Economists predict lasting damage to tourism from recent storms

HONOLULU (HawaiiNewsNow) – The University of Hawaii Economic Research Organization says a series of storms is adding to economic pressures that were already weakening the state’s economy.

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UHERO says higher energy costs, inflation, tariffs and rising interest rates were already hitting Hawaii hard before the storms. The organization says the storms are likely to discourage tourism further.

“And when we put all that together, we end up with a really a very weak, weak year for tourism,” said Carl Bonham, UHERO executive director.

Tourist spending losses

The loss in tourist spending by visitors who fled Kauai is one impact of the storms. During a presentation of a forecast titled “No Respite From Storms…or Oil Prices,” they also said more tourists will choose other destinations.

“There’s a decent chance that this is going to make the shoulder season even weaker than it would have been and even weaker than if you just add up the individual impacts, right,” Bonham said. “People will start having second thoughts about traveling.”

Inflation and energy costs

The Iran war oil shock has already pushed up Hawaii’s inflation rate, according to the report.

“So the cost of energy flows through to the cost of all of the other goods we buy, and this and that contributes a significant share of that 5.6% inflation rate,” said Steven Bond-Smith, UHERO economist.

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Interest rates, tariffs and insurance costs are also raising the cost of shelter, which could be affected by the storms as well.

“It’s hard to imagine that there won’t be continued upward pressure on insurance costs after a summer like this,” Bonham said.

Affordability gap widens

According to UHERO predictions for 2026, inflation will be about 4.8%, incomes will rise only 1.1% and available jobs will be down 0.2%.

Meanwhile, housing costs will continue to rise.

“So, less income growth and higher interest rates that makes affordability worse,” Bonham said.

“And now we’re facing yet another storm, so I feel like this forecast is almost out of date already,” Bonham said.

Economists predict some improvement if energy costs and interest rates drop, though when that will happen is unclear.

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