New Owners Have Big Plans for the Kona Kai

It’s the sign that gives it away, letting all who venture into the Kona Kai Club know that there’s been a change in recent months at the 12-acre Shelter Island resort.

“Welcome to the Kona Kai Club,” reads the sign at the kiosk fronting the resort’s parking lot.

That’s a stark contrast to the placard that used to be there: “Stop. All Vehicles Must Stop.”

The philosophical change parallels the management turnabout at the 31-year-old club. And the changes are just beginning, according to Bill DeLeeuw and Dale Rorabaugh, two young entrepreneurs who purchased the Kona Kai in May for $15 million from brothers William and Bernard Lipin.

DeLeeuw and Rorabaugh plan to sink another $17.5 million into the Kona Kai over the next five years, building in the process 200 new rooms and 100 new dock slips, and remodeling and redecorating the facility, inside and out.

The goal of the young--DeLeeuw is 38, Rorabaugh is 41--owners is to return the Kona Kai Club to the prominence it maintained in the mid-1950s and 1960s, when the facility was the in-spot on newly built Shelter Island.

The ranch-style grounds --developed by former financier C. Arnholt Smith in 1954--are relatively unknown to the county’s newcomers. In fact, many San Diegans know of the Kona Kai only because of the recent brouhaha over the outdoor concerts held there last month.

The noise bothered some Point Loma residents across the bay and the Port Commission voted to prohibit further concerts.

It may not be the last battle between the Kona Kai’s new owners and the Point Loma homeowners.

Concerned that the new plans--which also include an underground parking structure and tennis courts--may block their view of San Diego Bay and downtown, the Point Loma Village Associates “will be watching” the Kona Kai’s expansion plans, according to Kingsley Boyd, the group’s vice chairman.

The residents’ association did battle last year with developer Frank Hope’s Bay Club, now nearing completion down the road from the Kona Kai. Hope wanted to build a 37-foot-high facility and sought a waiver of the Port District’s 26-foot height limitation.

Petitions Against Waiver

Nearly 400 Point Loma residents signed petitions against the waiver. But, Boyd said, although the residents are still not “terribly happy about it,” as long as the Port District approves it, they will abide by that decision.

Approval seems likely, primarily because the port gets a healthy chunk of the Kona Kai’s revenues: 6% of room revenue, 5% of liquor sales, 20% of dock fees, 3% of food sales and 5% of membership fees.

Nonetheless, port officials say they’ll look at at least two possible problem areas related to expansion.

“The two problems I (anticipate) are see-through qualities (of the new buildings) and the traffic generation,” according to Port District Director Don Nay. “Nobody wants to see the Kona Kai held back from improving their property. But if they want to make a denser development, they

will probably receive some (citizen) inquiry about the effect of that densification.”

The Kona Kai property boasts a 92-room hotel at the end of Shelter Island, a 76-room hotel (the Kona Inn) a few yards to the east, the Voyager restaurant, 18,000 square feet of meeting space and 431 boat slips in the marina.

$11-Million Price Tag

In addition, there is a 160,000-square-foot parking lot that will be the site of the new owners’ expansion plans: a 200-room hotel, underground parking and tennis courts. The price tag is $11 million.

To counter criticism from the Point Loma residents, the buildings are designed with open spaces between them--called “view corridors”--so that the nearby residents can still enjoy unobstructed views of the bay.

In addition, DeLeeuw and Rorabaugh plan to sink $1.5 million in decorating the facility’s interior, another $1.5 million remodeling the exterior and $3.5 million building new boat slips.

The facility, although profitable, was marketed quietly and failed to expand its membership base over the years, DeLeeuw said.

As a result, the average age of the 1,000 members (500 are active) is about 60. The new owners would like to trim that by about 20 years.

Revenues at the facility last year were less than $6 million, with earnings at nearly $1 million, according to sources familiar with the Kona Kai.

Projected Revenues

The new owners won’t discuss potential profits, but they project revenues of about $10 million in 1985.

To get there, the new owners will pump nearly $400,000 into marketing and advertising this year, up from $37,000 in 1984.

Advertising will be aimed at the tourist markets in Arizona and Los Angeles, said DeLeeuw as well as the executive-meeting market.

Key to the plan, the new owners said, is reversing the public’s perception that the hotel is only for Kona Kai members.

Other facilities, such as the boat slips, are definitely members-only, however.

Initiation fees are $400 for individuals, $600 for families and $1,000 for corporations. Monthly dues are $35 for individuals, $50 for families and $75 for companies, good for three employees.

For DeLeeuw and Rorabaugh, the purchase of the Kona Kai is the latest in a series of entrepreneurial ventures.

Dozens of Projects

Since they met in the Navy Reserve 10 years ago, they have developed dozens of apartment buildings, small condominiums and some commercial projects. Their latest development is a 512-unit apartment complex under construction in Palm Desert.

Although their joint interests are real estate, Rorabaugh seems a long way from his roots. An optometrist by training, he fancies himself something of an inventor, and his pet projects have paid off handsomely.

He invented an electronic digital pachometer--a device that measures oxygen flowing into the eye’s cornea--in the early 1970s that is now used for contact lens research. He also fashioned a glaucoma test.

Rorabaugh sold his company three years ago to Cooper Labs, which later became Cooper Vision in San Diego. The deal made millionaires of him and four other principals.