Hawai'i's visitor arrivals plunged last month — again — with a 17.3 percent drop from last August, not counting cruise passengers.

The double-digit plummet and continuing decline in the state's No. 1 industry could fuel more worries about the economy.

The worst news came from a traditionally strong source of visitors — the U.S. West — which posted its biggest decline on record, down 24.2 percent, according to the August report by the state Department of Business, Economic Development and Tourism.

The Hawai'i Visitors and Convention Bureau is expected to launch a major marketing campaign next week aimed at slowing the decline.

In California, longtime travel agent and manager Renee D'Avirro said a combination of higher airfares, the downturn in the economy and higher fuel prices has slowed travel to Hawai'i.

"We've seen a decline in the Hawaiian market this year," she said, with more travelers choosing to stay closer to home or go to Mexico or Canada.

D'Avirro, who has worked for 27 years for World Travel in Santa Ana, Calif., said a midweek air ticket to Hawai'i in October is now selling for about $600 roundtrip, up from last year's $450.

For a family of four, that increased the cost of a vacation by $600 and she said that makes a difference.

A continuing decline or stability in air prices would help more, she said.

But things are looking up for the new year, beginning in January and going up to summer.

"Overall, we're seeing a lot of requests for next year, in '09, which is a good sign," D'Avirro said.

State tourism liaison Marsha Wienert sees some room for optimism, with some Mainland flights returning next month. "Starting in October, Delta Airlines will resume several flights to the Islands that had been canceled earlier in the year," she said.

"Alaska Airlines will be adding flights from Seattle to Kona in November, and Anchorage to Kahului in October, with seasonal flights from Honolulu to Anchorage. The biggest challenge we face moving forward is to increase demand for our islands. By increasing demand, the visitor industry and our economy will benefit, " Wienert said.

SHIFTING STRATEGIES

On O'ahu's North Shore, Turtle Bay Resort saw business start to drop in May — from occupancy of more than 80 percent to 75 percent, said general manager Bob Boyle.

"We lowered our rates," he said. "We had a terrible summer but we're going to have a good fall," partly buoyed by some group meetings booked more than a year ago.

Boyle said the resort also adjusted by shifting emphasis to a kama'aina promotion called the Escape Club that offers a package deal to local residents.

"That has been a huge success for us," Boyle said, with 2,490 members helping fill the gap left by those missing U.S. West visitors.

"That California customer was our customer; it is our biggest segment," Boyle said.

Businesses reliant on visitors are adjusting with various strategies.

At The Little Hawaiian Craft Shop in the Royal Hawaiian Center, manager Kimberlee Nihei said she is grateful for the loyal support of longtime customers.

Her store has been at the Waikiki shopping center since 1980, specializing in made-in-Hawai'i items.

"I can't complain; we've done OK," Nihei said.

Business is down from last year but she's changed the mix of what she's buying, with a bigger focus on less expensive but Island-made items. The size of the store has been cut in half in recent years but she finds a demand for authentic crafts.

"I'm buying more affordable items, such as lotions, candles, smaller jewelry boxes," she said.

While shoppers might not be spending $60 a person for take-home gifts, they are still buying. "This way they spend $20," she said.

"We're in the good travel books. We have a good staff."

The Neighbor Island resorts also are feeling the decline. Sheraton Kauai Resort general manager Angela Vento said industry officials are worried about the outlook for November and December, which are traditionally slow months.

But she's hopeful that creative marketing and innovation can help. "In Hawai'i, we really collaborate together to be able to work through difficult times," Vento said.

She said the hotel has picked up some business from Europe and Canada but those numbers do lag the traditional U.S. and Japan markets.

SPENDING DOWN, TOO

The state's monthly economic indicator report released this week shows hotel-room tax revenue down 28 percent in August.

And the visitor industry has seen some layoffs: Sea Life Park, Molokai Ranch and some hotels have reduced staff. Initial claims for unemployment insurance rose to 1,955 for the week ending Sept. 20, up 114 percent from the same a year earlier.

The state statistics showed: