Will be interesting to hear your take Cammo, but I think there's no grand unifying theory of tiki devolution due to any single biggest factor.
Agree with many of the points raised above. Also I think there's a natural finger-pointing tendency between the perpetual polar opposites - business blames government and government blames business, the hippies blame the squares and the squares blame the hippies, the young blame the old and the old blame the young, etc. In a way they're all right, but maybe tangential to the central question. Here's some lunch break philosophizing about some of the big reasons...
CHANGING TASTES
Maybe this is where we can blame the hippies (lucas vigor, that's your cue), for leading the larger cultural shift away from exotic escapism in the late 60s. Or maybe it was the bigger picture of global events, in which the hippies only typified the most pronounced reaction to the times as they were, while other strata of the population were changing of their own accord too. Doesn't make much difference - the fact was that tastes changed. However, today's cultural landscape is far more eclectic, and it's possible to see a Forbidden Island or Smuggler's Cove thriving without being in the mainstream. So the mere fact of changing tastes is probably less a factor than we might think, at least directly.
PLANNING COMMISSIONS, REGULATION
While changing tastes may not be directly to blame for the trends we see, modern sensitivity (aka political correctness) is having an increasing effect on the esthetics of the world we inhabit. Arbitrary and arrogant committees increasingly have the power to literally dictate the smallest decorative details in private spaces. My neighbor wanted to paint his house, re-do his driveway, and change a bathroom. The city not only vetoed specific color choices on the exterior AND interior, but even dictated the colors he could choose from. This insanity comes from commissioners who profess to be responsible for ensuring good taste, but who in fact have no legitimate grounds whatsoever. For their input on semi-public spaces in the hospitality industry, their reach goes much further, including not only claims on esthetic decisions but also other mushy factors like cultural sensitivity. They're essentially thinking about the lowest common denominator for all planning decisions, where the least offensive always trumps all else. You'll actually hear commissioners say things like, "well I don't like the red." Add on top of all that the regulatory requirements involved in any contracting work (at least anything above board with permits), and the barriers to entry for anyone attempting to create or preserve a unique vision become enormous.
ROT, ATTRITION, INHERITANCE
The historical narratives for many midcentury tiki temples are often punctuated (or ended) with the need for major repairs due to rot, mold, etc. In parallel with the physical decay over the passage of years is the simultaneous disenchantment with the original concept and fantasy. Whether a place remains in the hands of the original visionary, or has passed to a next generation, it's easy for the dream to lose its luster over time with the daily grind of upkeep. So imagine an owner facing massive impending renovation costs and dwindling attendance coupled with their own fatigue running the day to day enterprise. They're stuck. If they put off the repairs, this could lead to any number of unappetizing outcomes, including even being shutdown by the local authorities. If they want to take on the repairs, now they have to face a whole new set of regulations, inspectors, and other busybodies who make it nearly impossible to even just re-create what's already there. It's very hard to make the case that they should up the ante with their personal stake in the place, as opposed to the attractive option of selling. With the rarest of exceptions, whatever entity comes along with the financial means to buy the place will have even less stake in the original dream. Not only that, but from the buyer's perspective it's hard to escape seeing the "features" of the original vision more as liabilities in their present aging state - essentially the mistakes of the prior owner that need to be corrected rather than repeated.
CAPITAL CONSOLIDATION
The regulatory barriers to entry in most forms of the hospitality business have made it very difficult or almost impossible for the "lone visionary" to create a destination, or even take over and preserve the spirit in an existing place. It's not only the financing, but also the willingness to operate under all the modern constraints of safety, liability, staffing, etc. Only a rare individual has the capacity for all that, PLUS the execution of the day to day things that attract visitors, like good food and drinks. (Another reason to laud modern proprietors of Smuggler's Cove, Forbidden Island, Tonga Hut, Tiki Ti, the Mai Kai) All combined, this is a big reason why "Mom & Pops" are disappearing, and being replaced by much larger corporate entities with the consolidated capital to handle facilities costs, the teams of lawyers to handle and internally oversee all the modern legal and regulatory crap, and the economies of scale for the tasks of running the business. Where the Mom & Pops were about the realization of an idea, the corporate world is about the execution of a business model. In simple terms, that's a big reason why unique ideas are disappearing from the hospitality business (and other industries too, BTW). While there are some examples of business models that actively try to seek out, preserve, and even inject diversity in their different properties, they still can never approximate the wonderful decentralized diversity of another era.
PERCEIVED COMFORT
So with all the above context, there's still the question of why a place like the Hanalei restaurant was converted to "boring". It would be interesting to know if anyone involved in the design would argue against that characterization. No doubt they prefer words like clean, modern, and bright. My guess would be that they don't think of it as boring so much as the "winner" in terms of lowest common denominator focus group thinking about the atmosphere that guests find comfortable. Basically the highest ranked consensus choice among a filtered set of options prepared by a design team with their own initial biases aligned with prevailing, self-reinforcing trends. In that kind of context, there's just no room for a strong, exotic vision.
Hope all this doesn't sound heavy handed - these are just some opinions!
-Randy
