Outrigger explores expansion in U.S. mainland and Asia

Outrigger Enterprises Inc., which got its start as a kamaaina company in the 1940s and has morphed into one of the largest privately held hoteliers in the Pacific, is now eyeing business opportunities in the U.S. mainland and Asia.

David Carey, president and chief executive officer of Outrigger Hotels & Resorts, announced yesterday that the still largely family-run company intends to pursue new initiatives in Japan, Thailand, Vietnam and China as well as the U.S. West Coast. More announcements will likely follow in six months as the company narrows its decisions, he said.

"We have a big share of a smaller pie, and now we want a smaller share of a bigger pie," Carey said. "We're already a global company; now we want to become a more dominant regional player."

The family company, which began when Roy Kelley and his wife, Estelle, began renting a back bedroom to military folks, is deeply rooted in Waikiki; however, in recent years it has followed the trend of other regional hoteliers and looked for growth far beyond its primary market on Oahu.

There is a trend in the hotel business for regional companies either to be absorbed into larger corporations or to become more global, said Keith Vieira, senior vice president and operations director for Starwood Hotels & Resorts Worldwide Inc. in Hawaii.

"If you are going to compete in a global market, it is very difficult to be a small regional hotelier," Vieira said.

While it is hard for regional companies to compete against larger hoteliers, which can offer more hotel choices and destinations for their guests, Outrigger is a strong brand with what looks to be a sound strategy, Vieira said.

"If you look at the global economies of the world, there isn't a region with more potential than Asia, particularly China," Vieira said.

The huge, long-term growth potential of travel in and around Asia is something that has not escaped Outrigger. The company began its push into foreign markets in the wake of Hurricane Iniki, which missed Waikiki but left 80 percent of the residential homes on Kauai damaged.

"That experience shook us and we started looking beyond Waikiki," Carey said.

Most recently the company's strategy has combined hospitality with real estate and retail opportunities in Hawaii and across the Pacific. The company now manages or has under development nearly 60 properties with close to 12,000 rooms in Hawaii, Australia, New Zealand, Fiji, Tahiti, Guam and Bali. The success of that expansion will help fund growth into previously untested markets, Carey said.

"The strong capital market climate in Hawaii has enabled us to attract financial partners from around the world to invest in our Waikiki Beach Walk project and to explore new hospitality opportunities in Hawaii and the Pacific," he said.

Equity in upwardly valued Waikiki properties has given the company the opportunity to implement a financial re-engineering plan, he said.

"Our new approach will enable the company to raise significant capital to fund its growth plans, diversify its investment holdings and yet preserve our management presence in Hawaii," Carey said. He declined to disclose how much the company will need to raise to fulfill its newest strategy.

Even though Outrigger is expanding, the company's deep commitment to Hawaii and its people will not change, Carey said.

"We've successfully grown Outrigger to become one of the largest, fastest-growing privately held lodging and hospitality companies in the Pacific," Carey said.

While Outrigger's main focus has long been catering to middle-class American families traveling on wholesale packages, the company's plan to expand into Asia and the U.S. West Coast will likely meet with additional success, said Ken Phillips, staff vice president for Pleasant Holidays LLC, Hawaii's largest wholesaler.

"They have incredibly strong brand recognition in the West Coast among both consumers and travel agents," Phillips said, adding that many of these travelers would be likely to seek out the Outrigger brand or affiliates in Asia as well.

"People like to stay in familiar brands," Phillips said, adding that it will be interesting to see how Outrigger competes against the Marriott and Best Western brands on the U.S. mainland.