How Kailua Became A Tourist Town

Editor’s Note: “Tourism’s Tipping Point,” is an ongoing series that looks at the future of the vacation industry in Hawaii. 

At first glance, Iana Street in Windward Oahu’s Enchanted Lake neighborhood seems an unlikely tourist mecca. The houses are mostly modest, ‘60s-era island ranch homes. There aren’t any trendy restaurants or bars nearby. And given that it’s a 30-minute walk along a major thoroughfare to Kailua Beach Park, the street hardly has the air of a resort.

But talk to residents, and you’ll hear how Iana Street is a prime example of the profound changes happening in and around Kailua. By some counts, nearly half of the homes on a stretch of Iana Street are vacation rentals. Some are entire homes rented out by absentee investors, others are bed and breakfasts operated by resident owners.

Anthony Peters said he used to know everybody on the block.

“Now,” he said, “you see a lot more rental cars, motorcycles, all that. Even foot traffic, people with backpacks and suitcases.”

In some cases, he said, the visitors have “no consideration for the people who live here and have to work the next day.”

Lihiwai Road bridge with beachgoers headed to Kailua Beach.

The once sleepy beach towns of Kailua and Lanikai have become tourist meccas. Some residents feel the changes have damaged the quality of life and sense of community.

Cory Lum/Civil Beat

Peters’ neighbor, Lisa Cates, echoed his concerns in recent testimony to the Honolulu City Council.

“We bought our home because the street had tons of families and children,” Cates wrote. “Now, there are very few.”

State Sen. Laura Thielen, who represents the area, said this is happening all over her district.

Other sources corroborate her view. Airdna, which gathers short-term rental data from Airbnb, recently showed 1,006 active short-term rentals in Kailua and neighboring Kaneohe. A 2017 study by the Hawaii Tourism Authority estimated that 5% to 15% of the area’s residences have been turned into vacation rentals.

“I’ve gone door to door in the community, and I’m not surprised,” Thielen said, when told about the growing number of tourist rentals on Iana Street.

“It makes a community less of a community.”

People have set up vacation rentals on a number of streets, she said. The result isn’t simply residents dealing with a continual ebb and flow of transient neighbors, but also less visible effects, like the loss of children attending public schools as residents are pushed out.

The Hawaii Department of Education confirmed enrollment at Enchanted Lake Elementary School declined 14 percent from 449 students in the 2017-18 school year to 385 in 2018-19, but said there were a number of other factors involved, such as a declining military population and aging residents.

Enchanted Lake, and Kailua as a whole, soon will be at the center of an experiment to manage tourism in residential neighborhoods.

Cracking Down On Vacation Rentals

The Honolulu City Council in June passed a bill to make it easier to enforce an existing law prohibiting short-term vacation rentals on Oahu in neighborhoods outside of resort zones in Waikiki and Ko Olina. The bill could have a major impact on not just vacation rentals, but the island’s economy in general when it takes effect Aug. 1.

While the bill’s effects remain to be seen, it’s also clear that many of the changes in Windward Oahu are here to stay.

The changes in Enchanted Lake are a microcosm of what much of Windward Oahu faces, as visitors are lured by easily accessible trailheads, beaches regularly ranked among the world’s best and the vision of quaint coastal towns outside bustling Waikiki.

Those changes aren’t limited to the Windward side. For example, Oahu’s North Shore isn’t just a must-see spot for day trippers, but a de facto resort where the city estimates more than a quarter of the homes have been turned into vacation rentals – the highest rate on Oahu.

Even Waianae, the lower-income West Oahu community where officials have placed an inordinate share of landfills and power plants, has caught the attention of local tourism promoters. They recently included Waianae on the itinerary of a junket for New York travel writers looking for “authentic experiences” to include in glossy magazines to promote a luxury food festival.

Kawainui Marsh Castle Hospital Olomana Aerial.

Kawainui Marsh has remained largely undeveloped amidst the growth of Kailua and Maunawili.

Cory Lum/Civil Beat

But Windward Oahu is rapidly changing. Andrea Bell moved to Maunawili 30 years ago and has seen the neighborhood overrun with hikers headed to the Olomana and Maunawili Falls trails.

