Wildfires have delivered a “heavy blow” to Maui’s economy and will exert costs on the county and state that will last well into the future, according to a University of Hawaii Economic Research Organization report released today.

UHERO’s latest forecast is its first assessment of how the firestorm and its aftermath will affect Maui’s economy over the next several years, and what that downturn will mean for the overall state economy.

The group’s assessment: The wildfires will lead to sharp and persistent economic losses on Maui, with limited spillovers for the rest of Hawaii’s economy.

While Maui represents about 30% of the state’s visitor industry, it comprises just over 10% of Hawaii’s overall economy, UHERO director Carl Bonham said Thursday during a virtual news conference to discuss the group’s third-quarter forecast results.

Bonham said UHERO now expects the state’s overall gross domestic product to fall about half a percentage point from its previous forecast.

“The economy will grow more slowly, and then it will sort of rebound in a sort of typical fashion after a disaster,” he said. “It will look like the state economy is doing quite well in 2025 and 2026 — not so much in 2024.

“The overall state economy will weather this Maui downturn, and we’ll actually see a boost in overall economic activity — job growth and particularly construction activity,” he said. “Overall GDP growth will be higher in 2025 and 2026 and 2027 than we had forecast before the fires.”

While UHERO expects rebuilding will boost the state’s GDP, the forecast’s authors said, “this does not capture the value of lost homes and businesses and the non-pecuniary costs of displacement, trauma, and so forth.”

Current economic costs from the fires are mounting for the county and the state. Depending on the level of federal funding, UHERO said the state could incur substantial recovery costs for the next half-decade or longer.

UHERO is forecasting real personal income and tax revenues will decline, and statewide income growth is projected to slow to below 2% in 2024.

The state Council on Revenues reduced its forecast for state general fund revenues for fiscal 2024 to just 1.3% growth, down from an earlier estimate of 4%.

However, UHERO expects that the planned reopening of unaffected areas of West Maui to tourism Oct. 8 will reduce Maui revenue losses.

Because Maui represents about 30% of Hawaii’s tourism, the island’s struggles mean the visitor industry will suffer.

Bonham said Maui lost over $13 million of visitor spending each day in the weeks following the fire when arrivals plunged by nearly 75%. He said West Maui’s tourism reopening will restart tourism in the region, but recovery is expected to ramp up gradually.

“There has to be a time for the industry and the (Hawaii Tourism Authority), etc., to tell the world that we are reopening, and ideally you would like that message to get out in time for people to plan for later in the fall, whether it’s Thanksgiving or Christmas and New Year’s — the peak travel periods,” he said.

State Business, Economic Development and Tourism Director James Kunane Tokioka told the Honolulu Star-Advertiser on Thursday that the reopening of West Maui, which accounts for 15% of Hawaii’s tourism economy, is critical to the economies of both the Valley Isle and the state.

“There has been outreach to many community leaders and ILWU as the largest hotel union in West Maui,” Tokioka said in an email. “Some are reluctant, but we are listening to the guidance of many hotel workers asking to reopen and return to normalcy. A delayed opening would lead to more employees being laid off and without medical benefits.”

Bonham said he expects that even with the reopening it will be year’s end before Maui visitor arrivals surpass 50% of their 2022 level. He said visitor arrivals are not expected to reach 80% of their 2022 level until the end of 2024.

The UH economist said recovery after 2024 is expected to slow again due to some travelers’ reluctance to visit Maui and the island’s continued temporary housing needs.

In the wake of the fires, nearly 8,000 survivors and hotel employees have been housed in over 2,400 units across about 40 lodging properties, including hotel, timeshare and Airbnb units.

Gov. Josh Green said during a Thursday news conference, “We are beginning the process of transitioning survivors out of hotels and into longer-term housing, including additional vacation rental and condo-hotel housing, that will begin to feel at least a little bit more normal for those deeply affected.”

The Hawaii Housing Finance and Development Corp. has placed over 300 families through the Hawaii Fire Relief Housing Program, which has about 1,200 property listings. The state also is having discussions with Expedia-VRBO about adding housing for displaced survivors.

Tokioka said that “with regards to moving survivors out of hotels, the situation is fluid.” He said the Joint Housing Task Force is trying to confirm units with kitchens, in particular.

The Federal Emergency Management Agency has reported receiving 15,931 registrations for services and will support more than 18 months of rental assistance for survivors.

Bonham said rebuilding homes for the thousands of families displaced by the Lahaina fires will take years, straining an already tight and expensive Maui housing market.

“The recovery of the overall economy and the tourism economy will be very much influenced in 2024 by what happens in the housing and the reconstruction phase and the need to continue to house displaced residents and emergency workers and visiting federal employees and eventually construction workers — all of that will come together to essentially slow the process of recovery in the tourism space,” he said.

Bonham said fires destroyed the vast majority of businesses and jobs in Lahaina, and even local businesses outside that impact zone are struggling because of the tourism downturn.

He noted that spending to meet Maui’s disaster and recovery needs will create jobs.

UHERO’s forecast estimates that Maui’s unemployment rate will soar above 11% in the fourth quarter. Though UHERO expects the unemployment rate will gradually recede, economists do not expect it to dip below 4% until late 2026.

UHERO expects statewide job growth will fall below 2% this year and to 1% in 2024.

Bonham said a likely federal government shutdown on Oct. 1 threatens further disruption, but, as rebuilding ramps up, jobs are expected to rise slightly above UHERO’s previous forecast.