Hawaii works hard for its money. We took a look at 12 different businesses—from Matson to L&L Drive-Inn to a downtown parking garage—to find out just what it takes to make a living in paradise.
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We interact with all kinds of businesses everyday, just in the course of living our lives. It’s easy to forget, as we’re filling up our gas tank, or buying lunch, that, behind the scenes, someone is obsessing over the exact price of a gallon of gasoline, or the ingredients of a plate lunch, to make sure you’ll be back next week. The life of a business owner is a constant hustle, especially in Hawaii—the Milken Institute recently ranked our state as the single most expensive in the United States in which to do business, with costs 52 percent higher than the national average. To find out what it takes to survive in such a competitive environment, we talked to 12 different businesses and nonprofit organizations, in a wide range of different industries, about the nuts and bolts of their operation. Turns out there’s a rhyme and reason behind even the smallest details, down to the weight of an airline snack cart.
Matson Navigation Co.
How it works: Matson works with major distribution centers on the West Coast—Seattle, Oakland and Long Beach, Calif.—and ships goods to the Islands on 13 vessels. Hawaii is Matson’s core business, and it has been operating here continually since 1882. Matson handles 70 percent of everything shipped in from the Mainland, from light bulbs to mirrors for space telescopes. Companies such as Safeway rely on West Coast distribution centers, rather than building new ones on pricey Island real estate.
photo courtesy of Matson
Who’s on deck: The average crew size on a vessel is 21 people.
The Schedule: “We depart when scheduled, regardless of whether the ship is full,” notes Jeff Hull, director of public relations. If demand goes up, Matson calls in a reserve unit; if business is slow, it can cut down by one boat per week. But Hawaii’s island economy keeps demand fairly steady year-round. On the return trip, Matson ships a lot of air—the balance is Hawaii products, including nursery stock, pineapples and cattle.
Expenses: In the past four years, Matson spent $500 million on four new ships. And, to run any vessel, as well as operate the refrigeration systems for milk and Christmas trees, you need fuel. For every $1 per barrel increase in the cost of oil, Matson experiences a $2 million annual increase in its cost of doing business. A fuel surcharge, adjusted up or down as oil prices shift, adds to each customer’s bill. It’s currently 24 percent of the ocean freight charge.
Contain your excitement: 1,000 to 1,300 containers are carried by each ship. Each container can hold 51,744 aluminum cans, 24,000 heads of lettuce and 2,280 20-pound bags of rice.
—Kathryn Drury Wagner
Mark’s Garage, managed by Propark
How it works: A well-run downtown garage can wring $400 to $500 a month from each stall, thanks to efficient juggling of unreserved monthly parking and hourly parking. Most of that money goes to the building owner. The bidding for parking management contracts is highly competitive—parking firms typically end up with just 5 to 8 percent of a garage’s gross revenues. They make up for this in volume; Propark runs 57 garages on Oahu and Maui, including Mark’s Garage. You know, where you park for Hawaii Theatre shows.
Demand: The wait list for monthly parking at Mark’s Garage is two to three years long, with about 300 people listed.
Economics: According to a recent survey, downtown Honolulu has the third-most expensive daily parking rates in the nation, trailing only New York City and Boston. The real question, though, is why parking rates aren’t higher. With such overwhelming demand for parking, why not raise prices to match? “Parking has to be in support of whatever else fills up the building,” points out Richard Leong, president and founder of Propark. “If customers couldn’t afford to park downtown, it would be very discouraging. So building owners have to be sensitive to their tenant’s needs as well.”
How it works: $14,725 a year in tuition per child sounds like a lot, but Punahou School actually derives only 75 percent of its operating budget from tuition. The rest comes from a combination of endowment income and charitable contributions (12 percent) and various fees such as summer school, co-curricular programs and the cafeteria (13 percent.) John Field, vice president and treasurer of the school, says “Punahou is a large business, but we need to keep our focus on the collegial learning environment appropriate to meet the needs of our students, faculty and staff. At the same time, we must manage our costs so that we can manage tuition levels.”
Building an education: Major capital projects, such as the new Case Middle School, are funded almost entirely by charitable donations ($60 million of the total $63 million cost for Case Middle came directly from fund-raising).
Gross annual revenues: $75 million
Financial aid: In 2007, $3 million went to Punahou’s needs-based financial aid program, which benefits about 11 percent of students, with an average grant of over $7,000.
Punahou Carnival: In 2007, Punahou School sold 130,000 malasadas at its carnival. In 2006, it sold 8,000 jars of mango chutney and 2,000 jars of lilikoi butter. Carnival proceeds ($260,899 in 2004) generally pay for 15 to 20 percent of the school’s financial aid.