Business Beyond the Reef

Are the Brits on their way to Hawaii?

Most of Hawaii’s visitor industry is fixated on an established customer base in North America and Asia, or relaxing in the prospect of increased travelers to come from South Korea and China.  So it was with some excitement that I read Tuesday that Thomson Airways is thinking about direct flights between Honolulu and the United Kingdom beginning in 2012.  British Air used to have Honolulu – Heathrow flights, but dropped out of the market years ago as traffic lagged.  Thomson’s plans are not a done deal, but they do reflect strong British tourist interest in Hawaii.  Thomson recently surveyed their U.K. passengers about possible new long-haul destinations and Honolulu was favored by three-quarters of them, a strong vote for the new route.

Honolulu-bound flights would likely originate at Gatwick, Manchester, Glasgow or Bristol, and Thomson would use new Boeing 787s.  Other long-haul destinations considered in the Thomson survey are Borneo, Madagascar, Namibia, Cambodia, Ecuador, Vietnam and Argentina.

Thomson’s interest, of course, comes at a difficult time for the visitor industry.  Using January to May data for 2010, Hawaii welcomed 14,733 visitors from the UK, a drop of 7.6% from the same period last year.  European visitors as a whole dropped by 4%, though neither decrease is surprising given what has been happening in European economies.

Nor are the decreases surprising in light of the relative lack of Hawaii promotion in European markets. The Hawaii Tourism Authority, which is supposed to be developing markets for new visitors, steadfastly ignores Europe (and much of the rest of the world).  It is hard to know exactly what HTA plans because they have now closed their board meetings, where the marketing budget decisions are paid, to public view.  Occasionally news seeps out and it is clear that HTA only spends $100,000 a year in Europe, all of it devoted to the UK and Germany.  That is out of an international marketing budget of over $67 million, the majority of it spent in Japan.

Hawaii’s visitor industry claims that it wants long-staying visitors who spend a lot over the course of their stay, which sounds like a prescription for attracting Europeans.  What HTA does, however, is devote its resources to short-staying Asians or lower-spending Canadians.  Go figure.

Thomson Airways provides us with a bit of hope, but we have to keep things in perspective.  About three years ago, Virgin Atlantic said much the same thing, but they have been silent ever since.

Kaneohe Golf Club

For years I watched the Hawaiian Open on TV.  The golf held little interest – I was mesmerized by the scenery.  Eventually, I moved to Hawaii and, for several years, lived on a ridge that overlooked the course.  If there was a segment of Hawaii’s tourism industry that I would have thought was booming, it would likely be golf.  Wrong.

The Honolulu Star-Advertiser ran a piece last week about how Hawaii has fallen behind in the world tourism sweepstakes to attract golfing visitors.  And, even as a non-golfer, I found some of the reasons fascinating.

Most golf visitors to Hawaii are from the U.S. mainland or from Canada.  Visitors play close to one-quarter of the rounds on Hawaii courses, though that goes over 50% at the famous high-end courses.  But where are the golf visitors from outside North America?  Mark Rolfing of the Golf Channel, and soon to host a new worldwide golf show on NBC, says Hawaii’s courses are too tough, too costly and take too long to play.  I’m not sure about the too costly part; according to the U.S. Commercial Service, average club memberships around Shanghai are $78,000.  I don’t think we’ve got anything that steep in Hawaii.  It’s true, the famous courses can have high greens fees, but my father-in-law was quite happy playing the many public courses, particularly Ala Wai and Hawaii Kai.

Rolfing’s point about too tough puts Hawaii’s courses in a similar league to Scotland’s.  He points out that Europe’s relative newcomers to golf (e.g., Swiss or Germans) take their golf vacations in Portugal, Spain and Turkey where the courses are easier and not too expensive.  It may be many years, if ever, before they decide to tackle St. Andrews or Royal Dornoch.  He thinks China’s legions of new golfers just aren’t ready to take on Waialae or Kapalua – and he may well be right.  Of course, Rolfing and many others note that U.S. visa requirements are also likely keeping Asian golfers away.  Talk about a tough lie.

