Outrigger Hotels became famous for filling Waikiki with budget travelers lured to Hawai'i with cheap rates and bargain hotel-air packages.

Bringing in the masses fundamentally changed the beachfront O'ahu destination. Six decades later, the resort company is reshaping Waikiki again, but this time with the development of a decidedly high-end $535 million Beach Walk development.

As the company celebrates 60 years in business this month, the emphasis has evolved to cater to a variety of travelers. That's the assessment of Hawai'i tourism officials looking back on the Outrigger legacy from inside and outside the family-owned resort. In the 1970s, Mainland newspaper ads offered bargain package deals to Hawai'i to stay at Outrigger hotels: "$499, five nights Waikiki, including air," recalls Frank Haas, former marketing director for the Hawai'i Tourism Authority who is now with the University of Hawai'i's Travel Industry Management school.

"They created an affordable property that was open to everybody," he said. And they did it by linking with airlines and tour companies, plus offering a basic hotel without room service, restaurants or even bell service in some places.

"As tourism was growing from virtually nothing to a major industry, that's what put Hawai'i on the map," Haas said.

But the company didn't stay the same. Outrigger moved into the Neighbor Islands, created different types of hotels in different price ranges and began managing properties for other hotel chains, shifting from a company that owned more than 30 hotels to one that owns fewer than 10 and manages more than 40, for a total of more than 12,000 rooms.

Outrigger spokeswoman Nancy Daniels said annual revenue grew to $474.9 million for 2006.

CHANGING FACE

The properties are spread throughout the state, the Pacific and even some on the Mainland, and the portfolio keeps shifting. "The other remarkable thing about Outrigger is its ability to change and adapt as Hawai'i tourism has changed and adapted," Haas said.

A decade ago, Carey noted that the company needed to spend money to renovate. Now they have done that. "They've made a commitment to renovation of their properties and to the development of retail space in Waikiki to keep the destination relevant," Haas said.

Now tourism is more complicated, Haas said, with 80 percent of West Coast visitors saying they have been here before.

The company's early days were shaped by the work of its colorful founder, architect Roy Kelley. When he built the Islander Hotel in 1947, Kelley introduced the lowest room rates ever in Hawai'i: $6.50 and $7 a night, a big change from the other, pricier accommodations available.

When jet travel revved up in 1959, the Kelley empire grew with innovative partnerships and hard work.

The founder was famous for walking around the hotels and spending most of his time near the front desk to stay close to customers. But he was also blunt about what he thought.

He stirred a controversy by jokingly suggesting that Waikiki be sealed off with a "hula curtain" that kept out local people who couldn't enter without a "genuine tourist pass." The Advertiser's Harry Lyons penned a cartoon (see accompanying graphic) of the mythical Kelleyland that hung on the founder's walls for years.

The company has had only three CEOs and remains family-owned and operated. Kelley was succeeded by his son, Dr. Richard Kelley, who steered the company through modern expansion and a growing community presence.

The company is now led by CEO David Carey, who married a granddaughter of the colorful founder and learned the hotel industry by working his way through desk jobs into management.

Looking back on the legacy of the founding Kelley, Carey said, "He really helped make the Hawai'i dream possible for a lot of travelers that otherwise wouldn't have been able to come."

Murray Towill, president of the Hawai'i Hotel & Lodging Association, describes Outrigger as "one of the driving forces in affordable tourism" in the 1960s and 1970s.

But he said the company has shown strength in its evolution and its roots in Hawai'i. "As the company grew, it broadened its portfolio to attract a wider variety of visitors," Towill said.

"Their heart is here. They have a real sense of what's good for the community," Towill said. And that has helped the company grow in ways that help the community as a whole, not solely what is good for the hotel industry, he said.

Carey said being a family-run local company comes with community involvement as a given as well as a variety of challenges of running a large company.

Most Outrigger hotel employees aren't union members. The hotel does have union hotels on the Neighbor Islands and manages other hotels with unions.

COURTED BY UNIONS

In recent months, two unions that represent hotel workers have held informational picketing outside Outrigger-affiliated hotels: the Pacific Beach Hotel by ILWU's Hawai'i Local 142; and the Ala Moana Condotel by Unite Here Local 5.

Both unions have said they are hoping to negotiate favorable new contracts with the company. But ILWU spokesman Dave Mori noted that company officials are pretty clear: "They would prefer the union not be there."

Mori said the company has proposed an "open shop" at Pacific Beach where it would be optional for workers to join the union and pay dues.

But Mori said that's unrealistic: "I don't know of any hotel that has an open shop, that allows each employee to decide if they want to be in the union. It's like having a restaurant and telling customers you pay what you like."

Carey said it's unfortunate that the company came in to manage those hotels well into the union negotiations.

Economist Paul Brewbaker said Outrigger survives in business by keeping pace with the changing face of tourism and capitalizing on trends. "For the last 20 or 30 years, the gap between reality and perception for Hawai'i tourism has widened," Brewbaker said. "Outrigger has stayed focused on reality, while most people in Hawai'i live in a mythological version of reality."

Carey acknowledges the change. "We're a vastly different business today," Carey said. "We're in Hawai'i. We're international. We run upscale hotels, We run condominiums. We actually don't run very many budget hotels anymore. Whereas when I first started in the business, they were all budget hotels."

He said the company adapted to the changing world: "We moved with the market."

What's Outrigger's next big challenge? "We're still working on that," Carey said, but quickly added that the company is looking at growing the business internationally, looking at Asia as potential for hotel management and a source for customers.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.