Hawaii Travel Paradise Is Deserted, With Recovery Further Off

(Bloomberg) -- Hawaii's beauty may also be its curse in the time of coronavirus.

The unique nature of the most remote U.S. state turned it into a favored vacation spot, its economy heavily relying on tourism. Now the region's labor market is the hardest hit by the pandemic downturn: About one in three workers have filed for jobless claims since the crisis started.

Long after the shutdowns are lifted, discretionary incomes will have evaporated and people will likely remain reticent to fly long distance, making Hawaii slower to recover than the rest of the country.

In Maui, one of the most popular islands, Rick Nava experienced the fallout firsthand. In early March he got a call from a client canceling a booking for April that alone would have brought in $25,000 for his photography firm, MSI Maui. More cancellations rolled in for Nava, who takes pictures for company team-building meetings, award ceremonies and weddings. He was forced to lay off all 16 employees.

“I thought that this may be the end of my business,” said Nava, 61, who took over the company in 2007.

Tourism makes up one-fifth of Hawaii's gross domestic product, with more than 10 million visitors last year -- more than six times the size of the local population. That's all but vanished now. In the week ended April 25, spending by visitors dropped 96% compared with the same period last year, according to the U.S. Travel Association.

“Hawaii is so tourism-dependent that it stands to reason it will be disproportionately affected by a recession that dampens consumer spending on vacations and public health concerns about travel,” said Joseph Parilla, a fellow at the Brookings Institution's Metropolitan Policy Program.

Hawaii's distant location may help, to an extent, shield it from the pandemic that's ravaging some parts of the mainland. In Hawaii, the number of new cases has dwindled to five on April 30, compared with a peak of 31 on March 17, according to the state's Department of Health. The state had 618 cases in total, and 16 deaths.

Even as Hawaii's cases fall, Governor David Ige extended the state-at-home order through the end of May and said visitors need to quarantine for 14 days.

Tourists will take a while to return. An International Air Transport Association survey found 40% of recent travelers anticipated waiting at least six months after the coronavirus is contained before flying again.

That's particularly devastating for local businesses who rely on visitors, including Nui Mizel, who's been farming for 30 years in Maui with acres of papaya, avocados and pumpkin. In a typical week, she'd be conducting farm tours, providing lunch from the food truck where her son cooks, and selling orchids and birds of paradise as bouquets and leis for weddings.

With most events canceled, and hotels, schools, and restaurants closed, the three wholesale companies that usually purchase Mizel's fresh produce either haven't renewed orders or have stopped operating. Business is down about 95% for her.

“I'm really afraid -- I can't sleep,” Mizel, 67, said. “I've just been pacing back and forth thinking how we're going to survive this. I put too much money into this.”

Jobs on the tropical island heavily depend on small businesses like those run by Mizel and Mava: More than half of the total labor market is reliant on firms with fewer than 100 employees. The state has the highest share of small businesses at risk to job loss in the country, said Parilla from the Brookings Institution.

The Washington, D.C., research group ranked the Kahului-Wailuku-Lahaina metropolitan area in West Maui as the second-most at risk economically in the U.S from the pandemic, with about 40% of jobs vulnerable. It's second only to Texas oil town Midland.

Other unique quirks of the islands also exacerbate the crisis, including slower internet speeds potentially delaying online applications for government aid, according to Pamela Tumpap, president of the Maui Chamber of Commerce. And the unemployment data may not even reflect the worst of the hit yet, since response rates for jobs surveys have been lower than usual, according to Phyllis Dayao, research and statistics officer for the state of Hawaii.

Federal relief has helped mitigate the impact. As of April 16, Hawaii firms got 11,553 loans approved under the main small-business rescue program, valued at $2.05 billion and ranking fourth in the country as a percentage of eligible payroll. But many of the smallest businesses were shut out before the fund was exhausted within two two weeks, and a new tranche of $320 billion that started April 27 could soon be depleted as well.

Michelle Estling, who manages a scuba diving business in Maui with her partner, was bracing for a busy spring-break season before lockdowns in March brought revenue to a halt.

One month on, she's spending hours on her computer researching different types of financing.

“The money will help take away the stress,” Estling, 53, said, adding that she has used her savings to cover costs such as insurance and boat permits.

Even if she is uncertain about when life in Hawaii will fully return back to normal, Estling remains upbeat about the future.

“Things will come back eventually,” she said. “We aren't ready to retire.''