Hotel sale holds promise for Hilo

A jewel that’s been diminished in recent years, the troubled Hilo Naniloa Hotel now has a new lease on life, quite literally, with much potential for the property and for the economic vitality of nearby communities in East Hawaii.

After years of decline, the bayfront hotel was bought this month in bankruptcy auction for $7 million by real estate developer Ed Bushor and partners, including marine artist Wyland and major Hawaii island landowner Ed Olson.

To be rebranded the Naniloa Volcanoes Resort, its new owners have the deep pockets to spend $20 million on renovations and transform the property into a museum-like visitor attraction by New Year’s 2015.

What’s good for the Naniloa, and the other hospitality purveyors along Hilo’s scenic Banyan and Bayfront drives, is good for the economic well-being of East Hawaii.

The 383-room hotel had been in Chapter 11 bankruptcy since November 2012, operating just 180 rooms in one tower after previous owner, Hawaii Outdoor Tours Inc., ran into money trouble after renovations during the economic downturn several years ago.

That company, led by Ken Fujiyama, had bought the Naniloa and its golf course on state land in a land-lease auction in 2006.

Where the current hotel has hobbled along with a mere 20-30 percent occupancy rate employing just 35 workers, the revitalized property envisions employing 115 to 200 people.

Having the Naniloa sale resolved — especially involving such prominent names — gives much-needed stability heading into mixed times for Hawaii’s tourism industry.

New preliminary data released Friday by the Hawaii Tourism Authority shows an unsettling trend: For the third month in a row, visitor arrivals and spending fell compared with the same time last year — and it’s a trend forecast to continue into the new year.

Total visitor arrivals in November dropped 5.5 percent to 620,051, while expenditures dropped 2.1 percent to $1.1 billion, said the HTA.

It was largely thanks to the state’s tourism boom that a bullish Hawaii County Economic Forecast Report in August gave Hawaii island its best economic outlook in five years.

But that forecast was buoyed largely by activity on the Kona side. For Hilo, the tourism outlook was mired by uncertainty on hotel-lined Banyan Drive —as it has been for years — where the state Department of Land and Natural Resources’ lease extension rules, requiring renovations equal to at least 50 percent of the value of the improvements on the land, has been difficult for leaseholders. Shoreline management area permit rules also add obstacles.

Still, the Hilo Hawaiian Hotel has been doing well and is undertaking renovations; the neighboring Naniloa, though, had been slogging through bankruptcy with one wing shuttered.

So it’s encouraging that the property is to be rejuvenated before it falls further into disrepair.

Bushor, whose company is part-owner of the Modern Honolulu hotel in Waikiki, has plans to invest $20 million, including renovations to evolve the Naniloa into an environmentally friendly boutique hotel by the start of 2015.

Then, enthused Bushor after the sale this month, "I plan to throw a New Year’s party for Hilo having the hotel they deserve."

If such confidence can propel the new owners to refresh the site and boost the area’s vitality as a jobs and tourism magnet, while retaining the bayfront charm so integral to Hilo’s character, that will indeed be cause to celebrate.