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The Honolulu Advertiser
Posted on: Monday, October 22, 2007

Kahala Hotel upgrades aim for renewed glory

By Andrew Gomes
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Charles Sweeney, the chairman of a partnership that bought the Kahala Hotel & Resort, said out-of-date guest rooms were a big reason why the hotel lost its AAA five-diamond rating late last year. A three-year, $50 million renovation project will overhaul the iconic resort by 2009. "This isn't painting and carpet and some wall coverings," Sweeney said. "It's not a face-lift. What it needs is an owner-operator that really cares. This is a very special place."

Photos by REBECCA BREYER | The Honolulu Advertiser

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Hawaii news photo - The Honolulu Advertiser

The 343 guest rooms at The Kahala Hotel & Resort will be stripped of their plantation decor and replaced with a more contemporary feel.

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Hawaii news photo - The Honolulu Advertiser

Guest rooms at The Kahala will get new floors, 40-inch flat-screen TVs, iPod clock radios and cordless phones.

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A little more than a year ago during a stay at The Kahala Hotel & Resort, Charles Sweeney plunged a floor of guest rooms into darkness by plugging a coffee pot into the electrical outlet in his room.

As the chairman of a partnership that had then just bought the now-43-year-old O'ahu luxury hotel, Sweeney knew the property needed improvements, but the blackout underscored how extensive a renovation would be necessary to restore The Kahala's lost prestige.

The regal, oceanfront hotel and popular local wedding spot at one time regarded as Hawai'i's most luxurious vacation destination had indeed seen better days.

"It was a little tired," said Joseph Toy, president of local hotel industry consulting firm Hospitality Advisors LLC.

Today, a $2.5 million electrical system upgrade and four floors of renovated rooms are ushering in the beginning of what Sweeney said will be a gradual grand renewal of what had been, until last year, O'ahu's only AAA Five Diamond hotel.

The hotel, which hosts about 800 weddings a year and features daily room rates from $395 to $4,000, is staying open during its three-year, $50 million upgrade that will replace everything from linens to the laundry room.

Well, not exactly everything. Antique lobby chandeliers and the dolphin lagoon are among some items that will remain at the stately, yet relaxed hotel built on 6.5 acres next to Waialae Country Club.

Among coming changes are renovations of the pool, lobby and ballrooms as well as additions such as a 14,000-square-foot spa and expanded wireless Internet access.

FOCUSING ON ROOMS

The hotel's 343 rooms, however, are the main focus of the improvement plan, accounting for $30 million of the $50 million in estimated work, according to Sweeney, chairman of Honolulu-based Trinity Investments LLC, which through an affiliate paid $176 million for the Kahala Hotel in November 2005.

Each room with its elegant plantation decor is being stripped to its structural bones and reappointed in more contemporary tony fashion.

Old teak parquet floors are being replaced with Brazilian walnut, or ipe. Other features include 40-inch flat-screen TVs, iPod clock radios, cordless phones and cappuccino makers that won't turn out the lights.

Sweeney said the rooms, which hadn't been significantly updated in 10 years, were a big reason the hotel failed to achieve AAA's top rating late last year after four years on the five-diamond list.

The Kahala had been one of only four Hawai'i hotels with the designation, and now is one of 11 hotels in the state, including Waikiki's Halekulani, with the four-diamond rating.

Sweeney said his goal is for The Kahala to reattain a higher level of quality.

"This isn't painting and carpet and some wall coverings," he said. "It's not a face-lift. What it needs is an owner-operator that really cares. This is a very special place."

THE PLACE TO BE

When it opened in 1964, the then-Kahala Hilton with its dolphin lagoon and relatively large 550-square-foot standard rooms established itself as Hawai'i's premier luxury vacation stop for world leaders. Guests included President Nixon, Emperor Hirohito, Queen Elizabeth II and King Hussein.

So many celebrities also coveted the Kahala Hilton as the place to be performers from John Wayne to Bette Midler to Michael Jackson that the resort was nicknamed Ka-hollywood.

Over the decades, more grandiose and luxurious Hawai'i resorts were developed, particularly on the Neighbor Islands, which diluted the prominence of the Kahala Hotel to one among Hawai'i's best.

But the Kahala Hotel also has endured periods of decline and renewal under four owners over four decades.

A HIGH POINT AND SOME LOWS

Perhaps the low point for the Kahala Hotel was in the early 1990s when a dispute over ground lease rent forced William Weinberg to sell the hotel to Japanese commodities executive Katsumi Iida and local developer Bill Mills in 1993 after years of deferred maintenance.

