Keauhou Beach Hotel to close Oct. 31

The Keauhou Beach Hotel will close Oct. 31, leaving 112 employees without a job.

Kamehameha Schools CEO Dee Jay Mailer announced the closure to employees Wednesday afternoon, during a meeting at the hotel. She said the school’s shareholders and trustees made the decision to close the property after it had several years of declining revenues.

The property has lost millions during that time, but Mailer and Kamehameha Investment Corp. President Kyle Chock declined to provide an exact figure.

“It’s been significant,” Chock told West Hawaii Today after the meeting. “Any other owner would have thrown in the towel.”

Outrigger Hotels managed the property. A message left with an Outrigger spokeswoman was not immediately returned Wednesday.

Mailer said the trust cannot continue to lose money at the rate the hotel was experiencing. She said trustees brought in a consultant to study whether the hotel could be repaired and repurposed as timeshares, dorms or for other uses. It could, she said, but it would cost about $50 million.

Kamehameha Schools plans to raze the hotel, then turn the site, as well as the adjacent property, which formerly was home to the Kona Lagoon, into an educational center with an emphasis on agriculture and leadership development, and cultural and natural resources management. Chock said the permitting process to demolish the hotel will take 12 to 18 months, and includes an environmental assessment.

“There will be some concerns (from the community about the demolition) because the footprint of the hotel sits in the ocean, which would never happen today,” he said.

Mailer said she loves the hotel, and during the staff meeting, employees took time to share about their appreciation of the hotel, which was built in the late 1960s.

The closure “is not because the hotel’s people were doing a poor job,” Mailer said.

Some employees exited the closed-door meeting Wednesday afternoon in tears after the announcement was made.

Gladys Nagatori, who has worked in housekeeping there for 13 years, said the job is her life.

“It’s scary,” Nagatori said, while crying. “I don’t know where to go now. The hotel will be missed, and I will miss the guests because it’s my life, housekeeping. Meeting new people made me happy.”

Director of Sales Anabelle Smith was critical of Chock and other Kamehameha Schools management officials.

“Kamehameha Investment Corp. has to be the biggest disappointment I’ve ever encountered in my life, and I’m 62 years old,” Smith said. “Kyle Chock had come here four weeks ago and (said) it’s business as usual. We’re not closing. So we booked group meetings. How did he have the gall to come by and four weeks later this has happened?”

Chock said the hotel’s location in Kailua-Kona worked against it, as did its age.

“The Big Island has struggled and been hit the hardest in terms of occupancy,” Chock said. “We’ve been bucking against some tough headwaters. When Keauhou was built, it wasn’t built as a destination resort.”

That made it hard for the hotel to compete with the Kohala Coast resorts, which are fairly self-contained, Chock added.

Hawaii’s hotel industry has made some gains this year. Occupancy on Hawaii Island was up over the first six months of this year when compared with the first half of 2012. According to Hospitality Advisors’ Flash Report, the island’s occupancy rate was 62.7 percent this year, compared with 58.1 percent in the first half of 2011.

The average daily room rate for Hawaii Island during that period in 2011 was $185.17. That increased to $192.79 for the first half of this year.

Visitor arrivals continue to increase this year, according to the Department of Business, Economic Development and Tourism.

Visitor spending hit a new record high statewide in June, $204 million for the month, bringing the total for the first half of the year to $1.2 billion.

Kamehameha Schools is offering hotel employees preference for any of its Hawaii Island openings in the next few months, Chock said. The landowner is also working with ILWU Local 142 to help employees, offering a job fair and other assistance prior to the closure, Mailer said.

Union representatives learned of the closure about 90 minutes before the Wednesday meeting, Division Director Wallace Ishibashi said.

“Kinda sad that it happened this way,” Ishibashi said. “Our main goal is to get everybody back to work.”

He said the union brought information to the hotel Wednesday about openings at other hotels the union represents.

“We just came today to reassure them they’re not alone,” he said.

Reporter Chelsea Jensen contributed to this report.