“They park on the sidewalk. They park close to the mailbox. They park partially blocking our driveway. They have no respect for the area or the neighbors,” she said. “They throw their trash on the ground. They come through our hedge and use the area as a bathroom facility. It’s not comfortable any longer.”

Unsettling Change For Some

Native Hawaiians are believed to have lived near Kailua as long as 1,500 years ago, and Hawaiian legends focus on the area, such as stories of menehune who worked at night in Kawainui Marsh.

The origins of modern Kailua date to 1917, when Harold Kainalu Long Castle bought 9,500 acres of land in the region around Kailua. To help establish a community, Castle donated land for churches, as well as for Castle High School, Kainalu Elementary School and what is now Marine Corps Base Hawaii in Kaneohe. The Harold K.L. Castle Foundation remains a prominent charity.

For all of Castle’s good deeds, the authors George Cooper and Gavan Daws, in their book “Land and Power in Hawaii,” say that Castle and his family were among those who “did most to dispossess (Native) Hawaiians of their land and sovereignty.” For example, the book says Castle’s father and two of his uncles were “deeply involved in” an organization that helped overthrow Queen Liliuokalani.

Castle’s Kaneohe Ranch Co. spearheaded the residential development of Kailua, starting in the early 1960s, and was the dominant commercial landlord for a generation, owning the central commercial hub known as Kailua Town.

Alexander & Baldwin Inc., one of Hawaii’s old Big Five companies, which has shifted its focus from agriculture to shopping centers, acquired Kailua Town in 2013 for $373 million from Kaneohe Ranch and the Harold K.L. Castle Foundation. The acquisition, which included some 28 acres of retail and industrial property, made A&B the dominant landowner in Kailua — and a lightning rod for gripes. The company has tried to address concerns of residents by doing things like sending out surveys to nearly 16,000 households to get feedback.

Still, long-time residents say between the new developments and growing presences of tourists, they don’t recognize Kailua.

Many say the changes are for the better.

Whole Foods Market brought nightlife, said Marlena Mlynarska, a law student who grew up in Kailua. And a row of trendy shops on Hekili Street behind Whole Foods, across from the old Pali Lanes bowling alley, has made the street feel safer.

“You never would have walked around that area at night before, or ridden your bike at night,” she said.

And for some businesses, the visitors are a blessing.

At the Brazilian Show Room bikini store in town, as many as 70% of the customers are tourists, said Avelania Junkert, a saleswoman there.

Across Kailua Road from the bikini shop, Scott Phillipson, the owner of the Sand People and Sand Kids boutiques, said shutting down vacation rentals would certainly hurt local businesses and the area’s economy in general. How much, he couldn’t say.

“You couldn’t live here for one week and not realize our economy is based on tourism and the military,” he said.

Alexander & Baldwin sees the core of its market as residents, not tourists.

“Our main focus is serving local residents who shop, eat and do business at the neighborhood shopping centers we own and operate in communities across Hawaii,” Sheila Ebert, A&B’s Kailua asset manager, said in a statement. “We are constantly looking at ways to provide support to our tenants — some who depend on tourists for their business, particularly in Kailua.”

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Danny Casler ‘You can tell a drastic difference. We’ve been trampled on.’
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Andrea Bell ‘They have no respect for the area or the neighbors.’
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George Kaipo Chung ‘Amongst my friends they call it Cry-lua or Kailua-fornia.’

Still, change hasn’t been easy for everyone.

A new Target store took heat
for replacing the old Don Quijote, a local store known for Asian staple foods, hard-to-find households items and inexpensive fresh local produce. Many people are so fed up with change that saving Pali Lanes has becomes a cause celebre. Tourists by the busload now mob Boots & Kimo’s Homestyle Kitchen, which was once a largely local breakfast joint.

Concerns about tourists overwhelming Kailua aren’t new. In 2012, Hawaii Business magazine ran a lengthy feature with the headline: “Kailua Seeks Balance.”

But if recent news is any indication, the area didn’t find it.

Kailua-Fornia?

