Help Wanted - Hawaii's Economic Crisis

Tourism’s glory days
gone for good?

Mainland visitors have
turned away from Hawaii and some
may never come back,
experts say

By Russ Lynch

Isle tourism is undergoing a structural change that is seriously affecting Hawaii's economy, say industry leaders and observers.

It's time to take notice, they say, since tourism-related work provides more than one out of every five jobs in Hawaii.

The big change is that mainland tourism fell in 1990 and has not risen to its peak level since.

Some see this as a permanent shift as frequent Hawaii visitors look to new alternatives, such as ocean cruises, and as potential new customers get lured to a range of competing destinations offering attractive prices.

"Tourism does have the look of having run its course as far as the North American market is concerned, pending whatever changes there are that might expand tourism's dimensions," said Paul Brewbaker, chief economist at Bank of Hawaii.

He's not saying tourists won't keep coming but that Hawaii probably has bid farewell for good to the days when arrivals were showing double-digit annual increases.

Changes are coming, Brewbaker noted. The Hawaii Convention Center is expected to attract a higher-spending class of travelers when it opens next year. The neighbor islands are developing their own specialties.

But leisure tourism from the mainland, traditionally the bread and butter of the industry, is not just going through a cycle, Brewbaker says.

"I don't think you can call stabilization of westbound tourism a cyclical thing," he said. The economies in the states where Hawaii's tourists traditionally came from have resurged but that hasn't brought their people flooding back to Hawaii.

Continuing growth of eastbound tourism, mainly from Japan, seemed to balance the loss of some of the westbound business and took people's minds off the challenge presented by the decline in mainland business, Brewbaker said.

New attractions are needed

Hawaii's long record of success as a tourist destination is a two-edged sword, said Dallas travel agent Harold Portain of Voyagers Travel Store.

People who have been to the islands several times are starting to look elsewhere, said Portain, who visits the islands frequently to stay in touch with the market.

Hawaii is easy and comfortable to visit and many travelers are taking on more adventurous travel challenges while they are young enough, he said.

"They're saying, 'We can always go back to Hawaii when we don't want to do any serious traveling,' " Portain said.

For David Carey, president of Outrigger Hotels & Resorts, that attitude presents an immediate challenge: Hawaii needs to build new attractions.

"I like to say the last new attraction we had on Oahu was Waikele. There's not a lot of things here compared to other places," he said. There aren't even as many golf courses, relative to the population and the tourist flow, as there are in many other destinations, he said.

Oahu could have a world-class zoo or a world-class aquarium. "There is no excuse for us not to have the best aquarium in the world," said Carey, who is also chairman of the Waikiki/Oahu Visitors Association.

Portain said he is aware of some innovative approaches being taken in Hawaii to develop new types of tourism and there is a big market waiting. Refocusing to concentrate on Hawaii's natural attributes and provide options such as hiking and camping out or boating can generate a lot of business, he said.

"We're seeing a tremendous increase in active lifestyle vacations. Hawaii has always been a place to come and have a good time and lie on the beach and maybe take a few tours," he said.

Hawaii hasn't been chasing the more active visitors, except maybe golfers, Portain said.

In search of new adventures

Nature tourism, the kind of outdoor adventure known as ecotourism, is a huge emerging market and Hawaii should go after it more, he said.

One of the three offices his company has in the Dallas area is entirely focused on active lifestyle travel, he said.

It's not really hard to sell Hawaii, he said. People know about it. There is competition, he said, particularly from cruises, but Hawaii will always be attractive.

"For people who have not traveled extensively, Hawaii is definitely on their list and they will probably go back two or three times," he said.

But while Brewbaker predicts that eastbound travel to the islands, from Japan and other Asia-Pacific regions, will continue to grow well into the next century, he doesn't hold the same opinion for travel from the mainland.

And for Hawaii's struggling poor economy, that will hurt since more visitors mean more spending, more tax revenues, more jobs.

Spending by Japanese visitors has helped boost the state's tourism-dependent economy, climbing from $2.8 billion in 1991 to $4.34 billion in 1995, the last year for which the Hawaii Visitors & Convention Bureau has an estimate.

But not everyone in the industry benefits from the Japanese business. Japanese tourists mostly keep to Oahu. They may make day trips to other islands, some take direct flights to the Big Island, and some stay overnight off Oahu but, by and large, the neighbor islands get the least benefit from the Japanese.

Spending by mainland visitors, meanwhile, has headed in the other direction. It hit a peak of $5.75 billion in 1991, but slumped by more than a billion dollars the next year to $4.23 billion and has stayed $1 billion or so below that peak ever since, according to HVCB estimates.

The drop represents a substantial blow to the state and counties, which get up to one-fourth of their tax revenues from tourism.

Dependency on tourism inevitable

So, is it a problem that Hawaii is so dependent on one struggling industry?

To Carey, there's not much point in agonizing over that question.

Since tourism's size and domination are facts of economic life here, he said, Hawaii instead needs to focus on improving that industry.

"I don't think it was intentional, that we said tourism is going to be our No.1 industry. In today's world, I don't think we have a choice, if we are to have an economy at all. Hawaii doesn't have an opportunity at all when it comes to the big economic drivers," he said.

"From an environmental standpoint, you couldn't have any big manufacturers. That's out."

Short of man-made or natural disasters, like a war or hurricane, Carey doesn't see any catastrophic threats on the horizon for Hawaii's No. 1 industry. But, he agrees, the industry is undergoing structural changes in its markets and therefore needs to make some adjustments.

"It's unlikely in the near term that we're going to have any other significant industry besides tourism. (So) it should be the public and government policy to make sure that tourism is as strong and as diversified as we can make it.

"Let's make sure that tourism is absolutely the best in the world and as diversified as possible, until the next opportunity occurs," Carey said.

How has the slump affected you?

Mai-Scherelle, Fashion designer

About three years ago Mai-Scherelle saw her couture-fashion design business drop by 50 percent. Yet while business was dropping, she saw the rent on her small Auahi Street workshop increase from $1 to $4 a square foot.

"It was shocking," she said. "It was like going from driving a Cadillac to a horse carriage. When the economy is bad, jewelry and fashion go first."

She said that in the past, her clients would have no trouble paying $1,500 for a business suit to $3,500 for an evening dress. But now, she said, "People are having a hard time. They have to pay their bills first, pay for the basics, like food."

To cope with the loss of income, she began to teach pattern-making and fashion design out of her home. She found many students eager to make ends meet by sewing their own clothes. She continues to teach today, even though her business is rebounding.

"One thing people learned is how to look for quality. They're tired of paying for cheap, poorly made clothes on the market."

Dubious Distinction

Hawaii was last in a 1996 survey
ranking entrepreneur-friendly
environments among states.

Source: Small Business Survival Foundation

Wanted: Your comments
What needs to be done to help Hawaii emerge from
its prolonged slump? Write to us at Letters to the
Editor/Economy, P.O. Box 3080, Honolulu, HI 96802
or e-mail us at and share
your suggestions. Please include your
daytime telephone number.

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