Hawaii’s economy prospered broadly in 2012, but it particularly surged in two areas: tourism and real estate.
These two sectors had the most impact on Hawaii Inc. and dominate the Star-Advertiser’s list of this year’s five biggest local business stories, though there is also a reminder that effects of the recession still linger.
1. Welcome to Hawaii
It’s been three years now that Hawaii tourism has been growing in the wake of the recession, but the industry in 2012 soared into uncharted territory with record visitor arrivals and spending.
Data for the full year have yet to be assembled, but industry officials project visitor arrivals will be just about 8 million. That would top the 7.3 million arrivals in 2011 and the prior record of 7.6 million arrivals in 2006. For the first 11 months of the year, 7.3 million people visited the state.
Visitor spending in 2012 is projected to be about $15 billion, eclipsing the $12.8 billion last year that was $50 million shy of the prior high in 2007. This year through November, spending reached $12.9 billion.
Strong tourism growth has led the state’s economic resurgence and been good for revenue and job growth in hotels, retail stores, restaurants, airlines and other businesses tied to the industry.
Just one example is Hawaiian Airlines, which hired more than 500 employees this year as it capitalized on, and helped drive visitor demand by adding, several new routes to cities in Japan, the mainland and Australia.
2. Buying an island
Lanai had been in the local news a lot over the past few years as the site of a controversial wind farm plan. But when the plan’s author, billionaire David Murdock, sold the sixth-largest Hawaiian island for hundreds of millions of dollars to fellow billionaire Larry Ellison in June, it became one of Hawaii’s biggest business news stories of 2012.
Ellison, the third-richest man in America and CEO of business-software giant Oracle Corp., has yet to publicly lay out a comprehensive vision for his latest trophy real estate acquisition. That makes the story an intriguing one to follow, especially for the island’s roughly 3,200 residents.
3. Health care emergency
Bankrupt Hawaii Medical Center-East in Liliha closed its doors for good in January after transferring the last of its chronically ill, long-term care patients to other facilities.
That followed the closure a few weeks earlier of HMC-West in Ewa, West Oahu’s only acute-care hospital. Combined, nearly 1,000 employees were laid off and a number of the state’s most fragile patients displaced.
In addition, the Pacific’s only organ and bone marrow transplant program was shuttered and ambulances were diverted to other hospitals, straining the city’s emergency medical system.
HMC first filed for Chapter 11 bankruptcy protection in 2008. It emerged in 2010 and became a nonprofit organization before filing its second bankruptcy in 2011.
The facilities were shuttered when St. Francis Healthcare System of Hawaii, HMC’s largest secured creditor, objected to a sale of the hospitals to a California hospital operator. St. Francis, which opened the Liliha campus in 1927, sold the hospitals in 2007.
4. Urban growth
Defenders of farming took on two of Hawaii’s biggest housing developers this year in a pair of epic battles before the state Land Use Commission to determine whether crops or homes are a better use for several thousand acres of prime farmland on Oahu.
The developers, backed by city planners and the administration of Gov. Neil Abercrombie, won out over opponents that included farmers, three former governors, the Sierra Club and state Sen. Clayton Hee.
As a result, 11,750 homes at Ho‘opili on the Ewa Plain, planned by D.R. Horton, and 5,000 homes at Koa Ridge between Mililani and Waipio, planned by Castle & Cooke, are expected to be built and gradually displace farming over the next 20 years.
5. Home sweet home
Hawaii’s housing market finally broke away from a roughly four-year soft patch, as home prices statewide this year made significant gains not seen in many years.
On Oahu, the median sale price for previously owned single-family homes was up 9 percent through November to $625,000 — the biggest increase in seven years. Oahu’s condominium resale median price was up 5 percent in the same period, and follows five years of declines or gains of less than 1 percent.
Neighbor island home prices also made gains, mostly after several years of falling prices.
The increase in home prices is restoring equity for owners, while low interest rates helped keep homes more affordable and have driven strong demand from buyers.
