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What will KSL do with Outrigger?

Outrigger Hotels and Resorts President and CEO David Carey is working with new owners KSL Capital Partners to create long-term goals, and expectations are high that the Denver-based equity firm will provide Outrigger with capital and other synergies. The prospect of this support prompted the Kelley family to sell the chain after 70 years of building Outrigger from a single walk-up hotel in Waikiki to 37 properties with around 6,500 rooms throughout Hawaii, Asia Pacific and the Indian Ocean.

“The global hospitality market has become increasingly technology-driven and capital intensive,” Carey says. “To go to the next level in this global business landscape, the Kelley family decided that it was the right time to transition ownership of Outrigger over to a strong buyer. The family is confident that this choice will put Outrigger on the best path for long-term success as well as sustainability of jobs and growth for its hosts (employees).”

More than a dozen firms had shown interest in Outrigger, according to Carey, and after an “intense” bidding process, hands-on KSL, known for focusing on creating value rather than financial engineering, was selected because of “pure financial considerations” and “great strategic fit.”

David Carey
David Carey

Early day conjectures

Question marks swirl over the extent to which KSL will inject capital into Outrigger, whether goals can align, whether the brand’s spirit will remain, whether there will be a new leadership structure, and whether the new strategy will unlock hidden value or dispose assets.

It’s business as usual at HQ, which remains in Honolulu. While the Kelley family no longer has an official role, the reins remain in the hands of Carey, who has been running the group since 1994 and is married to Kathy, daughter of then-Outrigger Chairman and CEO Richard Kelley. The management team under Carey, including Paul Richardson and Sean Dee, is also intact, which provides continuity and consistency in current business operations.

When asked in December if other changes have taken place, and if there is a new acquisition/disposition strategy, Carey says, “Nothing yet – we’re still in an initial evaluation phase.”

Carey says he would like to see expansion of Outrigger’s geographic platform with steady growth of its beachfront Outrigger Resorts, supplemented by a secondary brand. “It makes strategic and economic sense; with Outrigger’s global reputation and brand equity at an all-time high, cultivating growth is better than the alternative of divesting our investments,” he says.

Robert Hecker, managing director, Pacific Asia, Horwath HTL, thinks KSL might bring to bear more, or different, discipline to strategy and capital spending, while having more capital available to drive growth, both in terms of infrastructure and acquisition. “If handled correctly and for the right reasons, the deal should help drive Outrigger to a new level. I would expect to see more brand leveraging and expansion (not necessarily internationally) coming soon,” Hecker says.

Hopes, anticipations

Carey anticipates that KSL will give it “capacity to acquire new assets, renovate existing properties, improve operations and continue to pay competitive wages and wages and benefits.”

He also points to synergies with current holdings and future acquisitions, such as Apple Leisure Group. KSL entered into an agreement in December with Bain Capital Private Equity for Apple, a top seller of all-inclusive vacations in North America, and owner of AMResorts (hotel management and marketing services) and Amstar (the largest DMC for Mexico and Dominican Republic). The transaction is expected to close this quarter.

Outrigger wants to expand its Outrigger Resorts brand into destinations such as Cabo San Lucas, Mexico; Bali, Indonesia; Hainan, China; Okinawa, Japan; and Australia. It is also considering re-energizing its 4-star Ohana brand for its off-beach properties and others in emerging markets.

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