Increased Water Scarcity Risk for Hawaii Businesses Following Record Hot, Dry 2025
Hawaii experienced its hottest and driest year on record in 2025, with temperatures consistently above average and rainfall significantly below normal for most of the state. This persistent climate pattern, as detailed in the University of Hawaii's Annual Climate Report, directly elevates the operational risks for businesses critically dependent on stable water resources and predictable environmental conditions.
The Change
The Hawaiʻi Annual Climate Report, released by the University of Hawaiʻi, confirmed that 2025 was an outlier year for extreme weather. Every month saw above-average temperatures, contributing to a statewide heat record. Rainfall was below average across all major islands for the majority of the year, with only one month showing average or above-average precipitation. This deviation from historical norms signifies a tightening of water availability that is likely to persist, requiring businesses to adapt to a new reality of increased scarcity.
Who's Affected
Agriculture & Food Producers:
Farmers, ranchers, and aquaculture operations face the most immediate threats. Reduced rainfall means increased reliance on irrigation, straining already diminished reservoir levels and groundwater. Expect potential reductions in crop yields, higher costs for water acquisition where available, and stricter water use regulations. Land used for grazing may suffer from reduced forage availability, impacting livestock operations. Aquaculture may face challenges with water quality and salinity.
Tourism Operators:
The hospitality sector is also significantly exposed. Resorts, hotels, and golf courses are large water consumers. Persistent drought increases the likelihood of water use restrictions, potentially impacting guest services and operational capacity. Furthermore, dry conditions dramatically increase wildfire risk. Wildfires can lead to direct property damage, service disruptions, flight cancellations, and negative publicity, deterring visitors. Increased costs for landscaping maintenance and water-efficient technologies will likely be incurred.
Small Business Operators:
While less directly water-dependent than agriculture or large resorts, small businesses will feel the ripple effects. Restaurants may face higher produce costs if agricultural yields decline. Retail businesses could see reduced foot traffic if tourism falters due to environmental issues. All businesses face potentially higher utility bills if water and energy prices increase as a result of scarcity. Increased insurance premiums due to heightened wildfire risks are also a concern.
Second-Order Effects
The prolonged hot and dry conditions in 2025 are likely to trigger a cascade of economic impacts across Hawaii's island economy.
- Reduced agricultural output → Increased food import dependency → Higher consumer prices for staples → Strain on household budgets → Decreased discretionary spending at local businesses.
- Water scarcity → Stricter agricultural and commercial water use regulations → Increased operational costs for businesses → Potential reduction in new business permits or expansion → Slower overall economic growth.
- Increased wildfire risk → Property damage and infrastructure disruption → Higher insurance costs for businesses and residents → Out-migration of risk-averse businesses and individuals.
What to Do
Given the persistent nature of these climate trends, a proactive, watch-and-prepare strategy is recommended for the next 1-2 years.
Action Details: Businesses should actively monitor local water authority advisories and drought indices. Implement and enhance water conservation measures across all operations. For agriculture, explore drought-resistant crop varieties and alternative water sources. Tourism operators should review emergency preparedness plans, particularly concerning wildfire mitigation and response, and communicate any potential service adjustments to guests proactively. All businesses should factor potential increases in utility and insurance costs into their budgets and explore water-efficient technologies.
Monitor: Water authority drought declarations and updated restrictions; local fire department advisories and burn bans; agricultural yield reports from the USDA and state Department of Agriculture.
If: Water restrictions escalate to stage 2 or higher for commercial users, or if widespread burn bans are enacted for more than 60 consecutive days, then businesses should trigger their enhanced contingency plans, including securing backup water supplies (if feasible) and reassessing seasonal staffing needs based on potential tourism downturns. For agriculture, this could mean shifting crop focus or seeking emergency water access permits.
