Paradise Lost : Kauai's Economy Was Hurting Long Before the Hurricane

TIMES STAFF WRITER

The arching trees are so much firewood, the delicate silk tapestries so many rags, the reflecting pools now fetid swamps.

So easily is the studied fantasy of a luxury hotel such as the Westin Kauai Resort here reduced to wreckage by disaster.

And so too do the ruins of Hurricane Iniki undermine the illusion of paradise that is so crucial to the tourism that is this state's lifeblood, or to the economic development efforts that state officials have undertaken to lessen Hawaii's dependence on that key industry.

Looking ahead, state officials fear that the hurricane could derail Hawaiian efforts to reinvigorate the economy as it faces a crossroads.

Even before the hurricane struck last Friday, such traditional industries as tourism and sugar cane were already stagnating or in decline, the result of recession and world competition. Real estate, which attracted billions of dollars in Japanese investment in the 1980s, was also softening.

Officials were eagerly courting high-tech businesses or trying to tout Hawaii's attractiveness as a trade nexus, standing as it does smack in the middle of the Pacific Basin.

Though most of the damage was confined to Kauai, Iniki could set back development efforts in the whole state of Hawaii, local officials and business people said. The problem: The disaster creates uncertainty and diverts scarce resources.

The hurricane also creates a new set of disharmonious images that won't help attract the clean, high-tech industries favored by state economic development officials. The visions of roofless houses and flattened palm trees will take their place beside the more familiar grass skirts and white beaches.

"I can see the future now," said Pilialoha (T.C.) Caipbell, general manager of Scenic Air Tours, a charter plane service in Honolulu. "People are going to say there's terrible destruction in Hawaii. Don't go to Hawaii."

Economists in Hawaii said that despite the severe damage on Kauai, Hawaii was lucky because Oahu escaped damage. "If the hurricane had hit Oahu, this state would have been flat on its back for three years," said Sumner La Croix, a professor of economics at the University of Hawaii, explaining that most of the state's business and financial infrastructure is based in Honolulu.

Here on Kauai, Iniki dealt major damage to three main industries: tourism, agriculture and small businesses.

Reports on Tuesday said agriculture suffered $140 million in losses. The damage is easily visible from the ground. Stands of sugar cane appear raked and flattened, exposing the deep red soil underneath like sunburned scalp.

The island's two largest sugar cane plantations, operated by Amfac/J.M.B. Hawaii Inc., are damaged and inoperable for the time being. One of them, operated by Amfac subsidiary Lihue Plantation Co., supplies 20% of the island's electricity by burning cane refuse.

The 11,400-acre Lihue plantation and its sister, the 8,400-acre Kekaha plantation on the island's west side, supply about a third of Hawaii's total sugar output. It could be weeks before they are back in operation.

Honolulu conglomerate Alexander & Baldwin said it suffered severe damage to a 600-acre macadamia orchard, 7,000 acres of sugar cane and a 5,000-acre coffee farm. "We had just begun the coffee harvest. Beans that were ready to be harvested are now on the ground," said John Kelley, the firm's vice president.

In downtown Lihue, the island's largest town, virtually every business has had windows broken or its roof blown off.

State officials estimated that Kauai will lose $660 million in future tourism revenue, although much of that may be diverted to other islands. Mufi Hannemann, the state's chief economic development and tourism official, said about 11,000 Kauai jobs will be lost and that business will be off by about 60% over the next year.

At the 5-year-old Westin Kauai Resort, there is extensive damage to landscaping, valuable artworks and furnishings. Ray Brum, the hotel's marketing director, estimated damage at $75 million to the $200-million hotel. Hotel officials said they expect to reopen in early 1993. Other hotels are expected to be closed until January.

On Tuesday, Kauai remained without power, telephones and other basic services. Some officials said it will take weeks or months to rebuild the island's basic infrastructure.

But the most immediate effects will be on tourism, which had picked up a little in the weeks before the hurricane. Normally, the island accounts for about a tenth of the state's total tourist dollars (about $9.9 billion statewide last year), and the state is already changing its promotion campaigns to emphasize that most of Hawaii escaped the storm.

Still, most experts forecast some drop in tourism, much as San Francisco suffered after the 1989 earthquake. David Ramsour, chief economist for the Bank of Hawaii, said the pictures transmitted around the world on television the last few days suggest to many people that the hurricane destruction was statewide.

However, travel agents and airlines report only a small number of cancellations. Many Kauai-bound vacationers are switching to other islands.

One irony of Iniki is that it struck Kauai just as many local businesses were bouncing back finally from the disruption caused by Hurricane Iwa 10 years earlier. The earlier hurricane in fact is now seen as a kick in the pants for the island, setting off a construction and development boom that transformed Kauai's sleepy tourist industry into a business of luxury resorts.

The summer "has been somewhat difficult, but was fairly decent in August and September," said Ernest Nishizaki, general manager of Sheraton's two resort hotels on exclusive Poipu Beach, on the island's hard-hit south-facing shore.

That ended abruptly when Iniki blasted the south beaches, smashing into both Sheratons and littering them with debris. The 450-room hotels recently underwent a two-year, $22-million renovation that was completed just last year. But Nishizaki said Sheraton will rebuild.

But for other resort operators, the hurricane could be the last straw. With "these last 18 months of recession (and the) Persian Gulf War, money issues will become very trying," Nishizaki said.

Times staff writer James Bates in Los Angeles contributed to this report.

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