Aquarium deal spurs Ko Olina development

By Andrew Gomes
Advertiser Staff Writer

The approval of a $75 million tax credit for construction of an aquarium in the resort community of Ko Olina is seen as the catalyst for fully developing an area that until recently stood as an arid symbol of 1980s over-enthusiasm and undercapitalization.

Jeff Stone, who has been trying to revive Ko Olina since 1998, lobbied governors and legislators for more than two years to win support for the aquarium tax credit. He has said the aquarium, and the projects it will draw to the West O'ahu community, will generate $700 million in construction projects, 2,000 permanent jobs and an average of 1,000 annual construction jobs for the next 10 years.

Last week, Stone said about $500 million of the anticipated projects, including the aquarium, should break ground in the first quarter of next year.

Among the projects being discussed:

• A hotel and two hotel condominiums, worth about $350 million.
• A combination 250-room hotel and 150-room condominium building for private residences with hotel service in front of Lagoon No. 2. It is expected to be managed by The Ritz-Carlton Hotel Co., which earlier this year signed a letter of intent to be part of Ko Olina.
• A condominium hotel inland amid the existing golf course. Estimated cost: $150 million.
• A $25 million commercial village with retail shops and restaurants built as part of the aquarium and swimming lagoon project.

The aquarium project has created momentum for those other developments, Stone said. "I am going to make all my commitments as fast as I can because the window of opportunity is there."

If even a portion of the projects are completed, it would be the second resurgence in development for the master-planned resort originally envisioned to have been nearly finished by now.

"It's a very promising thing that is happening," said Leigh-Wai Doo, a former city councilman who helped approve planning for Ko Olina in the mid-1980s and has long expected greater development of the area and job-growth benefits.

"By the time we're old men, it'll be a wonderful, matured ... destination resort," said the 56-year-old Doo, who occasionally stayed at the J.W. Marriott Ihilani Resort & Spa, which stood for nearly a decade as Ko Olina's only hotel, and swam at the underused lagoons completed 10 years ago by the original developer, Herbert Horita.

Observers said if Stone can deliver these projects it will bring Ko Olina much closer to the elusive "critical mass" needed to make the resort a success.

But the same observers note that even with the additional development, Ko Olina still has long way to go to becoming a mature visitor destination.

"I think they're maybe not quite halfway there, but pretty close," said Sen. Colleen Hanabusa, D-21st (Nanakuli, Makaha).

Hanabusa, who represents the area and was a sponsor of the aquarium tax-credit bill, said the anticipated Ko Olina projects will bring more employment and visitors to the Leeward Coast and build momentum for further development.

"It'll move them along quite a bit ... but we've still got a lot more to do to make that the true economic engine that we need to have," she said.

Stone, who estimates that the current round of projects won't be complete until 2007, is well aware of the long-term nature of building out Ko Olina.

He said he lost commitments from Hilton Hotels Corp., Outrigger Hotels & Resorts and Canadian time-share operator Intrawest Corp. last year when then-Gov. Ben Cayetano vetoed the tax-credit legislation.

"It was very discouraging," Stone said of the one-year delay and lost commitments that he said he is positive he can regain later.

"To go into Ko Olina you have to think five to 10 years out," he said. "I can't tell you today that this is the most successful resort in the Islands. I can tell you I think we can be one of the most successful resorts in 10 years."

Tourism industry consultant Joseph Toy, president of Honolulu-based Hospitality Advisors LLC, said the momentum is obviously building for Ko Olina.

He said brand names such as Marriott International, which manages the Ihilani resort and recently finished one of four phases of a time-share resort nearby, and Ritz-Carlton, a Marriott-owned company, add credibility to the resort.

He said Marriott's time-share project did more to define and re-establish Ko Olina as a visitor destination than the aquarium can, but that the aquarium will enhance the resort and help establish what will ultimately become the property's anchor: mid-rise ocean-front hotels.

As originally envisioned in the mid-1970s, Ko Olina was to be a $2 billion resort with 8,000 rooms in 10 hotels, a golf course, marina and 3,000 residential homes.

Horita completed one 490-room hotel, four lagoons, a golf course and 280 townhomes before investors and Hawai'i's economy pulled back in the early 1990s and real estate investment evaporated. With the exception of the hotel and golf course, the area remained largely a dry landscape of scrub brush and deserted lagoons until construction began on the Coconut Plantation townhouse project in 2001 and the Marriott time-share project in 2002.

Five years ago, Stone revised the master plan toward lower density development and in the past four years has added a marina and brought in two residential projects and Marriott's massive $300 million, 750-unit time-share to the resort.

Robert Calhoun, regional vice president of sales and marketing for Marriott Vacation Club, said the company committed to Ko Olina early in 1999 and thankfully has had success on its own. But the aquarium will help, he said.

"In our business of selling time-share, the more people that are in Ko Olina Resort — either by way of being a hotel guest or by visiting an aquarium or for any reason — the bigger the audience that I have a chance to talk to and sell a time-share to," he said.

Calhoun said Marriott plans to start construction of a second time-share phase next year, but that the aquarium and additional hotels could help increase sales and advance construction of the third phase.

"I look out into the future and the further out I look the more excited I become," he said. "As more people are going there — for whatever reason: to visit the aquarium or check into a hotel room — more and more things will follow ... additional restaurants, additional attractions, additional hotels.

"It's a shared vision that Ko Olina will in time, as it develops and as it matures, certainly become another huge destination like Wailea or Ka'anapali Beach where it's perceived as a true destination with golf, with tennis, with a marina and quality accommodations, restaurants and activities."

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

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