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Acquired in December of 2013, The Waikiki Trade Center (WTC) project encompasses the redevelopment of the leasehold interest in the WTC, a mixed-use building. Upon completion, the Waikiki Trade Center Hotel will be transformed into a lifestyle Hyatt Centric branded hotel offering 230 oversized guest rooms and suites with nearly 50% suite product. The property will also offer a 403-unit parking structure and approximately 55,000 square feet of retail space, including a two-level, 34,000 square-foot Nordstrom Rack and a 13,000-square-foot Island Gourmet Market. The new hotel will include a restaurant, entertainment deck, pool, and fitness center. The redevelopment is planned for completion by December 2016. Chartres and Kokua will act as the owner, asset manager, development manager, and property manager.
Forecasted Performance & Competitive Analysis
The hotel is expected to fulfill previously unmet demand for new, well-located, high-quality lodging in the heart of Waikiki. Adjacent to the hotel is the new $400 million International Market Place “IMP.” Developed by Taubman and CoastWood, IMP will become a 360,000-square-foot commercial center expected to generate $60 million in annual sales with roughly 77 retailers opening in the summer of 2016. Barriers to enter the market are high and the retail and parking components are expected to generate substantial, predictable, and diversified cash flow.
Kokua has a strong role in this project, and beyond. Throughout the development and planning process, Kokua provided insight on functionality of food and beverage services, public spaces, room layouts, and any other matter of interest to the guests’ experience. The streamlined relationship between Chartres and Kokua paired with the expertise of both entities individually make the communication smooth and efficient. Upon completion of the redevelopment, Kokua will manage both the hotel, retail, and parking components.
The Powell Hotel successfully transitioned into the new, tech-savvy Axiom Hotel
In May of 2014, Kokua Hospitality took over management of the 139-room Powell Hotel. After one year of ownership under Host Hotels & Resorts, a $22 million (145K/key) renovation began in January 2015 as an integral part of the investment strategy to convert the property into an independent property. Upon successful completion in January 2016, the property opened as the 152-room Axiom Hotel. The hotel has recently received the TripAdvisor Bravo Award in 2016 for being rated Excellent by 52 travelers.
Focus on Revenue Management
Beyond the hotel’s renovation and shifting to a new positioning, Kokua was successful in increasing overall NOI and RevPAR Index. Gross Operating Revenue in 2014 as The Powell sat at $2,486,727, and as of June 2016, has grown by $1.2 million to be $3,746,733. Initiatives and strategies from the Kokua team boosted the RevPAR index 6.2 points and is expected to rise even further by the end of 2016. NOI has also significantly increased, starting at $695,697 in 2014, and now in 2016, is at $812,887. The collaboration of Kokua and on-property staff has resulted in greater transparency and solid pricing decision making. Expenses have also been cut with the introduction of the property’s sustainability efforts, which has resulted in a LEED Certification. TripAdvisor has given the hotel a Platinum level of GreenLeaders.
Focus on Guest Satisfaction & Competitive Set
Since the conversion to an independent property, Kokua has successfully implemented various initiatives to elevate guests’ experiences. Since the hotel opened, the on-property team was encouraged to word hard to ensure our guest survey scores reflected the efforts to fix the issues that existed in the hotel. Within a month of opening, TripAdvisor changed the Axiom Hotel from a 4 star to a 4½ star hotel due to the exceptional surveys received, and continue to receive, despite the issues previously mentioned. The Axiom is now the lead in the competitive set on TripAdvisor in percentage of total reviews—Excellent at 70.5%, with the closest competition being the Zetta at 55.3%.
In order to achieve a higher number of reviews posted, the team collaborated to shift procedures to put the following in place: TripAdvisor solicitation cards given at the Front Desk at checkout, TripAdvisor solicitation cards given by servers at The Turn Café, express checkout email contains link to complete a TripAdvisor Review for the hotel, in-room televisions have an option for TripAdvisor requesting reviews, and all hotel email signatures include a TripAdvisor review solicitation link. Hotel G and the Axiom are the only properties in the competitive set with a 5 for location.
Kokua’s devotion to addressing guests’ concerns and feedback is clear, with 90% response rate to reviews posted, with the next closest Hotel Adagio at 72%. Popularity Index through TripAdvisor started in 2015 with The Powell at #164, and as of June 2016, the Axiom Hotel has jumped to #83 with a goal from Kokua to get to the top 25 by the end of the year. Revinate also shows a significant jump in a Market Metrix Guest Satisfaction Survey, where at year end in 2014 as The Powell was at 57.3% while now year to date through May 2016, the Axiom has 89.4%, which represents a 56% jump in overall guest satisfaction.
