Will Hawaii Finally Be Able To Break Its Dependence On Tourism?
This summer, in the midst of all the doom and gloom of the pandemic, something
This summer, in the midst of all the doom and gloom of the pandemic, something remarkable happened in Hawaii. For 13 bittersweet weeks — in between Hawaii’s first stay-at-home order and the dramatic spike of coronavirus cases that sent Oahu into a second lockdown — people got to see what the Aloha State was like without tourists.
Suddenly there was no line at Matsumoto Shave Ice in Haleiwa. Monk seals and large fish started returning to the clearer waters of Hanauma Bay. Traffic on the road to Hana felt more like it did in the 1970s.
Nowhere was the change more striking than in Waikiki, a neighborhood synonymous with hordes of tourists. Along the shore, in sight of the pink hotel that Joni Mitchell immortalized with the lyrics, “They paved paradise and put up a parking lot,” local families lounged on the sand, took their kids surfing and fished by the dozens.
Now, as the state tries to restart tourism by launching a pre-travel testing program on Thursday, many locals worry about what will come next. There’s anxiety about what will happen if tourists don’t come back — and what will happen if they do.
“There’s also some sadness,” said Bonnie Kahapea-Tanner, who has been surfing with her children and several other families every week in Waikiki since May. “The local community has been able to be down there, to breathe down there, now it’s like we are going to be forced back out.”
Tourists need to return or Hawaii is financially doomed. The state has one of the highest unemployment rates in the country. Gov. David Ige is proposing furloughs on government workers for years to come. Businesses are closing.
But there’s also a widespread sense that tourism before the pandemic wasn’t working for Hawaii the way it should.
Tourism was initially meant to diversify Hawaii’s economy. Instead, it became Hawaii’s economy. Attempts since the 1970s to wean Hawaii off its dependence on visitors have mostly fallen flat.
That doesn’t mean efforts to change are doomed today, say some historians and economists. The pandemic is forcing Hawaii to rethink its approach to tourism, and it offers the opportunity to change the status quo.
The solution to Hawaii’s tourism dilemma might be found in the desire of residents like Kahapea-Tanner to hold on to what made Hawaii so appealing to tourists to begin with. There are ways to improve life for residents and stimulate business growth that aren’t tied to tourist dollars, says economist Sumner La Croix.
The challenge is having the political will to make those changes.
With Hawaii’s breathtaking scenery and year-round temperate climate, its success as a tourist destination might seem predestined. But the development of the tourism industry was the result of decades of concerted efforts to attract travelers to the Pacific — and outside forces that aligned at just the right time to market Hawaii when jumbo jets were beginning to make long-distance travel affordable to the masses.
The first real efforts to create a tourism industry date back to 1892, when a group of business owners — some of whom were involved in the overthrow of the Hawaiian Kingdom a year later — formed the Hawaiian Bureau of Information. The bureau was short-lived, but a decade later many of those same power brokers established the Hawaii Promotion Committee, this time with financial backing from the territorial government to pay for offices and magazine advertisements abroad.
At the time, Hawaii’s economy was dominated by the sugar industry and — a bit ironically in hindsight — tourism was seen as a way to diversify the economy. There was also a more sinister reason for developing tourism, says James Mak, a professor emeritus of economics at the University of Hawaii who has written extensively about the history of tourism in Hawaii.
Hawaii’s sugar plantations were drawing heavily on workers from China and Japan, and the white business owners who had only recently overthrown the Hawaiian monarchy, were concerned that the islands were becoming too Asian. Tourism was viewed as a way to attract more white people to Hawaii and change the ethnic makeup of the islands, Mak says. The idea was that white tourists would come to Hawaii from the United States, see what a wonderful place Hawaii was and decide to stay, he says.
Tourism grew slowly but steadily in the early 20th century. The Moana Hotel opened in Waikiki in 1901. Regular steamship service to the West Coast helped grow a small but steady flow of travelers.
In the 1920s, the wealthy and powerful Walter Dillingham bought 230 acres of land in Waikiki and helped push through a plan to develop the area into the “Venice of the Pacific” by constructing the Ala Wai Canal. The canal was an environmental disaster but helped grow Waikiki into a dream destination for well-heeled travelers in the jazz age.
Then in 1959, the same year Hawaii became a state, Pan Am launched its first jet service from the West Coast. Other airlines followed suit. Changes in federal regulations in the late 1960s allowed more airlines to launch routes to Hawaii. Airfares plummeted. Tourism exploded.
In 1959, the year Hawaii became a state, fewer than 250,000 visitors came to Hawaii. By 1969 that number had jumped to a million and a half. By 1980, Hawaii was hosting nearly 4 million tourists a year.
Faster, cheaper travel played a big role in marketing Hawaii to the masses. Between 1960 and 1970, the cost of a plane ticket to Hawaii dropped by nearly half, Mak writes in his book “Developing a Dream Destination.”
The excitement over statehood and a national push during the cold war toward embracing Asia and Asian culture in the United States also helped promote tourism, said Sarah Miller-Davenport, a historian and author of “Gateway State: Hawai’i and the Cultural Transformation of American Empire.”
As the United States tried to jockey for power in Asia, Hawaii’s multiracial society was heavily promoted as a way to improve an international image tarnished by Jim Crow-era segregation in the South, Miller-Davenport said.
“Tourism is seen as really key to that,” she said. “A way to really show off Hawaii’s multicultural, multiethnic society.”
