Jan. 27, 2011--Hawaii tourism begins 2011 with renewed momentum from last year's turnaround; however, it's still expected to fall short of the industry's 2005, 2006 and 2007 banner years.

Visitor arrivals to Hawaii grew by 8.7 percent to nearly 7.1 million in 2010, and spending rose 16.2 percent to $11.4 billion, according to data released yesterday by the Hawaii Tourism Authority.

Arrivals in December grew for the 14th straight month to 633,730, and overall spending rose by double digits for the eighth straight month to $1.1 billion, HTA reported. The 2010 International Chemical Congress of the Pacific Basin and the Honolulu Marathon held in December helped bring a strong finish to the year and boosted arrivals and spending across all markets for the month.

The gains, which surpassed HTA annual arrivals targets by 3.3 percent and spending targets by 8.4 percent, were good news for the visitor industry. However, the performance bar was not very high coming off 2009, the year that the state's visitor industry saw arrivals fall to 6.5 million -- the lowest level since 2003 -- and spending drop to $9.9 billion, a number not seen since 2001.

"2010 finished ahead of the prior year and ahead of our expectations, but you have to take into account that it's being measured against 2009, when we fell into a very deep hole," said Barry Wallace, vice president of hospitality services for Outrigger Enterprises.

Before arrivals started picking up last year, Hawaii went through a string of 22 months with declining arrivals and expenditures, said Mike McCartney, HTA's president and chief executive officer.

"We have a way to go to achieve full recovery," McCartney said.

As such, the HTA board is slated to vote today on 2011 spending and arrivals targets that are about 4.5 percent below 2006's peak of 7.628 million arrivals and about 4.3 percent less than 2007's $12.8 billion expenditure benchmark.

Profitability for the hotel sector is at least another three to five years out, said Jerry Gibson, Hilton Hawaii's area vice president.

"We are coming off of 2010 with higher occupancies, but rates are still about a decade behind where they need to be," Gibson said.

Cobie and Peter Spaans of Edmonton, Alberta, who are visiting Oahu for two weeks, said their trip this year is even cheaper than the one they made in 2009.

"The prices are good," said Cobie Spaans, who was perusing bargains with her husband at the International Market Place in Waikiki yesterday. "Everything is quite reasonable and our money is just about on par with the U.S. dollar."

Tokyo office worker Ayano Yamanaka, who was sunning herself with friends at the Hilton Hawaiian Village on her fourth trip to Oahu, said she found good bargains.

"It's a good value," Yamanaka said. "The beaches are awesome and we found cheaper clothes."

Despite the start of recovery, Hawaii's visitor industry may find it hard to achieve profitability in 2011. Continued consumer cost consciousness, lingering group business declines and rising oil costs will work to drive prices down, Gibson said.

Hawaii's group business fell about 20 percent in 2010 due to the economic downturn and the tendency among corporations to cut down on travel to avoid criticism, he said. While APEC will boost group business in 2011, Gibson said Hawaii's visitor industry is still about four or five years out from having the base of group business needed to boost profits.

"We have to make up for lots of cancellations and lost business," he said.

When the state's on-beach and larger group hotels like Hilton lack group business, it pushes recovery further out, Wallace said.

"When the larger properties don't have a set base of business to fill their rooms, they drop their rates or put out special offers," he said.

To remain competitive, other hoteliers have to follow suit, which means that Hawaii travelers probably will see more discounting this year, Wallace said.

Rising oil prices, which are at $90 a barrel, also could play havoc with visitor industry profitability, said Jack Richards, president and chief executive officer for Pleasant Holidays LLC, Hawaii's largest wholesaler.

"It's the wild card," Richards said. "If consumers have to pay more for long-haul travel, hotels, wholesalers and other travel sellers will have to work harder to drive demand."

The operational costs of increased energy prices cut into profits in 2010 and could remain an issue in 2011, Gibson said.

"Our energy costs went up 19 percent in Hilton's Hawaii hotels last year," he said. "It's our largest delta ever. If it continues, it could mean diminishing returns."

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