Hawaii’s tourism rebound looks brighter—UHERO warns the ‘lost generation’ risk is still growing
Hawaii is getting a near-term lift from high-spending visitors even as a deeper economic warning hardens into place: a widening gap in what residents can afford compared with the mainland U. S. UHERO argues the core problem is not simply high prices, but lagging productivity and wage growth that have kept real per capita performance on a lower track. The result is a state that can post encouraging tourism headlines while still struggling to deliver the kind of broad-based economic momentum that sustains middle-class stability over time.
Why this matters now for Hawaii: tourism signals vs. long-run stagnation
A recent UHERO analysis frames today’s debate in an uncomfortable way: the state’s economic stagnation that began in the early 1990s has never truly ended for residents. While standard measures adjusting for national inflation can make Hawaii appear to have mostly kept pace, UHERO’s approach changes the picture by accounting for local prices. Under that lens, the “lost decade” narrative is not a closed chapter—it becomes a continuing trajectory that helps explain pressures residents feel in housing and standard-of-living sustainability.
At the same time, UHERO’s latest economic forecast describes a tourism landscape that looks “a bit brighter” because high-income tourists from the mainland continue to spend more, with visitor spending on Maui providing an especially strong boost. That combination—near-term gains alongside a long-term underperformance story—creates the real policy dilemma: whether today’s improvements are the start of a more durable expansion, or a thin recovery layer over structural weakness.
Inside UHERO’s warning: a ‘lost decade’ turning into a ‘lost generation’
UHERO’s March 5 analysis, “The Lost Decade Never Ended in Hawaiʻi, ” authored by Steven Bond-Smith and Erich Schwartz, concludes that the gap between residents’ affordability and the mainland widens every year. The authors attribute the widening primarily to weak productivity and wage growth—rather than prices alone—arguing that focusing only on the cost of living would offer temporary relief without addressing the underlying structural issues.
Method matters in the report’s argument. UHERO notes that when local prices are incorporated, the 1990s look somewhat different than they do under national inflation adjustments: price growth in Hawaii was slower than the U. S. overall during part of that period, making the decade “not quite as bad as it first appears. ” But the recovery is also muted once prices returned to their long-run relative level. This helps explain why the analysis finds an average real per capita growth rate since 2005 of 0. 7% per year—anemic enough to resemble the slow-growth pattern of the prior period rather than a post-stagnation rebound.
Crucially, UHERO ties the widening gap to the state’s economic structure: tourism plateaued, and other sectors have not emerged to offset the slowdown. The report’s phrase “lost generation” is not a rhetorical flourish so much as a conclusion drawn from decades of underperformance that reframes today’s immediate concerns—outmigration, housing stress, and the difficulty for middle-class families to sustain a standard of living.
High-spending visitors are lifting totals—but concentration brings new risks
UHERO’s forecast outlines a distinct pattern in the tourism economy: overall visitor arrivals were off 1. 3% last year, and visitor spending fell on Kauai and Hawaii island. Yet daily visitor spending rose on Oahu by 2. 5%, while Maui saw a 9% increase. UHERO’s Steven Bond-Smith said the increase in real spending statewide of roughly 3% was dominated by Maui and by higher-spending visitors.
That detail reshapes how to read the tourism story. The issue is not simply whether tourism is “up” or “down, ” but what kind of tourism is doing the work and how stable that mix might be. Bond-Smith described the spending rise as driven by “high-end visitors” staying in luxury and upscale properties, adding that UHERO does not expect the increase in spending per person per day to continue long term.
UHERO Executive Director Carl Bonham sharpened the risk: relying on the top 20% of income earners to drive tourism can be fragile, particularly if the conditions supporting that spending weaken. UHERO’s forecast describes “an unusually large share of spending by the highest income folks, supported by stock market gains, ” which has buoyed spending even as weak labor markets, moderate income growth, and high prices have held back lower-income households.
The forecast also highlights that arrivals from Japan remain about half of pre-COVID-19 levels and Canadian tourism is down 10%, underscoring that Hawaii’s visitor mix remains uneven. These are not just tourism metrics; they are signals about whether the state is becoming more dependent on a narrower band of affluent travelers—an economic concentration that can complicate any attempt to translate tourism receipts into broader household prosperity.
Policy pressures: trade uncertainty and the limits of a tourism-led rebound
Beyond visitor dynamics, UHERO flags economic uncertainty tied to tariffs after the U. S. Supreme Court overturned President Donald Trump’s global tariffs last week, followed by questions about what policy might come next. In UHERO’s forecast narrative, late 2024 and early 2025 saw imports surge as businesses sought to avoid looming levies, then fall later in 2025 as tariff effects began to “bite. ” UHERO adds that at least 90% of tariff costs are being borne by the U. S., either by importers or consumers, with uncertainty about whether additional price impacts—such as those on metals—have fully flowed through.
For Hawaii, this matters not because tariffs are a local story, but because they amplify the volatility facing sectors that UHERO identifies as drivers: construction, health care, and visitor accommodations and food service. If cost pressures rise or consumer behavior shifts, a visitor economy increasingly reliant on high-end spending may not provide enough ballast for residents already facing a long-term affordability gap driven by weak wage and productivity growth.
What to watch next
UHERO’s structural argument leaves policymakers and households with a difficult question: can Hawaii convert a Maui-led tourism spending resurgence into durable, broad-based gains, or will the state’s plateaued tourism model and limited diversification keep widening the gap the report describes? With UHERO warning that treating cost-of-living alone is only temporary relief, the bigger test is whether economic strategy can move beyond short-cycle visitor strength and address the productivity and wage-growth deficits that define the “lost generation” risk.
