FIRST HAWAIIAN BANK ECONOMIC FORECAST - Maui
MAUI COUNTY STILL DOING WELL; OUTLOOK FOR ’07 IS BRIGHT
However, A Slowdown is Coming from the Recent Heated Pace
(Kahului, Hawaii, September 8, 2006) – Maui County continues to do well this year, and the outlook for 2007 is bright for most sectors, First Hawaiian Bank economics consultant Leroy Laney said today. “However, both Maui and the state as a whole can expect a slowdown from the heated pace of the last several years,” Laney said at the 32nd Annual First Hawaiian Bank Economic Outlook Forum at the Maui Beach Hotel.
He made these comments about major economic sectors:
- The pluses for Maui: healthy tourism, a continuing construction boom, active development plans by kama‘aina companies.
- The minuses: an extremely tight labor market, harbor overcrowding and a slowdown in real estate sales and price increases.
Tourism: Maui visitor arrivals were up a healthy 9.2 percent through June 2006, but visitor spending was up a much stronger 20 percent. “This was far higher than any other island in the state,” Laney said. “For some years now, Maui has been closer to capacity than other islands, and it has been targeting higher spending visitors rather than just more bodies. That strategy seems to be paying off.”
U.S. East Coast visitors continue to pick up, he noted, although Maui's bread and butter remains repeat visitors from the Western U.S. The average daily room rate rose almost 10 percent in 2005, after a 4 percent climb the year before that.
Hawaii got another mega-cruise ship this year, bringing the total to four on the inter-island circuit. “Cruise passengers passed the 100,000 mark in 1999, broke 200,000 in 2002, 300,000 in 2005, and this year will exceed 400,000. In 2007, current bookings show the 500,000 milestone will be passed. A ship is in Kahului Harbor six days a week now,” he said.
Construction: “Previously permitted construction projects -- both residential and non-residential -- are now coming out of the ground, tangible evidence that the Maui construction boom is continuing. This sustains the demand for construction jobs, and higher paying jobs in this sector are making life harder for other employers,” he said.
Builders report that the permit and entitlement process “is getting longer and harder, a sign of increased anti-growth sentiment on Maui. After the prolonged expansion, a greater focus on the negative aspects of growth isn't surprising.”
The biggest residential development in central Maui is Maui Lani, which has built more than 750 homes with the potential for about 3,700. Nearby Kehalani could add another 2,000.
Alexander & Baldwin still plays a big role on Maui, he said, with development plans in the works for the Kahului Shopping Center, Maui Business Park, housing for Haliimaile and Wailea, a possible business hotel adjacent to Costco, and a $21-million, 400 bed-student housing project for Maui Community College.
Laney said Maui Land & Pine has gotten Planning Commission approval for its 882-unit Pulelehua project in West Maui, including 450 “affordable” houses and apartments.
Housing market: Laney said most economists believe that the national building boom is over and that “it would be foolish to believe that Maui is totally insulated from this wider trend.”
“Through June 2006, single-family sales volume declined a dramatic 27 percent. Median prices are still rising, but by a much more realistic 6 percent,” he said. “That's to be expected after the unsustainable run-up in prices over the last several years. During 2005, Maui median single-family prices rose 23 percent.
“This year the speculators are gone, and those wanting to own a home to live in are more on the sidelines, watching price trends closely. If this cycle follows past ones, a mild decline in prices next year would not be surprising. Slumping prices on Maui last time lasted four years – a 16 percent decline from 1993 to 1997.”
Labor Market: “Though the state's labor market is tight, Maui's is even tighter, to the point where not being able to find employees is an increasing business problem. This is one of the biggest constraints on growth -- for the state, certainly, but especially for Maui’” he said. “When growth does eventually taper off, it's likely to be as much because Maui is running out of workers as it is because the economy is slowing.”
Harbor Space: “Kahului Harbor likely has more problems than any harbor in the state when it comes to accommodating cruise vessels and the new SuperFerry. There simply isn't enough space and, with the SuperFerry supposed to begin operations in 2007, not much time to fix things,” Laney said.
He noted that Young Brothers will lose 23 percent of its space and, in response, has announced that it will no longer ship partial container loads, which worries small businesses and especially Molokai.
“But let's not forget the economic benefits” of the SuperFerry, he said. “For those who have the time, it will be cheaper than air travel. Families can travel with their cars, school groups can travel together in buses or vans and all kinds of equipment can be brought along. Fresh produce and other perishable items can be shipped.”
High-Tech Sector: High-tech now employs about 1,300 people on Maui.
Sugar: “Maui's remaining sugar plantation, HC&S, has a good current position and future outlook. This year, production will be about 200,000 tons of sugar, around 10 percent lower than they would like. “The plantation is also selling more power to Maui Electric, so higher energy prices are actually a net positive for HC&S. Its ethanol production efforts are still being pursued, even though that endeavor has fallen short of earlier goals.”
Diversified agriculture: “The real future of Maui agriculture is in smaller niche operations. That can be tricky. Paradise Flower Farms is feeling the effects of Thai competition on its lei production. But Ali‘i Kula Lavender in Kula has found a popular niche. It partners with other producers to make and sell everything from lavender tea, lemonade, and scones to soap and shaving cream. Last year's sales increased 70 percent, and it expects another 50 percent increase in 2006.”
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