Thursday, February 1, 2001
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Posted on: Thursday, February 1, 2001

Record tourism is no cause for extravagance

Before lawmakers break out the champagne over yesterday’s front-page news that Hawaii enjoyed record tourism in Year 2000, they should carefully study the rest of that day’s news.

There they would find another story, on the Mainland economy, that puts sobriety into the celebration.

The other story spoke of a steep dive in consumer confidence, which signaled yet another interest rate cut from the Federal Reserve.

The consumer confidence story followed on the heels of yet another report suggesting that the national economy has slowed dramatically. During the fourth quarter, the economy grew at a rate of just 1.4 percent, the weakest performance in half-a-decade.

And how do these stories relate, and how do they offer policy guidance for state legislators now in the process of building a new budget?

Hawaii’s visitor industry has long understood that it operates "off-cycle" from the rest of the economy. Vacations and trips are generally planned in advance, sometimes far in advance.

So the record numbers from 2000 represent in good measure the white-hot economy on the Mainland, and particularly California, in 1998-99. Meanwhile, the current Mainland economy is slowing down. That may be a good thing for the overall health of the national economy, but it signals a dip in visitor numbers in Hawaii in a year or so.

Smart promotion and diversification of the products we offer to visitors can help smooth out that decline, but it cannot totally offset the realities of the Mainland economy.

In short, our economic rebound fueled by record tourism may be far from a permanent trend. It would be unwise to use today’s visitor numbers as fuel for irrational exuberance about the amount of tax dollars we will have to throw around.

A smarter choice would be to use some of today’s money to build against the next downturn. That means targeted tourism marketing and exploration of alternatives to the kind of tourism that brought a record 6.98 million visitors to the Islands last year.

It also signals general caution about building new permanent programs or spending plans into the budget. There is a little extra money this year, but it should largely be devoted to one-time expenses or tax incentives that have some form of economic payoff.

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