Study recommends replacing Hawaii Tourism Authority with new governance model

A contractor hired by the Hawai‘i Tourism Authority is recommending that an alternative system of tourism governance replace the agency, which was created by the state Legislature more than a quarter of a century ago.

HTA’s overall governance structure has been discussed during previous legislative sessions. Various bills also have been introduced but not advanced in recent years to explore whether HTA’s structure as outlined in Hawai‘i Revised Statutes is the best approach for managing tourism, a top economic driver.

Last year, with the looming threat of bills calling for HTA’s repeal, it decided to fund a third-party governance study. Through a competitive bidding process, Better Destination LLC, founded by Cathy Ritter, was selected for a $294,400 contract, which kicked off in January.

The recommendation is for HTA to restructure into a Destination Stewardship Organization (referred to as DSO) with a new name.

Destination stewardship is described by the Global Sustainable Tourism Council on its website as “a process by which local communities, governmental agencies, (nongovernmental organizations), and the tourism industry take a multi- stakeholder approach to maintaining the cultural, environmental, economic, and aesthetic integrity of their country, region, or town. In other words, to ensure that the destination retains and enhances the distinctive attributes that makes it attractive to beneficial tourism.”

Other key recommendations from Better Destination include:

• Establishing a new position of stewardship liaison in the Governor’s Office.

• Organizing the DSO as a nonprofit.

• Structuring a productive partnership between the DSO and the Hawai‘i Visitors and Convention Bureau.

• Creating a Hawai‘i Destination Stewardship Council to provide strategic oversight.

• Establishing Island Destination Stewardship Councils to empower meaningful collaboration between the state and the islands.

• Funding the DSO with a predictable revenue source.

• Centering the DSO’s organizational structure on stewarding Hawai‘i tourism.

• Elevating the understanding of the value of Hawai‘i tourism through greater transparency of county and state allocations of the transient accommodations tax (referred to as TAT).

• Empowering the new state agency to lead.

• Establishing a Blue Ribbon Commission for Hawai‘i tourism governance to spearhead the transition, which is expected to take at least two years.

The new model, called “Governance with Aloha,” is described as “a ‘community- first’ regenerative mindset that delivers not only a healthy tourism economy but addresses local priorities and improves unique assets through ongoing collaboration.”

Ritter and her team of experts included Elke Dens and Frank Cuypers, co-founders of Place Generation; Denise Miller, executive vice president of SMARInsights; and Karey Kapoi, owner of Karey Kapoi.

“It’s a big challenge (for HTA and Hawai‘i) and we don’t think it can be answered successfully with just small fixes,” Dens said.

The recommendations, which were presented to the HTA Board June 27, now head to an HTA Governance Study Permitted Interaction Group. HTA will take the group’s recommendation into account in determining its response to the study.

“The governance study is not radical in the sense that the various objectives such as destination stewardship … have all been identified in the past,” said Daniel Naho­‘opi‘i, HTA’s interim president and CEO. “The way we should be marketing integrates both the product as well as the destination. It’s the approach and the structure that is slightly different.

“The most important part is that this was an independent study not influenced by legislators or staff or board members so we will need to review it, understand the implications going forward, test the cases that they are recommending,” Naho‘opi‘i said. “There is still a lot more to do.”

Legislative will

It’s unclear if HTA is feeling the same sense of urgency as it did at the beginning of the process, after emerging from this year’s legislative session with a recurring $63 million lump sum budget — no small feat for an agency that endured cutbacks, organizational changes and the threat of defunding over the last several sessions.

For the governance study recommendations to move forward, it also would require the support of state legislators, who may be resistant to giving up even partial control of the state’s tourism industry — a cash cow that delivers some $1 billion annually in TAT. In addition to designating $63 million of the state’s TAT collections for HTA’s operating budget, legislators during the last session allocated $11 million in operating funds for Hawai‘i Convention Center.

Still, some recommendations made by Ritter’s team dovetail with the passage of Senate Bill 3364, which amends HTA’s powers and duties to bring its statutory mandate into alignment with its work in regenerative tourism and destination management.