Another factor is that, over the years, golf course ownership in Hawaii has become separated from hotel/resort ownership.  This means that, although concierges will happily tell you about golfing opportunities, their main task is to keep you doing things in their resort – not on somebody else’s golf course.  And the recession has taken its toll on sponsorship for Hawaii golf tournaments, resulting in less worldwide coverage, fewer shots of superstars playing Hawaii courses, and fewer people like me watching the magnificent scenery.  Finally, the experts say that it sure does help if a destination is the home of some of golf’s superstars.  Hawaii made a run at this with Michelle Wie and Tad Fujikawa, but both have faltered of late.

I’m no expert on golf, but it seems that some good, old-fashioned marketing is needed.  A good step would be for Hawaii, whether the Hawaii Tourism Authority or individual golf courses and tour companies, to participate in the Commercial Service’s Sino-U.S. Golf Tourism Expo this September in Shanghai, Chengdu and Beijing.  But focus on bringing those new Chinese golfers to the smaller public courses.  Don’t start them out with the tough ones, even if they are famous.

The New York Times ran an excellent editorial a week ago entitled “Waiting for a Trade Policy”.  Of course, any editorial that agrees with me is, by definition, an excellent piece.  But there do seem to be more and more of us who realize that President Obama’s trade policy is mostly smoke and mirrors.  The Times astutely summarizes the situation:

“… the Obama administration’s trade strategy has been limited to hoping that a world economic rebound and a rising Chinese currency would double American exports in five years. Beyond this new enthusiasm, Mr. Obama’s approach to trade still appears to be hamstrung by strong opposition from his party’s union base.”

That’s hitting the nail on the head.  I won’t repeat my rants about the National Export Initiative, but you can read the latest here.

Coming to America? Pricy.

Now comes word that the United States is shooting itself in the trade foot once again.  Effective tomorrow, consular fees are being hiked at American embassies and consulates worldwide.  The increases are part of laudable efforts to control budgets, though it appears that the State Department is try to recover the full fixed cost of having a consular section at an embassy or consulate, rather than charging for the variable cost of delivering the service, which would be much lower.  Here’s a list of the new fees, though the language is typically obtuse.

Let’s consider the potential impacts on business for the United States.  The most obvious impact may be the increase in prices charged to apply for a treaty trader or investor visa (an E visa), springing up from $131 to $390 – a rise of 198%!  I doubt that this will deter a major investor from applying to come to the United States, but they will see it as the sort of nickle-and-diming that is now practiced by American airlines.  It will be an irritant that smacks of price gouging, since most other non-immigrant visas will now cost $140 to apply.  Does processing an E visa really cost that much more than a visa for a normal business traveler?  I doubt it, but perhaps I am mistaken.

I am more worried about the new $140 charge to apply for a tourist visa.  The increase is only $9, but tourists can be extraordinarily price sensitive, so this one could have an adverse impact on the numbers of visitors the United States will receive.  It’s tough enough, for instance, for Hawaii to attract Asian tourists across most of an ocean, but even tougher when we charge for visas and competing tropical destinations do not.  And bear in mind that these fees are simply to apply for a visa.  There is no guarantee that you will actually get one.  The visa application fee is on top of the costs engendered by having to go to an American embassy or consulate for a personal interview.  Not all potential travelers live in or near a city where the United States has a consular office, so simply applying for a tourist visa can involve substantial expense and inconvenience for the applicant.  We don’t make it easy.  Why should an Asian gambler go through all this hassle to fly across the Pacific to Las Vegas when they can more easily and enjoyably hit the new casinos in Macau or Singapore?

Full cost recovery sounds a reasonable goal, but the unintended consequences can be killers.  It is really a clash between those who view entry to the United States as a privilege, and those who wish to attract visitors who pay for jobs in our country.  Most of our competitors come down on the latter side of the argument, and wonder why the world’s richest country can’t foot the bill for its own legal requirements.

Islamic decor at Honolulu's Doris Duke Mansion

Friends in Hawaii’s visitor industry have been talking about what it would take to attract Muslim tourists to Hawaii.  I’m sure we get some now, but it certainly isn’t an overwhelming presence.  The major Muslim populations of the world are not areas into which the Hawaii Tourism Authority (HTA) has sunk any of its marketing budget, and I assume our present Muslim visitors find their own way here.  That is unfortunate because the Muslim market worldwide is simply huge and the Aloha Spirit would mesh easily with many strains of Islam.

