Hawai'i will experience only modest growth in visitor arrivals and spending in coming years, according to a forecast released today by the University of Hawai'i Economic Research Organization.

Capacity constraints and soft visitor demand kept tourist arrivals unchanged in 2006 after a 7.2 percent increase in 2005. Things aren't expected to improve much this year when visitor arrivals are forecast to grow just 0.8 percent, followed by growth of 1.4 percent in 2008 and 1.8 percent in 2009. Beyond that, growth should improve as new visitor accommodations enter the market.

About 5,000 units will be added to Hawai'i's hotel room inventory statewide by 2010, which would be the biggest net gain in accommodations since the 1980s, UHERO said. Among Hawai'i's other economic indicators, housing prices on O'ahu are now essentially flat, and a small decline is expected this year.

"Together with the residential construction slowdown, the weak near-term visitor outlook means that two pillars of Hawai'i's economic expansion have been sidelined, at least for now," according to the forecast. "At the same time, there are no warning signs on the horizon of an outright end to Hawai'i's economic expansion."

Job and income growth will slow further, but not stop, and the jobless rate will gradually ease upward from recent record-low levels, UHERO said.

The strongest job growth will be seen in the "other services" category, which includes business, administrative and professional services.

Job growth for wholesale and retail trade and for the accommodations and food service sectors will be limited, as both tourism and construction plateau.

Meanwhile, the cost of living in Honolulu will remain higher than normal for several years as home price increases feed through to shelter costs.

The report echoes the findings of a separate economic forecast issued last week by the state Department of Business, Economic Development and Tourism.