Tracking Hawai‘i’s Private Equity-Owned Hotels and Their Impact
I spent five months digging into private equity’s ownership of Hawai‘i’s hotel industry and how that presence has affected their employees and the surrounding communities.
My latest report – “Private Equity Owns a Big Chunk of Hawai‘i’s Hotels. Here’s Why That Matters” – found that private equity firms own 33 of the state’s 144 hotel properties and control about 29% of the state’s 42,000 rooms. That’s a big increase from 20 years ago, when these firms owned about 4% of the state’s hotels and about 5% of the rooms.
Private equity firms are investment companies known for using lots of debt to buy companies and then doing quick flips designed to maximize profit. While these firms can help their acquired companies access needed capital and innovate, they’ve also had harmful social impacts on retail, nursing homes, rental housing and other industries on the mainland.
I wanted to understand what private equity’s presence in our hotel industry meant for Hawai‘i, especially with many residents angry about tourism’s impact on the environment and surrounding communities.
I spent about five months working on this story. A good chunk of that was spent identifying Hawai‘i’s current and former hotel owners. I looked at news articles, company websites, business filings, property tax records, Bureau of Conveyances records, the Hawai‘i Information Service’s tax map key database and data from capital markets research company PitchBook. Unite Here Local 5, which represents about 7,000 Hawai‘i hotel workers, had been tracking private equity hotel ownership and shared its findings with me, too.
One challenge was the layers of shell companies that sometimes mask full ownership. For example, Hawai‘i hotels are often owned by limited liability companies. Some of those companies’ managing or member LLCs are registered in other states that allow corporate anonymity.
Join the Discussion
When: Thursday, Jan. 18, 2024, from 4 p.m. to 6 p.m.
Where: Entrepreneurs Sandbox, 643 Ilalo Street Honolulu, HI 96813
What: Our panelists will discuss local hotel ownership trends, the investments that private equity firms have made locally, and the impacts on local workers and communities.
For example, I wanted to see if private equity firm Rockpoint still co-owned the Four Seasons Resort Hualalai. In 2006, Michael Dell’s MSD Capital and Rockpoint purchased the resort under Hualalai Investors LLC. MSD Capital is the family office that manages the wealth of Dell and his family, but it also manages private equity funds.
Through my research, I learned that Hualalai Investors LLC has five layers of LLC ownership above it, comprising 14 individual LLCs. It turns out that in 2014 Kaupulehu Water Co. and Kaupulehu Waste Water Co., which are subsidiaries of Hualalai Investors LLC, sought the Public Utilities Commission’s approval to transfer Rockpoint’s interest to another entity. I wouldn’t have learned about all those layers of LLCs or that Rockpoint was no longer an owner if not for the PUC’s public documents.
In all, I spoke to or contacted over 70 people for this story. That includes various hotel owners, industry consultants, trade organizations, hotel workers, community members and lawmakers, plus mainland organizations that work with communities impacted by private equity investments.
This article was supported by Poynter, a nonprofit journalism institute, through a grant from the Omidyar Network, an organization that invests in social change. This was the first reporting grant that Hawaii Business Magazine has received. It’s part of a larger trend of foundations funding news outlets so their journalists can pursue independent, in-depth reporting projects.
The grant was part of Poynter’s 2023 Beat Academy, an eight-month online course geared to provide journalists with skills to tackle challenging coverage areas, like private equity, climate change, health care, immigration and other topics. The funding helped cover research, travel and some overhead expenses. The grant will also help us host a community event to discuss our reporting; that event will be on Jan. 18 at the Entrepreneurs Sandbox in Kaka‘ako.
In addition, Poynter connected me with investigative journalist Aaron Glantz, a two-time Peabody Award winner and 2019 finalist for the Pulitzer Prize. He is also the author of the 2019 book “Homewreckers,” which investigated the ways Wall Street bankers and private equity firms profited from millions of working- and middle-class Americans who lost their homes during the 2008 housing crisis. Glantz acted as a coach and sounding board as I identified the private equity owners and dug into the histories, debts and impacts of their hotels and firms.
