May 23–The arrow-shaped Mauna Lani Bay Hotel &Bungalows, a Hawaii island fixture for nearly four decades, will close this fall for a $100 million renovation triggering temporary layoffs for about 400 employees.
Layoffs will begin Oct. 1 to make way for about 14 months of renovations — the most extensive undertaken since the property was developed by a subsidiary of Tokyu Corp. Noboru Gotoh, former chairman of Tokyu Corp., opened Mauna Lani Bay Hotel &Bungalows in February 1983 at a cost of $71 million.
In August the 32-acre oceanfront property was sold for estimated $225 million to DiamondHead Land, a joint venture between San Francisco-based ProspectHill Group and Hawaii-based hotel executive Pat Fitzgerald, and another major institutional investor. They agreed to the purchase on the same day a two-year International Longshore and Warehouse Union contract was ratified.
Thanks to that contract, all 400 associates, a majority belonging to ILWU Local 142, will be recalled at the same tenure and benefits upon the resort's reopening, which is slated for fall 2019. In the interim, Fitzgerald said, employees are eligible for unemployment benefits, and the "company has committed to helping associates find alternate employment."
While the short-term repercussions of the renovations aren't necessarily good for workers, over the longer term visitor industry players say they are expected to fuel upward repositioning for the resort and the island's Kohala Coast. The ownership and development group has selected California-based Auberge Resorts Collection, a luxury hotel management company, to make its Hawaii debut managing the property.
"We have a budget in excess of $100 million," DiamondHead Land partner Pat Fitzgerald said ahead of today's announcement disclosing the renovation plans. "Some of it is going into deferred maintenance, but the majority is going into enhancing the hotel and creating amazing experiences. We'll also be adding 10 to 12 new suites to the ocean front of the arrowhead."
Fitzgerald said guest rooms will be overhauled, new pools will be added and renovations will take place at the Canoe House and the Bay Terrace Restaurant, which will be transformed into a three-meal restaurant with a bar.
Upon completion of the renovations, the resort will be among the top hotels in Hawaii, said Chris White, Auberge Resorts Collection's senior director of regional marketing and sales. The property's competitive set will include brands like Four Seasons, Montage and Ritz-Carlton, White said.
Auberge is expected to draw from its strong concentration of customers from the U.S. West, the core visitor market for Hawaii's visitor industry.
"There hasn't been a new brand on the Kohala Coast for a long time," Fitzgerald said. "We think Auberge will bring excitement to the Kohala Coast."
The level of investment will certainly draw atten-tion, said Keith Vieira, principal of KV &Associates, Hospitality Consulting, who estimates that the property's renovation and purchase costs equate to spending in the neighborhood of $1 million a room, not including additional closure costs.
"It's a substantial investment, one of the larger ones in the state," Vieira said. "But I expect that they will come out ahead. Their neighbor is the Four Seasons Resort Hualalai, which can fetch average daily rates of over $1,200 a night. I don't think they will get that at first, but over time they might be able to get it once they add resort programming."
