- Associated Press - Saturday, December 12, 2015

HONOLULU (AP) - Paul and Motoko Oxman left the relative bustle of Maui to visit neighboring Lanai for two days recently and encountered hardly any other tourists. That was nice for the couple from Singapore, who enjoyed some extra serenity. But for businesses on the island, serenity causes concern.

Gift shops, restaurants and grocery markets in Lanai City - nearly all of which are operated by local residents - are in the midst of a challenging time as Lanai’s two main hotels that feed the island’s economy have been closed for most of this year for renovations.

Larry Ellison, billionaire owner of 98 percent of Lanai, can afford revenue drying up for his resorts on Lanai until they reopen. But for a lot of small businesses, it’s been financially painful.

At restaurant and bar Pele’s Other Garden, owner Barbara Lucas has reluctantly trimmed her staff to five from as many as 15. Shelves that once displayed liquor bottles are empty. And the typical lunch crowd, which used to be 50 to 60 customers, has dwindled to about 10.

“I’m trying to be positive,” Lucas said. “I’m worried.”

Ellison’s management company on the island, Pulama Lanai, has made efforts to soften the blow for businesses. Still, some residents are critical of Pulama’s decision to close the 102-room Lodge at Koele for construction worker lodging, given that this hotel is within walking distance of Lanai City and provided local shops with important visitor income.

“I think it was one bad move to shut down both hotels at one time,” said Stephen Ferguson, owner of Canoes Lanai Restaurant. “I don’t think they realized how fragile the economy is.”

After the Manele Bay Hotel closed in June, visitor spending plummeted 81 percent to $1.2 million in July from $6.7 million in the same month last year, according to Hawaii Tourism Authority data. October spending totaled $1.5 million, down 72 percent from $5.5 million a year earlier.

Most of the lost spending reflects absent revenue flowing to the hotels. But fewer tourists now visit Lanai City businesses that need vacationers.

Brad Bunn, president of the Lanai Chamber of Commerce, noted that even the year-ago spending figures weren’t good. Spending on the island hadn’t rebounded in recent years following the Great Recession, which took hold in 2008 - unlike the state as a whole, which has seen visitor spending set new records this year.

Visitor spending on Lanai totaled $72 million last year. That was down from about $80 million in each of the prior three years and compares with a pre-recession $110 million in 2007. For the first 10 months of this year, visitor spending on Lanai was $42 million.

“Those numbers paint the picture,” Bunn said.

Lanai not closed

There’s a perception that the island is closed. To counter this, the chamber, representing about 60 businesses, has made efforts to attract day travelers, especially folks from Maui using regular scheduled ferry service to Lanai.

“We’re trying to get the word out that Lanai is open,” Bunn said. “There’s more than just the resorts.”

Bunn changed up his own business focus from photography and a travel agency under the Two Boldly Go name, and created the website Lost on Lanai to promote events and excursions.

Since the hotels closed, a few retailers in Lanai City have called it quits, including a juice bar, a clothing store and a gift shop. But not everyone’s business is suffering. Hunters are still visiting the island for wild game, including deer. And the lack of hotel rooms has increased demand for bed-and-breakfast operators. The 11-room Hotel Lanai, which is owned by Ellison, also remains open.

Neal Rabaca, owner of Rabaca’s Limousine Service, said he’s doing all right with customers who include day-trippers and repeat visitors who own resort homes on the island.

“I can’t complain,” he said. “It’s not too bad for me.”

Bunn estimates that about 50 visitors are making their way to Lanai daily, down from about 200 before the hotels closed.

A 75 percent drop in potential customers is hard to take, especially given that not everyone coming to the island makes it up to Lanai City. On a recent day John and Laura Sable, from Pittsburgh, came on the ferry just to snorkel at Hulopoe Bay for an afternoon. “We mainly just like the park,” said John Sable, a snack food distributor.

Even for day-trippers, getting to the island is more difficult. Island Air, an airline owned by Ellison, eliminated three of five daily round trips to Lanai when the Manele hotel closed. And for the two remaining flights, a 25-minute stopover on Maui was added to what had been a 30-minute direct Honolulu-Lanai route.

Ohana by Hawaiian, the sister company of Hawaiian Airlines, also dialed back its Lanai service. A third carrier, Mokulele Airlines, offers only charter flights to Lanai.

Shelly Barfield, a Lanai native who works for the county’s motor vehicle and licensing division and helps coordinate the annual TriLanai triathlon, noted that people from Hawaii island wanting to visit Lanai have to fly past Lanai to Honolulu first and then back. “That’s like a half-day of travel,” she said. “The flights are very challenging.”

Participation in the triathlon held last month dropped to about 80 this year from about 130 last year.

Business stimulation

One event that has been a significant shot in the arm for Lanai’s economy since the hotels closed has been a recurring art, music and food festival modeled after First Friday in downtown Honolulu. Lanai’s version, dubbed Fifth Friday, happens only four times a year and involves Lanai City businesses providing prizes and arranging entertainment to attract consumers largely from Maui via ferry.

After the hotels closed, Maui County paid to have one extra boat run for Fifth Friday, leaving Lanai at 10 p.m., or about three hours after the last regular ferry. Maui County also helps pay for entertainment and marketing.

“Fifth Friday is huge for us,” said Lucas of Pele’s Other Garden.

Pulama also has tried to ease the pain for Lanai City businesses. The company, which owns most of the commercial buildings in town, has given some businesses rent discounts. Pulama also began arranging for some Lanai City restaurants to provide construction workers with lunch twice a month.

