When the 200-room Kapalua Bay Hotel opened in 1978, it was a place local people called the “end of the road”, because that was where the paved road turned into a dirt road, which continued along the shore of the leeward coast of West Maui. There were no houses or developments beyond that point.

The Bay Course, the first of three golf courses, had opened earlier in 1975. The golf course and hotel were surrounded by pineapple fields, and at certain times of the year were invaded by tiny white pineapple (mealy) bugs. This was the beginning of a master-planned resort community that would be built by the Kapalua Land Company, the development arm of the Maui Land and Pineapple Company which owned the 23,000 acre Honulua Ranch and pineapple fields.

The development followed a business plan that was proving successful in other areas of Hawaii. The idea was to build a luxury resort with hotel and golf course, which would attract guests who could afford to buy the high-priced homes that would be built around the golf courses.

Today the Kapalua Resort covers 1,650-acre with three luxury-class hotels (The Ritz-Carlton Kapalua, Kapalua Bay Hotel, and The Kapalua Villas), 5 condominiums (The Coconut Grove on Kapalua Bay, Bay Villas, Golf Villas, Ironwoods, The Ridge), and four single family community developments (Plantation Estates, Pineapple Hill, Pineapple Hill Estates, Kapalua Place). There are three golf courses, two tennis facilities, three white sand beaches, restaurants and shopping.

What are Condo hotels? 
The 28-year old Kapalua Bay Hotel will be torn down and replaced by a new hotel with a mix of regular hotel rooms, some rooms sold as residential units, and some sold as “fractional” owned units. These developments are commonly known as condominium hotels (Condotel) where the people who buy the units can use the rooms whenever they want or have the hotel rent the rooms as part of the hotel inventory. The owners would receive half of the rent and the hotel takes the other half as its fees.

By selling rooms as condominium units, hotel owners get cash up front, instead of waiting years to recover their capital costs. The hotel is able to spread some of the risks and costs to condo owners who are essentially investors in the hotel. The fee received by the hotel for renting the rooms and the monthly maintenance costs for each unit can also become profit centers for the hotel.

Condo owners who rent their rooms for most of the year benefit by receiving some rental income and higher tax deductions. They also have greater flexibility in using their units as they don’t have to deal with a long-term tenant.

Conversion trend 
The strong sales of condo hotel units has created a small boom in the real estate market in resort areas like Hawaii, South Florida, Las Vegas, and parts of California. A number of Waikiki hotels, including the Ala Moana and Ilikai Hotel, have converted some or all of their rooms to condo units. Nationwide, about 227 condo hotel projects are in the development stage and will add more than 93,000 rooms to the supply of traditional hotel rooms.

The “fractional” owned units are similar to condo units except a number of buyers share ownership and the maintenance costs of a single unit. The Kapalua units will be sold as part of the Ritz-Carlton Fractional Club program where the buyer of a fractional unit would own 1/12 share and be entitled to stay in the unit for 21 or more days each year. The Kapalua shares are being offered for $300,000-$700,000 depending on the size of the unit, which is much less expensive then buying a vacation home which would be vacant most of the time.

The construction of the new hotel is expected to take three years and the 208 ILWU members who worked for the Kapalua Bay Hotel were permanently laid off in April. ◆

Aloha Kapalua Bay Hotel ILWU Members

Aree Teamglum, Helen Magno, Peter Rizzo. (Right) Romana Balcita.

Dale Yamamoto, Lino Bermudez, Visese Sakaria, Minda DeGracia, Lauren Higa.

Nathalie Quedding, Bundit Teamglum, Crystal Kaauamo.

Mila Manglicmot, Narciso Buduan, Ricardo Gazmen, Alfredo Malapira, Alden Armantico, Jun Sablay, Den Melchor.