Here comes the sun.

More hotel rooms, more tourists and a few proactive moves by county government are giving Kauai businesses reason for optimism. A recovery, however, is yet to come.

Kauai Mayor Maryanne Kusaka was an unlikely attendee at the American Society of Travel Agents' World Conference in Philadelphia last November. She came with island businesspeople bearing a slew of Kauai products, from exotic fruit to ice cream to tropical flowers - all in hopes of convincing the world's largest travel agent association to hold its western regional planning conference on Kauai. According to Gerald Dela Cruz, director of the county Department of Economic Development, lobbying at the convention was a novel approach. "Usually, they decide on their own," he says. In the end, Kusaka's campaign won ASTA over and 600 members attended the four-day conference at the Kauai Marriott this past May.

Roadshows have been part of Kauai's tourism marketing since the Kunimura administration of the 1980s, but after Kusaka took office she stepped up the practice and broadened its aims beyond attracting visitors. One of her motivations was the end of federal relief funds coming in after Hurricane Iniki, which resulted in o 70 percent cut in the Kauai Visitors Bureau's marketing budget, from $3.3 million in 1994 to only $975,000 in 1995. That drop pushed the county and the bureau to try targeting travel industry association gatherings nationwide and overseas.

In the past year, county officials have been to Seattle, Los Angeles, Albuquerque and most recently, Bangkok and Taipei. "It's been done before," says Kauai Economic Development Board executive director Sue Kanoho, "but I would say that Mayor Kusaka has been a little more aggressive in travel because of the critical (times) that we're under. I think at this time, it's warranted." While the mainland and Bangkok junkets targeted tourism industry representatives, the Taiwan trip was designed to entice investors with information on commercial properties open to sale offers from foreign buyers.

Promoting foreign investment on the county level seems like a good idea for an island economy that has still not fully recovered from Iniki. Unemployment as of April was running at 11 percent. Though that's down from a annualized high of 14.2 percent in 1994, it's still the highest rate for any county in the state. To add to Kauai's problems, real estate values remain depressed and many major retailers aren't seeing sales pull upward.

Despite those bad signs, many of Kauai's government leaders and businesspeople are feeling better about their 1996 and 1997 prospects than they have in years. According to First Hawaiian Bank consumer confidence surveys taken late last year, optimism for the island's near-term economic future is rising. "We're still winding down in the recovery process, but I feel that we're through the worst of it," says Kanoho. "We're really turning around."

TOURISM. Much of that confidence is being generated by Kauai's largest industry. Hawaii Visitors Bureau preliminary figures indicate visitor arrivals were up 4.3 percent last year, from 873,870 in 1994 to 911,446 in 1995. Ninety percent of the island's hotels are on-line and occupancy rates are at pre-Iniki levels in some areas. Poipu Beach Resort Association's executive director Margy Parker says her association's properties ran at 80 percent through the first quarter of this year.

Accounting firm PKF-Hawaii reported a drop in Kauai occupancy rates, from 75 percent to 65 percent between 1994 and 1995, but that, according to tourism officials, is due more to an increase in room inventory than a decrease in arriving guests. The reopening of the Kauai Marriott, formerly the Westin Kauai, gave the island back a much-needed luxury property. Kauai Marriott marketing director Paul Toner says, "Travel agents are more comfortable about sending people now that there's a full range of properties on the island." Some hotels, however, are still in limbo. The future of the Coco Palms, the Stouffer Waiohai and Poipu Beach Resort remain uncertain due to ownership problems and insurance disputes. The Sheraton Kauai is rebuilding and set to reopen in late 1997.

The resurgent timeshare industry is getting some credit for Kauai's stronger visitor numbers. At the Kauai Marriott Beach Club, timeshare unit sales have been risks, according to Toner. At Poipu, Parker says 150 units have been sold, and eventually will make up 15 percent of the area's total room inventory. The consensus so far is that Kauai's timeshare marketers have avoided the in-your-face tactics that Lahaina timeshare hawkers are infamous for.