It is hard to know how big the Muslim market is because official visitor statistics are neither collected nor published by one’s religion.  The U.S. Department of Commerce forecasts a 34% rise in visitors to the United States from the Middle East between 2009 and 2014.  But those visitors aren’t all Muslim, nor does this forecast pick up the many Muslim travelers from, say, Indonesia, Malaysia or – increasingly – Europe.  We can’t know how large the potential market might be.  We just know it is there and it is big.  And we know that Hawaii doesn’t seem to realize the Muslim market exists.  If you have followed my tourism diatribes, you will be aware that HTA spends no marketing funds in the Middle East, south Asia, Malaysia, Indonesia, and not much in Europe.  That lets out most of the world’s Muslims.  But is Hawaii even ready for a Muslim marketing campaign?  Probably not.

The least troublesome aspects include things like installing signage in hotel rooms so that Muslims know the direction to Mecca – usually a small unobtrusive arrow on the ceiling that non-Muslims may not even notice.  These arrows are ubiquitous in S.E. Asia.  I’ve seen them in Singapore, Malaysia, Thailand, India, China, Taiwan, Indonesia, even some hotels in Europe.  And for many Muslims, of the less devout variety, that is about all you need to do.  The devout Muslim market, however, is a whole different matter.

One friend points out that, though Honolulu has a mosque in Manoa Valley, attracting Muslim visitors in significant numbers will require prayer rooms in hotels or malls.  This also requires hotel staff knowledgeable and sensitive about Islam’s requirements.  I’m not sure we should put the Muslim prayer room right next to the tourist wedding chapel.

Food is a major issue.  Devout Muslims must have access to halal foods.  This is not just a matter of offering halal dishes on a menu, but necessitates entirely halal restaurants as I understand it.  To my surprise, Honolulu has four halal restaurants (one, intriguingly, is a pizzeria) and a Muslim visitor with kitchen facilities can buy halal meats at Costco (not sure how many visitors from Pakistan have their Costco memberships).  There are Costcos on the Big Island, Maui and Kauai, but apparently no halal restaurants.  Traditional luaus are probably out of the question for the devout Muslim.  Based on their locations, I would guess that the halal restaurants of Honolulu are targeted at our local Muslim community rather than visitors.

Hong Kong is wrestling with the halal issue.  They have seen a significant increase in Muslim visitors and, though the city already has 63 halal restaurants, the Hong Kong Tourism Board wants more.  Of course, Hong Kong has at least 220,000 Muslim residents, so there is less of a risk to setting one up than in Hawaii.  Despite this, the Tourism Board has encountered resistance from the big chains when they have been approached about establishing halal kitchens.  McDonalds has reportedly refused, arguing that Hong Kong is not a Muslim country, ignoring the fact that McDonalds has hundreds of halal stores in Muslim countries and presumably knows how to do it.  Hong Kong’s Disneyland has also refused.  Hong Kong’s food processing industry, however, is responding by producing products to halal specifications.  They don’t sell much of it at home, but they have seen their exports to Muslim markets go up.  Perhaps Hawaii needs halal-certified macadamia nuts or papayas to get things started.

One thing Hawaii has gotten right was establishing September 24 as Islam Day to encourage local knowledge and understanding of Islam.  Our first Islam Day was held last fall and was a modest success.  The center piece was a festival at Ala Moana beach park.

Designed by Circuit City?

It’s a success by definition, but look beneath the surface of the Shanghai Expo – and the associated U.S. Pavilion – and you would be forgiven for having some doubts.  The South China Morning Post reports today that Nick Winslow, CEO of the U.S. Pavilion at the Expo, unexpectedly stepped down this week.  Martin Alintuck, who succeeds Winslow, says the resignation is “completely unrelated” to recent suggestions of improprieties in procurements during construction of the pavilion.  Of course.  Nothing to do with Winslow’s purported conflict of interest when he awarded a $23 million contract to a company with which he has a “working relationship”.  Surely there can’t be a connection.

