The wild exuberance and pent-up demand for tourism that turned 2022 into the peak year for U.S. arrivals to the state has softened.

May was the second month in a row since December that there has been year-over-year pullback from Hawaii’s core U.S. market. It was also the second month in a row this year that there was a drop in statewide hotel occupancy, which at 72.8% was at the lowest level of the year.

That’s a concern for hoteliers and other members of Hawaii’s visitor industry that set performance-based goals that strive for year-over-year gains. But for others the end of 2022’s domestic arrivals bubble represents more of a return to pre-pandemic 2019, which could be OK if there were enough international and group visitors to fill the puka.

“Though visitor arrivals from the U.S. mainland have shown signs of slowing down in the last two months, the May 2023 U.S. visitor arrivals were still 10.7 % higher than the same month in 2019,” said James Tokioka, Department of Business, Economic Development and Tourism director, in a statement Thursday. “May 2023 marked the 25th consecutive month where visitor arrivals from the U.S. mainland exceeded 2019 monthly levels for those respective months.”

The major question now is whether the softness that began creeping into Hawaii’s domestic market this spring will continue to cause domestic arrivals to fall short of expectations and fail to offset ongoing sluggishness in group business and international arrivals, especially from Japan.

“All of us went into this year expecting that worst-case scenario that you’d see a better pickup of Japanese visitors, and that hasn’t happened,” said Keith Vieira, principal of KV & Associates, Hospitality Consulting. “You do see slightly more, but it’s obviously not the 1.8 million higher-spending travelers that we need.”

Vieira added, “I don’t think anybody feels that (Japanese visitors’) love and affection for Hawaii and the aloha spirit is waning, but they haven’t come back yet, so that’s a concern. A lot of your strategies are based on having a certain percentage of foreign travelers. If you don’t have that and we don’t really have a group market, you’ve got nothing that can help with compression, nothing that can really give you a base, and you are really relying on pickup out of the U.S. market, which until April was pretty good. But we definitely have seen softness.”

DBEDT reported Thursday that visitor arrivals from Hawaii’s top U.S. West market fell in May to 431,983 visitors, a 4.8% drop from May 2022 and an 11.4% increase from May 2019. Hawaii’s second-largest visitor source market, the U.S. East, was down 1.9% from May 2022 to 217,981 arrivals but up 9.3% from May 2019.

U.S. West visitor spending of $815.1 million in May rose 4.1% from May 2022 but was 44.5% higher than in May 2019. U.S. East visitor spending increased 1.8% from May 2022 and 42.7% from May 2019.

The moderating in arrivals comes as Hawaii’s visitor industry continues to struggle to regain visitors from Japan. Recovery of visitor arrivals from Japan, which was Hawaii’s top international market and third-top market overall before the pandemic, remained sluggish compared with 2019.

Year-over-year growth in Japanese arrivals rose 376.3% to 34,141 but was still down 69.8% from the 113,226 visitors who came to Hawaii in May 2019.

To be sure, the University of Hawaii Economic Research Organization released a second-quarter forecast in May that said, “The recovery of Japanese tourism once again falls short of our expectations, even as there are signs that it will continue to gradually improve. The Japanese yen and Korean won rallied a bit in the November to January period, but have since given up some of those gains, which will continue to weigh on their purchasing power here.”

UHERO added, “The Canadian and Australian dollars are comparatively strong, buoying arrivals from these markets. At the same time, the global outlook has weakened somewhat. The anticipated U.S. recession and sub-par growth abroad will bring total visitor numbers down just a bit over the next two years, and the balance of risk continues to be to the downside.”

It’s not that U.S. travelers aren’t traveling. Honolulu-based Omnitrak, a strategic research firm, reported Tuesday that its monthly travel market penetration index moved upward to 111.5 in May, well above the 92.2 score observed in April.

“The pickup in the number of U.S. households traveling in May sets the stage for a strong summer travel season,” said Chris Kam, Omnitrak president and chief operating officer. “While high-level indicators of summer travel demand appear strong, it is important for travel suppliers to keep an eye on changes in consumer travel behaviors beneath the surface in the face of rising travel prices.”

Price consciousness also could be a factor for Hawaii, where travel costs, like the cost of living, are typically perceived as high.

Deloitte’s Leisure Travel Study indicated that while more U.S. travelers are traveling again, their trip spending and the duration of their summer trips are expected to be down compared with 2022. Deloitte reported about half of the Americans surveyed planned to travel, and the other half said “they will stay home because they can’t afford to travel.”

Vieira said Hawaii also is losing some travelers to competitive destinations that were not fully open in 2022 or are closer and better marketed.

“We are hearing that people are traveling to other destinations, not because they don’t want to come to Hawaii, but because they have pent-up demand for places like Europe or for Southeast Asia, New Zealand,” Vieira said. “Other destinations also are marketing much more aggressively and have higher marketing budgets.”

Despite the emerging challenges, some 801,569 visitors came to the Hawaiian Islands in May, an increase of 3.2% from arrivals in May 2022, according to preliminary visitor statistics released Thursday by DBEDT. When compared with the pre-COVID-19 May 2019 total, May’s arrivals were 5.4% lower.

The visitors who came to Hawaii in May spent more on a nominal basis (not adjusted for inflation) than visitors who came in 2022 and in 2019. Visitor spending in May reached $1.69 billion, a nominal increase of 7.9% from 2022 and 19.4% from May 2019.

During the first five months of 2023, some 4,075,437 visitors arrived in the Hawaiian Islands, up 13.6% from the first five months of 2022 but down 3.5% from the first five months of 2019. Year-to-date through May, nominal visitor spending hit $8.78 billion, up 18.8% from the first five months of 2022 and a gain of 21.5% from the same period in 2019.

Overall, Hawaii visitor arrivals in May were 94.6% recovered to May 2022, down slightly from the 96.5% recovery rate during the first five months of the year.

Full recovery to the pre- pandemic level isn’t expected until 2025, according to DBEDT’s second-quarter 2023 Statistical and Economic Report, released earlier this month.

DBEDT projected that visitor arrivals will reach 9.9 million in 2023 and increase to over 10 million in 2024, and by 2025 be fully recovered to the pre- pandemic level.

Visitor spending was projected to reach $21.1 billion in 2023 and $23.6 billion in 2026.