RETAIL. The tourism rebound is helping some retailers, but merchants who sell mainly to residents have continued to struggle. According to Bank of Hawaii, Kauai retail receipts fell from $373.2 million in 199 to $353.5 million in 1995, down 5.3 percent. The trend has continued though the first quarter of this year, with receipts falling 5.8 percent from the same period a year ago.

The island's largest shopping center, Kukui Grove Center, is redirecting its marketing toward tourists following a 20 percent drop in gross receipts last year, according to vice president Angela Morehead. The center now has agreements with 10 hotels to bus in guests twice a day, and more stores are seeing sales increases as a result. Morehead says 86 percent of the shopping center is occupied.

Kukui Grove's struggles and Bankoh's numbers don't tell the true tale for more tourist-oriented retailers, however. By and large, their business has risen as visitor arrivals have increased. "There are more smiles all around," says Jeff Culver, manager of Ching Young Shopping Village in Hanalei. Culver has seen a 30 percent increase in Japanese tour groups at his center. For the past couple of years, he says, the center has had no rent increases for tenants. "Now that business is better, we've reinstated rent increases and no one's complaining."

Poipu Shopping Village is also reporting better news. Its 1995 sales were up substantially over 1994, according to manager Valerie Pichler, and first quarter sales this year are up another 15 percent. Occupancy is at 80 percent, unchanged from last year. AGRICULTURE. Heavy rains hit Kauai sugar growers hard last year, dropping the islandwide harvest to 135,011 tons from 144,480 tons in 1994. Closures and rumors of closures persist among the industry's plantations. In September, McByrde Sugar Co., an Alexander & Baldwin subsidiary, will harvest its final crop of 20,000 tons at a yield of 4.9 tons per square acre. According to A&B officials, McBryde's closing comes after a projected loss of more than $4 million in 1995, adding to cumulative losses of $22 million over the last 20 years. McBryde will now focus on its coffee growing operations under a new name, Island Coffee Inc.

With Amfac/JMB Hawaii's yields suffering another decline last year, 1996 could determine how much longer it remains in sugar as well. Rains hit the company's Kekaha Plantation particularly hard, dropping harvests from 84,000 tons in 1994 to 66,000 tons in 1995, and delaying planting schedules.

Of the island's major sugar growers, only Gay & Robinson had good news to report: a 50,000-ton harvest in 1995, up from 1994's 42,733 tons. Yields have risen from 12 TSA in 1994 to 14.8 TSA as of early May. G&R president Alan Kennett credits higher yields to a harvest schedule that, fortuitously, escaped the rains that plagued Amfac, increased capital investment, and efficiency gains brought about by 1994's G&R/Olokele Sugar consolidation. He says consolidating operations with Amfac could also result in mutual gains. "The bottom line is that sugar can survive on Kauai, but only if we have one mill," says Kennett.

The good news for A&B is that Island Coffee increased its production from 1.4 million pounds in 1994 to 1.8 million pounds in 1995, increasing its share of Hawaii's total coffee production from 40 percent to 43 percent, according to the state Department of Agriculture.

Ideal weather conditions and control of the pesky Asian two-spotted leaf hopper brought about a 9 percent increase in the guava harvest for Kilauea Agronomics, a C. Brewer subsidiary. According to president Wayne Katayama, steady increases in harvests since Iniki have been accompanied by stronger demand for guava on the mainland. "Guava is coming out of its specialized niche and becoming more mainstream," he says. Following this trend, a new mango-guava flavored drink was recently introduced by the company on the East and West coasts. Katayama hopes to increase demand for the juice through sample tastings at Lihue Airport and by reopening part of the company's visitor center, which had been closed since Iniki.

