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HomeMy WebLinkAboutCOM 0739.024 2016-2018r ;RESORB' ASSOCIATION �j 00 "0 2 April 16, 2018 Council Member Valerie Poindexter, Chairperson. Hawaii County Council Hawaii County Building, 25 Aupuni Street Hilo, HI 96720 Comments on the Hawaii County Budget Discussions for the Department of Public Works (Buildings Division) and Research and Development Dear Chair Poindexter and Members of the Hawaii County Council, The Kohala Coast Resort Association (KCRA) would like to comment on the budget hearings for the Department of Public Works and the Department of Research and Development. At the Kona-Kohala Chamber of Commerce Luncheon on March 15, 2018, Department of Public Works Director Allan Simeon explained that one of the primary reasons that permitting and inspections have slowed down significantly is because of a lack of staffing in critical positions. He said that there are currently only 3 plans examiners for the entire island and a similar number of building inspectors. We do not believe this is an adequate level of staffing to meet the needs of the island's residents and businesses. Some applications for permits have taken as long as 8 months to process, and the lack of timely building inspections at key milestones has led to costly construction delays. The visitor industry relies on this system working well, and we plan our renovations and our group business accordingly. Many of our member properties (Marriott Waikoloa Beach Resort, Hapuna Beach Prince Hotel, Hilton Waikoloa Village) have undergone extensive renovations during the last 2 years, and additional renovations are planned at other member properties (Mauna Lani Bay Hotel and Bungalows, Four Seasons Resort Hualalai) during the next few years. We encourage the Hawaii County Council to fully fund staffing for this important department, as these bottlenecks and delays impact everyone's ability to conduct business. Department of Research and Development Director Diane Ley explained to us last month that she was requesting significant cuts to the Island of Hawaii Visitors Bureau's budget for the upcoming fiscal year, in order to meet the administration's request for overall departmental cuts. We do not believe that these cuts are in the best interest of the island. Hawaii Island is finally leading the state in terms of the percentage of new visitor arrivals after years of coming in last in comparison to our sister islands. Because of our size, and underperformance in the recent past, we have the capacity to welcome these new visitors with open arms. We are hitting our visitor accommodation occupancy goals, which allows us to employ more than 5,000 island residents at our member properties and resorts. We are adding new flights and work closely with the airports administration on key issues. We are rebuilding Hilo's tourism infrastructure through the beautiful renovations at the Grand Naniloa Hotel and encouraging our guests to increase the length of their stay and the impact of their dollars across the island. With this new momentum, we're adding product, including a new evening Kohala Coast Shopping and Dining Shuttle in partnership with the Japanese wholesalers, which launched April 1St. This is the first time that all of the wholesalers are working together on a new product, and this partnership would have never come to fruition without the leadership of the Island of Hawaii Visitors Bureau and Hawaii Tourism Japan. 2�. 2I Cort�rr�. Rio. 'i Ref. To, 17 VPC - Ref. Dot�P 2 .. O PO Box 6991, Kamuela, HI 96743 * (808) 747-5762' kohalacoastresortassno_qmail.com'-www�kohatacoastresorts.com Another big consideration, is that the Hawaii State Legislature is actively pushing HB2010, which would significantly cut the Hawaii Tourism Authority's budget. These proposed cuts would have significant impacts on Hawaii Tourism Authority's contractors, including the Island of Hawaii Visitors Bureau, the Visitor Aloha Society of Hawaii and our community festivals and events. Cuts from both the county and state simultaneously will not be easily absorbed by the Island of Hawaii Visitors Bureau, even with greater financial support directly from the tourism industry. Therefore, we encourage the Hawaii County Council to maintain the Island of Hawaii Visitors Bureau's funding at current levels. We also encourage you to move forward with your deliberations on a short-term vacation rental bill, which is scheduled for a hearing with the Finance Committee later this month. We believe there are additional revenue streams for both the county and the state through stronger management and partnership with this growing segment of the visitor accommodations market. KCRA is a collection of master -planned resorts and hotels situated north of the airport which