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Hawaii’s economic woes expected to widen

Recovery is on pause again for Hawaii’s battered visitor industry.

Gov. David Ige said Tuesday that the state will wait until at least Oct. 1 to begin a program to allow passengers with approved negative COVID-19 tests taken within 72 hours of their trip to Hawaii to bypass the state’s mandatory 14-day self- quarantine for out-of-state passengers.

Finding a balance is complicated. Hawaii’s geographical isolation and passenger quarantines initially made it one of the least impacted by COVID-19 cases and deaths. While few of Hawaii’s recent coronavirus cases have been travel related, infections surged, especially on Oahu, as the state reopened parts of its local economy.

Certainly some Hawaii residents, even members of the visitor industry, consider Ige’s decision necessary to bringing down a recent rash of COVID-19 counts. The state and counties also need more time to ensure that health care facilities aren’t at capacity and that they’ve got enough contact tracing, tests and personal protective equipment.

Melvin Sakurai, a management consultant with Research Information Services, said he supports the delay given that Hawaii isn’t ready yet, but said “just postponing things is a fool’s mission, if you don’t understand what it takes to reopen.”

“Coronavirus and the economy are one and the same. You have to get control over the virus or we’ll simply be toggling back and forth between opening and closing,” Sakurai said. “Given the situation there’s a very high likelihood that a lot more businesses will fail once we commit to this path of containment. It’s a pitiful thing all the sacrifices, all the hardship and destruction that took place between March and now because of poor management and policy decisions.”

The state’s visitor industry, which in normal times supplies 17%, or the largest share, of the state’s gross domestic product, began free-falling after Ige ordered a 14-day travel quarantine for out-of-state arrivals starting March 26.

Visitor arrivals statewide in June were still down more than 98%; although, visitor industry members saw some gains after the interisland quarantine was initially lifted on June 16. But that all came to an end Aug. 11 when it was reinstated.

Hawaiian Airlines spokesman Alex Da Silva said delaying the start of a pre- travel testing program by yet another month will keep demand for travel suppressed and will potentially widen job losses.

“As a result of the economic impact of the pandemic and travel restrictions, yesterday we made the difficult decision to formally eliminate approximately 185 non-contract, management positions — many of which were accomplished through voluntary packages and elimination of vacancies,” Da Silva said in an email Tuesday. “This is in addition to Worker Adjustment and Retraining Notification, or WARN, notices issued at the end of last month that could affect up to 2,135 of our union colleagues. “

Mark Bratton, senior vice president of Colliers International, said many of Hawaii’s largest and best-known hotels and resorts also are struggling. As many as three properties with large commercial mortgage-backed securities (CMBS) loans have gone to special services and another six have been placed on the watch list, Bratton said.

“At this time last year, there weren’t any CMBS loans on the list,” Bratton said. “But I don’t think we’ll see dozens and dozens of hotels going to lenders for foreclosure. We all believe there’ll be a lot of demand for the Hawaii brand when we can get back to full status.”

The question is just how long is recovery going to take? Bratton said when the pandemic first started the industry thought recovery would take one to three months. Now it’s looking more like one to three years.

Lynette Eastman, general manager of the Surfjack Hotel & Swim Club, said it’s hard to predict a turnaround timeline. All she knows is that whenever Ige issues a new restriction or delay, the negative impact on business is instantaneous.

The lifting of the interisland quarantine and robust military travelers had recently allowed her to bring about 50 of her 80 employees back to work. But she fears for their job security, given that more delays will make it hard to build on her paltry bookings.

Eastman said she’s only got 29% occupancy on the books for October, 16% for November and 12% for December and everything for 2021 is under 4%.

Mufi Hannemann, president and CEO of the Hawaii Lodging & Tourism Association, said low occupancy has opened the door to preliminary discussion about temporarily transforming some ancillary and off-beach hotels into overflow health care facilities and quarantine and isolation centers.

“Right now anything that would bring in some revenue for the hotels, we’d be open to it as long as it’s done in a safe healthy way that doesn’t put workers or the community at risk,” Hannemann said.

But Hannemann would rather see tourists filling hotel rooms. That’s why he’s reached out to all four mayors and is pushing the concept of a resort bubble, which would give quarantining visitors the right to roam at designated areas in participating hotels or resorts. They wouldn’t be allowed off the resorts for the 14 days. If they stray, a geofencing app would alert police.

“The industry urgently needs to reopen and this is a safe way to do it,” Hanne­mann said.

But Ben Rafter, CEO of OLS Hotels and Resorts, said he worries the effort will “divert time and attention away from the broader return of tourism” with little gain.

“It’s a very small microcosm of tourists that would want to be confined to a resort,” Rafter said. “Also, I think it could be a PR disaster for the state — it screams of Hawaii embracing big brother.”

For now, the status quo remains and the pain isn’t just on Oahu.

Times are so tough that the Kohala Coast Resort Association (KCRA) recently obtained $900,000 in Hawaii County coronavirus relief funds to feed the nearly 5,000 workers who are still furloughed at the properties that fall under its umbrella.

Twice a month from September to November workers will get food assistance, including two dinners to feed a family of four, along with pantry staples sourced from local farmers.

Yogi Dean, aloha ambassador for the Mauna Kea Beach Hotel, said in a statement, “It has been very difficult with no work due to the hotel closure. We have three generations under one roof and the care package program will really help me and my ohana as this pandemic situation continues. I cannot express how thankful we are for this food assistance, it is truly a blessing.”

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