In the middle of the workday on a February afternoon, three dozen people signed up to testify on one of Maui County Council’s most contentious proposals in recent years: A plan to permanently cap the number of hotels, vacation rentals and other accommodations for tourists.

Maui County locator map

On one side of the spectrum, representatives of the visitor and real estate industries told council members that the cap could backfire, fueling the spread of illegal short-term rentals into neighborhoods while simultaneously stifling Maui’s economy.

Jason Economou of the Realtors Association of Maui warned that residents saw what could happen when tourists stop coming, like during the pandemic: “The beaches were great to visit, but people were undeniably broke.”

Many residents, however, tuned into the virtual meeting to say they welcomed the change, urging their elected officials to prioritize locals’ needs by controlling what many feel is an unmanageable volume of tourists, who wear down roads, crowd beaches and have increasingly bought up second homes, fueling rising housing costs.

“What we need to do is make sure that the quality of life of the residents of Maui is as high as possible,” Dick Mayer, a retired economics professor, told the council members.

But regardless of which side residents fell on that day, one thing was clear for many who spoke: Hotel cap or not, Maui desperately needs to figure out how to diversify its economy.

A photo of Cove Park in Kihei, which is almost always packed with tourists taking surfing lessons.
Cove Park in Kihei is almost always packed with tourists taking surfing lessons. Marina Riker/Civil Beat/2022

The pandemic showed just how fragile the island’s economy is. By the start of 2019, at least half of Maui residents were employed by the visitor industry, according to a report by the Maui Economic Development Board. After the pandemic began, Maui’s unemployment rate soared to 35%, the highest among all U.S. metro areas and higher than the national unemployment rate during the peak of the Great Depression, ABC News reported.

Many of the island’s existing problems were exacerbated to crisis levels. Thousands of residents working in the service industry lost their jobs while housing costs accelerated to record highs. Hawaii has for years grappled with a “brain drain” as residents, particularly young people, leave in search of higher wages and lower costs of living; now, community leaders speculate the outmigration of longtime families may have only gotten worse. 

“We’re trying to raise a generation of brilliant people, and we want them to have those opportunities and we want them to reach for the sky,” said council member Kelly King, who represents South Maui and has pushed to make the economy more sustainable. “But we’re not giving them these opportunities in their backyard, so they have to go somewhere else to find them.”

Decades ago, when pineapple and sugar cane jobs were increasingly replaced with machines, Maui’s political leaders championed the tourism industry as a way to fuel economic growth and fill the gap left by the plantations, as many families were forced to leave the island to find work elsewhere.

Now, nearly 50 years later, many Maui families feel overlooked, as they’ve watched roads clog with traffic, beach parking lots overflow and vacation rentals pop up in their neighborhoods, while service industry wages have failed to keep up with the rising cost of living.

Maui Paia bottleneck
On any given day, there might be more than 60,000 tourists on Maui. Ludwig Laab/Civil Beat/2022

When accounting for inflation, Maui’s median household income has “stayed basically constant” since 2005, according to a recent report by the Maui Economic Development Board. In 2018, the annual average wage for retail salespeople — the most common occupation in the service industry — was just $29,860 per year, barely over the federal poverty level and, when adjusted for inflation, $400 less than the typical earnings in 2005, according to the report

Last week, in his State of the County address, Mayor Michael Victorino listed economic diversification as one of his top priorities, along with addressing the dire lack of housing within local families’ financial reach, which business leaders have said is one of the biggest barriers to economic development on Maui. 

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“Maui Nui is a community first — a visitors’ destination second,” the mayor said. “It’s time to restore that balance.”

Despite the challenges the county and businesses faced during what Victorino called “the worst public health and economic crisis in our lifetime,” Maui still made strides in ramping up programs and funding to support local businesses and families, he and his department heads said during the address.

The county, for example, partnered with Hale Makua to develop a workforce pipeline to train health professionals; launched a course for aspiring video production workers; and put millions of dollars aside in recent years to fund micro-grants for small farmers as part of a community-wide movement to empower local agriculture businesses and strengthen food security.

