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Going Swimmingly

Come on in. Kauai’s economic waters are just fine.

Pool contractor Dave Bice believes that he resides somewhere near the bottom of Kauai’s food chain. Since he specializes in high-end residential work, ranging from $75,000 to nearly $200,000 a project, the Kapaa businessman reasons that it takes an awful lot of trickle down before his business starts to see an increase in sales. But instead of being some single-celled organism in the island’s economic ecosystem, it is easy to argue that Bice is actually somewhere near the top, an indicator species for the health of the forest, a sort of Spotted Owl of Kauai’s economy.

"I deal in a luxury item. So for me to have a good year a lot of other factors have to come into play," says Bice. "Tourism has to gear up, real estate has to gear up. Developers and contractors have to start to crank, then someone says, ‘Let’s have a pool, let’s call Dave.’"

Lately, a lot of people have been calling Dave.

Bice’s Tropic Pools and Spas is having its best year ever. While he usually builds about one or two new pools a year, Bice has already completed nine pools in the first six months of 2000 and expects to build 15 to 18 by year’s end. But it is not only the rich and famous who are doing well. Bice’s spas sales are also making a big splash. He expects to sell about 30 of them, more than three times the number he sold in 1999.

Bice now has five full-time employees and with pool construction already bringing in over $500,000, he expects gross annual sales to top $1 million, more than double last year’s $405,000. The prospects leave Bice as giddy as a school girl.

"I never ever fantasized about building this many pools, never in my wildest dreams," says Bice. "It has been a long, hard road, but we’re still here and it’s great. Every guy I know in the construction business is busy."

According to Bice, his good fortune is largely the result of mainland money (with a heavy high-tech influence) flowing into Kauai, especially the island’s North Shore. But he does concede that the ability to diversify and having the patience of Job didn’t hurt either.

After Hurricane Iniki, Bice figured that few people would be interested in building luxury pools so he acquired a line of spas as well as stepped up the repair and maintenance branch of his business. The moves didn’t exactly make him rich but they did kept him afloat.

Then two years ago, after sensing increased economic activity on the island, Bice tripled the size of his Kapaa showroom and stepped up his advertising presence. This year, the phone hasn’t stopped ringing.

"I’ve actually had to turn down work this year. That’s never happened before," says Bice. "I hate to do that, but we’re swamped."

Trickle up or trickle down. Either way, every major economic indicator reveals an economy on an upswing: tourist arrivals are up, construction is up and unemployment down—at 7.7 percent it is almost half of its post-Hurricane Iniki 1994 high of 14.3 percent. With representatives of the island’s major industries echoing optimistic forecasts, Bice’s odyssey appears to be reflective of Kauai’s own long journey back. Over and over again the observations are simple and similar: diversify, innovate and be patient.

No Longer everything to everybody

Last year, the island’s tourist industry, which has lagged behind the rest of the island chain, led the state in visitor arrival increases. Kauai’s nearly 5 percent gain from 1998 to 1999 outpaced the Big Island and Maui’s negative numbers and Oahu’s paltry increase of 0.3 percent. While Sue Kanoho, executive director of the Kauai Visitors Bureau, cautions that Kauai is improving upon poor post-hurricane numbers, Kauai’s gains are significant. According to Kanoho, in 1997 the island’s visitor arrivals exceeded one million for the first time since Iniki. She also believes that by 2002 the island will surpass 1.2 million visitors a year, the previous high set before the hurricane.

"But going after 2 million visitors is not our goal," says Kanoho. "That’s not what we are all about. We are trying to be more targeted in what we go after."

According to Kanoho, Kauai’s recent upswing in tourist activity may be attributed to an evolving marketing campaign that now targets specific consumers with specific activities. For example, previous efforts featured a single image heralding the island’s natural beauty, which was followed by a multi-image mural that showcased the island’s many activities. That in turn has now been replaced by a campaign that highlights particular activities such as golf, hiking, watersports and other selling points, such as Kauai’s romantic appeal. Kauai is no longer everything to everybody.

"We used to have people who came over and asked where is that nightclub that is open till 4 a.m. or where Louis Vuitton is. That’s not happening anymore," says Kanoho. "With each campaign we better defined ourselves and better informed our visitors. So I think our message about the diversity of activities on Kauai has finally hit. Over the last two or 3 years, we have seen a shift to where people are saying, ‘Wow, there is a lot to do here.’ It was all a matter of time."

