Billions in losses projected to hit Hawaii’s economy hard

The statewide economic impact of wildfires on Hawaii island and Maui — where the destruction in Lahaina has become the nation’s deadliest single wildfire in recent history — is likely to hit at least $8 billion to $10 billion in the Hawaiian Islands.

That preliminary estimate from AccuWeather, a source of global weather forecasts and warnings headquartered in State College, Pa., mostly takes into account Maui, where the loss of life and property have been staggering. Maui, which depends on tourism more than any other Hawaiian island, also has had the most direct economic hit.

Still, Jake Sojda, AccuWeather senior meteorologist, told the Honolulu Star-Advertiser on Sunday that “this is a Hawaii estimate because there is ripple impact across the islands.”

Sojda stressed that AccuWeather’s estimate was preliminary and could grow as information such as the death count and property losses are updated, and aspects of human behavior become clearer, such as will people stay and build or leave.

Sojda said AccuWeather tries not to assume population changes, which gets into forecasting people’s minds, but recognizes that it does happen and “could certainly build into that impact.”

To put this wildfire event into context, AccuWeather’s estimate is approaching all of the tourism spending statewide, some $10.78 billion that was collected during the first six months of this year. The estimate also is more than 50% of the roughly $19.29 billion in visitor spending that was collected last year.

Sojda said the estimate takes into account the importance of tourism in Hawaii. He said that especially applies to Maui, where he said the GDP in 2021 was $10.3 billion, with tourism accounting for about 75% of the revenue.

“The tourism piece makes this more economically impactful,” Sojda said. “Especially since it’s such a large percentage of the GDP. I don’t know if you would find another place in the U.S. with that percentage.”

Maui led the tourism rebound after COVID-19, and although it’s had some slowing in recent months, statistics from the state Department of Business Economic Development and Tourism show that during the first half of the year, Maui drew more than 1.48 million visitors, or 30% of all Hawaii tourists. It also generated $3.5 billion in visitor spending during the first six months of this year, or 32.3% of all the visitor spending to Hawaii.

Sojda said the 2018 Camp fire, the most destructive wildfire in California’s history and the nation’s dead­liest single fire in recent history until the Lahaina wildfire, has come up in comparisons to the situation in Hawaii. He said the Camp fire had some similarities to the Maui wildfires as it “quickly blew through powered by strong winds and completely wiped out (towns).”

He said depending on the source of the data, Camp fire economic loss estimates have ranged from roughly $16 billion to $8 billion to $10 billion —“that’s like what we are looking at for Hawaii.”

However, he said, a critical difference is that the “Camp fire did not impact an area as heavily impacted by tourism as we are talking about in Maui. That can change and factor into some of the estimates as well in terms of recovery.”

Maui already is sustaining direct tourism losses from the destruction of two hotels in Lahaina as well as temporary hotel closures in West Maui due to road closures, power outages and phone, cellphone and internet disruptions affecting Kaaanapali, Kapalua and Napili, as well as Lahaina.

Keith Vieira, principal of KV &Associates, Hospitality Consulting, said it was only over the weekend that most of the West Maui hotels, which comprise more than 3,500 hotel units, got their power back.

“We are taking reservations for the future, but not for the next two weeks,” he said. “We are focused on housing employees, residents and state, federal and emergency workers.”

Jerry Gibson, president of the Hawai‘i Hotel Alliance, said the first resident guests from the shelters were expected to arrive at West Maui hotels about 5 p.m. Sunday.

“We are preparing for about 500 residents. We already have 500 to 600 hotel team members already staying at the hotels. We also have FEMA in town,” Gibson said.

Vieira said ultimately many of those who have been displaced by the wildfires are likely to go to Maui’s vacation rentals, which are more suitable for longer-term stays.

With West Maui hotels focused on emergency response, some of their tourism revenues will drop as rates are lowered for this category of guests. Spending patterns of residents and emergency response workers also differ from leisure guests on vacation.

Jack Richards, Pleasant Holidays president and CEO, said a concern is that a lot of travelers are geographically challenged, and it’s hard to know how many would-be travelers to Hawaii are booking elsewhere.

