New Zoning Laws To Ease Waikiki Hotel Development

A new era of redevelopment that could transform dozens of older budget properties into business-friendly hotels may be on the horizon for Waikiki because of recent amendments to the district's zoning and density laws.

Hotel expansion and renovation in Waikiki has been subject to strict regulations designed to regulate business development and changes effected by hoteliers. The rules were enacted in 1976 when the area was designated the Waikiki Special Design District. Further controls came in 1992 with a moratorium on new hotel development that capped the number of rooms in the district at the current 32,800.

While the room-count limit is still in place, the city and county council of Honolulu has amended some of the district regulations that will make it easier for hotel owners to renovate their properties or even replace them with entirely new buildings.

Under the revised laws, hotel owners now have the right to construct buildings up to 20 percent higher than the previous codes permitted, providing their redevelopment plans also allow for additional open space at the ground level. The council also terminated a regulation that hotel renovations cannot exceed more than 10 percent of the property's overall value.

Other changes to the zoning laws identify areas in the district that may be used for mixed-use projects that could include hotels as well as other types of commercial development.

"These amendments open up the possibility for hotel redevelopment in Waikiki that simply couldn't happen before," said Joseph Toy, director of hospitality consulting for Coopers & Lybrand in Honolulu. "We may not see large-scale renovation immediately, but people will start to make plans."

The council's decision to pave the way for more hotel improvements is coming at a time when Waikiki, which currently has an average year-round hotel occupancy rate of 83 percent, sorely needs new first-class hotel rooms. Toy sees two factors intensifying this need: the opening of the Hawaii Convention Center in 1998 and the continuing popularity of Waikiki as a destination for Asian visitors.

"Both the Asian market and the convention market prefer mid- to upper-tier hotel rooms, and there may not be enough of them to go around," Toy said. "Increasingly, hotels will be under pressure to renovate in order to provide the kinds of rooms these visitors prefer."

David Dodge, president of the Waikiki Improvement Association, which strongly supported the amendments, agreed. "What is most likely to happen is that some hotel owners will tear down their aging properties, many of which date from the 1960s and '70s, and replace them with new buildings in which the guest rooms are far more spacious," he said. "Waikiki will have far more product to appeal to business travelers and Asian visitors."

Along with encouraging hotel improvements, the Special Design District amendments also will make Waikiki more visually appealing, Dodge said. The requirement that there be at least 50 percent more open space at the ground level means "buildings will be set back farther from the street with more landscaping, sidewalk cafes and other pedestrian-friendly features," he said.

Now that the amendments have been granted, the next major issue surrounding hotel development to surface in Waikiki is likely to be the cap on additional rooms. "The first hurdle has been crossed, but ending the moratorium is still up ahead," said Toy. "That won't be as easy."

While most business groups in Waikiki favor loosening the restrictions, they have long faced heated opposition from Waikiki residents. "At the same time Waikiki has evolved into a major resort area, it is still a residential community of 26,000," Toy said. "A real issue is hotel growth versus residents who are concerned about development density and being squeezed out."

Residents' groups are expected to provide formidable opposition to any discussion of ending the 1992 cap on hotel rooms. But, despite their objections, Toy believes it is "inevitable" that the cap eventually will be lifted. "Even with more upgraded hotel rooms, there still may not be enough to satisfy demand," he said. "We're at near capacity now, and we will have to have additional units to support the convention center."

Should the cap be lifted, the problem remains of where additional hotels can be built in the already crowded district. Toy believes one likely spot will be opposite the Hawaii Prince hotel near the Ala Wai canal. The land, owned by Outrigger Hotels, was originally proposed as a site for the convention center.

At the same time, future hotel development also is expected in areas outside of Waikiki, which also could support the convention center or at least divert some travel traffic from Waikiki. The Aloha Tower marketplace complex on the Honolulu waterfront has been zoned for a 400-room hotel, and the vicinity of Honolulu International Airport is zoned for up to 600 additional hotel rooms.

Toy believes increasing hotel demand also could breathe new life into the Ko Olina Resort outside Honolulu, a waterfront development originally designed to include up to seven hotels with 4,000 rooms. Plans for the resort, which currently has just one hotel, the 386-room Ihilani Resort & Spa, have been stymied for several years.

"Ko Olina has been stalled because Japanese financing has dried up and also because Hawaii is only starting to come out of its tourism recession," Toy said. "However, all the infrastructure is in place at Ko Olina, and the convention center and other factors could well stimulate interest there once again.