Howzit Howard

What Hawaii is doing to bring more visitors

It is appropriate for the kickoff of fall football season that Hawaii tourism marketers can sum up their strategy for increasing fall visitor bookings in two words: the blitz. Hotel, airline, attraction and other marketers are running around California this week to get more West Coasties to come at us through the air with the goal of interrupting their recession with a nice vacation in Paradise. "There's great demand still, but motivating people in these times is difficult," says John Monahan, head of the Hawaii Visitors & Convention Bureau, which is the North American marketing contractor for the Hawaii Tourism Authority. There will be singing and dancing and cooking and briefings for travel agents and contests for radio stations and free trips for bloggers and anything else they can think of, targeted at this subset of Californians: those who have secure enough jobs that they can afford such a visit, and who are already sold on Hawaii. These are people who intend to come here sometime, and can afford to come here anytime, so the pitch is: for the love of God do it now, because we need your business and prices will never be lower. Monahan's deputy Jay Talwar uses the term "productive visitor" to describe the visitors we want most, who spend more money on spas, golf, tours and other attractions, and hence have more positive impact on our economy. "Those who plop and drop on the beach eventually find a beach that's closer and cheaper," Talwar explains. "Those who really get into Hawaii are more likely to be satisfied." Months ago, public and private tourism marketers did the blitz in San Francisco. Not only did it produce a measurable bump in bookings right away, but traffic from the San Francisco Bay area has been a little bit better ever since. The Los Angeles blitz underway this week is the most coordinated marketing strategy Hawaii has ever done. And there are signs that rival destinations are eyeing it closely with a view to trying the same thing, hence the continuing focus on Hawaii's beauty, diversity and aloha, the better to offer something that is not to be had for any price in Cancun, Cabo or the Caribbean. Not only domestic visitors are being sought with this approach. Kristine Klein, discussing European tourism marketing efforts, says, "Europeans don't just want to relax, they want an experience." And it had better be a once-in-a-lifetime experience, because the travel time to Hawaii from Frankfurt or London is roughly 24 hours. Hawaii is actually doing pretty well compared to most tourist destinations. South Korean outbound travel is down 32% but to Hawaii it's up 9.7%. Hawaiian Airlines has an expanding codeshare deal with Korea Airlines that includes a neighbor island trip, and it is doing a similar piggyback to put more butts in seats on its own service here from Sydney. Tourism marketers are hoping for a September bump from Japan due to a first-time cluster of holidays that allows Japanese consumers to take a week off without taking too much leave. ANA is laying on some extra flights, too. Citic Bank of China has launched a credit card that accrues points toward a Hawaiian vacation, and China has lifted some swine flu-related travel restrictions that had been discouraging travel in both directions. Hainan Air, which has applied for permission to fly between Beijing and Honolulu, expects approval in September. Hawaii tourism officials say they will be surprised if China arrivals in Hawaii do not include next year by at least 20%.

Australian shipbuilder reveals Superferry loss

Austal Ltd., the Australian shipbuilder that constructed the Superferry, has posted a profit of only $9 million on $500 million revenue for the first half of 2009, because it wrote off $30 million it lent to Hawaii Superferry. Austal CEO Bob Browning, interviewed by someone who was busting his chops about the weeny profit, justified the investment in Superferry by saying it enabled the company to build a shipyard in the United States, which in turn allows it to compete for U.S. defense contracts. The interviewer was in Australia and was focused on the 82% plunge in profits, not exposing anything about Superferry. Browning was focused on explaining that the Superferry project led to other business, thus minimizing the loan loss. Browning is himself an American and joined the company as head of the Mobile, Ala., shipyard, but now runs the entire company. I mention all this because Superferry critics continue to portray all military connections to the project as suspicious. I would portray it as an example of something which isn't nefarious but is mildly interesting - reverse dual use. Austal took a private sector contract with the hope of later winning defense contracts. Dual use usually works the other way around. Hawaii technology companies, including Oceanit, Hoana Medical and Tissue Genesis, seek defense contracts to fund research and development, then look for civilian markets for the same technology. That's dual use. In the shipbuilding industry, the big money for smaller ships is from military contracts, but the Jones Act prevents foreign shipbuilders from chasing such contracts unless they build or acquire a shipyard in the United States. Austal lent money to Superferry to help the company get started, took the contract to build its first two catamaran ferries, and set up the U.S. shipyard it needed to win other U.S. business.

