Maui’s recovery is expected to be ‘choppy’

Maui’s economic recovery has been inconsistent this year as a sputtering visitor industry and an overdue construction rebound have slowed growth on the state’s third most populous island.

But job creation, a firming real estate market, locally focused retailing and increased airline seat capacity all provide optimism for 2015, economist Jack Suyderhoud told business leaders Thursday at the 40th annual First Hawaiian Bank business outlook forum at the Maui Beach Hotel.

"The recovery continues, but it has not been consistent over time and across sectors," said Suyderhoud, a First Hawaiian Bank adviser and professor of business economics at the University of Hawaii Shidler College of Business. "’Choppy’ may be the watchword on Maui for the next year."

Tourism continues to be the main driver of Maui’s economy, accounting directly or indirectly for about 40 percent of the gross domestic product — the broadest measure of the county’s economic activity, according to Suyderhoud.

"Maui County remains largely dependent on visitors from the U.S. West and East coasts as well as Canadian tourists," he said. "Together they account for 85 percent of the visitor arrivals to Maui."

But Maui visitor arrivals were virtually flat through the first seven months of this year, according to the latest data from the Hawaii Tourism Authority. Suyderhoud said the HTA’s recent disclosure of possible errors in its data makes trend analysis problematic.

Maui tourism industry leaders seem optimistic about the future despite strong competition from Mexico, the Caribbean, Dubai and the Maldives, Suyderhoud said.

"The Maui Visitors Bureau and Maui County government have launched initiatives to market Maui in Korea and Oceania," Suyderhoud said.

Increased air seat capacity also will give tourism a needed push, he said.

"The key to short-term success is airlift, both from Honolulu and direct flights," Suyderhoud said. "Kahului is the only airport in the state to see positive changes in both domestic and international seat growth in 2014."

Suyderhoud cited two daily flights that Hawaiian Airlines added between Los Angeles and Kahului, Island Air’s resurgence and new Honolulu-Maui service added from ‘Ohana by Hawaiian.

Thus far, construction has not been able to offset the economic impact of decelerating tourism, according to Suyderhoud. Construction permits have shown inconsistent growth since the depth of 2010, and construction jobs were down by 2,700 from the peak of 2007 to the trough of 2010.

"We have recovered only 800 of those," he said.

Suyderhoud said part of the problem is the lack of residential construction.

"Some things are happening in this sector, but regulatory hurdles have, over time, prevented more housing from being built," he said. "The value of residential permits as a percentage of all permits has declined about 60 percent 10 years ago to 30 percent today. When it takes seven to 10 years for new projects to get their entitlements, it can’t help but slow down housing construction."

Suyderhoud said the strength in construction remains public infrastructure. He said the new airport access road has begun and is budgeted for $53 million. Other pending airport projects underway or starting soon include a new centralized rental car facility ($250 million), restroom improvements ($7.5 million), runway resurfacing ($3.2 million) and more efficient lighting systems ($60 million). He said building Kihei High School will involve more than $130 million in construction.

Maui lost about 10,000 jobs as a result of the 18-month Great Recession, which ended in June 2009, but two-thirds of those have returned, Suyderhoud said. Maui County’s unemployment rate, which has followed the state’s downward trend, was 4.8 percent in July.

"Job creation has been uneven across sectors of the economy," Suyderhoud said. "Tourism-related jobs such as hotels and restaurants have seen the most growth in job counts. Federal government and some service jobs have actually declined."

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