Hawaii's tourism and hospitality sectors are bracing for significant changes as the state moves forward with a new Transient Accommodations Tax (TAT). Senate Bill 1396, now signed into law, increases the TAT rate by 0.75%, effective January 2026, bringing the total tax on short-term rentals to 18.712% statewide, as reported by ABC News. This measure also introduces the TAT for the first time to cruise ships that dock in Hawaii, taxing them at an 11% rate based on the number of days per voyage a ship is in port. These changes are designed to generate funds for climate resiliency initiatives, but have sparked debate within the industry.
The bill's implications are far-reaching. For the tourism industry, the increased taxes could affect visitor spending. Some industry leaders, such as the Activities and Attractions Association of Hawaii, voiced concerns that higher taxes could lead to reduced spending by visitors in other areas, rather than an overall increase in their expenditure per trip, as mentioned in Aloha State Daily. The rising cost of doing business, already a challenge for many Hawaii businesses, is a key concern. Travel Weekly also notes that the measure has been met with opposition, with some arguing that the tax burden should be distributed more broadly across all taxpayers, not solely on the tourism industry, to address climate change impacts.
The revenue generated from the TAT increase is earmarked for climate resiliency measures. According to Hawaii News Now, the funds, estimated to bring in between $85 million and $100 million annually, will be dedicated to