The lunch program began in October after a test in September. Each Friday, four of the eight restaurants in Lanai City alternate to make 60 box lunches for construction workers. Pulama pays $12 for each of the 240 lunches, which include a drink and dessert.

Lucas is grateful for the business. “We all need the cash flow,” she said.

Kurt Matsumoto, Pulama’s chief operating officer, said the biggest contribution the company is making is paying Four Seasons employees, who are the primary consumers for most Lanai City businesses.

Some spending by construction workers also is helping. On one recent evening at Pele’s Other Garden, one worker ordered 12 pizzas. However, such business isn’t typical given that Pulama provides construction workers with three meals a day.

Ferguson of Canoes Lanai Restaurant said all the stimulation efforts haven’t offset losses that started when half the lodge was closed last year. He said hotel workers who left the island to work at other Four Seasons hotels triggered a 10 percent loss for him, while visitors represented 35 to 40 percent. In all, sales are down 60 percent.

Ron McOmber, a retiree who has lived more than four decades on Lanai, said in his view Ellison could easily do more to mitigate all the economic disruption. “This guy’s so rich, he could do something about it.”

Matsumoto recognizes that it’s been a difficult time and said the community effort to sustain local businesses shows the resilience of Lanai as Ellison works to produce long-term sustainable benefits.

“In the fullness of time, this is a brief moment,” he said.

Major economic forces

Concentrated landownership and an undiversified economy that has strained Lanai’s population are common threads in the island’s modern history, for which the main economic engines have included sheep and cattle ranching, sugar cane and pineapple farming, and luxury hotels.

1200s: Native Hawaiians begin to populate Lanai’s 140 square miles, or 90,000 acres.

1779: Western explorers make first contact with the island.

1864: Walter Murray Gibson, an official sent to Lanai in 1861 to oversee a Church of Jesus Christ of Later-day Saints settlement, starts Lanai Ranch to raise sheep on 26,000 acres after being excommunicated by the Mormon church.

1898: Frederick Hayselden, Gibson’s son-in-law, starts Maunalei Sugar Co. with 700 employees largely from China after Gibson acquires control of 90 percent of Lanai through land purchases and leases.

1902: Sugar plantation shuts down following epidemic among workers and well water turning brackish.

1909: Investors acquire nearly all of Lanai and shift from sheep to cattle ranching.

1922: “Pineapple King” James Dole buys Lanai for $1.1 million to expand his Hawaiian Pineapple Co., establish a town, build an industrial harbor and phase out cattle ranching. The venture becomes the world’s largest pineapple plantation, producing 75 percent of the world’s pineapple.

1955: Hawaii pineapple production peaks with 76,700 acres planted.

1966: Pineapple production in Hawaii begins decline.

1973: Castle & Cooke Hawaii, which acquired Dole’s company in 1961, obtains state approval to urbanize 22,000 acres as part of a plan to add six hotels and 3,000 homes on Lanai.

1990-91: Castle & Cooke opens the 102-room Lodge at Koele and 249-room Manele Bay Hotel.

1992: Pineapple production on Lanai ceases.

2012: Billionaire Larry Ellison buys Lanai from Castle & Cooke owner David Murdock for a reported $300 million.

2014: Ellison begins overhauling his Lanai resort properties in an effort to make them profitable.

Sources: Lanai Culture & Heritage Center; Lanai Community Plan; state Department of Agriculture; Honolulu Star-Advertiser research


Annual visitor spending on Lanai:

In millions of dollars














(asterisk) Through September

Source: Hawaii Tourism Authority


Restaurateur weighs his options

A little more than 20 years ago, Stephen Ferguson would arrive on Lanai on Monday and go home to Maui on Friday, living the life of a commuting carpenter before he decided to become a Lanai resident. “I just got used to the slow pace over here and never like go home,” he recalled.

Now, though, the pace - at least for his business - is too slow. Ferguson gave up construction and took over the Canoes Lanai Restaurant in Lanai City with his wife about 13 years ago, and sales are down 60 percent since the island’s two Four Seasons hotels closed.

The situation has become so dire, even with a rent discount, that Ferguson recently reactivated his status as a carpenter in case he has to step away from the restaurant to make ends meet.

“We’re trying to keep a positive outlook on the whole thing,” he said. “It’s rough. It’s real bad right now.”

Goal is to make Manele Bay profitable

Kurt Matsumoto, a resort industry veteran born on Lanai, is the top representative in Hawaii for the island’s billionaire owner, Larry Ellison. Ellison hired Matsumoto three years ago to head up operations on the island as chief operating officer of Pulama Lanai.

Matsumoto, 58, has spent roughly half his life on Lanai, leaving after high school and returning in 1991 to oversee Lanai’s pair of then-new luxury hotels for prior owner David Murdock of Castle & Cooke.

Ellison is spending $75 million to redo one of the properties, the Manele Bay Hotel, while keeping the other hotel, the Lodge at Koele, closed to house construction workers.

“We’re really investing a lot,” Matsumoto said. “Remodeling is not even the right word. We’re completely modernizing this hotel.”

The goal, Matsumoto said, is to cease subsidizing the hotel, as was done under Murdock, and make it profitable so that returns can be reinvested elsewhere on Lanai.

Matsumoto, in an interview in Pulama’s offices in downtown Honolulu, said Pulama is spending millions of dollars to ensure that hotel employees continue to earn wages, which get spread around town and help sustain local businesses.


Information from: Honolulu Star-Advertiser, https://www.staradvertiser.com

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