How Much of Hawaii’s Economy Is Tourism?

Hawaii, a chain of islands situated in the Pacific Ocean, possesses a distinctive economic landscape where tourism plays a central role. The state’s natural beauty, inviting climate, and rich cultural heritage consistently draw millions of visitors annually. This influx of travelers has positioned the visitor industry as a primary economic driver for the islands. The significant financial contributions and employment opportunities generated by tourism underscore its importance to Hawaii’s overall prosperity.

Direct Economic Contribution of Tourism

The financial impact of tourism on Hawaii’s economy is substantial, as visitor spending fuels various sectors directly. In 2023, total visitor expenditures in the Hawaiian Islands reached approximately $20.87 billion. This spending encompasses a wide range of activities, including accommodations, food and beverage purchases, retail goods, ground transportation, and diverse leisure activities. These direct transactions inject significant capital into businesses.

Tourism also contributes directly to Hawaii’s Gross State Product (GSP). In 2023, the direct and closely related indirect impacts of tourism accounted for 17.1% of Hawaii’s GSP. The industry also generates considerable tax revenues for the state, which are essential for public services and infrastructure.

The Transient Accommodations Tax (TAT), applied to gross rental proceeds from accommodations rented for less than 180 consecutive days, is a significant source of revenue. The state TAT rate is 10.25%, with individual counties authorized to levy additional surcharges, potentially bringing the combined rate higher. For example, through June 2023 of the fiscal year, Hawaii collected $865.3 million in TAT. Additionally, the General Excise Tax (GET), a business privilege tax on gross income, also captures revenue from visitor spending, with a general state rate of 4% on most business activities.

Tourism’s Role in Employment

Tourism stands as a major employer across the Hawaiian Islands, providing a broad spectrum of job opportunities for residents. In 2023, the visitor industry, including its direct, indirect, and induced effects, supported an estimated 234,757 jobs statewide. This figure represents a significant portion of Hawaii’s total workforce, which averaged 633,745 workers in 2023. The sheer volume of jobs highlights the industry’s role in sustaining household incomes throughout the state.

These tourism-dependent jobs span various sectors, including hospitality, transportation, retail, and food services. Common positions include hotel staff, tour operators, restaurant employees, retail associates, and ground transportation providers. The total labor income generated by tourism’s direct, indirect, and induced impacts amounted to $14.3 billion in 2023, supporting approximately 183,166 wage and salary jobs. While average earnings in tourism-intensive industries can vary, the sector remains a consistent source of employment.

The Broader Economic Footprint

The economic influence of tourism extends well beyond direct visitor spending, creating wider ripple effects throughout Hawaii’s economy. This broader footprint includes both indirect and induced impacts, illustrating how money spent by visitors circulates and generates additional economic activity. Indirect impacts occur when tourism-related businesses purchase goods and services from other local industries, forming a supply chain. For example, hotels buy produce from local farms, and tour companies contract with local maintenance services.

Induced impacts arise as the wages and salaries earned by employees in both the direct and indirect tourism sectors are then spent within the local economy. A hotel employee, for instance, uses their income to buy groceries, pay rent, or access other local services, thereby stimulating further economic activity. This process is often referred to as the “multiplier effect,” where each dollar initially spent by a visitor generates more than a dollar’s worth of economic activity as it moves through the economy. The total economic impact, encompassing direct, indirect, and induced effects, contributed 23.5% to Hawaii’s GSP in 2023.

Numerous other industries benefit from these extended effects, including agriculture, construction, utilities, financial services, and real estate. The demand created by the visitor industry stimulates growth and investment across these diverse sectors. This interconnectedness means that the health of the tourism sector directly influences the vitality of many other businesses and industries throughout the islands.

Comparing Tourism to Other Key Sectors

While tourism is a dominant force, Hawaii’s economy is diversified by other significant sectors that also contribute to its overall prosperity. Federal defense spending represents another substantial economic component. In Fiscal Year 2023, federal defense spending in Hawaii amounted to $10.0 billion, accounting for 9.2% of the state’s GSP. This includes direct funding for personnel salaries, defense contracts, and the construction of military facilities, providing a stable economic base.

Other important sectors contributing to Hawaii’s economic landscape include healthcare, education, and agriculture. These industries provide essential services and goods, alongside employment opportunities for residents. Although tourism’s contribution to GSP and employment is considerable, these other sectors collectively form a more balanced economic structure. The presence of diverse industries helps to mitigate some of the economic vulnerabilities associated with a heavy reliance on any single sector.