Monster that won ' t die: the state budget crisis

From "Terminator" to the remake of "Cape Fear," movies are jammed with monsters and bad guys who, not having been entirely killed, emerge from the water or climb over a railing and we're all on the run again. So it is with the state budget crisis. On Friday morning HGEA revealed that Governor Lingle has sent over a new proposal that contained a little give on furloughs and layoffs, so the union decided to send back a counteroffer that also contained a little give. Both sides had been toning down their rhetoric of late and it is a fact that the new proposals narrowed the gap between their various stands on employees sharing the pain of lower tax revenues. By Friday afternoon the specter of confrontation and crisis was back, with the governor saying her hopes of conciliation were dashed after she read the counteroffer. Lingle called her cabinet into emergency session over the weekend to do another round of spending cuts, possibly including another round of outright layoffs. It's a horror movie in which the monster keeps coming back as screaming taxpayers run away from the swamp. A union counteroffer that falls short of closing the budget gap is not, in and of itself, sufficient reason to gnash the gubernatorial teeth. It is the essence of bargaining that no offer is practical until the last one, the one that is accepted by both sides. To evaluate offers at this point in the process, when each side is presumably asking for more than it expects to get in the end, each side must consider the trickier and more subjective criterion of whether the other side's latest proposal is close enough to a settlement that you can see it from here. If the governor's people know what they're doing and don't have unreasonable expectations, their dismay at the new union counteroffer suggests that they think HGEA is still angling for binding arbitration in the hope of getting a better deal from the arbitrator. What we know for certain is that the governor has responded to HGEA's newest proposal, and to the still-lower revenue estimate from the Council on Revenues, by calling her lieutenants into a weekend meeting to figure out where they're going to cut next. I often call out people who I think are holding their breath until the rest of us turn blue, that is, artificially amplifying a crisis to show everyone it was a bad idea not to treat them better. But in this case, it is hard to see how any governor of any political stripe could do anything different from what Linda Lingle is doing. Tax revenues are still way below pre-recession rates and the state government is overspending its revenues even after several different kinds of spending cuts. You should know that I have heard whispers from the union side that suggest the state government negotiators have been high-handed with them and sometimes didn't seem all that interested in real bargaining. Maybe a different approach in June could have led to a holding hands approach to furloughs that would have prevented all the legal wrangling. But even if that's the case, the situation both sides face now is a still-deepening state budget deficit that is likely to force more layoffs than if all of this had been resolved early in the summer. Maybe it just wasn't possible, but it's too bad.

Music Post: Motoric music from the classics to the movies

From Baroque to the Beatles, we like music with a beat, even when the beat is a primative, pounding pulse, what Prokofiev, who composed "Peter and the Wolf," called "motoric." Prokofiev used the term when asked to describe the basic elements in his music. You can't hear it so much in "Peter and the Wolf," but it is very apparent indeed in the finale to his Seventh Piano Concerto, which I will play on my public radio show Saturday morning, followed by the equally motoric finale to Keith Emerson's piano concerto. Give me a political message and a backbeat, John Lennon said, and I'll give you a hit. We're not talking about a backbeat here, more like a pounding four-square beat. But that is not to be taken literally. The Prokofiev is in 7/8. Earlier on the show I will play movements by Edvard Mirzoyan and Dmitri Shostakovich that are in 3/4 time but still manage to be motoric. There is plenty of pounding music in the movies but the examples I've chosen this week are from Steve Jablonsky's score to "Transformers: Revenge of the Fallen," becayse the Transformers soundtracks have unusually unrelenting pulses, reflecting the actual motoric story line. You'll also hear the motoric finale of Stravinsky's "Symphony of Psalms," technically a choral work but one in which the chorus replaces the strings as a body of instruments in the orchestra. Anyone who has gone to a movie where a wordless chorus figures in the musical soundtrack will get it right away. "Howard's Day Off" airs live, 5-7 a.m. HST, on Hawaii Public Radio stations on Oahu, Maui and the Big Island, and streams live on http://www.hawaiipublicradio.org . Facebook users can visit the Howard's Day Off Appreciation Society page organized by Max Cacas of Washington, D.C.

Council on Revenues: " Look out below! "

