Hawaii stands to lose some tourism in the wake of Japan's disasters

4/05/2011 15:10:08 PM

For supermarket operators in Hawaii, paradise is just a memory

“Hawaii is a tough place to do business,” Barry Taniguchi, president and chief executive officer of Hilo-based KTA Super Stores, told SN. “People think we live in paradise, but the cost of living is higher than on the mainland, we have to import a lot of product, and the supermarket business is very competitive.”

With a full slate of conventional chains, discount stores, mass merchandisers and drug stores vying for the food dollars of an expanding but changing population base, operating in Hawaii is no longer much different than operating anywhere else in the U.S., observers said. “Hawaii is a small market,” said one, “and there's so much overlap among different channels today that we all carry virtually the same merchandise.”

With an expected drop in tourism from Japan following the earthquake and tsunami there, the competitive climate could become even more difficult, they told SN.

The Hawaiian economy has suffered during the recession, with unemployment rising as high as 7%. The outlook had been improving of late, however, as tourism began to pick up, giving a boost to the incomes of foodservice employees — until the twin disasters in Japan last month.

“The economy was looking pretty good a couple of months ago,” Gary Hanagami, executive director of the Hawaii Food Industry Association, told SN. “We were seeing gains in tourism dollars, the economy was projected to grow, and things were looking fairly bright.

“But now we anticipate a slowdown in Japanese tourism, which will mean a lot of workers will be hurt, including some who had secondary part-time jobs in the service industries to supplement their incomes,” he pointed out.

Japanese tourists tend to stay longer and spend more than other groups, Hanagami added, “so the overall economy will be hurt — first in the neighbor islands and then in Oahu.”

According to Hanagami, it's in the nature of the Japanese culture to let some healing take place before they resume normal travel. “The Japanese were very sensitive to 9/11, and they stopped coming to the U.S. out of deference, to let feelings heal. Now the situation is reversed, and they are likely to stop traveling to give their country time to heal and bounce back.”

Natalie Berg, an analyst with Planet Retail, London, also said she believes tourism in Hawaii will be negatively impacted. “With Japanese tourists accounting for nearly 18% of Hawaii's visitors, this is clearly going to be a major blow to the economy,” she told SN.

At its peak, the recession had resulted in a 25% drop-off in the hotel and restaurant businesses, one industry observer noted — “very similar to what's been happening in Las Vegas,” he explained — “and the disasters in Japan are going to have quite a negative impact on tourism.

“In fact, I suspect Hawaii will be affected more than any other locale in the Western Hemisphere, with business potentially dropping another 10%,” he said.

That could open the way for Wal-Mart to get approval to begin opening supercenters in the islands, Berg noted.

No Wal-Mart Supercenters
Over the last few years, Wal-Mart Stores has been boosting the grocery assortment at the eight discount stores it operates in Hawaii. But although it has two Sam's Clubs in the state, it does not operate any supercenters there.

“Hawaii and Vermont are the only two states without Wal-Mart supercenters,” Berg pointed out. “But considering the impact from the anticipated drop in Japanese tourism, combined with rising food and fuel prices, local governments that previously shunned Wal-Mart might have a change of heart about the effect Wal-Mart can have on the local economy, both in terms of job stimulation and delivering lower prices to consumers.

“If Wal-Mart gets approval to open supercenters, it could be the final nail in the coffin for local grocers in Hawaii.”

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