Redevelopment may spur a Waikiki renaissance

By Michele Kayal
Advertiser Staff Writer

Waikiki is in for what may be the biggest changes in its history, and the sweeping plans are expected not only to make the place look better, but to increase the overall importance of the destination by bringing higher hotel rates and customers willing to open their wallets a bit wider.

The Hilton Hawaiian Village's $95 million Kalia Tower project, which opened in May, is in the forefront of major redevelopments planned for resort properties in Waikiki. Advertiser library photo

But a wave of investment has already been rapidly pulling the resort along: the Hilton Hawaiian Village's $95 million Kalia Tower, opened in May, created 453 upper-tier rooms; DFS's $65 million Galleria offered a new family-oriented shopping experience; and the city's Kuhio Beach renovation has opened up more pedestrian areas.

Over the coming months, construction will continue on the Honu Group's 95,000-square-foot luxury retail complex at the 'ewa end of Kalakaua Avenue, set to open next year. And a total of nearly $100 million in renovations are planned at the Waikiki Beach Marriott Resort, the Renaissance 'Ilikai Waikiki Hotel, and the Hawaiian Waikiki Beach Hotel among others. Some hotel analysts predict the wave of renovation will go on for the next three to four years as properties continue to change hands.

The city, meanwhile, has its next phase of public improvement on the drawing board, this time on Kuhio Avenue. The city has set aside $800,000 over the next two years for planning, design and construction of a master plan for Kuhio Avenue that will widen the sidewalks, landscape the area, and create a more pedestrian friendly environment.

All of these changes, experts say, will add up to higher prices at hotels, new visitors, and a more competitive destination overall.

"It should help raise rates," said Joseph Toy, president of Hospitality Advisors LLC, who is also a consultant on the environmental impact statement being prepared for the Outrigger project. "We will see rates going back to where they should have been had they not deteriorated. Overall, it certainly will help the rates."

Toy and others are reluctant to predict how much rates might increase after the renovations, but in general, they said, renovated properties will be able to ask more, and that will allow other properties farther down the street to ask more as well.

The average price of a Waikiki hotel room at the end of 2000 was about $114 a night, according to Hospitality Advisors, compared to $139 statewide and $174 on the Big Island, which had the state's highest prices .

The changes are also likely to upgrade the demographic of Waikiki visitors, some said. Waikiki in general, and Lewers Street in particular, has attracted mass-market travelers, often on less expensive wholesale tours.

Mainland visitors to Waikiki have an average household income of $69,000 a year, according to the most recent available figures from the Hawaii Visitors & Convention Bureau gathered in 1998, compared to an average household income of $83,000 for Mainland visitors to the Neighbor Islands. Both groups average about 45 years old.

The average household income of Japanese visitors to Waikiki is 8 million yen, or $64,000. The average household income of Japanese visitors to the Neighbor Islands is 8.45 million yen, or $67,600. From the Japanese market, Waikiki visitors tend to be in their late 30s, while Neighbor Island visitors are older than 45.

Over the years, the mix has shifted a bit, bringing more business class travelers, and more independent visitors who spend more. The changes coming on line are expected to shift that mix even further.

"It sounds like their target is going to be more of what we used to call DINKS (Double Income, No Kids), now they're GenXers," said Ron Cole, assistant professor of hotel and restaurant management at the University of Delaware, who has been bringing student study missions to Hawai'i since 1990 and will return again in January.

"Probably 25 to 45 (years old), not just honeymooners, but people who are looking for shopping venues besides just souvenirs, probably more upscale European groups, as opposed to lower-end tour groups that are looking for a seven-night $800 package," Cole said. "The groups with more disposable income, more families too, I would think."

Other destinations have had tremendous success in upgrading. In Miami, the Art Deco South Beach district underwent a mass wave of private investment in the mid-1980s to mid-1990s that turned what had been a haven for retirees known as "God's waiting room" into a place for the coolest of the cool where the average visitor is 41 years old.

In just the last five years, average room rates in Miami-Dade County have gone from $87 a night to $130 a night, said Bill Anderson, research director for the Greater Miami Convention Bureau.

"Because of what's going on in South Beach and the rates they're getting at those properties, it allows the others to ask higher rates," Anderson said. "Even in the first five months of this year, our average room rate is $104 a night in Dade County, compared to $101 a year ago."

The changes in Waikiki are unlikely to be as dramatic as those in South Beach, which had reached a legendary state of degradation, with most of the hotels in dilapidated condition and transformed into long-term lodging for fixed income retirees. But change is expected to inject new life into a Waikiki dangerously teetering through what the visitor industry calls "maturity."

"This is a way to make the product more appealing to younger consumers or consumers on their first visit who may want to come back," Cole said. "You can't ever escape the unplanned, overdevelopment that went on in the '60s and '70s once jet travel came in...But this will help restore some of the old Hawai'i look if that's what they're going for. Maybe it will show a return to some more sustainable development."

Correction: The average household income of Japanese visitors to Waikiki is 8 million yen, or $64,000. The average household income of Japanese visitors to the Neighbor Islands is 8.45 million yen, or $67,600. A previous version of this story had incorrect information.

Michele Kayal can be reached at mkayal@honoluluadvertiser.com.