Total economic losses from the wildfires in Lahaina and Kula range between $4 billion to $6 billion, according to a new blog by University of Hawaiʻi Economic Research Organization (UHERO) experts. These losses include property damage, contents and business interruption, across residential, commercial, industry, automobile and infrastructural assets. The authors estimate that 75% will be covered by insurance, but that rebuilding Maui will necessitate significant government involvement at the federal, state and county level.
“Lahaina won’t be rebuilt as an exact replica of the pre-disaster town. Nor should it be. The goal should be to build back better, using improved building materials and technologies and taking into consideration the anticipated effects of climate change and long-run demographic and economic trends,” said the blog by James Mak, Paul Brewbaker and Frank Haas.
The authors write that Hawaiʻi is very good at crafting plans that involve broad community input, but these must be implemented well. This requires effective governance involving vertical coordination (coordination between federal, state and county governments), horizontal coordination (inter-departmental/agency coordination within a government) and community stakeholders.
The second challenge is the recovery of the Maui macroeconomy. Data from the state estimates that visitor spending accounts for 37.8% of the county’s GDP, thus, bringing tourists back would be the most logical economic recovery strategy. Very early estimates of foregone tourism receipts due to reduced tourist travel to Maui range between $200 million and $300 million for the period August 9 to August 31.
Drawing lessons from Hurricane Iniki
Hurricane Iniki was a category 4 storm, which passed directly over Kauaʻi (population about 54,000) on September 11, 1992. Iniki claimed several lives and injured about 100. The Hawaiʻi Emergency Management Agency estimated the property damage at $3 billion, or more than $6 billion in 2022 prices. The Federal Emergency Management Agency reported that about one-fifth of Kauaʻi’s 20,000 homes were destroyed or badly damaged, and most hotels and government buildings also suffered damage.
Kauaʻi’s tourism industry, which directly and indirectly accounted for about a third of the county’s economic output, took a significant hit. Total visitor days on Kauaʻi plummeted by more than 50% from 6.468 million visitor days before the hurricane in 1991 to 3.013 million visitor days in 1993. It wasn’t until 1998 that total visitor days finally surpassed the 1991 count.
According to the authors, Kauaʻi County’s effort to expedite rebuilding after Iniki shows what can be achieved with imagination and determination. Right after September 11, 1992, the county established the Office of Emergency Permitting (OEP). OEP was a pop-up building permit agency designed specifically to facilitate reconstruction. OEP’s creation was an important institutional step forward and permit issuance began immediately.
“Like Kauaʻi, the expected surge in post-disaster construction spending will provide a big boost to the economy,” said the blog. “Whether or not all of that will be enough to bring the economy back won’t be known until much later. It is noteworthy that while Iniki inflicted billions of dollars of property (i.e. capital) loss in Kauaʻi, total inflation-adjusted personal income in Kauaʻi County did not decline in the immediate years after the hurricane. Kauaʻi’s resident population and labor force were higher in 1993 and 1994 than in 1991 though civilian employment fell. The encouraging news on tourism is that Maui’s lodging sector, the bedrock of the visitor industry, has kept its physical capital stock largely intact.”
The blog concludes, “The current economic recovery strategy is to encourage visitors to return with the specific exception of West Maui. …An initial $2.6M tourism recovery campaign to run through October was approved by the Hawaiʻi Tourism Authority. While the welcome mats are out, visitors are advised to behave responsibly in the Aloha State. Thus, there is hope that tourism’s recovery on Maui from the wildfires that devastated one part of the island will be faster than Kauaʻi’s recovery from Hurricane Iniki that devastated almost the entire island.”