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Tourism jump-starts sputtering Maui economy

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NCL America, which usually brings in about 2,400 passengers a week to Kahului Harbor on its Pride of America, is helping fuel a rebound in Maui tourism.
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A rebound in the visitor industry means that retail sales have picked up at shopping centers that cater to tourists, like Whaler's Village in Kaanapali. Business at regional malls has not been as strong.

Maui’s resilient tourism sector is leading the island’s economic recovery.

Maui, which suffered the largest declines in visitor arrivals and spending of all major islands last year, is now at the head of the pack.

It will still be "some time" before economic activity returns to pre-recession levels, said economist Leroy Laney. Laney delivered his remarks yesterday at a forum in Kahului sponsored by First Hawaiian Bank.

Residential real estate sales are another bright spot for Maui’s economy, but the island’s construction sector trails both Oahu and the Big Island, said Laney, a professor of economics and finance at Hawaii Pacific University.

"Barring any unforeseen misfortunes an economic recovery is now under way or at least imminent for the Maui economy, but don’t expect a rapid return to normal," he said in a presentation at the Maui Beach Hotel.

Through the first seven months of the year Maui’s visitor arrivals and spending are up 7.8 percent and 16.4 percent respectively compared with the same period in 2009. For all of 2009, arrivals and spending fell 8.8 percent and 13.6 percent.

Added flights to Maui by Hawaiian and Alaska Airlines, as well as Canadian carriers WestJet and Air Canada are helping boost arrivals, Laney noted.

Steep discounts on travel packages last year began luring tourists back to Maui, and some of that is continuing, Laney said. "Visitors are still searching for value," he said.

There has always been a dichotomy in Maui’s retail sector between centers that cater to tourists and those that mainly serve residents, according to Laney.

High occupancy rates at hotels and time-share properties are driving sales at nearby shopping areas like Whaler’s Village in Kaanapali, he said. Some regional malls more oriented to the local market, such as Queen Kaahumanu Center, "are still seeing mild declines in sales," he added.

Construction activity on Maui is lagging behind the rest of the state, with activity in the second quarter running about 30 percent behind year-ago levels.

Laney said industry sources told him part of the weakness in construction activity can be traced to the county’s 50 percent affordable housing requirement for new residential development and an ordinance requiring a water meter permit before construction can begin.

Several commercial projects planned by Alexander & Baldwin are expected to boost the island’s construction sector in the years to come.

Maui Business Park Phase II along Hana Highway in Kahului is targeted to break ground in early 2011 and be completed in late 2012. A&B is also moving ahead with Kahului Town Center, a mixed-use project with residential, retail and office space, planned for the site of the old Kahului Shopping Center, which was destroyed by fire several years ago.

Maui’s residential real estate sales, like elsewhere in the state, are being fueled by declining prices and low mortgage rates, Laney said. Single-family home sales are up 43 percent year to date, while condominium sales have risen 64 percent. Prices are down 7 percent for single-family homes and down 32 percent for condos.

One of the downsides of declining prices is that lower property valuations "have serious implications" for county tax revenue, about 41 percent of which come from property taxes, he said.

"There were some great years during the last real estate boom, but it’s over for a while," Laney said.

Maui’s main agricultural company, Hawaii Commercial & Sugar Co., is expected to see a rebound in sugar production this year. The state’s last remaining sugar plantation is estimating it will produce 170,000 tons of sugar compared with 127,000 tons a year ago. An increase in yield also is forecast to 11 to 12 tons per acre from last year’s 8.4 tons per acre.


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