As coronavirus halts tourism, Hawaii’s job losses mount

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HONOLULU (The Wall Street Journal) — Hawaii’s workforce has sought unemployment benefits at the highest rate in the nation since mid-March, reflecting how hard the coronavirus pandemic has hit the state’s tourism industry.

The surge in job losses is renewing worries about the state’s reliance on visitor spending and need to diversify its economy. The crisis is also raising questions about how businesses on the islands —  many of which depend on air travel, recreation and social gatherings — can rebound once restrictions on activity are lifted.

The state’s $18 billion tourism industry ground to a near-halt in March, after the Trump administration recommended that Americans avoid unnecessary travel, and bars and restaurant dining rooms closed.

Hawaii’s Chamber of Commerce said many of its members were already closing down temporarily or reducing business hours before the state’s March 25 stay-at-home order.

A recent survey by the Chamber and the University of Hawaii Economic Research Organization found about one in four businesses anticipated having to shut their doors permanently, said chamber president Sherry Menor-McNamara.

“They’re bleeding,” Ms. Menor-McNamara said. “As you can imagine, there’s only so much cash in the bank account. Their fixed costs are far exceeding what they have.”

About 194,000 people in Hawaii filed claims for unemployment benefits in the six weeks ended April 25, representing 29.1% of the state’s workforce. While restaurants and hotels were responsible for many of the early layoffs, related businesses such as gift shops, surfing schools and tour operators all shed workers in recent weeks.

Kyle Baxter, 55 years old, a server at the Beachhouse restaurant at the Moana Surfrider hotel in Honolulu, was laid off temporarily on March 17. He said he considered moving to New York, where he has lived in the past, but figured the cost of shipping or selling his belongings would be too high. Instead, he said he plans to wait for the hotel to reopen. “I have a little bit of savings, and this is probably going to wipe it out,” he said.

The outlook for many businesses is uncertain. Restaurants and hotels might need to continue to practice social distancing and limit their customers to prevent the spread of infection, which will weigh on their recovery.

The scale of the job losses highlights how important tourism is to the state’s economy. More than 10 million people traveled to Hawaii last year, generating $2 billion in state tax revenue, according to the state tourism authority. Leisure and hospitality, including food service, account for 19% of all employment on the islands.

“Hawaii is hospitality,” said Douglass Miller, a lecturer at the Hotel School at Cornell University. “And it’s more than just the hotels and restaurants being shut down. There’s a whole trickle-down effect.”

Among the hardest-hit are local artists, whose stalls in the tourist hot spot of Waikiki have been closed, and musicians who can no longer perform at luaus or concerts.

“All these artists are heavily reliant on tourists,” said Aaron Lau, whose company Simply Wood Studios had to temporarily close its Waikiki in March. Mr. Lau said he first filed for unemployment benefits on March 21 but hasn’t received any payments.

Mr. Lau said he isn’t counting on a pickup in tourism until October at the earliest. He reasons people will want to get back to work and wait for things to stabilize before they start thinking about their next vacation.

Workers in tourism aren’t the only ones under pressure. Gov. David Ige, a Democrat, has acknowledged that salary reductions for state employees are a possibility, although he considers such a move to be a last resort. Roughly one-tenth of Hawaii’s workforce is employed by the state government.

The pandemic has added urgency to longstanding discussions about diversifying the state’s economy to focus more on other sectors, such as research and development, film production and alternative energy.

Business leaders and economists said Hawaii’s high cost of living was already prompting some residents to leave the islands for the continental U.S. during the years before the pandemic began. Prices for goods and services in Hawaii were the highest in the country in 2017, and about 19% higher than the national average, according to the Commerce Department.

Hawaii relies heavily on imports of crude oil and petroleum products, and its remote location means the state has the highest electricity prices in the U.S. The state wants to move to 100% renewable energy by 2045.

The state’s population declined during each of the past three years.

Don Murphy, who owns Murphy’s Bar & Grill in the Honolulu financial district, said he cut his staff by about two-thirds after his restaurant was forced to move to takeout service only.

Just days earlier, he had canceled the pub’s annual St. Patrick’s Day block party, which usually brings in about a month’s worth of business in a single day.

Mr. Murphy said he and his wife are discussing at what point they might throw in the towel. Sales last month were about a third of what they are in a typical month, he said, and the pub has lost the higher profit margin it once got from selling alcohol to sit-in customers.

“How much more money do we want to put in to keep it going?” Mr. Murphy asked.

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