Lawmakers take aim at Hawai‘i Tourism Authority

LIHU‘E — As lawmakers move forward with two bills aimed at repealing and replacing the Hawai‘i Tourism Authority, the authority and a nonprofit group are speaking out against the proposed measures — for opposing reasons.

Senate Bill 1522 and its companion, House Bill 1375, state it is “necessary and appropriate to dissolve the Hawai‘i Tourism Authority” and replace it with an “office of tourism and destination management.”

Ilihia Gionson, the authority’s public affairs officer, disputes the claims that the HTA is being mismanaged and says they are making significant progress.

“We believe in our model. We believe in the work that we’re doing, and the results that we’re getting,” he said in an interview with The Garden Island.

Meanwhile, The Grassroot Institute of Hawai‘i, a nonprofit policy research organization, has submitted testimony against both bills, saying Hawai‘i doesn’t need the HTA or a similar agency promoting tourism. The Grassroot Institute “has taken the position that the state shouldn’t be funding tourism promotion,” said its Director of Policy Malia Hill in a separate interview with The Garden Island.

Hill noted the nonprofit is not anti-tourism and sees it as important and valuable, but “does that really mean that taxpayer money needs to go to promoting tourism?” she said.

She referred to the legislation’s criticism of the HTA in recent years, stating they “want to get rid of it” but don’t know what to replace it with other than an enhanced version of the same agency.

“There are these two different bills that are replacing or repealing the HTA and replacing it with this new agency. But when you kind of drill it down, it’s hard to really see why this would be that much different,” said Hill.

The bill emphasizes a commitment to regenerative and holistic approaches to tourism, that “sound really good,” but “how is this really different from the HTA other than the sort of rhetorical window dressing you’ve put on it,” she said.

When asked about the criticism that the state no longer needs an agency promoting tourism, Gionson said “pushing for visitor arrivals” is “something from the past.” He stated that the agency’s focus is on visitor spending, resident sentiment, visitor satisfaction, as well as educating visitors.

Gionson agreed the bill would create a similar entity that would “dissolve the HTA in favor of an agency that is focused on destination management and caring for our community. And that is exactly what we are already.”

HTA president grilled

Legislators grilled HTA President and CEO John DeFries a couple of months ago, during a meeting with the Senate Committee on Ways and Means and the Senate Committee on Energy, Economic Development, and Tourism on January 17.

During the meeting, Sen. Glenn Wakai (D-District 15) said he was skeptical of the HTA’s operating budget request increasing from $60 million to $75 million for the 2023 to 2024 fiscal year, saying “he wasn’t sure how that money would be spent.” The current state budget appropriates only $35 million to the HTA.

Wakai mentioned a 2018 “scathing” audit of the authority that pointed out “so many procurement flaws,” as well as a 2022 follow-up audit that stated its lack of progress with addressing those issues.

“Out of the 27 recommendations that the auditors suggested for addressing some of those procurement flaws, only 20 percent had been fully implemented. So 80 percent of the recommendations have not been fully implemented, or outright ignored,” he said.

DeFries responded, noting that out of the 27 recommendations, five were implemented, 16 were partially implemented, two were not implemented, two were found to be no longer applicable, and two were disagreed upon. He used the pandemic to justify the criticism, adding this “hasn’t been a usual 2.5 years,” and that they were implementing various strategies to address the report’s findings.

“If you’d fixed things back in 2018, maybe you wouldn’t have gone through those struggles,” said Wakai. “I could accept that we were working on it if this was 2019. But Mr. DeFries, this is four years after the recommendations were made and you’re still working on them. When are we ever going to fulfill these recommendations.”

DeFries responded that he would return with an “accurate timetable” announcing when all recommendations would be implemented.

‘Lax oversight’

Wakai was referring to the February 2018 report, completed by the state Office of the Auditor, which said the HTA was operating with “lax oversight” and not ensuring tax dollars were being used effectively.

One major issue in the report stated the HTA “did not provide adequate oversight” on two contracts: a more than $83 million contract with AEG Management HCC, LLC for the operation of the Hawai‘i Convention Center, as well as a more than $98 million contract with the Hawai‘i Visitors and Convention Bureau (HVCB) to market Hawai‘i in the continental United States and Canada. The subsequent follow-up report in September 2022 stated HTA had “not implemented” requested changes and disagreed with the recommendations.

Among other issues, the 2018 audit also said HTA was misusing funds. It stated the authority had “reimbursed millions of dollars to contractors without receipts and other required documentation; reimbursed costs, such as first-class airfare, luxury hotel accommodations, and other extravagant expenses, that were expressly prohibited by contract.”

The 2022 follow-up report stated HTA “had shifted some of those administrative expenses to non-Tourism Special Fund Sources, but had not significantly reduced its administrative costs.”

The report also criticized the HTA’s exemption from the State Procurement Code, leading the authority “to be less accountable and less prepared.” The HTA lost its procurement exemption in 2021, meaning it now requires state approval for all contracts and purchases.

But the 2022 audit said there was still a need for HTA to develop clear procurement policies and procedures because its approach was “lax and undisciplined.”

Gionson referred to the authority’s written testimony on HB 1375, which says that the HTA has “not received a written notification of a procurement violation,” and that “whatever mistakes were made … none rose to threshold of a procurement violation.”

The HTA received broad support when it was created in 1998, but faced criticism in the years following. A February 2002 article by Pacific Business News reveals that auditors had provided similar criticism in a report from over 20 years ago, stating HTA is “plagued with management deficiencies and alleges that the board of directors lack leadership, vision, and direction needed to manage the growth of the visitor industry.”

Residents frustrated

Both Hill and Gionson seem to agree the bills are an attempt for legislators to deal with some residents’ frustration with the current state of tourism.

“The level of visitor arrivals that we started seeing before the pandemic caused pressure on communities at a level that (residents) had not experienced before, with 10.4 million visitors in 2019,” said Gionson. “And so we understand that many people in the community are asking their legislators and elected officials to do something about these pressures on the community.”

But Hill referred to the dissatisfaction not coming from tourism itself, but the way HTA is handling tourism. “People are unhappy with the HTA. They don’t know what they want. They just know, they don’t like what they have,” she said, adding that the bills are premature.

She said legislators should spend more time on a long-term approach instead of just pushing ahead with this new agency, which isn’t much different from the current HTA.

During the latest hearing for SB 1522 on April 5, state Rep. Gene Ward (R-District 17) asked DeFries about how the bill would be different from the HTA.

DeFries responded that the new entity “reminds me of throwing the baby out, but keeping the bathwater.”

He noted that the HTA adopted its new “destination management action plan” back in 2020.

“With a lot of help from industry and community leaders, we were able to put an infrastructure in place and a system in place, that is now at work,” DeFries said.

“This work is being done. We’re delivering on it and that is at the heart of my concern about dumping the baby out,” he said.

Both SB 1522 and HB 1375 received a recommendation for passage on third reading on April 6.

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Emma Grunwald, reporter, can be reached 808-245-0441 or egrunwald@thegardenisland.com.