Maui feels recession's pain


POSTED: Friday, September 04, 2009

Due to its dependence on tourism and its self-promotion as an upscale destination, Maui feels a greater impact from a drop in visitors than Oahu during an economic recession.

Payroll jobs on the Valley Isle continue to shrink, and are likely to see a 4 percent contraction this year, according to First Hawaiian Bank economic adviser Leroy Laney, speaking yesterday at the Maui Beach Hotel about the bank's annual economic forecast.

By the end of the year, he said, unemployment in Maui County could end at about 10 percent, double the 2008 rate.

Visitor arrivals, which declined 14 percent in the first quarter of this year versus the first quarter of last year, will continue to shrink, says the forecast, along with visitor spending, which dropped 18 percent over the same period.

“;Perhaps the biggest hurdle for Maui in the current environment is the image it has tried hard to cultivate—an upscale destination for affluent travelers, not a reputation you want in this world of frugality,”; says the report.

Visitors lured to Maui by lower airfares and hotel room rates won't likely be spending big when they get there, says the report.

Maui activity sales have declined more than on other islands.





The percent change for the first quarter of 2009 compared with the first quarter of 2008:


Visitor arrivals-14%
Visitor spending-18%
Private building permits-27%
Government contracts-59%
General excise taxes-13%
Matson container volume-14%

        Source: First Hawaiian Bank Economic Forecast



Laney's report comes just on the heels of news this week that the 310-room Maui Prince Hotel faced imminent closure after failing to meet financial obligations for its management contract.

While it is expected to remain open under receivership, there's a possibility some of the 380 workers will be laid off.

Laney said he does not expect a genuine recovery for Hawaii tourism until the U.S. national economy regains sustained strength, which likely will be slow.

Travel to Hawaii is usually among the first luxuries eliminated from a household budget in the current situation, according to Laney, and among the last to be restored.

Retail sales at Queen Kaahumanu Center, Maui's largest mall, are down double digits, even though only 10 percent to 15 percent are related to tourism.

“;Foot traffic is higher if time-share units are nearby, because occupancies are higher there than in hotels,”; said the report.

“;But one shopping bag instead of several is more the norm, and often that bag is from an ABC Store, not a higher-end retailer.”;

Meanwhile, practically all planned private residential projects have been delayed or canceled, reflecting a downturn in the construction sector.

Laney says the slowdown is compounded by a Maui County ordinance requiring developers to identify sources of water for new houses before granting a meter.

The last remaining sugar operation left in Hawaii—the Hawaiian Commercial & Sugar Co.—faces more threats to its survival. HC&S, a subsidiary of Alexander & Baldwin, is one of the largest employers on Maui.

Sugar production has been falling over the years, with yield in tons of sugar per acre trending downward since 2003 due to a long drought. If these 35,000 acres of sugar cane in the Valley Isle were to go fallow, Maui would lose a key part of its beauty, which nurtures tourism, says the report.

“;Those who remember the green hillsides of West Maui before sugar's exit, compared with the wind-swept red dirt of today,”; it says, “;realize that sugar made the scene much more attractive to the visitor.”;