Hotel market heating up outside the Waikiki core
Developers and the visitor industry say more hotel construction could be coming outside the usual resort districts, and even in them if the market continues to shine.
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Curiosity brought Waipahu residents Vic and Martha Jane Carvalho to
the grand opening of the
Embassy Suites by Hilton Oahu Kapolei, which continued the West Oahu hotel expansion trend that started when Hampton Inn &Suites opened in late 2016.
The couple, who recently celebrated their 61st anniversary, said they have marked many special occasions and taken staycations in Waikiki, Oahu’s most famous hotel market. But they now have their eye on the closer Embassy Suites for future events. The 180-room, all-suite property has an outdoor pool, whirlpool, and restaurants like Sprigs Grille and Manamana Lounge Bar.
The Embassy Suites is at 725 Manawai St., not far from Kapolei Hale and Costco. It was developed for roughly $65 million by Utah firms Western States Lodging &Management and Thackeray Garn Co., doing business as Kapolei Hotel Partners.
“We might visit for a staycation or book a special event like an anniversary,” Martha Jane Carvalho said.
“Ko Olina was the first resort on the west side, but the rates here are much more reasonable.”
The Embassy Suites’ opening comes on the heels of Tuesday’s groundbreaking for a neighboring 183-suite Marriott Residence Inn Kapolei at 725 Kunehi St. Slated to open in summer 2019 after a $68 million investment, it will be the second Oahu hotel owned by Kapolei
Hotel Partners LLC and
managed by Western States Lodging LLC. It also will be Oahu’s first extended-stay brand.
These investments build on the trend of small, limited-service hotels planned for outside the urban Honolulu core and Oahu resorts that started with the 2015 opening of the Courtyard by Marriott Oahu North Shore and moved west with the opening of the 175-room Hampton Inn, a DeBartolo development in Ka Makana Alii shopping center.
These limited and extended-stay hotels tend to cater to government meeting groups, business travelers and regular folks like sports teams and families on a budget. They didn’t exist outside the usual Oahu resort markets until a few years ago when the city amended its land-use ordinance to allow limited-service hotels to be built in areas zoned for mixed use.
“Our zoning didn’t allow for limited-service hotels in suburban markets, a type of land use that you typically see around the country,” said Erik Kloninger, a partner with Kloninger &Sims Consulting LLC. “Right now, we’re seeing them coming out of the ground in Kapolei because of the availability of sites. There’s another one zoned for Ka Makana Alii.”
Developers and the visitor industry say more hotel construction could be coming outside the usual resort districts, and even in them if the market continues to shine. So far this year, the top two U.S. single-asset hotel sales have been Hawaii properties, according to Daniel Fenton, executive vice president of JLL Hospitality Tourism Group, who spoke at the Hawaii Tourism Authority’s recent Global Tourism Summit. Waikiki’s Pacific Beach Hotel was the top transaction at $515 million. Next was the Westin Maui at $317 million, but the Waikiki market has comprised most of the largest Hawaii transactions since 2013.
Another summit speaker, Duane Vinson, vice president of STR, was equally bullish on Hawaii’s hotel market. In July, Hawaii hit its highest ever average daily rate of $263 per night, Vinson said. During the same period, the islands also achieved their highest occupancy — 79.7 percent, he said. Revenue per available room (what each hotel room rents for nightly whether occupied or not) has been growing for seven years, with two tiny dips, he said.
Joseph Toy, president and CEO of Hospitality Advisors LLC, said there’s especially room for midmarket inventory, which has shrunk as Waikiki properties were renovated and repositioned.
New markets are likely to emerge in the University of Hawaii-West Oahu, Koa Ridge and Hoakalei Resort, and there’s room for growth in traditional resorts like Turtle Bay, Ko Olina and even in Waikiki, where a number of high-profile properties are for sale. Also, developers like Irongate, which developed the Ritz-Carlton Residences, Waikiki Beach, are working to assemble large enough sites for new projects.
“Both business and leisure stays in Hawaii are up and on the rise — demand is greater than it’s ever been,” said Tyler Miles, Western States Lodging partner and project manager for its Kapolei hotels.
Andy Pettingill, Western States Lodging vice president of hospitality, said he believes conditions are right for West Oahu’s limited-service market to continue strengthening.
“I think our average daily rate, which is currently at $250 to $300 at Embassy Suites, will be right there with Waikiki,” Pettingill said.