The Hawaiian economy needs a restart, and COVID-19 has provided the opportunity to do so.
Almost everyone agrees that the state needs to diversify and be less dependent on tourism. There’s also a growing sense that tourism is out of control – too many tourists spending too few dollars.
There is less consensus on how to diversify and transform tourism.
Diversification ideas include everything from astronomy to grinding breadfruit.
Two goals for Hawaii‘s economic development from about 30 years ago have been put back on the table: broadband expansion and growing tourism through spending rather than arrivals.
Other economic development proposals floating around include green energy, health care, aquaponics and other forms of agriculture.
But so far, no other leading lady has emerged who could quickly repeat 2019’s tourism performance, which supported 216,000 jobs and brought in nearly $17.8 billion in visitor spending and more than $2 billion in taxes.
Alan Oshima, tapped by Gov. David Ige, is leading a collaborative effort to create the Hawaii Economic and Community Recovery & Resiliency Plan. Oshima said a three-pronged strategy to address the economic and community impacts of COVID-19 through stabilization, recovery and resilience is underway, but work on step one is ongoing.
“This must be done in phases, based on data and informed decisions that balance economic recovery and public health,” Oshima said. “It’s not that tourism will go away and there are other ways the economy will transform, but if everyone is waiting for it to be like it was in February, it’s not going to be. We have to be real.”
Portions of the economy where social distancing can minimize the risk of COVID-19 have already reopened in Hawaii and Kauai and will reopen in Maui and Oahu this week, he said. If the curve stays low and under control, Oshima said, Hawaii could consider reopening medium-risk businesses like hair salons and restaurants under certain conditions and guidelines.
Once Hawaii has begun to stabilize and recover, Oshima’s next focus is for the state to gain resilience by reassessing and restructuring the economy to function in a “new normal” and propelling the state into its “desired future.” ” respectively.
Travel will be the mainstay
Mike McCartney, director of the state Department of Business Economic Development and Tourism, said travel must change to accommodate a COVID-19 world, but he expects it will remain a mainstay of the Hawaiian economy.
McCartney said he consults with government and tourism leaders from Hawaii and around the world to identify travel industry best practices. He wouldn’t speculate on when Hawaii plans to lift the mandatory 14-day self-quarantine for passengers, which coupled with fears of COVID-19, has kept travel demand low. However, McCartney said he envisions Kamaaina trips later serving as a pilot for receiving out-of-state visitors.
“There is an issue: how do we become the safest place on the planet for visitors when we are ready?” he said. “Because if we do it too soon, we’re going to run into problems.”
Ben Rafter, CEO of OLS Hotels & Resorts, said Hawaii’s COVID cases are tiny compared to major tourism destinations around the world. Unfortunately, that doesn’t mean there’s a clear path to reopening tourism on a significant scale, Rafter said.
“I am confident that even when it comes to such simple temperature checks, we can take appropriate security precautions either at the airport of departure or after landing at one of our airports,” he said. “In the long term I find the ‘passports’ that show that you are healthy, vaccinated or have passed a test interesting.”
But Rafter said if those solutions are months away and 95% of the population is barred from visiting Hawaii, “tourism will fail and Hawaii’s economy will fail with it.”
“Hawaii simply isn’t economically prosperous without tourism. We can talk about diversifying the economy –– I and every other hotelier I know are all for it — but we can’t do that until we get tourism back,” Rafter said.
However, some in the community, including State Senator Donovan Dela Cruz, State Senator Glenn Wakai and Honolulu City Council Member Kym Pine, believe Hawaii should plan for a future where tourism has a smaller footprint takes. They worry that the reward doesn’t always match the cost. For example, it took 10.4 million visitors in 2019 to reach $17.75 billion in spend, which was less than the $18.3 billion in 2019, which 6.5 million visitors saw in 1989 brought Hawaii.
“We cannot continue to rely on the outside world to come here to feed us and give us money for our economy – that has proved to be a risky, failed system for our future through COVID,” Pine said.
