The opening of Espacio in Waikiki caters to Hawaii’s strong luxury hotel market

Hawaii visitors may be spending less per day; however, that doesn’t mean the luxury market isn’t thriving.

The opening of Espacio, the Jewel of Waikiki, slated for Sept. 7, is proof investors aren’t too bothered by a 3% midyear drop in daily tourist spending statewide, which fell to $196 during the first half of the year. They are banking on the expectation that luxury guests will continue to splurge on Hawaii vacations.

Espacio’s Japan­ese-based owner, Kowa Waikiki LLC, purchased the 88-unit Waikiki Beachside hotel for $25 million and spent $50 million to convert it into an ultraluxury suite hotel with only nine units. To stay in one of those units will cost you $3,000 to $10,000 per night in what is technically an off-beach property.

The project, which is nearly complete, turns Espacio into the state’s most expensive renovation per unit for a hotel and one of the most expensive all-suite properties. The remodel, which incorporates top materials from around the world, including Italian marble, Moroccan metalwork and hand-quilted Stearns &Foster mattresses, cost nearly $5.6 million for each suite.

While such a costly remodel is unusual, luxury hotel data suggests Espacio investors aren’t necessarily taking a leap of faith. At the midyear point, occupancy for all hotel categories had dipped, save for the luxury market, which was flat, and the upper upscale market, which grew.

Through the first six months of the year, the luxury market’s average daily rate dipped less than 1% to $560, and its revenue per available room, whether occupied or not, dropped just over 1% to $429, according to a hotel report from STR, a data and analytics specialist. Occupancy was flat at nearly 77%.

In June, Hawaii’s luxury market was even more robust. Occupancy was almost 81%, a nearly 7-percentage- point occupancy gain, the highest by category in the state by far. The luxury market’s June average daily rate rose 2% to $548, and revenue per available room increased by 10% to $443.

“We’ve had this run of a great economy where a lot of wealth has been created. Even though we are seeing a slowdown in Hawaii’s hotel market, the people that can afford such a buy won’t be impacted,” said Joseph Toy, president and CEO of Hospitality Advisors LLC. “This renovation will substantially change the use of the property. It will be watched by other investors to see how deep the slice is for the upper tier of the suite market.”

Aqua-Aston Hospitality already has cut its teeth on the all-suite hotel product in Waikiki on its Aston Waikiki Beach Tower, which is less than a block away from Espacio. The beach tower, which typically rents two-room suites for $700 to $1,000 nightly, is well known for hosting celebrity guests. But Ed Skapinok, Aqua- Aston Hospitality senior vice president of sales, marketing and revenue, said Espacio is designed to go beyond that experience.

“There really isn’t anything like it. Our guests will have access to very exclusive, very high-end service. The views are spectacular — the only thing in the way of the ocean is a banyan tree,” Skapinok said. “We’ve had a lot of interest from travelers from Japan and the U.S. West Coast.”

Skapinok anticipates Espacio guests will be so comfortable that they’ll even keep the property rented as a home base while they explore the neighbor islands. Units, which are approximately 2,250 square feet and span entire floors, come with concierge, butler and car service. Each room has an iPad and Bulgari amenities. For a fee, guests can ensure their refrigerators are stocked with all their favorite foods.

Private chefs are available to come cook in their rooms or on a shared rooftop deck that overlooks an infinity pool with a dragon tiled into its floor.

The hotel also is opening a new restaurant, Mugen, which will be run by chef Jason Yamaguchi. The property has an extensive and costly list of wines — its most expensive is 2009 Chateau Latour Pauillac, which retails for $6,471. Its oldest bottle is a 1975 Dom Perignon that sells for a more affordable $5,511.