Consumers picked up their retail spending in Hawaii in 2010 after two down years, and if the trend holds this year, the tourism-dependent state could be well on its way to a full-fledged recovery.
First Hawaiian Bank, the state’s largest bank provider of merchant card terminals and debit and credit card processing, released today its first-ever business activity report, which showed business retail spending grew in each quarter last year. Transactions at stores open at least a year rose 3.5 percent in the first quarter, 4.1 percent in the second quarter, 9 percent in the third quarter and 9.2 percent in the fourth quarter over comparable periods in 2009. For all of 2010, retail business sales increased 6.4 percent.
Tourism, which has led Hawaii’s recovery, not surprisingly showed the biggest increase in credit and debit card transactions as travel agencies processed $123.9 million in card transactions, a 17.4 percent gain over 2009. Other industries showing double-digit increases were utilities/communications, 13.2 percent; convenience stores, 12.7 percent; travel activities, 11.4 percent; and shipping, 10.2 percent. The only industry out of 16 to show a decrease in spending was insurance at minus 3.7 percent.
"The overall increase was clearly provided by the growth in our statewide tourism industry," said Keith Nagata, First Hawaiian senior vice president and business services manager.
In the fourth quarter, spending at hotels rose 17.5 percent, followed by convenience stores, 15.7 percent; utilities/communications, 14.7 percent; travel activities, 13.6 percent; and "others," 10.7 percent. However, in an anomaly, sales at travel agencies were off 2.4 percent. Insurance, down 5.1 percent, brought up the rear.
First Hawaiian has 7,500 merchant client locations throughout the state, and the report tracks retail sales activity in 16 different economic sectors, including automobile, retail, hotels, home improvement, restaurants, shipping and travel.
First Hawaiian processed $3.8 billion worth of customer credit and debit card sales last year, the highest amount of card activity since 2007.
"It’s clear from those (industry) numbers, as well as a lot of others and not just in tourism, that you’re seeing 2010 was a much better year than in 2009 and 2008," First Hawaiian Bank Economic Adviser Leroy Laney said. "2008 was when we fell off the cliff, especially in the fall with the financial freeze, and 2009 was a bad year for everybody. So these double-digit increases that we saw in 2010 weren’t that hard to come by because 2009 was such a bad year. But it is a sign of recovery and is more of a sign of a return to normal."
Laney said that, barring any unforeseen setbacks, retail spending probably will increase in the state this year but not at the same rate of growth as in 2010 because that was compared with 2009, which was a "bad year."
"I think we’ll see a continued recovery in tourism, but what we need to see in Hawaii is some kind of return in terms of construction," Laney said. "Real estate has turned around a little bit. On Oahu, at least, we’ve had mild growth in median prices, and that’s a positive, but in order to get a full-fledged sustained recovery, we need to see some return of strength in the construction sector. I think we’ll see some return in the construction sector this year, and if we see that, I think the economy will be on its road to a more sustained recovery rather than just in the tourism sector."
Don Horner, chairman and chief executive officer of First Hawaiian Bank, said he is "cautiously optimistic" about 2011 and would welcome a pickup in the construction industry.
"As a lender in the construction industry, with the return in growth in tourism, you’re going to find renewed confidence across the state," he said. "And when confidence returns, you’ll see more construction activity and job creation. The challenge we have now is there’s an attitude of wait and see, but as the economic activity led by the tourist sector continues to improve, then you’ll see renewed confidence and growth."
Ron Williams, CEO of Atlantis Submarines, said 2010 was "a pleasant improvement" over 2009, but declined to provide any numbers.
"I think it will continue in 2011 as long as we don’t have any major distractions," Williams said. "I think the momentum will carry over to 2011, and we just have to make sure to continue to work hard."
Horner said it is an encouraging sign that the year-over-year quarterly comparisons increased throughout 2010 and ended with the strongest quarter.
"The results are testimony to the hard work of many people, primarily led by the tourism industry," said Horner, noting that almost 40 percent of the economic activity in the state is related to tourism. "Most of the growth happened in categories of restaurants and travel-related activities, everything from submarine rides to activities at the activities desk, because we had more visitors coming back."
Hawaii Tourism Authority CEO Mike McCartney said First Hawaiian’s results are supported by a 30.4 percent increase in visitor spending in November and a 16 percent increase through the first 11 months of 2010.
"We project to end 2010 with over $11 billion in visitor spending compared to over $9.8 billion the year before," McCartney said. "That’s over a billion more in the economy in 2010 than 2009, so I’m pleased it’s showing up in local businesses. The hospitality and visitor industry is one of Hawaii’s most important exports. We see the momentum continuing, and we’re hopeful the money that visitors spend in Hawaii multiplies to the community, and that will continue to stimulate Hawaii’s economy."