University of Hawaii economists dialed back their forecast for visitor arrivals this year as higher hotel room rates and a weaker yen have put a damper on growth in the state’s No. 1 industry.
The University of Hawaii Economic Research Organization said in its quarterly economic forecast scheduled for release today that visitor arrivals will grow 5.5 percent this year, down from its May prediction of 6.6 percent.
"In the wake of last year’s record setting performance, the tourism sector has downshifted to a more measured pace of expansion," the economists, led by Carl Bonham, wrote.
The slower growth is partly due to hotels being almost full, especially on Oahu. Hotel occupancy in the first quarter on Oahu was 85 percent.
Because of the demand, hotels are able to charge more for rooms. The average room rate on Oahu in the first quarter was up 18 percent compared with the first quarter of 2012 and 30 percent higher than the first quarter of 2011.
"While the large rise in room rates is good for hoteliers, higher room bills are squeezing spending on other tourism activities, dining, shopping, and so forth," the report said.
Bonham said if politicians in Washington don’t muck up things, the U.S. economy should continue to improve, which would make affording higher room rates easier for mainland visitors.
"A healthy rebound in U.S. household income would help to alleviate this (room rate) squeeze," the report said.
For tourists from Japan, the higher room rates are compounded by the weaker yen. The yen has dropped nearly 30 percent against the dollar in the past year, meaning virtually everything in Hawaii costs 30 percent more if you are converting from yen.
That’s why the economists are predicting Japanese arrivals will grow by only 1.3 percent next year and 0.6 percent in 2015.
While the growth in tourism may appear weaker than it did three months ago, the industry is still chugging along nicely, as is the rest of the state’s economy.
The UH economists are forecasting Hawaii’s economy will grow by 3.3 percent this year and 4.4 percent next year.
"Hawaii is moving onto a strong expansion path," the report said. "The islands are poised for several years of moderately rapid growth that will bring measurable improvements for many local families."
Construction is one of the highlights. The economists estimated construction jobs will grow by at least 9 percent this year and more than 11 percent next year. By 2015 there should be 39,200 construction jobs in the state, or 10,000 more than in 2012.
Incomes should also start increasing more rapidly. Inflation-adjusted personal income will rise by 2.6 percent this year and 3.3 percent next year, the report said.
