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The Honolulu Advertiser
Posted on: Monday, February 1, 2010

Lanai hit hard by economic downturn

By Ilima Loomis
Maui News

Hawaii news photo - The Honolulu Advertiser

The Lodge at Koele, shown here, and the Manele Bay Hotel have reduced their combined work force by about 20 percent and cut hours for those workers who remain.

Advertiser file photo

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LANAI CITY — With a high cost of living and a tiny economy of limited job prospects, survival on Lanai has never been easy.

But now that all major new construction has stopped and the island's largest employer has laid off or furloughed 20 percent of its work force and cut hours for the employees that remain, more families have been pushed to the edge.
Struggling families are moving in together, signing up for government assistance and doing whatever they can to get by, said Lanai City resident Alton Aoki.
"I see the increase in people needing help," he said. "Now people's unemployment insurance is starting to run out, so subsistence fishing and hunting are becoming a means of survival."
And many decide to leave the island. Residents estimate between 300 and 500 people have moved away over the past 18 months — more than 10 percent of the island's population of 3,196, as recorded in the 2000 U.S. Census.
Tom Burke, owner of the Lanai Fitness Center, said membership at his gym, where dues cost only $13 a month, dropped last year from about 500 people to 300, mostly due to people leaving the island.
"We did get a bump this month — New Year's resolutions," he said early in January.
Lt. Ernest Soares of the Maui Police Department’s Lanai Station said crime on the island had actually dropped since the recession hit, because of the number of people who had moved away.
And Alberta de Jetley of the Lanai Animal Rescue Center said her group's shelter was now home to cats whose owners had left the island and couldn't afford to take them.
"It's sad," she said.
The official unemployment rate for Lanai was 8.7 percent in December, on par with unemployment on Maui.
But residents say the statistic significantly undercounts the devastating effect work force reductions have had on Lanai.
Of course, the unemployment rate does not count people who have left the island; it also excludes people who have given up looking for a job, lost a second job they depended on for income, or had their hours reduced.
"People are in survival mode. They're worried about putting food on the table," said counselor Butch Gima. "Unlike other places, it's not like there's another game in town."
Driving the downturn has been a steep decline in visitors to the island and a near shutdown of major new construction.
Lanai received 61,334 visitors last year, a 24 percent decrease from 2008, according to the Hawaii Tourism Authority.
That was the second-biggest drop in tourism in the state, after Molokai, which saw a 29 percent decline. The next in line was Kauai, with a 10 percent drop in visitors for the year.
Castle & Cooke President Harry Saunders said Lanai's remoteness and its position as a high-luxury destination were two reasons it was being hit so hard by the downturn. The luxury visitor market has seen the greatest declines, he said, and many travelers are more reluctant than ever to pay the additional costs involved in getting to Lanai, which can be reached only by ferry or an interisland flight.
"Because the resort is the major employer, it has an impact on the whole island's economy," he said.
Over the last 18 months, Castle & Cooke Resorts and the Four Seasons, which operates the Manele Bay Hotel and the Lodge at Koele, have reduced their combined work force by about 20 percent, including both layoffs and worker furloughs, Saunders estimated. For the workers who remain, the resort has cut hours by 10 to 15 percent across-the-board, he said.
Saunders said he believed that Lanai's hotel occupancy has "hit the bottom," and that the resort had reduced its work force to a level that can now be sustained.
Castle & Cooke Resorts has also shut down all of its new construction on Lanai, he noted.
The company had already built out the first phase of the Palms, a 16-unit resort condominium development at Manele, but put a second 18-unit phase on hold when sales "came to a screeching halt."
A Koele project, the Pines, had been planned for 20 units, but the company stopped construction after completing six. It also has suspended work on about a dozen empty lots planned for custom homes at Manele.
"Until we see some interest we're probably not going to start any more custom homes," Saunders said. "We'll build to order, but not to spec."
Bill Kamai of the Hawaii Carpenters Union said the union previously had about 100 members on Lanai, but only six men are working now.
Construction workers are staking their hopes on government projects, including planned upgrades of the Lanai Community Center and the Lanai Senior Center.
Kamai was also hopeful that Castle & Cooke's proposals for a major wind farm on Lanai would move forward, creating new work for carpenters during construction.
"It's all small projects coming up, government projects, and we're trying to get whatever we can," he said.
Maui County Council Member Sol Kaho'ohalahala, who holds the council's Lanai residency seat, said in an e-mail that part of the island's struggle was due to its residents' near-total dependence on Castle & Cooke as both employer and landlord.
"We live in a community that is controlled by a single employer, and that dependency leaves us with little to no alternatives or options," he said.
