Hawaii’s hotel industry already charges the highest room rates in America, with luxury properties nearing $900 a night and a statewide average of $364. Now its national lobby is pushing to eliminate more than 30,000 vacation rentals statewide, backed by a funded study, an invitation-only ballroom event with the governor and mayors, and an enforcement agenda that is already becoming law on Maui. If that effort succeeds at scale, the primary alternative to high-priced hotel rooms begins to shrink, and the cost of Hawaii vacations moves higher still.
The pricing reality of Hawaii hotels.
Hawaii hotels’ statewide average of $364 a night already leads every hotel market in the country, including New York. Rates are at least 30% above 2019 levels, even though occupancy has never fully recovered.
Put that into practical terms. A $500 room for a week is $3,500 before tax. The tax alone adds roughly $665, and that still does not include resort or other daily fees. The rate visitors see is not the rate they ultimately pay. That is the pricing baseline before any reduction in vacation rental supply or other policy changes.
What just happened at an invitation-only event.
Last week, Oxford Economics released a study commissioned by the American Hotel and Lodging Association (AHLA) and the Hawaii Hotel Alliance that makes the economic case for Hawaii’s hotel sector. On the same day, hotel executives gathered with Governor Josh Green, island mayors, and state legislators at The Hospitality Show: Honolulu, following the study’s release. We covered the study and its claims separately.
The Honolulu Star-Advertiser was granted exclusive access to the gathering tied to the study’s rollout. It was a tightly focused meeting of industry leadership and policymakers.
The paper’s parent company, Oahu Publications, publishes custom in-room magazines for major Hawaii hotel chains, runs an events division that co-produces the Hawaii Hotel and Restaurant Show with the hotel lobby, and publishes HILuxury, a magazine targeting luxury hospitality advertising. That is the outlet providing the public account of what took place.
The Star-Advertiser’s coverage also included comments from vacation rental leaders and cited conflicting data as part of the debate.
The study measures what hotels contribute. It does not reflect what happens to visitor pricing or to the broader Hawaii accommodation market if 30,000 vacation rental units are removed from circulation. When industry groups fund research and release it at an industry-organized event attended by the same officials who shape accommodation policies, the details may become public, but what that means for Hawaii visitors remains unsaid.
Hawaii hotels estimate more than 30,000 illegal vacation rentals.
That number gets repeated in enforcement discussions, legislative testimony, and industry-funded research. UHERO’s Hawaii Housing Factbook puts the total number of Hawaii vacation rentals at roughly the same figure, about 5.5% of Hawaii’s 557,000 housing units. That count includes every vacation rental in the state, permitted and unpermitted. No comprehensive statewide audit has sorted legal from illegal. The state’s own vacation rental performance reports say explicitly that they do not differentiate between permitted and unpermitted units. The industry’s decision to label all 30,000 as illegal is their policy position, rather than any verified count.
Honolulu alone has 29,000 hotel rooms across 93 properties with another thousand in development. Put the vacation rental numbers next to that, and the ratio is hard to ignore, whether the real target is 30,000 units or something less. Take even a fraction of that supply out of a market where hotel rooms already cost more than anywhere else in the country, and the equation changes.
Governor Green underscored the volume when he said that if you could flip a switch and have short-term rentals go to the housing market, Hawaii would not really have a housing shortage. He was talking about housing, not tourism pricing, but the volume he described is the same volume the industry wants removed.
The vacation rental position.
Vacation rental advocates don’t accept that framing by the Hawaii hotel industry. The Hawaii Mid and Short-Term Rental Alliance says the vacation rental sector generates $4.8 billion annually in visitor spending, $2.4 billion in household income, and supports 49,000 jobs statewide. Executive director Caitlin Miller argues that most properties are owned by local families rather than institutional investors.
Miller has pointed to Hawaii Tourism Authority data indicating that roughly two-thirds of short-term rental owners rent part-time to offset household expenses. In her view, the narrative that vacation rentals are emptying local housing oversimplifies a much more complex situation. She and others argue that Hawaii’s housing shortage stems from decades of underbuilding, high construction costs, and land constraints, among other things.
