LIHU’E — Reports that airlines are scaling back flights to Hawai‘i this summer have alarmed some who fear it will hurt tourism, but others say it’s cyclical and does not present a serious concern. Hawaiian Airlines, United, Alaska and Allegiant
LIHU’E — Reports that airlines are scaling back flights to Hawai‘i this summer have alarmed some who fear it will hurt tourism, but others say it’s cyclical and does not present a serious concern.
Hawaiian Airlines, United, Alaska and Allegiant have plans to trim capacity to Hawai‘i this fall after an expansion left them with too many seats.
Hawaiian Airlines, for instance, recently said a $17.1 million first-quarter loss was due to an industrywide 11 percent gain in seat capacity from the Mainland to Hawai‘i.
Air seats from the West Coast will be reduced by 2 percent in the third quarter and 6 percent in the fourth quarter.
Don’t worry, said Sue Kanoho, director of the Kaua‘i Visitors & Convention Bureau,
“Some of the flights are not relevant to Kaua‘i specifically, but these people adjust all the time,” she said. “It’s an ongoing management thing.”
The signs of market trouble are when passenger numbers decrease and flight prices increase to the point where it is not competitive with other markets, she said.
“We’re not worried. It comes down to price point,” Kanoho said.
One report shows more people are coming to Kaua‘i.
According to the Hawai‘i Tourism Authority’s report in April, increases in direct and inter-island flights to Kaua‘i boosted visitor arrivals in the first quarter this year.
Overall, it said increased air service from the West Coast to Lihu‘e in 2012 boosted the arrival rate by 8 percent, which led to a 6.8 percent growth in spending.
And this year, January through March, visitors spent around $4 million on Kaua‘i. Daily spending was up 7.9 percent to average $170 per person.
Mike McCartney, HTA president and CEO, anticipates moderate growth later in the year.
“Spending and arrivals have been on the upswing, but there has been a decrease in visitor average length of stay for markets like U.S. West and Canada, which could be an indication that visitors may be reaching their spending threshold,” McCartney stated in the report. “Furthermore, the reduction of service from the U.S. East and U.S. West and the weakening Japanese yen could also have an effect on arrivals and spending this year.”
Which is where more marketing comes in.
Kanoho said KVCB promotes Kaua‘i at hubs and gateway locations that equate to big business.
Airlines look to add a direct flight by tracking customer origins to their destinations. Portland to Kaua‘i flight records showed residents were connecting through Seattle.
“Why not just give them a Portland flight?” she said.
A Newark to Honolulu flight resulted in more East Coast numbers to Kaua‘i as well, she said.
Kaua‘i County Council Chair Jay Furfaro, who has worked in hotel management for several years, said the airline strategy is perhaps related to increasing the average occupied seat rate for destinations like Hawai‘i.
“But more important would be what percentage of the reduction is being planned for Kaua‘i’s direct Mainland flights, as they will have the biggest impact on the longer stays and rate for our county,” Furfaro said.
Dr. Jack Suyderhoud, professor of Business Economics at Schidler College of Business, University of Hawai‘i-Manoa, said a reduction in seats would discourage visitors in two ways.
Fewer seats, he said, means fewer convenient flights.
“The effect of this depends on how much excess capacity there has been,” Suyderhoud said. “If the airlines are just reducing excess capacity, then the seat reduction may not have a large impact since those seats were empty to begin with.”
He said 91 percent of seats were filled on Hawai‘i-bound flights in 2011. But in March 2013, the number was down to 88 percent. That, Suyderhoud said, partially explains why airlines are cutting flights. Fewer filled seats means lower prices and lower profits, he added.
“Between 2010 and 2013, airline seats increased by 25 percent,” Suyderhoud said. “Perhaps they feel they added too much capacity too fast.”
The way for airlines to fill more seats and increase prices is to reduce the number of flights. But even that isn’t an absolute.
The Hawai‘i market is relatively easy to enter and to exit, with examples including Allegiant, and now Southwest, he said.
“The ability of airlines to translate lower capacity into higher prices is limited,” Suyderhoud said.
The HTA report said that sustaining and diversifying an increasingly competitive global market share is crucial for a fragile tourism-based economy.
But that’s easier said than done.
Visitor numbers from outside the U.S., along with length of stay and daily spending, are influenced by foreign exchange rates.
The Japanese government has undertaken a policy of quantitative easing that has the effect of depreciating the value of the yen, he said.
“As a result, travel to Hawai‘i will be more expensive to the Japanese,” Suyderhoud said. “Likewise, the underlying strength of the Canadian and Australian economies and dollars will have an impact.”
Enhanced incentives to attract off-season business and conventions, and strengthening core markets while attracting new or smaller ones in Oceania, Korea, China and Taiwan are encouraged.
The report notes a 33 percent increase in Oceania arrivals and a 24.1 percent from other Asian countries. Arrivals were up 12.8 percent from Europe, and 31 percent from Latin American visitor markets.
