Waikiki Beachcomber to get $25M makeover

Denver-based KSL Capital Partners, which bought Outrigger Hotels and Resorts late last year, is kicking off an aggressive Waikiki reinvestment plan with a $25 million overhaul and re-branding of the Waikiki Beachcomber.

As part of the new plan, the Holiday Inn Resort Waikiki Beachcomber will change to the Waikiki Beachcomber by Outrigger in February. The transformation, which should be complete by next summer, is designed to move the property from mid-upper-scale to upper-­scale pricing. Renovations will include guest rooms and public spaces — ranging from the lobby to the pool deck, corridors, elevator and hotel exterior. There also will be significant technology upgrades.

“This reinvestment is the first of many exciting capital projects to come and part of our larger strategy to ensure sustainable growth for Outrigger’s authentic and iconic brand,” Scott Dalecio, president and chief executive officer of Outrigger Hotels and Resorts, said in a statement.

Outrigger Enterprises has deep Waikiki roots going back to its founders, Roy and Estelle Kelley, who entered the hotel business in 1947 when they built the chain’s first property, the Islander Hotel on Seaside Avenue. The circa-1970 Beachcomber has been an important part of the history of Outrigger and Waikiki. During its glory years the property was known for its showroom where legendary Hawaii entertainers like Don Ho performed.

KSL’s new strategy runs counter to Outrigger’s more global push, which over the last two decades had turned the company into one of the largest privately held hotel firms in the Pacific. Much of Outrigger’s direction before KSL was determined by the need to diversify outside of Hawaii, where 75 to 85 percent of the family’s resources were located.

At the time of the sale, former Outrigger President and CEO David Carey, who is married to the former Kathy Kelley, the founders’ granddaughter, said KSL’s larger portfolio “would allow the company to expand its Hawaii presence while continuing to look for new markets.”

Today Outrigger is best known for its nine premium beachfront resorts in Hawaii, Fiji, Thailand, Guam, Mauritius and the Maldives. It also has 28 owned and/or managed hotels, resorts and vacation condominiums. The company now intends to grow its Hawaii portfolio, especially in Waikiki, said Mike Shaff, Outrigger’s vice president of operations for Waikiki and Guam.

“Our primary focus in Waikiki will be to put money back into all the properties that we own and manage — starting with the Beachcomber,” Shaff said. “This will be KSL Capital’s first real investment in the Hawaii market dating back to the Grand Wailea, which it once owned on Maui.”

Shaff said it’s too early to reveal the company’s plans for its Outrigger-branded Waikiki portfolio, which also includes the Outrigger Reef Waikiki Beach Resort, the Outrigger Waikiki Beach Resort and the Ohana Waikiki East by Outrigger. The company also manages the Ohana Waikiki Malia by Outrigger and the Embassy Suites Waikiki by Hilton Waikiki Beach Walk for other owners.

Over the next five years, many of these properties will see reinvestment, he said.

“We’re still in the design phases for more reinvestment for the Outrigger Waikiki, the Ohana East and the Outrigger Reef,” Shaff said.

Keith Vieira, principal of KV &Associates Hospitality Consulting, said KSL is likely to augment the $100 million redevelopment of the Outrigger Reef, which the Kelley family introduced just before selling Outrigger as a cheaper alternative to a previous second tower plan.

“Hawaii is an expensive place to enter and operate in; they’ll need to get high returns,” Vieira said. “KSL is not new to the Hawaii market. They have a lot of experience upgrading and repositioning here. When they bought the chain, I thought they were perfect because they’ll have the money to take Outrigger where it needs to go.”

Many private equity firms are in the business of renovating, repositioning and selling, but it’s possible that KSL will take a longer-­term view, said Joseph Toy, president and CEO of Hospitality Advisors LLC.

“Some private equity firms have committed to the destination, and I think KSL might be one of them. When you buy a portfolio like Outrigger, it takes more time to create added value,” Toy said.

Elizabeth Churchill, owner of Churchill Group LLC, said she would expect KSL’s Waikiki refocus to include acquisitions.

“Right now I’m very bullish on KSL and on Highgate, which is another strong Hawaii hotel owner,” Churchill said. “I think they are titans in the market, and they’ll be fighting it out. It will be interesting because right now nearly everything in Waikiki is for sale. “

Shaff said the company isn’t actively shopping now, but continues to look for Hawaii opportunities beyond its initial Outrigger purchase.

“The Outrigger opportunity was very attractive to KSL, and they recognize that this market is very strong. They were drawn to the stability of Waikiki’s market, which has strong domestic and international appeal,” he said. “We are obviously looking for something that would make sense for our brand and compliment our other properties.”