State lowers tourism projections for 2003

By Kelly Yamanouchi
Advertiser Staff Writer

Hawai'i's $10 billion tourism industry continues to struggle, despite some signs of recovery, leading the state today to lower its projections for this year and cut back expectations for 2003.

By the end of the year, some 6.4 million tourists will have come to Hawai'i, spending more than $10.3 billion, according to the latest projections by the state Department of Business, Economic Development & Tourism. While that's a 1.8 percent increase over last year's arrivals and a 2.2 percent increase in spending — the improvements are less than half of what had been expected.

As recently as September, the tourism industry this year was expected to make up much of its losses resulting from the drop in travel after the Sept. 11 terrorist attacks. The state had projected Hawai'i would end the year with a 3.5 percent increase in visitor arrivals and a 3.4 percent increase in expenditures.

But weak visitor arrivals last month have now moved the state to revise projections downward.

"Some of these numbers have been coming in a little lower than we expected in the last couple of months," said state economist Pearl Imada Iboshi. "We expected, I guess, a stronger recovery ... the Japanese side has been coming back a little slower than we had thought."

The Hawai'i Visitors & Convention Bureau is estimating 2002 will end with a total of 1.45 million Japanese visitors — down even from last year's 1.5 million. Next year the expectation is for 1.6 million to 1.65 million Japanese.

"This would help get us back toward 2 million," said visitors bureau president and chief executive Tony Vericella. The number of Japanese visitors to the state has been declining since 1997. The last time 2 million Japanese came to Hawai'i was in 1998.

Next year, the state projects Hawai'i will see about 6.8 million visitors, who will spend $11.1 billion. That's down from previous forecasts of 6.9 million visitors — which would have meant a return to the state's record 2000 level — and $11.2 billion in expenditures.

The state has not released its visitor counts for November, but Iboshi said it will show particularly low arrivals for visitors from the U.S. Mainland and Japan. That affects next year's estimates because 2002 data is used as a base for projections.

Economic uncertainty and fears of a war with Iraq may be keeping potential travelers from spending money on leisure items such as vacations.

The state now projects 6.1 percent growth in visitor arrivals for 2003, followed by 2.5 percent growth in 2004, and 2.1 percent in 2005.

Other forecasts are not as optimistic. Carl Bonham and Byron Gangnes, University of Hawai'i Economic Research Organization economists, predict 4.6 percent growth in arrivals next year, including a 3 percent increase in U.S. visitors and a 10.2 percent recovery in Japanese visitors.

"Hawai'i's visitor industry will struggle for some time to recover," according to the university economists' report earlier this month.

The visitor industry's struggles have taken their toll on the state's work force: there are 2,500 fewer hotel jobs than in early 2001 and 4,400 fewer transportation jobs, according to state labor data.

Still, in spite of the lowered expectations, some say the high number of runners in the Honolulu Marathon earlier this month gave hope that more Japanese visitors will begin returning to Hawai'i.

"For the first 11 months it's been kind of slow, but this past Honolulu Marathon sort of kick-started the big interest in Hawai'i," said Gilbert Kimura, sales director for Japan Airlines in Honolulu. "I think next year will be better than this year."

Others, like Vericella, agree. "We are cautiously optimistic. Of course, all this is couched in not knowing what external events may occur."

Experts say it's growing increasingly difficult to predict where the tourism industry — and in turn a large portion of the state's economy — is headed.

"The tourism industry is a fragile industry. It is dependent on so many other factors of what's going on in the world," said Mark Hukill, interim association dean at the University of Hawai'i's School of Travel Industry Management.

And although estimates for future years look positive, he said, "It all has to be tempered with the fact that it could be exceedingly wrong based on external events that we don't have a lot of control over."