Kaua’i strongest of all Neighbor Island economies, says Laney

PO’IPU – The strength and resiliency of the state’s economy after the terrorist events of a year ago surprised even the financial prognosticators, one economist said.

“Actually, last fall, we didn’t know what to expect,” said Dr. Leroy Laney, professor of economics and finance at Hawaii Pacific University and economics consultant to First Hawaiian Bank.

The Neighbor Islands withstood the drop-off in visitors after Sept. 11 of last year better than O’ahu, and Kaua’i did the best among the Neighbor Islands, said Laney.

“Kaua’i’s numbers were better than any other county’s,” Laney told members and guests at the Kaua’i Chamber of Commerce quarterly membership meeting at the Sheraton Kauai Resort here.

“The main reason for the resiliency of the Kaua’i economy during the recent recession was the fact that its tourism sector was not hit as hard as the rest of the state from the fallout of 9/11,” Laney said.

“This was due to Kaua’i’s greater dependence on Mainland visitors, especially condo and timeshare owners, who continued to come even as the Japanese market fell,” he said. “I think Kaua’i was the least affected.”

Kaua’i’s international market share is just 16 percent of visitor arrivals during the first half of the year. On O’ahu, 41 percent of arrivals were international, Laney said.

The Garden Isle does face some challenges, Laney said. The year started slowly, with tourist arrivals down 7.6 percent for the first half of the year.

Kaua’i will have to fight its reputation as an expensive market. Lihu’e Airport is also near capacity, which could limit further growth, he said.

The strength of the construction and film industries are of particular note on this island, he continued.

Those sectors like real estate (particularly home and condominium sales), construction and auto sales, which are buoyed by historically low interest rates, are doing well on Kaua’i and across the state, he commented.

At the U.S. Navy’s Pacific Missile Range Facility, the events on and after Sept. 11 “actually caused an acceleration of activities,” he said.

“Strength in interest-rate-sensitive sectors have helped Hawai’i through the blows it took on the tourism side in the past year, and that may continue to be the case,” as the Federal Reserve has hinted if it moves interest rates at all, it is leaning toward lowering them further, Laney commented.

Laney moved back to his host island for the remainder of his remarks.

“Kaua’i withstood fairly well the recent global recession and the aftermath of 9/11,” he said.

“Longer term, the center of Kaua’i’s economy will be its primary export industry – tourism. Its comparative advantage here remains its less hectic pace than competing resort destinations, an image and reality that it would do well to maintain,” Laney said.

“Yet Kaua’i tourism still faces challenges,” including 2002’s slow start, and the need to continue to fight “a reputation as an expensive market that is attracting less business travel,” he said.

While he sees no problems with the Kaua’i economy over the next six to 12 months, what might disrupt the local economy are external factors like international “geopolitical unrest,” continued turbulence in domestic and international financial markets, and other circumstances out of the county and state’s control.

The Associated Press contributed to this report.


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