Hawaii’s top source of international visitors, Japan, is not projected to recover to pre-pandemic levels this decade.

That was the opinion of Carl Bonham, executive director of the University of Hawaii Research Organization, who testified Jan. 6 before the House Committee on Finance during an informational briefing. Bonham’s co-presenter, state Chief Economist Eugene Tian, has anticipated that Japan arrivals will close in on the pre-­pandemic level in 2027.

Neither economist is expecting a quick rebound for tourism from Japan, which visitor industry leaders say has become increasingly important to diversifying tourism and improving its overall outlook, especially as wildfires continue to devastate Los Angeles. As of Sunday at least 14 people had died from the blaze, which also devastated thousands of homes and forced 100,000 people to evacuate. Another 16 people were believed missing.

Los Angeles was the source market for 791,961 of the visitors who came to Hawaii during the first 11 months of 2024, making it the top source city for total visitor arrivals, according to state Department of Business, Economic Development and Tourism data. California itself during the first 11 months of 2024 represented more than 2.6 million of the 8.7 million visitors who came to Hawaii during that period.

Mufi Hannemann, Hawai‘i Tourism Authority board chair and Hawai‘i Lodging & Tourism Association president and CEO, said, “The fires in our top visitor source market point to the need for diversification, and it’s very important that we continue to focus on recovering tourism from Japan.”

Visitor arrivals from Japan to Hawaii during the first 11 months of 2024 reached 649,662, a 25.2% increase over the same period in 2023. Eric Takahata, managing director of HTA marketing arm Hawai‘i Tourism Japan, said Hawaii is expected to finish 2024 with about 700,000 arrivals from Japan — not quite half of the more than 1.5 million arrivals from Japan who came to Hawaii in 2019. Takahata said Japanese arrivals to Hawaii should grow this year to about 1 million, and “hopefully by 2027 we’ll be back to the pre-pandemic level.”

The return of the Japan market to Hawaii has been much anticipated, and up until recently over-promised. As far back as 2022, a delegation from the Japan Association of Travel Agents visited Hawaii and predicted that in 2023 Hawaii would see the Japan market restored to its 2019 level. The continued shortfall, mostly due to the negative impact of U.S. inflation and a strong dollar on the purchasing power of Japanese visitors, has been a huge cause for concern as plenty of tourism infrastructure and businesses have been built around catering to more robust visitor arrivals from Japan. Still, even the limited recovery has helped bolster Hawaii’s greater tourism economy by offsetting downturns in other markets.

Bonham said, “A lot of the visitor recovery that we saw in 2024 — one of the reasons that the overall numbers were not worse than they were is that we did see continued recovery in the Japanese numbers, although it has stalled throughout the year.”

He added, “Japan is still hovering around 45% of pre-pandemic levels, so in our forecast we don’t have Japanese visitors recovering to pre-pandemic levels this decade. I don’t see why we should expect that.

“If you look at past episodes of severe disruption in Japanese visitor travel — whether it was the first Gulf War or SARS or the Great Recession or the Asian financial crisis, take your pick … there are occasions where you get sort of V-shaped recoveries. Obviously, this is not one of them, and in many cases you never recover.”

The lengthy struggle to regain numbers from Japan has caused some lawmakers to question the level of marketing resources for Japan that are in the Hawai‘i Tourism Authority’s budget. Rep. Adrian Tam (D, Waikiki), the new chair of the House Committee on Tourism, asked Friday during another House Committee on Finance briefing, “In your budget, you are asking for an increase in the amount of marketing towards Japan. Given the value of the yen being very low right now in their economy, how do you justify that increase in marketing spending?”

Interim HTA President and CEO Daniel Naho‘opi‘i replied that it was important to get ahead of the curve, and said, “For 2025 and 2026 and into 2027, the economists did mention that they actually see the Japan economy improving. They showed positive numbers in their GDP increases and expectations. Also, we had a good talk with Dr. Tian the other day, and he mentioned that he thinks the exchange rate will come down to almost 137 yen to the dollar, which is actually past that threshold that we have always been looking for below 140. We know at that point the general Japanese traveler will understand that that’s good value to come here.”

Tian shared with lawmakers during the Jan. 6 House Finance Committee hearing that the November economic projections by the top 50 economic forecasting organizations published in Blue Chip Economic Indicators, which showed economic growth in Canada, Japan and Europe, are expected to be better in 2025 than 2024.

Naho‘opi‘i said reduced spending power has left general travelers from Japan still lagging behind. However, he said HTA contractor Hawai‘i Tourism Japan has experienced success in niche markets such as educational and group travel.

“We need increased funding from government to be able to stimulate the Japan market as much as we can,” Hannemann said. “It’s a niche market, so the overall traveler in Japan is going to be challenged, but there are other opportunities such as the high-end traveler that is going elsewhere that has disposable income to travel, those that are seeking sports or adventure or weddings. We aren’t going to get the numbers that we got pre-pandemic level, but it’s still a good market for us and we don’t have anything close to replace that as our No. 1 international market.”

Toby Tamaye, president of AT Marketing, said the potential drop in tourism due to the California wildfires has increased the urgency for Hawaii’s visitor industry to expand efforts to diversify so that it is not so reliant on U.S. travelers.

“It’s not the kind of dire news that we want to tell people, but as a marketing person for so long, we have to really pivot,” he said. “We need to look to Japan, Korea, Canada, the U.S. East. The neighbor islands, which are more reliant on U.S. travelers, should definitely look to locals.”

Tamaye said Japan arrivals to Hawaii still haven’t fully recovered, but if Hawaii businesses find a way to add value to their vacations, more will come, and those who do will increase their spending.

“The best way to tap into the Japan market more is to go after inflation and the exchange rate through promotions like happy hour or deeply discounted lunches. They don’t spend as much time at the beach or at activities, so they eat during the day,” he said. “Offer social media promotions. The goal should be to offset the drop in U.S. mainland visitors through discounted programs that attract Japanese visitors, who will help us ride out the storm.”

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Reuters contributed to this report.