Kaho'ohalahala said the long-term solution was to diversify the island's economic base.
Business owners said they're feeling the effects of the recession on their bottom line as well as seeing it in the faces of their customers.
"We notice when it's payday," said Stephen Ferguson, owner of Canoes Lanai.
The plate lunch restaurant fronting Dole Park used to see steady business through the month; now Ferguson said he sees a spike in customers about every two weeks — after they get paid.
After the holidays, Ferguson saw customers opening their gift envelopes at the cash register and handing over their Christmas money to pay for dinner.
"Luxury for them is going out to eat," he said.
To keep customers coming in he's offering "cheap eats," a lower-priced plate lunch special twice a week; adding "tourist-friendly" items like crepes and museli aimed at frugal visitors looking for dining options outside the resorts; and adding more bargain items to his menu.
"We're doing a lot of chicken specials," he said.
Pine Isle Market owner Kerry Honda said he had seen a "noticeable decline in sales" at the general store his father started in 1949. Some customers moved away, and others were spending less; a number of families travel to Maui so they can stock up on bulk goods at Costco and other big-box stores, he said.
"They're being more thrifty," he said.
Honda said he'd tried to cut costs by reducing his store's energy use and keeping a smaller inventory in stock, avoiding cutting employee hours as much as possible. One thing he feels he can't do is raise his prices.
"For the people who can't go off-island, we've got to keep our prices reasonable," he said.
Next door, Richard's Market Manager Edwin Vila said his store was "doing OK."
He was noticing more customers on food stamps. People were spending "more on food, less on alcohol," and probably cooking more because they were spending more time at home, had less money to eat out and had kids in the house on furlough Fridays.
Vila said he was trying to respond to the economic conditions, such as offering more sale items at the market, which is owned and operated by Castle & Cooke.
"We're trying to do more volume instead of higher pricing," he said.
Vila was optimistic.
"I think we're going to be all right," he said. "I think things have already bottomed out, so it's going to get better."
Artist and gallery owner Mike Carroll was also keeping a positive outlook. He had a tough year in 2008, but 2009 ended better, and November and December were good months for his gallery.
To keep things going, Carroll and his wife tightened their belts and started working longer days so the gallery could stay open later. Realizing that the visitors who were still coming to Lanai were more cautious about spending money, Carroll also began painting smaller works he could sell for lower prices.
"We called these 'recession paintings,' and we can't keep them in stock," he said. "We adapted."
One resort worker, who asked that his name not be used, said he didn't know what to do when he was laid off a year ago.
He'd worked for Castle & Cooke for more than 20 years and had wanted to retire on Lanai but found himself planning a move to Oahu so he could find work.
"We were struggling," he said. "It was pretty scary for me."
The family, which includes three children, survived on his unemployment benefits and his wife's salary from a part-time job. He felt lucky to find another job on Lanai after being out of work for seven months.
The experience left him feeling bitter and upset at his former employer and Castle & Cooke's billionaire owner, David Murdock.
"Twenty-two years I was loyal to the company," he said. "A lot of the people laid off were like me — born and raised on Lanai."
And while he sees his neighbors leaving the island and facing foreclosure, the former resort worker felt angry that the Four Seasons continued to employ and bring in workers from the Mainland and foreign countries.
That's led to "a lot of bad feeling" in the community that has contributed to a lack of support for other Castle & Cooke projects like the massive wind farm it is proposing to develop on the northwest end of the island.
Saunders said he understood the resentment felt by laid-off workers when they see off-islanders employed by the company. He said as much as possible Castle & Cooke and the Four Seasons prefer to hire local workers, but the resorts have to bring in outsiders for some positions if they can't find qualified candidates on the island.
"If we're going to lay off a busboy or a chef, we're probably going to keep the chef," he said.
Diana Shaw, executive director of the Lanai Community Health Center, said her clinic has seen a significant spike in uninsured patients, and huge growth in the number of patients without dental coverage.
"Rather than lay off, sometimes what the primary employers are trying to do is just modulate the workload," she said. "What that's actually done is resulted in people who are one pay period with health insurance, and another pay period without health insurance."
Looking forward, many Lanai residents say their community's positive outlook and support for one another are the strengths that will help them survive hard times until tourism turns around.
But they also express a deep and lingering unease over the future and question the very foundation of their island's economy.
"I don't know what the future holds," Aoki said. "I have a difficult time seeing how two hotels and a wind farm will sustain this population."
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