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Guam Premium Outlets taps into Japanese tourist trade

By Kathryn Dube

Hawaii has long been the prime vacation destination for Japanese tourists, but the downturn in the Asian economy has left many Japanese shoppers looking closer to home. A prime beneficiary is Guam Premium Outlets (GPO), the only outlet complex on the self-governing unincorporated U.S. territory.

WFSG, the developer of Guam Premium Outlets, modeled the center after its own highly successful Waikele Premium Outlets on Oahu.

Guam Premium Outlets "has had a lot of success due to Asian visitors, especially the Japanese. There is no outlet competition, so we fill this niche successfully," said Dick Gushman, president, CEO and managing partner of Honolulu-based WFSG partners, the center's owner.

The enclosed outlet mall opened Oct. 29, 1997, in Tamuning, an important business and tourist area of the 30-mile-long island territory. Guam is located just two-and-a-half hours from Osaka and about three hours from Tokyo by air.

Guam Premium Outlets is modeled after the successful Waikele Premium Outlets on Oahu, also developed by WFSG. The project's 124,200-square-foot first phase is 78% occupied, according to Russell Robinson, managing general partner of Retail Concepts Pacific. The Honolulu-based Pacific-Rim consultancy firm handles GPO's leasing.

The center's 30 tenants offer discounts of up to 70% off suggested retail prices for designer fashions, accessories, cosmetics, footwear and the like.

The center's second phase, expected to open by late this year, will total 23,000 square feet. It may or may not have one large anchor store. Robinson maintains that "outlet centers do not have to have anchor tenants. It depends on the critical mass."

GPO is a primary component of Guam Shopping Center, which also features a variety of stores, theaters and a food court, said by the firm to be the largest in Micronesia.

Because the company is private, Gushman declined to disclose overall sales figures, but reported that it is "in the Top 10 for [U.S.] shopping centers in terms of sales per square footage, and we certainly are solidly in [that group's] upper quarter. If we can sustain high single-digit increases in our growth rate this year, we will be doing well."

Sales for the first 12 months of performance averaged $404 a square foot, meeting GPO's expectations, according to Robinson.

"Business was very successful in relative terms. Second-year sales are slightly higher than during the comparable period the first year," Gushman said.

Japanese visitors represent 85% to 90% of Guam's tourism, with the remaining percentage primarily a combination of Korean and other Asian visitors. Because Guam is only 1,500 miles south of Tokyo while Hawaii is 3,700 miles away, Japanese visitors to Guam increased 15% from 1996 to 1997 as mobility patterns shrank with the economy. Guam's market share capture rate of the total number of Japanese outbound travelers increased another 6% during 1998.

According to 1997 statistics from the Guam Visitors Bureau, the average Japanese visitor spends four days and three nights in Guam. Seventy-four percent of the Japanese tourists are in the 18-to-29 age bracket, and most are single and female.

Guam in general attracts a different type of Asian visitor, Gushman said. He likened a trip to Guam vs. Hawaii to a U.S. traveler opting for Florida instead of a Caribbean island.

"Guam is more for the midmarket visitor. It's a warm-weather little getaway. Whereas the Hawaiian tourist may be more affluent and consolidate a vacation into a seven-day trip, the Guam visitor stays three or four days," Gushman said.

The center's marketing reflects that difference. GPO promotes the fact that a three-night trip to Hawaii from Japan costs $2,800 while a four-night stay on Guam is $2,100.

In fact, Asia's economic problems may have boosted the center, as many Japanese tourists have leaned more to value/discount shopping instead of higher-end items. GPO is the only retail enterprise on the island catering to that shift. The center hopes to capitalize on the continued high Japanese living standard, and tourists who can afford to travel are more likely to seek bargains.

"During tough economic times, Japanese still travel. They simply reduce the risks of travel by doing so closer to home," Robinson said. The closeness of Guam to Japan, he continued, "plus the fact that Guam is a U.S. Territory with the English language, U.S. currency and a tropical climate make it a perfect threshold experience for young Japanese individuals and couples."

The disposable income of Japanese businesswomen, in particular, has been little affected by the country's economic woes. Fifty-five percent of young Japanese office women intend to spend their summer bonuses traveling and shopping abroad, the Japanese fashion magazine CanCam reports.

Downturn

Nevertheless, Gushman admitted that the Asian economic downturn has affected Guam's tourism as well. Total arrivals are down primarily due to fewer Japanese customers and the fact that business on Guam is heavily affected by the value of the Japanese yen. In August, Gushman noted, a dollar was worth 148 yen. By early January, the yen had strengthened, with each dollar worth 108 yen. As of press time, the U.S. dollar was worth 117 yen.

"This improves the buying power of Japanese visitors 30%," Gushman said. "The stronger yen also makes airfare cheaper for Asian tourists."

Nearly all of a recent $5.7 million emergency tourism marketing campaign initiated by the Guam Visitors Bureau has been targeted at the Japanese market. A Japan-focused promotional campaign sought to lure back Japanese visitors by promoting the island's proximity to Tokyo, its value shopping, numerous luxury hotels, and a beach at Tumon Bay that rivals those of Hawaii. Tourist arrivals to Guam, currently targeted at 1.6 million annually, are expected to double within the next five to seven years, according to the Guam Visitors Bureau.

The Asian economic flu also adversely affected the Korean tourist market, which was growing rapidly a few years ago.

"Now, it's almost nonexistent," Gushman said.

The opening of GPO coincided with one of the worst natural disasters to strike the area in recent years, Typhoon Paka in December 1997. In addition, the Korean Air disaster occurred off the coast of Guam during the summer of 1997. KAL has not flown to the island since then, but plans to resume service later this year, Robinson said.

Prior to the fourth quarter of 1998, sales at GPO were evenly divided between residents and tourists. The balance then shifted toward 63% tourism in the fourth quarter, because of the managing partnership's promotional activities in Japan, Robinson said.

Executives hope a shuttle bus service that now carries visitors from luxury hotels to Guam Premium Outlets will help to boost sales among tourists. Building permits are expected to increase resort hotel space by 2,000 rooms within the next few years, augmenting the present figure of 7,100 rooms.