Will the Volcano Hurt Hawaii's Tourism?

by | May 25, 2018

By Allison Schaefers and Kristen Consillio

The only eruption Hawaii's visitor industry had been anticipating a month ago was the possibility that the tourism juggernaut could shatter the 10-million visitor arrivals benchmark this year.

While the numbers still look good for some in the state's tourism industry, others worry that they could change direction much like the Hawaii island lava flows that are appearing nightly on newscasts around the world.

The Hawaii Tourism Authority released a glowing hotel report Wednesday showing that despite the flood on Kauai last month, the overall hotel industry had a blockbuster April.

Ross Birch, executive director of the island of Hawaii Visitors Bureau, kept the good news going Wednesday when he shared that domestic passenger arrivals to Hawaii island from May 1 to May 20 are pacing more than 26 percent ahead of last year despite the lava flow that began May 3.

Birch also reported that Norwegian Cruise Line will resume Kona visits Wednesday and return to Hilo on June 6. That's welcome news since NCL's decision to temporarily suspend Hawaii island stops caused devastating impacts to some of the isle's retailers and activity providers, who Birch said were losing $10,000 to $15,000 each time a cruise ship missed port.

The rosy outlook didn't convince Beth Churchill, owner of the tourism consultancy Churchill Group LLC. She said these early reports are "history," and don't accurately reflect the negative market changes that are occurring.

"Everything through April looked peachy keen, even with flooding on Kauai, but now we've had this volcano," Churchill said. "It doesn't look like there is any sign of it slowing down and if it continues, it's definitely going to affect the 2018 tourism numbers."

Hawaii island hasn't seen the same type of eruption since 1955. The most recent eruption has closed two-thirds of Hawai'i Volcanoes National Park due to increased seismic activity, ash fall and steam. Officials are warning the public of the hazards of volcanic ash, toxic sulfur dioxide and hydrogen sulfide and "laze" -- or lava haze -- when hot lava mixes with cold seawater to produce a plume of steam laced with hydrochloric acid and glass particles.

On Wednesday, the U.S. Geological Survey Hawaiian Volcano Observatory also reported continued eruptions and ground cracking in the Lower East Rift Zone, particularly in Leilani Estates and Lanipuna Gardens, as well as high ash emissions at the Kilauea summit, with plumes up to 8,000 feet high.

The Hawaii county Civil Defense Agency warned residents at a community meeting Tuesday to stop vacation rentals, especially in the lower Puna area, where they have been banned by local government.

Airbnb, which has complied with the ban, said it has experienced a 9 percent drop in Hawaii island business from cancellations since the eruptions began. While the cancellations include the banned lower Puna inventory, they also include inventory as far away as Hilo, Kona and Waimea, the company said.

Churchill said similar warnings were issued in flood-ravaged Kauai in April. Tourists moving from alternate accommodations to hotels may be keeping hotel occupancy high, she said.

"I think the April hotel report and passenger arrivals data give a false sense of security," Churchill said. "This is a totally unexpected and unpredictable 'black swan' event that will have a major effect."

A black swan event is an event that comes as a surprise and has a major effect.

Birch, the Big Island tourism chief, confirmed some cancellations, mostly from the Japan market, and a lower booking pace, and said tourism officials won't fully know the impact until the end of June.

The cancellations are a "knee-jerk reaction ... from those you just can't talk off the wall who are convinced there are issues and challenges to the island."

Those travelers may return, he added. "I don't think that business is completely lost. The airlines are becoming a little more aggressive with some of their pricing, so I have a feeling we'll be able to recoup some of this."

Birch thinks Hawaii island could recover quickly once the media coverage dies down.

Discounts could help.

Daniel Chun, Alaska Airlines spokesman, said the carrier is cutting prices to drive demand.

"We're still running generous fares, meaning we've got availability of seats," Chun said. "Travelers can still find one-way fares for under $200 including taxes."

Jack Richards, president and CEO of Pleasant Holidays LLC, said the "overall impact to Hawaii is minimal at this point."

As of Wednesday morning, Pleasant Holidays had received 16 cancellations for Hawaii, including Kauai and Hawaii island. Twenty-five bookings also were changed from Kona to other Hawaii islands, Richards said.

"Overall, we remain bullish on fiscal year 2018 as we have not seen any significant airline capacity reductions for Hawaii as of (Wednesday) and the NCL Cruise Lines announcement (Wednesday) said they will include Kona is a positive for tourism," Richards said.

Sean Dee, executive vice president and chief marketing officer for Outrigger Hotels & Resorts, is not so optimistic. He estimates the booking pace for Hawaii island hotels through the next 90 days is off 50 percent from last year. Statewide, the pace is off an estimated 10 percent, he said.

"We're concerned. This is very serious for the state," Dee said.

Keith Vierra, principal of KV & Associates Hospitality Consulting, said he knows of at least one Hawaii island property that had to contend with 300 cancellations in one day.

Jerry Gibson, area vice president of Hilton Hawaii and vice president and managing director for Turtle Bay Resort, said May cancellations resulted in a 5 to 7 percent downturn for Hilton's properties on Hawaii island.

"Traffic has slowed down a bit from Japan, which tends to be a very sensitive market, and from the U.S. mainland. We're getting lots of calls asking if it's OK to come," Gibson said. "Even hotels along the Kohala Coast, which are very far from the volcano, are being affected. We're all trying to get the message out that we are open for business."

Gibson said Hilton puts out "generous offers" when it is looking for business. Hilton Waikoloa Village starts an all-inclusive sale today, that covers booking periods through December. Rates start at $179-per-person-per day for the five-night minimum package, which includes the room, and three meals and drinks daily for two people.

"We haven't had to put out an offer like this in awhile," Gibson said.

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