitution, and polluted with “plastic Hawaiian culture" and hordes of budget-minded tourists who aren’t smart enough to seek out the “quality destinations" on the other islands.

But tourists still love Waikiki. It’s cheap, exciting, accessible and filled with frenetic urban energy. During the day, the beaches are crowded with young people and surfers. On any given night, the shops are jammed with Japanese tourists buying golf equipment, mainland travelers buying garish flowered shirts and moo-moos, Canadians buying every pineapple in sight, and a healthy smattering of Europeans, Chinese and Koreans have the time of their lives.

Frequent business travelers journeying to Honolulu tend to avoid Waikiki, of course. They also avoid the tourist hotels if they can. The Westin Ilikai, on the fringe of Waikiki, is one of a number of hotels beginning to cater to corporate travelers. So are the Waikiki outlets of the Hilton, Sheraton and Hyatt chains. The Kahala Hilton Hotel, located in a prestigious residential neighborhood, and the Colony Surf and the New Otani Hotel, two small hideaway hotels near Diamondhead, are also paying more attention to businessmen and upscale travelers.

Oahu’s continuing popularity hasn’t stopped the development of major destination resorts on the state’s so-called “Neighbor Islands," however. Two out of three travelers from the mainland and Canada now travel beyond Oahu to the beaches, resorts and recreational facilities on Maui, Kauai, Molokai, Lanai and the Big Island. In fact, it is on the Neighbor Islands where most of Hawaii’s future tourism development is likely to occur.

“I like the potential for Hawaiian travel off Oahu," says Tomonari of Stouffer’s. "The Neighbor Islands have a lot of places that will be developed. We’re looking to add two or three more properties under the Stouffer’s banner. A lot of other chains are going to be right with us."

Maui, for example, is already a formidable tourist destination in its own right. It draws more than a million travelers a year, most of them more upscale than visitors to Oahu. The tourist boom in Maui started in the early 1960s when Amfac began developing the Kaanapali Beach Resort, Hawaii's first master-planned resort. Kaanapali now boasts six hotels, 1,500 condominium units, a shopping center, two golf courses, private homes and other amenities. Besides Kaanapali, Maui also offers the Wailea Resort (two luxury hotels, two golf courses, five beaches, condominiums and a shopping village), the Kapalua Resort (a world-class hotel, two golf courses, and luxury condos), and dozens of other travel attractions such as a winery, the world's largest dormant volcano and the state's only operating railroad.

Maui "really doesn't compete with Waikiki in any way," says Takahashi of Amfac. "We're more upscale and we're forcing ourselves even further up the ladder. Many of the hotel operators are concentrating on the Far East, especially Japan, where Maui is gaining a reputation as a great golf tourism destination."

On the Big Island of Hawaii, which was once known primarily for its volcanoes and for the Kona fishing village, the state's most expensive and most spectacular resort communities are now being developed. Along a stupendously sunny area of volcanic coastline known as Kohala, three major developments are taking shape.

"We're not calling Kohala Hawaii's 'Gold Coast' without reason," says one of the developers, Mauna Kea Properties Vice President William F. Mielcke. "What you'll see in this area will be the very pinnacle of Hawaii resort development. I'm biased, of course, but I think the Kohala Coast will surpass any resort area in the world."

The Kohala area is coalescing around the Mauna Kea Beach Hotel, the magnificent 310-room resort built by Laurence Rockefeller and now owned and operated by Westin. Over the next 20 years, the 3,500-acre Mauna Kea site will be divided into three different resorts, each with condominiums, hotels, golf courses and other amenities. The first phase of the plan, which is designed to complement the Mauna Kea Beach Hotel, is nearing completion. It features several dozen breathtaking, $1 million-plus condominium homes with ocean and mountain views, private decks and pools, and amazing degrees of privacy and security.

"Mauna Kea will always be the place for the upper strata traveler," says Mielcke. "Everything we're doing here is being done with that in mind. Rockefeller built what may be the world's finest hotel here. He wanted to develop the rest of the area in a similar vein. We're trying to be true to his original concept as best we can."

Just down the road from the Mauna Kea site is the Mauna Lani Resort, a 3,300-acre site that is only the slightest bit less spectacular than Mauna Kea. The owners of Mauna Lani, the Tokyu Corporation of Japan, also have a 20-year plan. They envision five hotels, beach and racquet clubs, 16 high-quality "residential clusters," two golf courses and a shopping center. One golf course, the 351-room Mauna Lani Bay Hotel, and a series of $300,000-$900,000 residences are now open. All have been profusely acclaimed by critics, architects and planners.

"It sounds presumptuous as hell, but we're working hard here. We didn't want anything that seemed to be 'fake Hawaiian.' We wanted Mauna Lani to be real Hawaiian and I think we're succeeding," says Kenneth Brown, the president of the resort. "The Kohala Coast is sacred to the Hawaiian people. It's like the Acropolis, you know. You feel Greek at the Acropolis and you feel Hawaiian at Mauna Lani."

The third jewel in the crown of the Kohala Coast is the Waikoloa Beach Resort. This community is being planned by Sheraton around its Waikoloa Beach hotel. Future development plans call for two golf courses, lagoons and waterfalls and residences.

Although all three developers are loathe to release design and construction costs, it is clear that at least $1 billion will be spent developing the Kohala Coast.

"It took a long time for anyone to come to this coast. Frankly, I'm glad it's developing slowly," says Brown. "It's probably the last place in Hawaii where this kind of superior development can take place. I think Hawaii's tourism era should probably end here when we're all finished sometime in the early part of the next century."

This column originally appeared in Frequent Flyer magazine.

Copyright © 1984-2010 by Joe Brancatelli. All rights reserved.