On May 31, Bob Jacobson published an article on the Huffington Post entitled “U.S. Pavilion in Shanghai Fails To Do It’s Job: San Antonio Threw a ($500,000) Party And No One Came”.  Jacobson points out that the Bush Administration knew since 2006 that this Expo was coming, made a decision early on not to use Federal funding for the Pavilion, but then failed to raise the private-sector funds needed to do the job.  The Obama Administration gave the fundraising job to Secretary of State Hillary Clinton who raised some $100 million in record time from about sixty American and Chinese executives and their companies.  Even Hillary was apparently surprised by how commercial the Pavilion turned out, though I’m not sure what she might have expected.  The Washington Post‘s Ezra Klein compares the U.S. pavilion to a Circuit City store.  The pavilion seems to portray America as the stereotypical land of giant companies, featuring, of course, the giant companies that paid for it: GE, Citibank (didn’t we just bail them out?), Pfizer, PepsiCo, Chevron, Johnson & Johnson, Disney and the like.

To be fair, the U.S. Pavilion is not all bad.  It is said to have attracted a million visitors in the first month of the Shanghai Expo, so there must be something people, mostly Chinese, like about it.  Still, the reviews are not glowing and one has to wonder if it is all worthwhile.  The City of San Antonio is certainly wondering.  San Antonio decided that the Expo was a great opportunity to promote Chinese investment in their fair city and signed up for three “San Antonio Days” at the U.S. Pavilion, including special exhibits, parties, press ops and more.  The three days cost the city a cool $500,000.  (Curious that corporations that paid $1 million get to use the Pavilion for a full six months, not just a few days.)  And what did San Antonio get for it?  A flock of new investors?  Not so you would notice.  The San Antonio News Express reports that the city put on a seminar for potential investors at the U.S. Pavilion – and eleven, count ‘em, eleven people showed up.  Now let’s see, that’s a bit more than $45,000 per person to get people to listen to your investment pitch.  Surely, there is a better way.

Hawaii is in Shanghai as you read this.  And Tennessee, Texas and Chicago are lined up.  Hawaii’s Governor Linda Lingle has led a delegation of 32 government reps, Hawaii musicians and hula dancers to do what San Antonio couldn’t accomplish.  Hawaii certainly got a better deal than San Antonio, budgeting $448,000 for a full week at the U.S. Pavilion.  Maybe the world’s largest aloha shirt (size 400-XL), coupled with macadamia nut handouts, will do the trick.  Or the Aloha Day dinner for 100+ VIP guests.  The venture is largely organized by the Hawaii Tourism Authority, so is naturally canted towards attracting tourists rather than investors.  Hawaii tourism, however, is already well showcased in Shanghai, HTA and the Governor having staged several huge Hawaii shows in Shanghai in the last few years.  This time, the delegation includes such stellar attractions as the Speaker of the State House of Representatives and a state senator.  When was the last time you decided to take a vacation because a politician visited your city?  Or were you enticed by an aloha shirt the size of a house?

So what are Chinese visitors to the Shanghai Expo and the U.S. Pavilion to make of all this?  The visitor counts are high, though China will do everything possible to make sure the numbers are high.  But reactions seem tepid at best.  A friend in China tells me that the Expo is something of a joke among the Chinese.  Shanghainese are said to be saying “if you want to break-up with your girlfriend, take her to Expo”.  The verdict is in: Expo is boring.

For those of you curious about the headline, shibai is a Japanese word that has become part of Hawaiian pidgen.  Loosely speaking, shibai refers to anything that is a bit shady, below the belt, not especially honest.  Bovine excrement.

Psst … wanna hear a secret?  The Hawaii Tourism Authority must have lots of them!  HTA bamboozled the Lingle Administration and the dominant Democrats in the Hawaii State Legislature into passing unprecedented rights to close its meetings for almost any reason at all.  All HTA has to do is declare that their board is discussing “secrets” they wish to keep Hawaii’s competitors from discovering.  The result is the agenda that has been published for the next HTA board meeting on May 27:

Oh, the secrets we must protect ...

If you have followed my posts about Hawaii tourism marketing (the most recent, Debacle in Paradise, is here), you are likely wondering what secrets the HTA could possibly wish to hide.  HTA’s international marketing is amazingly lackluster and the markets they target are, as we say in Hawaii, same-old, same-old.  They have been going after the same markets (U.S. East Coast, U.S. West Coast, Canada and Japan) for as long as anyone can remember, and Japan – an important but non-expanding market – still dominates their international spending.

