Governor Neil Abercrombie has proposed a bill to increase the hotel room tax to 11.25 percent starting in July 2013. Currently the hotel room tax is 9.25 percent, but this was supposed to be a temporary increase to help the state solve its budget deficit that was caused by the recession. The current tax of 9.25 percent was supposed to expire on July 2015 and revert back to its previous level of 7.25 percent. According to the governor’s office, the tax increase would be used to help maintain Hawaii’s tourism infrastructure and marketing brand. According to the state Department of Taxation, the hotel room tax generated a total of $323.9 million during the last fiscal year under the 9.25 percent transient accommodation tax level.
However, there are many tourism industry experts and leaders who are very concerned with the governor’s room tax increase proposal. Hawaii Lodging & Tourism Association President and CEO, George Szigeti, argued, “We’re going to get to the point of what I like to think of as diminishing returns, where you get to that price point, and that visitor on the mainland or anywhere else is going to look at Hawaii and say, ‘Here’s my threshold.’ It’s something we need to be very, very careful of. And we’re getting to that point and I just think you can’t recklessly and all of sudden, because things are good right now, tack on additional taxes on the visitor.”
According to a national report released by the Global Business Travel Association, business travel in the United States is expected to increase by 4.6 percent to $266.7 billion in 2013. Historically, Hawaii has been seen mostly as a leisure destination, but the Hawaii Visitors and Convention Bureau is hoping to change that image and see significant gains in business travel and spending. Westin Moana Surfrider’s director of sales and marketing, Vickie Omura, noted that business groups booking are up between 10 to 20 percent as compared to the previous year. Omura stated, “Most are realizing that when you have an important message to convey it’s important to be here. They also care about the type of experience.”
The 2012 Honolulu Marathon was a huge success from an economic standpoint, and set records for the highest amount of visitor spending and the most amount of tax revenue generated for the state of Hawaii. A total of 31,083 people signed up for the Honolulu Marathon in 2012, and inclusive of friends and family members traveling to Hawaii, spent a total of $132.8 million in visitor spending. This equated to $6.18 million in tax revenue. Chairman of the Hawaii Pacific University’s Travel Industry Management program, Jerome Agrusa, stated, “The economic impact of the Honolulu Marathon is quite significant and gives a much-needed boost to the Honolulu economy.”
President of the Honolulu Marathon, Jim Barahal, stated that 2013′s marathon could be even stronger. Barahal commented, “Our early-entry numbers for North America and Hawaii are up 25 percent. We’ve already got 13,037 people registered. At this time last year we only had 10,463. That’s a pretty good indication that the popularity will continue. We think we’ll stay pretty strong this year.”
Two boulders crashed into a home located at 1551 Nobrega Street in Kalihi Valley after being dislodged by heavy rains. One boulder was measured at 3 feet by 5 feet while the second was slightly smaller at 3 feet by 3 feet. There were four people sleeping in the house at the time, but fortunately no one was hurt. The deputy director for the Department of Emergency Management, Peter Hirai, stated that officials had surveyed the cliff face behind the house in the past. At the time of the survey, the department had stated that there was no immediate concern of falling rocks. However, Hirai added that the department did advise the homeowners that if there was more rain, there is always a possibility of rocks coming down. A city surveyor will be brought out to determine if the boulders came from the hillside that is part of the property, or they came from a parcel of land above. Once ownership of the boulder generating land can be determined, correction to the problem can be addressed.
According to a report released by the state Judiciary Department, the number of foreclosures filed statewide increased to 341 new cases in December 2012. In comparison, 327 new cases were filed in November, and 196 new cases were filed in October. Experts say that this increase is to be expected as lenders are starting to file more foreclosures now that there is a better understanding of the legal changes (Act 182) that were made in June 2012. Many court cases were suspended or delayed due to Act 182, and have now been restarted in the court system.
341 foreclosures filed – December 2012 327 foreclosures filed – November 2012 196 foreclosures filed – October 2012 58 foreclosures filed – September 2012 59 foreclosures filed – August 2012 75 foreclosures filed – July 2012 (Act 182 Started) 458 foreclosures filed – June 2012 397 foreclosures filed – May 2012 382 foreclosures filed – April 2012 404 foreclosures filed – March 2012 345 foreclosures filed – February 2012 285 foreclosures filed – January 2012
The United States Navy is going to be forced to make some tough budgetary decisions due to a federal budget shortfall. Admiral Jonathan Greenert, chief of naval operations, announced that nationally the Navy would be force to layoff a total of 1,121 temporary workers by the end of the year, place a freeze on hiring new civilians, and place a hold on many new research and development projects to trim the budget. All naval bases would be required to make financial sacrifices. For the state of Hawaii, a total of $110 million in savings would be required by the end of 2013. This would include many temporary workers having their jobs terminated in the next few months, canceling a $35 million repair job of a Pearl Harbor destroyer, and reducing base support and modernization by $75 million.
