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HOTELS Interview: Taking a family company to the next level

David Carey
David Carey

When David Carey joined Outrigger Enterprises Group in 1986, the Honolulu-based company was truly a mom-and-pop business. Carey recalls he didn’t even have an office, let alone “luxuries” like purchase requisitions or audited financial statements.

Today, Carey is the president and CEO of a global and growing company. Currently Outrigger operates and/or has under development 45 hotels with approximately 11,000 rooms in eight countries under the Outrigger Hotels and Resorts and Ohana Hotels and Resorts brands in addition to outside brands including Embassy Suites and Holiday Inn. Yet even as it has grown to post more than US$519 million in annual revenue, Outrigger remains family-owned and mindful of the legacy of its founders, Roy and Estelle Kelley.

HOTELS recently talked to Carey about Outrigger’s growth plans, the advantages and challenges of working for a family company and his thoughts about where the market might be headed next.

HOTELS: What is Outrigger’s expansion focus in terms of owning and managing versus strict management, target markets and any other important factors?

David Carey: The current focus is on acquisition of properties, primarily in the Outrigger brand and primarily in the Asia Pacific and Indian Ocean regions.

That’s not to say we wouldn’t look at opportunities in Hawaii, but the equity markets are so hot in Hawaii we haven’t made it to the second round in any of the bidding processes that have come to market in the last couple years. The price perception by some of the global capital players is beyond our company’s comfort level from a return-projection standpoint.

HOTELS: Is there a goal to open a certain number of hotels within a set timeframe?

Carey: We would be successful from an acquisition standpoint if we bought one to two major properties in premier destinations over the next several years. It’s relatively slow growth, but if we had 10 or 15 hotels that were in all of the premium resort destinations, that would make a big difference for us.

This past January Outrigger opened the 181-room Outrigger Mauritius Resort and Spa, a property that remains true to the company’s focus on acquiring beachfront properties particularly in the Asia Pacific and Indian Ocean regions.
This past January Outrigger opened the 181-room Outrigger Mauritius Resort and Spa, a property that remains true to the company’s focus on acquiring beachfront properties particularly in the Asia Pacific and Indian Ocean regions.

HOTELS: And again, ownership is your main focus when it comes to growth?

Carey: Yes. Having said that, if a management opportunity in the right location comes up, we would probably do it. For example, we have a management contract signed for a property that we hope will start construction this year in Hainan Island, China. It’s probably not even possible for us to own a property there. It may be a similar situation in Vietnam.

HOTELS: Which of your brands do you see having the strongest growth potential right now?

Carey: Our primary focus is on the Outrigger brand — premium beachfront, aspirational, iconic destinations.

We are exploring developing an alternative brand to replace our Ohana brand, which we use in Hawaii, for possible use in other destinations, but we haven’t completed all the work on that.

Ohana has been very successful in Hawaii, but we didn’t feel like it traveled as well internationally and in the Asia Pacific region. So we’re working on some name concepts and some probably upgraded capability of the property that would fit in all of those markets, including Hawaii.

HOTELS: Would this new brand have a positioning similar to Ohana?

Carey: The current thinking is that Outrigger is 4-star U.S./5-star Asia. Ohana is 3-star U.S./4-star Asia. We think there will be a little more edge to it (the new brand), a little more contemporary feel.

HOTELS: What are your expectations in terms of a timeline for this brand’s launch?

Carey: We’re hoping to make announcements sometime this year.

HOTELS: Conveying a sense of place is critical with your hotels. How does that philosophy impact deals you will or won’t do?

Carey: We’ve actually had some pretty significant debates. I’ve got a proposal on my desk right now for a city hotel that some of our guys want to put an Outrigger label on, and we’re just saying, how do you do that? How do we distinguish ourselves? Maybe our new brand might do that, but it would be hard to deliver that same kind of Outrigger feel that we have here on the beach in Waikiki or in Thailand or Mauritius or Australia.

HOTELS: So right now your focus is on the beach and resort locations as opposed to urban destinations when it comes to expansion?

Carey: That’s clearly our preference. But if it’s a key destination city … We’ve talked about Bangkok, Sydney, Brisbane. You never know whether we might do that or not, but certainly we’re far more successful with delivering the beachfront resort experience, and that distinguishes us from the global brands that have properties everywhere.

HOTELS: What are some of the biggest advantages and challenges in being a family-owned company, especially when it comes to securing deals?

Carey: The advantage from a real-estate ownership standpoint is we’re not subject to the vagaries of market fluctuation that a lot of public companies are. Public companies almost by definition are forced into a short-term mentality. The family understands if you buy the right kind of property in the right location you can work through a cycle.

The flip side is, when families are involved, emotions sometimes enter the picture. But from our perspective that’s preferable to some of the external forces that are applied on a lot of public firms.

HOTELS: How has your role evolved within the organization over the years, and where does it go from here?

Carey: I’m really enjoying what I’m doing. The notion of being able to build a bevy of properties in these aspirational, iconic types of places is really high on my personal list. We’re concentrating now on Asia Pacific, but perhaps as we gain a further foothold there we begin to explore other places. We’ve talked about the west coast of Mexico, the Caribbean and other resort beachfront locations.

The near-term aspirations are to continue to grow the brand and on a personal level build folks behind me so if I do decide to play more golf the company is in a solid position. I don’t have any present plans of not working here.

HOTELS: What are your thoughts about current market conditions and your expectations for how they will affect Outrigger’s strategy as well as the hotel investment community in general?

Carey: The notion of being deep into the leisure travel and resort travel business gives me comfort because there is a desire in the world to travel like that.

We also feel good that we have had decades of experience in the resort/leisure business. A lot of the global brands are pretty good in cities and with conventions, but not a lot of them devote their entire focus to the resort/leisure experience, which we have.

The capital markets continue to be strong, and that is good news and bad news. It’s very difficult today, when everybody wants to buy, to find real-estate opportunities that are going to have real-estate appreciation when the bid list is five deep with global capital players. But so far there doesn’t seem to be a blink on that.

Things that worry me are those macro global events we don’t have any control over. But I can’t do anything about those things other than to have a conservative financial picture. We want to position our business so we can handle those kinds of downs and are ready to handle the ups.

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