represents more than 3,500 hotel accommodations and an equal number of resort residential units. KCRA member properties annually pay more than $20 million in TAT and $20 million in GET, as shown in their Economic Impact Report 2010-2015, copies of which have been provided to all members of the Hawaii County Council. Thank you for your consideration of these funding requests. Sincerely, Stephanie Donoho Administrative Director PO Box 6991, Kamuela, HI 96743 * (808) 747-5762' kohalacoastresortassn@gmail.com * www.kohalacoastresorts.com HTA faces major funding cuts By Allison Schaefers April 15, 2018 Updated April 15; 2018 12: 5 ni Substantial cuts to the Hawaii Tourism Authority's funding, which the state agency says will put tourism and the jobs and programs that it supports at risk, are still on the table as the Legislature heads into conference. HTA, the state agency responsible for marketing Hawaii to the world, receives $108.5 million in transient accommodations taxes from the Legislature each year with $26.5 million of it earmarked for the Hawai'i Convention Center. HTA also is allowed to spend up to $141 million to address a crisis or emergency. The Senate last week added a proviso to the state budget bill (House Bill 1900) that would reduce the cap from $141 million to $55 million, and also remove the agency's procurement exemption with the exception of marketing and sports marketing contracts. The proviso cut is even deeper than those proposed in House Bill 2010, which would reduce HTA's convention center fund to $6 million and HTA's tourism fund to $60.3 million — roughly the amount the agency -currently spends on marketing. Under that bill, $59.5 million would be spread to other state agencies like the state Department of Land and Natural Resources that have a nexus to economic development and tourism. HTA President and CEO George Szigeti said such deep cuts will hamper the agency's marketing efforts, and would result in staff layoffs and cuts to more than 120 nonprofit programs supported by HTA. "No organization can survive a 50 percent reduction in funding without having to make deep cuts to its entire operation. Everything that HTA does to support Hawaii's tourism industry, including our global marketing efforts, our funding of product enrichment programs statewide, and our dedicated staff will'suffer if this drastically reduced operating budget goes into effect," Szigeti said. During conference, state legislators will attempt to resolve differences in House and Senate versions of pending legislation. The House Tourism Committee would prefer to keep the HTA's budget intact, and beef up funding for maintenance of the Hawai'i Convention Center, said Rep. Richard Onishi, committee chairman. "I think the House supports the need to have a robust management plan for promoting tourism," Onishi said. "The tourism industry is very fragile. Take Puerto Rico, if a natural disaster like that happened here, it could decimate the tourism industry." The Senate Ways and Means Committee has said it hopes to address accountability issues raised in a state audit of HTA and to protect Hawaii's infrastructure and natural resources. The committee maintains that appropriating funds to programs with a nexus to economic development and tourism also benefits HTA by allowing it to concentrate on marketing. "Tourism has grown significantly and HTA has taken a piecemeal approach to sustaining our environment, keeping tourists safe, developing tomorrow's workforce, and preserving our culture. There is no comprehensive action plan," Sen. Glenn Wakai, chairman of the Senate Committee on Economic Development, Tourism and Technology, said in a statement. "Allowing the HTA's budget to remain status quo only condones the undisciplined spending pointed out by the audit." The Senate's take has been popular with Hawaii residents who say the state should be mindful of allowing tourism beyond the capacity of Hawaii's infrastructure and natural resources. Unchecked growth of vacation rentals has changed the fabric of Hawaii neighborhoods and increased housing costs, they say. North Shore community advocate KC Connors said the number of tourists should be capped at 7 million per year and Hawaii should refocus on 21 st-century jobs and industries. "Expanding an economic structure that only benefits a few, and produces primarily more low-income service jobs and destroys the quality of life in Oahu with overcrowding is irresponsible and immoral," Connors said. "The boom in illegal vacation rentals is causing Hawaii to become a third-class tourist destination." However, HTA supporters say Hawaii tourism, including visitor industry -related businesses and nonprofits and their employees, would suffer if the measures advance as written. "The visitor industry and hospitality