KAHULUI – Maui County’s economic outlook is “bright for most sectors” in 2007, according to professor Leroy Laney, who gave his 17th annual First Hawaiian Bank Economic Outlook presentation to the Maui Chamber of Commerce on Friday.
Not just bright, but brighter than the rest of the state’s.Take tourism.
“Maui visitor arrivals were up a healthy 9.2 percent though June,” Laney said, “but visitor spending was up a much stronger 20 percent.”
That was three times as much as Kauai, five times as much as the Big Island. Despite overall prosperity, visitor spending on Oahu is not up at all.
In addition to tourism, Laney told an audience of 200 at the Maui Beach Hotel that Maui can expect a continuing construction boom and active development plans by kamaaina companies.
The negatives are the stresses of success: an extremely tight labor market, overcrowding at Kahului Harbor, and a slowdown in both the pace of real estate sales and an evident plateau in prices.
Laney, who teaches business and finance at Hawaii Pacific University, spent a week on Maui earlier this summer interviewing various businesses. He found many enjoying as much success as they could:
“The Old Lahaina Lu’au sells out every night,” he reported. Tedeschi Winery now gets 1,000 visitors a day, instead of 200 as formerly.
A lot of Tedeschi’s busyness is attributed to cruise passengers. From 1999, when the total cruise passenger landings first topped 100,000, Laney expects them to reach 400,000 this year and 500,000 next year.
He declined to describe what is happening as choking on success, but many businesses are clearly bursting at the seams.
Tedeschi, for example, needs to create more room for 1,000 visitors, but it is finding getting permits to be an extended process.
“You’ve got some problems with the building permit process,” he said.
Chamber members responded with a hollow laugh.
He attributes part of the permit slowdown to increasing anti-growth sentiment. This is normal, he said. When an economy picks up, the benefits of growth are attractive. When it continues a long time, the negatives assume more prominence.
Maui’s expansion has now continued for a record 10 years. The old record was nine years from 1982 to 1991. Laney predicts in 2007, the current record will be extended to 11 years.
Accompanying that will be inflation at “more painful levels.”
Laney is part of the economics panel that advises the state government. That group had settled on 3 percent expansion this year and inflation around 4 percent.
He said that when they meet again in November (to give numbers for the state Legislature to work with), they may reduce the 2006 expansion forecast to 2.6 percent.
But they were surprised when the last quarterly inflation report came in at 5.8 percent. (Inflation numbers are taken on Oahu; there is no survey for Maui County.)
As a result of all this prosperity, Maui County has the lowest unemployment rate in the state, and the state has nearly the lowest rate in the country.
Unusually, Maui’s rate is even lower than Oahu’s. Generally, Laney said, the Neighbor Islands with their smaller economies have higher rates, because when someone loses his job, there are fewer choices of new ones. (Also, Oahu is home to lots of government jobs, which are more resistant to downturns in the economy.)
Every sector is short of labor, he said, but construction is leading the way. Even if the housing boom appears to be sighing to a pause, construction employment looks to remain strong for a while. But since construction pays high wages, other businesses are having a hard time competing for labor.
“Maui job creation accelerated despite the unavailability of workers,” Laney said. Business managers told him that instead of asking if a candidate had the needed skills, they now ask themselves, “can they really train that person to do what they need.”
He cites lack of housing as a key problem, though it is “not impossible” that median prices could come down. He is not predicting they will but he was not excluding the possibility either.
The problem that seems most pressing to him is Kahului Harbor. The increase in activity at the harbor is keyed to cruise ships, the coming of Hawaii Superferry and a steady increase in freight.
In a tour of Kahului Harbor Friday afternoon, Young Brothers Vice President Vic Angoco said his company’s business over Pier 2 increased 21 percent last year and will be up another 10 percent this year.
Laney said it is generally understood that Kahului Harbor “is less prepared than any other.”
He said he has supported and continues to support the Superferry. But he wonders how the necessary adjustments can be made by the middle of 2007, when the first Superferry is scheduled to arrive.
“That’s not much time to do what’s got to be done.”
Another pressing issue is commercial space. Brokers told him that Maui’s commercial market is the tightest it has been in 20 years.
He notes that A&B Properties is projecting 179 acres of expansion at Maui Business Park, but that would add only about 800,000 square feet of business space.
The estimated need is 3 million square feet.
“Both Maui and the state as a whole can expect a slowdown from the heated pace of the last several years,” he said.
It looks like just a slowdown, not a change of direction, he said, which would be the much desired “soft landing.”
Harry Eagar can be reached at heagar@mauinews.com.