Create new economy
Pine, who hosted a community meeting Friday focused on creating a new economy for Hawaii, said she is passionate about growing and milling breadfruit, which could lead to billions of dollars in spin-off applications. Breadfruit has been identified as an effective source of plant-based protein, an ingredient that helps leave gluten-free bread, a natural herbicide, and a moisturizer in cosmetics, she said.
Pine also supports investments in thermal energy conversion of organic materials – a mobile system that processes waste and converts it into commercially viable products with no negative or harmful emissions.
“With minimal investment, both ideas could be operational in about six months,” she said. “Tourism made so much money and was so easy. Now is the time to finally listen to the many people who had a solution for Hawaii but were ignored because of tourism greed.”
Dela Cruz said $10 million in CARES Act funds has flowed into the economic navigator’s Oshima-led effort, which has so far failed to provide state legislatures with an actionable plan.
“When it does, I hope it will not be a rehash of DBEDT’s same ambitious strategic plans that we have already reviewed. We need concrete projects and actions yesterday,” Dela Cruz said.
Dela Cruz said he advocates diversification into agriculture, construction projects and healthcare — areas of the economy that could grow quickly.
Wakai, chair of the Senate Committee on Energy, Economic Development and Tourism, is pushing for expansion in alternative energy, aquaculture and aerospace.
“When we were capitalizing on eight years of record growth in tourism, nobody wanted to have a discussion about diversity. Now that the economy is in shambles, people are more willing to talk about economic opportunities,” he said. “People are realizing there has to be a better way. If we start now, we could pick up some momentum in two years.”
Oshima and McCartney were less specific about what Hawaii’s resilience plan should include; However, they said it would be data-driven, with the University of Hawaii helping to shape economic diversification.
“We can’t just talk about diversity if we don’t have access to markets or access to capital or a skilled workforce to cater to the new economy. They all need to be connected together,” Oshima said.
People’s will and desire also played a role, McCartney said.
While plans for economic navigation are still evolving, the couple appeared to favor expanding broadband so Hawaii can better export its products and intellectual knowledge to include COVID-19 management when the state is able to maintain current success rate. Oshima said expanding broadband to rural areas as well will be key to supporting businesses in a world where social distancing may be required.
I’m looking for big donors
They’re also supporting growing Hawaii tourism through spending instead of arrivals — a plan that will require finding a way for Hawaii to attract more spend-happy visitors who are willing to pay more for the experience.
Paul Brewbaker, director of TZ Economics, said using broadband to connect Hawaii to the world sounds like an introduction he wrote for the 1992 edition of Atlas of Hawaii. Still, the adoption of broadband could finally allow Hawaii to better manage and monetize tourism and lead to new economic development, he said.
“Disney has accomplished this through merch and intellectual property content,” Brewbaker said. “This is the moment to capitalize on what technology enables, to take that natural gift, the cultural gift, and turn that into something that other people are willing to pay for, to enjoy virtually or through content or to experience service.”
He’s less confident that the state can attract wealthier visitors to Hawaii, given that tourism spending hasn’t nearly kept pace with growth in arrivals over the past 30 years.
“It is unlikely to succeed after decades and decades. We built a Hawaii Convention Center on that premise, and that didn’t work either,” Brewbaker said. “But I could be wrong.”
Frank Haas, president of Marketing Management Inc., said he believes big data and analytics make it possible to identify higher-spending guests and lure them to Hawaii with targeted marketing. Given Hawaii’s reliance on tourism, Haas said the state needs to try.
“The standard line when people used to talk about tourism recovery was, ‘Let’s put asses in seats and heads in beds,'” he said. “It can no longer be about mass marketing. It has to be about giving the customer what he appreciates. We need to think about how to create the kind of tourism we want given the opportunities we have.”
Hawaii also needs to find an acceptable standard for reopening tourism in a COVID-19 world and how to manage the risk, Haas said.
“Keeping tourism closed for a long time would ruin the economy. It’s 200,000 jobs and we don’t have a short-term replacement,” he said. “We’ve been talking about diversification for years, but we’ve never found anything that’s as effective at replacing so many jobs.”
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