The Big Island weathers a down economy


POSTED: Wednesday, September 23, 2009

Recovery of the Big Island's economy is dependent on “;the return of healthy tourism,”; but Hilo can do a better job of marketing tourism at Kilauea volcano and stands to gain from construction jobs at the Thirty Meter Telescope, a noted isle economist said yesterday.

Leroy Laney, a professor of economics and finance at Hawaii Pacific University, said isle tourism largely will depend on the mainland economy, “;especially the West Coast.”;

He made his remarks at the 35th Annual First Hawaiian Bank Economic Outlook Forum on the Big Island, held at two venues, the Naniloa Hotel in Hilo and the Hapuna Beach Prince Hotel in South Kohala.

“;Even though that recovery is largely beyond the control of local actions, anything that can be done to stimulate the visitor industry is more welcome than ever,”; Laney said.





The Big Island is still trying to recover from the recession:


Job growth*-5%
Jobless rate*10.5%
Visitor arrivals**-13%
Visitor spending**-17%
Construction permits*-45%
Home sales**-16%
Condo sales**-37% 
Home median price**-26%
Condo median price**-34%

        * 2009 forecast


** First half 2009 versus year-ago period


Source: First Hawaiian Bank



While East Hawaii benefits much less from tourism than West Hawaii, Hilo could improve its lot by promoting the “;increasingly active volcano,”; Laney said. To do that successfully, Hilo needs “;two missing assets: a first-rate hotel and dedicated airline commitment.”;

The siting of the Thirty Meter Telescope atop Mauna Kea is a beacon of hope for the island, as its development will create 300 construction jobs and 140 permanent full-time jobs while pouring $1.2 billion into the economy over nine years, Laney noted.

Disparities between the Kona and Hilo sides of the Big Island are a positive in this economy, he said in two presentations yesterday.

Hawaii County's economic cycle is determined by the Kona side because the visitor and construction industries are concentrated there, but that also makes that side's economy more volatile, he said.

The Hilo side is more stable—not necessarily a plus in boom times, “;but it looks a lot better in times like the present.”;

Laney used harbor activity to illustrate the point, citing the five to six weekly Young Bros. barge arrivals at Kawaihae in 2005 versus this year's, of about two a week. Hilo's three-a-week arrivals have remained about the same.

The number of jobs in Hawaii County has been shrinking at about the same rate as on other neighbor islands and will likely end the year down 5 percent from last year, while Big Island unemployment is projected to end the year at 10.5 percent.

Employment declines can be traced to negative performance in numerous other aspects of Hawaii island's economy, including visitor arrivals and spending, construction permits, home and condo sales, and agricultural performance.

Big Island construction peaked in mid-2006, about a year ahead of the rest of the state. It is now in its fourth year of decline and is expected to hit bottom in mid-2010 and recover slowly.

Oversupply of commercial developments is a bigger issue for Hawaii County than other neighbor islands, particularly in Kona, where the Kona Commons retail development is largely complete and where Lanihau Center plans an expansion. The influx of space and the new Queens Shops at Waikoloa will “;put downward pressure on rents,”; he said.

Residential real estate on the island has seen falling prices and sales due to low buyer confidence, tighter financing “;and expectations that prices may fall further,”; Laney said.

Price drops are running about 1 percent a month, and the market is back to 2004 levels, which does have interested buyers on the lookout.

Outlook co-presenter Jack Suyderhoud, a professor of business economics at the University of Hawaii, likens Hawaii's collective experience in this economy to being on a slow train in a long tunnel.

The light is some distance away, he said.

“;I see us bouncing along the bottom of the economic cycle for the last half of 2009 with a modest recovery in place by mid-2010,”; he said.