Kyo-ya Hotels and Resorts has spent $10 million over seven years seeking permission to build Waikiki’s first new hotel in 30 years.
Though the city’s zoning board of appeals recently ruled in favor of Kyo-ya’s plan to build an oceanfront hotel and condominium tower next to the Moana Surfrider, A Westin Resort & Spa, the project has run into objections that have kept it from proceeding.
"Petitioners have stated that they’ll continue to appeal with their ultimate objective just to delay, delay, delay," said Greg Dickhens, president of Kyo-ya Hotels and Resorts.
While strong hotel performance is starting to fuel investor interest in Hawaii, Kyo-ya is just one of many cautionary tales that could persuade developers to look elsewhere and eventually curtail growth in the state’s No. 1 industry.
"We certainly have a capacity issue in Waikiki," Dickhens said.
He and other investors say they are frustrated by how long it takes to deliver new accommodation units or improve their products.
"It’s usually a minimum of 10 years for anything of significance, that’s how long it took Waikiki Beach Walk," Dickhens said.
While some, including economist Paul Brewbaker, have complained the rate of delivery for visitor units is causing Hawaii tourism to run out of room, others say thoughtful, careful growth is the only kind they will accept.
Donna Wong, executive director of Hawaii’s Thousands Friends, said the group opposed the Kyo-ya project because the plans encroached into shoreline setbacks.
"We are very mindful that tourism is our mainstay," Wong said. "We just think it’s in everyone’s interest to make it viable. It shouldn’t socially impact the people who live here or destroy our natural environment and cultural resources."
Despite obstacles, market forces could result in new visitor capacity before 2020, Brewbaker said. In the pipeline is the Polynesian Cultural Center’s plan to build a new hotel in Laie.
"The new hotel in Laie, in conjunction with the Turtle Bay Resort, provides a great opportunity for the Polynesian Cultural Center to position itself as a ‘destination within a destination’ to a broad market base," said PCC President Alfred Grace.
Even with the difficulty of getting projects approved in Hawaii, some hotel developers may find a way.
"We are getting closer to the tipping point for new builds," said Joe Toy, president of Hospitality Advisors LLC.
Kuhio and Ala Wai are potential Waikiki redevelopment spots, he said. Hotels and condominiums from Ala Moana to downtown, including Aloha Tower, could be repurposed or developed, Toy said. Demand from athletic competitions in Waipio and from the University of Hawaii at West Oahu and businesses in Kapolei could bring community hotels, he said. Ko Olina and Turtle Bay have room to expand.
"I think you’ll see some very minor expansion outside of Waikiki, but not a building boom," said Jerry Gibson, Hilton Hawaii area vice president. "Waikiki is where the visitors and businesses want to be. It would be like building outside of Las Vegas."
On the neighbor islands, Toy said resorts such as Princeville, Waikoloa, Hapuna Beach and Makena could grow.
Time-share builders also are eyeing Hawaii as they have for some time, said Howard Nusbaum, president of the American Resort Development Association.
"Hawaii really became conspicuous because there was so much development in 2009, 2010 and 2011 when most other destinations weren’t building time share because of the downturn," Nusbaum said.
Roughly 1,436 time-share units were planned for delivery between 2011 and 2013, he said. Another 2,336 were possibilities, Nusbaum said.
Gibson said Hilton Hawaiian Village in 2014 will begin building a time-share tower that will deliver 422 units.
"For new builds, time share and resort condo is the way of the future," he said.
