Big Island economy survives storm, lava

It’s been a rough two months for Hawaii island.

On Aug. 8, heavy rain and strong winds from Tropical Storm Iselle whipped around Puna.

Then this month Pahoa residents have been bracing for a gradually approaching lava flow from Kilauea Volcano.

But Hawaii island appears to have weathered the storm with minimal damage. And despite additional costs associated with building lava escape roads, the economy of the state’s second-most-populous island continues to grow.

"In spite of storms and lava, Hawaii island’s outlook continues to be generally positive with both sides of the island experiencing economic expansion, even though this growth has been patchy over time and across sectors," economist Jack Suyderhoud told business leaders Thursday at two First Hawaiian Bank business outlook forums at the Waikoloa Beach Marriott Resort in Kona and the Hilo Hawaiian Hotel.

"The good news is that the damage from nature’s wrath has been geographically limited, and the island’s tourism and agriculture infrastructures have not been badly affected," added Suyderhoud, a First Hawaiian Bank adviser and professor of business economics at the University of Hawaii Shidler College of Business. "Rebuilding will likely add to construction activity."

Suyderhoud said the most serious damage was to Puna’s homes, utilities, small businesses and papaya farms.

Hawaii County officials estimate that Iselle caused $2.6 million in damage to county government buildings.

The damage total will grow after homeowners’ insurers tally up the damage to residential properties.

There also could be up to $12 million in costs incurred by the county, state and federal governments for rebuilding three abandoned roads that could provide an escape route in and out of the lower Puna district if lava covers up the main thoroughfare, Highway 130. And the state Department of Education said it is spending about $9 million to build a temporary school to accommodate up to 500 students that would be cut off from attending class at three schools if lava crosses the highway.

Suyderhoud said even before Iselle and the lava flow, it was hoped that construction would make up for slowing tourism.

"And to an extent it has done so," he said. "The number of construction jobs continues its slow climb out of the hole created by the 2008 downturn when over 3,000 jobs were lost. Gradually, about 800 have been recovered."

But while construction is gaining steam, tourism is going in the opposite direction with a few exceptions.

"We had hoped 2013 would be better than it was, but starting in the last quarter of the year, visitor arrival numbers turned negative," Suyderhoud said. "While we had expected a slowdown, the downturn in late 2013 caught many by surprise. Also troubling is that the downturn has persisted into the first few months of 2014."

Through July of this year, visitor arrivals to Hawaii island were down 1.9 percent to 857,802, from 874,385 in the year-earlier period, according to Hawaii Tourism Authority data.

Suyderhoud attributes some of the slowdown to fewer air seats.

"Hilo experienced declines in airline seat capacities in the first part of 2014, but Kona did well," Suyderhoud said. "It’s good news that for Kona both domestic and international seats are expected to increase in late summer 2014. Alas, Hilo is not destined for the same. Tourism officials note that airlift from Honolulu remains a concern though the expansion of routes by the state’s smaller carriers may be helping."

Suyderhoud noted, though, that while tourism overall has been sputtering, some parts of the island, such as the Kohala coast, are doing record business.

"Hawaii island is less dependent on tourism than other neighbor islands," he said. "The Hilo and Kona sides are at polar opposites in terms of tourism dependence. Kona has a high — and above average — dependency on tourism whereas the Hilo side does not."

Suyderhoud said despite sluggish visitor arrival numbers, visitor spending on Hawaii island has been up. Through the first seven months of this year, visitor spending rose 6.5 percent from the year-earlier period.

"The makeup of the tourists coming to Hawaii island remains unique among neighbor islands," he said. "Hawaii island has the largest proportion of foreign visitors, with Japan leading the way. Increasingly, more Chinese visitors come for day trips."