UHERO’s modeling of Maui’s Bill 9 projected that implementation could lead to roughly $900 million in annual visitor spending losses and about $75 million in annual tax revenue losses on Maui. Supporters of the bill believe housing benefits will outweigh those losses. Critics question whether conversions will occur at the scale projected and whether units in resort-zoned areas will realistically ever shift to long-term housing.
The vacation rental sector also argues that rental income helps families cover mortgages in an already expensive state. They say vacation rentals distribute visitor spending to local restaurants, shops, and service providers that reach beyond resort walls.
This is clearly not a simple or one-sided story. It is a hotly contested disagreement between two Hawaii accommodation models that both claim to support local jobs and tax revenue.
Gibson and the hotel alliance agenda.
We have known Jerry Gibson since his days managing the Grand Hyatt Kauai nearly 25 years ago. He has been a consistent and disciplined advocate for the Hawaii hotel industry, from property-level leadership to corporate hotel management to his current role at the statewide alliance.
For 2026, the Hawaii Hotel Alliance has laid out priorities that include retaining transient accommodations tax revenue for destination marketing and expanded air service development, strengthening enforcement against illegal rentals, reinvesting visitor-generated taxes into beaches and parks, expanding anti-human trafficking training, and building a stronger workforce pipeline for hotel careers. Those goals are framed as stewardship and stability for an industry that employs tens of thousands.
Gibson has said that every unit lost to illegal vacation use is a unit taken from a local family. He has also argued that tourism supports more than 200,000 workers statewide and indirectly benefits more than 800,000 residents. In his words, tourism is Hawaii’s best and cleanest export.
On the national front, industry leaders have emphasized that their issue is not competition with Mom-and-Pop operators but tax parity and affordable housing. That argument now sits next to our statewide average hotel rates of $364, luxury rates approaching $900, and an enforcement push that could remove tens of thousands of competing units.
AHLA President Rosanna Maietta said they regularly share enforcement lessons from cities like New York, Los Angeles, Chicago, and Nashville with local governments. Hawaii is the latest market where their national playbook is being applied.
Readers can recognize both realities at once. The hotel sector is a major economic engine. It is also operating in a market where it already commands the highest room rates in the country. It supports enforcement that would significantly reduce competing inventory.
What Hawaii visitors should be watching.
Maui’s Bill 9 is already law and will eventually phase out thousands of grandfathered vacation rental units in South and West Maui. Even after that, Maui will still have more than 13,000 vacation rental units. Mayor Bissen has defended the move as the fastest way to add housing that Maui could never have built on its own.
At the state level, Representative Tam introduced HB 1590 to give counties new enforcement tools, including the use of screenshots from rental listing sites as evidence against illegal operators. The bill would also require the Hawaii Tourism Authority to actively promote legal accommodations. The enforcement side is moving fast.
In his 2025 State of the State address, Governor Green pledged to return more homes to local families, including short-term rentals that have taken too many units off the market. At last week’s hotel industry event, he said 47,000 housing units are now in motion statewide and that Hawaii ultimately needs about 60,000.
If enforcement and phaseouts proceed at the scale being advocated, Hawaii’s accommodation market will change shape. The primary alternative to hotel rooms shrinks. In a state where hotel pricing already leads the nation, that means consequences for what visitors pay.
Most travelers do not track these legislative hearings or industry conferences. They notice room rates, tax lines, and fees when they try to navigate a Hawaii vacation. Hawaii’s hotel industry is moving quickly on vacation rentals. If the balance tips the way industry leaders are advocating, the next time you price out a trip, you may find that the cheapest options are fewer, and that the baseline starts higher than it does today.
What does a Hawaii vacation cost when a $364 average room before taxes becomes the starting point instead of the midpoint?
Photo Credit: © Beat of Hawaii at Prince Waikiki Hotel.
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