New Tax on Hotels & Cruises: Will You Be Paying Up to $500 More This Summer? Find Out!

Starting January 1, 2024, Hawaii will implement a new Green Fee on hotels and cruise ships as part of a broader initiative to fund climate resilience projects. This decision comes after a federal court largely dismissed a lawsuit from the Cruise Lines International Association, which sought to block the state's policy, claiming it violated federal trade protections.

The Green Fee will increase the state's visitor tax by 0.75 percentage points, bringing the total transient accommodations tax (TAT) to 11%. This fee will now also apply to cruise ships docking in Hawaii, which previously did not contribute to this state tax. The additional revenue generated is projected to be around $100 million annually and has been incorporated into Governor Josh Green's recent budget proposal for the state legislature.

Federal Judge Jill Otake ruled that blocking the law would unfairly favor the cruise industry over land-based accommodations such as hotels. In her opinion, she noted the rarity of litigation surrounding federal protections for maritime commerce, suggesting that other courts might interpret the legality of the Green Fee differently in the future.

In addition to the state TAT, Hawaii counties impose their own 3% TAT, along with the state's 4% general excise tax and applicable county surcharges. Once the Green Fee takes effect, visitors will face a total tax exceeding 18% on their hotel or vacation rental stays. This significant tax burden aims to support sustainable tourism practices and enhance the state's climate resilience efforts.

The introduction of the Green Fee highlights the increasing emphasis on sustainability in the tourism industry, particularly in a state like Hawaii, which is highly vulnerable to climate change impacts such as rising sea levels and extreme weather events. With tourism being one of Hawaii's major economic drivers, the state is attempting to balance the needs for economic growth and environmental protection.

As the new year approaches, both residents and visitors will need to adapt to the changes in financial obligations associated with travel. The outcome of ongoing discussions about the legality of the Green Fee may also have lasting implications for the cruise industry and its role in Hawaii's economy.