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The Honolulu Advertiser
Posted on: Monday, October 14, 2002

Kona Lagoon Hotel may be torn down

By Timothy Hurley
Advertiser Staff Writer

KAHALU'U, Hawai'i — It's a graffiti-covered, boarded-up monstrosity — an eyesore that belies its multimillion-dollar shoreline setting in the heart of the Keauhou Resort.

The Kona Lagoon Hotel never fulfilled its potential, leading some to believe it was cursed from the start.

Jeff Widener • The Honolulu Advertiser

Some people think the Kona Lagoon Hotel was cursed from the start. Surrounded by ancient temples and archaeological sites, it was built on the dwelling place of supernatural twin sisters, 'aumakua who took the form of lizards, according to Hawaiian legend.

Security guards hired to watch the property when the 462-room hotel closed in 1988 were frightened at night, said Joe Castelli, who lives at the neighboring Keauhou Kona Tennis and Racquet Club.

"They told me that they would see lights up there and hear Hawaiians singing and talking," Castelli said. "...But when they got there, they didn't find anything. So they said they just didn't go anymore."

Whether or not the property is cursed, it's true that attempts by landowner Kamehameha Schools and its for-profit subsidiary, Kamehameha Investment Corp., have failed to find a lessee.

Now it appears Kamehameha may be on the verge of razing the building. The company hired Wilson Okamoto and Associates to study ways to demolish the structure. According to reports last month, the Honolulu engineering consultant was assigned to come up with a plan.

G. Rick Robinson, senior asset manager with Kamehameha Schools, said no decision had been made on what to do with the hotel. Information was still being gathered for any proposal to be presented to the trustees.

Salvaging the seven-story structure may not be an option.

"The small room sizes just don't fit into today's world," Robinson said. "We've gone through lots of cost surveys and gone through lots of due diligence."

Robinson declined to discuss further details about the fate of the hotel, referring calls to Kamehameha Schools spokesperson Kekoa Paulsen, who did not return phone calls last week. Officials at Kamehameha Investment Corp. referred all inquires to Robinson.

But the buzz in the community is that the trust is considering transforming the site into a cultural park or using it partly to develop a school.

Park idea welcomed Wayne Sterling, general manager of the Ohana Keauhou Beach Hotel, neighboring the abandoned hotel, said he had heard the building was coming down to make way for a cultural park, along with the restoration of the area's archaeological sites.

"We would love it," he said. "Anything is better than the eyesore."

Kamehameha officials have attributed the hotel's unfortunate condition largely to a complicated history of ownership struggles and management changes.

Built in 1975, the hotel was popular with local folks for its lively restaurants, bars and disco. The building's arrow shape gave most of the rooms ocean views.

But occupancy targets were never reached, and owner Kona Hawaiian Associates went bankrupt. The hotel closed in 1988 after Azabu USA bought the lease for $23 million and announced plans to spend $65 million on a plan to combine it into a single resort with neighboring Keauhou Beach Hotel.

Azabu wanted an artificial beach and breakwater in front, but community opposition beat that proposal back.

Several years later, it obtained permits for a scaled-down project. But by then the Japanese economy had collapsed, leaving Azabu crippled and incapable of following through. Although the company continued to seek permit extensions until the end of 1993, it simply walked away from the lease in 1995.

Since then, managers of the property have been unable to find investors willing to refurbish the hotel.

Meanwhile, neighbors have witnessed the decay. They've seen it attacked by vandals, gutted by fire and occupied by the homeless. Time and neglect left it in shambles.

Castelli said neighboring homeowners wish something, anything, could be done with the derelict structure because of its negative effect on property values.

The Kona-Kohala Chamber of Commerce has been urging Kamehameha to do something with the property for years, said Marni Herkes, former president of the chamber.

"It does no good for the business community to have this deteriorating property in the middle of the Keauhou Resort," she said.

John Michael White, president of Hawai'i Land Co., said he hoped Kamehameha would do everything possible to save the building for a hotel, because it might be impossible to replace if anti-development forces dig in.

Calling the Keauhou Resort "Hawai'i's biggest sleeper," White said it had as much potential as a destination resort as any place outside of Waikiki.

Resort potential

"It's beautiful — similar to the resorts of the Riviera, how the mountains come down to the sea," White said. "Most resorts in Hawai'i are built on flat coastal plateaus. But here, with the mountains and the beautiful bay, the views are just overwhelming. It's the most underrated area in Hawai'i."

In order for Keauhou to blossom, he said, it needs a critical mass of hotel rooms, which weighs the resort's other properties down. Occupancy never has been spectacular at the Keauhou Beach Resort, he said, and the nearby Kona Surf Resort closed two years ago. (Koa Hotel LLC bought the hotel in foreclosure and is planning $40 million in renovations with the aim of reopening in 2003.)

His advice to Kamehameha: Look at the big picture to enhance the overall success of the resort. Losing money in the short run may be necessary to ensure long-term viability, he said.

Reach Timothy Hurley at thurley@honoluluadvertiser.com or (808) 244-4880.