Outrigger Hotels empire grew from a small room

Which hotel chain began with the founders renting out a single room in their house? The answer is Outrigger Hotels.

Dr. Richard Kelley believes it "started around 1933 with the renting of a small room in our family home at the corner of Seaside and Kuhio avenues, in the heart of a then very quiet and sleepy Waikiki."

Around 1934 or 1935, in the middle of the Great Depression, Richard’s parents, Roy and Estelle Kelley, built some two-story, wood-framed units called the Monterey Apartments next door to where they lived on property leased from the Queen Emma Foundation. The Waikiki Trade Center is there today.

"That marked the birth of our tradition of providing clean, comfortable and affordable accommodations," Richard Kelley says.

In 1936 they completed a 20-unit apartment building called the Town House at the corner of Royal Hawaiian and Kuhio avenues. "It was three stories tall, which in those days made it a high-rise!"

World War II stopped their expansion. When it was over, they continued in earnest.

The Kelleys benefited from a fluke occurrence during the war. Immediately after the Dec. 7, 1941, bombing of Pearl Harbor, the military commanders of Battery Randolph ordered its cannons test-fired.

Battery Randolph was a concrete bunker with two 14-inch coastal artillery cannons that were built to repel an enemy attack by sea. It occupied the Diamond Head end of Fort DeRussy where the Army Museum is today.

The shock wave from the muzzle blast had an unexpected effect. It shattered windows nearby and badly damaged the Edgewater Beach Cottages, near the Halekulani hotel. The apartments sat empty for five years, as no materials or manpower were available to do repairs.

Roy Kelley scraped together $60,000 ($680,000 in today’s dollars) to acquire the Edgewater Beach Cottages in 1946. They repaired and rented them by the week or month.

The Kelleys opened the 33-room Islander Hotel on Seaside Avenue in September 1947. Room rates were an affordable $7.50 a night.

The Waikiki Twin Theatres later occupied the property.

"It was not a development that came out of the blue. My parents had been developing and renting apartment units in Waikiki for over a decade before that," Richard Kelly said.

Roy and Estelle Kelley considered the Islander Hotel, with its front desk, telephone switchboard and snack bar, to be their first stand-alone hotel.

"Its opening 65 years ago in September 1947, marked the beginning of the company known as Outrigger Hotels & Resorts," Richard Kelley said.

Roy Kelley foresaw the postwar wave of middle-class visitors to Hawaii and saw a niche for himself. While most hotels were expensive and catered to the wealthy, Kelley targeted the middle class. An architect by training, he could build hotel rooms for half the price of others and keep his rates low.

How Outrigger Hotels got its name is an interesting story. The Outrigger Canoe Club used to occupy a beautiful beachfront property between the Moana and Royal Hawaiian hotels. When its lease expired in 1963, it moved to its current location at the foot of Diamond Head.

Sheraton Hotels wanted the property, but an impasse developed during negotiations with the Queen Emma Foundation. Sheraton objected to a $10,000 annual increase in lease rent after 10 years they believed had been inserted into the proposed lease at the last minute. The foundation said it had been there all along.

During a lunch break, Roy Kelley walked into the room and learned about the impasse. He offered to meet the terms. When the Sheraton people returned from lunch, they were told that the property was no longer available. Kelley borrowed the Outrigger name for his growing hotel chain.

Kelley opened the Outrigger Waikiki Hotel on the former canoe club site in 1967. The Outrigger East, Outrigger West and Coral Reef hotels went up soon after on parcels that were part of the deal with the Queen Emma Foundation.

Kelley was a frugal man. He maintained a desk inside the lobby of the Edgewater hotel for many years and could often be seen helping tourists with their bags. He also was not averse to answering the phones or running to the supply room for toilet paper. "I don’t want any upstairs office and secretary keeping me away from people," Kelley said. He was also a generous man who went out of his way to help friends and employees in need.

Kelley died in 1997 and Estelle Kelley a year later, both at the age of 91. They started with a single rental in their home, and grew to apartment buildings, and then into the largest hotel chain in Hawaii.

Outrigger Enterprises Group celebrated its 65th anniversary this year. Today it manages 16 properties on Oahu, 16 on the neighbor islands, nine in Australia, Fiji, Guam, Thailand, and Bali, and is developing hotels in Thailand, Bali, Hainan island, China and Vietnam.

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Bob Sigall, author of the “Companies We Keep” books, looks through his collection of old photos to tell stories each Friday of Hawaii people, places and companies. Email him at Sigall@Yahoo.com.