Travel experts predict long slump for Hawaii


POSTED: Thursday, February 05, 2009

Hawaii's lead visitor industry and the state in general are likely in for a “;long and deep”; recession with a slow recovery, according to a panel of travel experts and economists.




Looking ahead

        » Hawaii's tourism industry will experience a shallow first quarter in 2009 with further occupancy drops expected.

» Hawaii is not likely to see the start of economic recovery until 2010.


» The recession in Hawaii and in the U.S. is likely to be long and deep.


» This recession in Hawaii resembles the 1982 cycle, which was significantly longer than the downturns in 1991 and 2001.


Source: Tourism forecast seminar


“;Hawaii's downturn is not likely to be milder than the U.S., and it could be even worse,”; said Byron Gangnes, who spoke along with seven other experts at yesterday's Travel & Tourism Research Association/Pacific Asia Tourism Association tourism forecast seminar at the Hawaii Prince Hotel in Waikiki.

Gangnes, who is an associate professor of economics and the director of the University of Hawaii's Economic Research Organization's Hawaii Economy Group, said that he expects Hawaii's economy to experience a deep downturn by historical measures that will be fairly long-lived.

“;This cycle looks like the 1982 cycle - significantly deep,”; he said. “;We expect the downturn to continue well into 2009 with recovery not beginning until 2010.”;

The Hawaii visitor industry's dependence on California, where approximately one-quarter of the visitor arrivals come from, is problematic, he said.

“;They've been doing particularly poorly,”; Gangnes said, citing the region's high levels of job layoffs, declining home values, bankruptcies and foreclosures.

A significant portion of homeowners in California are now underwater on their mortgages, he said.

“;It's not hard to imagine what that does to a household's ability to spend,”; he said.

Since the U.S. market makes up 60 percent of Hawaii's visitor market, the state is greatly dependent on the nation's economy, said Daniel Nahoopi'i, tourism research branch chief for the state Department of Business, Economic Development & Tourism.

“;We are likely to see a retreat in consumer spending in 2009,”; Nahoopi'i said, adding that this pullback likely will translate into less long-haul travel.

And, while President Obama's stimulus package could have a positive impact on Hawaii tourism, it could take several years to effect change, he said.

“;We may see some stabilization in 2009, but we aren't likely to see recovery until 2010,”; Nahoopi'i said.

Local economists said that Hawaii's international tourism markets are also grappling with financial concerns.

Hawaii's declining Japan market has been particularly hard hit by economic concerns, Gangnes said.

“;In December their exports were down by more than a third,”; he said.

Yujiro Kuwabara, the director and general manager of JTB Hawaii, said that he is worried about summer travel to Hawaii from Japan.

“;If they don't get their summer bonus, they won't take the family to Hawaii, maybe. They'll go to Tokyo Disneyland or a nearby hot spring instead,”; Kuwabara said, adding that he does not expect to see recovery in the Japan market until at least 2011.

While Japan's yen rate is favorable to the U.S. dollar, the exchange rate is not driving travel demand, Nahoopi'i said.

“;The Japanese have a tendency to save during harder times,”; he said.

Europe, South Korea, China, Oceania, New Zealand and Australia are all grappling with the global financial crisis, the panel said.

And while the Canadian economy had been booming, weak U.S. growth is likely to have a negative impact moderating travel from this group, Nahoopi'i said.

“;We could see the first decline in world GDP since the 1930s,”; Gangnes said. “;There's nowhere to hide. It doesn't matter where you are getting your tourists from, you are bound to be in bad shape today.”;

As the global recession plays out, Gangnes said, long-haul destinations like Hawaii are likely to see a protracted tourism slump.

Unlike the period after Sept. 11, 2001, when Hawaii recovered quickly, during this tourism downturn, “;we get steep drop in occupancy with no snapback and a period of recovery that takes a lot longer to get out of,”; he said.