The Backyard Economy: Hawaii
A look at this state's economic issues.
— -- Hawaii is known for its tourist appeal but these days the Aloha State is bracing for a continued decline in its marquee industry.
"It's kind of like the sun is shining, but you know there's a storm coming," said Carl Bonham, director of the University of Hawaii Economic Research Organization.
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Nearly 7.5 million visitors traveled to Hawaii last year, according to the state's Department of Business, Economic Development and Tourism. That number represented a slight drop from the previous year.
Bonham is predicting a larger drop -- 4 percent -- in visitors this year, partly thanks to a slowing national economy, higher fuel costs and higher airfares.
A reduction in the number of airlines and cruise ships serving the islands will also prove painful to the tourism industry, he said.
Norwegian Cruise Lines is cutting its Hawaii-based cruise liners from three to one. But the biggest blow will come from the absence of Aloha Airlines and ATA Airlines. Both carriers shut down their operations within days of one another earlier this year.
The two airlines, Bonham said, represented 15 percent of all airline seats flown from the U.S. mainland to Hawaii last year.
"That basically has doubled our expected loss in visitors for 2008," he said.
Government spending, however, provides some stability to the state's economy.
The general residential construction has slowed but construction payrolls in Hawaii -- in contrast to the rest of the country -- have not fallen, Bonham said.
"The primary reason for that is the increase in activity from the military side," he said.
The government, he said, has contracted with private companies to rebuild and refurbish housing on the state's military bases.
The state government, meanwhile, is working on an $842 million plan to improve operations and increase capacity at Hawaii's harbors.
The project's short-term benefits -- job creation in construction, engineering and other businesses -- will be offset, Bonham said, by the increased shipping fees that will be used to fund the harbor work.
The project is key to the state's long-term economic health, he said.
"If we didn't do it, there would be an economic consequence because we wouldn't be able to bring goods in," Bonham said. "Making those harbors work well is much more important than thinking about an $800 million injection into the economy."
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