HONOLULU — Alaka‘i Development has secured $135 million in financing and is on its way to delivering Ewa Beach’s first hotel: a dual-branded Hyatt Place and extended-stay Hyatt House for the Ho‘opili master-planned community.
Construction could start in 2025 on the project, which is on 3.49 acres at 91-3456 Nana Hope St. in Ewa Beach, within the Ho‘opili master-planned community, the University of Hawaii West Oahu and a Skyline rail station.
The five-story building will feature 108 Hyatt Place rooms and 132 Hyatt House extended-stay rooms, 19 of which include balconies and 86 kitchenettes. The development includes an outdoor swimming pool and spa, 3,009 square feet of meeting space, a dining room, a business center and a fitness center.
The project’s ability to get financing represents not only a thaw in what has been a challenging hotel development market over the past few years of interest rate hikes, but also confidence that the wave of hotel development on Oahu hasn’t peaked.
Hotel analysts say Oahu is ripe for the trend of developing select-service hotels, those with fewer amenities and services, that has dominated recent mainland hotel development.
“It’s been 80% of the new hotel development on the U.S. mainland,” said Kevin Aucello, co-founder of Powell & Aucello.
Aucello said the model is working in West Oahu, too, where select-service hotels are getting occupancy in the high-80 percentile to low-90 percentile.
Keith Vieira, principal of KV & Associates, Hospitality Consulting, said popularity of short-term rentals, which have faced stiffer regulations over the past several years, also indicates that there is visitor demand for lodging outside of traditional resorts.
“Not all visitors want to stay on the beach or in resorts. More rural or suburban settings may appeal to experiential travelers who want to go hiking, swimming and eat and shop in locally owned places,” he said. “Spreading these visitors around supports the community, and it provides tax dollars and jobs.”
Aucello said the Hyatt project is part of an active cycle of hotel development on Oahu with more than a dozen properties in the planning or the construction pipeline, most with delivery goals through 2027. Over the past two decades, Oahu lost more than 13% of its hotel inventory, but the island now is making up for lost ground.
Aucello said the hotel construction pipeline is still the largest on Oahu that he can recall since land-use policies tightened the barriers for hoteliers, especially in Waikiki, where the majority of the island’s hotels are located.
Mark Bratton, Colliers International senior vice president, said access to financing temporarily paused the cycle, but “there’s been a thaw in the debt market. Once interest rates were going up, people got uncertain. Rates went up quickly and abruptly and in a pretty big, wide range, so people stopped and sat back and were paralyzed.”
He added, “We’ve seen it in the second quarter of the CMBS market, too — that’s institutional investment out of Wall Street. The dual-branded Hyatt is the first from-the-ground-up hotel that we’ve seen for a while.”
The financing for Alaka‘i Development’s dual-branded Hyatt was secured by CBRE’s Capital Markets Debt and Structured Finance team. CBRE said a bank provided the senior construction loan, while a correspondent life insurance company provided mezzanine financing, bringing the overall construction financing to approximately 72% loan to cost. In addition to arranging the construction debt, the CBRE team said it also sourced a joint venture equity partner so that the developer could fill the remainder of the capital stack.
Bratton said select-service hotels are popular with Hawaii hotel investors because they typically cost less to build and maintain, need fewer employees and yield bigger returns. They also tend to attract kamaaina as well as visitors.
“The hotels in West Oahu have done well, and the demand seems almost insatiable,” Bratton said.
Hampton Inn & Suites Oahu/Kapolei opened in 2016, followed by the Embassy Suites in 2017 and the Marriott Residence Inn in 2019. Another fourth select-service Kapolei hotel, the Element by Westin, is expected to open soon.
Select-service hotels are dominating Oahu’s current hotel development expansion, and Bratton said there is room for more of them and even a few more full-service hotels. Places with long-term zoning like Ho‘opili are particularly promising, he said.
Vieira agrees and said among the destinations ripe for hotel development is Castle & Cooke Hawaii Koa Ridge, particularly if the community gets a brain hospital and other health care development.
Aucello said he envisions new hotels would work in Aiea and Mililani and could expand in Ko Olina, Kapolei and Ewa.
Business development on the West side has increased the need to serve more business travelers. However, Bratton said there’s still room to expand resort development outside of Waikiki.
Colliers is the brokerage firm representing the master developer of Ocean Pointe and Hoakalei Resort, which just listed a 5.5-acre parcel fronting Hoakalei‘s Wai Kai Lagoon for $25 million, which is suited for a roughly 225-room hotel or timeshare complex.
Haseko has 31.4 acres of vacant resort-zoned land on which it anticipates future development based on market demand. The company has long envisioned adding up to 950 visitor accommodation units for hotel, timeshare or condominium use in addition to 4,850 homes.
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Star-Advertiser staff writer Andrew Gomes contributed to this report.
