Research & Economic Analysis

Tourism is the activity most responsible for Hawaii’s current economic growth and standard of living. Although many emerging industries – such as technology, film, health & wellness, professional services, specialty products and others – show great promise for the future, our economy and standard of living will probably depend on the activity generated by visitor activity for years to come. At the same time, the visitor industry has major impacts on almost every aspect of our economy, our physical infrastructure, our natural resources, and even our social and cultural lives.

The Department of Business, Economic Development and Tourism (DBEDT) undertook this pioneering study, in cooperation with the Office of Planning and the Hawaii Tourism Authority, to better understand the impacts of tourism growth. The study looked at the extent to which the benefits from tourism can be maintained, while sustaining the quality of our social, economic and environmental assets. This research project examined the impact of visitors on the economy, the environment, socio-cultural factors, and the State’s physical infrastructure (highways, harbors, parks, etc.). The overarching goal was to better understand tourism’s relationship with the rest of the economy, our infrastructure assets and environmental resources. The major products of this study are new tools and better understanding of the costs and benefits of tourism, in order to help policy makers, the industry and the community make decisions on the future of tourism growth. In that sense, the conclusion of this project is a beginning rather than an end. The tools developed in this initial effort will be refined in the coming years and gaps in data and measurements narrowed.

The sustainability approach recognizes that there is no single capacity measure for the maximum number of visitors that Hawaii as a state can or should accommodate. Rather, there are different limits for each specific resource and infrastructure element on each island and for each local community due to both visitor growth and residential growth. Such limits also tend to change over time as we manage resources better, invest in more and better infrastructure and as the nature of the visitor markets change.

By focusing on the sustainability of tourism, this study has helped identified how important resources, infrastructure and social factors are impacted by tourism growth before limits are reached. In addition, the study has developed some general strategies and planning tools to help policymakers manage the industry’s growth in a way that maintains Hawaii’s quality of life and the quality of the visitor experience.

The Economic and Environmental Modeling Study applied state-of-the-art economic modeling and other techniques to simulate conditions of tourism development and population growth through time, and identify the impact of this growth on key infrastructure, environmental and quality of life measures for various economic sectors and geographical areas.

The goal of this component was to develop analytical tools that can measure the many impacts of tourism growth on the State and counties and also suggest policy strategies to mitigate negative impacts. Among the major tasks of this component were to:

• Create a series of linked models to analyze the impact that changes in the level and composition of tourism have on Hawaii’s economy, quality of life, infrastructure and environment.
• Develop long-term simulations of the probable impact on the economy and infrastructure resulting from changes in the growth and composition of tourism as well as resident and economic growth outside of tourism. These simulations started with the most likely future scenario and then explored how impacts would be different under alternative growth scenarios. The simulations identified key pressure or trigger points where infrastructure limits need to be addressed.
• Provide recommendations that could address the potential impacts of the various scenarios.

To accomplish these goals the modeling team broke new ground in the fields of economic modeling and geographical analysis. The primary model is a computerized general equilibrium (CGE) model. This model more closely approximates the way the real economy reacts to changes in supply, demand and prices. A major secondary modeling innovation was the development of a geographical allocation model that can translate projections of tourism-driven economic activity into the demand for infrastructure, labor and land use in specific geographical areas of the State.

The purpose of the Socio-Cultural/Public Input component, undertaken by John Knox & Associates, was to assess key social and cultural impacts of tourism on Hawaii and to draw out the public’s opinions, concerns, appreciations and awareness of tourism’s impact on their lives and their communities. This component also organized the public meetings held by the project and established the Internet website used to provide information about the project to the community during most of the project period. The Socio-Cultural/Public Input component focused on the less measurable, more elusive social and cultural issues related to tourism that modeling and infrastructure measurement cannot fully capture.

The Socio-Cultural/Public Input study developed several critical components of the project’s final results. These included:

• A Socio-Cultural Impact Report investigating evidence about the likely effects of tourism growth and change in social factors of concern to residents – e.g., crime, housing cost, Native Hawaiian issues, etc. This effort included assembling an expert panel of Native Hawaiian representatives to articulate the relationship between tourism and the Native Hawaiian community’s concerns and aspirations.
• Assembling a Study Group of “stakeholders” from different interest groups – tourism, environmentalists, Native Hawaiians, labor, business, the non-profit sector and more, which meet during the life of the project. Despite the wide range of interest groups represented, the group formulated a proposal for “Sustainable Tourism Goals and Indicators” to maintain a balance between tourism and Hawaii’s economic, environmental, and social values.
• A survey of residents in all counties to explore in greater depth how the balance between tourism’s economic benefits and resident’s quality of life can be reconciled.
• Organizing and conducting public meetings on all islands to invite input into the purpose and goals of the project and to better understand the concerns of each community.
• Developing and maintaining the project’s website and drafting the final summary report of the project.

The “Infrastructure” Study produced by the firm Carter & Burgess, Inc. compiled an inventory of selected public and private infrastructure, as well as environmental features in the State, in order to establish baseline information and the “current situation” for the project. New research into the State’s infrastructure and environmental conditions would have required more time and resources than were available to the project. Instead, the Infrastructure study focused on gathering and assimilating information and reports that were already “on the shelf.”

The result was a report in ten volumes (a report and appendix volume for each county and a state summary and appendix) encompassing more than one thousand pages. The study collected information from hundreds of documents and produced perhaps the most comprehensive look at the State’s infrastructure and environmental features ever attempted. It illuminated many issues related to the infrastructure and our environmental resources down to the district level.

The study also highlighted many gaps in information and inconsistencies in the way information about the infrastructure and environment are processed. In particular, the study found information distinguishing the visitor impacts from resident impacts to be very scarce. This ultimately placed a higher burden on the project’s modeling effort to develop innovative ways to surmount the lack of hard data on visitor use of the State’s resources.