Princess Kaiulani Hotel to be razed for new tower

Kyo-ya is gearing up to raze the existing Princess Kaiulani Hotel to construct Waikiki’s first new all-hotel tower in nearly 40 years.

The Waikiki Neighborhood Board on Tuesday night unanimously approved a plan from Kyo-ya to develop a new 33-story hotel tower with approximately 1,009 hotel units on the 4.1-acre site where the Princess Kaiulani Hotel has long stood. All existing hotel towers, retail buildings, the parking garage and other structures, some dating back to the 1950s, would be demolished.

The new development also includes an attached six-story podium offering retail, food and beverage, and meeting space. There will be a recreational deck featuring an infinity edge pool, a lazy river, a gym and a pool bar. A courtyard with water features, a garden and a legacy library are part of the design to pay homage to the history of the hotel, which was built where the gateway to Princess Kaiulani’s estate Ainahau once stood. Also, there will be a 695-space parking structure, a bus landing area and an underground delivery zone.

Michael Takayama, Kyo-ya’s director of real estate and development, said the new plan better meets “the needs of the community, Hawaii’s visitor industry and Kyo-ya’s corporate values and philosophy.”

“We’ve been in Hawaii for over 55 years. It’s about doing the right thing. We’re different than the typical hotel ownership group that has a seven-year outlook plan. We don’t have an exit strategy,” Takayama said, adding that the project’s new design significantly increases open space and improves views.

Takayama said the city ruled last month that Kyo-ya did not need to complete a new environmental impact statement. He said Kyo-ya plans to seek permission from the city next month to modify its existing project permits.

If all goes according to plan, Takayama said, Kyo-ya would begin demolition and construction in mid-2022 with an anticipated completion date of 2025.

The future of the Princess Kaiulani Hotel, which was Kyo-ya’s first hotel property in the United States, had been on hold for about a decade as Kyo-ya struggled through ownership changes, a court land-use battle and more recently a protracted hotel strike.

New union contracts were reached late last year with Kyo-ya’s U.S. portfolio of resorts, including Sheraton Waikiki Resort; the Moana Surfrider Hotel, a Westin Resort and Spa; the Royal Hawaiian, a Luxury Collection Resort; the Sheraton Princess Kaiulani; the Sheraton Maui Resort and Spa; as well as the San Francisco-based Palace Hotel, a Luxury Collection Hotel.

In 2010 the city awarded Kyo-ya a planned development resort designation and a Waikiki Special District major permit to redevelop the Princess Kaiulani’s Ainahau Tower and add a new tower operated as a mix of hotel, condominium and condotel units.

It also approved Kyo-ya’s plan, which was detailed in a 2009 draft environmental impact statement, to replace the eight-story wing of the Moana Surfrider with a 26-story hotel and condo tower on Waikiki’s shoreline. However, in 2015 the Hawaii Supreme Court ruled that the city should not have approved a zoning variance for the Moana Surfrider portion of the redevelopment.

Takamasa Osano also took back control of his family business from Cerberus Capital Management LP in 2014, prompting Kyo-ya to ask the city to extend its building permit deadline to August 2019. It also provided an opportunity to align the project with the family’s longer-term preference to operate full-service hotels, said Yasuhiko Ishikawa, Kyo-ya financial manager.

“Once you do a condominium, you are basically selling the land, and it’s piecemeal. Mr. Osano wants to be a responsible steward to manage the land for the future,” Ishikawa said.

Waikiki Neighborhood Board member Kathryn Henski said she preferred the proposed changes to Kyo-ya’s earlier proposal. “Sometimes it’s worth waiting,” she said.

The news is exciting for Waikiki, which hasn’t see a new hotel tower since the Halekulani’s 1987 opening of the Waikiki Parc Hotel, said Keith Vieira, principal of KV & Associates Hospitality Consulting.

“Nobody builds new completely full-service hotels now because they are typically too expensive for most owners, who are looking for a five- to seven-year flip,” Vieira said. “You need a longer-term investment position like Kyo-ya has to make it work.”

Joseph Toy, president and CEO of Hospitality Advisors LLC, said a new, modern hotel would continue needed improvements to Waikiki’s hotel inventory, most of which was built in the 1960s and 1970s.

“This was an underpositioned property. The changes will create more value along the central corridor of Kalakaua Avenue and continue the rejuvenation of Waikiki,” Toy said. “It’s going to be great for the destination.”