Road Block

Following a banner year in 2000, Maui residents are looking at a flat 2001.

June, 2001

Forget about leading economic indicators. One look at Maui’s grid- locked traffic will paint a clear picture of what’s ahead for the county: Stagnation. “Understand we have what could be identified as a crisis here on the island, and it’s infrastructure,” says Maui Chamber of Commerce President Lynne Woods. “There’s a strong movement here to really slow down any type of development until we get those issues dealt with.”

Following a banner year in 2000, Maui businesses are looking at a flat 2001, with little to no growth in most industries. Tourism, Maui’s economic engine, will likely be dealt the hardest blow. Although visitor arrivals as of January 2001 were 183,788, a 16.5 percent increase over the same month last year, recent last-minute cancellations of large groups suggest a weak second half.

“There’s been damage and you can attribute most of it to the economy. Increasing airfare’s definitely a factor too.” says Brian DiMartino, president of 21st Century Group, a sales and marketing firm that tracks Maui’s group business. He predicts Maui may experience an eight to 12 percent decrease of group arrivals this year as compared with last year.

Last year, Maui saw growth in nearly every economic indicator, including income, jobs, construction permits and corporate profits. They all contributed to Maui’s 2000 unemployment rate of 3.3 percent, the lowest in the state. This year Maui residents, while painfully aware of the mainland downturn, are cautiously optimistic that it won’t result in too much of a slowdown for the island. “So far we haven’t suffered repercussions,” says Jeanne Skog, president and chief executive officer for the Maui Economic Development Board. “But we’re all watching cautiously what happens with the market.” In the all-important tourism sector, for example, hotel occupancy rates during the first quarter of 2001 increased 10 percent to 77.87 percent, up from 70.69 percent the year prior, according to consulting firm PKF Hawaii. And at $212, Maui also boasts the state’s highest average daily room rate.“We are spending some time marketing on the mainland to see if we can fill those gaps, but it is going to mean some change,” adds Woods. “When something happens to the visitor industry, every business on this island is affected by the downturn.”

In addition, Maui’s 27.6 percent increase in population over the past decade (currently 128,094 residents), coupled with the island’s tight labor market, has resulted in an increased demand for housing. “The residential market in the $200,000 to $400,000 price range is where a lot of action is taking place,” says Tracy S. Stice, president of the Maui Board of Realtors.

Whereas the high-end market may be feeling some pressure from the economic slowdown on the West Coast, the middle-end market of the home price spectrum hasn’t seemed to be as affected. According to Prudential Locations, condominium sales in 2000 increased 7.5 percent to 1,502 from 1,397 the year prior. Sales of single-family homes during the same period increased just a tad from 974 to 980. Land sales, however, dipped slightly from 447 in 1999 to 358 last year, due to the high cost of developing lots and decreased inventories.

Denny Watts, president and chief executive officer for Dick Pacific Construction, says, “Over the next year there will be more infrastructure opportunities for us than we’ve seen in a while … water and sewer systems on Maui need to be upgraded, as well as the roads … but it will be a byproduct of growth.”

Dick Pacific currently has about $130 million in contracts on Maui, up about 20 percent from last year. Watts says the opportunities for commercial construction on Maui are in a lull, but still exist. Three retail developments, for example, have sprouted on Maui in the last year, all within 10 miles of one another, for a total of more than 350,000 square feet of retail.

Paul Brewbaker, vice president and chief economist for Bank of Hawaii, says Maui has thus far been under-retailed and the shopping centers, along with the new Home Depot, and the Wal-Mart development currently in the works, will stimulate Maui’s retail sector. “Everybody says we can’t handle anymore retail, and then they build it and it works,” he says. Retail in the resort area of Wailea, where five-star resorts seem as numerous as technology companies in Silicon Valley, was most noticeably lagging until last December when The Shops at Wailea opened its doors.

The same could be said of the tenants at Maui’s high technology mecca, the 330-acre Kihei-based Maui Research and Technology Park. High tech seems to be the one industry in the county that hasn’t been affected by the national downturn.“This is really a world-class resort area, and this shopping center is like the icing on the cake,” says Michele Parker, general manager for The Shops at Wailea. “Our occupancy rate is about 80 percent right now. Leased, we’re at about 96 percent, and all of our tenants are doing unbelievably well.”

“Technology is going through a continued evolution,” says Ted Sheppard, interim director for the Maui High Performance Computing Center. “We’ll see that growth for the next dozen years or so as more and more people move technology into their organizations.”

Technology experts agree that if anything, the lack of skilled talent will prove more damaging to the industry than any type of stock market crash — technology related or not. In fact, mainland trends continue to enhance Maui’s reputation as an attractive place to do high-tech work. Allen Hunter, vice president of Trex Enterprises, a high-tech firm specializing in the design and creation of video chips, says, “There are a number of firms in Silicon Valley that are looking at us as a barometer of success. Southern California is looking at a 30 percent increase in their electric bills, and so firms are looking around for a more companionable place to do business. Maui just happens to be one of those.”

One industry that is not so lucky as to be insulated from any changes to the economy is agriculture. Dominated primarily by agricultural giants, Maui Land and Pineapple Co. and Alexander & Baldwin’s Hawaii Commercial and Sugar (HC&S), Maui is looking closely at diversifying.

HC&S is also continuing to upgrade. Improvements to its mills, production facilities and generators have all been made within the last year. Its combination of relatively flat land, abundance of water and a centrally located mill make it the ideal configuration for sugar operations.“Diversified agriculture has been growing at a faster rate than any other segment of the economy because we have markets for tropical fruit crops,” says Doug MacCluer, vice president of agriculture development for Maui Land and Pineapple. Recently, the company has had to reevaluate its position in the marketplace following an oversupply of canned pineapple from Southeast Asia last year, which contributed to a dip in sales. He says there is a big demand for fresh juice, fresh cut pineapple, and other tropical fruits and fruit medleys, which the company will be developing. A $30- to $50-million automated food processing plant is awaiting board approval to step up production.

West Maui, however, is a different story. Whereas sugar from the former Pioneer Mill once kept the land lush with greenery, it is now a mountainside of dusty red dirt, and farmers are scrambling to find a viable product to fill it. “It all goes back to visitor numbers. Without sugar we’ve lost that rural attraction, and that’s the reason people come here,” says Maui Chamber’s Woods. “Sure, employment is very low and we have a labor shortage, but it won’t take long to reverse that if we don’t get our visitor numbers back up.”

While most remain optimistic about Maui’s economic outlook this year, the reality is, an eight to 12 percent decrease in group arrivals to the island will have a tremendous compound effect. And although external factors do point to a continued momentum on Maui, that’s only if group arrivals bounce back and the controversial infrastructure issues are resolved. With traffic being the major obstacle to continued economic growth, frustrations are likely to mount in the coming months.


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Jacy L. Youn