But wait, you say, what about HTA’s increased budget for China?  Oh yeah, that’s a big secret.  Who would have expected Hawaii to go after the fastest growing travel market in the world?  I’m sure that’s one they needed to hide from the competition.  And South Korea?  It must have been a huge surprise to Hawaii’s competitors that we would take advantage of our own country’s visa waiver program, newly inaugurated in South Korea.  Oh, we must hide that.

Perhaps HTA has stealth marketing programs elsewhere.  We can hope.  Their own published budgets show a vast decrease in European marketing; apparently HTA only wants Brits and Germans, and not many of them.  HTA spends a pittance in Australia, New Zealand and Taiwan.  Maybe those are the secret programs they don’t want the public to know about.  Or could they be running covert tourism campaigns in India, Latin America, the Middle East, S.E. Asia, Mexico, Scandinavia, Africa, France, Switzerland, Russia – all markets in which HTA officially spends nothing, nada, zero, zilch?

Maybe the big secret is a hidden plan to actually participate in the world’s major travel and tourism trade shows!  You know, places where they might have to meet and talk to potentially new business partners – not just the same old ones HTA has gone to for years and years.  Imagine the board’s trepidation.

But enough cynicism, no matter how well deserved.  The real secret, I fear, is HTA’s failure of imagination, aversion to risk, high comfort level in existing relationships and strategic incompetence.  Don’t get me wrong, HTA is excellent at implementing programs in the markets they know – but the HTA Board has a responsibility to consider development of new markets and to examine questions raised about the vast portions of the globe where Hawaii is now unseen and unheard.  Their secrecy, I’m afraid, guarantees the same-old, same-old.

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Posts may be sparse the next few days.  By the time you read this, my wife and I will be on the East Coast to attend a wedding.  We’re staying with family and friends, and – as wonderful as that is – it means blogging time may be at a premium and Internet access uncertain.  I’ll post when I can, but bear with me for a few days.

• I posted Tuesday about how difficult the Chinese market can be (Just Don’t Go There), so I read with interest an interview the next day with Winnie Lui, CEO of Hong Kong’s Patty Company, a maker and retailer of shoes that has been successful in China.  You can see it on the Hong Kong Trade Development Board’s site.  Patty uses its own shops to sell in China and opened more than 200 of them between 1982 and 1997, when the Asian financial crisis led to closing all but 30 of the shops.  Patty has had to re-develop its sales network and now has more than 100 shops.  Ms. Lui’s advice to new consumer goods companies trying to sell in China is to focus on the large existing department stores, paying for good space or opening up their own counters within the larger store.  Her reasoning: Chinese consumers trust department stores more than small shops for finding good quality products, so selling through department stores is sort of a seal of approval.
• One of my articles that questions how Hawaii does its tourism marketing was picked up by WorldTourismDirectory.com.  Unfortunately, they didn’t pick up the nice tables that give the real picture.
• The annual World Competitiveness Scoreboard is out.  The United States, which held the title for years, has been dropped to #3 by Singapore and Hong Kong.  At least we’re still on the podium, given the anti-business atmosphere among populist politicians.  Consider poor Venezuela, easily at the bottom of the rankings – again.  See the complete scoreboard here.
• The Obama Administration still can’t get its act together on free trade agreements.  Canada and Panama just concluded an FTA, while our FTA with Panama languishes.  The race is now on to see which FTA is ratified and implemented most expeditiously.  I’m betting on the Canada-Panama agreement.  Sigh.
• By the way, the European Union has re-opened free trade talks with Argentina, Brazil, Uruguay and Paraguay.  Where is the United States, one wonders?

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I will be traveling the next week or so, attending a wedding on the U.S. East Coast, staying with family and friends.  It’s always nice to see them, but it does mean that Internet connections are not always convenient and the time for blogging will be unpredictable.  I’ll try to post as usual, but there may be lapses.  Please bear with me.

Last Wednesday I posted about Hawaii’s international tourism marketing, taking a look at how the Hawaii Tourism Authority’s marketing funds are divvied up and assessing their decisions in terms of how much it costs to attract foreign visitors to Hawaii.  My conclusion is that Hawaii is under-weighting Europe, might be putting too much into China and is overly reliant on Japan.  I stand by that, but you have to look at more than marketing cost per visitor to make decisions in this business.

