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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. And there is breaking news.

The latest 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.

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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.”

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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.

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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.

Hawaii vacation rentals

Updated: Hawaii vacation rentals in the crosshairs.

Another proposal from the governor, updated today, February 27, is for a potential moratorium on Maui vacation rentals should. It was due to return to the news in the days ahead. Governor Green had said earlier that by March, he’d 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.

Today he decided to give it another month, until April, before slamming the hammer down hard on Maui vacation rentals.

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.

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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.

U.S. Transportation Secretary Pete Buttigieg in Hawaii.

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.

24Q1_Forecast

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139 thoughts on “Hawaii Tourism Boom Bursts | Troubled Waters Lurking”

  1. I still do Not understand how a person who OWNS a home can be told what they can and cannot do with it. Do they realize the rent will skyrocket, not decrease. How will that help in any way?? Resort costs will also go sky high because ‘they can’, knowing there are no short term rentals available. The state is going to end up losing money, not gaining.
    Hawaii depends on tourism to survive. It’s going to cause people to go to other beautiful warm places that they can afford and will cost a family way less to have a vacation. I’m totally against cutting out STR. Hawaii Needs tourism, plain and simple. Let alone the fact the government is telling people what to do with property They Own !! Not Right !!

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  2. Been there,over crowded, unfriendly, they will suffer the consequences of their actions then cry the blues

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  3. Despite the supposed downturn it tourism there are still tourist boat operators that are laughing to the bank. There are so many tourist snorkel boats that have basically ruined our neighborhood and Bay here in Keauhou. I for one would not mind if tourism sinks along with their tour manta chasing operations. Way too much traffic at all hours of the day, every day too many tour boats and way too many people in the water at the same time has changed everything here! The only ones that benefit are the tour boat operators without any care for The neighbors around The Bay or the sea life that lives here. As far as short-term rentals go, it has affected the cost of renting and buying here drastically.

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    1. What evidence do you have that short-term rentals have “affected the cost of renting and buying here drastically?” Just the fact that both real estate and rentals have nearly doubled the last couple of years?

      That is due to inflation, and is happening all over the country, in those locales that have STRs, and those that don’t.

      Be careful not to parrot what you hear from unreliable sources.

      We do evidence that STRs don’t affect prices at all. Look at any STR ban that happened any time within the last 3-5 years, and you will see that housing and rents are at record highs. Within a year and beyond, STRs being there/not being there had 0 effect on housing and rent prices.

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  4. Ever since the expose on HI’s pay to play, I haven’t seen any news from the anti-VR people in Kailua. Is this my imagination? DPP also seems to have backed down on the rhetoric.

    I’m a constant reader of BoH and appreciate the light you’ve shown on the short-term rental industry.

    Mahalo,
    Karen in Ewa Beach

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  5. I will be flying to Honolulu on May 8th. My dream vacation from childhood.
    I thought if canceling due to bad runways and so many Sounding dangerous flights.
    Dropping off plane parts. Returns to destination you left from 3 hours into a flight.
    Expenses climing past few months. This will be my dream vacation but Would not book Hawaii vacation in future. So many placed from the mainland to go to.
    USVI Porto Rico. Less expensive/ shorter flights.
    And They Want Tourists.
    hope Delta goes there and back safely.
    I am so looking forward to being in Ohau on May 8th.

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  6. We are (husband & wife) saved all our lives to purchase a condo in Maui. We bought it because, we enjoy coming to the Island, I believe its good for the Maui economy!

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  7. Adding taxes , fees onto people coming to Hawaii will only hurt them. Along, with riding short term rentals that will only give money into the resorts and hotels that are over charging already. This Government body has done Nothing to help the people. Only, to give our Money to other countries and support the people invading our country.

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