Iain Wood, the president of the Ship Repair Association of Hawaii and chief operations officer with Pacific Shipyards International, is in charge of the private shipyard workforce that would have done the $35 million of repairs on the destroyer USS Chafee. Wood noted that other surface ships were also slated for minor or major repairs over the next few years, and these too could be delayed or canceled. This could lead to the loss of several hundred jobs. Wood noted, “We’re obviously very concerned as an industry.”
The latest results from the archaeological survey of the route of the Honolulu Rail Project has uncovered a section of a human pelvic bone near the corner of Ala Moana Boulevard and Punchbowl Street. This is the seventh set of human remains that the survey has uncovered since the Hawaii Supreme Court ruled on August 2012 that an archaeological survey must completed along the entire route prior to construction resuming. Executive Director for the Honolulu Authority for Rapid Transportation, Dan Grabauskas, stated that his agency will continue to work with the State Historic Preservation Division and the Oahu Island Burial Council to ensure that the remains are treated respectfully and in accordance with state law.
In June 2012, billionaire Larry Ellison, under the name Lanai Resorts LLC, purchased 98 percent of the island of Lanai. In a recent press conference, it was released that Ellison would like to build a new oceanfront hotel, expand the existing Four Seasons Resort at Manele Bay, build a second airport runway, create a desalinization plant which would supply the whole island with fresh water, utilize more solar energy, and create free electric-car charging stations across the island. There are also plans to re-establish commercial farming on the island, create a university research center and create new health care and hospice care facilities for the residents. At this time, however, Lanai Resorts LLC has not given exact specifics on what would be done, nor did they give exact timelines as to when these projects would be started.
For the most part residents of Lanai approved of Ellison’s ideas, but have noted that they do not want Lanai to become too commercialized. President of the Lanaians for Sensible Growth, Butch Gima, commented, “Overall the community is I think excited and optimistic about the potential. There are really no red flags at this point.” Gima added that Lanai Resorts’ management is doing an excellent job engaging the community and asking them for advice and suggestions as to what they would like Ellison to accomplish.
Alan Arakawa, the Mayor of Maui (which includes the island of Lanai), commented, “This is probably the best thing that could have happened to the island,” he said. “The former owner was allowing it to deteriorate. My hat’s off to Larry (Ellison). His intent seems the very best. I see Ellison as trying to find all the things that can enhance Lanai. I don’t think it has to be his way or the highway.”
When the Ko Olina Resort & Mariana project was first conceived, one of the requirements put into place was that the resort was required to build a public boat ramp on its property. The Ko Olina Resort installed a public ramp in 2000, but it quickly became a controversial issue as the public complained about operating hours and fees, while resort residents complained about noise and heavy traffic. As a result, the resort closed and destroyed the public boat ramp in 2005 and stated that the public could use a ramp that a boat repair company used to transport boats to and from the water at the adjacent industrial Kalaeloa Harbor. However, fisherman and public boaters complained that the ramp was unsafe for them to use due to the fact that its design was made for larger vessels and had poor protection from larger ocean swells for small boats. In 2008, the Hawaii Land Use Commission ruled that Ko Olina was required by law to re-establish a public boat ramp in its marina, but did not specify a deadline for its construction to be completed.
Now, almost eight years from when Ko Olina Resort & Marina removed the public boat ramp and five years after the Land Use Commission required Ko Olina to rebuild a public boat ramp, no work has been done. Ko Olina Development LLC’s attorney, Wyeth Matsubara, stated, “We have no control over the permitting authorities and how long it takes to process permits. It is the process and it is what is required.” Matsubara added that once all of the permits and requirements were completed it would take about 12 months to build the boat ramp and cost a total of $2 million. Matsubara noted that the resort needs to get water quality certification permits, a conditional use permit, a conservation use district permit, a coastal zone management permit, a shoreline management area permit, a Corps of Engineers permit and finally a building permit to build the boat ramp. The resort may also have to conduct a cultural survey as required by the State Historic Preservation Division and a study to assess the impacts on fish as required by the National Marine Fisheries Services.
Meanwhile, local fishermen and boaters remain furious as the Ko Olina Resort & Marina and feel that the resort is intentionally delaying the project and permitting process. Many noted that the Disney Aulani Resort and Spa at Ko Olina, which costed over $850 million, was completed in just two years while a $2 million boat ramp has taken over five years and counting.
