The Hawaii Tourism Authority, the state agency tasked with leading the islands’ tourism recovery, is in dire financial straits and has already begun executing “doomsday scenarios” in case it faces funding.
Governor David Ige issued an executive order earlier in the pandemic ending transient accommodation tax payments to HTA, which was created by the state legislature in 1998 to serve as the “lead agency of the state.” supporting tourism.
In 2019, HTA received $79 million in TAT funds and an additional $16.5 million for the Hawai’i Convention Center. In fiscal 2020, HTA received only the first four months of its TAT distribution and reduced its fiscal budget in September to $48 million from $86 million and then to $41 million in November.
HTA survives on funds carried over from previous years and budget cuts. But the agency is quickly depleting its reserves. Unless Ige restores some funding, HTA will be down to just $10 million by June 30, the end of fiscal 2021.
“At $10 million with no additional funding. I would be in a downturn,” HTA President and CEO John De Fries told the Honolulu Star-Advertiser. “Myself and Keith Regan (administrative director of HTA) examine what amounts to doomsday scenarios. We haven’t presented it to the board yet, but I mean, with that kind of dramatic loss of funding, it would end up limiting HTA in anything it could do.
De Fries said he had asked Governor David Ige for a meeting to discuss HTA’s difficult funding situation and intended to seek full restoration of the agency’s budget. De Fries said HTA believes it is critical to ramp up promotion and marketing of Hawaii trips to capitalize on increased consumer confidence in the third quarter, which hopefully follows six months of vaccine distribution.
The state Senate Committee on Energy, Economic Development and Tourism, chaired by Senator Glenn Wakai, also sent Ige a letter on January 4, arguing for the immediate return of a TAT disbursement to HTA for replenish the agency’s special fund.
“As the COVID vaccine is distributed, every tourist destination on the planet will be competing for the same potential visitors. It is imperative that HTA assure them that Hawaii is safe and open for business,” Wakai said in his letter to Ige. “Their funding will mean that jobs for our neighbors will continue to evaporate. HTA is the fulcrum that will propel Hawaii out of its financial misery. We hope you restore full or partial TAT payments to HTA.
Ige did not immediately respond to a question from the Star-Advertiser about when or even if he planned to restore TAT funding to HTA.
Wakai said Ige sent a non-binding letter acknowledging receipt of the EET committee’s request.
In the letter, Ige said the state “would reverse the TAT suspension as incomes improve.”
Ige told EET committee members that he shared the view “that tourism is a critical part of our recovery and our long-term economic well-being and that the ETS plays an important role in facilitating that recovery. “.
However, he said he was “balancing[HTA’s]needs with many other critical needs, as we face a significant, long-term revenue shortfall that needs to be addressed.”
De Fries said Ige was right to cut TAT funding from the HTA in May, but the funds now had to be returned to the HTA.
“If we are required to complete a full fiscal year at $10 million, the efforts would not be effective. It would result in severe cuts,” he said.
De Fries said that in fiscal year 2019, HTA helped bring $631 million in TAT collections to the state, and while TAT collections have dropped significantly with the downturn in tourism related to the pandemic, there are still funds that could be distributed.
State Economist Eugene Tian said the Hawaii Council on Revenues last estimated the TAT for fiscal year 2020 at $560.6 million and only $198.4 million for fiscal year 2021. .
A portion of TAT funding is statutorily mandated in order of priority for the Turtle Bay Conservation Fund, the Hawai’i Convention Center, HTA and counties. But De Fries pointed out that “HTA is the only entity receiving TAT funds that can contribute to its growth”.
Although Wakai supports additional TAT distributions for HTA, it said it intends to remain vigilant in tracking agency efficiency and spending. Wakai added that HTA expenses must be reduced. Given the state’s financial situation, Wakai said HTA is unlikely to expect a quick return to full funding.
“De Fries must prepare now for the doomsday/nuclear scenario,” Wakai said. “Preparing a plan for next month’s ETS board meeting means an additional two months of expenses for the entrepreneur.”
Sean Dee, executive vice president and chief marketing officer for Outrigger Hospitality Group, said HTA funding needs to be restored to operational levels. Dee pointed out that HTA’s TAT allocation was “already the lowest in years”, even before COVID-19.
The agency received $82 million for its Special Tourism Fund in fiscal year 2014 through 2018, but the state legislature cut it to $79 million in fiscal year 2019. Dee said said it’s less than 20% of TAT’s annual funding, which is generated solely by Hawaii. visitors.
Dee said HTA and its major contractors must be funded now to drive recovery. He said they also play a role in educating potential travelers about the destination as well as supporting other vital initiatives such as Hawaiian cultural programming, sustainable tourism initiatives and vital research.
“While some believe tourism will magically return to past levels, the reality is that there is a lot of competition for consumer travel dollars, especially with the number of travelers so drastically reduced globally. “, said Dee.
Among the myriad of challenges facing the tourism industry in Hawaii, he said the most commonly heard is that customers lack the confidence to book due to constantly changing rules and protocols by the state and the counties.
Dee said: “We need strong collaborative leadership across the islands working together to open up the market for travelers safely. Safe Travels (the state’s pre-arrival COVID testing program) has been an effective program, and it’s clear that the biggest health concern is community spread from returning residents, not COVID-negative visitors .
Keli’i Akina, president of the Grassroot Institute of Hawaii, said in an email: “There are many needs that deserve to benefit from our limited fiscal resources more than the promotion of tourism, including the repayment of debts. increasing state fees, paying for essential services and helping Hawaii residents who have lost their jobs due to the shutdowns.
While the TAT comes from tourists, Akina said using it to subsidize tourism seems less ideal than using it to alleviate Hawaii’s current economic crisis. Even under more normal circumstances, he said, subsidizing tourism is questionable.
“In the future, we could instead use the TAT money that usually goes to the HTA to repair or maintain our tourist-affected infrastructure, like our beaches and parks,” Akina said.
He said another option to consider would be to reduce or eliminate the TAT altogether, “which would make Hawaii more affordable as a tourist destination and would be a great form of tourism promotion in itself.”
“For now, though, let’s spend this TAT revenue where it can make the most difference: helping Hawaii deal with its economic devastation,” Akina said.