While mainland tourists are returning faster than predicted, there is little hope of a quick rebound of visitors from Japan and South Korea, according to the latest economic forecast from the University of Hawaii Economic Research Organization.

“Bookings by US visitors have now bounced back to their pre-pandemic pace, although bookings by Asian visitors remain essentially zero,” UHERO wrote.

“At the beginning of March, Japan will reduce quarantine requirements for returning residents to three days, but due to the late Omicron wave in the country, we do not expect Japanese visitor numbers to pick up significantly before the second quarter,” according to UHERO. “South Korea is now seeing a sharp spike in Omicron numbers, which could lead to a re-tightening of quarantine requirements.”

Like a similarly optimistic economic forecast of Hawaii’s economy released last week by the state Department of Business, Economic Development and Tourism, UHERO said, “Our outlook for Hawaii is relatively upbeat. The anticipated retreat of COVID-19 will clear the way for a more complete visitor industry recovery.”

Both DBEDT and UHERO expect visitor arrivals to increase, but UHERO’s forecasts are lower.

It says Hawaii should see 8.746 million visitors this year, 9.455 million in 2023, and 9.615 in 2024.

But DBEDT has forecast 9 million visitor arrivals this year, 9.7 million in 2023, 10.1 million in 2024; and a record-tying 10.4 million 2025 that would match Hawaii’s numbers just before COVID-19 all but shuttered the economy in 2020.

UHERO expects a bump in international visitors later this year.

“After a weak first quarter, Japanese visitors will begin to return in the spring. … Visitors from other international markets will rise strongly in the second quarter, recovering to three- quarters of their pre- pandemic level by the fourth quarter of this year. … Oahu will continue to lag in overall numbers compared with the Neighbor Islands until international markets approach full recovery.”

Like DBEDT, UHERO warns that several factors could drag down Hawaii’s economy, including disappearing federal stimulus funds that will result in a 4.7% drop in personal income, a series of expected increases in the Federal Reserve interest rate, and Russia’s invasion of Ukraine that could trigger “higher energy costs and slower global growth, which would impact Hawaii tourism and local inflation.”

UHERO also reported:

>> “Housing affordability, which had improved over the past several years as mortgage rates fell and incomes rose, will deteriorate in coming years. The combination of high home prices and rising interest rates will drive a wedge between the median price of homes on the market and the mortgages local residents can afford.”

>> “In labor markets, the pandemic sparked a surge in new business formation, and the Omicron wave brought a spike in absences that has worsened labor shortages.”

>> “Industries linked to tourism, which have lagged the broader economy, stand to make the largest gains. As the economy approaches its sustainable long-run path, growth will slow over the next several years. At this stage of the pandemic, the road ahead looks somewhat more secure, even if there is an array of risks that could yet cause setbacks in Hawaii’s recovery.”

>> “Energy prices have surged in recent months, with oil pushing to its highest level since 2014. Russia’s invasion of Ukraine — and the potential scale of international sanctions — adds considerable uncertainty to the energy picture.”

>> There “has been substantial upward pressure on wages, especially in traditionally low-paying occupations.” Competing bills in the state House and Senate call for increasing Hawaii’s $10.10 an hour minimum wage, but with different plans on how to do it.

“Aggregate wages have risen 14% since the beginning of 2019 and 16-18% in the retail trade, and leisure and hospitality sectors,” UHERO reported. “The recent surge in inflation cuts into the purchasing power of these wage gains. Labor costs for firms are therefore on the rise.”

>> “While COVID-19 may still have surprises in store, monetary tightening may now be the biggest risk to ongoing recovery and growth. … A too-rapid shift to monetary contraction could derail an economy that is really just now moving back toward normal.”