Revisiting the Visitor Industry, part one

Ed. Note: This is the first in a series of pieces that will examine the visitor industry and the future of the island’s economy.

Maui tourism is down—way down. Unless you’ve been living under a rock, you already know that. For the first quarter, visitor arrivals declined more than 22 percent from last year, which was also down from the year before. Over the last two years, we’ve lost almost 30 percent of our visitors. Ouch.

The fundamental economic engine of this island is the money those tourists spend. Although only about 30 percent of our economy is part of that industry, they bring in well over 90 percent of our outside revenue. When the visitor industry suffers, we all (eventually) suffer.

One of the problems with tourism is that it’s a luxury for our customers. As such, it waxes and wanes with the disposable income of our visitor base, leaving us at the mercy of macro-economic swings. Many other industries have similar problems (retail’s almost unhealthy need for a good Christmas season comes to mind). Is there anything we can do about this besides communal suffering?

If we really wanted to, this problem of reliance on an often fickle income source could be corrected. For example, the present economic downturn wouldn’t effect us much if Maui primarily manufactured and sold, say, toothpaste. People need toothpaste no matter what their financial condition, and it’s inexpensive enough that they are unlikely to stop using their favorite brand and seek out cheaper alternatives when their personal financial situation deteriorates. However, it’s an accepted fact that manufacturing doesn’t work here—the shipping costs for raw materials in and finished goods out are prohibitive. So even if we tried very hard, it’s unlikely our community would be successful in any attempt to become the next manufacturing moguls of the world, toothpaste or otherwise.

If not manufacturing, what could we do to collectively make a living besides tourism? If we imagine ourselves as a community watching one of those job-posting commercials, and in an epiphany decide we’re ready to make a completely new start, just what are our options? What industries are more fulfilling than tourism, pay well and, perhaps more importantly, would actually work? 

Let’s go on a hypothetical “career search” for our community, keeping in mind what we’re looking for. We need an industry that would pay $2.3 billion every year like tourism does (well, did) so we can maintain our standard of living, while at the same time improving our quality of life without damaging our environment.  

Ready? Let’s assess some possible “job offers,” and see how they stack up against tourism.

Manufacturing: As already noted, we’re too far away from raw materials and end users—and one look at the sugar plant tells us we don’t want a bunch of factories on Maui. Plus, factory jobs are the poster children for unsatisfying career choices. Final answer: not likely except for some small specialty items.

Farming: Unfortunately the only farm product that could generate billions in revenue isn’t legal. With legal crops the work is hard and it doesn’t pay well (at either the owner or laborer level). However, it does make a nice complement to other industries. A healthy farming industry could reduce our reliance on food imports. This would help our island’s balance of payments, and create a safety net in case of some unforeseen emergency that interrupted our shipping. Final answer: it won’t be a complete replacement, but should be strongly supported by government policy and your spending choices. 

Medical: Unfortunately there’s not enough community base, even for a center of excellence.  This could work in, say, a small community right next to a major city—which could set aside land for hospitals, medical colleges, research facilities, offer tax breaks, etc. to become a community known for it’s medical expertise. However, again, our geographic location makes this choice economically unviable. Additionally, there’s no way our state government, which is essentially run by Oahu, would ever grant the certificates of need necessary to even get started. This is a government-regulated industry; Oahu can and will keep us a medical backwater for a complex variety of political reasons, including the need to support their own medical industry.  Final answer: great, fulfilling, high paying jobs—but forget it. 

Energy:  There is none to export that actually creates sizable quantities of good jobs. The solar farm on Lanai and continuing geothermal research are worthwhile experiments, but don’t create many actual positions after the installation is complete. Green energy technology is an interesting possibility—but it’s not classified with energy. Final answer: technology may change this in the future, but we’re currently not qualified for this “career.”  

Raw Materials: Maui doesn’t really have any to export except our sand to Oahu, which apparently won’t last long. Additionally, this is a low-margin industry and there are those darned shipping costs again. Final Answer: no.

Professional Services: Legal, architectural, accounting, etc. are high paying, quality of life careers, but due to the necessity of specializing in local law, planning and tax rules these are difficult to deliver at a distance. Those services that aren’t locally driven are already being exported overseas to places like India and the Philippines. Some similar services, like customer or technical support, are so price sensitive that we can’t compete with Oklahoma—much less India—with our high cost of living here. Plus, our community tends to have an accent that adds a nice local flavor for tourists, but makes it difficult to serve the Mainland (McDonald’s discovered this in reverse when it tried to setup call centers on the Mainland for their drive-throughs—they had to find local voices after a few weeks because there was a communication difficulty). Final answer: not really exportable; we should only expect as much of this industry as we can consume ourselves.  

