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With visitors choosing to go elsewhere, Maui County can expect “slow progress” in its economic recovery in the wake of the August 2023 wildfire disaster, according to economics professor Carl Bonham, executive director of the University of Hawaiʻi Economic Research Organization.
“The recovery is ongoing, and the place we think it’s going to be slowest, besides housing, is tourism,” said Bonham, who spoke with reporters via Zoom Thursday in advance of today’s release of UHERO’s fourth quarter economic forecast for Hawaiʻi. “At the moment, tourism is really suffering. And, you know, there was some optimism around the tournament, the (November) basketball tournament. But if you looked at the daily passenger counts, and you just barely could see any impact of that.”
The UHERO forecast predicts — in rounded numbers — 2.6 million visitors in 2025, 2.7 million in 2026 and 2.8 million in 2027. Those visitor arrivals compare with other, previously more robust years: 2.8 million in 2017, 2.96 million in 2018, 3.1 million in 2019 and 2.97 million in 2022. (The COVID pandemic year saw 807,308 visitors to Maui County.)
Aside from visitor arrivals to Maui, hotel occupancy rates have been anemic too, he pointed out.
In October, Maui County had the lowest hotel occupancy rates in the state at 54.9%, according to the state Department of Business, Economic Development and Tourism’s Hawaiʻi Hotel Performance Report. Statewide, hotel occupancy rates were 70.4% — 77.5% on Oʻahu, 65.7% on Hawaiʻi Island and 74% on Kauaʻi.
The Maui hotel occupancy rates “hasn’t been this low in many, many years,” he said. It would be necessary to “just probably have to go back to, I would say, maybe even the Great Recession, to see occupancy rates this low. And, essentially, what’s going on is just after the residents moved out of the hotels, you know, we haven’t seen the push to bring visitors back in a way that’s adequate to fill the rooms back up.”
Regarding the vacation rental phase-out proposed by Mayor Richard Bissen, Bonham said UHERO is working on a report on the subject, and he didn’t want to discuss it in much detail. (The report is expected in the first quarter of 2025.)
However, “it’s not rocket science to know that if you take in 2025, 30% of the visitor plant off of Maui, it’s going to have a negative impact on the number of visitors who are on island and the amount that they will spend. And that will then impact the recovery of Maui employment, of jobs, particularly in areas like food service and retail, in restaurants. These are the places that have been hit the hardest by post-fire loss of visitor spending, and so you know . . . that policy will make available from housing, and it will have an impact on housing costs, and it will also have an impact on holding down job growth and overall recovery.”
Bonham acknowledged that some visitors would stay in hotels, rather than vacation rentals if they’re unavailable.
“If you lose say, 20% of your visitor plant, your accommodations, it doesn’t mean that visitor spending falls by 20%, and that you know, then visitors necessarily fall by 20%; that some of the visitors will switch from short-term rentals to other accommodations.”
“You could also have some new short-term rentals popping up in areas where they are permitted, where they’re already permitted in resort areas,” he said. “Room prices will probably go up, so you would end up with some extra spending for that reason.”
“So, yeah, it’s kind of a complicated mess, but it’s pretty hard to come up with any analysis that would tell you that you won’t end up with too many negatives,” Bonham said of forecasting the impacts of a vacation rental phase-out on Maui. “Any way you slice it, you know, even with additional spending because of higher prices and because of people staying in hotels or resort condos that are legal, you’re still going to end up with a decline in spending and therefore some impact to jobs and overall household income. Just no way to avoid that.”
The UHERO report summarizes Maui’s economic forecast, saying: “Visitor numbers remain subdued, with occupancy rates at historic lows and labor force participation constrained by post-fire disruptions and outmigration. Maui has regained more than half of the jobs lost to the wildfires, but employment remains well below pre-fire levels. Rebuilding efforts will provide ongoing support, but a full tourism recovery is years down the road.”
The UHERO report says “Hawaiʻi’s labor market is softening, shaped by both the Maui wildfires and broader national trends.”
The total number of new hires statewide fell from 74,000 in the first quarter of 2022 to 62,000 by the third quarter of this year. Also, fewer employees are leaving jobs, with job departures down 26% from the first quarter of 2022.
“This reduced labor market activity reflects slower economic conditions on Maui since the wildfires, as well as softer overall Hawaiʻi economic activity,” the report says.
It points out that Maui County’s seasonally adjusted unemployment rate has gone down from a high of 8% in September 2023 (a month after the wildfires) to just more than 3% in October.
“While declining unemployment can indicate an improving labor market, in this case it primarily reflects workers leaving the labor force,” the report says. “Since the fourth quarter of 2023, the number of employed workers in Maui County has fallen by 200, while the labor force has declined considerably more, losing 2,700 potential workers over the same period. Some of these workers appear to have relocated to other islands or left the state entirely. Estimates from our Maui Recovery Dashboard suggest that nearly 5% of West Maui residents have relocated to the Mainland or another country. Additionally, 3% have moved to another island within the state.”
For Hawaiʻi overall, the UHERO report’s main takeaway is that there’s “broad uncertainty” about the impacts of the incoming administration of President-elect Donald Trump.
“Under the assumption of policy changes that are sharp but limited in scope, we will see a short-term boost to Mainland tourism and local income, but there will be medium-term supply challenges and an uptick in inflation. State tax cuts will provide local support. Maui rebuilding will add to an already-buoyant construction cycle, even as home affordability woes continue,” the report says.
The report says UH economists are adopting policy assumptions of “limited magnitude.”
“The Tax Cuts and Jobs Act will be extended, and the corporate tax rate will be reduced,” it says. “Tariff hikes will be more limited and targeted than many expect, resulting in a 5 percentage point increase in the tariff rate. Other countries will retaliate with similar tariff hikes. Through deportations, the administration will be able to reduce the number of unauthorized immigrants by 350,000 per year. The policies as a whole will provide a moderate near-term US economic boost, but will result in higher inflation and slower growth in the medium term.”