drives so much of our economy. To reduce HTA funding to what I feel would be an unfavorable level is cutting off our nose to spite our face," said Kelly Hoen, area general manager of the Outrigger Waikiki and Outrigger Reef. Hoen said effective tourism marketing should include festivals, events and cultural promotion, areas that the Senate measures would trim. Sam Shenkus, vice president of marketing for the Royal Hawaiian Center, said the Senate proposals could have serious repercussions for the state's tourism -dependent economy and for Hawaii's visitor industry, which depends on HTA's research and marketing expertise. "This attitude that people are going to keep coming just because we are here is extremely short-sighted and ill- informed," Shenkus said. "We've worked for years to get our current level of airline access.. A lot of tourism infrastructure is already in Hawaii. If we don't fill the hotels and the convention center, what's the game plan?" If the measure passes, Szigeti said staff layoffs would be inevitable. HTA also would have to reduce or eliminate support for programs like the Visitor Aloha Society of Hawaii, the Junior Lifeguard Program, the ClimbHl LEI Program for high school students, and various festival events and nonprofits that support the environment and Hawaiian culture, he said. "HTA makes up 90 percent of our budget, if they stopped funding us, it would be cause for great concern," said Jessica Lani Rich, president and CEO of the Visitor Aloha Society, which assists 1,600 to 2,000 visitors in distress annually. "If something happens to visitors, we don't want them to go home with a negative experience, which would impact tourism." ALIT H OR I TY Hawai'i Convention Center 1801 Kal&aua Avenue, Honolulu, Havjai`i 96815 kelepona tei 808 9732255 kelepal fax 808 973 2253 kaittta pa'a ,,,,ab hawaiitourismauthority.org HB2010 SDI Will Reverse Hawai`i's Tourism Future HB2010 SD1 Unravels the Mission and Purpose of the Hawaii Tourism Authority David Y. Ige sovemor George D. Szigeti President and Chief Executive Officer • HTA's Mission: To strategically manage Hawaii tourism in a sustainable manner consistent with economic goals, cultural values, preservation of natural resources, community desires, and visitor industry needs. • HTA marks its 20th anniversary in 2018 as the agency that was established specifically to support the tourism industry's diversity of benefits and impacts on behalf of the State of Hawai'i. • HTA was created in 1998 to provide a comprehensive management of tourism for the State of Hawaii by putting in place a single agency whose various responsibilities were previously handled by several departments, none of which regarded tourism as their primary focus. • In two decades of service, HTA has guided the State's leading industry in staying current with worldwide trends and implementing strategies to reinforce the Hawaiian Islands' appeal in primary source markets, while developing new markets globally to broaden the base of HawaiTs economic strength. • HTA has also responded to the needs of kama'aina, both creating and supporting programs to perpetuate Hawaiian culture, protect natural resources and preserve treasured community traditions. HTA's impact is evident statewide. To be a successful destination, continued investment in the product is a necessity. • Throughout 20 years, HTA has adapted its focus as needed, consistently elevating Hawai`i's brand, enacting effective marketing programs to counter economic downturns, and being a valued resource for supporting communities' needs. • Looking ahead to fiscal year 2019, HTA is adapting its focus once more to place added emphasis and funding on initiatives to support Hawai'i's people and place. Immediate Negative Impacts of HB2010 SD1 • HB2010 SDI reduces HTA's annual budget by $48.2 million — a 44 percent drop in State funding. • The dedicated funding provided by the Transient Accommodations Tax (TAT) to support HTA's management of tourism for the State of Hawaii will be reduced from $82 million to $60.3 million. The dedicated funding provided by the TAT to support the operations and obligations of the Hawai'i Convention Center, currently at $26.5 million, will be eliminated altogether. • HTA's annual budget of $108.5 million, which has been unchanged since 2016, will be set at $60.3 million if HB2010 SD1 goes into effect. Potential impacts to the State's effectiveness in marketing Hawai'i tourism include: • Reduction of funding allocated to the Hawaii Visitors and Convention Bureau to market the Hawaiian Islands in the U.S. mainland, Hawai`i's largest market and the source for 60 percent of total visitors. • Reduction of funding to support the Island Chapter Bureaus that market O'ahu, Kaua'i, Maui County, and the island of Hawai'i. • Reduction of