Waikiki Wave

Project Summary

RHR asset managed the Waikiki Wave for eight years until it was sold in January 2014, netting an overall IRR to investors greater than 21%.
During RHR’s asset management, the property achieved RevPAR improvement of 87.2% while growing NOI by 140.7% from $1.9 MM to $4.6 MM.
RHR oversaw a $7.0 MM renovation immediately upon being hired as asset manager, including improvements to the guestrooms, corridors, public areas, lobby, ADA modifications, equipment upgrades, and minor exterior maintenance.
Four vacant lobby stores and a separate commercial space on property were renovated and leased within a year of assuming ownership. RHR also created additional value by adding for rent office suites, a gym, and multi-function rooms on the first floor of the Hotel.
RHR advised on the refinance of the senior loan with Bank of America in April 2007 resulting in a return of equity and a decrease in the cost of debt.
RHR initiated an arbitration process with the land owner and reset the ground rent payment. RHR also structured the ground lease’s demolition clause.
RHR monetized an existing property easement with Kaanapali Land resulting in a large cash payment to ownership.
RHR restructured easements and land use provisions with the adjacent leasehold and ground owner to facilitate the redevelopment of the International Marketplace site by Taubman Companies.

RHR increased revenue through the following initiatives:

Shifted the revenue management strategy to focus on higher-rated direct channels and FIT business, dramatically improving ADR.
Enhanced the Hotel’s website to increase profitable bookings.
Deployed new sales and marketing strategies focused on growing property-controlled reservation channels and e-marketing.
Renovated and leased lobby area retail and ground level commercial space.
Maximized parking revenue, which increased from $195K in 2006 to $418K in 2013.
Aligned management interests with ownership through an incentive plan tied to profits.

Results

RHR reduced operating expenses through the following initiatives:

Delayed the contractual increase in ground rent for 30 months, which allowed the property to survive the economic downturn.
Reduced labor expenses through complexing management functions.
Installed digital thermostats to reduce cooling expenses guestrooms and publics areas.
Upgraded HVAC systems and installed reflective window topcoat to reduce energy usage.
Instituted a preventative maintenance program to perform deep cleanings and minor repairs.

Results

NOI increased by 140.7% and the NOI margin improved by 5.9 percentage points over the hold period, even though ground rent increased from $156K to $968K annually and utility expenses ballooned from $375K in 2006 to $1.1 MM in 2013.