Stories by Michele Kayal
Advertiser Staff Writer

Tourism, real estate markets unclear

Hawai‘i’s economic recovery began on the Neighbor Islands, and some experts say the economies there should continue to play a leading role through 2001.

Those economies have been driven lately by increases in tourism, a two-year surge in construction, real estate sales and agriculture. Leading economists predict a 4 percent growth rate for the Neighbor Islands collectively this year while the state as a whole proceeds at a slightly slower rate around 3 percent.

But as the high-tech bubble continues to deflate on the West Coast and the Mainland economy begins to show signs of slowing, the Neighbor Islands could be in for a less certain ride than in 2000, which many say was the best year in nearly a decade.

As with Hawai‘i as a whole, the Neighbor Islands’ tourism prospects are unclear for 2001, with many hotels already noting a slowdown in bookings for the lucrative group and corporate meetings business. The booming real estate market - which has seen local buyers as well as Mainland residents buying expensive homes - also poses questions for many Neighbor Islands, realtors say.

Still, new projects in agriculture, science and technology in places like the Big Island could bring new opportunities. And executives on many islands say this year they will push to further diversify their economies, or cultivate new markets in the industries they rely on.

Maui: Growing economy provides hope

Nothing says a strong economy like Wal-Mart and Home Depot - people buying, people building.

Both of those giant retailers will open this year on Maui, and county executives say it’s a sign of just how good things will be.

"Our economy is growing and it’s going to get better," says Rosalyn Baker, economic development coordinator for Maui County.

Many executives in tourism and other industries on Maui say they agree - for now. But they are crossing their fingers against a slowdown on the Mainland and continued uncertainty in the stock market.

"Unless something happens with the U.S. economy, I think we’ll see a very good year in 2001," says Marsha Wienert, executive director of the Maui Visitors Bureau. "Maybe not at the level of 2000, but overall tourism will be very good in 2001."

Last year brought Maui slightly fewer visitors but longer stays at hotels, pushing occupancy up 3 points to 82 percent through November, by far the highest in the state. For 2001, Wienert says she expects a further decrease in arrivals, but a 6 percent increase in occupancy as the bureau mines Europe, Canada and other markets for longer-staying visitors.

Tourism accounts for about 80 percent of the Maui economy. But a minus is the news that group business bookings are off about 3 percent, Wienert says. But the cruise industry will pitch in, delivering more visitors to the sidewalks from American Hawai‘i Cruise Line’s Independence, which relocated to Kahului in November and will have its first full year there in 2001.

The cruise ship, Wienert says, also has generated additional business for the hotels, which host visitors who tack a few days onto their trips. The Shops at Wailea, a new complex in one of the state’s most upscale resorts, also will see its first full year of operation in 2001.

Pineapple and sugar, diversified agriculture and technology fill up the rest of the island’s economy, and experts say those sectors also will make strides in 2001.

For instance, Baker says a microalgae farm that was blessed in October will soon apply to the Food and Drug Administration to sell nutritional supplements. The Maui Research and Technology Park in Kihei should break ground on a new building in 2001, says Jeanne Skog, chief executive of the Maui Economic Development Board, which manages the incubator.

Skog says the center has three or four companies with staffs ranging from five to 35 people, and each outfit is looking to expand this year. She figures that 10 new companies or projects might emerge there.

Real estate gains have also been pushing the Maui economy for months now. The Maui Board of Realtors reports a 10-year high in membership, recently reaching 1,000. Brokers in Wailea, an area that may prove recession-proof because of its wealthy clientele, say their sales are still "red hot," in the words of one. But some realtors offered more measured assessments.

Tracy Stice, a broker with Century 21 All Islands and president of the Realtors’ board, says that since the stock market dived last year he has seen a dramatic dip in some parts of the business, such as the $500,000-and-over market in upcountry Maui. He expects it to slow even more.

"I’ve heard a lot of pessimism recently from my Mainland buyers, the ‘Siliconites,’ people working in high tech who have lots of stock options," says Stice, who does 60 percent of his business with people outside Hawai‘i. "I suspect the people who have lots of money are still coming to the party, though I have heard of quite a few high-end things dropping out lately."

Stice says the $200,000 to $300,000 range - what he calls "entry level homes" - remains strong.

"I’m optimistic about it sustaining in 2001, because the interest rates have fueled the entry-level and step-up buyers," he says. "Those people are the workers, the painters, the contractors, and they’re all real, real busy working on the million-dollar homes that sold last year."

Kaua'i: Tourism down; film industry booms

On the day in November that Amfac/JMB Hawai‘i Inc. closed its last remaining Kaua‘i sugar plantations, nearly 400 workers it left behind paraded through the streets, honking horns and showing their pride for the industry’s 150-year history on the island.

This year, Kaua‘i will grapple with helping those displaced workers and determining just how hard the change will hit tractor and repair companies, supermarkets and other businesses that serve the day-to-day needs of this former plantation island.

"There’s a big question mark around what will happen to people displaced by sugar and the trickle-down effect of that," says Gini Kapali, director of the county’s economic development office. "We don’t know yet. It’s a bit early."

Tourism, by far the county’s largest economic engine, offers small but steady hope for growth in 2001, says Sue Kanoho, Kaua‘i Visitors Bureau executive director. Hotel occupancy numbers, which rose 3 percentage points through the first 11 months of 2000 to hit 75 percent, are likely to remain flat or improve only slightly in 2001, she says.

