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The Honolulu Advertiser
Posted on: Sunday, June 1, 2008

Bolstering economy in lean times will take vision

The experts have been tagging the expression "a perfect storm" to the current economic picture. It fits, though in another sense what we have feels more like the doldrums than a storm.

Perhaps the metaphor springs from the dark clouds hanging over tourism, our primary economic engine. Visitor industry leaders and retailers who depend on tourist spending have noted the disturbing trends that will inhibit both the demand for Hawai'i vacations and the "supply" — the capacity to bring visitors here.

  • Downturns in real estate and a jittery stock market have left many worried about loss of wealth, too worried to gamble with a travel budget.

  • The sub-prime lending tumult has cut into families' financial security, especially on the Mainland, the mainstay of our tourism market.

  • Aloha Airlines and ATA ended passenger service here. Other airlines are cutting back on routes here as well. Visitor counts are dropping, and the state has published sobering estimates of how many airline seats are Hawai'i-bound from the Mainland for May through July: 12.9 percent fewer than the same period last year.

  • Spiraling fuel costs will continue to push air fares higher — another disincentive.

    All of this suggests that a rebound from this slump won't happen very quickly.

    The business community here is rightly concerned about how to navigate this turbulence. There is natural impulse to batten down the hatches through cost-cutting measures, but the primary focus needs to be on adjusting to capture what money is there for the spending.

    "You can downsize yourself out of business," said Jim Tollefson, president and chief executive officer of the Chamber of Commerce of Hawai'i. "Now is the time for companies to step up their marketing efforts. Even with a reduction in visitors they need to look for ways to expand their customer base."

    The heavy lifting has to be done by the private sector: The hotel industry and the restaurants and businesses that rely on tourism have to get creative and find alternative revenue streams. Some are reprising kama'aina discounts, a reasonable fallback strategy to cushion the impact.

    But now is not the time to play it safe.

    "In the immediate term, we need to be promoting Hawai'i as a destination, so that as we lose some vacationers we pick up others," said Mark Dunkerley, president and chief executive officer of Hawaiian Airlines.

    He's right, and other prime movers in the industry agree. An aggressive marketing strategy will help the state chart the smoothest course through the rough spots ahead.

    Rex Johnson, Hawai'i Tourism Authority president and chief executive officer, underscored that "we have to make sure we do whatever we can to assure there's plenty of demand for the product.

    "Most people are willing to pay a little more if they think they are getting value for their dollars," he said.

    The Hawai'i Tourism Authority should supplement private marketing budgets with its own funds in this effort. And the state should play the role of a convener, bringing together the private heavy-hitter companies, helping to steer promotional campaigns and learning what state and county governments might do to help businesses.

    It's a role the governor seems reluctant to play. But such a convention could also jump start the faltering campaign to reduce burdens that government places on business. Some progress was made in the 2007 legislative session with a reduction in unemployment insurance premiums paid by businesses, a wise idea considering the whopping half-billion-dollar reserve fund for benefits.

    That reduction took effect in January, but more should be done. State and county officials need to rev up efforts to streamline permitting processes that don't improve outcomes for the public.

    The state government is more constrained in what it can do to inject new capital, unlike its federal counterpart, with its stimulus checks. But economist Paul Brewbaker believes that state and county governments have credit ratings strong enough to support borrowing money for an accelerated schedule of improvements to Hawai'i's physical infrastructure and investment in "human capital."

    Part of that human element should be the retraining, education and skill enhancement of workers who need to prepare for new employment opportunities in an economy that should have a broader base.

    That's where government should place its focus for the long term, Brewbaker said. David Carey, CEO at Outrigger Enterprises Group, the largest locally owned hotel group, concurred.

    "We're in for a transition, whether we like it or not," Carey said. "I feel confident that, given the quality of the people who live here, we'll survive. But it won't be like the past."

    We can get there from here, but it will take leadership and vision to make the transition.