HAWAII-With the local hotel industry experiencing its lowest numbers in four years, a Santa Barbara, CA investor has swooped in to pick up a historic property as its first island buy. Invest West Financial/Pacifica Hotel Co. has acquired the King Kamehameha’s Kona Beach Hotel for $32 million and has plans for another $25 million in upgrades. The buyers picked up the property from Hawaii-based HTH Corp.
Invest West is Pacifica’s parent company and the entity has a “tradition of buying underperforming hotels in good locations, renovating them and getting them back on their feet,” says Lori Keller, vice president of sales and marketing for Pacifica. “This hotel falls exactly into that model.”
While the Santa Barbara group is the lead investor, other players are involved in the acquisition. Those include: IWF LLC, a consortium of Hawaii investors and real estate investors Patrick Beach and Russell Geyser.
The 460-room hotel has two six-story towers, restaurants, shops and a historical element. “We look forward to further enhancing the valuable relationships that exist with both Ahuena Heiau Inc. and the Kona Historical Society,” said Pacifica Hotel Co. president Mike Barnard in a released statement. “We are dedicated to ensuring that the rich Hawaiian heritage of the area will be incorporated into our design plans.”
Developed in the 70s, the property saw limited renovations in the mid-90s, but is in dire need of significant upgrades, to bring it a more contemporary look, while maintaining its historical significance, which includes a museum area in the lobby and first floor hallway.
“We don’t intend to shut down the hotel, but instead close a tower or wing at a time,” Keller tells GlobeSt.com. “All of the guest rooms will be completely renovated, as well as the lobby and other public areas.”
The renovation will take place in phases, with some work already underway, but the major renovation is beginning in spring 2008. The hotel will remain open during the facelift. Also, according to the buyers, “Pacifica will honor existing union agreements and will retain King Kamehameha’s management staff.”
The buy comes at a time when the state’s hotel industry is mired in a slump. According to a recent report by Honolulu-based Hospitality Advisors LLC, the local market has been slowing for four years. Hotel occupancy rates dipped below 70%, to 69% for May. That figure is 6.5% below year-to-year numbers.
For the Big Island, where the property is located, hotel occupancy fell to 60.1%, a 7.2% drop from the same month a year ago. Interestingly enough, while occupancy rates fall, average daily rates are on the rise. Statewide, ADR grew 7% to $187.07 from May 06. On the Big Island, ADR rose to $187.30, a 5.7% uptick from a year ago.
Keller says the company doesn’t have any plans at this time to flip the property after renovation. As for additional Hawaii acquisitions, she says the company would be open to a buy if opportunities present themselves. “We are primarily a California coastal hotel company, but have a hotel in Florida and now one in Hawaii, so it really depends on finding the right property in the right market at the right time.”