"The feeling is that the Mainland is softening a little, so people are pulling back a bit," she says.

The chance of surpassing the island’s pre-Hurricane Iniki high of 1.2 million visitors?

"Not this year," Kanoho says, noting that Kaua‘i failed to reach 1.1 million visitors in 2000. "Unless there’s something on the books I don’t know about, I don’t think we’re going to make a-million-two in 2001."

On the plus side, the island’s film business is booming, with three major pictures, including yet another Jurassic Park sequel, shooting in January. "Because of these three major films already in 2001, there will be an increase (over 2000)," says Kapali, referring to the dollar value of Kaua‘i’s film business.

Kaua‘i still has one functioning sugar plantation, Gay & Robinson’s Olokele Plantation. The island also has 3,000 acres in coffee and exports about 7 million pounds a year, making it the largest coffee-exporting island of Hawai‘i, Kapali says. Kaua‘i also has thriving aquaculture operations, and other opportunities may pop up on the former Amfac sugar fields, Kapali and others say.

The tech sector, a small but expanding part of Kaua‘i’s economy, is expected to grow about 35 percent in terms of jobs and revenues, says Gary Baldwin, managing director of the Kaua‘i Technology Center in Waimea. Most of the growth will come from a $4.5 million expansion of the center, set to begin this year, Baldwin says. The addition, which should be completed in 2002, is expected to attract several new companies, some of which will begin moving to Kaua‘i this year.

Island of Hawai'i: Occupancy rates, crops could rise

Just weeks before the Northern Indiana Brass Co. was to bring 160 employees to the Mauna Kea Beach Hotel for some January fun, sun and company talk, it took a hard look at its books and called it off.

"Financial expectations were not met, and they had to cancel last-minute," said Brian Lynx, the hotel’s director of sales.

Lynx said group business at the resort is running about 15 percent ahead of last year, an anomaly along the Kona Coast, where other hoteliers say 2001 is a bit soft in the all-important groups sector.

But despite the hiccuping stock market and the indigestion it has given many companies, Lynx and other Kona coast executives say they expect 2001 to match 2000, or even beat it. Occupancy rates last year climbed 5 percentage points in the first 11 months to reach 72 percent.

"We’re seeing increases from the East Coast. We’ve seen increases all over the nation, increases in the wholesale business," says Fred Duerr, general manager of the Kona Village Resort, who predicts a 4 percent to 5 percent increase in occupancy over 2000. "The cold weather is helping us too."

Tourism watcher Marni Herkes, president of the Kona-Kohala Chamber of Commerce, throws in a caveat, saying things should hold up "as long as it keeps snowing and (Federal Reserve chief Alan) Greenspan keeps dropping interest rates."

About half of Hawai‘i County’s roughly $2.6 billion annual economic output comes from tour-ism, according to the Hawai‘i Island Economic Development Board. Agriculture and science and technology account for most of the rest.

In 2001, hot crops like noni and kava - plants in demand by nutritional supplement companies - are expected to nearly double their presence on the Big Island. Both corporate and small-hold farmers are putting another 400 to 2,000 acres in the ground, says Paula Helfrich, president of the economic development board. The value of those new crops, she estimates, could approach $23 million with the first processing.

Expansions at the Pacific Basin Agricultural Research Center should begin sometime this year, Helfrich says, and will increase the number of scientists there from two dozen to about 300.

Groundbreaking is expected in the next few weeks on a high-tech incubator at the Natural Energy Laboratory of Hawai‘i in Kailua-Kona. The technologically challenged Big Island should have high-speed Internet access by summer, Helfrich says.

"We went through positioning exercises through the ’90s for agriculture, the visitor industry, high-tech and so forth," she says. "And now we get to pull back and say, ‘OK, we survived the war. Now we need to position ourselves for the long term.’"

Lana'i: Real estate, tourism look solid this year

On Lana‘i, real estate has been a force. Sales of the super-luxury homes that range from $400,000 to $20 million doubled in 2000, says Harry Saunders, Castle and Cooke Hawai‘i executive vice president, and are expected to rise another 10 percent to 20 percent in 2001.

"Most of our home owners are not necessarily tech-related," Saunders says. "They’re entrepreneurial and owners of their own businesses. We have not seen any fall-off in activity (since the dip in the stock market)."

Tourism at Lana‘i’s two resort hotels comprises a large part of the economy, and business there in 2000 was the best since they opened in the early 1990s, says Marsha Wienert, executive director of the Maui Visitors Bureau.

The island hopes to have a solid 2001, Wienert says, and to even out the peaks and valleys that plague its occupancy patterns.

Lana‘i hotel occupancy figures are closely held by Castle and Cooke, which owns the resorts and the island.

Moloka'i: Better times may lie ahead for tourism

Moloka‘i, always the orphan with the state’s highest unemployment rate and poorest tourism figures, may get a break in 2001.

Marsha Wienert, executive director of the Maui Visitors Bureau, says an aggressive marketing campaign launched late last year pushed occupancy figures up in November - the first increase the island has seen in three years. But again, the cooling Mainland economy and the closure of the Kaluako‘i Resort and golf course in December still call for crossed fingers.

New endeavors on Moloka‘i, such as a million dollar-plus call center set to handle the business of the Maui Visitors Bureau and others, should bring new jobs.

The call center, which will open in mid-February with four employees, could employ 30 people in three or four years, said Edwin Medeiros, chief executive of Global Medical Transcription Inc. and the center’s operator.

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