A McDonald's in Waikiki
We've had many a tourist tell us that "everything in Hawai`i" is expensive; and some of those tourists have said that was the reason that they weren't going to come back again.
This is not what we want to hear. We need our tourists; we need new ones to visit, old ones to visit again, and everyone to tell their friends that they had a great time. All of us who live here share responsibility for making these things happen, if we want our state to thrive and prosper, and provide the jobs and opportunities that we'd like to have.
We don't agree that "everything in Hawai`i" is expensive, but if that's what someone thinks, it's an issue. So we decided to look into this a little, and today is the first in a series of columns which deal with various aspects of tourist-area pricing.
To start out our effort, we took a look at prices for a couple of standard items at the ubiquitous McDonald's and Starbucks chains. We picked three locations each: one in Waikiki, one elsewhere on O`ahu, and one on the mainland in an upper middle class suburb of Denver. Here's what we found out.
A Mcdonald's in Littleton, Colorado
A Big Mac at a McDonald's in Littleton, Colorado, will run you $3.79 (we're leaving out highly variable sales and excise taxes). A Big Mac sells for the exact same price, $3.79, at McDonalds on Dillingham in Kalihi. A large fries is $1.99 in Littleton and $1.99 in Kalihi. The Littleton prices and the Kalihi prices are exactly the same. We found this a little surprising but quite pleasing.
However, if you check in at the McDonalds on Kalakaua in Waikiki, you find a somewhat different story. There, a large fries is the same price as the other locations, $1.99. However, a Big Mac goes for $4.45. That's 70 cents, or roughly 18.5% higher than our Littleton, Colorado sampling; it's a pretty good markup, and considering that the Waikiki location is a busy one, it likely translates into some pretty good money.
A McDonald's in Kalihi
How about Starbucks?
A Starbucks in Littleton, Colorado
A Starbucks in Kaneohe
Those same drinks at a Starbucks in Kaneohe run $1.95 for the coffee, the same as Littleton, and somewhat higher for the latte at $3.55.
A Starbucks in Waikiki
Go to a Starbucks in Waikiki (the one on Kuhio near Food Pantry) and you'll pay $2.15 for the coffee, and $3.95 for that latte. The coffee is about 10 percent higher than the Colorado price, while the latte runs just short of 20 percent more.
But what's really the bottom line here? Businesses in Waikiki pay pretty hefty rents, and the only way to recover increased costs is with increased prices and/or increased volume with at least some profit margin. The volume is surely there in Waikiki, but without having available full financial information for the businesses in question, we can't really judge if the markups are more than necessary.
Our feeling is that a 20% premium in Waikiki just might fall in line with increased costs; a 10% premium surely does. We honestly don't see these Waikiki prices as instances of gouging. While we didn't collect the numbers, we know that Starbucks and McDonald's pricing in other expensive areas, such as Manhattan in New York City, reflects costs as well. None of this seems at all unreasonable.
We were very pleasantly surprised with the outcome of our little initial study. But why, then, do tourists tell us "everything" is expensive, if the data doesn't particularly support this?
We have a theory about that, and it's got to do with our observation that Waikiki in particular doesn't have a huge amount in the way of lower-end, less expensive options, whether for dining, lodging, or entertainment. But there's enough here to fill several more columns, so we'll save the rest for subsequent entries in this series.
Reporting on O`ahu by local staff, with additional reporting from our Littleton, Colorado correspondents.
2 comments:
David and I have stayed at the Royal Hawaiian Hotel and at the Hilton Hawaiian Village, both in Waikiki and before the Royal was renovated.
The room rates were reasonable, because we are kamaaina. Probably costs more for tourists.
We were last at the Hilton in 2008 when our house was being fumigated for termites. We always dined at the Wailana Coffee Shop/Restaurant opposite the hotel. Very reasonable prices for generous servings.
I never felt we were being gouged in Waikiki, as we never ate at the hotel.
Gigi: the data we've been able to gather simply doesn't support the idea that Waikiki is more expensive than is reasonable, and your comment bears that out. And if Waikiki hotel restaurants tend to be expensive, as you point out, that's true elsewhere as well. Try eating at a restaurant in a major hotel in downtown Los Angeles!
Certainly, there are going to be a few unscrupulous gougers--- but that's true anywhere you go. We're finding that the vast majority of Waikiki merchants charge prices that are very much in line with their costs of doing business,
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