Owner Obayashi Corp. is spending $40 million to rebuild the hotel and open it late next year as a deluxe beachfront resort.

The Japanese company plans a groundbreaking ceremony for tomorrow to kick off the Poipu Beach project, which is expected to employ more than 150 construction workers.

Obayashi went through three years of negotiations with landowners and prodding from the government before it could put all the pieces in place.

The hotel, which had 355 rooms before it was destroyed by the hurricane, will have 413 rooms in its new configuration of three- and four-stories buildings.

A new ocean-view porte chochere and check-in area, a children's center, a health spa and new meeting facilities are planned.

Room rates will start at $175 for garden-wing rooms and go up to $300 in the beachfront section, with kamaaina rates starting at $130, said Keith Vieira, vice president, director of marketing and area manager of ITT Sheraton Hawaii, which has the management contract.

Vieira said travelers to Kauai tend to be interested in cultural and historic sites and outdoor activities. The hotel will cater to those interests.

Concrete beachfront buildings that weren't ruined by the hurricane are being renovated. Garden-wing buildings that did not have any structural damage are also being redone. The rest will be new buildings.

ITT Sheraton said Charldon Thomas, general manager of the Sheraton Princess Kaiulani in Waikiki, has been named general manager of the Kauai resort.

The Sheraton-managed hotels in Waikiki and on Maui are owned by another Japanese corporation, Kyo-Ya Co., part of Kokusai Kogyo Co. Both Japanese investors signed Sheraton to long-term management contracts.