Aloha State is far from an economic paradise

KAILUA-KONA, Hawaii — Between dealing with terrorism threats and crises abroad, President Barack Obama has been unwinding in Hawaii
with his family. They’ve snorkeled in pristine bays and dined in
fashionable restaurants. Tourism officials only wish there were
thousands more visitors like them.

Tourism is the glue that holds this island state’s
finances together, keeps its streets clean, its workers paid and its
kids educated. But for the last two years, vacationers and corporations
alike have abandoned Hawaii
in favor of less exotic destinations closer to home. The result is an
unprecedented slowdown in the industry and some cavernous cracks in the
state’s budget.

Hawaii was so
short of cash this year that it furloughed teachers and suspended
school for 17 Fridays during the academic year, giving it the fewest
school days of any U.S. state. Home foreclosures and bankruptcy filings
are soaring. The unemployment rate has more than doubled over the past
two years to 7 percent. While that’s well below the national average of
10 percent, it’s a stunner for a place that just a few years ago
boasted a jobless rate under 3 percent.

For the first time in a decade, the number of Hawaiians receiving welfare benefits has increased. Crime is up in Oahu this year, even as it fell nationwide. And as if things weren’t discouraging enough, an army of rats in Honolulu’s China Town is plaguing the already beleaguered restaurant trade.

It’s the “worst recession in our lifetimes,” said Marcus Oshiro, chairman of the state’s House Finance Committee.

The number of visitors to the islands in November
fell 17 percent from 2007, and total spending by air visitors for the
first 11 months of 2009 decreased $1.3 billion from the same period in 2008.

Tourism officials are hoping that the Obamas’ visit
can begin to turn that around, with images of sugary beaches and
30-foot waves being beamed back to snowbound mainlanders.

“We believe that having images of Hawaii in the media — especially now when it’s 20 degrees below in some places — can only put the desire for a Hawaii vacation in future travelers’ minds,” said Marsha Wienert, the tourism liaison for the state.

But some Aloha State natives are blaming Obama, a Hawaii
native, for at least part of the slump. They say he didn’t do them any
favors last year when he said companies receiving government bailouts
shouldn’t be taking trips “to Las Vegas or go down to the Super Bowl.” He might as well have said Hawaii.

Lavish conventions and corporate junkets have come under fire since it was revealed that troubled insurer AIG spent $443,000 at the St. Regis Resort in Dana Point, Calif., just days after accepting an $85-billion federal bailout. The backlash has cost luxury destinations such as Hawaii
a bundle. More than 100 corporations and associations scrapped Hawaiian
business retreats or conferences after Obama’s comments, according to Hawaii’s Department of Business, Economic Development and Tourism.

“We’re losing the group business that’s either
canceled due to economic reasons or concerns about being seen as a
company going to Hawaii,” said Keith Vieira, senior vice president and director of operations for Starwood Hotels and Resorts in Hawaii and French Polynesia.

Some Hawaiians are underwhelmed by the return of their native son. In the scruffy town of Wahiawa on Oahu,
far from the beaches and fancy hotels, some locals waiting by a pawn
shop for the bus were decidedly ambivalent about the president.

“It’s not good here — there are no jobs,” said Hu Toelupe, who said she didn’t expect to see the president, and didn’t care if she missed him.

That drop has especially hurt Hawaii’s Big Island, which traditionally feels a slowdown first and recovers last compared to Oahu, the most populated island, said Joseph Toy, president of Hawaii tourism research firm Hospitality Advisors. In November, hotel occupancy in the Big Island was a meager 40 percent, he said.

Occupancy at hotels in the Big Island and Kauai
fell to 54 percent from 72 percent and to 60 percent from 78 percent,
respectively, over the past three years, according to TZ Economics, a
local research firm. The overall drop in hotel revenue exceeds $1 billion across the state, according to some estimates.

On a recent sunny afternoon at Uncle Billy’s Kona Bay Hotel on the Big Island,
only cats scurried around the manicured grounds. The balconies and
outdoor restaurant were deserted. A lone woman sat smoking by the
circular pool. Across the street at the Kona Inn Shopping Village, a jewelry store, tour operator and an arcade called the Fun Factory were all closed, padlocks on their doors.

“It’s never been this slow in 25 years,” said Patrick McFeeley, a photographer who owns The Picture Store, which sells photos of giant waves, lava flows, palm trees and other iconic Hawaiian images from a shop overlooking the sea.

There’s hardly a tourist spot on the planet that hasn’t been hurt by the global slowdown. But Hawaii has proven particularly vulnerable. Located 2,900 miles off the West Coast,
it’s completely dependent on air travelers and cruise ship passengers
at a time when many nervous consumers are contenting themselves with
“staycations” — if they’re traveling at all.

The tourism decline here accelerated in early 2008,
as the U.S. economy faltered and employers axed tens of thousands of
workers. Suddenly, a tropical vacation became an unthinkable luxury to
many consumers. In April of that year, Aloha Airlines and ATA Airlines each closed, cutting the number of airplane seats coming to Hawaii by 15 percent, said Wienert, the tourism liaison. Then two cruise lines redeployed ships to other ports of call.

“We’ve gone through two years of huge declines in our tourism industry, which has resulted in huge declines in revenue for Hawaii business and government,” she said.

A number of ritzy hotels are in foreclosure or have
changed hands because of financial difficulties. Shops around the
upscale areas are feeling the slowdown too. “Usually at Christmas time,
you couldn’t walk through the mall it was so crowded,” said Dion DeBois, who works at a jewelry store at the upscale Kings Shops at Waikoloa Village about 30 miles north of Kailua-Kona. “Now, nobody’s traveling,” he said, glancing outside where a man with a guitar sang to a row of empty plastic chairs.

That’s made Hawaii, which is trying to close a $1.2-billion budget shortfall, eager to find new sources of income. Green power is at the top of the list, said Russell Pang,
a spokesman for the governor. The state has pledged to obtain 70
percent of its energy from renewable sources by 2030. It’s trying to
lure entrepreneurs to make the state a hot-bed of clean technology and
home-grown power.

And many here are thrilled that consortium of universities has chosen Hawaii as the site for the world’s biggest telescope, which could spawn construction and research jobs.

Even though signs are emerging that more Americans
will start traveling again in 2010, some Hawaiians are giving up on
paradise for good. In 2009, more residents left Hawaii than moved here for the first time in a decade, according to Census data.

Sonia Grimme, co-owner of Surf and Sand, a beachwear shop on the Big Island, is thinking about moving back to her native Taiwan with her husband and 12-year-old son. She’s worried that her son isn’t getting the education he needs in Hawaii; the child now stays home and plays videogames on furlough Fridays.

“The system is broken here,” she said. “He can get a much better education in Taiwan.”

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