It’s for the kids

Nothing motivates more than building a legacy for the kids, which is why Outrigger Enterprises Group is buying resorts globally and creating a space for itself. President and CEO David Carey talks to Raini Hamdi

David Carey

You’re the man who took Outrigger out of Hawaii into Asia.
Well, it wasn’t just me, but yes it was under my watch. Hawaii is a great place and we’ve done extremely well there for years, but it’s only one place. Sometimes as an owner of assets, you worry about the concentration in one place. If there is a big cyclone or some kind of (disaster), the company would be finished and that’s not a good thing for a family business. So the idea of buying assets in different destinations makes good investment sense.

David Carey

The other piece about it is it enables us to hedge the currency exposure. If we do this right, we will have multiple destinations around the world that have different source markets and different currencies so we’re not exposed if one of them is down. In Fiji, for example, our customer base is mainly Australia/New Zealand, so part of our effort is to diversify the source and get more Chinese, Koreans and Japanese to come in bigger numbers.

Are you an asset player or hotel player?
Our strategy is to buy on a generational basis. The family (Carey is married to Kathy Kelley, the granddaughter of Outrigger founder Roy Kelley) has indicated they want to hold these (resorts) for generations, so we’re really different from a lot of other players. We want to be owner-operator for a long time.

We are not in the business of buying and selling assets, although we have bought and sold. For example, we sold 18 properties in Australia and New Zealand, then bought four back and recently sold them again. In the first instance it was an offer we couldn’t refuse. The second one was because the four hotels are not on the beach and we are refocusing on beachfront properties only.

So you’re like, say, Patek Philippe – you never actually own it, you merely look after it for the next generation?
(Laughs) Yah, that’s the idea. My kids are in their late 20s and early 30s, they are among 14 fourth-generation family members. My brother-in-law is in charge of the business of the family, I’m in charge of the family business, i.e. I run and operate it.

But what we’ve done as a family business is we’ve begun to expose and train the up-and-coming generation members on what it means to own a business and to be in the business. We have quarterly meetings, we train them on everything from why you need prenuptial agreements to how to buy insurance and basic tax rules. Hopefully they will be good citizens of the world but also understand the long-term strategy of the company. We help them be good owners.

Now that doesn’t always work, as sometimes there are things that cause the need to prune the family tree, so to speak. But that’s why we’re unique; we spend a lot of time working on the family relationship. We have an annual event where family members try and build a relationship outside the business so that conflicts among people in the family are not detrimental to the operation of the business.

It’s easy to say, hard to do. We’re working hard and doing it as a focus, a non-trivial exercise.

So where else are you looking at to buy?
We’d like to be in Bali, Hainan, Okinawa, the Seychelles, beachfronts in Vietnam, Sri Lanka, Australia. We’ve opened in Phuket, Mauritius, the Maldives – ideally we want to be in all the iconic beachfront destinations people want to go to.

But the biggest challenge in the last 18-24 months was finding reasonably-priced assets. We’re not the only company that is interested in buying properties. All the equity funds and REITs have so much money, so we’ll have to be patient to find the right property at the right place and right time. We’ve also been looking at beachfront resorts in Mexico and the West Coast of US but the asset pricing has been prohibitive.

So what are you going to do, given deals are few and far between and competition for them is stiff?
A lot of our focus right now is to look at the properties in our system today and see what investments we can make to further improve those properties.

For example, in Fiji, some of them could support additional units on property, and we could add may be a spa, do pool improvements and other internal investments.

In Phuket, we’re going to be putting in a beachfront restaurant, upgrade the pool bar and we’ll probably do the usual rooms renovation as appropriate.

(The resort in) Maldives is brand new, but (the one) in Mauritius, which has just been taken over by us, is an older building, so there will be investments to upgrade F&B quality, the little things in the room, spa, etc – it’s a fair amount of work while we continue to look for new acquisitions.

Does it pay off to be only beachfront?
It is a small niche and we’re a small company. If you look at the big global brands – they add 100 properties a year. We’re not going to add 100 properties a year so how can we compete but through owning a niche and executing it exceptionally well from the operational standpoint. The idea is once a guest comes to us, he will go to another Outrigger resort.

Our brand promise is to deliver authentic, world-class hospitality and celebrate the culture of the places we do business. We’re small enough we can be genuinely authentic to a particular culture…My website is not going to be as robust as Marriott’s – they have billions to spend – but I can assure you that anyone who has ever stayed with us and has had that cultural experience will look again at our website.

It’s hard to find a real niche today, isn’ t it, and when you do it gets copied?
Yes, it’s hard to find a niche but I think a values-based management is hard to copy. The genuineness of the hospitality delivery from an employee who believes he is there for a purpose – now that’s hard to copy. It’s also hard to replicate in a multi-thousand units chain.

But doesn’t this niche cut you out of city hotels or urban resorts?
We did talk a lot about that. We say we can’t do both well, we’re not big enough.

Our marketing system is also designed around the resort product.

May be one day when we have lots of different resorts.

Are travel agents still a huge business for resorts?
In the US, we’re very well-known in the agency community. When I first started in the business, 90 per cent of the business was through retail travel agents, either directly or through wholesale tour operators. We were able to reach 50,000 travel agents just through a good selling strategy.

Now, the agency business is declining a bit and is going direct to consumer. So now we’ve had to improve our Internet access. While we’re known among consumers in the US and Japan, we’re working hard to expose our brand in China, because we have several resort locations, for example, the Maldives, which is idyllic for the Chinese. The idea is once they stay with us, they’d go to another Outrigger resort.

It’s tough because we’re competing with the billion-dollar players. So we have to execute exceptionally well from the operational standpoint.

Are agents still important for you then?
They are still a part of our business, particularly out of Europe, Japan, (South) Korea, which are still an agency business. We’ve set up GSAs in the UK, France, Germany, Russia and will probably have  one in Dubai to help us penetrate the agency market there.

In destinations such as Hawaii, consumers just go straight to the Internet instead of the retail agent. It is interesting to watch what’s going to happen to the retail travel agent, how they are going to morph over the years. Some are more technology-savvy and have learnt how to connect.

But I think there is room for agents in remote locations. My daughter is getting married in Costa Rica. We go online and find ideas that look interesting – but what is it really like? So the role the retail agent can play is to tell customers ‘I’ve been on a fam trip there, here’s what it’s like’.

You can search all you like but there is nothing like a human explanation.

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