The Hawaii Tourism Authority has released the preliminary numbers for visitor arrivals and for visitor spending in 2012. As expected, 2012 was a record setting year with almost 8 million visitors coming to the islands and visitor spending hitting $14.3 billion. The previous records were 7.6 visitors set in 2006 and $12.8 billion set in 2007. HTA President and CEO Mike McCartney was pleased with these numbers and expects the momentum to continue in 2013. McCartney stated, “2012 was the best year on record for Hawaii’s tourism economy. Together with our global marketing contractors and industry partners, we will continue efforts to make 2013 another successful year for Hawaii’s visitor industry.” The HTA’s goal is to have 8.2 million visitors this year and have them spend $14.88 billion.
Bank of Hawaii’s President and CEO, Peter Ho, commented that the strong tourism sector has really boosted Hawaii’s overall economy. Ho stated, “If you look at the national unemployment picture, the country is at 7.8 percent, and we are down just over 5 percent. That’s a big difference, and a large part of that is due to the success that we are having here in the visitor industry. The visitor industry is one of the primary economic drivers in our marketplace. We see that success spreading. There is increasing business and investment activity.”
The Honolulu Authority for Rapid Transportation has received preliminary approval from the Honolulu City Council to buy two private properties in Pearl City who have refused to sell their land through the use of eminent domain. The first property is a 9.7 acre lot located on the 96-100 block of Farrington Highway and the second is a 2,200 sq ft stretch of parking that fronts a commercial building on the 900 block of Kamehameha Highway. HART had attempted to negotiate with the landowners to acquire the properties, but negotiations were unsuccessful.
The Honolulu City Council has 45 days to raise any objections regarding the eminent domain purchase. If none are made, the owners would be forced to sell their properties based upon what a third party deems to the fair market value. Executive Director and CEO for the Honolulu Authority for Rapid Transportation, Dan Grabauskas, commented, “We believe the best option now is to have a third party, that is the court, decide the appropriate settlement. This action will respect the property owners’ interests and those of the taxpayers.”
However, Karen Lee, the vice president of RHS Lee Inc., which owns the 9.7 acre lot on the 96-100 block of Farrington Highway, is furious about the process. Karen Lee stated that she has owned the property with her husband Richard Lee for over 30 years. The land is currently zoned agricultural and has been was given a fair market value of $66,200 by HART in 2011, a number with Karen and Richard Lee feels is insultingly low. Likewise the Honolulu Authority for Rapid Transportation offered Stuart Plaza Investments, who own the 2,200 sq ft stretch of parking spaces on the 900 block of Kamehameha Highway, only $115,000 for their land. Bradley Pulice, the attorney representing Stuart Plaza Investments, felt that that HART’s appraisal was overly simplified and did not factor in the effect that removing their parking stalls would have on their businesses. Stuart Plaza Investments believes that the fair market compensation should be $950,000.
Governor Neil Abercrombie has announced that he would like to create a new development authority for the state’s harbors and parks. Under the governors’ proposal, a five member board would work with the private sector to develop these locations and bring in additional revenue for the state. For example, the new development authority may identify a state owned small boat harbor and find a suitable private developer to redevelop and manage the facility for the state.
Abercrombie’s administration had suggested a similar initiative to develop underused public school land and use the money generated to modernize existing schools.
Alexander & Baldwin, a Hawaii based real estate firm, has announced that they have purchased the Waianae Mall for $29.8 million. The property has approximately 170,000 sq ft of retail space and is the neighborhood shopping center. President and Chief Operating Officer for Alexander & Baldwin, Chris Benjamin, commented, “We plan to revitalize the mall and restore it as an important retail and community center for Waianae residents.”
The property was built in 1974 and has been struggling with occupancy rates over the last few years. Currently, the mall has an occupancy rate of 79 percent, though Alexander & Baldwin has stated that they do have a new anchor tenant in place which would increase that occupancy rate to 93 percent by the end of this year. Alexander & Baldwin would be the fourth owner for Waianae Mall in the past decade.
PACREP LLC, the developer for the new Ritz-Carlton condominium-hotel in Waikiki, is requesting a height exemption from the Honolulu City Council Zoning and Planning Committee. Currently, the height restriction is 300 feet for the Waikiki Special Design District. However, PACREP would like to build a 37-story building at 350 feet tall. The 3.5 acre property is located at 2121 Kuhio Avenue on the site of the Old Waikiki Market. PACREP is expected to spend $275 million to develop the property which will have a total of 351 units inside.
The Honolulu International Airport has issued a press release outlining a massive $750 million renovation plan. According to airport officials, the project will start in June 2013 and is expected to be completed by 2017. Plans including building a new terminal and renovating the old terminals, creating a new maintenance and cargo facility, widening the airport runways, increasing the size of the gates, and adding a new rental car building. The project will be paid for by fees collected from airport tenants, federal airport improvement grants, and a special airport revenue bond.