We need to consider length of stay, average daily spending and – multiplying the two – the total spend per traveler in Hawaii of tourists from different countries and regions.  Today we’ll take a look at those and see if that changes the picture.  Once again, I will be slicing and dicing HTA’s own published numbers.  Here’s the data, drawing on HTA’s estimates for 2010 of length of stay and average daily spending per person.

Source: Hawaii Tourism Authority 2010 Estimates (click for larger version)

Lots to think about here!  First, it is clear that it is the Canadians and the Europeans who come to Hawaii and stay a while.  Next longest stayers are the Aussies and mainland Americans (who I have included because the data was available and I thought you might like to see what they do).  Hawaii’s Asian visitors are conspicuous short-timers, the mid-Pacific equivalent of day-trippers.  (My next door neighbors are from Japan; they only use their Hawaii house for perhaps 5-6 days a year.  Amazing.)  Length of stay is key.  The longer visitors stay, the lower the room turnover in the hotels and, presumably, the higher the average occupancy rate and smoother income streams over time.  Longer stay visitors also cause less wear-and-tear on transport infrastructure.  They don’t require as much airlift capacity as short-timers, and they put less pressure on airport infrastructure, including getting through Customs and Immigration.  All in all, you want tourists who stay longer.  Europe and Canada win this category, hands down.

But our Chinese visitors take the average daily spending prize, dropping $441 every day while they are in our islands.  They are followed at a distance by the short-staying Koreans and Japanese at about $300.  From this perspective, our Canadian and western U.S. friends are our least desirable visitors, spending like relative paupers.  Round #2 to China.

The total spend per visitor per visit changes the picture somewhat.  Hawaii earns the most money from the Chinese, closely followed by the Europeans and the Australians (and the New Zealanders). We earn the least from the South Koreans, the Canadians and the Japanese.  As I showed in the previous article, HTA spends 72.8% of its foreign marketing budget on Japan – among its lowest revenue sources for tourists. What kind of business model calls for a company to spend the vast majority of its marketing budget on its least productive customers?  Isn’t that a recipe for bankruptcy (or at least a falling stock price)?

Drawing today’s post together with last week’s, let’s construct some ersatz profit numbers for HTA’s foreign market investments.  I can’t include Canada because HTA hasn’t issued data on how much they spend in Canada, and I’ve had to combine China with South Korea, which skews things a bit.

What Does Hawaii Gets For Its Marketing Dollar?

There are lots of problems with this kind of analysis, a major one being that we have no idea how much the private sector (hotels, airlines, tour operators) spends on marketing to Hawaii’s foreign visitors.  But it is HTA’s budget we can see (for now).  And what does it show us?

The Hawaii Tourism Authority has been drastically cutting its marketing budget in the region that provides its highest rate of return – Europe. HTA has also cut its budget for the next highest returning region, Australia and New Zealand.  HTA’s increased budget for China is probably a good decision.  Their increased spending in South Korea is of questionable merit, but may be justified by the need to get more visitors quickly during the recession.  The decision to keep spending 72.8% of its foreign marketing budget in Japan is a debacle beyond comprehension that smacks of merely putting your money somewhere you are comfortable.  We’ve done it for years, therefore we keep doing it.  How long would these guys last in the private sector?!

I’ll return to Hawaii’s tourism marketing.  We need to examine things like airlift capacity, overseas markets that are completely ignored, and Hawaii’s withdrawal from international trade shows.

Last week I took a look at where Hawaii’s international visitors come from.  Today I want to look at where Hawaii’s tourism marketing money is going.  There seems to be a mismatch.

I will use HTA’s own budget numbers and inbound tourism statistics, some of which you can find at their website.  No really detailed budgets are available on their site, only a dated 2008 annual report to the Hawaii Legislature.  Web-sleuthing turned up HTA’s 2009 annual report, presented to the Legislature on October 31, 2009.  It’s on the HTA site after all, but with no way to find it directly.  Curious.

Hawaii Tourism Authority FY2009 Actuals

Let’s examine the Leisure Marketing expenditures, nearly 56% of the total.  That, of course, includes U.S. domestic marketing, which we need to back out to get a look at HTA’s international marketing.  Luckily, the 2009 Annual Report allows us to do that – with one significant limitation.

