Facing tough questions from lawmakers about a twice-bungled attempt to award the state’s largest tourism marketing contract, the chief executive of the Hawaii Tourism Authority on Monday offered an elegantly simple solution: to give the authority an exemption so it doesn’t need to follow procurement law when awarding contracts anymore.

The suggestion by John De Fries, the tourism authority’s president and chief executive, went nowhere with members of the Senate Ways and Means Committee.

“You’re going to have to earn something like that,” a clearly miffed Sen. Donna Mercado Kim told De Fries, during an informational briefing.

Donovan Dela Cruz
Sen. Donovan Dela Cruz, chairman of the Hawaii Senate Ways and Means Committee, grilled leaders of the Hawaii Tourism Authority during an informational briefing on Monday. Screenshot/2022

So with that request seemingly off the table, the tourism authority must start over trying to find someone to market Hawaii to the mainland and to manage tourists who come here.

De Fries said the HTA hopes to award the new contract by March, when a current contract extension expires. De Fries couldn’t say when HTA would issue a new request for proposals from private vendors hoping for a piece of the state’s most important tourism contract. But De Fries said the idea would be to work backward from the March date.

Whether HTA can meet that timeline remains to be seen. The agency is administratively attached to the Hawaii Department of Business, Economic Development and Tourism, and the department’s new director, Chris Sadayasu, said the tourism authority has other contract proposals to administer in addition to the U.S. contract. Getting all of that done in a few months will not be easy, he said.

“I am very concerned,” said Sadayasu, who sits at the top of the procurement chain of command as DBEDT director. “That is a lot of work.”

The tourism marketing contract marks a first, thorny challenge for Hawaii’s new governor, Josh Green. It’s not just that the contract has been subject to back-and-forth fights between two bidders: the incumbent Hawaii Visitors and Convention Bureau and the Council for Native Hawaiian Advancement, a community development organization that has expanded into tourism marketing.

In addition, the Hawaii Tourism Authority is trying to reinvent tourism marketing. While previous contracts have chiefly involved marketing and public relations, HTA has pivoted in the face of public backlash to what many have seen as an overabundance of tourists.

The number of tourists to Hawaii topped 10 million in 2019 and, before the coronavirus pandemic, appeared poised for continued growth. The tourist boom led to clogged beaches and hiking trails and a sentiment among residents that the islands were being managed for visitors instead of people who live there. More than two-thirds of residents in a recent survey said they thought their island was “being run for tourists at the expense of local people.”

Accordingly, the new contractor will be responsible for not only marketing Hawaii but also managing tourism. For instance, the top items on the tourism authority’s plan for Oahu are to “decrease the total number of visitors to O‘ahu to a manageable level” and “to encourage respectful and supportive behavior” by tourists.

Visitor Arrivals 2019-2022
As the number of visitors to Hawaii approaches pre-pandemic levels, state officials are preparing to make another attempt to find a contractor to market the state to mainland visitors and manage the impact of tourists on the islands. UHERO

The latest tourism numbers show visitors are coming back, approaching 2019 numbers even with relatively few visitors from Japan, which has long been one of the state’s largest markets. Approximately 757,000 visitors came to Hawaii in October, representing a 95% recovery from the same month in 2019, DBEDT reported. The visitors spent $1.53 billion in October, a 15% increase over $1.33 billion in October 2019, DBEDT said.

This makes the new contract that much more important.

So on Monday, senators grilled De Fries about the series of false starts managed by the tourism authority and economic development department. It all started in October 2021, when the tourism authority first requested proposals to market Hawaii to mainland tourists.

The authority initially awarded the contract to the Hawaii Visitors and Convention Bureau, a tourism business association that has marketed Hawaii for more than a century. But former Gov. David Ige’s DBEDT director, Mike McCartney, agreed to rescind that contract and issue a new request for proposals after a protest by the Council for Native Hawaiian Advancement, which also had submitted a proposal.

But after the council won the contract the second time around, the visitors and convention bureau protested, alleging the tourism authority violated state procurement laws by favoring the Native Hawaiian council when awarding the contract, which was worth approximately $34 million over two years.

Facing legal processes that could further delay the contract award and let the public see whether the tourism authority had improperly favored the Native Hawaiian council, as the visitors and convention bureau alleged, McCartney initially tried to broker a deal between the two parties. While McCartney’s proposed solution might have been consistent with Hawaii’s “Aloha Spirit” statute, which McCartney cited when announcing a potential path to a settlement, the solution proved at odds with Hawaii’s procurement law.

In the end, McCartney opted to strip the contract from the Native Hawaiian council and start all over again — a third time — which was one of the forms of relief the visitors and convention bureau requested in its protest. McCartney announced he was rescinding the council’s contract minutes before Ige’s term ended earlier this month.

That might have put an end to inquiries into the procurement process, but the Ways and Means Committee continued to question the parties involved into what had happened.

Lawmaker Accuses HTA And DBEDT Of Collusion

Lawmakers were clearly displeased with what they heard.

Ways and Means Committee Chairman Sen. Donovan Dela Cruz said the answers from De Fries and HTA Board Chairman George Kam made it seem like HTA and DBEDT were working together to undermine procurement laws during the requests for proposals, bid evaluations, contract awarding and contract rescissions.

“It seems like everyone was in collusion about this,” Dela Cruz said. De Fries denied anyone colluded.

Sen. Kurt Fevella said McCartney’s friendship with Kam had led them to overlook the need to follow procurement rules while trying to work out a deal that would end the disputes between CNHA and HVCB. Fevella said he believed McCartney and Kam were acting with good intentions, just not according to procurement laws.

“None of that was approved,” Fevella said.

The legality of HTA’s extensions of its current contract with the visitors and convention bureau was called into question. And there were hints that things could get worse for HTA. With the public disenchanted by tourism and many questioning why the government should be spending tens of millions of tax dollars annually to bolster marketing campaigns conducted by hotels and airlines, lawmakers already have reduced funding to HTA.

Dela Cruz hinted more drastic cuts may be coming. When discussing a potential audit of the tourism authority, it became clear that the authority would be due for an audit mandated by statute in 2023. Dela Cruz added, “If they’re still around.”

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