The Department of Transportation’s deputy director for the Airport Division, Ford Fuchigami, stated that none of the improvements would be paid for out of the state’s general fund. Fuchigami added, “If you take a look at our current commuter terminal, it’s old. It’s very old. We need to go ahead and upgrade that. If you compare our airport to other airports we want to be in the same capacity with them, so I think it’s really important for us to keep up.”
Governor Neil Abercrombie has proposed a bill to increase minimum wage in the state of Hawaii to $8.75 per hour starting in January 2014. Currently, minimum wage is $7.25 per hour and has been that way since 2006. Abercrombie stated, “Many of Hawaii’s residents are the products of plantation-era workers, people who worked and toiled in the fields, earning the bare minimum in order to afford a better opportunity for their families. Today there still exists a hardworking sector of our society that deserves continued recognition. These are the working-class residents who earn the minimum wage.”
While many workers naturally applaud the governor’s plan, businesses have expressed concern about how such a rapid increase would actually lead to them laying off workers. State Senate President, Donna Mercado Kim, commented, “I acknowledge the fact that a lot of our workers deserve an increase. What that increase should be, we have to balance that out with our businesses. Many of our smaller businesses have been closing down, our mom-and-pop businesses, and the burdens that we put on them in addition to the minimum wage, what kind of taxes, unemployment insurance and all of those things have to be taken into consideration.”
Hawaii Employers Council assistant general counsel, Ryan Sanada, agrees with Kim. Sanada stated, “A dollar fifty is basically over 20 percent of the current minimum wage. In the private sector you rarely see a wage increase of 20 percent. We appear to be coming out of the recession, but I don’t think we’re coming out of it yet, so a raise of $1.50 seems to be pretty big to me at this time.”
According to reports released by Colliers International and CBRE, two commercial real estate firms, Oahu’s warehouse vacancy rates decreased from 4.8 percent in 2011 to 3.8 percent in 2012. This equated to approximately 392,000 sq ft of empty warehouse space being filled during the course of the year. Colliers noted in their report that, “The improved economy is placing increased demands on the island’s industrial marketplace.”
The commercial real estate firms also noted that the state of Hawaii has announced that they would be developing a new shipping container terminal on 94 acres on the Ewa end of Honolulu Harbor. This state owned land is currently filled with warehouses which the state leases out to private individuals and companies. As a result, the tenants occupying approximately 1.5 million square feet of warehouse space on this state owned industrial land will have to move out by February 2014. This will increase the demand for private warehouse space and should lead to higher rates and higher occupancy in the coming years.
Oahu Publications Inc., the publisher of the Star-Advertiser, has announced that they have purchase The Garden Island newspaper. The Garden Island is a Kauai publication and has a daily circulation of approximately 9,509 papers. Publisher for The Garden Island, Casey Quel Fitchett, stated, “We are pleased that The Garden Island will continue to be owned by a newspaper company with a demonstrated commitment to strong journalism and one that understands the importance of a locally produced newspaper on Kauai. We believe this is a great opportunity for The Garden Island’s print and online editions to evolve and expand with our association with the state’s largest media company. Our sole concern is for our readers, and we want them to know that we will continue to put out the best newspaper possible, reflecting the local issues and concerns of Kauai residents.”
One major change would be that production and printing of the newspaper would happen at the Star-Advertiser’s facility in Kapolei on the island of Oahu. These newspapers would then be flown to Kauai daily for distribution. Star-Advertiser Publisher, Dennis Francis, added, “In 1902, Kauai Publishing Co. began printing The Garden Island, one of Hawaii’s most historic newspapers. We want this newspaper to continue building its journalistic legacy and serving the people of Kauai. We feel strongly that Kauai residents need their own in-depth, locally produced daily news.”
While the State of Hawaii did post very low unemployment rates in December (5.2 percent), economists warn that the state is still about a year or more away from regaining all of the jobs that were lost during the past recession. The University of Hawaii Economic Research Organization (UHERO) predicts that the job market will fully recover by 2014, while the state Department of Business, Economic Development and Tourism are looking until 2015 for a full recovery to occur. State economist Eugene Tian stated, “We’re still about 25,000 jobs below the peak of the job market in 2007. The recovery has been slower than during previous business cycles.”
The United States Army has announced that they are considering the possibility of cutting 8,000 solider and government civilian positions at Schofield Barracks and Fort Shafter on the island of Oahu. Facing budget cuts, the Army is forced to reduce their active-duty force from 562,000 positions to 490,000 positions by 2020. If the Army decides to reduce the number of soldiers in Hawaii, it would cost the state an estimated $391 million in annual income. The U.S. Army Environmental Command issued a statement stating, “The (assessment) is designed to inform decision-makers of potential socioeconomic and environmental impacts associated with proposed actions as these stationing decisions are made in the coming years. The specific locations where changes will occur have not been decided.”
