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The Honolulu Advertiser

Posted on: Sunday, August 24, 2003

Time-shares leading rebound in construction

By Andrew Gomes
Advertiser Staff Writer

Under construction
Some of the resorts that are currently being developed


A Ritz-Carlton hotel
at Ko Olina Resort & Marina About 200 rooms — Construction is expected to begin in the second or third quarter of next year.

Marriott's Ko Olina Beach Club 90 rooms — Construction of the second phase of the 750-unit time-share project is to start in November 2004.

Hilton Grand Vacations Waikiki time-share 350 rooms — Hilton has not determined a construction timetable.

Kalia Tower at Hilton Hawaiian Village 453 rooms — Guest rooms have been closed since July 2002 because of mold. Most guest rooms are scheduled to reopen Sept. 1, but 72 units on six floors of the 25-story tower are to be converted to time-shares by December.

Outrigger's Waikiki Beach Walk, 890 rooms — Tentative plans call for groundbreaking in 2006 or later for a 27-story hotel/time-share tower, replacing 436 obsolete hotel rooms in the Lewers Street area.


Westin Kaanapali Ocean Resort Villas,
256 rooms — The initial 103-unit phase of the time-share project is scheduled to open Sept. 22. Another 153 units will be built, opening in September 2004. A secondary phase will include more units scheduled to open in September 2005.

Maui Marriott Resort and Ocean Club, 312 rooms — Conversion of Maui Marriott hotel rooms to time-share villas is ongoing, with 42 villas scheduled to be finished by October, bringing the total number of villas to 196. Another 275 hotel rooms are scheduled to undergo conversion to 116 villas starting in May 2005, subject to market conditions.

Kahului Airport Hotel up to 140 rooms — The project is in development stage formulating construction plans. Construction is expected to begin around the middle of next year.

Big Island

Kona Surf Hotel,
535 rooms — The hotel has been closed since June 2000; renovation is scheduled to begin within 30 days, with the hotel reopening in May as the Sheraton Keauhou Resort & Spa.

Kona Hawaiian Village, 270 units — There are 61 units completed in the first phase; more information was not available from the developer.


Starwood Vacation Ownership project in Princeville 250 rooms — Construction will be in two phases, with the first phase starting next spring.

Kukui'ula Bay Resort, 64 rooms — The developer recently filed a zoning application for a 64-room hotel. Another 123 units are planned for residential use, though the developer wants to give owners an option to put units into a hotel rental program. Construction is probably two years away.
After a 2 percent decline in the number of visitor accommodation units in Hawai'i last year, the industry is working to increase its inventory in step with a slow but accelerating tourism recovery.

Construction scheduled to begin or be completed this year or next year would add at least 1,700 hotel and time-share units to the market, overcoming the 1,421-unit loss last year that represented the second biggest decline in more than 30 years.

Beyond 2004, another 1,700 or so hotel and time-share units are scheduled for construction, though given the unpredictable nature of the state's tourism business, such projects may not move forward as envisioned today.

Leading the rebuilding are time-share operators who continue a vacation-ownership trend driven by giant hotel chains during the past few years in Hawai'i.

The restoration of the state's visitor plant in the next year is expected to include the reopening of a couple of shuttered hotels and the start of construction on at least two new hotels.

More hotel and time-share construction plans are in the works but are further off and could change, depending on world events, shifts in Hawai'i visitor arrival trends and financing markets.

"Obviously, as the economy picks up and people become more optimistic, you see increased opportunity," said Murray Towill, president of the Hawai'i Hotel Association. "I think we are going to see some increase, but I don't think we're going to see dramatic increases at all."

Hotel owners and developers are looking at a market where overall visitor arrivals this year are expected to be near flat, with the second half of the year showing better growth, followed by a projected 8.4 percent increase, according to the University of Hawai'i Economic Research Organization.

Last year, the number of Hawai'i visitors rebounded slightly, by nearly 1 percent, after a 9 percent drop in 2001.

The industry slump resulted in the closing of some visitor accommodations, while other vacation rentals were converted to long-term residential use, according to a report by the state Department of Business, Economic Development & Tourism.

The report said the number of visitor accommodation units fell last year from 72,204 to 70,783, a loss of 1,421 units representing a 2 percent drop.

The budding rebound will primarily fill niches, such as the growing time-share market statewide. In addition, there will be a business-oriented hotel near Kahului airport on Maui.

Development momentum also is accelerating at Ko Olina Resort & Marina where a tax-creditifinanced aquarium is being used to attract hotel and time-share developers.

Jeff Stone, master developer of Ko Olina, said he expects to have permits to build the $75 million aquarium in January. Then he expects construction of hotel and residential project by Ritz-Carlton to follow within six months, roughly in the second or third quarter of next year.

"Everybody wants to be certain that the attraction goes in," Stone said. "It's a huge component."

Marriott Vacation Club also plans to build new time-share accommodations at the West O'ahu resort, with work on a 90-unit second phase scheduled to begin in November 2004. Its 103-unit first phase opened earlier this year.

On the downside, Outrigger Hotels & Resorts may actually reduce the number of hotel rooms next year with plans to raze 436 rooms, some of which are not in use, to build a complex with retail, entertainment, ballroom and meeting space.

The company, which announced its plan two years ago and has since assembled property required for the massive redevelopment that would include the addition of a 890-room high-rise hotel, has been reassessing its plans and development schedule in light of the expiration of a state hotel construction tax credit.

Outrigger officials did not respond to requests for an updated development timetable, though the company has suggested the project could be delayed and modified.

Bruce Coppa, managing director of Pacific Resource Partnership, an alliance between contractors and Carpenters Union Local 745, said that while the hotel construction tax credit might have expedited more building, competitive pressures will be forcing hotel owners to upgrade properties.

Joe Toy, president of industry consulting firm Hospitality Advisors, said the economics for building large, stand-alone, full-service hotels haven't been good for about 10 years.

Time-share developments, on the other hand, are much more attractive because of the large up-front returns generated by sales and the flexibility to use unsold units as hotel rentals, he said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.