The backlash is so great that, despite hours of testimony from scores of rental operators and supporters and warnings about negative economic consequences, the Honolulu City Council passed the new law to crack down on vacation rentals. Meanwhile, tourism feels so out of whack to some that a few members of the Kailua Neighborhood Board have proposed to secede from the City and County of Honolulu, in part so they can get a better handle on tourism’s runaway growth.

Gary Weller, a board member pushing for the change, said people he talks with are fed up.

“They’re not only mad about the impact on the community. They’re also mad that the city hasn’t done anything to manage it,” he said.

That sort of backlash concerns local economists. It’s reflective of a broader challenge facing Hawaii: how to manage an ever-growing number of visitors that state officials project will reach 10.7 million annually statewide by 2022. The University of Hawaii Economic Research Organization recently published a paper discussing the issue:

“A steady stream of negative news stories indicates that overuse and unregulated or poorly-regulated access to popular sites have degraded both their physical condition and visitor and resident experiences,” the paper said. “Parks and trails and other public amenities have suffered from over-use to the point where citizen groups, in some cases, have organized to intervene.”

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Jill Tokuda ‘It’s the ‘I don’t know my neighbor’ syndrome.’
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Kekoa McClellan ‘The beaches are packed. They’re not as clean as they used to be.’
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John Foti ‘Now it's a bustling tourist town - it was country back then.’

The waning sense of aloha is a stunning change from the 1990s, said Danny Casler, who grew up in Kailua and moved back with his wife two years ago to raise their children. When he was young, Casler said, tourists were such a rarity that locals would invite them to drink beer and hang out. That doesn’t happen much these days.

“We’re so overwhelmed,” said Casler, who runs a popular Instagram site and related website that serve as hubs for Kailua community news. “There’s still aloha for sure, and you know I still love greeting people that aren’t from here; I know a lot of other locals do. But you can tell a drastic difference. We’ve been trampled on.”

Kaipo Chung cleans up an electric bike ready for the next customer.

Kaipo Chung of Pedego Electric Bikes said he wouldn’t be able to afford to live in Kailua if his grandmother hadn’t bought a house there decades ago.

Cory Lum/Civil Beat

On a recent Monday in Kailua’s town center, about a five-minute drive from Iana Street, George Kaipo Chung was helping tourists coming in to rent bikes at Pedego Electric Bikes.

The bike shop is in the heart of the town, where tour buses drop off visitors, many of them from Japan. Chung said he sees resentment against some of those tourists for crowding streets and sidewalks.

But, he said, “The people who hate the Japanese people — they’re the ones who just moved here.”

While A&B often gets blamed for letting tour buses use its parking lots, Ebert said the company has merely continued a practice started by Kaneohe Ranch — to let a few buses at a time use its parking lots to drop off tourists. What’s more, she said, Kaneohe Ranch took the step in response to community concerns about buses dropping throngs of tourists off curbside in residential neighborhoods.

“We do not control the flow of tourists coming to the Windward side, nor can we stop them. However, we can work more closely with the community and the government to look for ways to better manage tourism in Kailua overall,” Ebert said.

 

While Chung benefits from the tourists, he said the city could do a better job providing bike lanes and signs to let the tourists know where to go.

But the broader issue for him is that the area has changed from a sleepy, quasi-rural town into a tourist resort, complete with bumper-to-bumper traffic, high rents and mainland restaurants and retailers.

“We call it Kailua-fornia,” he said.

The observation is more than superficial.

It’s not just that Kailua has its share of franchises like California Pizza Kitchen, Whole Foods and Pieology pizza. Demographically, Kailua is much whiter and wealthier than the rest of Oahu. Compared to the island as a whole, for instance, Kailua has a significantly lower percentage of foreign-born residents and households where a language other than English is spoken.

Kailua’s racial makeup also is strikingly different from its neighbors, Kaneohe and Waimanalo. According to the U.S Census, 47% of Kailua’s residents are “white alone,” compared to just under 22% for Oahu, 20% in Kaneohe, and 11% in Waimanalo.

Kailua’s median household income of more than $114,000 is about 43% higher than the islandwide median of approximately $80,000, the census reported, based on data from 2010 to 2018. Median residential rent is more than $2,300 per month. It all means the area is increasingly out of reach for most people, including many longtime residents.

