Aquarium contenders
• Differing concepts for a new aquarium (graphic)
By Andrew Gomes
Advertiser Staff Writer
Twenty-five miles apart, tucked next to harbors on O'ahu's picturesque south and west shores, two developers are dreaming about acrylic tubes, tropical fish and millions of dollars in business.
The visions of Jeff Stone of Ko 'Olina Co. and Marvin Suomi of Kajima Urban Development float on establishing a world-class aquarium in a major city that surely should have one.
But two?
Both Stone's proposal for an aquarium at the fledgling West O'ahu Ko 'Olina resort and Suomi's plan for the Kaka'ako waterfront are moving ahead aggressively, elevating concerns about whether they can coexist successfully.
"When these aquariums fail, it hurts all of us," said John Tighe, a 33-year industry veteran who recently joined Maui Ocean Center as general manager. "O'ahu deserves a real good, strong aquarium product, but in my mind, one aquarium. All you're going to do (with two) is cannibalize each other — hurting both of them to the point where you get into financial difficulty."
Stone and Suomi strongly disagree. They insist their plans are different enough and exciting enough to draw required numbers of visitors to maintain financial health.
Many details of each plan, which would use public resources, are still in formation, and it is not certain whether one or
both projects will be built. Yet both are advancing, with Stone's proposal to finance an aquarium with $75 million in state tax credits, and Suomi negotiating a ground lease with the state while trying to obtain legislative approval to issue $40 million in revenue bond financing.
Risks and benefits of the two proposals differ widely. One would be financed using corporate tax revenue to help create jobs on the Wai'anae Coast and stimulate hotel and time-share building at Ko 'Olina resort. The other would be financed with a mix of private equity, private debt, donations and tax credits to help the state create a residential, research and retail community on industrial waterfront land in Kaka'ako owned mostly by the state.
If both aquariums are built, Honolulu will be the only metropolitan area in the country where two major aquariums draw from the same residential and tourist-customer base, according to a national aquarium consultant.
Ko 'Olina and Kajima development team members, who have met twice and discussed their general plans, said they were making efforts to cooperate but also pushing ahead regardless of what the other does.
Stone would develop the Pacific Outdoor Aquarium, a 75,000-square-foot aquarium next to snorkeling lagoons. Visitors could swim amid coral and tropical fish separated by clear walls from sharks, barracuda and other creatures in the aquarium. They also could walk inside acrylic viewing tubes.
The Ko 'Olina aquarium also proposes an open-ocean pen for the Kewalo Basin Marine Mammal Laboratory, also known as the Dolphin Institute. The Waikiki Aquarium would not be moved as part of Stone's plan.
Suomi proposes building a 150,000-square-foot aquarium at the 'ewa corner of Kaka'ako Waterfront Park, about two miles from Waikiki. The roughly $120 million facility, which could be enlarged by a third for future exhibit additions, would replace the 24,615-square-foot Waikiki Aquarium, which is in support of Suomi's plan.
It also would be linked to a roughly 250,000-square-foot research complex expanding the University of Hawai'i Kewalo Marine Lab, the Kewalo Marine Mammal Lab and potential private research tenants.
Suomi emphasized that Kajima's aquarium would be geared primarily to research and education — unlike typical, entertainment-focused commercial aquariums that move people around on conveyer belts. Still, he allowed that tourist-resident attendance ratios likely would be similar to the Waikiki Aquarium, where 60 percent to 70 percent of guests are tourists.
"There's no doubt that we are going to be an attraction in our own right," he said. "This should be one of the world's most important aquariums. But it's going to be a different aquarium experience, I expect, from what Jeff Stone is thinking about ... . Between us, I believe that we are trying to cooperate on this front."
In November, before talking with Suomi, Stone was adamant that there was no room in the market for both aquariums, a view he has since revised.
"There is no battling aquariums — that's a fact," Stone said. "They are completely different types, and I think they'll complement each other. One is a marine science complex; it's not a tourist attraction. It's meant to link with the university in biomarine medicine and other aspects.
"Ko 'Olina will be an outdoor interactive Pacific aquarium, with components of a museum aquarium and education on an interactive basis, where you can touch and feel marine life."
Market sharing dilemma
Regardless of features and intentions, industry observers said it's clear a majority of tourists will go to one or the other aquarium.
"All you're going to do is divide that market up three ways (with Sea Life Park), and the market is not going to support that," said Tighe, of the Maui aquarium.
John Haeseler, senior associate with Washington-based Economics Research Associates, a consulting firm that has worked on numerous aquarium projects, said the two O'ahu plans have some product differentiation, but still would draw from the same market.
"I think the situation requires careful planning to avoid oversaturating the market," he said. "Otherwise, when development has been completed, there could be some blood on the floor."
Other observers, who point to several Mainland aquarium debacles that have cost private investors and taxpayers millions of dollars, said a careful examination is required of whether a plan for one aquarium on O'ahu, at $50 million to $100 million, would be financially viable — much less two.
In several U.S. cities during the past decade, the problem generally has been overly optimistic attendance projections that allowed developers to build expensive aquariums financed with large amounts of debt that could not be serviced with actual project revenue. Kajima has been involved in two such aquarium failures, in Tampa, Fla., and Long Beach, Calif.
Other factors in aquarium failures, experts said, are poor location and product quality. A few markets have had competing aquarium products, such as San Francisco and the area encompassing St. Paul, Minn.
In San Francisco, where a private developer built Underwater World in 1996 next to Fisherman's Wharf, city officials feared the publicly financed Steinhart Aquarium in Golden Gate Park would lose $400,000 in revenue the first year.
