The good news is that tourism is up. The bad news for Hawaii’s visitor industry is that our visitors aren’t spending as much as we would like them to.
In September, visitor arrivals grew to 652,616, a 4.7 percent increase over September 2014. But visitors spent 1.2 percent less, bringing total expenditures to just under $1.1 billion. The tourists spent $196 a day, or 3.2 percent less than they did during the same month last year.
So the question becomes, how does the state maximize revenues from our ever-evolving tourism industry? It becomes increasingly important for the state to adapt collections to meet evolutions of its major economic generator, to increasingly think outside the hotel.
Still untapped is the state’s home-based rentals, or transient vacation units (TVU), which comprise 25 percent of all lodging units, with hotels accounting for 50 percent, and time shares and condos contributing 12 percent each. TVU owners should pay the transient accommodation tax, or TAT, just like any other visitor-lodging operation.
An attempt to regulate that cottage industry by establishing a system of state licensure petered out during the last legislative session. Lawmakers will need to revisit the issue come January to ensure that this potential reservoir of tax dollars is tapped.
After all, the collection of that tax, and the distribution of shares of it to the counties, is the state’s job. The counties also must do their part to rein in the illegal vacation rentals, which are scattered among residential neighborhoods that should not be overrun by tourists.
The City Council has yet to pass measures that would allow for a certain number of TVUs and establish permits and a corresponding fee to operate such a rental. Two separate measures were introduced, but Council members decided they needed a better handle on how many illegal bed and breakfasts or other transient vacation units exist on Oahu.
A Hawaii Tourism Authority study put the statewide total at more than 22,000 home-based lodging units, including condominiums, houses and bed and breakfasts.
With visitors arriving in record numbers, it’s imperative that their presence not overwhelm our resources — whether it be parks, beaches, streets or infrastructure. The tax dollars associated with their arrivals must be reinvested in order for counties to maintain and replenish those resources.
Visitor industry leaders noted that a drop in hotel stays in September, combined with a growing preference to book alternative accommodations, may have dampened spending or at least made it hard to track. Some 408,924 travelers told the HTA that they planned to stay in a hotel in September, a decrease of 1.9 percent from September 2014.
In contrast, the number of visitors who said they planned to stay in a condominium this September increased 11.6 percent to 100,076. Stays in bed and breakfasts grew to 4.2 percent to 6,327, and stays in other vacation rentals rose 3 percent to 8,421.
"We are seeing an inordinate amount of people staying in alternative accommodations … " said Jack Richards, president and CEO of Pleasant Holidays, Hawaii’s largest wholesale travel seller. "I’m concerned because I’m not sure how these rentals pass on their transient accommodation taxes or how they are regulated. They also take air seats that we could have used in our packages."
The numbers show there is a vast industry that has, for the most part, gone untaxed and unregulated. Frustratingly, measures are being introduced to attempt correction, but are ultimately stalling.
Growth in the visitor industry is expected to continue through the beginning of next year, and that’s certainly encouraging. But lawmakers need to move forward with measures to fully capture that growth, and to get a handle on underground lodging, before it becomes more drain than boon for Hawaii’s economy and public resources.