A sweet future after sugar?

King Sugar’s reign on Kauai lasted longer and was more absolute than on any other island in the state. Add to that Kauai’s smaller land mass and lower population, and the result is that the diversification of Kauai’s agriculture industry has been behind its island neighbors.

"More of our land was tied up for a longer period of time," says C.W. "Bill" Spitz, economic development specialist with Kauai’s Office of Economic Development. "The Big Island, for example, has a longer history of smaller-type farms because the land is cheaper than here. But up on the upside, I think that since we don’t have a history we might be open to new things."

According to Spitz, the outlook for Kauai’s agriculture industry is bright, reflected in slow but steady growth. Papaya production more than doubled in 1999 to approximately five million pounds. That is up from 2 million pounds in 1998, a more than 60 percent increase from the previous year. With 14,000 trees at a new farm in Koloa reaching maturity, Spitz expects another increase in 2000 before the numbers start to level off.

Another crop on the upswing is taro. Kauai produces more of the staple than any other island in the state, accounting for nearly 70 percent of the harvest. Over the last several years, island farmers have overcome inclimate weather and disease to bring production back to pre-hurricane levels. In 1999, they produced 4.3 million pounds of taro, a 12 percent increase over 1998.

"Taro had a remarkable turnaround," says Spitz. "We are over our bout with disease, and despite a rough start, the rest of this year has been great weather-wise and we were able to bounce back. But that is agriculture. The numbers across the board are looking good. However, agriculture being agriculture, you tend to be cautious about these things. For example, about three weeks ago we learned that we got banana bunchy top disease. But generally, agriculture is slowly going in the right direction and people are learning quickly."

Kauai’s land rush

According to John C. Ferry, president of Bali Hai Realty, Kauai’s real estate market started its turnaround in June of 1997. During that summer of land love, both the volume and units sold took off and have continued to rise ever since. In 1998 Bali Hai, a company which specializes in luxury properties, saw its sales increase a phenomenal 194 percent to $ 61.5 million.

"Our summer market tends to be our strongest time of the year," says Ferry. "The ocean is placid and blue, the weather is beautiful and that’s is when people fall in love with the island and when they start to buy. The numbers started to ramp up in 1997 and never looked back. I guess that is when the stock market started to take off and the dot-com money start to flow out of the West Coast."

In 1999 Bali Hai white hot sales numbers cooled down a little to $47.2 million. However, this drop was not for a lack of sales activity at Bali Hai or throughout the island but it was due to the fact that many of the premium beachfront properties have already been sold. According to figures provided by Prudential Locations, sales of single family homes increased by 35 percent in 1998 while the average sales price shot up over $100,000 to $376,190. Similar to Bali Hai’s numbers in 1999, sales activity throughout the island continued to increase (368 units sold that year compared to 332 for the previous year) while the average sales price dropped to $318,964.

Ferry believes that Kauai’s real estate industry is at an important crossroads after activity in the last couple of years exhausted its inventory early this spring. Hanalei is currently experiencing a housing shortage, thanks to the fact that many of the properties in the town have been purchased and converted into highly profitable vacation rentals. And all across the island the industry is turning from a buyer’s market to a seller’s market. Ferry believes that sellers’ unrealistic expectations and speculation may bring a premature end to this boom cycle.

"Sellers all want more money for their property now, but most of the very desirable stuff has already been sold. I don’t like to see things change so radically," says Ferry. "It is still red hot right now but if we can’t continue to bring sellers and buyers together then we will see things slow down considerably. Instead of speculating, we try to make people see real estate as a true investment, a reward for being patient."

... to those who wait

Meanwhile, back in Kapaa, Dave Bice is trying to get used to being poolman of the moment. He fully expects his strong sales to continue for several more years since lot sales on the North Shore have gone through the roof the last couple of years and the construction of houses—and pools—are usually very close behind. Bice isn’t planning to expand operations or his staff anytime soon. However, Bice is not worried about not keeping up with quick moving economy. He has the best crew that he’s ever had, and, maybe even more importantly, the confidence of the local building industry.

"It is tough making a living here. So many people left after work dried up in the mid ’90s," says Bice. "But we hung on. You know, you have to earn the right to live on Kauai and the people who stuck it out did whatever needed to be done. We deserve the right to live here and we deserve every bit of this success. The chickens are finally coming home to roost, and we’re kicking ass and taking names."

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