Economic diversity needed on Kauai, bank’s expert says

Kauai is more reliant on tourism than any other island and will benefit from another record year of arrivals, but it needs to make diversifying its economy a long-term priority, a local economist told business leaders Thursday at First Hawaiian Bank’s 41st annual Kauai Economic Outlook Forum.

Strong visitor numbers, growing momentum in the construction sector, increased airlift and investments in resort, commercial and residential real estate are all positive signs heading into 2016, said Jack Suyderhoud, First Hawaiian’s economic adviser and a professor of business economics at the Shidler School of Business at the University of Hawaii at Manoa.

“Diversifying the economic base should continue to be a long-term priority for Kauai,” Suyderhoud said at the event at the Kauai Beach Resort. “Take advantage of the good times while they are here.”

Suyderhoud said Kauai’s tourism-dependence ratio is three times that of Oahu and twice that of Hawaii island based on annual visitor arrivals divided by resident population. Through the first eight months of this year, Kauai visitor arrivals are up 4.5 percent to 802,554. But per person, per day spending is only $181 compared with $193 statewide because of the greater prevalence of timeshares on Kauai. Still, he said that if the current pace for 2015 continues for the full year, total spending on the island will reach $1.6 billion — topping last year’s $1.5 billion — in spite of relatively low per-person daily spending by Kauai visitors.

“This suggests that Kauai can do more to improve the value of tourism stays and improve the economic benefits from tourism without increasing visitor counts,” he said.

Airlines continue to expand seat capacity to Lihue for both the domestic market (up 5.3 percent through August) and from Canada (up 3.7 percent). More tourism inventory also is being added, with two additional condo/timeshare facilities bookending the Courtyard by Marriott, and work beginning next year at the planned Coco Palms Resort by Hyatt.

With increased tourism comes the need for changes, he said.

“It is possible for an industry to have too much success,” Suyderhoud said. “Kauai tourism may be in such a situation as the annual arrival count approaches 1.2 million,” he said. “Traffic is an ongoing concern, as are potential frictions between tourists and residents at venues with limited space. Likewise, residents are increasingly frustrated with having to expend resources and risk lives rescuing visitors from places where they should not go.”

Suyderhoud said the Kauai Tourism Strategic Plan update recognizes these issues and calls for better traffic infrastructure and management, more resources from the transient accommodations tax, better communication between the visitor industry and residents, and increased awareness of the Hawaiian culture among residents and the visitor industry. In addition, efforts by the county and the industry to provide transportation options such as shuttles could be helpful, he said.

Kauai construction, like in the rest of the state, appears to be coming back. Some of the job numbers, though, are hard to reconcile, partly due to how workers are classified who are hired by employment agencies rather than directly by construction companies. Some Kauai workers also may be listed as being employed on Oahu due to company addresses.

As an example, Suyderhoud said, Shioi Construction reports it has more than doubled its workforce in the past year and is trying to find more workers. On the other hand, officially reported job numbers on Kauai continue to lag and are about half of the 2,000 peak in 2007. Overall, Kauai’s labor market continues to improve, and while the job count is 1,200 below the prior peak, the island’s unemployment rate has declined to 3.6 percent.

Kauai, with a population of 70,475, according to the 2014 State of Hawaii Data Book, also has been visible this year on several other fronts.

The Kauai Island Utility Cooperative continues to shift electricity generation away from fossil fuels, and by the end of this year 38 percent of its energy will come from renewable sources.

The recent premiere of the movie “Jurassic World” and the island’s exposure in the 2015 Sports Illustrated swimsuit edition all have brought attention to the island.

And agriculture continues to play an important role on the island, especially with the virtual disappearance of sugar and pineapple, which has left a lot of agricultural land underutilized.

Seed corn, which accounts for less than 5,000 acres of land use, has significant employment and sales with Pioneer Hi-Bred, for example, having 114 full-time workers and more than 100 seasonal hires. Still, corn prices globally are down and farmers aren’t planting as much, resulting in seed companies such as Pioneer and Dow Agrosciences reducing their output and employment.

Kauai Coffee, Kauai Shrimp and Koloa Rum also have proved to be important players in the island’s agricultural industry, Suyderhoud said.