Experts: 77% of Hawaii's Economy Isn't Tourism; Policymakers Can Take Steps To Reopen It

Apr 10, 2020

It’s unclear when conditions will allow the resumption of normal economic activity. Two Hawaii experts have outlined a plan for how that might be achieved, even before a vaccine for COVID-19 is developed.

The stay-at-home orders that have closed schools and most businesses across the islands will remain in place at least through the end of the month. Developing a vaccine for the novel coronavirus known as COVID-19 is expected to take even longer, potentially 18 months.

That means the global tourism industry will likely remain shuttered for the foreseeable future.

When it comes to Hawaii’s economy, you have to think about it in two categories: tourism and everything else.

University of Hawaii economist Sumner LaCroix says restarting the tourism economy presents a much harder challenge. It relies on millions of people coming to Hawaii from all over the world. Most of those origins, like the continental U.S., Asia, and Europe,  are also grappling with their own epidemics of novel coronavirus.

Tourism generates around 23% of local economic activity. LaCroix says losing that represents a massive hit, but it also presents a silver lining.

“If that 23% isn’t operating it looks a lot like depression here. On the flip side, there’s a lot to be said for getting the other 77% up and running.”

LaCroix recently developed a framework, co-authored with Tim Brown of the East-West Center, for how policy makers could begin to restart local economic activity.

Brown, an expert in infectious diseases and behavioral epidemiology, said it’s important to remember that the current shutdown of non-essential businesses will not solve the problem long-term.

“The lockdown prevents virus transmission, but it does not produce immunity in the community,” Brown said in an interview.

He lays out the problem facing regulators: how to restart some economic activity while still limiting the spread of the virus to a manageable number of cases. According to Brown, it can be done.

“We have to have much more extensive testing capability and we need to have the ability to do contact tracing in a very effective fashion,” he said.

 

Contact tracing is when public health investigators track down every person that an infected person has come into close contact with while they were infected. Authorities can then contact those people and direct them to isolate or test them for the virus.

A spokesperson for the state said the Department of Health is training medical school residents and nursing students to increase its tracing capacity. LaCroix supplies the example of Iceland, which is using police detectives with light caseloads to serve as investigators.

An effective testing and tracing program could allow the resumption of non-tourism economic activity, which as LaCroix points out, constitutes over three-quarters of Hawaii’s economy. That includes the so-called “spillover economy,” the effect of personal spending by workers employed in the tourism industry.

According to LaCroix, the non-tourism economy is essentially everything that Hawaii residents spend money on.

“That economic activity comes via University of Hawaii, it comes from the schools, it comes from people getting medical care, and it comes from people going to restaurants,” he says an example.

But Brown notes that anything involving large groups of people will likely be on hold for the foreseeable future. He cites movie theaters and sporting events as examples.

“Anything that includes large groups of people in an enclosed space. Unless you can find a way to guarantee that people are maintaining their distance in those settings,” he adds.

Brown says that even if authorities  are able to relax the lockdown, everyone will still need to practice some form of social distancing.

He cites Hong Kong, which has allowed restaurants to reopen, but imposed limits on the number of diners who can be present at one time and is requiring tables to be spaced further apart than normal. The island has also experienced a resurgence of cases as earlier restrictions were relaxed.

When it comes to schools, Brown says there will need to be more stringent screening measures put in place before they can safely resume normal activity. He suggests that daily temperature checks for everyone entering the building, on top of testing and contract tracing, could be one way to ensure health and safety.

When it comes to tourism, Hawaii’s golden goose, LaCroix writes that the worst-case scenario is a travel sector largely stalled until the development of a vaccine, which is predicted to take anywhere from 12 to 18 months.

LaCroix says a robust testing regimen, both in Hawaii and at points of origin before departure, could allow for a gradual opening of the state to visitors.

But he also notes that the recovery path for tourism will depend in large part on the sentiments of would-be travelers. If people perceive that it is safe to travel, then they will do so, drawn by cheap airfare.

If travel is seen as risky and potentially dangerous, then people will postpone travel and stay home. However, that also presents an opportunity for Hawaii. A well-executed containment program could put Hawaii ahead of other once-popular destinations.

“It is possible, but far from certain, that Hawaii will become particularly attractive as a vacation destination later this year if it is one of the first global visitor destinations to have its epidemic under control,” Brown and LaCroix write.

Both repeatedly noted that while the tourism industry represents a significant challenge, there are concrete steps that local authorities can take right now that would allow for the gradual resumption of activity in the remaining 77% of the economy, while still limiting the spread of the virus.