Kona Business Report 2018

The key concept to describe the business situation in Kona, Hawaii is “at capacity.” Almost every business that we deal with at Kona Impact is in what I call a “busy and profitable” mode; that is, they are running full speed and making money. This contrasts with the worst case scenarios we have had in the past: “busy and broke” and “not busy and broke.” These, of course, are exaggerations and over-generalizations. That said, times are good now in Kona, perhaps too good for some business sectors.

Getting Things Done

Getting projects done has become an increasing concern for local businesses. We heard of one development that is “shovel ready,” but the developer can’t even get a company to do the lot grading. The bids that were received were prohibitively high, and there were no completion dates attached to the proposals.

I received a call from my dentist last week about my next, next appointment. They were booking appointments for September, a full seven months away. She “wanted to make sure I could get in.”

We know of one niche builder who now has a three-year backlog. They have stopped accepting architectural drawings, as they could not guarantee any preliminary work on new projects until 2019.

This lack of capacity in the construction sector has been good for construction company owners, but bad for those who would benefit from a supply of new homes: consumers, realtors and those who profit from home sales.

Kona Impact, too, is working near or over-capacity right now. We have worked extra hours and many weekends to keep up. We now turn away some projects, especially low dollar projects and projects from clients who have been less-than-ideal clients in the past.

We had dinner at Foster’s Kitchen in the Coconut Grove Center last week. Every place was crowded–a good sign for the bars and eateries in that area. We had an early dinner at 5 pm; by the time we finished at around 6 pm, there was a line of people waiting for tables. That seemed to be the case at every restaurant in the area.

The take-home lesson is that those who need something “now” need to be patient. Or they will need to have a good relationship with their service providers. If you want a new home, be prepared to pay a premium. If you are a client of Kona Impact, make sure you plan ahead, as our lead times are longer than usual.

Employment

We are at a point in our economy where anyone who wants a job can have one. The statewide unemployment rate is 2.2%, which is effectively full employment. It’s about half the national rate.

As a result of our strong economy, good workers are hard to find in some sectors. Employers that have poor conditions and low wages are scrambling to cover shifts. Many good employers are also struggling, so they are raising pay and benefits. Some have moved away from using (less reliable and loyal) temp workers to hiring full-time workers. Others have turned to temp workers to fill positions.

In the long-term, businesses will have difficulty growing if there are few available workers.

Other Tidbits

Despite the strong local economy, there does seem to be a lot of open offices and industrial space Kona. A person looking to start a business should have no problem finding an office and industrial space; good retail and restaurant spaces are always hard to find, but there are several decent spaces around town.
Our great highway debacle continues. The highway between the harbor and airport was supposed to be done by now. Looks like later this year, but I would bet on 2019 at the earliest. Depending on the time of a day, it can take 30-60 minutes to get from Hualalai through Kailua-Kona (or the reverse). Late and way over budget seems to be a fact of life for construction projects in Hawaii.
Planet Fitness, a large national chain, is scheduled to open this year in the old Borders location Henry Street. In a town saturated with gyms, this new gym will only prosper by eating some of the lunch of its competitors. I have my suspicion we’ll see a contraction in the fitness center market in the next few years.

Ola Brew is a welcome addition to the micro-brew/bar market in Kona. They make a variety of beers and ciders on premises. I’ve had several, and they are delicious. They have a good thing going and will only get better.
I got lunch from Cool Running, the Jamaican food truck the other day. I’ll be back for sure; the lamb curry with cornbread was just incredible. If you see this food truck around town, check him out; you’ll be glad you did.

My Rotary club used to have our luncheons at one of the big hotels in town. It was an excellent venue, with many pluses, but when they raised their fees for the second time in one year, we switched to the upstairs of Island Lava Java. I have to say; I enjoy the ocean views and fresh air more than I did the inside of a hotel. The food is quite good, too. I think the hotel got greedy with their pricing and thought we had nowhere else to go. They were wrong.

A similar thing happened when I went new car shopping last month. The salesperson at the local dealership seemed less-than-enthused about showing us the models we were considering. I even told him were cash buyers and looking to purchase right away.I left my full contact info with him after describing the car we wanted. Truth be told, we were most interested in the color at that point, as we had already decided to buy a particular model, a very common car in Kona. Two weeks after stopping by, there was no follow up, so I decided to see what I could get on Oahu. Within ten minutes I had made an offer–through email–for the exact car we wanted. Within an hour the salesperson and I had agreed on the price. We never talked. In the end, we figured that we saved close to $3,000 (which included shipping to Hawaii Island) on the car compared to the local dealer, who insisted on the “local area markup” a $1,500 surcharge added just because they can. I wonder how many other car buyers have given up on buying locally because of this.

The Thirty Meter Telescope is still in limbo. If it is not built on Hawaii Island, a clear message will be sent to those who want to invest in innovative and game-changing ventures on the island: the island is not a good place to do so. That, in my opinion, would be most unfortunate for our working men and women, their children and their children’s children.

Mountain Thunder Coffee Plantation has put a lot of effort into building a good Kona coffee farm tour business. For those who don’t know, the farm was bought out of bankruptcy in April of last year. While the farm has always produced exceptional coffee, the new owner has focused on improving the farm tours and providing better customer service to Kona coffee customers.