Last year marked Hawai'i's largest decline ever — 10.6 percent — in tourist arrivals, with just 6.7 million visitors coming to the Islands.

The drop was the steepest since the state began keeping statistics in 1927 and was the first time since 2004 that arrivals by air dropped below 7 million.

But perhaps the most painful statistic released yesterday was the $1.2 billion decline in visitor spending between 2007 and 2008.

That puts a large dent in the state's $50 billion economy.

"For us, it was worse than 9/11," said Laura LinKee, assistant manager at the 98-unit 'Ilima Hotel in Waikiki, speaking of the November-December numbers.

"It was the first time in the history of the hotel that we actually considered layoffs," she said. The 'Ilima avoided layoffs by cutting employee schedules to six hours a day, four days a week, she said.

With tourism slumping across the nation and around the globe, Hawai'i's No. 1 industry is feeling the pain of visitors canceling or postponing travel because of economic worries, high fuel prices and surcharges.

State tourism liaison Marsha Wienert said she's not sure if the numbers have reached as low as they will go.

Wienert worries about March, which last year was boosted by Easter/spring break business that will shift into April this year.

"March is on sale," Wienert said. "There's lots of deals out there, really good values."

In all of 2008, visitors who arrived by air spent $11.3 billion, down 9.9 percent from 2007, said the state Department of Business, Economic Development and Tourism.

The average daily spending was $180 per person, compared with $182 for 2007.

December 2008 was an especially difficult month. Visitor expenditures dropped 22.4 percent, or $280 million, from the same month in 2007, to $967.7 million.

The decline was caused by a 17.1 percent decrease in air arrivals to 550,529 visitors and lower average daily visitor spending — $170 per person, down from $185 in December 2007.

Air arrivals from the western Mainland states dropped 21.9 percent, and arrivals from the eastern U.S. were down 15.3 percent from December 2007. Japanese arrivals fell 15.5 percent, and air arrivals from Canada declined 11.6 percent. Those are Hawai'i's top four visitor markets.

Jack Richards, president and chief executive officer of California-based Pleasant Holidays LLC, whose company sends hundreds of thousands of travelers to Hawai'i each year, said the 10.6 percent drop in 2008 arrivals was "not too bad" considering all that happened last year.

With the closing of two major carriers, high fuel surcharges, and a tanking economy, Richards said, "If you're only 10 percent down, you had a great year."

Richards said that recent bookings for next month have picked up. So, while the decline might not be over, he's hopeful.

The last time Hawai'i saw a drop like 2008's was following the Sept. 11 attacks, when the year-over-year drop was 9.3 percent. That impact was swift and deep but started in the ninth month of the year, while 2008's decline was spread from spring through the rest of the year.

"Sept. 11 was way worse for us," said Kimberlee Nihei, manager of the Little Hawaiian Craft Shop, which has been selling primarily made-in-Hawai'i items in the Royal Hawaiian Center since it opened in 1980.

Nihei remembers that in 2001 "there were days when we had zero sales. I remember. I was unemployed for six months."

Having seen the business ebb and flow, Nihei said, she's learned to trim where she can and think positive.

"We have to face the reality every day no matter what the statistics say. It's going to improve."