The all-inclusive resort segment is about to get more crowded.
In recent years, the hotel industry's biggest brand players have made significant investments into the all-inclusive space. In August, Hyatt Hotels Corp. announced a $2.7 billion deal to acquire Apple Leisure Group and its portfolio of all-inclusive brands. Marriott International bolstered its all-inclusive portfolio in February in a mutual agreement with Sunwing Travel Group, growing its all-inclusive platform that it first launched in 2019. Hilton entered into a strategic alliance with Playa Hotels & Resorts back in 2018 to create and develop all-inclusive resorts.
Fernando Mulet, chief development officer and executive vice president of Playa Hotels & Resorts, said at the recent Caribbean Hotel Investment Conference and Operations Summit held in Nassau, Bahamas, that the all-inclusive resort segment has evolved significantly over the past two decades. The biggest testament to that growth today is that more brands are considering adding all-inclusive properties to their portfolios.
"It's a way of vacationing at every segment, every quality tier," he said.
Growing Brands Presence
Global brands see the value of the all-inclusive segment and how their existing brands could be tailored to the space, such as Marriott International's Ritz-Carlton or JW Marriott brands, Mulet said.
"In every segment, they see a customer that is preferring this type of vacation and they want that type of experience," he said. "... The fact that the brands are entering this space, they're investing more marketing and they're sending the message that all-inclusive is now tied to their brands and their reputation. Many, many travelers are going to give the all-inclusive an opportunity if they didn't think [before] that it was a good quality product. That's going to expand our customer base overall as an industry."
In October, Wyndham Hotels & Resorts introduced Alltra, an upper-midscale, all-inclusive brand that Wyndham will develop exclusively with Playa in the Caribbean and in select Latin America markets. The first two resorts opened in Mexico this month: the 458-room family-friendly Wyndham Alltra Cancun, and the 287-room, adults-only Wyndham Alltra Playa Del Carmen.
Scott LePage, Wyndham's president of the Americas, said the pandemic brought challenges industrywide but also reinforced the resiliency of travel.
"There's two things that are here to stay, and one of them is the value of travel to the general consumer that's out there," LePage said. "We took that away from them, or the pandemic took it away from them, for over a year. And now folks are realizing how important it is to their lives, to their families to their well-being."
Hotel brands are experts at driving loyalty among guests, and LePage said members of Wyndham Rewards so far make up the majority of bookings for Wyndham's two new Alltra properties.
"We have over 90 million loyal team members in our Wyndham rewards program, and as we've all opened up new opportunities in the Caribbean, we're seeing over 60% of the reservations that we're generating for these hotels and these owners coming from our loyalty program," LePage said.
Changes to Staffing, Operations
As brands invest more into the all-inclusive segment, the biggest question is how to make that model work in markets where employees expect higher wages. Alex Zozaya, former chairman of Apple Leisure Group, said the model works when the resort is located in a market where travelers are already willing to pay more to get there.
"How are they going to compete? They need to command a premium," Zozaya said. "The consumer has to be willing to pay more to come to this destination, and the difference in the premium they pay on the rate should offset the incremental cost of the labor and then the business will work."
An all-inclusive resort won't work in every market, Zozaya said, comparing the feasibility of developing in Puerto Rico versus developing in Hawaii.
"My suggestion to everybody in the Caribbean is if you guys know that for whatever reason, you have a cost base that won't let you compete neck and neck with the other guys, you only have two choices," he said. "You either lower your costs or have some additional incentive to an investor to come and put money in your destination, or you invest in marketing, public relations and in your product itself. So you make sure that the consumer is willing to pay more for your destination, knowing that your costs are going to be higher and therefore your company can attract investors."
José Carlos Azcárraga, CEO of Mexico-based Grupo Posadas, said across the industry it's apparent hotels are cutting back on services and blaming the pandemic, and in his opinion that comes with consequences.
"I see a lot of a lot of chains that have cut services in a way that it's absurd," he said. "I went to a hotel, and I'm not gonna say which one, but they tell you, 'You know what, you're going to be here for four days. You're not going to get even your rooms cleaned because of COVID.'
"Your brand is your experience. I mean, I'm guessing that we're using that excuse for things that are not related, and honestly, I think that's a very bad choice of strategy."
The pandemic has shown hoteliers where guests are more willing to control their stay themselves and where they still want human interaction, Azcárraga said. Self-serve check-in kiosks, for instance, could become more prevalent.
"It's a matter of really understanding where you have to interact with the customer and when you can leave them alone and give them a very better experience," he said. "And I think that that's something that we will keep on learning for the next couple of years."