In June 2015, Kokua Hospitality assumed management of the 312-room Queen Kapiolani Hotel. Kokua transitioned the hotel from the Aqua brand to an independent as the property had been under management of Aqua Hotels & Resorts since December 2010. Previously, the hotel had been experiencing issues with adherence to service standards and a lack of flowing communication from corporate operations support team to the on-site group. Kokua has since resolved both issues through involved management and transparent conversations. An extensive renovation to enhance the entire property is planned for the first quarter of 2017 totaling a projected $25 million. Kokua will be a part of the renovation plans to ensure better experiences for guests.
When under Aqua management, the on-site team was having serious difficulties receiving sales support from the corporate sales counterpart. There were no action plans on strengthening each market segment, nor any realized benefits of the partnership with a big brand name that has connections in the market. In fact, Aqua corporate sales offered other Aqua properties at lower rates and therefore took an enormous amount of business away from the property. The unexplained resistance from Aqua to provide access of wholesale and group contracts, leads, and the sales budget negatively impacted performance. Additionally, the property’s wholesale rates were not in parity with the competitive set or other Aqua properties. Upon change to Kokua, the on-site team was able to work alongside both ownership and management with honest communication and support. Kokua aligned the Queen Kapiolani’s rates to be more competitive and therefore improved overall performance.
There was an immediate ramp up of performance with Kokua due to the previously mentioned sales and communication strategies implemented. Rooms RevPAR year-to-date is up $5.87 and the RevPAR growth is high at 2.6% year-to-date compared to the competitive set of 1.9%. GOP has improved year-to-date, year-over-year from 37.5% to 45.5%. Transient RevPAR index 2016 year-to-date is 104.1%, capitalizing on the prime location and price for tourists. Kokua introduced a resort fee upon the transition from Aqua, which has since resulted in $700,000 in revenue. The savings to the hotel related to Aqua fees are about $423,000 alone. Operating expenses reduced year-over-year and year-to-date from 36.2% to 32.7%.
Rise in Guest Satisfaction
The property has progressed in ranking on TripAdvisor from #72 of 83 hotels in to #52 in only one year. This large achievement of popularity proves the progression of service quality and consistency. The Trend Analysis, which shows the number of reviews collected, has increased since Kokua took over to 211 compared to the competitive set at 74 for May 2016. This is an increase of 47 reviews since June of 2015, which shows that Kokua has been successfully proactive in encouraging guests to contribute feedback.
Hyatt Place Waikiki Beach
Kokua increased NOI by 300% after completing a $45MM ($106K/Key) renovation to comprehensively reposition the asset.
- Total Revenue Increased 68%
- RevPAR index grew 83%
- Doubled RevPAR to over $100 with only half of the hotel opened for the first 4 months of 2012
- 194% RevPAR growth in 2012, by increasing occupancy by 34% and ADR by over $80
- Government and Military transient revenue increased over 1,300% and overall group revenue by over 100% in 2012 by developing new marketing strategy to target corporate accounts, government and military demand, and layering in higher-rated groups
- After 1 year of management, Host Hotels & Resorts purchased the property and retained Kokua to continue managing the property due to our successful performance
- JV led by Chartres Lodging Group acquired the 451-room Ocean Report Hotel Waikiki
- Awarded “Project of the Year” from Hyatt’s Select Service Owner’s Conference
- Awarded “Turnaround Deal of the Year (Middle Market)” at the M&A Advisor Distressed Investment Summit
Pre-Renovation Room Type
Post-Renovation Typical Room
Kokua quickly managed a distressed asset located in a tertiary market.
- RevPAR increased 8%
- Occupancy increased 12.1%
- NOI increased 41%
- Group and transient revenue grew by 19% and 4% respectively
- By creating an effective marketing strategy, we booked over 17,000 group room nights and utilized the property’s 72,000 square feet of meeting space. This was 32% above the average, and the highest consumed group room nights in the hotel’s previous 10 years.
- Kokua was successfully able to sell the property at the height of the economic downturn.
- Chartres Lodging Group acquired the 4,867 room Adam’s Mark Hotel Portfolio in February of 2008.
- Kokua began managing the 486-room property
- 72,000 square feet of meeting space
- Full-service restaurant and bar