The state’s economy is expected to grow at a slower pace in the next few years, but a benchmark 10 million tourists could visit by the end of the year — and inflation-adjusted visitor spending could surpass a peak
that hasn’t been reached since 1989.
It took 9.95 million arrivals in 2018 to get to $17.8 billion in visitor spending, whereas it only took
6.49 million visitors in 1989 to get to $18.02 billion in 2018 dollars, according to economist Paul Brewbaker.
Visitor arrivals are anticipated to grow 1.8 percent, to 10.1 million, this year — a forecast discussed with the Pacific Asia Travel Association last week by Brewbaker, principal at TZ Economics, and state Chief Economist Eugene Tian.
Tian said he anticipates arrivals will grow 1.5 percent, to 10.3 million in 2020 and 10.4 million in 2021. The number of airplane seats sold, which is slated to grow only 0.5 percent during the first nine months of this year, is one reason for the slow arrivals growth, he said.
Tian also forecast nominal visitor spending, not adjusted for inflation, to grow to $19.1 billion next year, up from $17.8 billion this year. In the following years he anticipates that it will grow to $19.7 billion and $20.5 billion.
From 2010 to 2017, Tian said, real estate contributed the most to Hawaii’s economic growth, but tourism and health care were the top contributors to the state’s gross domestic product, the monetary value of all goods and services produced in Hawaii over time.
Visitor expenditures increased 4.9 percent in 2018, which Brewbaker said was a great year. Still, he said tourism has slipped from a 25-to-30 percent share of Hawaii GDP in the late 1980s to a
16 or 17 percent share now.
Brewbaker said 1989 marked the point where “Hawaii’s tourism social costs began rising while social benefits were not.”
Arrival gains without comparable real spending have resulted in tourism backlash, said Frank Haas, president of Marketing Management Inc.
“We’ve had many, many bodies without economic benefit, and that has put more wear and tear on the destination,” Haas said. “Do we have over-tourism here? That depends on where you look. We can handle 10 million visitors in Hawaii, but we can’t handle 500 at Laniakea Beach.”
The spread of illegal vacation rentals has been blamed for exacerbating tourism’s negative impact on communities. But Brewbaker said illegal vacation rentals are symptomatic of “much broader and deeper changes in the nature of economic activity and flexibility of asset management.”
He pins the gap between real and inflation-adjusted spending growth on Hawaii becoming a more mature destination with a higher percentage of repeat visitors. Lodging constraints also have pushed costs for accommodations higher, resulting in shorter stays and less overall spending by visitors, Brewbaker said. Productivity growth and greater access to information also have led to reductions in the cost of a Hawaii vacation, he said.
Rather than going after illegal vacation rentals, he suggested lawmakers and policymakers consider a more inclusive strategy in which more people — not just large lodging companies, airlines and transportation companies — have an opportunity to monetize tourism.
“The guy who repairs cars in his garage on the weekend, the homeowner who runs a part-time hair salon in her house and the vacation rental owner need to
be legitimized because it’s going to happen anyway,” he said.
He also advocated charging tourists to use
Hawaii’s public resources, pushed for using technology to develop apps that manage tourism and recommended developing tools that tap into growing consumer interest in virtual
vacations.
“None of these ideas will take us from $18 billion to $30 billion in real tourism receipts — but finally after 30 years of waiting, we are going to make more money then ever. If not this year, probably within the next five years. Once we go there, let’s do it right,” he said.
Consumers still have confidence in the U.S. economy, but Tian said there are indications that a U.S. recession is coming. The world economy also is forecast to grow at a slower pace than in 2019, he said.
“This is true for most of the countries in the world,” he said, “especially those countries that contributed to our visitor industry.”
