Back in the 1940s, Roy Kelley and his wife, Estelle, put the dream of a Hawaii vacation within reach of American travelers when they started a little kamaaina company in Waikiki.

According to legend, Kelley was such a micromanager that he didn’t want to own or manage a hotel that wasn’t within walking distance of his Waikiki office. Fast forward some 65 years and the younger generation of Kelleys and their spouses have developed hotels in such distant locations that it would take them more than a day of flying to get there.

While the family-owned Outrigger Enterprises is deeply rooted in Waikiki, it has morphed into one of the largest privately held hotel firms in the Pacific in the last two decades. The Kelleys launched their empire in 1947 with the opening of The Islander, a four-story walk-up. Outrigger didn’t venture outside of Waikiki until 1989 when it added The Royal Waikoloan Hotel on Hawaii island, to its inventory.

It started making up for lost time with an aggressive push into foreign shores in the wake of Hurricane Iniki, which missed Waikiki but left 80 percent of homes on Kauai damaged.

"I still remember standing in the ballroom with our employees watching Joe Moore thinking, ‘Oh, my God, I’m out of business,’" said David Carey, president and CEO of Outrigger Enterprises, who married Roy Kelley’s granddaughter Kathy.

While Iniki didn’t damage any of Outrigger’s Waikiki holdings, the hurricane affirmed the need for a diversification strategy, which began in 1996 with the Outrigger Marshall Islands Resort and has continued to accelerate over the last two decades.

"We’re overcapitalized in Waikiki," Carey said. "We have a lot of ownership in this market already and we don’t necessarily need more."

To that end, the company has been in the process of returning the OHANA Waikiki West to the landowner, The Queen’s Health Systems, since Outrigger’s lease expired in 2010.

"We are not making a bid for the capital part," Carey said, adding that the company is eyeing more promising opportunities in faster-growing markets in the Asia-Pacific.

Still, Carey said Outrigger is prepared, if given the opportunity, to remain as manager and be a partial investor. While many offers have reportedly come in to assume leasehold ownership of the OHANA Waikiki West, Outrigger’s successor has not been named.

"We are currently still in the evaluation process for OHANA Waikiki West, so it’s too early for us to discuss at this time," said Cedric Yamanaka, spokesman for The Queen’s Health Systems.

Regardless of any future role that Outrigger could play at OHANA Waikiki West, the company is involved in 15 other properties on Oahu.

Altogether, Outrigger operates or has under development 45 properties with about 11,000 rooms in Hawaii; Australia; Guam; Fiji; Bali; Thailand; Vietnam; and Hainan Island, China. The company also operates and develops hotel properties and hospitality-related retail and real estate opportunities for partners in Hawaii, the Pacific and Asia.

Earlier this week, Carey joined other Kelley family members and senior executives from Hawaii in Phuket, Thailand, to mark the opening of the Outrigger Laguna Phuket Beach Resort, the company’s latest addition to its resort portfolio in the Asia-Pacific. With the most recent opening, Outrigger now has four properties in Asia, including the Outrigger Laguna Phuket Resort and Villas, the Outrigger Phi Phi Island Beach Resort, and O-CE-N Bali by Outrigger.

"The acquisition and opening of the Outrigger Laguna Phuket Beach Resort gives Outrigger a wonderful and iconic resort property in Phuket," Carey said.

Outrigger’s latest strategy is to develop beachfront high-quality resorts in notable destinations, Carey said. They are still looking for management agreements that fit into their portfolio, he added.

"Vietnam is a nascent destination, which will be more fully vetted in five years. Bali is solid and Thailand is stable," Carey said. "We’ve had presence in and out of Australia. We’ve looked at the Maldives and the Seychelles."

Outrigger’s decision to expand further into the Asia-Pacific region and reduce its exposure in Waikiki comes at a time when other companies are chomping at the bit to break into the Waikiki market.

"I get daily calls about what’s available in Waikiki from investors, brands that are already in Waikiki and those that want to come here," said Joseph Toy, president and CEO of Hospitality Advisors.

That said, it makes sense that Outrigger, as one of the largest hotel companies in Waikiki, would seek to manage its risk in Waikiki while achieving greater penetration in the Asia-Pacific region.

"They aren’t necessarily divesting, but they are a very strategic company and they do think down the road quite a bit," Toy said. "This is more of a repositioning for them and a right-sizing of their portfolio."

Toy said in the early 1990s Outrigger had a broad band of properties that included a lot of lower-tier and mid-scale properties. Over time, the company has repositioned to concentrate more on the mid-upscale market and Asia, he said. A successful expansion into Australia in the late 1990s and then the sale of those properties helped Outrigger fund opportunities, Toy said.

"They are nimble and very flexible and they manage properties under different flags," he said. "I would match their capabilities with any hotel company in the mainland and Asia."

Outrigger was ahead of the U.S. hotel brand expansion into Asia in the late 1990s.

"They hit it at absolutely the right time," Toy said. "They now have a firm niche in Asia, which is growing by leaps and bounds."

Still, expansion has not diminished Outrigger’s historical and current importance in Waikiki and in Hawaii, said Jack Richards, president and CEO of Pleasant Holidays LLC, Hawaii’s largest travel wholesaler.

"The history of Outrigger and the Kelley family is closely related to the Hogan family and Pleasant," Richards said. "The first deal the Hogans did in the islands was in 1959 with Outrigger. Together, the two families put Waikiki Beach on the map for the mass market and started bringing tourists from the West Coast to Hawaii, he said.

"Outrigger was very, very important to the development of Waikiki Beach and of Pleasant Holidays and remains a very, very big brand, particularly on the West Coast today," Richards said. "The L.A. market is still bigger than all of the other East Coast markets put together and the Outrigger brand is very popular with travelers there. Outrigger is going to continue to be important to Hawaii for some time to come."