Hawaii welcomes a staggering 10 million visitors annually, yet the islands seem to have little to show for this influx of tourists. It’s a paradox that leaves both locals and visitors scratching their heads: where is all the money going? For years, travelers have watched iconic spots like Waikiki Beach deteriorate—narrowing, hardening, and losing their luster. Finally, the state has allocated $7 million specifically for restoration efforts at the Halekulani sector, marking the first time tourism revenue has been formally directed toward rebuilding Hawaii’s most famous shoreline. But is this enough to address the deeper issues at play?
Visitors to Hawaii pay some of the highest hotel rates and taxes in the nation, rent cars at prices that were once unimaginable, and dine on meals that cost twice what they did just a few years ago. Billions of dollars pour into the islands each year, almost entirely tied to tourism. Yet, the reality on the ground tells a different story—one of neglect and decline. Potholed roads remain unfixed, public restrooms in beach parks resemble those in developing countries, and infrastructure across the state is visibly worn down. Even high-end properties seem to struggle with service quality, leaving both visitors and residents wondering: Where is all this money going?
And this is the part most people miss: Hawaii’s economy, despite its massive tourism numbers, has been stagnant for decades. A groundbreaking report from the University of Hawaii Economic Research Organization (UHERO) reveals that, after adjusting for inflation, tourism spending peaked decades ago and never truly recovered. While visitor counts continued to rise, the real economic output tied to those visits remained flat. More people came, but the economy didn’t grow—it simply stayed stuck in place.
The report, titled “Beyond the Price of Paradise: Is Hawaii Being Left Behind?”, challenges long-held assumptions about the state’s visitor economy. Hawaii didn’t fail to attract tourists—it succeeded wildly. What it failed to do was translate that success into sustained economic growth. But here’s where it gets controversial: When adjusted for the state’s high cost of living, Hawaii’s economic performance resembles that of the Rust Belt, Appalachia, and rural parts of the South—not the premium economy it’s often assumed to be.
Workers in Hawaii earn 20% to 30% less than their mainland counterparts in similar jobs, forcing many to take on second or third jobs just to make ends meet. Since the early 1990s, the state’s per capita economic growth has averaged less than half the national rate. When purchasing power is adjusted for local prices, cities like Honolulu and Maui are economically comparable to places like Morgantown, West Virginia, and Binghamton, New York. As one of the report’s authors, Carl Bonham, puts it, “It’s not that our costs are going up faster—it’s that our income isn’t going up as fast.”
But why is this happening? UHERO points to a phenomenon economists call Dutch disease, where a single dominant industry—in this case, tourism—crowds out other sectors, absorbing labor, capital, and political attention. Hawaii’s attempts to diversify its economy have either stalled, faced resistance, or failed to reach a viable scale. The result? A state with one major economic engine and no meaningful backup.
This vulnerability becomes painfully clear during crises. During the Great Recession and the COVID-19 pandemic, Hawaii’s economy suffered more severely and recovered more slowly than most other U.S. states. Each downturn exposed the same weakness: over-reliance on tourism without a safety net. And each recovery returned the state to the same plateau, with visitor numbers rebounding but the underlying structure unchanged.
On the ground, the phrase “nothing to show for it” is all too real. Beach park restrooms at popular sites remain closed or barely functional, roads degrade faster than they’re repaired, and public services operate short-staffed and out of sync with the volume of visitors. Hotels charge record rates but struggle to staff housekeeping and food service, leaving guests to notice the gaps. Workers commute longer distances, juggle multiple jobs, and accept housing conditions that were once unthinkable. It’s a system running at full capacity yet falling further behind.
So, what’s the solution? The UHERO report calls for long-term economic development and diversification, but whether that leads to meaningful change remains to be seen. The data is clear: Hawaii didn’t suddenly become unaffordable—its economy has been stagnant for over three decades, despite the influx of visitors and money. The gap between what Hawaii could be and what it is today is growing, and it’s time to ask: What should come next?
What do you notice when you visit Hawaii that feels out of sync with the volume of people and money flowing through the islands? Do you think diversification is the answer, or is there another path forward? Share your thoughts in the comments—let’s start a conversation about the future of Hawaii’s economy.
