Firms upbeat
despite slump

Businesses say they continue
to suffer but feel the worst
is over, according to a survey

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By Dave Segal
dsegal@starbulletin.com

Nearly three-quarters of Hawaii businesses saw their gross revenues remain flat or decline during the second quarter as the nationwide economic slowdown cut a wide swath through the state.

In its worst showing ever for the 10 quarters the Business Banking Council survey has been conducted, only 28 percent of those businesses surveyed said gross revenues had increased from a year ago, while 49 percent said sales decreased and 21 percent said they remained the same.

Despite the downturn, however, the economic report released yesterday showed that 87 percent of businesses believe the worst is behind them even though more than half of the respondents expect business to remain flat next year. Last quarter, 73 percent expected business to either stay the same or improve.

"(The businesses) believe there will be other markets that will come in, that people will get tired of not traveling and that they will begin to travel again," said Barbara Ankersmit, president of QMark Research & Polling, which conducted the survey sponsored by American Savings Bank.

"(Hawaii businesses) felt that the Japanese visitors may stay away for some time. It's not so much now that they're afraid of Hawaii or they're afraid of 9/11, but it's the economy in their own country, and they're being conservative. But (the businesses) said other people will want to travel and there will be an increase in where people come from. I've heard China mentioned several times."

China, which was accepted into the World Trade Organization earlier this year, increasingly has been targeted by Hawaii government and tourism officials as a trading partner and a budding tourism market.

The semiannual survey, which questioned 419 companies between July 1 and 10, divided the businesses into groups based on size and equally weighted the answers. Despite recent improvements in tourism, the survey showed that Hawaii businesses are still suffering.

In the survey's performance index, which measures changes in employment, gross revenues and profit before taxes, the second-quarter reading fell to 99 from 102 in the first quarter and 108 a year ago. The reading was the second lowest in the history of the index, which began in the second quarter of 1998 at a base of 100.

Among other indications of a deteriorating business picture was that 44 percent of respondents said profits before taxes had declined from a year ago, and 31 percent reported they had reduced staff.

However, the optimism index, a general outlook for the economic future of the islands, rose to 120 last quarter, a six-point improvement from both last quarter and year-ago levels.

"If one thing is clear, though, it's that most companies expect little change in the near future," said Gary McCarty, president of retailer Blue Jeans 'n Bikinis Inc. "It could be said that without significant economic or political changes that the majority of Hawaii businesses expect little in the way of growth but are confident that the longer-term future remains bright."

For the first time, the survey also examined the visitor industry, which encompassed 135 of the responding businesses.

Approximately 67 percent of the visitor industry respondents reported decreases in either total dollar revenues, staffing levels, reduced wages or working hours as a result of the Sept. 11 attacks. On the other hand, 58 percent said they expect to see increases in sales over the next two years.