Still playing the waiting game.
With HTH Corp.'s purchase of the Hotel King Kamehameha, H.T. Hayashi has fullfilled a 10-year-old business strategy pegged on patience. Herbert Hayashi has learned that patience pays--not immediately, of course, but always eventually. As early as 1971, the chief executive officer of HTH Corp. thought about expanding his mini chain of hotels in Honolulu to the neighbor islands, but delayed the process because the potential property or the timing never seemed right. Seven years ago, however, Hayashi (known to his family and close friends as "H.T.") found just what he was looking for. Although the Hotel King Kamehameha in Kona was not for sale at the time, Hayashi let it be known to its owner, Amfac Inc., that he would certainly like to own the 460-room hotel one day. Amfac representatives politely acknowledged Hayashi's pitch but had no desire to part with their choice oceanfront property along Alii Drive.
Then in 1987, Hayashi heard that the Big Five conglomerate might entertain a serious offer for the hotel. He submitted a formal bid to Amfac's board of directors but again, no dice. "They decided not to sell for the time being, so we retreated to bide our time," explains Mark Hayashi, H.T.'s son and president of HTH Corp.
H.T. Hayashi wouldn't give up, hoping his patience would eventually pay off. In 1989, it did. After Amfac was purchased by JMB Realty of Chicago, Hayashi received a letter from Amfac's new owners, who were in the midst of a massive restructuring and were ready to discuss the sale of their single Big Island property. Through JMB's investment banker, Hayashi once again let them know that he was interested in the hotel. But so was a crowd of other investors, who also recognized the value of a property along Kona's coveted Gold Coast.
Last November, negotiations began in earnest between HTH Corp. and JMB Realty. By Thanksgiving Day, the deal was ready to be announced. One Realtor surmised in a newspaper report that conveyance of the Hotel King Kamehameha probably involved between $45 million and $60 million, although others in the industry say it was much higher. "I really wanted that hotel," is all H.T. Hayashi will say. "So we were patient but persistent, and when we got it, we were elated."
Such perseverance has been the mainstay of Hayashi's formidable career, from the mid-1940s when he headed a mom-and-pop construction company to his rise to become CEO of a $110-million tourism-based corporation. The Hayashi family now owns three hotels: the Pagoda in the Kapiolani area, the Pacific Beach in Waikiki and the Hotel King Kamehameha. Other subsidiaries include the Kaimana Villa condominium/hotel in Waikiki; the Pagoda Floating Restaurant; H.T.H. Advertising Agency; H.T.H. Contractors; and real estate investment and management interests in properties including the King Center Professional Building on South King Street, the Nalani Park Terrace Apartments near the University of Hawaii's Manoa campus, and the recently renovated Keeaumoku Square. In addition, the elder Hayashi is sole owner of two other corporations which own and operate the Hawaiian Life Building on Kapiolani and Piikoi, and the Liona Apartments off Keeaumoku.
Patented patience. H.T. Hayashi has doggedly displayed his capacity for patience throughout his business career. As a neophyte residential contractor in the 1940s, he designed individual homes situated from Aiea to Kahala. In the 1950s, when sales of a new subdivision in East Honolulu stalled, Hayashi offered to build and sell some of the homes piecemeal. The developers, however, considered him a "small-time builder" and would only give him a few parcels on consignment. To spur sales, Hayashi built what was then a novel concept: model homes. He sold more than 1,000 units in the growing community of Aina Haina.
His move into commercial development was also marked by patience. After studying various sites in central Honolulu, Hayashi discovered a one-acre lot with a ramshackle building on King Street near Keeaumoku, then a blighted area of town. Knowing that Sears Roebuck was planning a move from its Beretania Street location to the recently built Ala Moana Shopping Center, Hayashi envisioned the changes in traffic patterns that would result. But the land he was interested in was owned by the Bishop Estate, and Hayashi almost gave up before he started. He knew he had one chance in a million to successfully deal with one of the largest landowners in the state.
Still, he dashed off a letter to its board of directors. Every day, he drove past the coveted site and each night, he sat at home drafting rough sketches of the structure that he hoped to build. Three weeks later, Bishop Estate officials wrote, expressing interest in meeting Hayashi and hearing about his proposal. "I was so nervous, I don't remember what I said," Hayashi recalls. "But as a developer, I knew what a color rendering could do, so I brought in my sketches." In 1960, Bishop Estate granted him a 55-year lease; several months later, Hayashi's King Center building was signing up tenants.
King Center gave Hayashi a foothold into Bishop's other parcels along Liona and Rycroft--rundown areas in which not many developers were interested. His relationship with the Estate led to his development of several apartment complexes, as well as Keeaumoku Square and the Pagoda Hotel and Floating Restaurant. "Years later, Richard Lyman, who was Bishop's chairman and who later became a good friend, told me they couldn't give those lots away because of the recession and the condition of the area," Hayashi says. "He told me they had sent letters to 240 developers asking if they were interested in leasing any part of the land, and all they got back was one letter from a crazy, small-time builder: me."
Confidence in growth. By the early 1970s, Hayashi had hung up his builder's hard hat and turned his full attention to hotel management and tourism. He began by investigating the purchase of a hotel along Waikiki Beach. Nothing piqued his interest--until he saw the Pacific Beach Hotel, a property owned by hotelier Andre Tatibouet, head of Aston Hotels & Resorts. Although the Pacific Beach was not on the market, Hayashi approached Tatibouet about a possible sale.
