Hawaii Tourism Boom Bursts | Troubled Waters Lurking

Hawaii’s economic growth has turned lifeless and “will downshift this year” as the islands’ recovery boom is officially over. Changes are on the horizon with Hawaii tourism’s decline and the aftermath of the Maui fire. What comes next and what the means for visitors is our topic today.

The forecast, according to the latest report from the state’s research arm, attached below, suggests that Hawaii will transition to a much slower growth pattern rather than the breakneck speed at which it previously rebounded. In fact, instead of tourism being the driving force, it is a strong construction sector that will help provide any economic boost seen statewide, especially work on Maui following the wildfires. With that said, we never wanted to see a construction boom as a result of the Lahaina tragedy.

Hawaii tourism at saturation.

The report pointed to less U.S. visitor spending ahead and suggests that visitor arrivals will increase only slightly in the coming years. Significant growth in Hawaii travel is expected to end as the islands’ tourism industry reaches saturation. “Visitor numbers will also grow more slowly than in the past as the industry pushes up against capacity.”

What wasn’t addressed in the state’s economic update?

Hawaii sits at the forefront of an important shift in its approach to tourism, moving away from the paradigm of more visitors, resorts, vacation rentals, and flights. The state remains challenged in many ways following decades of overtourism and a lack of planning and infrastructure and seeks a new direction. With limited resources and framework, Hawaii has long been hard-pressed to know exactly how to manage its tourism success. Some shifts toward more sustainable tourism are nonetheless evolving in the near-term.

These issues were outside the scope of the report.

New $25 climate impact fee almost certain to be enacted.

The bill is intended to offset $16 billion in estimated Maui wildfire damage and mitigate the environmental damage caused by tourism. If that doesn’t happen, visitors should prepare for the alternative. That will likely take the form of an increase in the current 18% accommodations tax, as was recently confirmed by the governor.

Another proposal from the governor for a potential moratorium on Maui vacation rentals should return to the news in the days ahead. Governor Green said that by March, he’ll either achieve conversion of 10% of Maui’s existing 27,000 short-term rental units to long-term rentals for Lahaina fire victims or take the next steps.

Anti-vacation rental sentiment runs high in Hawaii, and this will remain a hotly disputed topic for the foreseeable future. With Gov. Green strongly on-board against vacation rentals, this will move forward. At present, 5.5% of the entire state’s 557,000 housing units are vacation rentals, but that varies widely. Maui has the most, at about 15%.

The push-back against vacation rentals is widespread. Joining the governor is the Hawaii Tourism Authority chair, Mufi Hannemann, who’s also head of the hotel industry’s Hawaii Lodging and Tourism Association (HLTA).

Hawaii’s Legislature is pursuing measures to phase out Hawaii vacation rentals as well. House Bill 84 seeks to give the counties more authority to start phasing out short-term rentals.

Will new efforts finally kill Hawaii’s golden goose?

The prospect of more taxes and fees and the elimination of vacation rentals is very concerning for many Hawaii visitors. There remains worry among stakeholders in the tourism sector that over-the-top vacation costs, plus real and perceived anti-visitor sentiment could have a negative impact on sustaining Hawaii’s visitor industry.

A lack of tourism infrastructure perpetually haunts Hawaii.

Last week US Transportation Secretary Buttigieg visited Hawaii and viewed disaster recovery efforts on Maui. He also delved into what some consider two of Hawaii’s infrastructure boondoggles. Those include the old and decaying Hawaii airport system and an expensive, incomplete, and largely unused Honolulu rail system.

The Transportation Secretary’s visit sought to highlight key infrastructure investments in Hawaii, and reaffirm the federal government’s commitment. At Hawaii airports, problems range from outdated, inflexibly designed, and maintained terminals, to damaged and poorly constructed runways, among other things. He acknowledged how important airports are to Hawaii’s island economy, and said bluntly regarding the Honolulu airport, ‘it needs work.”

While rarely mentioned by officials, these problems and others are inconsistent with both vitalizing existing Hawaii travel and attaining the new high-value tourism model that the state seeks.

Please share your thoughts on what’s happening.

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