“Lucky for me, I mean I’ve been here all my life because my grandma was one of the first people to buy a house,” Chung said. “You’re lucky to find a bedroom for fifteen or fourteen hundred. We’re talking maybe 200 square feet if you’re lucky.”

 

Boots and Kimo as scores waiting for a table outside the Kailua breakfast eatery.

Japanese tourists mingle with locals waiting for a table outside Boots and Kimo’s, a popular breakfast joint. While businesses have benefitted from Kailua’s transformation into a tourist hub, long-time residents say they no longer recognize their hometown.

Cory Lum/Civil Beat

 

 

 

 

 

 

 

 

 

The situation is especially striking for Native Hawaiians. Just 4% of Kailua’s residents were Native Hawaiian, census data shows, compared with about 10% on Oahu as a whole and 16% in Waimanalo.

Among those who have left are people like Kekoa McClellan, a Kamehameha Schools graduate. He grew up in Kailua and Kaneohe but eventually moved to raise his family in Maili, on Oahu’s west side, where he said his family has had land for generations.

“It’s a wonderful place, the weather hasn’t changed, the amenities are awesome,” McClellan said of Kailua.

But, he added, “It is a totally different vibe. It’s a totally different community. The local families that grew up there are few and far between.”

Even some who can easily afford to live in the area have left. Among them is Paul Alston, a founding partner of Alston Hunt Floyd & Ing, a prominent Honolulu law firm that is now part of the international Dentons firm.

Years ago, Alston said, he used to hike the Lanikai Pillbox trail, and it was rare to see anyone.

Now, Alston said, hundreds of people do the hike a day. In fact, there are now so many visitors on the trail that Honolulu first responders are frequently having to rescue people, even though one tourist site describes the trail as “one of the easiest hikes on the island.”

Once far off the beaten path, the Lanikai Pillbox trail has become one of Oahu’s most popular hikes.

Nicole Glass

The Honolulu Fire Department records show at least 26 rescues from January 2016 to December 2018.

“This is like Coney Island. This isn’t Lanikai anymore,” said Alston. “Little special places, little quiet places, don’t exist anymore.”

Buying Up Kailua

In a sign of the times, when Alston and his wife sold their beachside home, the buyer wasn’t a local family but a mysterious investor named Xin Liu, who paid $9.9 million for the property. Property records show Liu’s name on numerous properties in and around Kailua, including one on Iana Street that records show Liu acquired in 2016 for just under $1.3 million.

Still other properties were acquired in the names of limited liability corporations with ties to Liu or a business associate named Wudi Thn. For instance, another property on Iana Street was acquired for about $1.2 million in 2017 by W Club LLC. Although Liu’s name doesn’t appear on ownership records, business registration records list him as the manager of W Club.

Altogether, business and property records or building permits show Liu or Thn, or both, linked to at least nine properties in Kailua and Lanikai valued at approximately $34 million. Residents on Iana Street have pointed to the properties as a sign of what’s wrong with short-term vacation rentals coming into the residential neighborhoods.

It’s not just that most of the rentals appear contrary to Honolulu’s zoning ordinance, but that many are owned by investors with multiple properties and not mom-and-pop landowners just trying to make ends meet.

Whether investors like Liu will sell properties when Honolulu’s short-term rental law goes into effect on Aug. 1 remains to be seen. Under Honolulu’s land-use ordinance, the vast majority of short-term rentals are illegal outside of designated resort zones in Waikiki and Koolina. The new measure tweaks the land-use ordinance to make it easier for city officials to enforce the existing prohibition.

It’s logical that some investors will sell properties if they can’t rent them out to tourists, said Lisa Van Den Heuval, a real estate agent with Caldwell Banker in Honolulu. “It’s definitely going to have an impact,” she said.

That’s good news for residents of Iana Street, like Lisa Cates. Even if it means the value of her own property drops, as more houses come on the market, the result will benefit the broader community.

“I’m hopeful it will make a difference, not just for my street, but in general,” she said. “It’s the bigger picture. It’s where our state is going to be in the future.”

“Tourism’s Tipping Point” is part of Civil Beat’s year-long series, “Hawaii’s Changing Economy.” That work is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

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