Retail: We already have a strong retail base, but the only portion bringing in outside income is tourism retail. Most of the other retail tends to sell products manufactured elsewhere, which actually damages our balance of payments when local money is enticed offshore for that new item from China or the Mainland. As an interesting example, take Cuba, where the tourism industry abruptly halted in the early 1960s due to the American boycott. Without any other valuable export product, their economy has remained crippled for going on half a century—unable to buy anything on the international market. What does that have to do with retail? Retail is primarily one of our drains, not a spigot, and as such it quickly removes the capital we work so hard to entice to our tropical paradise. Final answer: this can never be an industry we rely on to make our living.

Education:  A top quality, full-time university could draw outside students, research dollars and create a college town economy. However, the cost is over-the-top prohibitive, and the amount of time necessary to establish a “must go” destination school (like a USC) would take decades. Who’s going to front those dollars? Certainly not the state, which is committed to Oahu and the University of Hawaii system (Maui Community College notwithstanding).  Final answer: it’s a compelling idea, with excellent possibilities for careers and outside revenue, two or more generations would have to be fully committed before this could come to fruition.  

Construction & Development: Two issues: too much already, especially right after a boom, and it doesn’t really bring in outside revenue because construction is financed with loans, not revenue sources. While people with second homes pay with outside money, all locals who have to service these loans must do so with money coming into the island. So construction creates a borrowing-fueled economic bump while it’s occurring, then a debt-servicing economic slump when the mortgage payments start (sound familiar?). This industry would also continue to divide our community between the extremely vocal no-growth proponents (which do appear to be in the minority) and the far less organized majority. While it’s hard to define this majority, here’s an attempt: they have no plan, but they dislike the fanaticism of zero growth.  Final answer: to protect the ‘aina and avoid false “profits” we should not base our entire economy on this boom/bust industry, but—as with professional services—a small, healthy one should always exist.

Finance: The truth is that to be in this industry you need to either have capital to provide or to setup markets for that capital to collect and allocate itself. Or, and this is even harder, you need to reach for the complex mix of both called insurance companies. This is a difficult industry to break into, and frankly New York beat us to it 200 years ago. Final answer: not going to happen, sorry.

Technology:  When you take a first look it’s such a compelling idea. With our abundance of environmentally minded citizens and our healthy solar, wind, geothermal and wave energy reserves, Maui as a Mecca for testing and developing green technology is an option that has been discussed by some local visionaries. This also segues nicely with the farming industry—they can work together to make us a true self-sustaining community.  Unfortunately, a technology industry needs three key things to be competitive on the world stage: trained scientific minds, ultra-competitive entrepreneurs and a supportive community.  We have none of those three in sufficient quantities to make a solid run at it anytime soon.  Yet we could start—these things get started as trickles. Perhaps a good first step would be setting up a county-funded technology center that follows a model like the Manoa Innovation Center (a state run entity, which of course is on Oahu). Final answer: intriguing, but lots of roadblocks.

When you look at that list, you realize there aren’t many other industries that will work for Maui. The one that might is technology, but unfortunately every other community with economic problems is fighting for this one. And even if we start now and are ultimately successful, we’re still generations away from replacing tourism.

Now that we’ve looked at our options, perhaps the real question we should ask ourselves is whether it’s really in our best interests to “change jobs”? To get completely away from tourism as our fundamental economic driver would be a difficult and time-consuming journey.

And tourism has great advantages, especially for us. Hawaii in general and Maui in particular are among the most amazing places in the world, and we’re also blessed with particularly heavy-spending visitors year-round. Yes, we have what appears to be a slow season, but compared to, say, a ski resort town where most businesses simply close down for eight months, our slow season is quite benign.  

Being a tourist destination also supports a more diverse restaurant industry. A community our size would normally have far fewer establishments to chose from (and more of those would be generic chains) if it weren’t for the additional visitors eating out every night to support them.

There are clearly other advantages to tourism, but perhaps most importantly: our visitors do us a huge favor every time we talk with one of them—they are still in awe of our little island.  How valuable is it to be reminded we reside in one of Earth’s most cherished spots? Since it pays the bills too, we should all be willing to live with that. Maui Time Weekly, Doug Levin