The purpose of this brief is to provide additional information on current impacts of the coronavirus disease 2019 (COVID-19) public health crisis on Native Hawaiian owned businesses, identify their ability to access resources, and investigate Native Hawaiian business owners’ perspective on Hawai’i’s post COVID-19 economy.
Native Hawaiian businesses continue to suffer from the COVID-19 contraction, although disruptions continue to be less severe for Native Hawaiian owned businesses than for those owned by non-Hawaiians despite Native Hawaiian businesses being smaller and more vulnerable in other respects. The reason fewer Native Hawaiian businesses report a negative impact is unclear but may be due in part to Native Hawaiian businesses being less reliant on tourism as a revenue source.
Native Hawaiian owned and non-Hawaiian owned businesses report similar rates of seeking financial assistance from available programs. However, despite historically reporting fewer resources and numerous challenges, findings suggest that Native Hawaiian businesses are less likely to apply for assistance from the Paycheck Protection Program.
Native Hawaiian and non-Hawaiian businesses show a great deal of similarity in terms of what industries they want to see in the new economy. Both prioritize industries that promote sustainability— Agriculture, Aquaculture, Forestry, and Fishing and Clean, Renewable-Based Energy sectors were among their top three priorities for the future of Hawaiʻi’s economy. On the other hand, these businesses ranked Military, Transportation, and Oil and Petroleum-Based Energy industries as their least prioritized industries in the new economy.
A statewide analysis by the Hawaiʻi Department of Business, Economic Development, and Tourism (DBEDT) predicts historic contractions in Hawaiʻi’s gross domestic product (GDP) in 2020, followed by stagnation in the following years.[1] The state’s drastic downturn is unique in some ways, but exists alongside an unprecedented national and global downturn. First and second quarter GDP contractions in 2020 are larger than any single quarter contraction during the Great Depression,[2] and the World Bank forecasts that the COVID-19 recession will be the deepest global recession since the second world war.[3]
In response to the rapid spread of COVID-19 and the state and county shelter-in-place mandates, businesses temporarily or permanently closed or altered their ways of operation. While some businesses and nonprofits quickly pivoted to online and creative ways to continue sales and stakeholder engagements, these measures were not sufficient to fully replace prior revenue. As a result, many businesses and nonprofits are struggling to stay afloat and fear having to permanently shutter their doors in the near future.
The Native Hawaiian COVID-19 Research Hui released a Hawaiʻi’s Economy: Visions of a Better Normal Survey in June 2020; responses from businesses and non-profit organizations are presented in this brief. This brief provides a second point-in-time look at the impact of the COVID-19 crisis on Native Hawaiian owned businesses and organizations. A previous brief released in May 2020[4] provided a first look at the impacts and resources needed among Hawai‘i’s businesses as a result of COVID-19.
Over 500 businesses responded to the survey (n=512), with roughly an even split between Native Hawaiian and non-Hawaiian owned businesses.
Responses cover the span of June 1, 2020 to June 22, 2020 when the state saw a period of relatively low COVID-19 case counts, hovering around single to low double digits and when residents were practicing “Safer At Home” orders where restaurants and retail businesses implementing physical distancing were open. This survey does not include responses from the most recent Oʻahu-wide stay-at-home order.
About three-quarters of the businesses who responded to the survey are an LLC, 501(c)(3), or sole proprietorship. The majority of the businesses in Hawaiʻi County are 501(c)(3). In Honolulu County, most businesses are either an LLC, 501(c)(3), or other form of non-profit. In Maui County (including the islands of Molokai and Lānaʻi), most businesses that responded to the survey are sole proprietorships. In Kauaʻi County, most businesses are an LLC.
As expected, the vast majority of respondents report a negative effect of the COVID-19 crisis on their businesses. This negative impact differs significantly by ethnicity of business owners, with 83% of non-Hawaiian owned businesses reporting a negative impact of COVID-19 compared to 74% of Native Hawaiian owned businesses (Figure 1). This finding is consistent with our first business impact survey,iv which found that Native Hawaiian businesses are less tourism dependent and may be facing less painful contractions than they would if they were as reliant on tourism as a whole. Additionally, the Hawai’i DBEDT report in 2017 noted that Native Hawaiian owned tourism-based businesses represented a smaller proportion of all their businesses compared to the state level.[5]
The pandemic negatively affects businesses in all four counties, especially businesses in Maui County, where 83% report a negative impact, compared to 63%–78% of businesses in the other three counties. This is unsurprising given Maui Countyʻs higher reliance on the tourism industry[6] and is consistent with other reports finding that the economic downturn is being felt especially hard in the neighbor islands, most of all Maui and Kauaʻi.[7]
The US government, philanthropy, and community organizations promptly responded to the economic fallout of COVID-19 by offering a series of financial assistance programs, either through public or private funding, to sustain the viability of small businesses and nonprofits. While critical, these responses have only reduced the extent of damage to small businesses.