funding allocated to Hawai'i Tourism Japan to market the Hawaiian Islands in Japan,. Hawai`i's largest international market and the source for 17 percent of total visitors. • Reduction or elimination of funding to market the Hawaiian Islands in all other global source markets for visitors: Canada, Oceania, Korea, China, Taiwan, Hong Kong, Southeast Asia and Europe. Potential impacts to community and nonprofit programs statewide that rely on HTA's support include: • Reduction or elimination of funding to support community-based, nonprofit programs addressing needs statewide, such as the Kukulu Ola Program (perpetuation of Hawaiian culture), Aloha `Aina Program (protection of natural resources) and Community Enrichment Program (celebrating community traditions and festivals). In 2018, HTA is providing $3.5 million in funding to support 124 programs statewide. HB2010 SD1 Will Reverse Hawai`i's Tourism Future Page 2 • Reduction or elimination of funding to support vital safety and security programs, such as the Visitor Aloha Society of Hawaii and Junior Lifeguard Program offered in all island counties. HTA also supports the Department of Health's Advisory Committee on Drowning and Spine Injury Prevention. • Reduction or elimination of funding to support festivals and events unique to Hawaii as a destination, such as the Merrie Monarch Festival and Hawaii Food and Wine Festival. • Reduction or elimination of funding to support tourism industry career development programs, such as the ClimbHI LEI program that encourages Hawaii high school students to learn about careers in tourism. Long -Term Negative Impacts of HB2010 SD1 • A downturn in tourism will reverberate throughout the State's economy, resulting in job losses for residents who depend on tourism's success for their livelihoods. • There will be a reduction in travel demand for the Hawaiian Islands, as market research shows there is a correlating decline that occurs when tourism marketing funds are reduced. The impacts will be: ➢ Reduction in Trans -Pacific Air Service: Airlines will reduce service to the Hawaiian Islands or eliminate routes altogether. ➢ Fewer Travel Options: A reduction in total air seat capacity will provide visitors and residents with fewer travel options. ➢ Economic Harm to Hawai`i's Economy: Fewer travelers will book hotel rooms, attractions and activities, dine at restaurants, purchase made -in -Hawaii retail products and goods, and buy foods and daily supplies at stores. ➢ Reduced State Tax Revenue: A decline in visitor spending statewide will produce a correlating decline in State tax revenue generated by the tourism industry. ➢ Impact to State's Funding of Essential Services: A reduction in the TAT will result in fewer funds being deposited into the General Fund and hamper the State's ability to fund essential services for residents and communities statewide. Hawaii will lose the momentum of its success in vying for global travelers that has been built up since the Great Recession, particularly in developing international markets. As Hawaii reduces or eliminates its funding of tourism marketing in global regions, particularly in international markets, it becomes more challenging to maintain the level of tourism's economic benefits to the State of Hawaii, including the number of resident jobs supported by the industry's success. Other Negative Impacts of HB2010 SD1 • The $60.3 million in funds that HB2010 SD1 allocates to HTA annually will be the lowest total since 2002 when visitor arrivals totaled 6.45 million, visitor spending was $9.6 billion, generated state tax revenue was $912 million, jobs supported by tourism were 160,000, and TAT collections were $157.5 million. • By comparison, in 2017, visitor arrivals totaled 9.38 million, visitor spending was $16.78 billion, generated state tax revenue was $1.96 billion, jobs supported by tourism were 204,000 and TAT collections were $508.4 million. • HB2010 SD1 eliminates any dedicated TAT allocation to support the Hawaii Convention Center. Additionally, funding to support the Center will have to be generated through the Center's operations, private contributions, compensation, interest and other means. However, total funding produced by the Center for its operations will be capped at $6 million annually, which is insufficient for the facility to be successful. HTA will be forced to seek additional funding from the legislature or other sources.-- • ources.=• The $2.5 -million cap on market research expenses limits HTA's ability to seek out new resources for data and information that supports marketing efforts by tourism industry partners. • The $5.8 -million cap for sports marketing will limit HTA's capability to secure new opportunities and negotiate agreements for sports events and programs that benefit the State.