Six months ago, Thomas Ray seemed to be on top of the world.
The 36-year-old former financial securities broker had one bustling restaurant downtown and another in the works in Kaimuki. He and his wife had just had their second child. Times were good for the former Navy search and rescue swimmer and Hawaii Pacific University graduate.
Fast forward six months, and Ray is having to “beg for money on the Internet,” as he puts it. His fundraising campaign to save his two restaurants, Square Barrels and Heiho House, has so far raised about $12,000 of the $80,000 he’s seeking.
“This is the only thing in my life I can’t beat,” Ray said recently during an interview. “I just can’t do it. We need help. Small businesses need help now.”
Ray’s experience reflects that of thousands of businesses in Hawaii.
In the past six months, the COVID-19 crisis has devastated Hawaii’s economy, battering hotels and locally owned restaurants especially hard.
Hawaii’s restaurant industry shed more than 40,000 jobs between February and April, declining from about 70,700 to 30,300, according to federal labor data published by the University of Hawaii Economic Research Organization. While about 10,000 of the lost eatery jobs have come back since April, few of the 30,000 lost hotel jobs have returned.
Sherry Menor-McNamara, president and chief executive of the Chamber of Commerce Hawaii, has been beating the drum since March about the challenges small businesses face: “If nothing is done,” she says, “businesses will go away or shut down.”
The message is gaining traction with policymakers and the public, thanks in part to social media postings and videos that are appealing to a broad audience, McNamara said. She points to Ray as one who’s contributed to the movement with a group he calls Be Vocal, Support Local that draws attention to the need to support local businesses as a way to keep jobs and money in the local economy.
This is the third in a series of articles that analyze Hawaii’s experience with the coronavirus over the past six months. We’re taking a collective deep breath and exploring what’s transpired in a number of different areas — including leadership, communications and data, schools, hospitals, business and the economy, tourism and even with people themselves.
“It’s a defining time for local businesses, and people want to be part of that effort,” she said.
For government officials, the challenge has been how to sustain the economy while limiting the spread of the virus. The first island-wide business shutdowns occurred in March, which started with bars and restaurants and spread to all but essential businesses.
Gov. David Ige in March also announced a 14-day quarantine for people traveling into the state. With no customers, many major hotels shut down, and Hawaiian Airlines, the state’s dominant carrier and largest private employer stopped almost all of its long-haul service to and from Hawaii.
Life went back to a semblance of normal, as the spectrum of businesses reopened: malls, bars, dance venues, dine-in restaurants, even cycling and boot-camp fitness classes.
A tepid recovery was germinating even though the quarantine for people flying into Hawaii remained. The monolithic hotels of Waikiki were empty, bleeding cash. More than 100,000 people remained unemployed.
Hawaii’s recovery over the summer was fueled by billions of dollars of federal money, new money pumped into the state that replaced the lost tourism income.
Congress’ Paycheck Protection Program handed out some $2.5 billion in forgivable loans to local Hawaii businesses, including dozens of restaurants.
Places like Rainbow Drive-In and Uncles Fish Market got loans of $350,000 to $1 million, according to data released by the U.S. Treasury. Maui Brewing in Waikiki got more than $1 million, and Roy’s Holdings Inc., which owns Roy’s restaurants, got $5 million to $10 million.
This was money that didn’t have to be paid back if 75% went to keep people on the payroll and the rest used for things like lease payments.
There was also money sent directly to people. The U.S. Treasury doled out checks of $1,200 for individuals who met certain income thresholds, regardless of whether they were working, plus another $500 per child.
And the feds boosted state unemployment claims with an extra $600 per week. These sources added up to another $2.4 billion flowing into Hawaii.
But the Paycheck Protection Program was ill-designed for restaurants and other businesses that depended on tourists, and most of that money was spent by June 30. The unemployment insurance boost also was gone by the end of July.
By that time, the virus was surging again on Oahu. By August, it became apparent that the Ige administration had simply not implemented an extensive contact tracing strategy that had been designed to keep the virus from spreading when the economy reopened. And with the virus out of control on the state’s most populous island, hopes that tourism would resume by late summer were dashed.
In late August, Honolulu Mayor Kirk Caldwell imposed another stay-at-home order and shuttered most Hawaii businesses in an attempt to get the virus under control. Reports of more establishments going out of business followed, including longtime restaurants and small businesses.
On Thursday, Caldwell lifted many of the tougher restrictions, allowing many businesses to begin operating, although with restrictions that limit their capacity and their cash flow. Those include restaurants, retail stores, malls, hair salons, barbershops and nail salons, as well as attractions including the zoo, aquarium, museums, bowling alleys and botanical gardens.
Ige has said he will effectively lift the quarantine for people who test negative for the virus before flying to Hawaii starting Oct. 15.
As Menor-McNamara sees it, Hawaii can’t afford to close again.
“Another shut-down will decimate many businesses,” she said.
