BAYAHIBE, Dominican Republic — The continued surge in leisure travel has helped support the rapid acceleration of all-inclusive resort development in the Caribbean, but that’s not the only driving factor, according to executives from some of the region’s leading brand names.
Solid operating margins for the all-inclusive model, amenable development environments and a growing interest in all-inclusive travel have fueled more interest in the region.
Marriott International and Hilton in recent years have joined more established regional brands such as Apple Leisure Group, Grupo Posadas and Barceló Hotel Group to expand all-inclusive resort options in the region.
Recent alliances and deals in the all-inclusive space include IHG's loyalty alliance with Iberostar Hotels & Resorts, Hyatt’s acquisition of Apple Leisure Group and Wyndham Hotel Group’s partnership with Playa Hotels & Resorts, all with the goal of claiming more of the Caribbean all-inclusive pie.
Distribution Matters For Big Brands
Distribution is a big reason why Marriott and Hilton have joined the all-inclusive cohort.
Paula Cerrillo, director of development in the Caribbean for Marriott, said the company needed all-inclusive offerings to stay competitive, and had been considering the space for some time prior to its 2019 launch of its all-inclusive platform.
“We realized there was a need to jump into all-inclusive when we saw that our loyal guests were staying with our competitors because we weren’t offering all-inclusive,” she said during a panel discussion at the recent Caribbean Hotel Investment Conference and Operations Summit.
Now Marriott has more than 32 all-inclusive resorts open and continues to announce expansion, such as the signing of the W All-Inclusive Punta Cana Uvero Alto in Dominican Republic, set to be one of the first all-inclusive W Hotels to open.
Nicole Tilzer, senior director of all-inclusive resort strategy for Hilton, said many strong demand drivers are lining up now in the region.
“There’s been a growing and improving perception of all-inclusive in general, so the brands coming in have raised the perception of the category and brought new consumers in,” she said. “And we can make a great business case for making money for our owners, and provide something to guests that perhaps we had been missing before.”
Tilzer said Hilton data shows that within the first six months of opening an all-inclusive resort, about 60% of people booking stays are Hilton Honors members redeeming points.
Perception Grows
The United States and North America in general have long been the top source of tourism into the Caribbean, and operators of all-inclusive resorts in the region say the demand boom for the segment can benefit everyone.
“For many years, we were basically the only U.S. operators of all-inclusive [resorts], and now having these competitors makes my job more difficult, but it’s wonderful to see how all-inclusive has positioned itself here,” said Fernando Fernandez, vice president of development at Apple Leisure Group. He added that all-inclusive resorts have dominated all new hotel construction across the Caribbean for the past 15 years.
With more interest in the sector, now is the time to take it to the next level, he said.
“Now we’re transforming all-inclusive from the basic hotel with the breakfast and buffet, to a more upscale product, good design, good service,” he said. “It shows where the market is going and hopefully it will help the Caribbean continue growing. With all-inclusive, the Caribbean will grow faster” beyond the traditional development hot spots of Dominican Republic and Puerto Rico.
The strong operating fundamentals in the region show how travelers’ comfort levels with the Caribbean have grown, said Mauricio Elizondo, director of development at Grupo Posadas, the Mexico-based resort company that has hotels across all segments, including all-inclusive, in Mexico and the Caribbean.
Broad airlift and easy flights, many within three hours of major U.S. destinations, also help, he said.
That increased exposure to the region has helped the all-inclusive segment to mature, he said.
“The all-inclusive segment we have now is not the same that started 15, 20 years ago,” he said. “We now have all-inclusive in different segments, and it’s well-accepted. You can get a very luxurious experience and a family experience. It’s just a matter of your aim for that vacation.”
All-Inclusive or European Plan?
Airlift plays a big role in where companies develop all-inclusive resorts, rather than European-plan resorts, because volume is needed to make operating margins to pencil out, speakers said.
“It’s about size as well,” Elizondo said. “If you’re on an island where you can have a 400-room hotel and run an occupancy of 75% to 85% all year long without the volatility of seasonality, that’s a perfect spot for an all-inclusive. If you’re on a smaller, more seasonal island and can’t build that 400-room hotel, then maybe it’s European plan. It’s a matter of understanding the destination.”
For hoteliers who are part of a brand family with both all-inclusive and traditional European-plan offerings, that’s no problem, speakers said.
A property with 400 rooms or more isn’t necessarily the baseline, especially for more luxurious all-inclusive resorts, they added.
Marriott is launching all-inclusive resorts under its Luxury Collection and Ritz-Carlton brands, which Cerrillo said don’t necessarily need 400 keys.
“It all depends on what the added value is for the customer and what the customer is willing to pay,” she said.
Fernandez reminded the audience that no matter the segment, operators of all-inclusive resorts must prioritize cost control. One way to help higher-end, all-inclusive resorts with a smaller room count hit margins might be to affiliate them with more traditional-model all-inclusives so they can share operating systems and even staff, he said.