Reverberations from Wall Street's dramatic plunge and other bad economic news yesterday figure to further weaken Hawai'i's already shaky visitor industry as people hold off on vacations and other large purchases.

At least one hotel operator yesterday reported an increase in cancellations, and other officials said they expect vacation bookings to slow further.

"It's like the perfect storm of bad news," said Keith Vieira, senior vice president and director of operations for Starwood Hotels and Resorts Hawaii.

"I bet at the end of this week we'll see a slowing of the booking activity and an increase in the cancellation pace."

Worries about the state's leading industry were stoked by a 504.48 point decline in the Dow Jones Industrial Average, the biggest one-day point drop since the September 2001 terrorist attacks. Markets tumbled as jittery investors reacted to news that Lehman Brothers Holdings Inc., one of Wall Street's oldest and best-known investment banks, was forced to file for bankruptcy, while another storied Wall Street name, Merrill Lynch & Co. was sold in an emergency transaction.

At the same time, worries circulated about the financial health of American International Group Inc., one of the country's largest insurers. Later in the day Hewlett-Packard Co. announced it would cut 24,600 jobs over the next three years.

Besides shocking investors, the plethora of bad news was said to take its toll on consumer confidence and sparked more people to talk about the country being in a recession. High crude oil prices, national unemployment at 6.1 percent and higher grocery prices are also gnawing into people's budgets.

Consumers already have pulled back in spending at stores, and are likely to be more cautious with the news about stock prices, said Carl Bonham, executive director of the University of Hawai'i Economic Research Organization.

"The consumer is retrenching," Bonham said. "They're kind of sitting back and saying 'What's going on?' "

He said even the highest 10 percent of income earners might wait to book a vacation after seeing the hit their investment portfolios took yesterday and seeing a drop in the value of their homes during the past year.

In Kane'ohe, investment and estate planning adviser Geal Talbert said some people are holding back on spending versus just three years ago because of uncertainty about the economy.

"It's the prudent thing to do even though you know it's a paper loss," said Talbert, president of Legacy Group Wealth Management.

"You tell yourself maybe I won't buy that sofa, maybe I won't go on that trip."

VISITOR COUNTS DOWN

Talbert said most of her clients weren't flustered by yesterday's market decline, knowing that markets fluctuate and that odds are there will be a recovery.

That's little comfort to the visitor industry, which is projected to endure its second straight year of falling visitor counts this year. In July, visitor counts were off 14 percent, while average hotel occupancy slumped to a 10-year low at 74.2 percent.

The drop in stocks was reminiscent of a dark day on Wall Street 21 years ago that also occurred on a Monday. On Oct. 19, 1987, the Dow tumbled 22.6 percent and the day became known as "Black Monday."

Visitors from the Mainland were off 0.6 percent that year and were essentially the same the next year. Hawai'i's tourism industry was able to offset some of the declines with growth in travel from Japan and other foreign countries.

That's not the case this year, with Japanese tourism also off. Vieira said his bookings have been running 15 percent below last year's level.

"It's a difficult, difficult period ahead," said Vieira, who has worked in the tourism industry for 34 years.

"It's the worst I've ever seen it."

He said there was an increase in cancellations yesterday, but there was no way to know if all of those people were backing away from the trips because of the economic news.

The tourism industry has been trying to battle back through marketing campaigns with the message that you get more for your money with Hawai'i vacations now than in recent years. That's because many promotional packages feature a free night's stay, free meals and other complimentary goods that offset the higher cost of air travel.

"The value of the vacation is better than it has been for years," said Marsha Weinert, state tourism liaison.

There, too, was encouraging news for the Japanese market yesterday, with the yen trading near a two-month high against the dollar and Japanese tourists getting more purchasing power here. Yet Weinert admitted getting U.S. tourists to book is challenging given the recent news.

"I'm sure consumer confidence is a little sketchy right now and that does affect tourism."