Hawaii's Tourism Hurt By Economic Downturn The slumping economy has taken a toll on Hawaii's No. 1 industry. Last year the state recorded the worst yearly drop in visitor arrivals since the beginning of the Great Depression. Vendors, hotels, airlines and tourism workers are all struggling — but the tourists who do make it to the islands are enjoying some extraordinary deals.
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Hawaii's Tourism Hurt By Economic Downturn

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Hawaii's Tourism Hurt By Economic Downturn

Hawaii's Tourism Hurt By Economic Downturn

Hawaii's Tourism Hurt By Economic Downturn

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  • <iframe src="https://www.npr.org/player/embed/101986509/101986483" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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In the midst of a slumping economy one of the first things families may cut back on is an expensive vacation. That's a problem for Hawaii, where tourism is the dominant industry. Last year saw the worst decline in visitor arrivals since the beginning of the Great Depression.

Along the still busy Kalakaua Avenue in Waikiki throngs of sun-burnt tourists mill about. But the crowds have thinned over the last year. Those who are here probably got a good deal.

"That's why I came," says Karen Eley of San Francisco. She looked on the Web and found deals on airfare. "So I said, 'Wow.'"

The same is true for Bob Child. He's from Saskatoon, Saskatchewan, where it's about 70 degrees colder at the moment. He leaves the travel planning to his wife, Pat.

"My wife's quite meticulous about how she spends her dimes because she works hard for them, so that was a big factor," Child says.

Deals Hurt Bottom Line

Hotel occupancy statewide dropped to 60 percent at the end of last year — the worst level since after the Sept. 11, 2001, terrorist attacks. Since then, occupancy rates have jumped to 80 percent, mainly because savvy tourists are taking advantage of great airline and room prices.

"It's a deal now," says David Carrey, president and chief executive officer of Outrigger Enterprises, which owns hotels across the Hawaiian islands.

"Rates both on the airplanes as well as the hotels are spectacular at the moment — if you can afford to come. But that doesn't help the bottom line, because if we cut rates and have the same occupancy and the same expenses, we have less dollars to go around."

In a prolonged economic downturn, the hotel industry is faced with a tough choice — "raise revenues or lower costs," says Carl Bonham, a professor of economics at the University of Hawaii at Manoa.

Raising revenue "is pretty difficult when the way you're filling your rooms is by reducing your rates, giving away the sixth or seventh night free, throwing in free meals and so on," he says.

So Bonham says hotels will need to cut staff. He expects Hawaii's unemployment rate, which was 6.1 percent in January, to approach record levels this year. Ten percent of the Outrigger hotel chain's workforce has already been affected by layoffs or reduced hours.

Though most hotels have avoided shutting their doors, the Ilikai Hotel — made famous in the opening credits of Hawaii Five-O — is in foreclosure.

Cutting Overtime At Luaus

The downturn isn't felt by just the hotels.

Luaus, previously booked solid, must now scale back. Norman Kaneshige, chief operating officer for Paradise Cove Luau, says his company has been luckier than others — business has dropped only about 10 percent so far — buoyed by a stable military customer base. He has avoided layoffs by cutting back on employees' overtime and urging efficiency.

"Everyone has to work harder during a period like this, so if everyone chips in ... helps out, then we'll be stronger, and that's our emphasis right now," he says.

And tour companies, which like luaus, feel the impact of a tourism drop immediately, are also struggling.

"I think this is probably the worst that I've seen it since I've been here," says Leanne Matsukado, a senior agent for Great Life Tours.

Here's the problem: A trip to Hawaii is a luxury. As long as people fear losing their house or job, they may instead choose something closer to home.

"The family vacation has kind of become not a birthright, but, you know, it's a part of our culture, but it doesn't have to be in Hawaii. It may be a road trip to Yosemite," says Bonham, the economist.

But tourism on the mainland is also suffering, with hotel occupancy down in tourist spots like Los Angeles and Orlando, Fla.

Ben Markus reports for Hawaii Public Radio.