Debacle in Paradise
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.
