Why Outrigger is Keen for More Assets After Buying Four Asian Resorts
Jeff Wagoner: “We’ve got capital to deploy, we’re not out trying to find it. If we do things right, then we will grow smartly in locations where we should be.”
By Raini Hamdi, 13 Dec 2022
Outrigger Hospitality Group has appetite for more acquisitions in Asia-Pacific after buying three hotels in Thailand in 2021 and one in the Maldives earlier this year. With aspirations to be the “premier beach resort company in the world,” it can’t afford to be un-ravenous. Moreover, after KSL Capital Partners acquired the chain in 2016, the need to ramp up asset and brand value through expansion and remodeling surely is another factor.
Group CEO Jeff Wagoner has taken Outrigger on a transformation journey since joining five years ago, but there is still plenty to do. The group’s image as a family-run, prime mover of modern Hawaii tourism is hard to shake off, despite Outrigger having a more balanced footprint today. Seven out of 15 resorts and hotels in operation (excluding vacation condos) are located outside Hawaii, namely the three resorts in Thailand, the one in Maldives, two in Fiji and one in Mauritius. The latter three, however, belong to Singha Estate, which has developed its own management capability and may part ways with Outrigger when the contract ends.
To be a global premium beach resort player, Outrigger needs a wider distribution in must-have leisure locations. Having filled the gap in Phuket, Samui and Khao Lak by acquiring the three Manathai hotels from SC Capital Partners, and in the Maldives by buying the fully-renovated Maafushivaru Resort, it is on the prowl to snap up more assets and management contracts.
Wagoner is bullish about growth opportunities in Asia-Pacific over the next few years despite hearing the market is “choppy” from so many brokers, he said.
“There is a financing disconnect because rates have gone up. The seller says why should I have to reduce my price when my occupancy and revenues are good? The buyer says I can’t buy it at that, because the debt costs me more money today [due to rising interest rates, for one]. But there will be people who will want to get deals done still,” Wagoner said in an interview with Hotels-Asia during the Hotel Investment Conference Asia-Pacific in Singapore recently.
Islands Galore
He said Outrigger has its own capital to buy assets and could also go to KSL Capital which is raising its sixth fund. His eyes are peeled on Asia-Pacific.
“The region has an amazing number of islands and locations where we could grow, versus any other places across the globe. We’re currently looking in Indonesia [Bali], Vietnam, additional properties in Thailand, Australia and Japan. In all of those locations we have properties that we are looking at, not ‘hope to be there.’ We’ve got three letters of intent already and more to come,” he said.
There isn’t however a specific amount earmarked for expansion. “It’s about the right property and market. For example, we’d like to have a property with scale, say 200 rooms, in Australia where it is important to have scale and we’ve been looking there for a while. We want to make sure that whatever we do, it’s indicative of the brand that we have created, not just any property that comes onto the market.
“We’ve got capital to deploy, we’re not out trying to find it. If we do things right, then we will grow smartly in locations where we should be. I want to stay discipline in our growth. We’ve got to be real with who we are, stay in our lane. We are a beach brand, and beach communities. Someone brought us a property on a lake in Arizona; it was beautiful but I’m having trouble fitting that as a beach resort [laughs].”
Outrigger spent a total of $325 million on renovating all existing hotels over the last four years, aimed at modernizing the brand’s image. Recently, it also beefed up its Asia-Pacific infrastructure with new senior hires, namely Tony Pedroni as vice president operations APAC and Jason Zvatora as vice president commercial strategy APAC.
“We have the capacity to easily take care of additional properties in Asia-Pacific,” said Wagoner.
As well, it has simplified the brand structure, with Outrigger as the main brand, applied to properties that are on the beach, and ‘by Outrigger’ for others that aren’t.
The group is celebrating its 75th anniversary and Wagoner maintained its “heart” is intact despite a change of ownership from a family run business to a private equity enterprise (read the author’s interview in 2015 with Bitsy Kelley, a member of the Kelley family which founded Outrigger, here.)
“The family has done a spectacular job creating a company with a lot of heart. When they got to the point contemplating ‘do we sell or do we put in a lot more money?,’ they chose the path of sell.
“KSL Capital is a great steward of everything it purchases – they only do travel & leisure. They have been incredibly supportive of identifying the capital for us to be able to change the company, part of which was identifying what to renovate to get the appropriate returns, and to be able to execute on that.
“When you purchase a brand and not a single asset, it’s a different scenario from just buying one asset, take it upstream and flip it. This [Outrigger] is an opportunity to bring multiple properties within a brand together, and create value for the individual assets and the brand as well. In this particular scenario, there could be a longer hold time. KSL understands that we’re creating something unique and special at Outrigger and is supportive of our growth strategy on APAC,” said Wagoner.
On uniqueness, Wagoner said Outrigger is authentic in celebrating the history and people of each location it is in.
“Each of our property follows a playbook. We look at what happened on this land, what is the history of this hotel, what’s the history of the people in this location. Then we figure out what to do to celebrate that,” he said.