Hawaii economists estimated that if the Army does decide to cut 8,000 soldier and government civilian positions in Hawaii, an additional 831 military service contract jobs would also be cut. Furthermore, an estimated 1,496 other jobs would be indirectly lost due as a result of reduced demand for goods and services. This would mean a total loss of about 10,327 jobs for the island of Oahu.
Governor Neil Abercrombie has asked state lawmakers to approve a fee on soda and other sugar-sweetened drinks. Under Abercrombie’s proposal, there will be a 1 cent per ounce fee, or $1.28 per gallon, for distributors wishing to sell in the islands. The state Department of Health estimates that this would generate $37 million a year in revenue and would be used to help with childhood obesity prevention and oral health care programs. Some of the money would be directed to adult obesity and diabetes prevention. Director of the Department of Health, Loretta Fuddy, stated, “The rationale behind putting a fee on sugar-sweetened beverages is we want to create a disincentive. And we know that cost is very much connected to our choice when we go into the market.”
The Governor had proposed a similar law two years ago, but the motion was quickly attacked by the No Hawaii Beverage Tax coalition, which is made up of dozens of businesses including Coca-Cola, Pepsi, Hawaiian Sun and Waialua Soda Works. These beverage industry companies argue that obesity (childhood and adult) are caused by a combination of food, drink and lifestyle choices. Therefore, imposing a tax only on soda and other sugar-sweetened drinks is discriminatory. Furthermore, the beverage industry cautions that higher taxes and fees would harm businesses and cause job losses and harm retailers who are recovering from the recession.
Island Air has announced that the new buyer for the company is going to be none other then billionaire Larry Ellison. Ellison made headlines in 2012 when he purchased 97 percent of the island of Lanai. Island Air is currently the third largest interisland airline and has an approximate 5 percent of the market share. Ellison is the co-founder and CEO of Oracle Corp and is the third-richest person in the United States with an estimated net worth of $41 billion. The exact sales price for the purchase of Island Air has not been disclosed.
According to a report released by the state Department of Labor and Industrial Relations, Hawaii’s unemployment rated decreased to 5.2 percent in December 2012. This marked the lowest unemployment rate for the state since October 2008, when the rate was 5 percent. Honolulu County continued to have the lowest rate at 4.3 percent. Maui County reported a 5.2 percent unemployment rate. Kauai County had a 6 percent unemployment rate and Hawaii (Big Island) County had a 6.9 percent rate. In comparison, the national unemployment rate was 7.8 percent for the month of December 2012.
After a ruling made by the Federal Energy Regulatory Commission stating that federal authorization is not needed, Hawaii Gas has announced that they will be shipping limited amounts of liquified natural gas to the islands within the next two months. Company president and CEO, Jeff Kissel commented, “This ruling is hugely positive. We still have to get state and local authorities comfortable with the plan, but we hope to have the first shipments here in 60 days.” Initially, the natural gas would be sold to residential and commercial customers. However, Hawaii Gas hopes to eventually have larger tanker ships bring enough natural gas to replace oil for electricity generation.
Island Airline, the third largest regional airline in the state of Hawaii, has announced that they have reached a preliminary agreement with an unnamed buyer of the company. According to Island Air officials, the new buyer is still doing their due diligence and are reviewing the airline’s books. Island Air also stated that all 245 employees will keep their jobs under the new ownership.
The Hawaii Tourism Authority’s vice president of brand management, David Uchiyama, commented, “We’re waiting to hear how this thing evolves. Our concern is that they get certification for that new aircraft that they brought in so they can get it up and flying. We’re very concerned about the interisland market and the competitive playing field we’re dealing with. One of our initiatives here is to be able to distribute more of our visitors to the neighbor islands, and any interisland carrier becomes an integral part of that — Hawaiian, Island Air, go!, Mokulele. We’re concerned about them (Island Air) going under very much so.”
TripAdvisors has named the Four Seasons Resorts Hualalai on the Big Island of Hawaii as the Best Hotel in the United States, the Best Hotel in the World, the Best Luxury Hotel in the United States and the Best Luxury Hotel in the World. The internet travel site, TripAdvisors, stated that they select their top hotels based up millions of traveler’s reviews posted over the past year. Three other Hawaii hotels made the top 25 United States properties. They included the Four Seasons Resort Maui at Wailea (#2 overall), the Four Seasons Resort Lana’i (#6 overall), and the Ko’a Kea Hotel & Resort on Kauai (#19 overall).
