Neighbor island economies catching up


HILO — Hawaii Island and the other neighbor islands are catching up steadily to the economic recovery first experienced on Oahu, according to a 42-page report released today by the University of Hawaii Economic Research Organization.

“We’re optimistic about where the Hawaii Island economy is headed, despite areas where the island has lagged,” Byron Gangnes, UHERO senior research fellow, told West Hawaii Today on Thursday. “Last year saw broad-based improvement in the Big Island economy. There was job growth in nearly all of the major sectors that we track.”

The report cited “robust” visitor growth, number of airline seats and income growth as pluses for the Big Island, while residential construction, hotel occupancy and overall employment experienced slower gains.

“Economic recovery is picking up in Hawaii County. Meaningful job creation is now occurring, and Big Island families will begin to see higher incomes,” the report states. “Despite pockets of weakness — particularly residential construction — we can expect healthy growth across the economy over the next several years.”

The visitor industry is especially strong, with growth rates second only to Honolulu. The Japanese market expanded by roughly 20 percent, and other international markets were up 17 percent.

New flights are increasing airport traffic. Hilo’s 60 percent increase in domestic seats, coupled with Kona’s 6.5 percent gain, pushed the seats flown to Hawaii County beyond the historic high.

Business and industry leaders are seeing the good news hit home.

“We are experiencing a definite uptick across the board for all our chamber members,” said Vivian Landrum, president and CEO of the Kona-Kohala Chamber of Commerce. “Those in or related to the visitor industry have enjoyed a strong comeback and we anticipate that to remain consistent, barring any unforeseen circumstances.”

But occupancy rates continue to lag at island hotels. Last year, occupancy averaged 62 percent, up from 58 percent in 2011.

Occupancy will rise to almost 69 percent this year, and to more than 70 percent in 2014-2015, roughly the level of occupancy that is typical of the Big Island during periods of peak visitor industry performance, researchers predicted.

The construction industry remains a mixed bag. With construction second only to tourism as the primary economic driver on the island, Hawaii Island took an especially hard hit when the real estate bubble burst in 2007 and the economy took a nosedive in the ensuing half-decade.

But construction is edging up, with a “robust” growth rate of more than 10 percent this year, researchers predicted.

That feeling was echoed last month by Craig Takamine, president of the trade group Hawaii Island Contractors Association.

“We can see the transformation happening right before our eyes, right now,” Takamine said. “It’s exciting.”

Takamine’s optimism is backed by first quarter 2013 data released by the county.

Led by North Kona and South Hilo, the value of Hawaii County building permits increased 37.4 percent over the first quarter of 2012. Also bouncing back, but to a lesser degree, were Puna and South Kohala.

The problem, according to researchers, is the numbers primarily reflect nonresidential construction such as for additions, alterations and a “buoyant” activity in photovoltaic installations.

“Very little is happening in residential construction. Permitting levels for new home construction are stuck at mid-1990s levels and just 17 percent of their level in 2005,” the report said.

Researchers cite a soft market for existing homes. While off their 2008 lows, there was no net increase in single-family resales last year, and home prices remain 40 percent below their 2006 peak, they said.

“Our construction sector is still struggling, particularly with new homes, but those in home remodeling are seeing an increase in business, both from local residents and secondary home owners,” Landrum said. “I have heard that as a result of the real estate market improving, many who are now selling their homes are moving off island. On the other hand, when our trucking/transportation members are busy and new accounts are on the rise with our financial members, we can assume people are also moving here.”

Researchers predict that as job growth continues and incomes firm, residential construction will begin to play a role in the next few years.

Overall, the anticipated low double-digit growth of the next several years will bring Hawaii County construction employment to 4,300 jobs by 2015, up from about 3,000 jobs last year, they said.

Overall, personal income is expected to grow, the report states.

The aggregate real income of Hawaii County residents will grow by a robust 4.3 percent this year and 4 percent in 2014.

Strong real income growth will begin to restore per-person income, which fell during the recession.

Still, it will not be until late in the decade before this measure of living standards recovers to its previous 2007 peak level, according to researchers.