UnderWater World developer Tarlton Aquastar agreed to pay the Steinhart $200,000 a year for eight years starting in 1997, though the private aquarium failed to pay, and filed for bankruptcy in 1999.
In Minnesota, three aquariums within 120 miles of each other tried distinguishing themselves so as not to compete. One, UnderWater World at the Mall of America, went bankrupt. Another, the freshwater Great Lakes Aquarium in Duluth, was bailed out by the city. And the third, Discovery Bay at the Minnesota Zoo, struggled with operating losses.
"Unfortunately, there is a tendency to build aquariums much larger and grandiose than the business model will support," said Tighe, a consultant in Cincinnati, where a profitable 100,000-square-foot aquarium was built in 1999 for $40 million.
Successful ventures
Tighe cites several examples of financially successful aquariums, including for-profit Ripley's aquariums in Tennessee and Myrtle Beach, S.C., as well as private nonprofit aquariums in Boston, Baltimore and Monterey Bay.
In general, successful major aquariums either have kept costs down and used little or no debt financing, or they have giant philanthropic benefactors.
On Maui, the 5-year-old, $22 million park-like aquarium with 1 million gallons of seawater tanks is profitable, with 380,000 visitors a year, Tighe said.
An average of 340,000 people have visited the Waikiki Aquarium in the last five years. Attendance at Sea Life Park has averaged roughly 400,000 visitors in recent years, falling to about 315,000 in the last two years because of Sept. 11 and road closures.
Wayne Neilsen, Sea Life Park general manager, said he embraced new O'ahu attractions, including a major aquarium, but couldn't fathom the need for two.
"What I have to question is do we, the island of O'ahu, really want to make a huge investment into what I think are two hugely overlapping facilities that are so close together?" he said. "I think we have to look at that long and hard."
A 1998 state-commissioned analysis for a Kaka'ako aquarium projected that after the first year, roughly 775,000 people would visit the attraction annually, including 600,000 tourists, generating a $4.6 million average operating surplus each year for the first 10 years.
The analysis by California-based Lyon Group with assistance from PricewaterhouseCoopers was predicated on the aquarium replacing the Waikiki aquarium, and did not factor a second major aquarium on O'ahu. It concluded the aquarium had to be, among other things, a "must-see signature visitor experience" to succeed in the marketplace.
The study estimated aquarium development costs at $36.6 million for a 61,000-square-foot facility, to $60.2 million for an 86,000-square-foot facility, excluding land and financing costs.
A Kajima representative said the company had a preliminary feasibility analysis that needed to be updated. A Ko 'Olina representative said it was too early in the conceptual phase to produce a study projecting attendance and revenue for the Pacific Outdoor Aquarium.
Reach Andrew Gomes at agomes@honoluluadvertiser.com or 525-8065.
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The aquarium business
Proliferation of big aquarium developments since the late 1980s has led to growing numbers of project successes, financial disasters and industry attendance. With little let up in aquarium construction plans, industry experts said more of the same can be expected.
Possible future aquariums
According to the American Zoo & Aquarium Association, development plans around the country could produce 31 aquariums in 19 states, though some have not progressed beyond the conceptual stage. Listed below are a few of the more advanced plans.
Tucson, Ariz. • Sonoran Sea Aquarium, a roughly $30 million, 70,000-square-foot aquarium. According to a 1999 annual report by the project's nonprofit sponsor, financing called for $10 million in tax-increment money, $10 million in debt and $10 million in private contributions. Attendance was estimated to stabilize at 860,000 a year.
Atlanta • Georgia Aquarium, a 250,000-square-foot aquarium to be financed with a $200 million donation from a foundation established by Home Depot co-founder Bernard Marcus. Land for the project is being donated by Coca-Cola Co.
New Bedford, Mass. • New Bedford Oceanarium, a 140,000-square-foot, $130 million aquarium to be housed in a converted electric power plant. Financing is primarily being sought from the government (about $60 million in federal tax credits plus another roughly $20 million in federal money). State contributions total more than $3 million. Private donations are being sought for the balance. Annual attendance is projected at 1.1 million.
Salt Lake City • The Living Planet Aquarium, an estimated $69 million 90,000-square-foot aquarium, has struggled for nearly two years to raise private donations to pay for the project.
St. Louis • The World Aquarium, a $55 million project, was called off late last year after a developer failed to produce $200,000 in startup capital for the project. The city of Richmond Heights planned to issue another request for proposals.
Aquarium failures
The proliferation of aquariums in the past decade have led to several failures. A few are summarized below, including two involving Kajima Corp.
Denver • Last April Colorado's Ocean Journey declared bankruptcy after failing to make payments on about $60 million in bond debt. Developers of the 107,000-square-foot facility, which opened in June 1999 at a cost of $94 million, had "conservatively" projected 1 million annual visitors, though only 800,000 were needed to break even. Attendance in 2001 was 742,554.
Tampa, Fla. • An affiliate of Kajima Corp. helped develop the Florida Aquarium, a 152,000-square-foot facility that opened in 1995 at a cost of $84 million financed by bonds sold to private investors. A feasibility study by accounting firm Coopers & Lybrand projected about 1.8 million annual visitors, but severe attendance shortfalls forced the City of Tampa, which had agreed to guaranty the bonds, to assume the debt and cover hundreds of thousands of dollars in operating shortfalls since.
Long Beach, Calif. • Kajima also was involved in the development of the Aquarium of the Pacific, which required a government bailout. The 156,000-square-foot aquarium was forecast to draw at least 2 million visitors a year, according to a Coopers & Lybrand market study. But the $117 million project, completed in 1998, fell short of projections and the city, which had agreed to help pay for debt-service shortfalls, issued municipal bonds to bail out the aquarium, which could require $2 million in taxpayer money this year.
