Hawaii’s economic outlook begins to brighten

Waikiki Beach will continue to be a key draw for what analysts are expecting to be another strong year for visitor arrivals in 2011 and economic analysts hope the recovery will extend beyond the visitor industry.

Economists with the University of Hawaii Economic Research Organization have put it plainly: Oahu tourism is leading the uneven economic recovery in Hawaii, but so far the rest of the economy is going nowhere.

Under a new state administration, Hawaii’s economic recovery in 2011 will hinge on sustaining the momentum gained in visitor arrivals and spending throughout 2010 as demand and consumer confidence return. UHERO Executive Director Carl Bonham has said state and local government will be a drag through 2011, but as home prices stabilize and government contracts pick up there’s hope that the economic rebound will extend beyond tourism.

> State revenue projections improve – The Hawaii Council on Revenues now projects a 3 percent increase in general fund revenues for the current fiscal year, a percentage point higher than what was projected in September. The slight increase is expected to help ease the state’s budget woes because the council said each percentage point change is equivalent to about $44 million.

In submitting his first budget to the Legislature earlier this month, Gov. Neil Abercrombie projected a $71 million deficit. Abercrombie said the council’s upward projection is a positive sign that the economy is on the rebound. But the governor also cautioned that much more needs to be done.

The Abercrombie administration is projecting budget shortfalls of $410 million in fiscal year 2012 and $361 million the following year. To meet the 3 percent projected increase, he added, revenues must grow by 7 percent over the remaining months of the fiscal year.

“Today’s projections by the Council on Revenues do not lessen the financial hardships that our families and businesses face right now,” Abercrombie said in a statement. “This administration will remained focused on economic recovery by creating jobs and restoring government services.”

> Airline capacity recovering – Hawaii expects to see a 4.5 percent increase in air seats to the Islands, to approximately 2.3 million, in the first quarter of 2011, according to early estimates from the Hawaii Tourism Authority. 2010 ended with a total air-seat count of 9.2 million, a 5.8 percent increase from 2009. That boost puts Hawaii’s air capacity at 90 percent of 2007 levels — before both the global economic downturn and the shutdowns of Aloha Airlines and ATA Airlines.

> Visitor spending on the rise – Visitor spending increased for the third consecutive month and visitor arrivals climbed in November, according to preliminary statistics released by the Hawaii Tourism Authority. Visitor spending rose to $976 million, an increase of 30.4 percent when compared to November 2009. Visitor arrivals by air grew by 17.6 percent over last year to 560,588 visitors, while cruise ships arrivals jumped 43.5 percent to 16,952 visitors, according to HTA data.

> Retailers hopeful – With the gradual return of consumer confidence and upticks in personal spending, Hawaii retailers say they’re hoping to ride the momentum gained from Black Friday and the holiday season well into the new year. While they stop short of projecting a strong and robust 2011 after the last rocky few years, they remain optimistic that sales will pick up if Hawaii’s tourism numbers stay as strong as they have been in 2010.

> Real estate market favors sellers – Higher interest rates and a tight inventory may turn Hawaii’s residential real estate market into a seller’s market in 2011, especially for Oahu. Interest rates on conventional mortgages have nudged up from their historic lows, and most industry experts expect rates to rise well above 5 percent in 2011. While that could price some buyers out of the market, it actually could help residential sales, some say.

> Foreclosures tumble – Hawaii foreclosures in November fell when compared to the previous month, but year-over-year an increase in filings on Oahu kept the number flat when compared to November 2009, according to new statistics from RealtyTrac. Hawaii was ranked no. 13 in the nation, with 877 foreclosure filings, which includes notices of default, trustee auctions and bank repossessions. That worked out to one of every 585 housing units, and a drop of 31 percent from October’s figures.

> Honolulu worker pay up 0.3 percent – Compensation received by workers in Honolulu rose 0.3 percent in 2009 from 2008, ranking it near the top of all counties nationwide, according to a report released on Dec. 21. Workers in Honolulu received $29.47 billion in compensation last year, averaging $58,847 per worker, the federal Bureau of Economic Analysis reported. Compensation includes wage and salary disbursements, government payroll taxes and employer contributions for employee pension and insurance funds. Honolulu's increase was the 20th largest of the top 167 counties nationwide, according to the report. Compensation declined by an average of 3.7 percent in those counties, the BEA reported. The agency defines the largest counties as those with at least $10 billion in compensation annually.