Hilo must prepare for tourism growth

Nearly a year ago, when the proprietor of Uncle Billy’s Hilo Bay Hotel announced its expected closure, a wave of nostalgia swept through Banyan Drive.

Closing the hotel, which had been a fixture in the community for more than a half-century, appeared to mark the end of an era in which charming mom-and-pop hotels dominated Hilo’s tourism scene. Indeed, a new era is now emerging, bringing with it decades-old growing pains as well as promise for a bright future.

The trick will be to update regulations to allow for sensible development without running roughshod over quiet Hilo’s unique historical character.

There are 12,000 hotel units on Hawaii island, yet only 1,500 are situated on the east side. Consequently, hotels in Hilo run at an occupancy rate of 80 percent to 85 percent on a nearly year-round basis. Islandwide, the rate is 60 percent to 65 percent. The Big Island Visitors Bureau and others are pushing for more “quality” hotel rooms in Hilo.

A long-standing drooping in quality is tied to the state’s handling of land-leases. The state Department of Land and Natural Resources owns 97 percent of the land under Banyan Drive’s resorts. The lease agreements, which max out at 65 years, were established in the aftermath of the 1960 tsunami that destroyed much of downtown Hilo. When a lease expires, the state puts it up for bid. The trouble with that practice is it fails to offer a leaseholder in good standing an option for extending the lease. Moreover, it hinders a leaseholder’s ability to secure improvement capital for hotel upkeep.

Such trouble prompts the question: What bank will loan a small operator money for improvements if it’s unclear that the lease will continue to be in their possession after 65 years are up? Hawaii island Mayor Harry Kim is putting that query before state officials, contending that changes are needed for the sake of promoting a thriving economy. The state agency counters that it is constrained by state law.

Lease-related snags were cited as a contributing factor in the decision to shutter Uncle Billy’s, which was opened by William J. Kimi Jr., otherwise known as Uncle Billy, in the mid-1960s. Before the scheduled Feb. 1 closure, however, the developer who owns Honolulu’s koi-famed Pagoda Hotel, picked up the property and rebranded it as Pagoda with management under Castle Resorts &Hotels, which also manages the nearby Hilo Hawaiian Hotel.

State agency staff members now want to see the 2-acre property go to public auction for a month-to-month revocable permit. The idea is to hold off on issuing a long-term lease until a recently formed Banyan Drive Hawaii Redevelopment Agency overseen by Hawaii County develops a long-term plan for the area.

While Kim, who was elected to the mayor’s post last month, says such a plan is toothless as the state has the final say on land use, DLNR counters that the community’s wishes weigh heavily in its decision-making and the agency is open to some give-and-take options on matters it can tweak.

Meanwhile, last month, for the first time in six years, an international flight arrived at Kona Airport, bringing with it the expectation for an increase in visitor traffic in the new year. The Hawaiian Airlines nonstop flight from Haneda International Airport in Tokyo is now touching down three times weekly.

The island’s hotels, including those in Hilo, can expect occupancy rates to increase as more visitors explore the island. The isle’s visitors bureau estimates that at least 1.55 million visitors arrived in 2016 — nearly matching 2007’s record figure of 1.6 million.

There’s some enthusiasm in the community for makeovers like the recent transformation of Naniloa Volcanoes Hotel from a rundown Banyan Drive property into the more upscale Grand Naniloa Hotel — a DoubleTree by Hilton. The hotel increased in size to 388 rooms from about 150 rooms.

And what about mom and pop? Ross Birch, executive director of the Big Island Visitors Bureau, says: “I think the hospitality industry is at the point where the mom-and-pop hotel is a business model of no more.” Pointing to Airbnb and the VRBOs (vacation rental by owner), he adds, “Your mom-and-pop are now your owner-operator vacation rentals and bed-and-breakfasts. They’re becoming more popular.”

Hilo’s hotel lineup is in need of appealing modernization that pays some tribute to the past, and expansion needed to accommodate an upswing in visitors.

The Banyan Drive Hawaii Redevelopment Agency and others should push state legislators for leases that clear the way for expeditious renovations as well as preservation of ample open spaces and regional charm. But a return to mom-and-pop glory days are not in the waterfront’s future.