By  on November 28, 2005

With brand-savvy tourists returning in droves and hungry for luxury merchandise, there's optimism and renewed confidence in the state's economy.

NEW YORK — Brand-conscious Japanese tourists are flocking back to Hawaii after staying away for several years after 9/11 and the SARS outbreak, and they're buying with a vengeance.

The signs of optimism are everywhere. In Waikiki, the Outrigger Beach Walk project, Royal Hawaiian Shopping Center and Ward Village Shops renovations as well as the International Market Place redesign are evidence of a retail explosion and renewed confidence in the economy.

Visitors to Hawaii spent $10.9 billion in 2004, 8 percent more than in 2003. Of that total, Japanese visitors spent $2.2 billion, a 13.7 percent rise above 2003, giving the demographic group a 20 percent share of spending, according to a report by the Department of Business, Economic Development and Tourism of the State of Hawaii.

On a daily basis, Japanese tourists increased their purchasing from $240 a day to $252. They devoted $99 a day to shopping, a 10 percent increase over 2003 and three times as much as visitors from the U.S., Canada and Europe, the study said.

To keep up with the demand, luxury retailers are opening second and even third stores on the island. And if they're not building new stores, they're expanding existing ones.

"Hawaii is one of the most important luxury shopping destinations in the world, and it's only natural that Bottega Veneta have a strong presence there," said Tomas Maier, creative director of Bottega Veneta, earlier this month. "We're thrilled to open our third Hawaii location at 2100 Kalakaua Avenue."

Other boutiques at the three-story town house-style center include Coach, Tiffany & Co., Yves Saint Laurent, Tod's and Boucheron.

Lehman Bros. sold 2100 Kalakaua Avenue for $156 million to Metropole Realty Advisors and Heller Properties. Robert Siegel, president of Metropole, said 2100 Kalakaua Avenue generates $1,700 to $1,800 in sales per square foot, but could do four times that amount based on pre-9/11 sales volume at luxury stores in the area. Higher sales are anticipated because there's about 20,000 square feet of vacant space, providing room for another two luxury stores. Moreover, the property will be marketed more intensively, particularly to international tourists.The two-year-old center is in the heart of Honolulu's Waikiki retail and hotel district, near the Hawaiian Convention Center and about four miles from the giant Ala Moana mall, which has several of the same tenants. "To my knowledge, there has been no cannibalization of sales," Siegel said.

He said there are 35,000 hotel rooms in the Waikiki district that turn over about every four days, generating an influx of 70,000 new shoppers at least once per week.

Last month, Louis Vuitton unveiled its renovated and expanded store at the Ala Moana Center in Honolulu. The two-level, 7,500-square-foot unit is three times the size of its previous location and is expected to generate between $50 million and $100 million in annual sales, according to Jean-Marc Gallot, chief executive officer of Louis Vuitton North America. "It's close to the New York flagship on 57th Street, but New York is the capital of the world," said Gallot.

Louis Vuitton is popular enough in Hawaii to support six stores, with locations also at Honolulu Gumps, Honolulu Hilton, Maui Lahaina, Maui Wailea and Waikoloa.

"We have gigantic sales of Louis Vuitton in Hawaii," Gallot said. "Hawaii contributes more than 20 percent of [total] sales in North America. The Hawaiian market is absolutely key and essential because of the future. We see a recovery of Japanese tourists to pre-9/11 levels. There's been a 5 percent increase year-to-date."

Royal Hawaiian Shopping Center in July will complete an $84 million renovation, which will include a new row of luxury retailers facing Kalakaua Avenue. Cartier and Ferragamo have already built new two-level stores and Bulgari tripled the size of its shop. Hermès has already opened a store there, and Fendi is in the process of building a unit.

The first Kate Spade store in Hawaii will open at the center, occupying 2,816 square feet, and a new 2,000-square-foot Tourneau store is set to open as well. Furla is building a 1,000-square-foot shop. And Pacific Harley-Davidson is expanding its store to feature more of its clothing and accessories.

"Waikiki has not seen this much tenant interest in 10 years," said Kim Scoggins, a leasing agent with Colliers Monroe Friedlander. "People are positive and willing to make commitments for the future."Outrigger Beach Walk, a $460 million mixed-use project billed as having something for everyone, is one of the largest transformations Waikiki has seen in decades. While several hotel demolitions will temporarily bring down the room count, Waikiki will gain a 195-unit Fairfield time-share, a 421-unit Embassy Suites hotel and an entertainment and retail complex scheduled to open next fall.

The plaza will include 40 stores occupying 90,000 square feet of retail space, four restaurants and a promenade.

General Growth Properties, which owns Ala Moana, the largest shopping center in Hawaii, purchased Victoria Ward for $250 million in 2002 and plans to invest $100 million on redeveloping its Ward Village Shops. With 200,000 square feet of proposed new retail space, the Ward Village site will boast a total of 800,000 square feet, becoming the third-largest shopping center in Oahu. A residential component will add 10 floors of rental units.

Other retailers with plans to open stores in Hawaii include Jimmy Choo, Just Cavalli, Samantha Thavasa and Vera Wang, who has already designed a bridal suite in her signature style at the Halekulani resort through a deal with the resort's management. She also has plans to open a boutique at the resort.

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