Of the financial assistance programs listed, businesses most often report requesting assistance from the Paycheck Protection Program (29%), Economic Injury Disaster Loans (17%), and other state or local government programs (13%). Respondents also frequently tap their personal finances (15%) to continue supporting their businesses. Surprisingly, 41% of businesses report not requesting any form of financial assistance. While not statistically significant, it is interesting to note that 46% of Native Hawaiian owned businesses, compared to 37% of non-Hawaiian owned businesses, report not requesting any financial assistance at all. Considering that DBEDT and other sources find that Native Hawaiian businesses are generally smaller and more vulnerable, the lower rate at which Native Hawaiian businesses report applying for support is striking (Figures 2 and 3).
The patterns of requesting assistance between Native Hawaiian owned and non-Hawaiian owned businesses are generally similar. One significant difference emerged: Only 21% of Native Hawaiian owned businesses, compared to 35% of non-Hawaiian owned businesses, requested assistance from the Paycheck Protection Program—one of the largest financial assistance packages offered under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. This finding is consistent with numerous studies which found that Native Hawaiians were more willing to apply for types of public assistance programs that included a Native Hawaiian focus or intentionally incorporated Native Hawaiian cultural components into their approach.[8]
Businesses that request financial assistance report receiving assistance most frequently from the Paycheck Protection Program, family or friends, self, and other deferal programs.
While non-Hawaiian owned businesses are more likely to request assistance from the Paycheck Protection Program, both Native Hawaiian and non-Hawaiian owned businesses are equally likely to report receiving support from this program.
Businesses are least likely to receive assistance from Community Development Financial Institutions, Banks/Credit Unions, and SBA Loan Forgiveness program.
Figure 3 below shows the proportion of Native Hawaiian and non-Hawaiian businesses that received assistance out of those that requested assistance.
Businesses consistently identify Agriculture, Aquaculture, Forestry, and Fishing and Clean, Renewable-Based Energy sectors among their top three priorities for the future of Hawaiʻi’s economy. At the other end of the spectrum, businesses rank Military, Transportation, and Oil and Petroleum-Based Energy sectors as their lowest priorities (Figure 4).
Native Hawaiian and non-Hawaiian owned businesses show some differences in their priority ranking of sectors for the future economy. Native Hawaiian owned businesses rank Accommodation/Food Services in 12th place compared to 3rd place by non-Hawaiian owned businesses. Another area of difference is in Sustainable Tourism, ranked in 13th place by Native Hawaiian owned businesses compared to fourth place by non-Hawaiian owned businesses.
Among counties, businesses in Maui County rank Mainstream Tourism in tenth place, compared to 16th place by Honolulu County and 18th place by Hawaiʻi and Kauaʻi Counties. Businesses in Kauaʻi County rank Retail Trade in second place, compared to 8th place by Maui County, 13th place by Honolulu County, and 15th place by Hawaiʻi County.
While most Native Hawaiian owned businesses have experienced disruption from the pandemic, they appear to be faring somewhat better than non-Hawaiian owned businesses. The resilience of these Native Hawaiian owned businesses in some respects defies expectations given previous findings that Native Hawaiian businesses are smaller and have trouble accessing sufficient capital.
However, the inability of COVID-19-related business assistance programs to foster greater participation among Native Hawaiian businesses may hurt Native Hawaiian businesses and reduce their ability to contribute to recovery and mainstream diversification. Nonprofits, policymakers, and the private sector should seek to understand the reasons behind the lower rates of Native Hawaiian business owners seeking assistance, and look at directing resources to Native Hawaiian-serving programs and community organizations with greater existing social capital and capacity who can, in turn, help Native Hawaiian business owners apply for the resources that they are eligible for.
The survey also suggests that Hawaiʻi's business community wants to see a more diversified small business community that focuses on resilience and regenerative economics to a much greater extent than the pre-Covid-19 economy. The desire for greater diversification, and a greater emphasis on industries that foster self-sufficiency spans the Native and non-Native communities in Hawaiʻi. Nonprofits, foundations and policymakers should do more to support efforts to expand these self-sufficiency focused sectors and support the entrepreneurs already working to expand these industries.
Finally, continued failure among mainstream programs to foster participation among Native Hawaiian businesses may have negative repercussions far beyond the Native Hawaiian business community itself. As we have found in our previous study, Native Hawaiian businesses are more likely to have the characteristics that the state (as a whole) seeks to shift towards: less reliance on tourism, an ability to weather downturns, and greater diversification.[9] If, or when, these types of businesses close, Hawaiʻi loses an invaluable asset in its pursuit of a preferred future and, consequently, existing examples of how we can get there.
This brief was produced through a collaboration by the Office of Hawaiian Affairs, Liliʻuokalani Trust, Kamehameha Schools' Strategy & Transformation Group, Hawaiʻi Leadership Forum, and KUPU.
