Report predicts challenging year for Hawaii tourism

by Kim Jarrett, The Center Square, March 10, 2023

(The Center Square) - The latest economic forecast from the Economic Research Organization at the University of Hawaii predicts a slight decline in tourism in light of other economic factors. 

The report released Friday says the Aloha state is in an economic slowdown but no recession.

"While international tourism will continue to recover, domestic travel will soften as the US economy contracts later this year," the report said. "Combined with high-interest rates and prices, this will cause local growth to weaken through the first half of 2024."

Inflation has improved in Hawaii, but higher interest rates from the Federal Reserve could lead to a "sharper slowdown" in the state, according to the report. 

Federal Reserve Chairman Jerome Powell told Congress this week he expects more rate hikes to get the nation back at its target inflation rate.

"The process of getting inflation back down to 2% has a long way to go and is likely to be bumpy," Powell told the Senate Banking Committee.

The labor market has not recovered to pre-pandemic levels. Workers in the tourism industry see more significant gains in income, but fewer of them have returned to the workforce, according to the report. Wages in the accommodations and food industry have increased 16% in the past year, while other non-farm jobs have only increased by 4%. 

Despite the increase in wages, Hawaii still has a shortage of low-income workers, according to the report.

"The lagging return of lower-income workers likely reflects Hawaii's lag in economic recovery compared with other regions of the country," the report said. "Many workers in industries heavily affected by the pandemic may have relocated to states with better job opportunities. This is consistent with Hawaii's population data. While the state's population began to decrease prior to the pandemic, COVID-19 accelerated the decline. Since the fourth quarter of 2019, Hawaii has seen a loss of more than fourteen thousand residents. The outflow of lower-income workers means that the pandemic has had a disproportionately negative effect on this income class."

The state is now in a position to address long-term challenges, according to the report.

"These include the visitor experience, questions of tourism capacity, housing cost and availability, our aging population, and adjustment to climate change," the report said.

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