Keauhou Beach Hotel doomed

About 112 Hawaii island hotel workers are scrambling to find jobs in the wake of Kamehameha Schools’ abrupt announcement that it will shut down and eventually demolish the poorly performing Keauhou Beach Hotel.

Kamehameha Schools, a 125-year-old private trust founded and endowed by the legacy of Princess Bernice Pauahi Bishop, informed the International Longshore & Warehouse Union, and Outrigger Hotels, which managed the resort, of its plan to close the property at the end of October.

"Despite the good work of many committed and talented people, financial losses at the hotel over the last six years have been substantial," said Kamehameha Schools CEO Dee Jay Mailer. "To return the Keauhou Beach to possibly compete in the Kailua-Kona hotel market would take tens of millions in further investment that would be very difficult to recover."

David Carey, CEO and president of Outrigger Enterprises Group, said that the hotel company was notified Wednesday by Kamehameha Schools that it would enforce an early termination clause in the property management contract. Outrigger, which had managed the 309-room property for Kamehameha Schools for about a decade, had worked with the owner to come up with a plan to return the stand-alone hotel to profitability, Carey said.

"If you just left the property alone and didn’t develop the rest of the surrounding areas, it’s a difficult investment to keep," he said. "If they had chosen to redevelop the entire resort, I believe they could have made a viable financial investment in the hotel."

Carey said Outrigger submitted plans to Kamehameha Schools that integrated the hotel with the region’s surrounding cultural assets.

"In my view, tourism and culture can coexist," Carey said. "We thought restoring the cultural and historical sites would serve as a real attraction."

While Outrigger had hoped to persuade Kamehameha Schools to invest more money in the hotel and in developing a surrounding resort concept, Carey said he understands their decision to restore the cultural landscape by tearing down the hotel.

Wallace Ishibashi, the ILWU’s Hawaii Island division director, said hotel workers in the region have been struggling since 2008.

While Kona-Kohala tourism started coming back in November, the tourist district has continued to lag behind other regions statewide. The Kohala Coast posted a 3.7 percentage point gain in occupancy and saw a modest gain in room rates through June; however, the region remained significantly behind Oahu and Maui and somewhat behind Kauai, said Joseph Toy, president and CEO of Hospitality Advisors LLC.

Kohala’s occupancy was at 62.6 percent during the first seven months of the year, while in comparison Waikiki occupancy reached a robust 85.2 percent, Toy said.

"The recovery has been uneven," he said.

Ishibashi said jobs for Keauhou Beach Hotel union workers were cut during the last downturn.

"At one point we had closer to 180 workers there," he said. "All the hotels took one cut, but nobody did this, shut down the whole facility."

The ILWU had hoped that Kamehameha Schools would be able to stem its loses by investing in eco-tourism, Ishibashi said.

While the most recent decision might improve Kamehameha Schools’ financial picture, it leaves working families suffering, he said.

"It’s the workers that are taking the brunt," Ishibashi said.

The ILWU, Outrigger and Kamehameha Schools will begin bargaining soon on issues such as severance and providing medical coverage for displaced workers, he said.

"Our goal now is to get workers new employment," he said.

The decision to close and demolish the hotel marks a pivotal point in Kamehameha Schools’ stewardship of the Keauhou lands, which they allowed to be developed for resort use in the 1960s.

Kamehameha Schools said the new direction is more aligned with the trust’s educational and cultural missions. The trust operates a statewide educational system that provides preschool to high school enrollment for about 6,900 students of Hawaiian ancestry. Its outreach programs serve an additional 40,000 Hawaiian learners and caregivers.

During the first phase, Kamehameha Schools will re-establish the cultural footprint of the complex with the extension and completion of restoration projects, said Greg Chun, vice president of Kamehameha School’s Keauhou-Kahaluu Education Group.

Heritage sites on the Keauhou Beach Hotel property include Kapuanoni Heiau, Poo Hawaii, two kuula and the reconstructed Halau of High Chief Kuakini and King Kalakaua’s Summer Cottage.

During the next six months, Kamehameha Schools will be meeting with the community to shape its conceptual plans for the site, Chun said.

Modest structures will need to be built to support outdoor learning programs and to accommodate group functions and overnight camping, he said. Building methods will follow cultural traditions and improvements to open spaces will focus on supporting cultural practices, Chun said.

"We envision creating a place for teaching and learning of applied Hawaiian knowledge," Mailer said.