OUTLOOK DIMS
Fewer visitors and less money in Isles forecast
By Greg Wiles
Advertiser Staff Writer
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The first economic forecast released since the demise of Aloha and ATA airlines predicts visitor arrivals will tumble this year to their lowest level in four years, while personal income gains will barely outpace inflation.
The forecast by Bank of Hawaii chief economist Paul Brewbaker projects almost no growth for the state's economy this year, while predicting growth will return next year as arrivals and jobs increase.
"We were slowing down quite a bit, of course. People had talked about a 2 percent growth rate, then that became a 1 percent growth rate," said Brewbaker, explaining his prediction for gross state product, or personal income adjusted for inflation, now calls for just a 0.1 percent increase.
"It basically drives down close to zero once you work through the airline scenarios."
While Hawai'i began the year with a positive outlook as the national economy struggled under the subprime mortgage and housing market downturn, a series of shocks have left some wondering if the state will tip into recession.
First came the announcement that NCL America would withdraw two of its three interisland cruise ships, followed by word that Molokai Ranch would shut down.
Then Aloha and ATA airlines announced they were ending passenger service.
So far, no economists have said they believe Hawai'i will enter a recession, though they say growth will be minimal this year. Gov. Linda Lingle last week gave an address saying she remains optimistic about the economy and that people need to separate what's happening here from bad news on the Mainland.
Brewbaker said the Aloha and ATA closures will hurt because Hawai'i is more reliant on the North American tourism market than it was a decade ago.
He said preliminary April numbers indicate passenger arrivals were off 10 to 11 percent.
His forecast calls for visitor arrivals to fall to their the lowest level in four years.
This amounts to a 3.9 percent drop, to 7.08 million total arrivals, as both the number of tourists from the Mainland and other countries decline.
Other projections in the Bank of Hawaii forecast for 2008 include:
Brewbaker said Aloha and ATA airlines are estimated to have accounted for 15 percent to 20 percent of the airline seats from the Mainland. He said it's difficult to predict how soon other airlines will fill the void as Hawai'i comes up on its busy summer tourist season.
Airlines could wait until later this year to build capacity back up — or, on the other hand, a carrier like Southwest or Virgin America could decide to step into the market.
"The question then becomes can a significant amount of lift be restored in the next couple of months," Brewbaker said.
Brewbaker added that the uncertainties mean the economic forecast is in flux and will probably be adjusted later.
"In a couple of places in this report I mention everything is in flux," he said. "Check back in a couple of weeks and I'll have a different forecast."
In February, the state Department of Business, Economic Development and Tourism predicted growth would slow this year, but said it should grow by 2.5 percent. Last week, it said it will issue a revised projection later this month that takes into account the recent negative news.
Brewbaker's projections say the state will experience almost no growth this year and have an 1.1 percent increase in inflation-adjusted personal income next year as visitor arrivals rebound.
Reach Greg Wiles at gwiles@honoluluadvertiser.com.
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