The dark wizards of the Council on Revenues, meeting last May, murmuring incantations and waving their hands over a crystal ball while dry ice filled the room, revised their tax revenue forecast yet again, and yet again they revised it to be darker and more ominous than before. "Economo confundis!" They confounded the governor and the legislature, whom they had previously told that revenues would be merely miserable, by changing their minds and forecasting that revenues would end the fiscal year down 9%, and that in the next fiscal year, beginning July 1, there would be 0% rebounding. Governor Lingle had already done all the "easy" stuff like curbing state travel and cutting executive salaries and reducing discretionary spending. Over the next several weeks she cut executive pay more, including her own, put non-union employees on rolling furloughs, and tried doing the same with union employees. The unions successfully blocked that, finding a sympathetic judge to say the furloughs needed to be negotiated with the employees' first. At the same time, they said that, providing there were indeed negotiations, they were warm to the idea of furloughs if it minimized actual layoffs. But the contract talks moved very slowly, with both sides accusing the other of stalling, even after the governor issued actual layoff notices. The talks seemed headed for binding arbitration, which in the past has been good for the employees, yielding bigger raises than most private sector citizens have gotten. But the whole situation changed Thursday when the economic seers of the Council on Revenues met once again and once again revised their forecast downward. Now 0% rebounding looks like the good old days. Now the council predicts that the current fiscal year will see a further 1.5% decline in tax revenues. If the smarties are right, the state budget crisis just got almost $100 million worse. The alarming thing about this is that the crisis was already getting worse simply because the contract talks were so slow. Every day without a contract agreement including wage reductions and/or rolling furloughs has been another day the state budget deficit gets worse, increasing the probability that the ultimate solutions will have to be more draconian. This is not a temporary crisis that can be waited out. It is a calamity that will be with us for two more years at least. It will be longer than that before the economy returns to the levels of 2007. If no contract agreements are reached soon, the matter goes to an arbitrator in a little over a week. Postscript Something good has happened. Governor Lingle and HGEA have exchanged fresh contract proposals. On its website Friday morning, HGEA said the governor has for the first time backed off her original numbers for furlough days, so the union responded by moving off its own previous proposal. Details are facedown as they should be at this stage of contract negotiations, but it does no harm to report that the two sides are both looking to rely on rolling furloughs to avoid, if possible, more painful options.

(Time) Killer apps

Some Internet applications are "killer apps" and some are just time killers. I'll enjoy dissing the applications I dislike, but this post is really about how, and when, we come to realize this. I detest instant messaging conversations and predict that over time we will all come to realize what a bad idea IM is. On a conventional email exchange, you can't hear how the other person is reacting to what you say, but you can't be interrupted, either, allowing you to choose your words carefully. On a phone call, you can't choose your words carefully, but you can hear the other person's reaction and adjust your comments accordingly. IM combines the failings of both without their strengths. Recently I posted on what's good and not good about Facebook, and got a number of comments (some on this site and some on Facebook itself) agreeing that some apps are time-wasting and devoid of content - pokes, non-existent gifts, Mafia games and so forth. I see a pattern in the way people react to new technologies, new products, and even new styles. We tend to be enthusiastic about anything new. Only when something isn't new any more do we seem capable of dispassionate evaluation, often deciding at that time that the new thing wasn't that good a thing after all. In the late 1800s there was a great battle of music critics over traditional classical music, as Brahms was then composing, versus the "new" storytelling music that Wagner was producing at the same time. Wagner was the latest thing and Brahms was seen as conservative. Now both guys are more than a century dead, neither has the advantage of being the latest thing, and Brahms enjoys somewhat broader popularity. In jazz, many traditional performers are now venerated more than some later ones who enjoyed being thought progressive. In rock, later generations have revisited the classic rock of my adolescence, valuing some bands more highly than I did at the time. On the technological side, my best example is analog versus digital clocks. For timing purposes, an old-fashioned clock with a sweep hand is easier for timing on the air because remaining time is represented as space - the space from where the sweep hand is to the top of the clock face - and no math has to be done in your head to calculate remaining seconds. But the broadcasting engineers who order equipment were for years so enamored of the "new" digital clocks they couldn't conceive of ordering anything else. Broadcast engineers still order liner volume controls - "faders" - because they're newer technology than the old "pots," or "potentiometers" - rotary knobs. It's too bad, because turning a knob is a fine motor movement for the wrist that can be more finely calibrated than the gross motor movement of the arm that moves a fader. If you think hard you can probably remember something that was very hip for five minutes and then faded from sight, because once they were no longer the latest thing, people realized they were a dumb idea. There used to be cars for which you pushed buttons to shift gears. All men's ties were paisley for awhile in the 1980s. Remember the EcoGrill, which used balled-up newspapers to cook hamburgers with what was basically a controlled grease fire? What examples would you like to offer?

