Naniloa Volcanoes Hotel purchased for $7 million

The Naniloa Volcanoes Hotel has a new owner and a new future as a marine art-themed vacation resort in Hilo.

A company led by real estate developer Ed Bushor completed the purchase of the oceanfront hotel Tuesday.

Work to revitalize the struggling property began quickly, with new landscaping planted in front of the hotel Tuesday and a 20-foot Christmas tree set up Wednesday.

"It’s looking like an operating hotel actually, instead of a desert like it used to be," Bushor said.

Bushor, who bought the hotel for $7 million through a bankruptcy auction with partners, including marine artist Wyland and major Hawaii island landowner Ed Olson, plans to spend $20 million on renovations and make the property a museumlike visitor attraction.

An envisioned focal point is a planned bronze life-size sculpture of a baby humpback whale that blows water like a geyser every hour on the hour.

"It’s really going to be spectacular," Bushor said, explaining that the whale feature would be part of a sculpture park between the ocean and the hotel lobby. "We want to create a second major tourist attraction for people who come to see the volcano."

Bushor hopes to finalize a deal with Wyland to rebrand the renovated hotel with the artist’s name and feature $20 million to $30 million of Wyland art in the hotel. Another possibility is to stock the hotel with art from a variety of artists.

Renovation work is projected to take a year. During that time, the hotel will operate as the Hilo Naniloa Hotel.

Aqua Hospitality took over management of the property with the sale and rehired nearly all the roughly 35 employees, Bushor said. The new owner expects that about 100 employees will be needed after renovation work is done.

The 383-room hotel has been operating with just 179 rooms in one tower after the previous owner, Hawaii Outdoor Tours Inc., led by Ken Fujiyama, got into financial trouble after renovating one tower amid the economic downturn a few years ago.

Hawaii Outdoor Tours bought the Naniloa and its nine-hole golf course on state land at a state auction for the land lease in 2006. The company filed bankruptcy last year, which led to the auction.

This year through November, the hotel reported a $1.1 million net loss and has had an occupancy rate of about 20 percent to 30 percent, said David Farmer, a court-appointed trustee overseeing the hotel’s operation in bankruptcy.

Recently, there was some question as to whether the sale would be completed after a delay that included a missed deadline to fund the deal and allegations that hotel inventory and equipment were missing. The state Department of Land and Natural Resources also objected to transferring its land lease without consent.

The dispute over the inventory and equipment was resolved, and the transaction was completed. Farmer said the state’s objection was made moot by the sale’s closing. Bushor is obligated to pay the state $500,000 a year for the lease, which has a remaining term of 58 years.