Stanford Carr, a local developer, has announced that construction for the Halekauwila Place Tower in Kakaako will begin shortly, now that financing has been secured. The $70 million project will be an affordable rental apartment tower in Kakaako and will be limited to tenants earning no more then 60 percent of Honolulu’s median family income. This equates to under $43,000 for a single person and under $63,000 for a couple with two children. Studios in the building will range from 395 to 424 sq ft in size, one bedrooms are estimated to be 535 to 597 sq ft, two bedrooms between 684 and 782 sq ft, and three bedrooms from between 1,093 and 1,511 sq ft. Rents will range from $850 per month for studios to $1,400 per month for three-bedroom units. Developer Stanford Carr stated, “This is truly workforce rentals. It’s been a long and arduous process, but we’re glad to be here. That’s really what’s needed in the marketplace. We are so far behind on (satisfying) the need for this kind of rental units.” Carr predicts that the building will be completed and ready for occupancy in April 2014.
After meeting with Hawaii Pacific University officials, the Aloha Tower Development Corporation has given their consent for the university to do a $32 million redevelopment of the complex. HPU plans to build loft-style dormitories on the second floor of the complex which would accommodation approximately 320 students. While the complex will still have retail shops and restaurants, the University plans to use some of the empty space for offices and classrooms, as well as build a sports/entertainment complex and an additional parking structure. Aloha Tower Market Place will be renamed as either the Tower District or Honolulu Live.
However, the project is still facing some legal challenges. Developer Ed Bushor, who originally partnered with Hawaii Pacific University and negotiated the purchase of Aloha Tower Market Place in December 2011, is now suing the university for fraud. HPU decided to execute a contract provision to buy out Bushor’s interest for $5 million in October 2012 and removed Bushor as its project manager in November 2012. Bushor’s attorneys dispute the provisions under the contract and believe that HPU acted in a fraudulent manner.
Additional human remains were found by archaeologists conducting a survey for the Rail Project in downtown Honolulu. According to the State Historic Preservation Division, the bones were located near the federal building on Pohukaina Street. It appears that the bones may be that of a child from pre-Western contact times. Project officials stated that they will consult with identified descendants of those who had lived in that area where the remains have been found and will decide on the proper burial treatment.
November 2012 was a fantastic month for the Hawaii tourism industry and actually set several records for the month of November. Usually one of the slower months of the year, this past November saw a statewide occupancy of 74.4 percent with an average daily room rate of $195.36 and a statewide revenue per available room of $145.35. All in all, Hawaii’s hotels took in a total of $247.3 million in room revenue for the month of November 2012.
Oahu had the strongest occupancy rate with 84.9 percent of its hotel rooms filled. However, the Big Island of Hawaii was only at 62.1 percent, creating some concern for the neighbor island industry. President and CEO of Hospitality Advisors LLC, Joe Toy, stated, “The large occupancy difference separating the islands was indicative of the unevenness of the recovery. So, while it’s great news about Oahu and the statewide numbers are good, we still have problems in various markets.” Toy did note that Maui, especially the Wailea resort community has seen significant improvement in 2012, and did admit that the Big Island is typically the last island to recover.
Senior Vice President and Director of Operations for Starwood Hotels & Resorts in Hawaii and French Polynesia, Keith Vieira, noted that Hawaiian Airline’s push to increase direct flights from Asia and the U.S. Mainland to the neighbor islands will significantly help their recovery. Vieira noted, “Visitors want to get to where they want to go in the shortest amount of time and the least difficult way possible. If you can fly direct versus stopping in Honolulu, that’s of great value to the visitor. If they are looking at a six-hour travel window, Hawaii competes instead with the U.S., Canada and Mexico, and we have a greater chance of getting that traveler. Ultimately, the more direct flights into the neighbor islands, the better they will do.”
Tax Appeal Court Judge Gary W.B. Chang ruled that online travel companies will be obligated to repay the state of Hawaii $150 million in general excise tax obligations on the sale of Hawaii hotel rooms dating back to 2000. The online companies, which included Expedia, Hotels.com, Priceline, Hotwire, Orbitz and Travelocity had argued that the tax did not apply to them since their business is conducted outside of the state of Hawaii. However, Chang ruled that the general excise tax is a “privilege tax imposed on businesses for the privilege of doing business in the state.” Ron Heller, the legal council for the online travel companies has stated that his clients will certainly appeal the ruling.
The state of Hawaii’s tax office estimated that the amount of unpaid taxes was approximately $110 million and that interest owed equaled an additional $40 million. David Louie, the State Attorney General, supported Judge Chang’s ruling and stated, “Hawaii hotels are good corporate citizens, paying their fair share of taxes to support the state’s infrastructure such as roads, schools, personnel and other costs and the online travel companies need to also play by the rules and pay their fair share.” Governor Neil Abercrombie added, “This is a significant ruling for the people of Hawaii. When I first came into office, I made this a top priority after I discovered the previous administration had chosen not to pursue these taxes. The court’s ruling shows that we were right to pursue this.”
