Lahaina Aftermath

We are still struggling to fully comprehend the destruction from the Lahaina fires. Our hearts go out to those affected. We've been asked what it means for the Hawaii visitor industry going forward. The answer remains unclear. What we do know is that many of the visitor accommodations in Lahaina were destroyed and many West Maui hotels are being used by residents for shelter. Hawaii's visitor industry leaders are making it clear that the rest of Maui is open for visitors and that the island needs visitors to return to keep the economic suffering from spreading. Governor Green declared that Kā‘anapali, Nāpili, Honokōwai, and Kapalua will fully reopen on Sunday, October 8. Hotel bookings on Kauai and Hawaii islands have spiked recently but we anticipate this will be a short-term phenomenon. Hawaii's Department of Business Economic Development and Tourism noted that visitor arrivals to Hawaii are expected to decrease significantly in August and remain flat in September, October, and November, before seeing growth again in December.

Details on the Japanese Visitor Market from Erik Kloninger

The Japanese visitor market has rebounded from COVID-19 much more slowly than the US market did. By May 2021 statewide US visitor arrivals had equaled their pre-pandemic level. With restrictions on international air travel persisting into 2022, the Japanese market is in the early stages of recovery. In June 2023 statewide Japanese visitor arrivals only equaled 37% of pre-pandemic arrivals. 

The chart below shows air seats from Japan and Japanese visitor arrivals, both expressed as a percentage of the same month pre pandemic. Air seats from Japan only reached 50% of pre-pandemic level in May 2023. Statewide arrivals began to grow more quickly during summer 2022 and have been increasing steadily since then. 

One factor that has been cited in explaining the slow return of the Japanese market is the exchange rate. In 2019 the average exchange rate was 109 yen to the dollar but now is at 147 to the dollar. This year the yen rate has averaged 135, making the dollar 24% more expensive for Japanese travelers. With hotel room rates also increasing during this period, the yen-denominated price of a Hawaii hotel room increased 65.9% compared with 2019. Because of more modest ADR growth on Oahu, the yen price of an Oahu hotel room increased 41% compared to pre-pandemic.

Investment Market Happenings

• Outrigger completed the purchase of the Kauai Beach Resort.
• A new debt package for Hilo's Grand Naniloa fell apart and it looks like the foreclosure process will continue.