“The (request for proposals from HTA) outlined nine actions for the scope of work. The last one of the nine was to determine if an alternative system of governance is necessary, and we answered that question with a ‘Yes,’ based on everything that we heard, and based on where HTA is today,” Ritter told the HTA board during its June 27 meeting.

“Even though there has been a lot of progress over the past legislative session. You have your first appropriation from the Legislature in three years, but you also lost the last exemption that was granted to you when the HTA was founded in 1998,” Ritter said, referring to a provision in SB 3364, which repealed the HTA exemption from administrative supervision of boards and commissions.

The lost exemption, which may be a harbinger of legislative will, could complicate the division of authority between the state Department of Business, Economic Development & Tourism and HTA, which is administratively attached to DBEDT.

Naho‘opi‘i told the Honolulu Star-Advertiser that the removal of the exemption shows “that there is sentiment about changing or altering 201B, which is our statute, from the Legislature. If they already altered one part of it, they may want to alter other parts of it.”

Stakeholder confidence

The governance study, which can be found at HawaiiTourismGovernance.com, is attracting attention from a broad swath of stakeholders, many of whom participated in the process.

Ritter said the situational analysis section included extensive desktop research, benchmark case studies, 69 in-depth interviews, co-creation labs and stakeholder survey findings from SMARInsights.

HTA received an unfavorable rating from 43 percent of the stakeholders who were surveyed, according to a presentation from Miller, who presented preliminary findings to the HTA board in May.

“This highlights the need for major changes at the organization. It has lost the confidence of its stakeholders and minor adjustments will not be enough to reverse the negative perceptions and attitudes about the organization,” she said.

Concern about “over- tourism and strain on infrastructure and local resources,” was among the key negative perceptions about HTA noted in the survey, along with an “impact on residents’ quality of life” and “concerns about over-reliance on tourism.”

Positive survey remarks came in the areas of economic growth and tourism promotion, responsiveness to industry and community needs, preservation of natural resources and environment, cultural education and protection, and efforts toward regenerative and sustainable tourism.

Thoughts on the study

While survey results were mixed, stakeholders seem to be vetting the governance study recommendations with an open mind and an eye toward change.

“It looks like the report was very extensive, obviously one has concerns, and I think the idea behind this whole process is for the report to be a foundation for serious further discussion, and in that respect it’s done a great job,” said Paul Brewbaker, principal of TZ Economics.

“There are going to be differences of opinions as we sort of move down the food chain in terms of specifics,” he said. “Still, the basic concept of a DSO — beneath which these two already statutory functions, destination management and destination marketing, reside in a peer relationship so to speak — I think, is an overarching goal for a lot of observers.”

The survey was much needed, said Rep. Sean Quinlan (D, Waialua-Haleiwa-­Punaluu), House Tourism Committee chair, who said he was “very glad” the study was done to thoroughly examine “everything that we do.”

“As our current market changes, as our society changes, tourism certainly must change with it. It identifies a lot of problems that we have. I think these problems are solvable, but we have a ton of work ahead of us. In a lot of ways, the plan that they outlined is not consistent with the political realities of Hawai‘i today,” Quinlan said. “A lot of the recommendations are interesting, but I just don’t see us being able to move in that direction in the near future.”

Keith Vieira, principal of KV & Associates, Hospitality Consulting, who served as a member of the original HTA board, said, “We should be more like Visit California, Visit Florida and Discover Puerto Rico — a nonprofit should be driving the bus. There should be less legislative interference. There should be more logic on the marketing dollar amount that is tied to a revenue goal or visitor expenditures. It needs to run independently based on logic and good business sense.”

The idea of a tourism liaison has the support of Sen. Glenn Wakai (D, Pearl Harbor-Kalihi), who serves as vice chair of the Senate Committee on Energy, Economic Development and Tourism and has introduced legislation to that effect over the past two years.

“HTA is in a better position now than it was two years ago. But what’s to say that two years from now, it won’t be in even deeper kimchi. I think what is suggested here provides some level of continuity and proper governance that we don’t have now,” Wakai said. “Right now, it’s just up and down like a wave coming into Waikiki. There’s high surf and low surf. We need to make sure that the public has a responsive tourism entity whatever it is. We just have to do better.”