Hawaii’s economic growth may slow in 2024

Deceleration in key visitor markets will produce slower growth in 2024 for Hawaii’s economy.

However, unless a U.S. recession materializes, moderate gains are expected to resume in 2025, according to the University of Hawaii Economic Research Organization’s fourth-quarter forecast scheduled for release today.

A reason for the recovery is that “Hawaii’s economy has been resilient in the face of weakening U.S. and global economies, high interest rates and the slower return of Japanese travelers.”

Moreover, UHERO economists, who are housed in the University of Hawaii at Manoa’s College of Social Sciences, said economic fallout from the Maui wildfires has been somewhat smaller than anticipated with a faster-than-
expected recovery for the Maui visitor industry and a more rapid-
than-expected recovery of partial employment.

Arrivals to Maui plummeted following the Aug. 8 wildfires, and were exacerbated by broad messaging from government leaders and others that tourism to Maui was shut down. Later, it was clarified that the only tourism closure on Maui was in West Maui, which began a phased tourism reopening Oct. 8. Maui tourism since then has been slowly recovering, and UHERO economists now forecast that visitor arrivals by air to Maui will fall 17.8% this year, drop another 9.6% in 2024 and then increase 19.9% in 2025 and rise another 9.8% in 2026.

Economists, however, said in a news release that they still expect Maui’s “rebuilding path will be long, and there are considerable uncertainties about how it will proceed,” such as how fast fire survivors can be moved from hotels into more permanent housing, the speed of ongoing cleanup, the extent and duration of support programs and the timeline and process for rebuilding.

UHERO’s latest forecast for tourism, a top driver of Hawaii’s economy, anticipates that the total number of visitors to Hawaii will be essentially flat in 2024 before returning to moderate growth in 2025. UHERO said visitor spending has been soft this year due to the tourism downturn on Maui, which is a high-priced market. UHERO economists expect overall real, or inflation-adjusted, visitor spending will drop in 2024 and firm thereafter.

David Yamashiro, co-founder of Ululani’s Hawaiian Shave Ice, said the numbers in the forecast fail to tell the whole story. Yamashiro, who lost two shave ice locations and a warehouse in Lahaina to the fire, said the four remaining shave ice stores and the Sugar Beach Bakeshop on Maui remain challenged.

“In my opinion, that’s an erroneous statement that the recovery is better than anticipated,” he said. “It’s still a long ways away. We took a really big hit. It got down to where our town-side shops dropped to 30% of what we were doing in 2022 and 2021, and that went on for well over a month after the fires. Right now there are some decent days, but the slow days are slow.”

Yamashiro said at times the remaining shops reach 50% or 60% of what they were doing before the fire but that “it’s totally not enough to offset the losses.”

Jerry Gibson, president of the Hawai‘i Hotel Alliance, said Maui’s hotel industry isn’t coming back better than expected, but is performing to expectations.

Gibson said hotels in West Maui for the coming peak festive season are anticipated to reach about 70% occupancy but that the number is deceptive as visitors make up only 8% to 10% of that occupancy.

“Without visitors a lot of restaurants and activities still haven’t opened since the tragedy,” he said. “Revenue is down and there aren’t as many jobs. It’s going to be a while before we see recovery. We need to get more short-term housing converted into longer-term housing so people can leave hotels and get into more suitable housing where they have kitchens and more space.”

Gibson said hoteliers have been happy to see some green shoots in Kapalua, but “it’s not over the top.”

In Wailea, on Maui’s south side, he expects hotel occupancy during the festive season will range from 70% to a low-80 percentile. While visitors make up most of Maui’s south-side hotel occupancy, Gibson said that during a normal festive season, Wailea hotels would reach occupancy rates of 88% to 90%.

To be sure, some of the visitors who would normally visit Maui are still hesitant. Many visitors are confused about Maui’s geography and don’t understand that only a portion of the island is a disaster zone. Others are still confused about whether Maui is open to tourism and ready to host them.

Stefanie Wind, a return visitor from Calgary, Alberta, on a family trip to Kihei, said she was glad that they came.

“We’ve had a great time. The weather has been amazing. The locals have been friendly,” Wind said. “We did notice that it’s not as busy. But that’s been the only main difference. We’ve been to Maui at least 10 times.”

Other key economic takeaways from UHERO’s latest forecast:

>> A slowdown in U.S. consumer spending is expected to help bring inflation into the Fed’s target range and achieve a “soft landing” 1.1% growth in 2024.

>> Global growth in 2024 is anticipated to be similar to this year’s tepid 3% pace.

>> Hawaii job growth is expected to reach 1% in 2024, and thereafter very slow population growth will bring only incremental job growth.

>> Incomes have been battered by inflation but are now above pre-pandemic levels in real terms and are forecast to grow at a roughly 2% annual pace.

>> Real gross domestic product is anticipated to slow below 2% in 2024 before picking up in 2025.

>> Hawaii’s home resale market is suffering from high mortgage rates, high prices and a lack of inventory.

>> While Maui rebuilding is expected to drive expansion of Hawaii’s already hot construction industry, getting and housing workers is expected to be a challenge.

“While Maui’s recovery remains top of mind, the state as a whole has continued to grow at a moderate pace, and only gradual slowing is expected,” the UHERO forecast said. “But, as always, Hawaii is somewhat at the mercy of conditions beyond our shores. A sharper slowdown or recession in the U.S. mainland would mean a sharper slowdown in Hawaii in 2024-25.”