It was hardly the time to expand in a fragile hotel industry. The national economy was sluggish and local tourism players had been hit by a crippling shipping strike. In addition, a number of Waikiki properties were on the auction block as hotel owners scrambled to bail out of a seemingly sinking industry. But Hayashi was willing to wait out what he saw as a temporary lull in tourism's long-term pattern of consistent growth. "Go back 20, even 30 years, and you'll see how tourism has climbed steadily," he says. "It's that kind of growth that gave me the confidence to get into the hotel business in the first place and to remain in it."
The Pacific Beach on Kalakaua and Liliuokalani avenues gave Hayashi a prime oceanfront property on Waikiki Beach. More significantly, the deal included an option on almost two and a half acres behind the hotel on which was situated a handful of old cottages. Hayashi would build the 37-story, 485-room Oceanarium Tower in 1979 and an adjacent three-story office building in 1986, two more components in his growing string of Honolulu holdings.
The acquisition of the Pacific Beach allowed Hayashi to formulate a marketing strategy that straddled both in-state and out-of-state markets. It's a strategy, over the years, that has catered as much to local residents as it has to tourists. Back in the mid-1960s, Hayashi saw a marketing niche that was rapidly being abandoned by other hotel operators as Hawaii's tourist industry moved into the world-carriage trade. Starting with the Pagoda, located near the Ala Moana Shopping Center, Hayashi developed a hotel that neighbor island residents could afford to stay at when visiting Honolulu. Rates hugged the low end of the scale and promotion was accomplished primarily through local advertising. "In the past we did as much as 80 to 85 percent of our business with neighbor island residents," says Mark Hayashi. "Today, 70 percent of Pagoda's business still originates within the state."
In addition, the Pagoda's food and beverage operations--which bring in about 50 percent of the hotel's total revenues--also reflect its local orientation, specializing in weddings, meetings and banquets rather than incentive group and package tours. Even at the Pacific Beach Hotel, where 60 percent of the guests are from the Far East and 40 percent from the mainland, the Hayashis have maintained a concerted effort to lure locals through the hotel's banquet facilities. It's not just regional loyalty, according to Mark Hayashi. "You'd be surprised at how many reservations are made locally for out-of-town guests," he says.
A perfect fit. With the purchase of the Hotel King Kamehameha, H.T. Hayashi has fulfilled his long-held goal of expanding to the neighbor islands and penetrating the second of the triad of Hawaii's major destination resorts: Waikiki, the Kona Coast and Kaanapali on Maui. "The timing for us was not as good as it could have been because of the Persian Gulf crisis and the economic slowdown," says H.T. "But neither was the timing for our purchase of the Pacific Beach. I was very surprised at how much investment is going on in Kona, and I think the King Kamehameha will be well situated to take advantage of all the activity from those investments."
From a marketing standpoint, the acquisition provides Hayashi with another prime property that fits nicely into the low- and mid-price range that he has targeted. In the post-Hemmeter era of mega resorts, vacation "luxury experiences" and all-suite boutique hotels, Hayashi has refused to sway from his marketing stance of providing what he calls "value-oriented" accommodations. It is a strategy that his son now carries out as president of HTH Corp. "We feel it's a market stratum that offers solid value for the dollar," says Mark Hayashi. "It's not only a market we know very well, but given the recessionary times and the flood of luxury properties, we believe this is exactly where we should be."
How does the Hotel King Kamehameha fit into the puzzle? While his father is impressed with the overall "feel" of the property--its local orientation, location and reputation--Mark sees marketing elements of both the Pagoda and Pacific Beach in the Big Island property. "In our due diligence, we had a chance to look at where the King Kam's markets are. And at first blush, we feel that it has real possibilities as far as synergy with both hotels," says Mark. "There's a good market for local traffic, in-state meetings, similar to the Pagoda. It also has a good tour package business, which we share at the Pacific Beach, and there is potential for combination packages there as well."
Currently, the Kona hotel is running at about 70 percent occupancy. H.T. would like to see that percentage rise by about 10 to 15 percent, primarily from an increase in local and Japanese bookings. His first move will be to spend several million dollars on room and common area renovations. Then the new owners will beef up the food and beverage operations, which the Hayashis hope will help create a larger in-state market for the hotel, just as it has for the company's two Oahu properties. "Whether it's banquet facilities or a nice restaurant, the dining experience is very important to local people," says H.T.
He also expects more Japanese visitors to venture to the Big Island as well as the other neighbor islands as they make return trips to Hawaii and become more adventurous--trends that the Hawaii Visitors Bureau has also observed. All of which puts Hayashi once again at the forefront of anticipated change. "I don't know if my father really had any grand master plan," says Mark. "But he does have an intuitive sense of where growth will occur. He got involved in construction just before the construction boom of the early 1960s. And he got into the hotel industry just as tourism was beginning its initial surge."
That intuition is one big reason why H.T. Hayashi is still actively involved in the business, although he likes to take time out to travel to Japan with his wife, Mariko, and work in his orchid nursery at his Diamond Head home. His continued involvement at his Pacific Beach Hotel office could also include negotiating more neighbor island acquisitions, possibly in Kaanapali where three years ago he nearly landed a deal for a major hotel that he still has his eye on. "I don't come in every day now. The day-to-day operation is Mark's," the senior Hayashi acknowledges. "But investments and new projects, that's my background. I'm a developer, so my mind is constantly on new projects. But that also means being patient. That's why it's important to always look carefully and put your heart and soul into any project you undertake."
PHOTO : Herbert "H.T." Hayashi and koi at The Pagoda Hotel and Restaurant.
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|Title Annotation:||Tourism; Herbert Hayashi|
|Date:||Feb 1, 1991|
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