Hawaii’s visitor industry is absorbing a new round of fuel-driven shocks as oil prices climb following President Donald Trump’s latest bombing campaign in Iran — a shift that is pushing airfares higher just as summer travel demand had begun to stabilize.
The U.S. strikes, aimed at keeping the Strait of Hormuz open, rattled Iran’s southern coast and sent oil prices more than $1 a barrel higher in post-settlement trading, adding fresh volatility to a market already strained by months of geopolitical tension.
Rising fuel costs have become another stress point for Hawaii travel. The University of Hawaiʻi Economic Research Organization warned in its May forecast that jet-fuel volatility would “continue to pressure long haul travel” through year’s end.
Fuel costs have roughly doubled since the Strait of Hormuz first closed, UHERO said, hitting about $4.90 a gallon in early April and driving fuel’s share of airline operating expenses to nearly 45%, up from the typical 25% to 30%. UHERO estimates that spike adds $120–$145 to a round-trip economy fare from the U.S. West Coast and $200 or more from the East Coast. Major carriers including United Airlines and Delta Air Lines already have announced schedule cuts, and UHERO warned that the combination of higher fares and reduced capacity poses a direct threat to Hawaii arrivals.
Visitor arrivals remain up 2.9% year to date through May, but Hawai‘i Tourism Authority interim President and CEO Caroline Anderson said the agency is watching fuel prices closely to gauge the impact of airfare volatility across major markets. She said U.S. travelers — 3.3 million through May — continue to anchor the state’s tourism base. Still, average length of stay has fallen across all markets, a sign that inflation, higher fares and currency pressures are tightening visitor behavior.
Japan exposed
The Japan market remains the most exposed. Fuel surcharges first spiked in May, followed by another increase on July 1 that brought the charge to about $250 per round trip, landing just as the market was beginning to post modest year-over-year gains. The yen has weakened to around ¥162 — its lowest level in 40 years — amplifying the cost burden.
Eric Takahata of Hawai‘i Tourism Japan, one of the Hawai‘i Tourism Authority’s global marketing contractors, said summer travel should hold because tickets were purchased before the July 1 surcharge hike. But he warned that soaring prices could weaken fall and winter arrivals.
“We were projecting single-digit growth for 2026 … Realistically, if we could be even with 2025, that would be fair,” he said, noting that flat performance would leave the market only about 50% recovered to pre- COVID-19 levels. “Every time we try to turn the corner, we run into a buzz saw.”
JTB Hawaii President and CEO Ted Kubo said rising surcharges already have slowed future bookings, even as surveys show Hawaii remains Japan’s top desired destination.
Kubo said families and price-sensitive customers have been most affected by the rising oil prices. He said JTB is responding with marketing promotions “highlighting the enjoyment and value of vacationing in the Hawaiian Islands.”
“We are hopeful these promotions will help counter the hesitancy of travelers from booking trips due to rising oil prices,” Kubo said.
Danny Ojiri, Outrigger Hospitality Group’s vice president of market development, said the situation involving Iran has had an immediate impact because the Persian Gulf remains Japan’s primary source of imported oil.
Ojiri said that Japan Airlines (JAL) Vice President and Hawaii Regional Manager Yasuharu Omura told him that most summer bookings were made before the May surcharge increase, and current load factors are tracking near last year’s levels. Ojiri added that Omura said that September bookings are running ahead of 2025, supported by Japan’s five-day Silver Week holiday.
Ojiri said that All Nippon Airways (ANA) America President and CEO Takashi Umetsu told him that the carrier’s twice-daily Haneda and Narita flights are performing well, with July and August load factors around 85%, comparable to last summer.
But Ojiri and other industry leaders said the real test will come in the fourth quarter and early 2027, when higher surcharges, a weaker yen and geopolitical instability could converge.
Landscape shifting
Ojiri said the impact is even more pronounced across Outrigger’s Asia Pacific portfolio, where many source markets also rely heavily on Gulf oil. Airfare increases have been widespread, and depending on origin, travelers heading to Maldives, Fiji, Mauritius or Phuket, Thailand, have postponed vacations, shortened stays, or booked further in advance. European travelers have been particularly affected, with limited access through Gulf hub airports prompting some to choose destinations closer to home.
Takahata said Japanese travelers have a great deal of choice and the competitive landscape is shifting. He said that Hawaii is increasingly competing with California for Japan’s outbound travel business. Travel agencies are running busloads of visitors to Los Angeles Dodgers games, driven by Shohei Ohtani’s star power and other marquee Japanese players. JAL is adding flights to Los Angeles, and ANA’s partnership with the Dodgers has boosted California’s visibility.
Kubo said JTB is seeing the same surge in demand for California, driven by the Dodgers’ popularity in Japan. “The JTB Corporation signed strategic partnership agreements with Major League Baseball in January 2024 and with the Los Angeles Dodgers in March 2025,” he said, adding that the team’s success has put JTB “in an advantageous position” to build promotions and packages tied to game tickets. “A lot of our customers want to see the Dodgers play in person.”
The naming of Dodger Stadium’s playing surface as UNIQLO Field and ANA’s partnership with the Dodgers are a clear sign of how strongly Japanese interest in California has surged.
KV & Associates principal Keith Vieira said the yen’s weakness — roughly 30% to 40% below pre-COVID levels — remains one of the biggest obstacles for Hawaii. “When it works against you, it definitely makes you look at alternative destinations,” he said.
Cost constraints
With mass market travel constrained by cost, Takahata said Hawai‘i Tourism Japan is pivoting toward affluent visitors who are less sensitive to surcharges and currency swings. Its new “Hawai‘i from Age 65” campaign targets Japan’s vast senior market, which holds more than $4 trillion in savings.
The pressure to reach more affluent and more price-resistant travelers extends beyond Japan. UHERO said Canada’s visitor market continues to slide, with arrivals down nearly 7% in the first quarter amid trade tensions and worsening sentiment toward U.S. travel. Combined weakness in Japan and Canada represents a structural vulnerability for Hawaii, especially as domestic travelers face softer spending power and higher airfares.
Jerry Gibson, president of the Hawai‘i Hotel Alliance, said the industry is bracing for potential pullbacks if the conflict drags on or worsens, noting that jet‑fuel prices jumped sharply in April and May and “pricing went up accordingly.”
He said the outlook hinges on “what will happen over the next six months and where Iran goes,” adding that oil coming out of the Gulf will affect “really every single market that we have — including our domestic market.”
Anderson said HTA is also monitoring Oceania and Korea, where airfare volatility, airline shifts and geopolitical uncertainty could weaken demand. She said HTA is stretching limited resources through co-op campaigns and value-focused messaging, but the agency’s current $63 million budget — split between marketing and destination management — limits its ability to respond quickly to shocks such as fuel spikes, storms or wildfires.
Vieira said the HTA’s budget is far too limited given the scale of Hawaii’s visitor economy, noting that the state collects about $1.3 billion a year in transient accommodations (TAT) taxes. He said marketing‑driven visitor growth consistently delivers strong returns on investment, and that the agency’s current budget leaves Hawaii hamstrung at a time when fuel volatility and global competition demand more aggressive promotion.
Heading into the next legislative session, Anderson said HTA will seek dedicated TAT funding to restore a budget “closer to where we were pre-COVID,” around $90 million, allowing more nimble crisis response and long-term planning.
“Not knowing where your funding is coming from … has made it so difficult for us,” she said.
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Reuters contributed to this report.