According to First Hawaiian Bank, credit and debit card transactions at businesses throughout the state of Hawaii increased by 9.8 percent in 2012 as compared to the year prior. The fourth quarter of the year was exceptionally strong with an increase of 11.3 percent as compared to the same quarter in 2011. President and Chief Executive Officer for First Hawaiian Bank, Bob Harrison, commented, “We’re optimistic. It’s consumer and tourism driven. This really demonstrates that we’re into a solid consumer driven economy. What we’ve got now is strong consumer spending with debit and credit (card transactions) consistently growing year over year for three years now. We see other parts of the economy engaged, namely construction, where there are new projects getting ready to start in the next few months. So that should add to these very solid consumer numbers we’re seeing in the report. Our feeling is that we’re going to see continued improvement,” Harrison said. “I don’t think we’ll see any huge increases, but we’ll see steady growth in 2013.
First Hawaiian Bank is the largest bank in Hawaii with approximately $16.1 billion in assets. The bank has more then 7,500 merchants on their network. For the fourth quarter of 2012, First Hawaiian Bank’s data reflected that hotel credit and debit card transactions increased by 22.6 percent. Restaurants during the fourth quarter increased by 11.5 percent and shipping increased by 41.5 percent.
According to AAA Hawaii, the average price for regular unleaded gas in the State of Hawaii is $4.04 per gallon. The city of Honolulu had the least expensive gas average at $3.98 per gallon, while the neighbor islands saw a slightly higher rate. AAA Hawaii Branch Supervisor, Cynthia Hall, commented, “Motorists in six states, Colorado Idaho, Oklahoma Minnesota, Utah and Wyoming, currently pay less than $3 a gallon at the pump, while the state average in Hawaii tops more than $4 per gallon. The highest average prices in the continental United States are found in California and also in the Northeast, where effects of superstorm Sandy continue to be felt.” The United States Energy Department noted that the national average for gas is $3.44 per gallon.
The state of Hawaii has given their approval to allow Kaiser Permanente Hawaii to increase their premiums by 5.3 percent for 155,000 of their members. This increase affects a total of 5,200 companies whose insurance is through Kaiser Permanente. Kaiser spokeswoman, Laura Lott, stated, “Rate adjustments are necessary to cover rising costs and continue delivering quality care. This rate adjustment is below the national health care cost projection for 2013 because we continually look for new and better ways to deliver high-quality, affordable care.”
However, many businesses owners feel differently. President of the Hawaii Business League, Tim Lyons commented, “Businesses are trying desperately to find ways to cut costs. Even though the economy’s showing some signs of improvement, there’s been no gangbuster solution. A lot of businesses would love to increase prices by 5 percent, but they just can’t or they’ll lose the business; one or the other. It seems (insurers) have this carte blanche for increases, and businesses that are paying it are having a difficult time increasing their own prices by even 1 percent.” The Hawaii Business League represents over 900 small businesses in Hawaii.
The Hawaii Natural Energy Institute has just released a report stating that the Hawaiian Electric Company could save more then 50 percent at each of its two power plants by switching over to using liquefied natural gas instead of using its current fuel oil. According to the report, the state’s reliance on oil-burning power plants is the primary reason why the state’s electrical costs are over three times higher then the national average. By switching to liquefied natural gas, Hawaii residents would see a significant decrease in their electric bills.
However, not all groups support the importation of natural gas. The Sierra Club argued, “Even assuming Hawaii can consistently access affordable LNG, it is unclear how infrastructure facilitating the use of fossil fuel energy will assist Hawaii in developing renewable energy resources. In fact, investors’ incentives to invest in innovative renewable energy technologies may diminish if opportunities to invest in more ‘familiar’ fossil fuel technologies become available.”
Island Air has announced that they will be selling their company to an undisclosed buyer. The deal is expected to close sometime within the next six to eight weeks. Current president of Island Air, Les Murashige, stated that due to his nondisclosure agreement, he could not identify the buyer or the price at this point. However, Muarshige did state that there are not any plans to play off any of the company’s 245 employees. Murashige commented, “This is very positive for all the employees of Island Air as well as the communities that we serve. It’s business as usual. At the appropriate time we’ll hopefully be adding more flights to the system.”
Island Air remains the third smallest interisland passenger service with approximately 5 percent of the market share. In comparison, Hawaiian Airline has the largest interisland market share at 84 percent, followed by go! airline with 8 percent. The company offers 322 flights per week and has a total of three planes in its fleet. Murashige added, “The finances of the company are fine. We’re struggling along. We’re OK, but we’re not making money hand-over-fist. I truly believe we can be the solid No. 2 carrier. We have no delusions of thinking that we can take over the world or be the No. 1 carrier. We’re just looking to be No. 2 as an alternative for people who want to travel on us.”
