Outrigger envisions new face for Waikiki

By Michele Kayal
Advertiser Staff Writer

Outrigger Enterprises Inc.'s $300 million redevelopment plan for Waikiki will be one of the biggest in the area's history, razing some of the most dated shops and hotels and creating a retail and entertainment mecca, higher grade rooms and lavish open space in the very heart of Hawai'i's top visitor destination.

Artist's rendering of the recontruction project along Kalia Road. Group 70, Outrigger Enterprises Inc.

"We are returning to our roots in Waikiki," said Outrigger chief executive officer David Carey. "Outrigger will breathe new life into an important section of Waikiki, and we are doing it in a way that can restore the lure of Waikiki as a favorite gathering place for Island residents, as well as visitors."

Hawai'i's largest local hotel company said redevelopment of the 7.9 acres bounded by Saratoga, Lewers and Kalia roads will include demolition of seven existing structures and will be done in two phases.

Major transformation

The first phase, to begin in 2003, will concentrate on retail, and by the end of the project Outrigger will nearly double its Waikiki shop space to 75,000 square feet. The second phase, expected to break ground in 2006, will see the construction of a new 27-story, 890-room hotel where three small hotels stand.

The project, called Waikiki Beach Walk, may be the largest single redevelopment effort ever to take place in Waikiki. The building boom of the 1960s and 1970s created the resort through massive initial investment and new construction; the 1980s and 1990s saw acquisitions, a couple of new hotels, and upgrades to existing properties.

Over the last two years, several hundred million dollars have gone into private and public renovations in Waikiki, with a $95 million tower built at the Hilton Hawaiian Village and new high-end retail stores coming on line. But while renovations to date have involved a single property or space, the Beach Walk project will completely obliterate some existing structures and transform the entire neighborhood they occupy by 2010.

"You're talking about multiple properties and a large tract of land," said Murray Towill, president of the Hawai'i Hotel Association. "There obviously have been renovations of individual properties, but when you look at the scale of the project and how they're trying to change and upgrade, we really haven't seen something of this scale that occurs at one time before."

The most recent improvements have begun to undo decades of neglect in Hawai'i's No. 1 destination, and have started to transform it into a higher-end, more competitive vacation resort.

Outrigger's project, which has been a half-decade in the making, will capitalize on those changes, Carey said, and will aim to lure a visitor that is bypassing Waikiki for the Neighbor Islands or other leisure spots. In addition, the upgrades will cater to higher-end visitors that will become a larger part of Waikiki's base as the Hawaii Convention Center gains business.

The project's $130 million Phase One — $75 million of which will be retail development — will knock down the Ohana Coral Seas hotel, the Edgewater Lanais, used by Outrigger as office space, and the building that houses Carl's Jr. fast food restaurant. In their place will be low-rise retail and outdoor entertainment venues.

The new buildings will be set back more than 60 feet from the current street line, Outrigger executives said, creating an open air plaza with tropical foliage and water features, meant to conjure up the Waikiki of the 1960s, said Outrigger Properties chief operating officer Mel Kaneshige, when the International Marketplace and Queen's Surf drew locals and visitors together.

The Ohana Edgewater hotel, built in 1951 by Outrigger founders Roy and Estelle Kelley, also will be torn down in Phase One. A central lobby will be created on its plot that joins the Ohana Waikiki Village and the Ohana Waikiki Tower hotels. Over the lobby, two floors of ballroom and meetings space will be erected, and a pool deck will be put on top.

The two hotels, along with their across-the-street neighbor the Ohana Reef Towers, will receive substantial renovations, Outrigger executives said. The three hotels are expected to remain open during the renovation, executives said, and to retain the Ohana name.

Rates are expected to rise, Carey said, but he made no prediction by how much.

A pedestrian bridge over Kalia Road will link the Outrigger Reef on the Beach to the new complex.

Bigger, pricier hotel

Traffic on Lewers Street, which has become a thoroughfare for delivery trucks and tour buses, will be significantly reduced, Carey said, with trucks and buses diverted to an off-street porte cochere and loading areas for the hotels. Traffic may even be eliminated on part of the street, Carey said, to provide a vehicle-free pedestrian promenade. But, he stressed, such plans are still under discussion and must be worked out with city authorities.

Outrigger president and chief executive officer David Carey points toward Lewers, the street at the heart of a plan to reshape central Waikiki. Richard Ambo • The Honolulu Advertiser

Outrigger currently has nearly 3,100 hotel rooms in the Lewers Street corridor, and will boost that total by about 240 to roughly 3,340 by the project's end. During Phase One, 436 existing rooms will be lost, and 221 will disappear in Phase Two.

But the new Lewers Street retail is expected to bring in more revenue than the Edgewater and the Coral Seas hotels would have generated, said Eric Masutomi, Outrigger Properties director of planning.

The average daily rate at those hotels is in the low-$60 range, about $50 less than the average rate in Waikiki at the end of 2000.

Roughly 25 percent of Outrigger's total revenue in Hawai'i comes from retail operations, Masutomi said, and most of that is in Waikiki. He could not say how much more of the company's overall revenue is expected to come from retail after the redevelopment.

"It's already a pretty significant part," he said. "It will become a larger part."

Outrigger also will add parking spaces required by the city to accommodate its room and retail increase, Kaneshige said. Masutomi estimated a net gain of roughly 300 parking stalls.

Potential for timeshare

The company said all employees affected by the redevelopment will be transferred to other 'Ohana and Outrigger hotels as positions open. No employees are expected to lose their jobs, company officials said, and any reductions will be handled through attrition. Carey said he expects the additional retail development to create jobs in the long run.

Roughly 40 different businesses operate in the area, Carey said. The vendors and retail tenants in the area have been on month-to-month leases in anticipation of the redevelopment and will vacate as the properties close, Outrigger said. Carey said it was too early to tell which of them will return, and said those who have "the right kind of retail" would be offered the first opportunities.

The redevelopment also may propel Outrigger into a new venture, timeshare. The company is not currently in the timeshare business, but said it would be willing to explore that option.

Large hotel brands have recently launched time-share projects in Waikiki. For instance, the Hilton Hawaiian Village transformed its Lagoon Tower to timeshare several months ago and is planning another time share project in Waikiki.

Outrigger has been hashing over the redevelopment for five or six years. Carey said the company decided to move forward now because of more favorable conditions for financing and redevelopment.

He noted the improved interest in Hawai'i's investment potential, the recent improvements to the city infrastructure and in existing Waikiki hotels and retail centers, and plummeting interest rates. Carey said the project also has received interest from potential investors.

Specific plans for financing were unclear yesterday. Outrigger executives said financing is typically arranged as permits are obtained and plans are made firm. Carey suggested the company would consider a combination of institutional financing and potential partnerships. It was unclear how much cash Outrigger itself would invest.

As crowded and traffic-filled as some people may think Lewers Street is, the avenue and environs clearly have a devoted following. As Carey paused in front of the 'Ohana Reef Towers to show a group what the new construction would look like, a visitor listened from the back.

When Carey finished speaking, the visitor chimed in that he was glad the Waikiki Village and Waikiki Tower would not be demolished.

"My kids grew up going there," he said.