MIAMI — Investors today are more comfortable with the thought of developing all-inclusive resorts, whereas 10 years ago that wasn't the case.
Paula Cerrillo, director of development for the Carribbean at Marriott International, said during a panel discussion at the Caribbean Hotel & Resort Investment Summit that this assurance has to do with the growing sophistication of the all-inclusive business model.
"The business model has evolved from a vertically integrated type of model to now you have the strength of the brands and the big distribution platforms. From an underwriting perspective ... investors were not trusting so much that type of business model. Now they see the brands playing in the space and say ... this model is much more sophisticated," Cerrillo said.
Investors who at one point were against the all-inclusive model are now developing all-inclusive resorts, she added.
Nicolás Valle, vice president of development and investment at Playa Hotels & Resorts, said the appetite for all-inclusive resorts is much different than it was 10 years ago.
"We're very happy that the brands are convinced today. When we started 10 years ago, that was not such an easy sell," he said. "We in Playa put $2 billion to $3 billion behind this investment thesis, and we reached performance levels that have surpassed our expectations. We see that there's still more that can be done now that more luxury experiences and brands have become available for us in the space."
In November 2021, Hyatt Hotels Corp. closed on its $2.7 billion acquisition of Apple Leisure Group.
Pablo Maturana, vice president of development for South America and the Caribbean at Hilton, said it's only natural that investors who are looking at developing all-inclusive hotels are gravitating toward the brands for management.
"It creates a bubble effect, in the sense that it opened for us the opportunity to enter partnership with a new set of investors," but it also opened opportunities for the investors, he said.
Entering New Markets
Ruben Becerra, vice president of business development at Karisma Hotels & Resorts, said the very first exercise for investors in deciding which markets to enter is analyzing the cost. He said that will determine whether a resort can be all-inclusive or not.
"There are countries that we would not recommend. But there are plenty of [up-and-coming] countries in all the regions of the world that could fit for that model," he said.
For example, Becerra said he would not recommend investing in an all-inclusive model in London or Paris.
Fernando Fernandez, vice president of development for the inclusive collection at Hyatt Hotels Corp., said even locations such as Puerto Rico present challenges for all-inclusive resorts due to cost of labor.
"It's based on how you control the cost of the operation because if you have three times the number of employees that you have at a regular hotel, you have a lot more expenses," he said. "The first thing that you have to analyze is that cost. If the labor cost is high, it cannot work."
Maturana said in some locations labor costs can be offset.
"It's a question of whether there is a premium, and that premium is the guest is willing to justify paying for [the experience]," he said.
He said it can be hard to deliver a luxury all-inclusive experience, however, for 400 to 500 guest rooms. That doesn't mean it can't be done, but there must be synergies in the operation.
"I don't think that you can enter luxury or ultra-luxury all-inclusive everywhere you go; it's very handpicked," he added.
Cerrillo said the all-inclusive model has already evolved so much and will continue to evolve as there's still untapped demand.
"There's a lot of U.S. customers that are a feeder market for the Caribbean but don't trust the all-inclusive segment yet. Once they experience a real all-inclusive location and really see the value of all-inclusive, they are going to start building loyalty," she said. "If there is demand for new destinations and the customer is willing to pay for that, then why not?"
(Corrected on June 2 to update the amount of investment made by Playa in the sixth paragraph.)