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The Honolulu Advertiser
Posted on: Sunday, March 14, 2010

What if all of those visitors don't show?

The report by the Council on Revenues last week confirms that this recovery is a tepid one, in no particular hurry to take hold.

The economists dialed back their estimates of economic growth for the second half of 2010, which will cause a few more headaches for the governor and legislators trying to balance next year's budget.

But beyond the short-term scramble to make the numbers work lies the bigger question about our economy: Is it sustainable if we can't consistently bring in 7 million visitors a year?

We now know what it feels like to have 1 million fewer visitors and about $3 billion less in spending, the biggest and fastest decline Hawai'i has ever experienced. It's pummeled the local economy, more than doubling our jobless rate and vaporizing nearly $2 billion in tax collections.

Visitor arrivals are expected to grow only slightly this year, to about 6.4 million. The state Department of Business, Economic Development and Tourism estimates that arrivals won't hit 7 million again until 2012 but by 2013 will hit 7.5 million, equaling the record set in 2006.

What concerns us is the assumption that if we can just get through the next 18 months or so, everything will return to "normal," with planes packed full of smiling tourists and buckets full of new-found tax money.

Legislators and even economists talk about "temporary" tax increases, just a brief little sting to get us through this rough patch until the recession wanes and visitors return.

But what if instead of recovering, Hawaii's visitor numbers stall at around 6.5 million? What if we never see 7 million again?

It's important to remember that the only way Hawai'i hit 7 million in the first place was because of the 2004 arrival of the first of the three Norwegian Cruise Line ships running interisland trips. At its peak in 2007, the cruise business brought in 500,000 visitors to Hawai'i, a number that fell by half the following year as NCL began retreating from the market.

It's not clear to us in looking at the DBEDT projections where they believe an additional 700,000 visitors will come from between now and 2012, especially since economists are saying that the Mainland economic economy will likely remain fragile well into next year, with job creation lagging far behind.

Business and community leaders in Hawai'i would do well to look beyond the immediate challenges of today and consider the example of Michigan, which stands as a sobering example of shortsightedness and over-reliance on one industry to pay its bills and employ its workers.

A Detroit assembly line worker circa 1970 couldn't imagine a future with a bankrupt General Motors and a vanquished United Auto Workers union. But it happened.

The tourism industry is just as global, just as competitive as the car business. More players emerge every day and the Internet has made demanding and sophisticated travelers of everyone. Maybe the Chinese would rather go to San Francisco than Honolulu.

And so as we make our assumptions about visitor industry growth and returning to "normal" over the next few years, it would be good to be conservative in our estimates and in our budgeting.