Kauai weathers
tourism downturn well

The island's reliance on mainland
time-share owners helped keep
arrivals relatively high

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By Lyn Danninger
ldanninger@starbulletin.com

Kauai's reliance on mainland tourists kept the island largely unscathed by the aftermath of Sept. 11, according to First Hawaiian Bank economics consultant Leroy Laney.

Kauai's reliance on domestic visitors, especially condominium and time-share owners, rather than the Japanese market and other international visitors helped it to weather the economic storm, Laney told attendees yesterday at the First Hawaiian Economic Outlook Forum at the Sheraton Kauai.

"Those visitors continued to come even as the Japanese market fell," he said.

Kauai's international market share is far smaller than elsewhere in the state, at just 16 percent of visitor arrivals during the first half of the year, Laney said. Compare that to Oahu, where 41 percent of arrivals were international visitors.

Laney said that Kauai's comparative advantage remains its less hectic pace.

"It's an image and a reality that it would do well to maintain," he said.

But even with a solid tourism sector and strong construction industry boosted by lower interest rates, overall job growth won't happen in 2002, he said. But Laney noted that the island's unemployment has fallen steadily in recent years to 5.4 percent from the 9 percent range in 1999.

There are some challenges for the island looming on the horizon, Laney said.

The year started slowly, with tourist arrivals down 7.6 percent for the first half of the year.

Kauai will have to fight its reputation as an expensive market that is attracting less business travel. The operating capacity of Lihue airport, fuel storage capacity and rental car space at the airport are examples of other emerging constraints the island faces, Laney said.

On the high side, the island did well with the number of film projects it attracted in 2001, with revenue of $11.4 million.

But Laney's view of the island's diversified agriculture picture is mixed.

The margins for some crops have been squeezed by rising costs. But Kauai Coffee improved its position and potential since installing a new roaster.

Laney predicts statewide visitor arrivals should finish up about 3 percent over 2001.

"That only regains some of the ground lost last fall," he said. "It will be 2003 before some aspects of our state economy recover to levels that prevailed prior to 9/11."