A merger - in the military

The Navy and the Air Force say they will merge Pearl and Hickam, and do it within a year. Redundant functions at the two bases will be consolidated, efficiencies will be achieved, and the resulting joint base will execute all the functions the bases now perform on their own, but more nimbly. If it works out that way, it will be a momentous event in world military history, because until now it has been the practice of military bureaucracy, in America and elsewhere, to grow ever larger, clumsier, and more focused on self-preservation than mission. Two of the most searing criticisms of "management" I have ever read were both leveled against hidebound military bureaucracy by their civilian leadership. In World War II, Prime Minister Winston Churchill bristled at an admiral's insistence that "traditionally" the British Navy should take the lead in a certain military action. The British Navy's only traditions, Churchill replied, were sodomy and the lash. More recently, Donald Rumsfeld, while secretary of defense under President Bush, declared that Pentagon bureaucracy had become so cumbersome that a new weapon could not be approved until it was obsolete. All large organizations, whether military or not, indeed whether public or private. become, when they achieve sufficient mass, distracted by their own self-perpetuation. Above a certain size, staffing becomes sufficiently ample that people can be tied up for meetings a lot. A meeting of 20 people that lasts for two hours uses 40 manhours, equivalent to losing an entire person's work for a whole week, and in practice a one-hour meeting of half a dozen people can do the same thing, because of the time spent preparing for the meeting, reporting to people who weren't in the meeting on the meeting, and having sidebar discussions with people after the meeting. The loss of manhours is a best case scenario. This is what you lose if the meeting doesn't "accomplish" anything. Often, however, a meeting leads to make-work projects, compromises to good ideas, and change orders on contracts that otherwise would cost much less. And heaven forfend that the meeting is about org charts and staff levels, because then the compromises made can be really costly, creating more positions to be filled by people who also have meetings. The merger of Pearl and Hickam has been in planning for four years! Why do these things take so long? Let's leave out all the selfish reasons. Let's assume, for the sake of argument, that no one is simply protecting his own turf as a matter of tradition because he has no taste for sodomy and the lash. You might argue to save a marginal function because in a large bureaucracy the easiest way to sideline people who don't work very hard to assign them to something that isn't vital to the mission. You might try to save some positions because if we went to war you'd want to be able to call on the services of some good men and women who are currently stuck in marginal assignments. In a small organization you don't have that luxury but in a large one you do. What I'm getting at is that this merger, apparently now fully "agreed upon," even to the point of announcing that the Navy will take the lead, will be harder than it looks, and if even incremental streamlining can actually be accomplished it will be a great victory for those who manage it.

No Hawaiian Airlines strike for at least three months

Here's something to be thankful for: it is extremely unlikely that Hawaiian Airlines will be hit by a strike before Thanksgiving. The arcane process that leads to a strike virtually ensures this. And who knows? Maybe pilots will get a contract by then. In the airline industry, union contracts do not expire. They merely become "amendable." The hundreds of pilots who work for Hawaiian Airlines have had an "amendable" contract for years, but the company has not been amenable to amending it unless, it can undo work rules that can be pay for raises. Hawaiian pilots are reluctant to give back all that time off, though in the end they may do so to get serious wage increases. Several pilots are talking to me about the negotiations; some are hardliners and some are not, and I'm insufficiently connected to know which faction is larger. I assume a contract will be reached. I also assume it will go down to the wire because a lot of money is involved and negotiators have a tough task on both sides. On the management side they want to be sure they don't lock in so big an increase in payroll costs that the next run-up in jet fuel prices sends the company into Chapter 11 again. Union negotiators want something ratifiable. After years of negotiations, a federal mediator is now involved. A recent bargaining session in Washington, D.C., has been described by both sides as producing some progress but not as much as either side wanted. The next session has been scheduled for October 12. The Hawaiian unit of the Air Line Pilots Association has begun a two-week vote on whether to give the union the authority to call a strike. This is mostly a formality, except insofar as the margin of victory, if it's large enough, could signal to both sides how the pilots feel about things. After years without a new contract, though, I think we can guess how they feel about things. Before a strike can be called, several other things have to happen. First, the federal mediator has to declare an impasse. In the dictionary and in the real world, an impasse means two parties can't agree. In labor negotiations that involve a federal mediator, it's not legally an impasse until the mediator says it is. ALPA can say it's an impasse, Hawaiian Airlines can say it's an impasse, I can go on the air and dramatically remove my glasses and point at you and say, "These guys are at an impasse," but until the mediator says so, nothing further can happen in the direction of a strike. The next step is for the mediator to offer the two sides "binding arbitration." Unlike a mediator, who merely tries to facilitate an agreement by acting as a go-between, cajoling, feeding the two sides pastries until they calm down from carbo-loading, etc., an arbitrator is a more Solomonic figure whose job is to decide where the middle ground is. Under binding arbitration, the two sides are bound to accept the arbitrator's sometimes arbitrary ruling on what's fair. (Remember this, not because there's a test, but because contract talks with Hawaii state employees could go this route.) If one or both sides reject binding arbitration, there still can't be an immediate strike because a 30-day cooling-off period kicks in. This means, even if the October negotiation sessions ends in one day in abject failure and the mediator, contrary to all past practice, declares an impasse the same day without even trying again, it would still be mid-November before a strike could be called. Even then, the president could appoint a panel to look at the situation and that would delay a strike. In brief, a strike before Thanksgiving is virtually inconceivable even if everything that can go wrong, does go wrong. Now let's see if the two sides can hammer something out without going this route. P.S. I may make adjustments to this post. Both sides in the talks watch what I write closely, and I am grateful to both sides for helping me correct factual errors.

