The tourism trap

Yes, we have car dealerships, retailers and professionals. True, there’s a plethora of medical services, light manufacturing and agriculture. And who can forget our seemingly incessant local battles over development, construction and real estate? However, despite the appearance of a broad industry base, the breadwinner in our community from which all other industries eventually profit is tourism. Nothing else comes close. Nothing.  

The fact is that without tourism 90 percent of the people on this wonderful island would be completely unable to make a living and would have to move away. Most of those who stayed would be either farm laborers (just like it was 100 years ago) or retirees (who didn’t exist much back then).

Many will initially disagree with me. The oft-heard counterargument centers on the statistic that tourism is “only” about 40 percent of our economy, which is true. However, Mark Twain popularized a saying: “There are three kinds of lies: lies, damned lies, and statistics.”  This is one of those cases where the statistic is incredibly misleading. (Oh, and for the record, that quote is originally attributed to Benjamin Disraeli.)

A more careful analysis of that 40 percent statistic shows that while tourism is less than half the total industry on Maui, it brings in almost all of the outside income. Visitors spent almost $2.3 billion here in 2005, a year when our island’s total Gross Domestic Product was $5.8 billion. Most other business enterprises on Maui just don’t bring revenue to the island. Instead, they live off the money already churning here.  

There are a few exceptions, but they don’t amount to much. Maui Pineapple’s now defunct canning operation and A&B’s sugar division are, I believe, the two largest examples. However, both of these together maybe total $100-$200 million in revenue. I’ve studied the Maui Data book off and on for years, and while it’s an excellent source of economic and other statistics, it’s noticeably lacking a table on sources of cash flow into and out of the island. You can still extrapolate somewhat from the information that’s presented, but even making leaping interpretations of the data I can’t identify industries generating more than 10 percent of our local GDP from offshore sources. If I had to hazard a guess, I suspect the actual amount of outside revenue other than tourism is probably just under 5 percent.

Even if you stretch that figure to 10 percent, that leaves tourism generating a whopping 90 percent of our outside revenue.    

Keep in mind that incoming money from tourism doesn’t stay forever. Eventually, after passing through several hands, it leaves the island for energy, food, retail goods, medical supplies and other consumables we don’t grow or manufacture here. A very large part also departs in more subtle ways, like home mortgage and other interest. These offshore expenses are like holes in the bottom of our bucket. The water coming in has to be equal to or greater than the water flowing out or our island economy starts to suffer.

Speaking of home mortgages and other debt, these have their place in bringing large amounts of cash flow to the island, but eventually they have to be repaid with earnings. A person or family’s largest expense is usually housing, and between principal and interest up to 35 percent of net income is leaving the island for debt service. This outgoing cash flow is offset by the loan proceeds themselves, which fund the building of the home, improvements, etc., but it doesn’t replace the need for outside revenue to service these primarily offshore debts.

Fortunately, many of our homes are not owned by locals. They are vacation and second residences for people who live elsewhere in the world. These are being debt serviced and maintained with funds from elsewhere. Although technically part of the visitor industry (almost all vacation destinations have a sizable second home component to their economy) it’s hard to see how the Maui Data Book could capture these expenses and report them as part of this industrial segment. These visitors are typically more experienced, have done their share of activities on their earlier trips and presumably spend their money on restaurants, shopping and the maintenance of their vacation homes—all items that are probably not counted as visitor industry spending depending on how the Data Book is compiled.  

If these second-home owners are in fact not included in much of the visitor industry statistics, then the extent to which Maui relies upon the visitor industry becomes even more acute.  

So it doesn’t matter if you’re a government employee, a construction worker or a banker: here on Maui you ultimately make your living from tourism. Period. We get to live in this paradise only because we help share it with others who come on a temporary basis. We are the stewards of the ‘aina that brings them, but we’re also hopelessly addicted to the money they spend. MTW

Bleak Picture

The 2008 visitor numbers are in, and they ain’t pretty…

Total visitor arrivals for 2008

(percent change over 2007)

Hawaii -10.6 percent

Maui -15.2

Molokai -16.4 

Lanai -17.9

Total visitor arrivals for Dec. 2008

(percent change over Dec. 2007)

Hawaii -17.1 percent

Maui -19.3

Molokai -49.6

Lanai -37.3

Figures from state Department of Business, Economic Development and Tourism.