Waikiki Project Suffers Setback

Outrigger to delay redevelopment in wake of tax-credit veto

By: Michele Kayal

Outrigger Enterprises will delay and likely scale back an ambitious $300 million Waikiki redevelopment project after Gov. Linda Lingle refused to extend a significant tax credit for hotel construction and renovation.

The project would be one of the biggest in recent years for Waikiki and has been considered to be a key to revitalizing Oahu’s tourism industry.

Hawaii-based Outrigger had counted on a three-year, 8 percent tax credit on hotel construction to help attract financing for its Lewers Street corridor renovations, said Eric Masutomi, Outrigger vice president for planning.

The Beach Walk project, which was expected to break ground in April 2004, would create a public plaza, major new retail space, a new 890-room hotel, a showroom, meeting and banquet facilities, and other components.

Masutomi said Outrigger now expects to trim those plans, eliminating such elements as a ballroom and meeting center, which don’t add revenue but would have attracted high-end business and convention customers.

“We’re looking at a minimum six-month delay,” he said.

“And in addition to that we’re looking at the need to scale the project back.” Masutomi said the company might replace some hotel construction with condominiums, which would bring immediate revenue.

Hawaii is facing a $152 million budget shortfall over the next two years, according to the governor’s office, and Lingle said she vetoed the hotel credit, as well as other measures, because the state cannot afford them.

Critics of the veto complained that the credit would have helped Waikiki, which the governor has made a priority for her new cabinet-level tourism czar, Marsha Wienert.

But Lingle said a new marketing strategy and planned sand replenishment could also aid the ailing resort.

Hotel businesses have not been left empty-handed. A 4 percent tax credit is currently in place through 2005.

The vetoed House Bill 1400 would have lowered a previously existing 10 percent credit to 8 percent, and extended it through 2006.

House tourism committee chairman Rep. Jerry Chang said he plans to introduce the larger hotel tax credit again next session.

Masutomi said Outrigger executives meanwhile will revise their plans based on the 4 percent credit and hope to revisit the issue next year.