Failed Efforts To Change
The speed at which tourism took over Hawaii’s economy was nothing short of breathtaking. When Hawaii became a state, tourism was the fourth-largest industry in the islands — lagging behind military spending, sugar production and pineapples. By 1976, it was number one. By 1978, it was bigger than the other three industries combined.
It didn’t take long for people to become alarmed over the unchecked growth. In the 1970s, more and more people were voicing concern about both the impact of tourism on local life — and the over reliance on one industry.
“I think by the 1970s, people can see that tourism is a very kind of unstable industry and that even when it’s a booming industry, it has all kinds of negative effects,” Miller-Davenport said.
Around the same time, the Hawaii Visitors Bureau and the state government became increasingly concerned that people did not have enough aloha spirit toward visitors, Miller-Davenport said.
“By the late ‘60s, early ‘70s, there are all these reports on ‘What do we do about the fact that people are losing the aloha spirit?’” Miller-Davenport said. “You can see this kind of creeping resentment.”
Over the decades, the state has made a number of efforts to diversify the wage economy. But largely, those efforts have not been successful.
George Ariyoshi, who was governor of Hawaii from 1974 to 1986, was constantly looking for ways to seed other industries in Hawaii, La Croix said.
His successor, Gov. John Waihee, tried to stimulate job growth by making developers come up with a plan to create one non-tourism job for every tourism job created by new developments. That turned out to be a dud, Mak said.
In 1999, state lawmakers tried to encourage growth in the technology sector through an overly generous tax credit that reimbursed up to 100% of expenses for certain high-tech businesses. Act 221 was implemented so poorly, a state audit later said, that after 10 years the state had lost $1 billion in tax revenue and had no way of tracking whether the state had seen any benefits from the program.
La Croix points to the growth of the University of Hawaii as a major research university as one of the state’s better economic development successes, but a university is certainly no replacement for an industry that employs tens of thousands of people.
The state has been more successful at diversifying within tourism, rather than moving away from it, Mak says. For example creating a new travel market in China to offset slowdowns in tourism from Japan, growing business travel — particularly around its convention center.
Any significant efforts to change tourism and the broader economy will likely take decades, Mak said. And when you look at attempts to move away from tourism in other parts of the world — particularly in places with a similar economic structure — the results have not been very encouraging, Mak said.
Making Tourism Work For Hawaii
As a historian, Miller-Davenport has a different view from economists on what is possible. Nothing is inevitable in history, she says.
There are a lot of things that cause large-scale economic change. But it’s often people themselves — especially in moments of crisis, not unlike what we are experiencing today.
“That’s when you see movements emerge that can really challenge the status quo,” she said. “Just because Hawaii’s economy is based on tourism now doesn’t mean it has to be.”
Hawaii is never going to attract certain types of commerce. The state is far away from other metropolitan centers. It’s not near the seat of political power. There’s a small labor market and when a skilled employee quits it is hard to replace them.
In many industries, firms tend to cluster together. For example, La Croix points out, there are few biotech firms here — and that’s a disadvantage to attracting other biotech firms.
While tax incentives and job creation mandates have failed in the past, La Croix thinks the key to stimulating economic growth outside of tourism is to “get the basics right.”
Have a traffic management system where people can get around the city easily. Improve public schools so that if an entrepreneur decides to relocate to Hawaii their kids can get a reasonable education. Remove barriers to building more affordable housing.
“I think these are really the ways that we can stimulate additional industries here,” La Croix said.
And it’s not just a matter of getting entrepreneurs and people who can telecommute to move to Hawaii, it’s also about improving the general business climate to make it easier for residents to start businesses.
Some of these changes, like improving public education, require more tax revenue — something of a catch-22 when tourism revenue is plummeting. But others, La Croix said, are more a matter of political will.
Controlling traffic is something that we’ve had the ability to do for a long time, La Croix says, but we just haven’t wanted to do it. We haven’t wanted to restrict people’s freedom to enter the road during rush hour or make them pay a toll on the highway.
For a long time, tourism was a really stable industry, says Keoni Lee, chief executive officer of Hawaii Investment Ready. It was an easy decision to invest in tourism because it was giving Hawaii solid returns.
“We have to look at tourism as a risky investment going forward,” Lee said. “The game’s changed. Tourism is not going to be the same. We all know that, right? And so we have to redesign tourism to work for us.”
Lee is part of the Aina Aloha Economic Futures initiative, an effort to bring people together from across the state to create a plan for a new kind of economy in Hawaii.
And many of Lee’s ideas align with La Croix’s: Focus on making Hawaii a great place to live, not just a great place to visit. In turn, Lee thinks, that will attract a new kind of tourist.
People make economic decisions based on what is most comfortable. Tourism used to be comfortable. The pandemic has changed that — which in turn, might breathe new life into efforts to move away from tourism as the state’s primary economic driver.
“The status quo was getting really uncomfortable,” Lee said. “I’m optimistic for change because the status quo is so uncomfortable that when we offer things that are a change, people are going to move to it because it’s going to be more comfortable than what they’re currently experiencing.”
That’s what Bonnie Kahapea-Tanner, who rediscovered Waikiki with her family during the pandemic is hoping for: something different moving forward.
“There has to be a balance,” she said. “We’ll have tourists. We know that’s how it’s going to be. But we need people to really think about the future and what is it that we want.”
“Hawaii’s Changing Economy” series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.