The owner of Maui's oceanfront Royal Lahaina Resort plans to transform the 536-room mid-price property into a luxury hotel with multimillion-dollar condominiums under a $330 million redevelopment proposal.

The project, by the Hogan family that founded travel service Pleasant Hawaiian Holidays, is the latest in a trend of hotel property owners trying to capitalize on Hawai'i's booming residential real-estate market by converting hotel units to condos or time-shares for sale to individual buyers.

Under the plan, Royal Lahaina's 12-story main hotel with 330 rooms would be redeveloped at a cost of $30 million starting in March and completed by the end of next year during which time hotel operations would continue.

Another $300 million would be spent to redo the balance of the 27-acre property fronting Ka'anapali Beach, including demolishing an 11-court tennis complex, a big parking lot and roughly 200 units spread among a low-rise building and cottages.

Redevelopment work, scheduled to start in 2007 and take three years to complete, would also add 125 townhouse-style villas, pools, a fishpond, new hotel lobby, spa, a Donn the Beachcomber restaurant, underground parking and two tennis courts.

"We wanted to maintain the overall feel of the property ... to keep the property timeless," said Gary Hogan, principal of Royal Lahaina Development Group LLC. "This is something that can't be built anymore."

Hogan said the main hotel would be upgraded from mid-price to luxury status, while condo units are projected to sell for $1.5 million and up.

After the renovation, the Royal Lahaina will continue to be operated by the Hogan family management firm Hawaiian Hotels & Resorts.

Royal Lahaina Development recently applied for a special management area permit and has begun work on an environmental assessment. Hogan said the project received overwhelming support at an initial public meeting last week on Maui because density is being decreased instead of increased. Under the plan, total units would decline from 536 to 455.

Hogan said the property could accommodate as many as 1,100 vacation accommodation units, and that the Hogan family in recent years had been deluged with interest from major hotel operators and developers wanting to maximize development of the property.

"The property in its current position is really underutilized," said industry analyst Joseph Toy of Honolulu-based consulting firm Hospitality Advisors LLC.

Toy said that with little remaining development land at Ka'anapali, the Royal Lahaina property was a prime opportunity. "It really wasn't maximizing its full potential," he said.

Hogan said the family business came close to accepting a deal with a partner to add about 800 time-share units in seven new 12-story buildings. But the Hogans ultimately rejected the proposal and have spent the past 18 months formulating their own plan.

Hogan said his father, Ed, who founded Pleasant Travel Service, wanted Royal Lahaina to retain a "simple and subtle elegance" and its old Hawai'i sense of place with lots of green and open space.

The cottages at Royal Lahaina were built in 1961 and were individually owned, according to Gary Hogan. Amfac later acquired the cottages and surrounding property and developed the 12-story hotel in 1971. Seven more 12-story buildings were planned, but Amfac never completed its plan. Amfac sold the Royal Lahaina to Pleasant Travel in 1982.

Pleasant Travel at one time owned seven hotels, including two in Waikiki, but over the years sold or gave up all but the Royal Lahaina and the Royal Kona Resort, which is undergoing a $10 million renovation.

Pleasant Travel sold its travel service Pleasant Hawaiian Holidays to the Automobile Club of Southern California in 1998, and Gary Hogan resigned as president of Pleasant Hawaiian last year to head the Royal Lahaina redevelopment effort.

Toy said development of condos and time-share have been a popular way in recent years to improve older hotel properties like Royal Lahaina because financial returns are more immediate by selling units compared with renting hotel rooms that are more expensive to build and operate.

"The economics continue to favor time-share and condo development over full-service hotels," he said.

Toy also said the investment in Royal Lahaina will help Ka'anapali compete with newer Hawai'i resorts like Wailea, which continues to expand.

The Royal Lahaina is one of several large development projects at Ka'anapali, including 700 condos being developed by an affiliate of Intrawest Corp. The 40-acre Intrawest project, called Honua Kai, includes two towers and low-rise condos projected to sell for $500,000 to more than $2 million.

Starwood Hotels & Resorts is also adding 258 units to its relatively new 280-unit Westin Ka'anapali Ocean Resort Villas time-share.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.