Hawai'i greeted more visitors last month than the previous July — the first increase in that key index since February 2008.

Visitor arrivals by air increased 1.3 percent to 621,590. But countering the good news was a 12.4 percent drop in visitor spending.

The two numbers tell the story of tourism in this down economy: Businesses have to slash prices to attract customers.

Deeply discounted hotel rates have kept guests coming but the pricing has been "painful," said David Carey, president and CEO of Outrigger Enterprises Group.

Visitors spent an average of $150 per person per day in July, down from $176 in July 2008. Total spending by air visitors for the first seven months of 2009 decreased by $1.1 billion, or 16 percent from year-to-date 2008, to $5.8 billion.

While it's true that revenues are down, Carey said there are signs that the plunge has stopped. "It feels like we bottomed. But it doesn't suggest that we've turned it up yet," he said.

Joint marketing efforts aimed at bringing in more visitors from the West Coast and Japan seem to be working well, Carey said. He's encouraged by the bookings for next month.

Air arrivals from the U.S. West rose for the third consecutive month, up 7.7 percent from last July.

Even though there was a spike in visitor arrivals surrounding the Japanese emperor's visit in mid-July, Japanese air arrivals ended the month down 9.2 percent.

Mike McCartney, president and CEO for the Hawai'i Tourism Authority, said he expects an improvement in Japanese arrivals.

"In September, eight flights are being added between Japan and Hawai'i to accommodate demand for travel during Silver Week," McCartney said, referring to a group of Japanese holidays that prompts travel similar to Golden Week.

'ATTRACTIVE PRICING'

State tourism liaison Marsha Wienert said the discounts are helping to bring back tourists.

"Increased arrivals reflect the attractive pricing being offered by Hawai'i hotels, travel partners and other visitor industry businesses, which is stimulating travel," she said.

Wienert noted that spending declined not just at hotels but across the board. "Food and beverage, entertainment and recreation, and shopping are also victims of decreased visitor spending," she said.

However, she said there were increases in transportation, primarily for interisland travel and rental cars in all market segments except Japan.

"Hawai'i is actually doing better than a lot of our competition," McCartney said. "We are working very hard to bring in business to Hawai'i by increasing arrivals and market share."

One retailer doing well is Freaky Tiki Tropical Optical in Waikiki Beach Walk, which offers an array of sunglasses. Outrigger Enterprises Group retail specialist Barbara Campbell said the company has found an approach that works.

While some sunglass stores specialize in higher-end $250 to $400 pairs, Freaky Tiki has added lower-priced sports sunglasses that start around $70.

Manager Ryken Shibasaki said the whole Lewers Street area is still benefiting from Outrigger's $535 million-plus renovation. "That's helped."

Freaky Tiki reported double-digit increases in sales for every month this year except April.

Shibasaki said he's noticed an upswing in travelers in general, and especially those from Japan. "We've seen quite a few of them back in town," he said.