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The Honolulu Advertiser
Posted on: Thursday, October 19, 2006

Earthquakes' financial effect mixed

By Andrew Gomes and Lynda Arakawa
Advertiser Staff Writers

Sunday's earthquakes and blackout wasn't a disaster for all businesses.

Gilbert Sakaguchi, general manager of Magoo's Pizza on University Avenue, said business on Sunday was 10 times busier than normal because he managed to open using the kitchen's gas ovens and generators on hand normally to run lunch wagons.

Other enterprises such as golf courses largely stayed open, while general merchandisers and gas stations most likely caught up on business in the days after the blackout.

Businesses that suffered include movie theaters and other indoor attractions dependent on discretionary spending.

The impact was mixed. The negatives include:

  • Lost sales from not being able to open.

  • Losses from spoiled inventory.

    The positives include:

  • Reduced expenses for electricity and labor for businesses that closed.

  • Added customer traffic for businesses that opened.

  • Enhanced sales of emergency supplies.

  • Added demand from consumers needing services or goods to repair items damaged by the blackout and earthquakes.

    The impact was all positive at Magoo's, which sold out of pizza by 4:30 p.m. Sunday. Other food menu items were gone by 7:30 p.m. and the beer, though it couldn't be chilled by the generators, kept flowing.

    "We had the jukebox running ... we were super busy," Sakaguchi said.

    Next door at Eastside Grill, it was a different story. Without a generator, the sports bar and restaurant hung on to about 20 customers until about 10 a.m. It lost an estimated $3,000 or so in sales for a typical Sunday when football games draw fans for food and drinks.

    "It was a big hit," said Eastside owner Robbie Acoba.

    To be sure, cutting off power to all of O'ahu for a day hurts a lot of companies, but the overall impact to the business sector may not have been all that terrible.

    MONEY GONE FOR GOOD?

    Local economists have not estimated business losses as a result of Sunday's earthquakes and subsequent daylong power outage, but there was $166 million of taxable spending on O'ahu in an average day last October.

    Assuming that much of this spending — from construction, manufacturing and wholesaling — doesn't typically happen on a Sunday, expenditures likely would be closer to $115 million, based on state Tax Department statistics.

    How much of that may have been lost permanently because of the blackout is hard to estimate, according to economists who caution that the impact can easily be overestimated.

    "I would tend to downplay the impact of the power outage," said Leroy Laney, a Hawai'i Pacific University economy and finance professor. "It probably didn't make much of a difference. People find other things to do and spend money on other things. Some of (the lost spending) is going to be made up on other days."

    Byron Gangnes, a University of Hawai'i associate professor of economics, said much of the lost spending was from tourists who missed out on a day of shopping, touring or attending some attraction.

    "I assume some of it will be recaptured, but my gut feeling overall is that they can't make up everything," he said. "That's like a visitor day that is lost."

    Visitors spent an estimated $6.6 million per day on shopping, food, beverages, entertainment and recreation last October, according to state Department of Business, Economic Development & Tourism data.

    UNEXPECTED GUESTS

    Still, some visitors like Michelle Stacey made unintended extended stays on O'ahu because of Sunday's power outage.

    Stacey, a doctor from Las Vegas on a Big Island vacation with her husband and a nurse, was supposed to fly home on Sunday but only made it to Honolulu and couldn't get another flight on ATA until tomorrow.

    Among things the three have done since Sunday is visit the Arizona Memorial, eat at Singha Thai Cuisine and hang out in a karaoke lounge. They also had to spring for five days in a Waikiki hotel.

    "This has actually turned out to be a better part of our trip," Stacey said. "You have a lovely state, but it's kind of expensive to stay here."

    For hotels, the loss of business on Sunday from canceled incoming flights was cushioned by the fact that visitors already here couldn't fly out. But many hotels, like Outrigger and Ohana properties, offered discounted rates for guests whose departing flights were canceled.

    Outrigger incurred "minimal" financial loss on Sunday, said Barry Wallace, Outrigger Enterprises executive vice president of hospitality services.

    "Yes, there were a few who couldn't get here, but we wound up having some more who checked in the same day — no reservation; maybe they came from another hotel," Wallace said. "And then we had a lot of people leave, go to the airport, and come back. The overall impact was not at all large."

    Also, many who initially canceled stays rebooked for a week later, he added. No guest requested refunds, Wallace said.

    LABOR COSTS ROSE

    But the power outage did bring other extra costs. Employee overtime drove up labor costs by as much as 15 percent that day, Wallace said. Some employees worked even though it was their day off, and hotels doubled up on front desk staff when computers shut down, he said.

    "It would be financially a less rewarding day than another Sunday would be, but it doesn't rise to the level of a disaster," Wallace said.

    Sheraton properties in Waikiki lost revenue on Sunday by offering discounted rooms for guests whose flights were canceled, and the power outage shut down more than half of the properties' restaurants, according to spokesman David Uchiyama. The hotels also gave discounts on food and beverages as well, he said.

    The people who couldn't fly out didn't necessarily make up the business lost from those whose incoming flights were canceled, Uchiyama said.

    "Some people stayed at the airport, some of them found accommodations near the airport because they wanted to be in a position to take the first available flights out," he said. "So they didn't necessarily return to the hotels that they were originally at."

    Uchiyama also said the company is carefully watching the pace of bookings, which has started to slow, although by a small amount.

    "I think people have gotten the wrong impression that the state is devastated and don't understand that really, after several hours, pretty much everybody was back to normal," he said.

    Starwood issued a news release to North American media on Tuesday and was preparing to issue another in Japan saying that its 11 properties in Hawai'i are open and structurally sound.

    Aqua Hotels & Resorts, which operates 10 hotels in Waikiki, probably broke even on revenue, said owner Mike Paulin.

    "It was a draw, financially," he said. "We probably filled rooms on Sunday night that we ordinarily would not have, but at a lower rate."

    Reach Andrew Gomes at agomes@honoluluadvertiser.com and Lynda Arakawa at larakawa@honoluluadvertiser.com.