Billy Balding has announced that he has arranged a lease of a 3-acre parcel in Kakaako from landowner Kamehameha Schools and hopes to build a year-round fairgrounds complex on the site. The lot is located near the Kakaako Makai Gateway Park and Balding plans to build a stationary surfing way, a skateboard park, a go-kart track, a miniature golf course, a rock-climbing wall, kiddie carnival rides and offer food and refreshments. The project still needs to obtain a development permit from the Hawaii Community Development Authority, the state agency that governs development in Kakaako and Balding still has to finalize the project details with Kamehameha Schools. However, if leasing and permitting goes through, Balding has stated that he would like to open his fairgrounds complex by this summer.
The Queen’s Medical Center had purchased the closed down Hawaii Medical Center West at the end of 2012 and has begun a massive renovation project of the property. According to their most recent press release, Queen’s will be opening the hospital under the name Queens Medical Center West Oahu in February 2014. Queen’s would have spent a total of $70 million aquiring the hospital, completely renovating the interior and purchasing new equipment for their doctors. The new West Oahu campus would have a total of 22 emergency rooms and four operating tables upon completion. President of Queen’s Medical Center, Art Ushijima, stated, “We have a larger medical staff compared to what HMC or St. Francis had. There’s significant interest among physicians who would like to establish services in West Oahu. That’s one of the key things. There’s expertise from the medical center that we can certainly provide that may not have been there before. There’s been significant community interest in reopening that hospital. I would anticipate the community wants the hospital to be successful so there’s going to be active interest in supporting the hospital.”
According to regulatory filings with the State of Hawaii, Queen’s estimates that there will be a total of 3,300 inpatient admissions in their first year, as well as 27,100 emergency and outpatient visits. By their third year, the West Oahu campus is expected to grow to 3,500 inpatient admissions and 29,400 emergency and outpatient visits.
Kaiser Permanente Hawaii announced that as of January 1, 2013, health insurance premiums for approximately 14,400 individuals has increased by 9.7 percent. In addition, Kaiser has asked the state Insurance Division to increase the rates of 155,000 members who are covered by business groups by 5.3 percent. Kaiser spokeswoman, Laura Lott, commented, “The Insurance Division carefully and thoroughly reviewed the rate adjustment and determined it was reasonable. As a nonprofit health plan, we use premium dollars to maintain health care infrastructure and provide quality care to our members.” Lott added that the increase is necessary for Kaiser to reinvest in its hospital and 18 clinics on three islands.
Hawaiian Airlines has announced that they will be acquiring 16 new long-range single-aisle aircraft to help increase the number of nonstop flights between the U.S. mainland and the neighbor islands. According to their press release, the airlines has signed a memorandum of understanding to purchase the 16 Airbus A310neo aircraft and have rights to purchase an additional nine planes if needed. If all 25 planes are purchased, this would equal to approximately $2.8 billion in costs for Hawaiian Airlines. However, the fleet expansion would also generate approximately 1,000 additional jobs for Hawaiian.
President and Chief Executive Officer for Hawaiian Airlines, Mark Dunkerley, stated, “”The A321neo will be the most fuel-efficient aircraft of its type after its introduction in 2016. With its slightly smaller size we’ll be able to open new markets that are not viable for wide-body service, while also being able to augment service on existing routes to the West Coast. “We serve more cities on the West Coast than any other airline, but they’re pretty much all to Honolulu with only a few to Maui. By acquiring single-aisle airplanes, we’ll be able to fly to more cities from the U.S. West Coast to the neighbor islands directly.” Dunkerley explained that each A321neo would service 190 passengers.
Mike Boyd, an aviation consultant, commented, “This is a brilliant move. That’s a tremendous airplane performance-wise and comfort-wise. It’s an airplane in big demand, and, if a year from now they find out the economy has turned down, they won’t have any problem getting rid of them and being stuck with them. I think they’ll be able to use them very effectively. They’re doing the right thing. The historical application of Hawaiian Airlines was to fly in the Hawaiian Islands. Nobody can make money doing that, but opening up those routes in the South Pacific and Asia, it’s brilliant. There’s a lot of discretionary income in Japan and China, and Hawaiian’s in the right spot with the right name at the right time. It’s a very sound strategy.”
The U.S. Army Corp of Engineers is working together with the Hawaii Department of Land and Natural Resources to help restore the Kawainui Marsh in Kailua. The 830 acre wildlife habitat is the largest remaining wetland in Hawaii and the home of many endangered Hawaiian waterfowl. Experts hope that the restoration will increase the number of aeo (Hawaiian stilt), alae ula (Hawaiian moorhen), alae keokeo (Hawaiian coot) and koloa maoli (Hawaiian duck). The project is 75 percent federally funded, while the Department of Land and Natural Resources will pay for the remaining 25 percent. The entire restoration is expected to cost $6.4 million and hopes to be completed by the Spring of 2013.