State Q2 report: Hawaiʻi’s visitor industry recovery accelerating, construction busy, employment increased

Despite slower growth projections at the national level, the economic growth projections for Hawaiʻi remain unchanged at 3.2% for 2022.

The state Department of Business, Economic Development and Tourism expects Hawaiʻi’s economic growth in 2022 and 2023 to be higher than the nation, according to a second quarter report released today.

Meanwhile, the US economic growth in 2022 was revised downward from 3.7% in the February projection to 2.6% in the May projection, according to the economic projections by the top 50 economic forecasting organizations published in Blue Chip Economic Indicators, and detailed by the state.

The DBEDT says that as tourism recovery continues, employment has increased and the construction industry is still busy, however, inflation remains high and labor shortages have put some limit on the growth.

“Hawai‘i’s economic recovery continues on a healthy path. In terms of real gross domestic product, our non-tourism sector has fully recovered while the tourism sector is showing strong recovery from the COVID-19 pandemic. Domestic travel remains strong although competition from other destinations will impact visitor arrival numbers. Japan visitors will slowly return to the Hawaiian Islands with the reduction of travel restrictions imposed by the Japanese government,” said department Director Mike McCartney.

Maui visitors by air in April surpasses 2019 levels

Maui County exceeded monthly visitor arrivals in April, for the first time since the pandemic impacted travel to Hawaiʻi. 

Lānaʻi, Hawaiʻi Island and Kauaʻi also showed robust visitor activity in April.

Percentage recovery of air visitors by island by month: 2022
(compared to same month of 2019)

Over the first four months of 2022, Hawai‘i welcomed 2.8 million visitors, representing a 83.3% recovery from the same period in 2019. During the first four months of 2022, US visitors were 13.8% higher than the same period in 2019 while international visitors were 71.9% lower than those came during the same period in 2019. 

Statewide hotel occupancy rate was at 72% during the first four months of 2022, eight percentage points lower than the same period in 2019 (at 80%) while hotel room rates increased from $286.1 per room per night to $364.3 (+27.3%) during the two comparison periods.

“As currently scheduled, total air seats during May-July 2022 period will recover 95.8% from the same period in 2019,” according to a DBEDT release.

The department notes that:

• Seats from the US mainland will be 12.5% higher.
• Seats from international airports will be 54.8% short as compared with the same period in 2019.
• Flights from Japan will not increase significantly until July of this year.

Improved Labor Market Conditions

Hawai‘i’s labor market conditions continued to improve throughout the first four months of 2022 with unemployment rate at 4.2% seasonally adjusted and 3.7% not seasonally adjusted.

Maui Island had a 4.2% non-seasonally adjusted rate in April. Molokaʻi’s non-seasonally adjusted unemployment rate was 17.4% and Lānaʻi was 3.2% last month. Combined, Maui County’s non-seasonally adjusted rate was 4.3% in April.

In April 2022, the total seasonally adjusted number of people employed either as payroll employees or self-employed was the highest since March 2020 at 645,700 and represents a 97% recovery compared to the pre-pandemic period of April 2019.

The DBEDT reports that non-agricultural payroll jobs grew 6.7% during the first four months of 2022 from the same period in 2021. As of April 2022, payroll jobs in most of the industries have recovered over 90% as compared with April 2019.  Industries with less than 90% recovery include manufacturing, wholesale trade, transportation, financial activities, leisure and hospitality, and other services.

Percentage recovery of payroll jobs by industry by month: 2022
(compared to same month of 2019)

Construction busy, Home sales up

Construction will remain busy as evidenced through a large increase in private building permits.

“Though value of total private building permits decreased 13.5% during the first four months of 2022, the large increase in private building permit value in 2021 (+43.9%) will keep the construction industry busy since construction work usually starts several months after obtaining permits,” according to the DBEDT.

Residential building permit values increased 15.3% while permit values for commercial & industrial, as well as for additions and alterations declined, according to the department.

The DBEDT reports that a total of 1,284 residential units were authorized statewide during the first four months of 2022, representing a 2.4% increased from the same period in 2021.

During the first quarter of 2022, there were 5,670 homes sold statewide, representing a 1.2% increase from the same quarter in 2021. The average sale price for single-family homes in 2021 was $1,056,548, a 3% increase from the first quarter of 2021, according to the DBEDT.

Of the homes sold in Hawaiʻi during first quarter of 2022, 4,255 units or 75% were sold to local buyers and 25% were sold to out-of-state buyers, according to the department. This is the same as the average percentages experienced between 2008 and 2021.

Uncertainty Rises with Increasing COVID-19 Cases

Hawai‘i’s new COVID-19 cases have experienced nine consecutive weeks of increases. “At the time this report is published, daily new COVID-19 cases will be well over 1,000 per day. Even without government enforced restrictions; businesses, residents, and visitors will be cautious on their activities and therefore, economic activities will be negatively impacted,” DBEDT anticipates.

The latest weekly count includes 772 cases on Maui, 1,102 on Hawaiʻi Island, 443 on Kauaʻi, 18 on Molokaʻi, 11 on Lānaʻi, and 103 out of state.  There are 6,475 new COVID-19 cases on Oʻahu.

The next weekly report is due out on Wednesday, June 1, 2022.

Additional Highlights:

Some highlights from today’s report includes the following:

• The visitor arrivals forecast is projected to be 9.1 million in 2022, an increase from the projection made in the first quarter. Visitor arrivals are projected to increase to 9.7 million in 2023, 10.1 million in 2024, and 10.3 million in 2025, which is at the 2019 level. Visitor spending is projected to be $17.8 billion in 2022, which is about the same as the 2019 level.
• The increase in visitor expenditures is mainly driven by the increase in average daily visitor spending, which increased 27.9% during the first four months of 2022 from the same period in 2021. Visitor spending is projected to grow at 7.1%, 4.9%, and 3%, respectively for 2023, 2024, and 2025.
• Non-agriculture payroll jobs are forecast to increase by 4.5% in 2022, then will increase by 3.2% in 2023, 2.6% in 2024, and 2.1% in 2025. For the current forecasting period (up to 2025), non-agriculture payroll jobs will recover to the pre-pandemic (2019) level by 2025.
• The state unemployment rate will continue to improve as economic recovery continues. The rate (not seasonally adjusted) is projected to be 3.7% in 2022, 3.5 percent in 2023, 3.1% in 2024. It will finally decrease to 2.9% in 2025.
• During the pandemic, personal income surged due to government transfers related to unemployment insurance payments and other CARES Act funds. As government support faded out in 2021, personal income is expected to decrease in 2022 by 0.9%, and then grow between 2.9% and 3.1% for the following years until 2025.
• As measured by the Honolulu Consumer Price Index for urban consumers, inflation is expected to increase in 2022 to 6%, still lower than the projected US consumer inflation rate at 7.1%. Hawai‘i consumer inflation will increase at rates between 2.8% and 2.1% in the following years until 2025. These inflation projections are higher than those projected last quarter (1Q 2022).