REAL ESTATE. Prices of Kauai real estate are soft and getting softer, according to Kauai Board of Realtors executive director Karen Ono. First-quarter numbers from MLS Hawaii Inc. indicate that in many categories the market is not as strong as it was even a year ago. Though land sales doubled from 20 to 40, the median price of parcels fell from $217,500 to $190,000, a 12.6 percent decrease. The result was an 8.8 percent decrease in total land sales volume, from $12.7 million to $11.6 million. Total condo sales volume was also down, from $4.2 million to $3.2 million, an 18.8 percent decrease, and the median condo price fell by 14 percent, from $160,000 to $137,500.

Single-family homes have at least held some of their value through the first part of the year, with a median price of $231,250 compared to first-quarter 1995's median of $225,000. At that price level, total sales volume more than doubled, from $9.2 million to $20.14 million. Like retail, Kauai's real estate market is being driven more by outsiders than locals, says Ono. "It's mostly speculators from the mainland, looking for bargains."

Debra Blachowiak, president and principal broker of Sleeping Giant Realty, says outsiders may spend more, but residents still make up half of her current business. "We've had plenty of deals with locals. They're not buying million-dollar homes, but they never did, not even in the robust '80s." She says list prices have dropped by 15 to 20 percent, since the start of the year with some higher-priced properties being listed for half their original value. That is creating more activity in the market. "If my business is any indicator, things are improving," she says.

Many real estate agents who don't share Blachowiak's optimism have left the profession or turned to selling timeshare. "Some people like it (timeshare) because they make money faster," Oho says. She's seen KBOR's membership decline 11.6 percent, from 370 real estate agents last year to 327 this year. Her conservative estimate is that membership will fall as low as 250 before it starts to climb back up again.

CONSTRUCTION. With the island's glut of commercial and residential space, private construction is at a virtual standstill. Bank of Hawaii reported a drop in private construction permits, from $196.2 million in 1994 to $103 million in 1995, while government construction contracts went down from $83.6 million in 1994 to $60.9 million in 1995. And contractors say prospects continue to look bleak. "Investor confidence is down and private projects are non-existent," says Conrad Murashige, president of Shioi Construction. "So competition is stiffer for public projects." Many of those, he says, are going to off island contractors. Some examples include Fletcher Pacific's $24.8 million rebuild at Kapaa Intermediate School, and Goodfellow Brothers' $2.2 million road widening project in Poipu. That's made survival difficult for many local subcontractors, according to Murashige. "Last year was the worst year ever as far as subs and suppliers going bankrupt," he says. "As the general contractor, we're obligated to finish the job, so we take the loss." This leaves general contractors in a classic Catch-22. "In order to get work, we need to go with the low-bidding (sub)contractor. But they're already weakened financially, so they're not bondable."

According to Murashige, construction is Kauai's least optimistic industry. "When there's lack of confidence, there are fewer people taking chances on private construction. Paul Brewbaker (Bank of Hawaii's chief economist) just said he's estimating a recovery in 1998. Last year he said it was 1997. Who knows?"

Karen Taketa, executive director of the Contractors Association of Kauai, says its members are wary of making any predictions about a construction recovery. "A lot of our members have been in the industry for more than 20 years and they can't remember being out of work this long," she says. She adds that the only glimmer of hope this year is in the rebuilding of the Sheraton Kauai. Otherwise, the industry is hoping that increasing optimism will eventually fuel an upswing in the home remodeling market. "Prices to build or remodel a home are the best that they've been in a long time. It's a competitive market for licensed contractors," she says.

FILM. In a year when Kauai escaped the notice of feature film producers, the island happily fell back on television. Film commissioner Judy Drosd says commercials, documentaries and photo shoots generated $3 million in 1995, and first-quarter revenues for 1996 are already at the $2 million mark. "The first quarter is generally our busiest, because of winter in other places. Also, the Japanese TV season starts in March or April, so that's when they scramble," Drosd says. With a $250,000 grant from the federal Economic Development Association running out, KICM is currently writing a business plan to ensure its future survival.