September 17, 2004

Maui Economy Continues to Flourish, Generating Worries About Housing Costs

(Kahului, Hawaii, September 17, 2004) – Maui County's eco nomy continues to flourish, with a more robust job market than the rest of the state and pervasive strength in construction, tourism and service sectors such as professional, business and health services, First Hawaiian Bank economics consultant Leroy Laney said today.

At the 30th Annual First Hawaiian Bank Economic Outlook Forum at the Maui Beach Hotel, Laney said the island’s small businesses report their biggest constraints to growth are labor costs –including benefits – and finding qualified people, especially for high-skilled jobs.

Lifestyles vs. livelihoods

“Ironically, one byproduct of the rolling good times has been more debate about the costs of growth – notably, skyrocketing housing prices that make it tough on people at all income levels,” Laney said.  Over the past year, he noted, prices have risen 33 percent for single-family homes in Central Maui, 50 percent in Kihei, and 18 percent in Kula and Napili.

“Higher home prices are partly a problem of limited supply, in the face of rising local and offshore demand.   One way to get relief from rising prices is to build more housing, but that brings more of the negative effects of growth.   There is no magic or painless solution to this dilemma.

“Local residents must collectively decide where they want to strike a balance of lifestyles on the one hand and livelihoods on the other.”

Maui visitor count flat

“Maui hasn’t seen as big an increase in total arrivals this year as other islands.   Part of that is because 2003 was such a good year, making it hard to top,” Laney said.

He noted that Maui hasn’t participated in the state’s 2004 pickup of Japanese visitors, who still must fly inter-island from Oahu.  Total air seats coming into Kahului are up 7.1% so far this year, so that shouldn’t be a constraint on growth, he said.

“Maximizing visitor numbers isn’t necessarily the goal, anyway – especially in an environment in which per-day spending, length of stay, and hotel occupancies are all up.   We want high-spending visitors, not necessarily a bigger head count, and in that regard Maui's upscale image continues to pay off,” Laney said.

He noted that turnover of several hotels show a “vote of confidence in Maui’s future” --   Fairmont’s sale of the Kea Lani to Host Marriott for $335 million, the Dell investment firm purchase of the Four Seasons Maui and Maui Land and Pine’s agreement to buy the Kapalua Bay Hotel.

“Maui tourism will also be boosted by more cruise visitors” including Norwegian Cruise Lines’ Pride of Aloha, Laney said, but he added there is a “festering problem” of inadequate infrastructure at Kahului and other Island harbors.

Mauiconstruction strong

“Construction remains one of the strongest sectors of the economy, as it has been for several years thanks to low interest rates and strong local as well as offshore demand,” Laney said.

He noted a strong pipeline of residential projects for coming years including Maui Lani Phase 7, Wailuku Country Estates, Waiehu Kou Phase III, Kehalani and Villas at Kahana Ridge.  And he said Alexander & Baldwin is apt to generate additional construction on its Wailea lands and at its Maui Business Park in Kahului.

“Time-share is hot on Maui now also.   Kaanapali Ocean Resort, Maui Ocean Club, and Maui Lu all plan added units.  Repeat time-share visitors may spend less money, but they smooth out seasonal variations and are less skittish travelers in time of global worries,” Laney said.

Sugar production down

“HC&S sugar production has lagged this year, mostly due to higher than average rainfall and poorer cane quality with the drought conditions of previous years.   Sugar prices are also down.   Higher energy costs also hurt, though some of this is recouped by selling power to Maui Electric,” Laney said.

High-tech: Important growth niche

Facilities at the Maui Research and Technology Park in Kihei remain full, and a new 35,000-square-foot building is out for bid, Laney noted.   Other developments at the park:

  • Boeing is adding a new mirror coating facility to its complex atop Haleakala.
  • Trex Enterprises targets defense projects that may also have commercial applications.   It has spun off three fledgling companies – a video chip company, a communication company based on radar, and a bio sensor company.
  • Textron Systems received a $50-million, five-year contract renewal from the Air Force to continue laser-radar research at Haleakala’s summit.

Hospital upgrade will create jobs

“The first phase of a planned upgrade of Maui Memorial Medical Center will be funded mostly by $38 million in general obligation bonds.  The project includes a new wing, plus renovations and additions to parking,” Laney said.

“When it is completed in 2007, the upgrade will create more medical jobs on Maui, allowing treatment on-island for residents who might otherwise have to go to Honolulu.”