Hawaii Tourism Authority FY2009 Leisure Marketing Budget

OK, backing out the North America budget leaves us with an international marketing budget of $12,560,000.  But that does not include Canada, a major source for Hawaii’s visitors!  If any of my readers knows how much HTA spends in Canada, I’d love to have it so that we get a true picture of HTA’s full international marketing.  Ignoring Canada, which is ignoring a lot, we’ll go with what we have.

So what is Hawaii getting for its marketing money?  Those are FY 2009 dollars above, so let’s compare it with HTA’s projections for visitor arrivals in 2010.  I’m blithely making an assumption that 2009 expenditures leads to 2010 sales.  According to their Spring 2010 market briefing (you can see the presentations here and my report here), HTA predicts that Hawaii will attract 1,589,619 international visitors (not including the 343,000 visitors expected from Canada).  In terms of HTA’s budget, each foreign visitor costs HTA about $7.90, but let’s look at individual markets to the extent the data allows.

HTA FY2009 Marketing Budget v. 2010 Estimated Arrivals

I had to tease the data a bit to get a clear picture.  Besides leaving Canada out, HTA provided no estimates for markets other than those shown, so I didn’t include their “Other” budget item.

Several things attract my attention.  One is the absolute dependence on Japan (73.9% of international visitors, 72.8% of the international marketing budget).  The portion of the budget that goes to “Other Asia” (almost entirely China and South Korea) seems to be an attempt to diversify, but there is no evidence that resources are being shifted out of Japan to do it.  In other words, the attention that continues to be paid to Japan smacks of simply going back to the sources you are comfortable with.  (It is hearsay, but a contact who often works with HTA tells me the prevailing attitude is to ignore any market that doesn’t already send large numbers of visitors – China and South Korea being exceptions.  One wonders how to build an industry if one ignores new markets.)

Building up China and South Korea is laudable, but look where the money apparently came from.  Somewhat reduced expenditure per customer in Australia, and almost nothing spent on European visitors.  And that is exactly what has happened: the marketing budget for Europe was cut from $883,000 in FY2008 to only $103,000 in FY2009 – a Draconian cut of more than 88% from your most cost-effective market! Does this make sense?  Most businesspeople would look at the cost/customer for Europe (only $0.94) and conclude that this is where the marketing funds need to go.  What’s going on here?

• It’s always nice to be recognized!  The Federation of International Trade Associations has added Business Beyond the Reef to its “Really Useful Links For International Trade”.

Really Useful Links for International Trade

• The yellow metal has a fascination so I had to stop and stare at a chart that shows which countries consume the most gold per capita.  While I might have guessed that India would be near the top of the list, I would have been badly wrong.  Saudi Arabia has a substantial lead in gold consumption, followed by Hong Kong.  Then come Turkey, Egypt and Italy (ever seen Flavio Briatore’s chains?), followed by the United Kingdom, the United States, Taiwan, South Korea and Russia.  Then comes India – in 11th place.  China is climbing quickly in 12th.
• Maybe there is some Chinese investment in Hawaii!  I posted recently about the apparent lack of Chinese interest in our islands, but may have spoken too soon.  One of my contacts tells me, according to the real estate grapevine, that Chinese investors have recently bought up 14 homes in Honolulu’s affluent Kahala district.  This apparently follows a very quiet visit to Hawaii by a group of Chinese investors, though I can’t confirm any of it.
• Starwood reports that Chinese visitors to its hotels in Waikiki are up 700%.  Welcome news, but that is from a very low base.
• Speaking of China, come see me and many better speakers, at the U.S.-Hong Kong-China Business Forum in Waikiki on Friday, May 14.  Great speaker line-up, people any company can pick something up from.  Check it out at www.ushkforum.org/.  I understand the early bird registration price is good through May 10, but there’s no reason to delay, is there?
• The Hawaii state legislature, in its “infinite” wisdom, passed SB2840, a bill that reserves a minimum of 80% of jobs on state-financed construction projects to Hawaii residents.  The aim seems to be to fix a problem that does not exist.  We just don’t see many non-Hawaii construction workers flocking to our islands.  Not to mention that the measure may run afoul of the WTO’s government procurement code, and is certainly a violation of national treatment principles.  Governor Lingle, to her credit, vetoed the bill, but the legislature over-rode her veto Thursday.  Another blow for Hawaii’s business image (or lack thereof).