“It’s going to be hard for Hawaii, in general, to diversify away from tourism. But it’s most difficult in Maui.” — Steven Bond-Smith, UHERO

The pandemic’s economic crisis was a wakeup call, and some community and business leaders hope that this could be a turning point. There are a number of groups working to tackle the issue, and they say there are lots of things Maui could do: advance investments in astronomy; boost local food production; cultivate herbs for supplements and beauty products; build its film industry; manufacture sustainable construction materials; train a health care workforce to care for kupuna; and ramp up renewable energy production, especially with the sky-high price of oil — the list goes on.

But for almost two generations, the fight to diversify Maui’s economy has been a struggle, a momentous task that the state as a whole has similarly strained to accomplish. It’s been long recognized that Hawaii’s reliance on tourism has made its economy precariously dependent on the outside world, but the problem is, business and community leaders say, there’s not a community-wide consensus on how — or what it will take — to get there yet.

“For decades, we limped along, but now we’re in the crisis that we saw in the ’70s,” said Pamela Tumpap, president of the Maui Chamber of Commerce. “How do we rally everybody, like we rallied the nation once upon a time to say, ‘We’re going to go to the moon?'”

“We need to do something extraordinary,” she continued. “And now’s the time.”

Cohesion And Aggressive Investment Needed

Seventy years ago, Maui was facing a crisis. After World War II, businesses on Oahu and the continental U.S. boomed, while sugar and pineapple plantation jobs on Maui began to dry up. Between 1940 and 1960, Maui lost a quarter of its population, according to a county plan. “Many residents, particularly younger generations, were forced to leave Maui in search of employment on Oahu and the mainland,” the report said.

In 1959, a community plan gave Maui two choices to boost employment and try to keep residents: diversify the agricultural industry or attract more tourists. Kaanapali was tapped as the island’s first resort destination, with hotels, restaurants, shops and a golf course. By the 1970s, Maui’s first mayor, Elmer Cravalho, contended that the tourism development in South Maui was key to the island’s economic future.

Agriculture was Maui’s main economic driver until the county ramped up efforts to attract more visitors in the late 1900s. Courtesy of Alexander & Baldwin

But there was insufficient water available in dry South Maui to serve the resorts that might be built there. So Cravalho played a key role in orchestrating a partnership between the government and private landowners to build a 22-mile pipeline to pump water there from Central Maui, according to a report funded by the Office of Hawaiian Affairs and Maui Tomorrow Foundation.

It was a controversial project even then, since Upcountry residents frequently dealt with water shortages, the report said. And, it came with an $11 million price tag, a massive investment at the time.

In the years that followed, tourism boomed. But business and community leaders recognized that the economy was still fragile, so they created the Maui Economic Development Board in the early 1980s to attract new industries, particularly those in science and technology that would provide higher paying jobs. 

Over the decades, however, tourism became more entrenched as the county’s economic driver. Between 2005 and 2019, the average number of daily visitors to Maui County grew 28%, according to data compiled by the economic development board.  

But shifting that balance is difficult for a number of reasons, said Leslie Wilkins, president and CEO of the  MEBD. Some of the most critical are the county’s severe shortage of housing for working families and lack of access to broadband. Right now, there are some jobs that simply can’t be done in some parts of the county because of the lack of high-speed internet, Wilkins said, which threatens to shut local workers “out of the global economy.”

But even for Maui residents who can find living-wage jobs, like nurses and doctors, finding housing can still be tough. The typical price of a home soared higher than $1 million during the pandemic, driven by a surge of out-of-state buyers. A recent state study estimated that the county needs an estimated 10,000 homes by 2025 to keep up with demand, after building for years lagged.

“It’s going to take some cohesion, consensus and investing together very aggressively,” Wilkins said. “The government can’t carry it all, and the private sector can’t carry it all.”

