FHB report marks continuing solid growth in CNMI tourism

The continued recovery of the CNMI’s tourism industry was one of the key highlights of a First Hawaiian Bank report released yesterday.

In her economic analysis of the CNMI and Guam, as prepared for First Hawaiian Bank, Dr. Maria Claret M. Ruane, resident development economist at the University of Guam-Pacific Center for Economic Initiatives, said the islands continue to attract an increasing number of visitors, with 17 percent growth in visitor arrivals in 2012, and another strong year in 2013, with 438,775 visitors and 9.6 percent growth.

“Data for 2014 show promise, with 82,992 visitors arriving in January and February, up 6.75 percent from a year earlier,” Ruane noted.

The report also indicated that more than 90 percent of CNMI visitors last year came from Japan (32 percent), Korea (32 percent), and China/Hong Kong (27 percent).

“Compared to 2012, the share of visitors from Japan decreased from almost 38 percent, while the share from China and Hong Kong increased from 21.5 percent. The share from Korea held steady around 32 percent of the total in both years,” Ruane added.

The increase pushed up both hotel room rates and occupancy and “has generated a strong demand for accommodations. President Nick Nishikawa of the Hotel Association of the Northern Mariana Islands said the CNMI needs 1,000 more rooms,” she said.

Aside from the CNMI’s steadily rebounding hospitality sector, the economist also gave an overview of the islands’ settlement of a lawsuit concerning the underfunded NMI Retirement Fund, a new law authorizing a casino on Saipan, a pending minimum wage increase, and changes to U.S. visa requirements for foreign workers and foreign investors.

Fund’s demise

Ruane expected the NMI Retirement Fund to have bellied up this year if the government’s policies had remained in a holding pattern.

“For years, solvency issues faced by the CNMI Retirement Fund have added uncertainty to the island economy. If nothing changed, the Fund would have become insolvent this year.”

Ruane said the issue came to a head with filing of a class action lawsuit against the government and Fund, which was settled last year, paving the way for retirees to receive 75 percent of their pensions.

“The amount required to pay for the settlement required revision of the CNMI government budget, created pressure to legalize casino gambling [on] Saipan, and authorized the Commonwealth Development Authority to float a pension obligations bond.”

She said the new law legalizing casino on Saipan—it is already legal on the islands of Rota and Tinian—passed despite opposition from the Saipan Chamber of Commerce.

The law would award to investors an exclusive license to operate a casino hotel on Saipan in exchange for a $1-million application fee, which was due by April 21 and a $30-million payment for license fee, which was due in escrow by May 5.

Gov. Eloy S. Inos vowed to use this $30 million to restore the 25-percent cut in retirement benefits called for by the lawsuit settlement. The law requires a $2-billion total investment to pay for construction of 2,000 hotel rooms and related facilities.

Ruane said by this spring’s deadline, two applications—from Best Sunshine International, Ltd. and Marianas Stars Entertainment Inc.—were received, along with a $1-million fee from each applicant.

Recently, Best Sunshine revealed its four-phase business plan for its casino hotel, with a grand opening in 2020. The first phase includes a 401-room hotel and casino to be built in 2017-2018.”

Federalization

Ruane noted that the CNMI has been transitioning since 2007 toward a tighter relationship with the United States, a process referred to as “federalization.”

Add to this, 2014 marks another round of increase in CNMI’s minimum wage effective Sept. 30. More important is the approaching deadline for the use of CNMI-specific foreign labor and investor visa categories, which will be aligned with U.S. immigration laws after Dec. 31.

Minimum wages in the CNMI have increased from $3.05 per hour in 2007 to the current $5.55. The next 50-cent increase is expected in September.

“The CNMI economy continues to hang on a balance, with the pending minimum wage increase and the deadline with regard to CNMI-specific visa categories for hiring foreign workers (CW-1) and attracting foreign investors (E2-C),” Ruane said. “This deadline can be extended by the Labor Secretary (for CW-1 visas), a decision that was already made but not yet announced, or by Congress (for both CW-1 and E2-C visas).”

Ruane said inflation also continues to decline in the CNMI and was almost nonexistent in 2013.

“Overall CPI (Consumer Price Index) prices in Saipan rose a mere 0.1 percent during the fourth quarter of 2013 compared to the fourth quarter of 2012.”