Consumers typically ramp up spending during the fourth quarter when they travel on vacation and load up on Christmas gifts.
In Hawaii, though, merchants see their largest volume of sales in the first three months of the year, thanks to an influx of tourists.
That was the case in the first quarter of this year as statewide credit and debit card transactions at businesses open at least 12 months hit $794.5 million, up 10.8 percent from a year ago and the highest since First Hawaiian Bank began reporting the numbers in 2010.
It was also the 13th straight quarter of growth, according to First Hawaiian’s Business Activity Report.
"Clearly, the holidays for local vendors is always high, but for the first quarter you’ll see a very strong tourism element for people staying here and visiting here," First Hawaiian President and CEO Bob Harrison said. "It’s a very strong consumer-driven economy."
That was particularly true last quarter even for travel agencies, which historically are among the report’s performance laggards because of an increasing number of people booking vacations online. Travel agencies had the third-highest percentage increase at 15.5 percent on revenue of $31.7 million.
JTB Hawaii, which primarily arranges vacation packages for Japanese visitors, saw a 21 percent increase in the first quarter as it serviced 104,000 customers compared with 86,000 during the same period in 2012.
"The reason for the good business is basically because we have lots of seats on the flights," said Keiichi Tsujino, president and CEO of JTB Hawaii. "Hawaiian Airlines started flights from Fukuoka last April, and they also have the flights from Sapporo. In the past we were suffering from a short number of seats, but now we have a sufficient number."
Tsujino said even though many people make reservations directly from a website, most tourists from Japan come to Hawaii via a package tour booked through a travel agency.
"Tourists from the mainland mainly use the Internet, but in the Japanese market the package tour is dominant and the second area is the website. There are three main areas in the Japanese market: the package tour, group tour and the website."
First Hawaiian, the largest bank in Hawaii with $16.6 billion in assets, is able to track the economic pulse of the state through its card processing services. The bank is the largest local processor of debit and credit card transactions in the state. It has more than 7,500 merchants on its network, with most of those in Hawaii.
CEO Harrison said he’s encouraged by the continued upward spending trend and noted that all 16 sectors tracked in the report posted increases over the year-earlier period for the second quarter in a row — the only two times every category has been up since the report’s inception. The report tracks such sectors as automotive, retail, hotels, home improvement, restaurants, shipping and travel, among others.
"Optimistically we’d like to see (double-digit percentage growth) continue, but we have cyclicality in the tourism area, so we’ll see some of that, I’m sure," Harrison said. "I don’t think we’ll see 10 percent or 11 percent for every quarter this year. That may be too optimistic but we’ll continue to see growth."
The strong first quarter continues a trend that started in 2010 when overall credit and debit card transactions rose 6.4 percent for the year. That was followed by an 8.6 percent increase in 2011 and a 9.8 percent gain last year.
"(First-quarter) numbers are strong with same recent trends apparent," said Leroy Laney, economic adviser to First Hawaiian and professor of economics and finance at Hawaii Pacific University. "Increases evince continued healthy tourism, with strength spreading to other sectors. Hawaii’s growing economic recovery seems to be on track."
JTB’s Tsujino expects that trend to continue.
"Our outlook for the rest of this year is maybe a 10 percent increase compared with last year because we’ll have direct flights from Sendai in June (from Hawaiian Airlines)," he said. "This is a good sign. Another good sign is the Japanese economy is getting a little bit better and better. However, we have a few concerns because the yen is getting weaker and is about 100 yen to $1."
When the yen weakens, it makes travel to the U.S. more expensive for the Japanese. The yen has fallen in value against the dollar by 12.5 percent this year.
With state visitor spending and arrivals on a record pace in 2013, it’s no surprise that hotel card transactions last quarter jumped 21.9 percent — the second-largest percentage gain of any sector. Transaction volume for hotels was $176.1 million, the most of any industry.
Those numbers portend a strong first quarter in occupancy and revenue for Hawaii hotels, which earned $328 million in room revenue for January — the highest month ever — according to the most recent data by Hospitality Advisors LLC. The average daily room rate of $231.02, up 11.3 percent from the year-earlier period, was a record for January. Statewide occupancy in January was 80.7 percent.
"The hotel segment is doing extremely well," Harrison said. "I think it’s two factors, specifically increases in (room) rates and strong occupancy. Going together, that’s really made a strong showing."
Restaurant card transactions — another barometer of economic growth —gained 6.6 percent in the first three months of this year.
"Hotels always focus on tourists; restaurants is a mix of tourists and local spending," Harrison said in explaining why the percentage increase in restaurant transactions didn’t come close to the gains realized by the hotels. "What you don’t have with restaurants is you don’t have the same occupancy push and rate push you can get with a hotel. Restaurants don’t raise their prices as demand ebbs and flows as hotels do. The cost of food doesn’t change that much."
Shipping, which includes land and sea, had the highest percentage gain in the first quarter at 26.9 percent, but that came from a relatively low transaction volume of $15.7 million.