Maui Kihei waiting for a seat
Half of all Maui employees work in jobs that rely on the visitor industry, according to the Maui Economic Development Board. Ludwig Laab/Civil Beat/2022

Steven Bond-Smith, an assistant professor at the University of Hawaii Economic Research Organization, said a lot of the barriers come down to the simple fact that Hawaii’s economy is small and “really far from everything else.” Those pressures are even more acute on Maui, where there isn’t a big city to drive business, like Honolulu.

“They’re ambitious about diversification, but it is something that is really hard,” Bond-Smith said. “It’s going to be hard for Hawaii, in general, to diversify away from tourism. But it’s most difficult in Maui, rather than some of the other islands.”

If Maui wants to shift away from tourism, the best way to grow new industries is to look to the ones the island already has, Bond-Smith said.

Some of the ideas he finds most promising: Investing in agriculture and local food production; positioning Maui as an education hub for the hospitality industry; and growing the number of jobs in astronomy and around Maui’s supercomputer in its Air Force research laboratory.

Later this year, Bond-Smith is hoping to research the industries best positioned, from a data perspective, to succeed on Maui. The most important thing, he said, is to build on the expertise that local entrepreneurs and residents already have — and invest in businesses that will thrive best on Maui, so they’ll be most inclined to stay.

“You see this with a lot of startups in Hawaii — at a very small stage of their development, they move away from Hawaii,” he said. “For Maui to support high-tech startups, it needs to find some element of tech that is extremely local and is bound to Maui.”

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In 2016, Hawaii’s last remaining sugar grower shut down an operation that had run for 146 years. Now the 40,000 acres are owned by Mahi Pono, the marriage of a California farm management company and a Canadian pension fund. Courtesy: Mahi Pono

Maui business leaders can already point to a number of local success stories in a range of industries. To name a few: Pacific Biodiesel, which was co-founded by council member King and is the nation’s longest operating biodiesel producer; Maui Brewing Company; Hoaloha Farms; Privateer Space; and HNU Photonics, a cutting-edge technology company. Many community members are also hopeful that the county’s new department of agriculture, set to begin operating this summer, could also pave the way for more growth.

But what has been lacking over the years, community leaders say, is a cohesive effort to engage governments, business leaders and local residents to plan or study what sorts of investments and policy changes Maui needs to diversify.

“If you look at it, we have thousands of tactics, but no strategic battle plan,” said Gary Albitz, a lecturer of business, technology and food innovation at the University of Hawaii Maui College.

“I know that everyone who’s working is working hard — as hard as they can,” he continued. “But there’s a lot of spinning wheels.”

Albitz teaches at the Maui Food Innovation Center, the first business incubator of its kind in Hawaii that educates entrepreneurs in food and agriculture with an aim to create a more diverse and sustainable economy.

The center has drawn national recognition, training 200-plus graduates who went off to start successful companies that have become Maui household names like Grandpa Joe’s Candy Company, Maui Cookie Lady and HI Spice, said Albitz.

The biggest barrier is the existing system often doesn’t provide small business owners and entrepreneurs with the support they need, and it can be difficult for them to find financing from banks, Albitz said.

Just purchasing ingredients and renting a commercial kitchen to assemble a thousand jars of a product can cost $10,000 or more. Then there are all the other expenses, like nutritional and shelf-life analyses, marketing materials, websites. By the time business owners get their products on the shelves of a small grocery store like Mana Foods or Pukalani Superette, their costs can run as high as $100,000, he said.

“It takes a lot of time, a lot of money, a lot of effort,” Albitz said. “You’ve probably got to be working a second job.”

For years, the state and Maui County put millions of dollars into tourism marketing. That same kind of investment is going to be necessary to grow other businesses, Albitz said. Agriculture and its related industries could be worth billions of dollars on Maui, he said, but getting the industry there could take $200 million in investment.

“If you look at any company, like Oracle or Microsoft, what did it take for them to get to a billion dollars?” he said. “It was a couple hundred million investment.”

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.

Hawaii’s Changing Economy” is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

Read the Maui Economic Development Board’s recent report on Maui below:

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