The fee will also apply to cruise ships.
V
isitors to the Aloha State may see a slightly higher hotel bill next year. State legislators have voted to increase the state’s existing lodging tax from 10.25% to 11%, effective January 1.
The bill is the first of its kind in the nation because the additional 0.75% will be earmarked specifically to help the state combat the effects of climate change. Lawmakers say the tax increase will generate $85 million to $100 million per year, and those funds will be spent on dealing with coastal erosion, removing highly flammable non-native invasive grasses like those that helped spread the 2023 Maui wildfires, and equipping homes with hurricane clips to secure roofs during powerful storms.
Hawai‘i hotels, vacation rentals, timeshares, and other short-term accommodations are also subject to a 3% lodging tax collected by the state’s island counties, plus the statewide 4.712% excise tax charged on all goods and services. The cumulative tax rate for short-term accommodations totals out at 18.712% of the room rate—one of the highest lodging taxes in the nation.
Hawai‘i justifies the higher lodging taxes because of the infrastructure impact of tourism—the state’s largest industry—and a preference that visitors, not local residents, shoulder much of the tax burden for maintaining visitor infrastructure. The additional taxes designed to combat the effect of climate change will benefit both visitors and Hawai‘i residents by driving projects such as replacing sand washed away on beaches throughout the state.
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Only the 0.75% increase will be earmarked for climate change and natural resource protection. Revenue from the existing lodging tax will continue to be paid into the state’s general fund.
Governor Josh Green, who says he will sign the bill, says the tax increase is small enough that most visitors won’t notice, and that most visitors would likely appreciate the intent of the tax increase. “The more you cultivate good environmental policy, and the more you invest in perfecting our lived space, the more likely it is we’re going to have actually lifelong, committed travelers to Hawai‘i,” Green told the Associated Press.
Green had advocated for a flat $50 for visitors to the state, but lawmakers eventually scrapped those plans because they would violate the state Constitution’s guarantee of free travel. Lodging taxes on short-term accommodations apply to the vast majority of domestic visitors. State economic officials estimate around 10-13% of domestic visitors stay with friends or relatives. An even smaller share of international visitors stay with friends or relatives.
The fee will also apply to cruise ships, applying for the first time the 11% lodging tax on cruise ships operating in the islands, prorated for the number of days the ships spend in Hawai‘i ports. A small percentage of the state’s visitors arrive in the islands via cruise ship, either beginning or ending their journey in Hawai‘i or in transit to another destination. Another share of cruise ship passengers arrive via air, with their destination being NCL’s Pride of America, the only large cruise ship operating solely within the Hawaiian Islands.
NCL lobbied heavily against the bill, saying that it would be “unconstitutional” for the state to charge a port tax or fee not directly related to the port’s handling costs. In a letter to the state’s attorney general, the line advised that if the bill was signed into law, they would sue. Per-passenger cruise fees are already collected in other states, including Alaska.
Cruise lines would face higher tax increases than other lodging types because they were not previously subject to the state’s 10.25% accommodations tax, but will now be subject to the higher 11% rate. NCL’s General Counsel told Travel Weekly that it will double the taxes paid by passengers on their 7-night Hawai‘i itineraries.
Tourism is the Aloha State’s largest industry, followed by defense and real estate.
