Honolulu — the entire state, in fact — is witnessing some radical shifts in the largest engine powering its economy, tourism. In addition to the global trends turning the visitor industry toward new markets in Asia, there’s the basic movement away from full-service hotels and toward "condotels" or other variations that are more residential than tourist accommodations.
As a result of various hotel conversions to a mix of guest rooms and condominium units, the number of good jobs tourism generates is being slashed, a cause for real anxiety among the working people who depend on that employment.
It’s a phenomenon noted on neighbor islands but the especially high-profile cases are in Waikiki, and that’s the reason the City Council is sitting up and taking notice. Of course, the alarm had been raised by the influential hotel union Local 5, so it’s no surprise a legislative response has emerged.
That measure, Bill 16, deserves to be moved along for discussion to develop appropriate regulation that addresses the interests of city taxpayers. But the current draft of the bill oversteps the city’s proper boundaries, calling for considerations that belong in the realm of labor law and private contracts.
According to the preamble of the bill, among the purposes of the proposed ordinance is "to limit the number of tourist hotel conversion projects that will have a significant, negative impact on guest room availability."
That is one of the criteria that would be the basis for issuing or denying a "conversion project" permit, a new level of city oversight.
There is no doubt that conversions have a serious impact on the hospitality workforce. According to a recent study prepared for Local 5, the decline in jobs has been documented across the nation, and despite the post-recession recovery of hotels’ financial performance, the job count has not.
In one of several case studies cited, the report details the job losses with the conversion of the Ilikai Hotel. With the sale and renovation of its Yacht Harbor Tower about eight years ago, the jobs for about 200 workers were lost; only 63 jobs are left at the hotel.
The argument being made is that hotels have become investment properties that are flipped to extract their value, rather than long-term business propositions. But there are also changes in market trends, with many visitors interested in repeat visits at a lower cost, the kind of stay best supported by a more residential setting.
It’s not within the powers of city government to reshape independent market forces, so having a permit system that attempts to control the stock of traditional hotel rooms is a bad idea.
However, the hotel conversions are substantial changes in the use of the property, and one that affects the city’s tax base. The city should have the opportunity to review such a plan and take stock of the number of units that are moving to residential use. Not only would this allow better planning for municipal revenues, but it would enable an assessment of how condominium use would affect traffic, sewers and parking burdens on the surrounding streets, aspects that do fall within the city’s purview.
It would also provide notification to employees that a conversion is imminent, earlier than the mandated 90-day notice of layoffs. Considering the difficulty in finding an equivalent job, the requirement to provide written notice 120 days before conversion is a benefit to the workforce that’s worth pursuing.
But the bill also sets rules about employment during a transition period, and that seems to be an overreach of city authority.
Honolulu does need to ease its way into a new tourism market, and officials must keep current conditions in mind when evaluating future hotel zoning requests. The economic benefit to the city, in terms of jobs and tax revenue generated, likely won’t offset the burdens on city systems as well as it once did. But Bill 16, as written now, simply goes too far.