For businesses like Ray’s Square Barrels, the second shut-down order was bad enough. Operating a restaurant while complying with social distancing requirements typically means operating far below capacity – a profit killer in an industry with notoriously small profit margins in the best times.
For instance, Ray said, running Square Barrels at 50% capacity meant hauling in about 55% of the normal revenue. That meant using a skeleton crew of workers to stay afloat. With the second shutdown, revenue dropped by 85%, he said.
Ray expresses incredulity that state and local officials didn’t do more to stem the spread of the virus, by reaching out to marginalized communities, for instance, and shutting down gatherings that exceeded legal size limits.
“It’s pure insanity that those clusters even flourished to begin with,” he said.
The University of Hawaii Economic Research Organization sums up the narrative in the headline of a report issued Thursday: “Hawaii in early stages of recovery, then a setback.”
The resurgence of the virus, UHERO says, “put the brakes on a very tentative economic recovery.”
The result: No meaningful recovery until the middle of 2021, and a slow recovery after that.
What is Fault Lines?“Fault Lines” is a special project that explores disruption and discord in Hawaii and what we as a community can do to bridge some of the social and political gaps that are developing. Read more here.
Home prices will be held down by higher supply and weaker demand, UHERO predicts. Non-residential construction, generally a bright spot, “will be hamstrung by low levels of capacity utilization in retail, hospitality, and office space,” UHERO says.
Another problem: the tourism recovery will be slowed because people won’t want to travel, and in many key markets won’t have the money to take a pricey trip anyway.
“More significant tourism gains will be seen after a vaccine becomes widely available in the second half of 2021,” UHERO forecasts.
The optimistic view: gains in the availability of rapid virus tests bring tourists back more quickly.
The gloomy view: a third surge of COVID-19 comes in the fall and winter, and an effective vaccine does not become widely available until late next year.
Other things factor in, UHERO reports, like whether there’s additional federal money for households.
But one overarching idea is something UHERO’s executive director, Carl Bonham, has said before: the virus and economy are linked. Recovery can happen only if the virus is reasonably well contained.
UHERO didn’t pull punches when alluding to the Ige administration’s failure to implement the contact tracing strategy back in the summer.
“Hawaii government’s failure to take advantage of a nearly two-month period without COVID-19 cases to prepare for an eventual resurgence is regrettable, to say the least,” UHERO said.
Mike McCartney, Ige’s economic development chief, sees a way to provide enough jobs for all of Hawaii’s 30,000 displaced hotel workers — and then some.
Hawaii already has 38,000 people working from home, says McCartney, director of the Department of Business, Economic Development and Tourism. That includes in lucrative fields like medical radiology.
McCartney said Hawaii can “double that number in a year.”
McCartney said details are still being worked out. “We need to define the design parameters,” he explained.
But the idea is to offer job training and skills assistance to workers. Those who can’t find telework jobs with companies outside of Hawaii can work as freelancers, he said.
Asked if it was realistic to retrain and find work for another 38,000 people, many of them lower-skilled hotel workers, in a year, McCartney said, “I think that would be a worthy goal.”
Ultimately, he said, the program’s success will depend on how much people want to adapt.
“It’s going to depend on people’s passion and desire to make the shift,” he said.
McCartney said he’s working with other state officials and the newly formed Laulima Alliance network of businesses and private organizations, recently announced by Ige as part of a state leadership reset, on other ideas to rebuild the economy.
Alan Oshima, the Hawaii Economic and Community Recovery and Resiliency Navigator also appointed by Ige, shared another vision for Hawaii’s path to economic stability over the next six months to a year.
Until a vaccine can be developed and widely administered, Oshima said, Hawaii will benefit from an enhanced testing capacity, which can reduce the time it takes for someone to find out if they caught the virus. In addition, he said, rapid antigen tests appear to hold out hope as a screening tool that could let workplaces and schools open more safely.
Ultimately, he said, the need for more federal money is crucial, and something that seems to be held up by election-year politics. Administration officials are seeking out pots of federal money that don’t need another act of Congress, Oshima said.
And tourism’s recovery is key, he said. It’s not just an issue of money for businesses and households, but also the need to pay for state government.
“There’s no magic bullet,” he said. “We have to bring in the revenue.”
For now, Oshima said, people have to get used to living with the virus as best they can. He acknowledged people have a right to be worried.
“It’s a rational fear. We’re all scared, period,” he said. “We’re scared about walking in the streets here.”
At the same time, Oshima said, for Hawaii to bounce back, people will need to deal with some level of uncertainty.
“It’s clear we’re going to have to find a way to live with these ambiguities,” he said.
Civil Beat readership has more than doubled in the past nine months. That’s incredible growth for which we’re so grateful.
But for a small nonprofit newsroom that provides free content with no paywall, readership growth alone can’t sustain our journalism. The truth is that less than 1% of our monthly readers are financial supporters.
To remain a viable business model for local news, we need a higher percentage of readers-turned-donors.
Will you consider becoming a new donor today?