The dispute involved how much Weinberg had to pay landowner Kamehameha Schools in lease rent. Iida's Kahala Royal Corp. paid about $54 million for the hotel, and in 1995 made Hong Kong-based hotel operator The Mandarin Oriental Group a 40 percent partner to help finance a $75 million renovation completed in 1996.

The 1996 upgrade included renovating rooms, expanding banquet facilities, converting five guest rooms into spa treatment rooms and creating Hoku's restaurant in place of a shuffleboard court.

Under the Iida-Mandarin partnership, the hotel attained its coveted five-diamond rating. But in recent years, operations strained as Iida's business empire crumbled.

Iida was president of the commodity futures trading firm Tokyo General Corp., which failed in 2004. His investments in other businesses, including Hawai'i hotels, were cited in Japan press accounts as playing a part in Tokyo General's failure, which led to bankruptcylike proceedings.

Under a work-out deal, Mandarin sold its stake in the Kahala Hotel to Iida's firm that then sold the property to Trinity.

'RENEWED COMMITMENT'

Toy of Hospitality Advisors said the hotel over the past few years hadn't lost much of its market position, but deferred maintenance issues were building up.

"It continued to be a grande dame, iconic hotel but with certain issues that would have to be fixed at some point," he said.

Toy believes Trinity should prove a good steward of the hotel because of the company's local roots and experienced leadership in the lodging industry.

"With Trinity coming in, it's a renewed commitment for the property," he said.

Sweeney, 68, is regarded as one of the hotel industry's modern visionaries. The New York native who now resides in Napa, Calif., started his career as a management trainee with Marriott in 1961 in Washington, D.C.

Later, Sweeney joined Amfac one of Hawai'i's Big Five companies and became president of the company's hotel business on the Mainland and in Hawai'i.

In 1982, Sweeney left Amfac, entered the hotel development business and partnered with Robert Woolley, a Dallas hotelier generally credited with establishing the all-suite hotel business.

Woolley created the predecessor to the Embassy Suites chain, which he expanded with Sweeney's help through development that included two Maui hotels, the Embassy Suites Kaanapali in 1988 and the Moorish-styled luxury Kea Lani hotel in 1991.

After a falling out with Embassy Suites, Woolley and Sweeney formed a new brand of hotels called Crown Sterling Suites, which a public company bought in 1996 for about $500 million.

Sweeney co-founded Trinity's predecessor firm in 1996 with former Chris Hemmeter partner George Ruff and local attorney Jon Miho.

The company focused on improving distressed property acquired from Japan-based owners. One of the firm's moves was to buy the Kea Lani in 1998 from Japanese lenders who earlier acquired the hotel from Sweeney.

Other former Trinity holdings include stakes in Aloha Tower Marketplace, Harbor Court, Wailea 670 and three business hotels in Japan.

Today, Trinity owns three hotels: The Kahala, a recently opened Embassy Suites hotel in Mexico City, and a 100-villa luxury resort being developed in Cabo San Lucas, Mexico. Trinity also owns the mortgage on the Hyatt Regency Waikiki, which Hyatt is buying from financially troubled Azabu Buildings Co. Ltd.

Sweeney said that of all the hotels he's been involved with, The Kahala is the most unique because of its age, location and history.

"This is a magical place," he said. "It can't be replicated."

'GOING TO GET BACK OUR GLORY'

Trinity took over management from Mandarin in March 2006, four months after the hotel failed its AAA five-diamond inspection, and renovation work began this past March.

In July, the hotel completed work on the bottom four room floors in the hotel's 10-story tower, but hasn't publicized the changes. The next four floors are scheduled to be completed in mid-December. All physical renovations are scheduled to be completed by 2009.

"We're going to get back our glory," said Lorna Bennett, a guest services agent who started working at the Kahala Hotel 28 years ago. "We're going to be the new kid on the block, so to speak, even though we're over 40 years old."

Concierge Marion Sato, 33-year employee of the hotel, said she views the hotel as a big diamond. "When you cut another facet to it, there's another sparkle," she said.

Besides the room renovations, Trinity has rolled out several amenity programs, including a family package with nanny service, and a package catering to travelers with pets.

Trinity also ended third-party management of pool, security, spa and concierge services, said John Blanco, the former general manager of The Ritz-Carlton Penha Longa in Sintra, Portugal, hired to be managing director for The Kahala.

"With this level of guest experience, you want your own people," he said, adding that an important part of what enhances guest experiences at the hotel are longtime employees.

But the company also is spending a lot of money on things like Frette linens from Italy and new industrial laundry machines being installed in an expanded laundry facility on site.

One thing not being changed is managing the hotel without a major brand like Ritz-Carlton or Hilton. Sweeney, who has much experience self-managing hotels like Kea Lani, said the Kahala Hotel already has a well-established presence. "This is a landmark hotel," he said.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.