Resilient Kaua’i economy top business story of 2002

Time was when Hawai’i and Kaua’i people would watch economic events unfolding on the Mainland, and wait, sometimes in horror, as the impacts of those events slowly affected the state.

Cyclical economic changes traditionally flow westward, oftentimes slow to the point of agonizing.

This time around, though, although the state and county economies have far less impact on the national economy than the national and international economies have on the state, it appears the state economy is leading the national economy out of the double whammy of the recession and lingering effects of the terrorist attacks of Sept. 11, 2001.

The strength of the Kaua’i economy surprised economists with the two major banks in the state, First Hawaiian Bank and Bank of Hawaii, but came as little surprise to some local elected officials.

The beauty of the island and her people, the high percentage of timeshare units on the island, and the relatively light dependence on Japanese visitors, added up to a much quicker recovery from the events of fall 2001 for Kaua’i.

In many tangible ways, especially the safety of domestic destinations even if they are thousands of open-ocean miles away, the terrorism actually increased domestic travel to Kaua’i. People felt they needed to take vacation time more than ever after the sobering events in New York City, Washington, D.C. and rural Pennsylvania, and Kaua’i offered the perfect tonic.

Continuing stock-market woes made many investors move their money into more-secure investments, and Kaua’i’s real estate industry continued to flourish this year. That heightened activity has also helped the island’s construction industry to another banner year.

For these and other reasons, it was easy choosing the resilience of the local economy as the top island business story of 2002.

Although most people were holding their breath and fearing the worst after the unprecedented shutdown of the nation’s airline industry for two days after the attacks, people on Kaua’i quickly found out there was no need in waiting to exhale.

The timeshare, construction, cruise-ship, retail, and other industries inside and outside of tourism all had solid years in 2002 on Kaua’i, with job-creation occurring as a result of the stronger-than-expected economy.

Strength in real estate, construction, and non-tourism services maintained the Kaua’i economy’s forward momentum, economists said. There were even positive signs from the island’s agricultural industry, with Grove Farm actively working to put ranchers and farmers on its thousands of acres of land through leases and licenses.

The outlook for 2003, clouded only by the ominous threat of world war, is sunny.

Economists predict the core sectors of the island economy “will continue to support growth over the next two years as tourism’s cyclical recovery proceeds. With a resumption of moderate job growth and improved profitability, real income for Kaua’i will grow by 1 percent this year, and accelerate to 2.6 percent in 2003,” according to a study on the island economy conducted by the University of Hawaii Economic Research Organization (please see a related story on UHERO on these business pages).

An updated economic forecast from the state Department of Business, Economic Development & Tourism (DBEDT) predicts that total visitor spending in Hawai’i will climb to $11.1 billion in 2003, a level even with the all-time peak in visitor spending reached in 1995.

The 7.6 percent growth in total visitor spending forecasted by DBEDT for 2003 follows an estimated increase of 2.2 percent in total spending this year.

DBEDT forecasters also predicted that total visitor arrivals to the state will rise in 2003 to 6,808,700. The 6.1 percent growth in total visitor arrivals forecast by DBEDT for 2003 follows an estimated increase of 1.8 percent in total visitors in 2002.

A strong rebound in travelers from the western region of the U.S. has fueled the growth in arrivals observed in 2002, off-setting a slow-down in travelers from Japan.

In line with Hawaii Tourism Authority objectives, growth in expenditures is expected to outpace growth in visitor arrivals for both 2002 and 2003.

More cruise ships are expected to arrive at Nawiliwili Harbor in the new year, also.

Honorable mentions for business story of the year include:

– The successful acquisition of Kauai Electric by Kaua’i Island Utility Cooperative, for $215 million. Perhaps no other single event so impacts more businesses and residents;

– The arrest of Gary James Baldwin, former executive director of the Kauai Economic Development Board, on theft and fraud charges. His trial in scheduled for the end of next month, in Arizona. This one gets honorable mention if for nothing else its shock value, including shock waves sent through the island business community;

– The changing of the political guard in the mayor’s office. Visitor-industry leaders are still worried that new Mayor Bryan Baptiste’s vision for tourism promotion is much more blurry than former Mayor Maryanne Kusaka’s;

– The announcement that Home Depot would arrive on Kaua’i. While this might not seem significant enough to even warrant honorable mention, the excitement the announcement caused do-it-yourselfers on the island was unanticipated. Also, those worried about Kaua’i becoming another Honolulu, or, worse, a Mainland city, loathed the announcement as another sign of the urbanization of paradise.

Business Editor Paul C. Curtis can be reached at or 245-3681 (ext. 224).


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