“We’ve had calls from people asking, ‘Did Hawaii burn down?’” Richards said. “Others are just nervous about the unknowns. We have had some guests that are nervous about the festive season in Wailea.”

Wailea and other unaffected areas of Maui are open to tourism, but Richards said worker shortages have caused some hotels there to close out inventory, too.

He said Pleasant Holidays this week canceled more than $1 million worth of travel to Hawaii. The light at the end of the tunnel is that many of those guests are rebooking on other Hawaii islands, he said.

Lynette Eastman, general manager of the Surfjack Hotel and Swim Club in Waikiki, said she has taken in Maui residents and offered preferred rates whenever possible, but that high summer occupancy has made it challenging.

“We aren’t seeing cancellations related to the wildfire yet, but we are expecting it,” Eastman said. “People don’t understand what’s going on from island to island. Our island will get affected, too.”

Toni Marie Davis, executive director for the Activities and Attractions Association of Hawaii, said about a third of the association’s Maui members sustained damage or catastrophic losses, and now the others are sustaining losses due to cancellations.

It hasn’t helped that NCL Pride of Hawaii has dropped Maui from its itinerary for now. It used to sail into Kahului Harbor on Sunday mornings and leave Monday night.

Davis said, “Clarity is really be important. It would really help if we could select some reopening dates. But we understand that this is going to be a marathon recovery — it won’t be fast.”

Sojda said generally, in areas as hard hit as West Maui, usually the “economic impacts are felt years after the event.”

There’s a growing realization in Hawaii that situations unique to the locality may increase the time to rebuild and recover. For instance, Lahaina was once the capital of the Hawaiian kingdom and there will be a need to salvage, categorize and relocate iwi (the bones of Native Hawaiians). Lahaina’s designation as a historic area also may come with extra requirements, as will its close proximity to the ocean. Managed retreat policies might mean that the Lahaina that has vanished will not be able to be restored at least in its most recent image.

Maui’s complicated relationship with tourism also could weigh on recovery. There already is a Maui Island Plan, which calls for daily visitor population not to exceed a third of the resident population. Frustrated Maui residents made the news when they stormed Wailea Beach in 2021 in objection to tourists overtaking the popular spots locals got used to having to themselves after COVID-19 virtually shut down the visitor industry.

The Maui County Council reacted on Jan. 7, 2022, when it adopted a moratorium banning new construction of transient accommodations, including short-term rental properties, timeshares and hotels, for up to two years. In November 2022, the Council struck new hotel rooms and timeshares from the moratorium, however, lawmakers included the caveat that new construction must be above the sea level rise line. Just before the fire, it approved asking the state Legislature to increase the rate for the transient accommodation taxes, which are already the highest in the nation.

Fire is further stoking anti-tourism sentiments. Although some locals and celebrities such as Jason Momoa are telling tourists to stay away from Maui, Gov. Josh Green said Saturday that tourists only needed to stay away from West Maui, and that the South Maui resorts and tourism center remain open, and tourists are needed to sustain local jobs there.

Green said, “We are asking that all of West Maui be used for local people. There is some need in other parts of the island to keep hotels going because our local people are working there so we are doing that for local people so they don’t lose their jobs so hotels don’t pull out.”

Green’s message was a departure from earlier state advisories where nonessential travel was strongly discouraged for the entirety of Maui. The updated messaging is unpopular with some residents, who say that they don’t want tourism in Maui or even across other islands to strain emergency focus and resources.

However, the clarification is important to the state’s tourism industry, said Mufi Hannemann, president and CEO of the Hawaii Lodging and Tourism Association.

“We can’t use the same lens as we did with the pandemic. Federal money is not going to pay to keep people at home. We need federal money to pay to put people back to work,” Hannemann said.

Rising anti-tourism sentiment is disturbing, he said.

“People who don’t want tourism at all are using the wildfires as an excuse to tell people not to come to Hawaii at all because our efforts have to go to save Maui,” Hannemann said. “To me, we have got to do both. We have to save Maui, and keep the unaffected areas on Maui going as well as the rest of the state.”