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The Honolulu Advertiser
Posted on: Thursday, September 11, 2003

9-11 left a resilient, but cautious, Hawai'i

Hawai'i remembers victims of attacks — Posted at 12:11 p.m.
 •  State maintains vigilance
 •  Nurse honors brother she lost

By David Butts
Advertiser Staff Writer

A Japan-bound passenger at Honolulu International Airport waits for clearance at a security checkpoint. In the aftermath of 9-11, travelers have become accustomed to multiple inspections. Officials say Hawai'i is more prepared than ever to cope with terrorist threats.

Bruce Asato • The Honolulu Advertiser

Two years ago, the Sept. 11 attacks delivered the most powerful blow to Hawai'i's economy since the Japanese bombed Pearl Harbor.

Air traffic was halted, nearly 40,000 workers lost their jobs in three months and tourism was forever changed.

Today, the state's economy, by many measures, has surpassed where it was before 9-11. There are 2.5 percent more jobs than in 2000, and the economy is expected to grow by 2 percent this year.

Hawai'i's No. 1 industry, tourism, had its strongest summer since 2000.

Still, few in business are ready to declare that the state has shaken off the effects of Sept. 11. They are pleased with the resilience the economy has shown, but they are still adapting to a world where challenges seem to come one right after the other.

"I'm not sure recovered is the right word," said Carol Pregill, president of the Retail Merchants of Hawaii. "Maybe restructured, changed, adapted. Some areas haven't recovered. We just evolved into something else."

Adapting, especially for those in the tourism industry, has meant not replacing all workers laid off after 9-11, discounting to attract reluctant travelers and combing through all expenses to find what can be cut.

"It's tougher and tougher," said Perry Sorenson, chief operating officer at the Outrigger Hotels & Resorts. "You can't plan a year ahead; you can't plan three months ahead. Nobody can rest."

Outrigger has reduced staff through attrition and is looking to save money on its cooling systems. After two years of trimming costs, there's not a lot left to cut, Sorenson said. "The low hanging fruit has been gone for a long time."

While the tourism industry continues to struggle, other industries are thriving.

Real estate has been booming. Even a recent rise in interest rates, after reaching record lows in June, hasn't discouraged buyers. Construction is strong as is the private security industry.

Jim Tilley, president of Star Protection Agency, says he will grow by 20 percent this year as companies are looking to beef up security in the aftermath of 9-11.

"What we are finding is the more highly trained and advanced we get, the more interest we are getting from customers," Tilley said.

The strength of some industries was able to make up for the weakness in the travel industry.

Paul Brewbaker, chief economist at Bank of Hawaii, says the effect of 9-11 on the state's economy was gone by the summer of 2002.

"The model of the Hawai'i economy as essentially resilient, not essentially vulnerable, is the correct model," Brewbaker said.

On a more disturbing note, Brewbaker says there is a 5 percent probability of another event with an effect similar to 9-11.

"I think that we all have accepted that something like that is going to happen," Brewbaker said. "Every time it happens, you have to deal with it. We should be so lucky that they don't happen every year."

That wasn't the case this year when the war in Iraq and SARS combined to curb tourism and dampen consumer spending.

The travel industry seems to bounce back faster from each succeeding event.

A year ago, on the first anniversary of Sept. 11, travel to the Islands fell off for four weeks. The war caused only a two-week drop, said Joseph Toy, who compiles hotel occupancy data for Hospitality Advisors.

"The traveling public seems to be resigned to the fact that the world we live in is different," Toy said. "The issue (now) is not so much terrorism as the economy."

Hotels statewide were nearly 80 percent full in July, according to Toy's latest figures, but he said that Maui and Kaua'i are keeping that average high, while O'ahu and the Big Island are lagging.

"I would characterize the recovery now as uneven and fragile," Toy said, echoing the feeling on the part of many in the tourism industry.

Even with the strong summer season, tourism executives aren't relaxing.

"Two months doesn't make a trend," said Outrigger's Sorenson.

Japanese tourism is still down because of what Sorenson calls the "perfect storm" of a slow Japanese economy, SARS and the war in Iraq. That doesn't bode well for the high-end retail market.

"There is an awareness that there is a different visitor out there," said Pregill of the retailers' association. "I don't think anybody expects the Japanese will come back to where they were in the 1990s."

As hard as 9-11 has been on hotels and retail stores, the industry that has suffered the most is the airlines.

U.S. carriers have laid off more than 100,000 employees since 9-11 and cut salaries for thousands more. Nationwide they are still about 13 percent below their pre-9-11 seat capacity.

Interisland travel has gone from a show-up-and-go affair to a major headache.

"Life is too short to fly interisland," says Brewbaker, the economist. He blames the higher prices and fewer flights on the antitrust exemption Aloha and Hawaiian airlines were given last year.

If allowed to coordinate schedules, companies will always choose to set fares as high as possible and maximize profits, Brewbaker said.

The change in air travel has spilled over to many businesses down stream.

Rental car companies have shifted to smaller fleets. Budget in Hawai'i no longer operates 24 hours a day. "We don't have the customers," said Karen Bostedor, a 23-year Budget veteran, as she stood at an empty counter at the Honolulu International Airport.

At the Avis desk nearby, the clerk wore a red and white button that said, "Honor & Remember; Sept. 11, 2001."

Reach David Butts at dbutts@honoluluadvertiser.com or 535-2453.