An improving global economy and more air service helped boost tourist arrivals and spending in Hawaii to near-record levels last year.
But competition from less expensive tropical destinations such as Mexico combined with Hawaii’s rising hotel room rates and airfares could weigh on the industry’s growth in 2012.
Tourists spent a record $1.3 billion in December, increasing annual spending to $12.58 billion in 2011, the second-highest annual total ever, the Hawaii Tourism Authority reported Monday.
Arrivals also posted a strong gain in December, pushing the annual total to 7.28 million, the fourth-highest level on record.
The 2011 spending total was second only to the $12.63 billion visitors spent in 2007. Arrivals peaked at 7.63 million in 2006.
Visitors from all markets posted solid spending increases last year, led by Canada, Australia and Asia excluding Japan, which all posted annual gains of 20 percent or more. Even Japan, which suffered a devastating earthquake and tsunami in March, made a significant contribution. While the number of visitors from Japan fell by 5.1 percent in 2011, the amount they spent rose 8.1 percent to $2.05 billion from 2010.
Mike McCartney, HTA president and chief executive officer, said the agency responsible for marketing Hawaii to the world was looking forward to another robust year.
"We will continue to work together with our marketing partners and the visitor industry to sustain the momentum we saw last year and achieve steady growth for another momentous year in 2012," he said.
But Hawaii will have to do so in an increasingly competitive global environment where more consumers are looking for more value, said Jack Richards, president of California-based Pleasant Holidays LLC. The company offers tours to a range of global destinations, including Hawaii and Mexico.
"Mexico is spending a lot of money in the U.S., and we’re seeing a shift in business to Mexico from Hawaii," Richards said. "The Mexico tourism board is comparing itself to Hawaii in their ads. They’re coming after you. They’re saying Hawaii is too expensive," Richards said.
The lowest-priced Mexican hotel and airfare package on Pleasant Holiday’s website Monday was 15 percent less than the lowest-priced Hawaii package. A three-night stay at the Hotel Finisterra in Los Cabos, Mexico, with airfare from Los Angeles was quoted at $443 per person based on double occupancy. For Hawaii, Pleasant Holidays offered a three-night stay at the Maile Sky Court in Waikiki with airfare from Los Angeles at $524 person based on double occupancy.
Mexico’s visitor industry’s marketing is generating more business in the U.S. now that the news of drug violence in recent years has begun to fade from people’s memory, Richards added. Bookings to Mexico began picking up in the fourth quarter of 2011 and continued through January, he said.
Themomentum Hawaii’s tourism industry built up in 2011 and the long-standing cachet associated with the islands will no doubt support the state’s industry this year, Richards said.
"There are a lot of reasons to be optimistic, but it has to be guarded optimism," he said. The industry in Hawaii really needs to determine how to sustain growth in 2012, he said.
The average daily hotel room rate, or ADR, in Hawaii rose to $184.79 in November, an 8.2 percent increase from the same month a year earlier, according to the most recent data available. It was the 13th straight monthly increase in the rate, which Richards described as a "relatively fast pace."
"At some point you hit an inflection point where higher prices start taking away from demand," he said. "The worst case for Hawaii would be for both airfares and ADRs to continue going up at their current pace."
The HTA’s 2011 visitor numbers showed double-digit spending increases on all of the major islands except Hawaii. Spending rose by 18.9 percent on Kauai, 18.7 percent on Oahu, 12.9 percent on Maui and 5.3 percent on Hawaii island.
On Oahu the increase in visitor industry spending wasn’t limited to just Waikiki, said Deborah Driscoll, who owns the North Shore Soap Factory with her husband, Jerry. The company makes soaps and other body products at its facility in the former Waialua Sugar Mill and sells them at retailers throughout the state. The company also has an international following thanks to the business it does on its website, she said.
"People that used to go to Waikiki are now staying on the North Shore," Driscoll said. "We had a great year in 2011. We work with small charters, so we had a lot of minivans, private tours in limos and taxis bring people to our shop," she said.
A popular attraction is the company’s factory where visitors can watch the soap being made, she said.
"We get a lot of locals who bring family members here when they are visiting. We also get a lot of visitors who have been buying our products for years and tell us they’ve always wanted to see where it was made."
