Kyo-ya Hotels & Resorts may have to wait another month or two before learning whether it will be allowed to build Waikiki’s first new shoreline tower in decades as part of a $700 million redevelopment project.

The company requested yesterday that the city Department of Planning and Permitting allow its planned 26-story Diamond Head Tower to be built some 40 feet from an existing sea wall instead of the required 100-foot coastal setback. The variance request drew community support and opposition at a hearing.

Visitor and construction industries testified in favor of the variance, saying the project provided critical economic stimulus and needed revitalization in Waikiki. However, at least four environmental groups objected to the development encroaching on the sand and the public beach next to Kuhio Beach Park in Waikiki.

Public comments from the hearing will be included in a recommendation to department Director David Tanoue, who must decide if the company can push the project further on to the shoreline. Tanoue’s decision could take 30 to 60 days.

The new tower, which would replace the existing eight-story Diamond Head Tower next to the Moana Surfrider, is central to Kyo-ya’s redevelopment plan. The tower would be the most recent Waikiki beachfront hotel built since the Halekulani was expanded in the 1980s and would offer about 100 residential condominiums and 60 hotel rooms.

"If Waikiki wants to maintain itself as a world-class destination, you need to provide new product that meets the demands of today’s customer," said Greg Dickhens, president of Kyo-ya Co. LLC. "Customers are looking for larger guest rooms with expanded bathrooms and more amenities than are currently provided in Waikiki."

However, representatives from the Surfrider Foundation, Hawaii’s Thousand Friends, the Sierra Club Hawaii Chapter and the Ka Iwi/Sandy Beach Coalition said that changing the setback sets a dangerous precedent and opens the door to seeing Waikiki covered in "beachfront behemoths." Setbacks are designed to protect the beach and should be enforced as established some 35 years ago, they said.

"With a lot of foresight, the city of Honolulu envisioned a generous Waikiki back-shore with reasonable building setbacks from the public beach. We still want that and Waikiki itself deserves that," said Donna Wong, executive director of Hawaii’s Thousand Friends.

Kyo-ya and supporters have said that the Diamond Head Tower would have no effect on the shoreline and that the narrower tower would open up mauka to makai views and provide greater public beach access.

The position of the new tower would be further mauka of a sea wall that is already in place at the current Diamond Head Tower, Dickhens said.

"We would add one to three feet of fill mauka of the sea wall, but nothing is being added makai of the sea wall or the shoreline," he said.

But Tim Tybuszewski, co-chairman of the Surfrider Foundation Oahu Chapter, objected to what he said was Kyo-ya’s plans to build up to the high-water mark.

"We are building a castle in the sand here and asking the taxpayers to keep filling in the sand to keep the castle from falling down," Tybuszewski said.

Kyo-ya’s planned Waikiki redevelopment of its Moana Surfrider and Princess Kaiulani properties received unanimous approval from the City Council in August. The zoning variance for its Diamond Head Tower is the latest step that the company must clear before breaking ground on its project, which also includes a new 33-story Pikake Tower on the site of the Princess Kaiulani property and renovation of the existing 29-story Ainahau Tower.

The project still needs a Waikiki special district permit and a conditional use permit to proceed. If Kyo-ya gets the required approvals, construction might begin in mid-2012, Dickhens said.