The new forecast: mild recession, faint recovery

The current recession could not be harder to measure if it were wearing Harry Potter's invisibility cloak, but state economists have made their quarterly attempt to do it, so you may as well have the new numbers. The revised forecast issued Monday calls for 1.1% shrinkage in Hawaii's economy this year, a third less than the 1.6% shrinkage that the same people predicted three months ago. They also think there will be less inflation this year, 0.6%, half as much as predicted earlier. At the same time DBEDT, the Department of Business, Economic Development & Tourism, forecasts 3% job shrinkage, more than it said earlier, and, despite steady visitor traffic, an 11.5% plunge in visitor spending, a third worse than it said earlier. The deeper predicted decline in the number of jobs is mostly based on the knowledge of how many jobs have already gone away, but it's also partly based on the expectation that hospitality jobs could shrink some more. "We do not believe it is prudent to predict an economic recovery yet," DBEDT Director Ted Liu said. "And all indications are that any recovery will be gradual." Carl Bonham of the UH Economic Research Organization, who appeared Monday morning on "Sunrise," said there are some encouraging signs here and there, but he and other economists wonder what will happen when the economic stimulus is done. "The thing is," he said as we waited to go on the air, "what if artificial stimulus is the only thing driving the economy right now? What happens after?" A widespread view among economists both in Hawaii and on the mainland is that the economy will resume growing by year's end, but might slip back into recession sometime in 2010 when homebuying credits, Cash for Clunkers and other stimulus is done. You're probably wondering how you personally will be affected. The key issue is whether you retain your income. Will you keep your job? If you have more than one job, will you keep that part of your income that is essential to your daily lifestyle? If the answer is yes, you should do okay, because inflation will be quite low for at least another year. But a big part of what inflation there is, is energy costs. How much money do you spend on fuel? If there is even a small chance you will lose your job in the next year, and you are committed to remaining in Hawaii, you should be building a war chest, enough savings to survive a few months out of work. I also suggest that you start reading online commentaries by the New York Times or the Wall Street Journal about personal investments. Right now the conventional wisdom is that you might as well stick with your current 401k portfolio because stocks have probably fallen about as much as they're going to, and later they'll rebound. But a double-dip recession may prove that wrong. After the Great Crash of 1929, stocks actually regained a third of their value by the end of the following winter, before falling again and further. Even safe bonds are being questioned by some commentators who think the next big financial calamity will be a collapse of the bond market. This is not yet a widely-held view and I haven't figured out how real a possibility this is. It continues to be helpful to channel as much of your spending as possibility toward local businesses that pour the money back into the local economy.

In the state budget crisis: two weeks ' notice

If HGEA and the Lingle administration cannot reach agreement on a contract this week or next, the matter will go to binding arbitration, and the result will be a contract that is not negotiated but imposed. A three-person arbitration committee will be consist of one person from the union, one person from the government, and one person from California who belongs to the national pool of professional arbitrators. As local labor lawyer and mediator Mike Nauyokas puts it, this arbitrator will get to decide how much employees will make and how much taxpayers will pay, then fly home to the mainland, unaffected by the consequences of his actions. Both Governor Lingle and Governor Cayetano before her have indicated that they think arbitrators tend to be generous to employees, sticking taxpayers with the bill. HGEA officials dispute this, but in years past the union has seemed more than willing to drive negotiations to the point of arbitration, suggesting the union is not too displeased with the results. This year, however, the situation is so different that it might be harder to guess what an arbitrator might do. If arbitrators have been content to award all the funds from rising tax revenue to employees, they might feel impelled to take a more draconian view in a year of falling tax revenue, if only to forestall accusations of not really being impartial after all. In recent days both HGEA and the state have indicated that informal talks have been going on almost every day, and unless I'm reading it wrong it seems like both HGEA Executive Director Randy Perreira and Governor Lingle seem to be toning down their rhetoric on the matter. In most years, the union head would be judged by how big a raise he won, and the governor by how much she could hold the line on wage costs. This year both will be judged by the same criterion: how many jobs they can save.