New Marketing Set for Hawaii

With the state marketing funds for Hawaii split between different companies, the Hawaii Visitors and Convention Bureau is facing a new set of challenges for the very first time.

By: Michele Kayal

Tourism marketing for the state of Hawaii, which has the largest tourism budget in the nation, will undergo profound changes for the first time in a century. The state Tourism Authority decided late last month to split state marketing funds between several companies, ending the monopoly the Hawaii Visitors and Convention Bureau had enjoyed since 1903.

While the bureau will retain the roughly $15 million North America contract, the authority, a cabinet-level board that oversees tourism spending, awarded much of the rest of the $25 million annual marketing funds to four other companies.

And while the bureau will remain the primary marketer to West Coast agents and professionals for the key Hawaii travel market, the agency is embroiled in controversy in the wake of a critical state audit and is searching for a new president whose vision could spell changes.

Frank Haas, marketing vice president for the authority, said the split of the marketing contracts reflects a shift away from destination-focused strategies, like that used by the bureau, to more vendors who are familiar with the source markets.

“The successful bidders demonstrated that they could create very effective marketing plans based on knowledge of those markets,” Haas said. “The underlying philosophy is, ‘What’s the best way to market in these major market areas, regardless of the history and organizational structure’.”

The change in marketing direction comes after a state auditor’s report in June questioned the bureau’s accounting practices and use of state funds, including some personal expenditures charged to the bureau by its chief executive Tony Vericella.

Vericella stepped down last month and is repaying $1,000 in expenses that officials said were improperly charged.

The audit has also sparked an internal review of the bureau’s management practices, an audit of the bureau by the tourism authority that will be overseen by a special master, and, potentially, an inquiry by next year’s Hawaii legislature.

Tourism authority officials have been quick to say, however, that the contract decisions were made even before the bureau audit was released, and that it played no role in the changes.

“Not only were the written presentations delivered, but the oral presentations were made prior to the time the audit came out,” authority chief executive Rex Johnson said.

The authority expects to begin its own audit of the bureau in a couple of weeks, Johnson said. If improprieties are revealed, penalties could be applied, or the contract terminated.

“With any of our contracts, we’ll have standards of conduct,” authority vice president Haas said. “In the event of a major problem, there’s the ability to have penalties or termination.”

Bureau officials appeared philosophical about losing the contracts. “It isn’t as big a blow as it could have been,” the bureau’s interim chief executive Les Enderton said. Enderton is also still executive director of the Oahu Visitors Bureau.

“With everything that’s been coming down in recent months and weeks, culminated by the audit publicity and Tony Vericella’s resignation, it’s been a tough time,” Enderton said.

Enderton and other bureau officials said it’s too soon to say what changes, if any, will be made at the bureau under new leadership or the new contract arrangements.

“HVCB is going to survive and probably do bigger and better things, just by concentrating on the market in North America,” said Tony Guerrero, the bureau’s executive board chairman. “It’s too early in the game. A lot of things need to be tied up, as far as what’s happening.”

Bureau executives said they hope to select a new leader within 90 days. Tourism executives and analysts hailed the new arrangements as a way to generate fresh ideas and opportunities.

But many said they also worried whether multiple contractors could be as effective as a single, dedicated organization, and whether companies who have other clients to deal with - such as Las Vegas or Barbados, in some cases - would be able to devote themselves to Hawaii’s needs.

“Are they going to give us the same kind of support and focus that we got out of the HVCB?” said Keith Vieira, Starwood Hotels and Resorts’ senior vice president for Hawaii and Polynesia operations.

Joseph Patoskie, associate professor at Hawaii Pacific University’s school of travel industry management, said breaking up the state tourism marketing contract could enhance accountability.

But there’s also a risk, he said.

“There’s a tradeoff here,” Patoskie said. “We have a marketing arm here that has had the experience of Hawaii, and knows the issues and special aspects of Hawaii.

“Another firm, even though they may on paper look competitive, when it comes to the actual marketing, may not be as good as someone who had real familiarity with the islands. I’m really split as to how this will pan out.”