Visitors Seek Alternatives as Hawaii Travel Rebound Wanes Says State

The State of Hawaii’s research arm, UHERO, reported yesterday on Hawaii travel in a massive and wide-ranging 48-page report on the state of the state. Important travel takeaways on point for us include the following, together with our observations (in italics). And, of course, we look forward to your input. We’ve included the entire report below for your review.

In 2023, Hawaii visitor spending reached the highest daily amount in over three decades (inflation-adjusted). That, to a significant degree, is based on dramatically higher costs.

Hotel room rates are reported to have stabilized, which we can confirm. They remain, however, at unacceptably high levels relative to the value provided. The state reports that there is a concurrent shift away from demand for luxury Hawaii accommodations.

For 2024, Hawaii visitor spending is expected to decline slightly, with stabilization perhaps coming in 2025.

International travelers may return to Hawaii gradually as “the US mainland market falls back a bit.” That having been said, the UHERO report makes clear that Japan, Canada, and Australia/New Zealand visitor numbers are all struggling.

It is not clear when improvement in those might occur. Part of the issue is their weak currencies compared to the U.S. dollar.

Hawaii visitor arrivals continue to be down 7.5%.

In March, as we previously indicated, Hawaii visitor arrivals were down 5% compared with last year. UHERO adjusts that to report the “average daily visitor census…was nearly 7.5% below the 2019 level. We’re awaiting April’s data.

Japanese visitors were at “less than 50% of their pre-pandemic level.” In March, Canadian visitors were down… 25% below pre-pandemic.

Perhaps in part addressing why Hawaii appears to court Japanese visitors moreso than it does U.S. visitors, the state reported the following:

“Japanese visitors typically spent one-third more per person than US visitors. However, post-pandemic, their spending has converged to roughly the same amount. While arrivals from Japan remain well below pre-pandemic levels, their still-solid per person daily spending… makes them an important part of the overall visitor mix.”

UHERO

The state believes we are in the midst of a “tapering of US arrivals, perhaps reflecting waning post-pandemic rebound travel. Based on other data, we find their assertions are likely incorrect. The “tapering” is, to a large degree, based on the lack of value that visitors are finding in Hawaii vacations. That combined with a world of other travel alternatives, as your comments have also confirmed.

For example, the European Travel Commission reports that in 2024, Europe will see “record numbers of foreign tourist arrivals and nights exceed 2019 levels.” That is being significantly driven by U.S. traveler demand.

Interesting notes include that the locations with the greatest improvement include Serbia, Turkey, Malta, Portugal, and Spain. ETC said that “These destinations offer competitively priced holiday experiences, often combined with milder winter temperatures.”

Therein is their hint towards the issues related to too-high Hawaii prices. We believe Hawaii vacation costs, including accommodations, taxes, and fees, is one of, if not the largest, obstacles to success in travel going forward.

Maui and Kauai are where prices sting the worst.

UHERO reported that “Maui continues to have one of the highest per-person visitor spending rates, primarily due to relatively higher room costs on the Valley Isle. Kauai exhibits similar visitor spending characteristics, also influenced by high accommodation expenses.”

These issues may continue to suppress visitor demand going forward, together with concerns on Maui about visitors being welcomed, as well as the latest prospect of vacation rentals problems ahead.

Light at the of the Hawaii Travel tunnel.

UHERO pointed to one fact that is, to at least a small degree, comforting. That is Hawaii accommodation rates have at long last stabilized. The prior concept of “no amount is too much” is over.

UHERO said, “Inflation-adjusted room rates have been essentially flat over the past two years, following a substantial increase in the aftermath of the pandemic.”

Regarding a move away from Hawaii luxury accommodations, UHERO reported that data suggests a “substitution away from the luxury segment. Between 2019 and 2023, room rates for luxury accommodations increased by 50%, while in the (lower) upscale segment, the increase was a more modest 30%. During the same period, occupancy rates dropped by more than 15 percentage points in the former category, but they remained essentially unchanged in the latter.”

24Q2_Forecast