Aaww. What a sweetheart! I agree with lots of others that I wouldn't want to crush his loving spirit. But one thing I would do is give him lots of alternatives. He is pretty young to explain things to, but just simply saying 'sometimes other people aren't ready for hugs' should suffice. Then tell and show him how to add other things into his repetoire. Blowing kisses, hands over his heart, using words, whatever you think he'd like.
It's so important to remember to tell kids what to do instead or in addition to something you want them to stop or do less of! You don't want him to feel rejected but you don't want him to be afraid of hugs either!
Good luck.