SAN JUAN, Puerto Rico—All-inclusive resorts continue to be a major driver of business to the Caribbean region, and industry leaders speaking on the “Hotel leaders outlook” panel at the recent Caribbean Hotel Investment Conference & Operations Summit indicated that pattern will continue.
“I’m a true fan of the model,” said Diego Lowenstein, CEO, Caribbean and Latin America for Miami-based Lionstone Development, which has holdings in the Caribbean that include all-inclusive offerings. “Particularly for this region, everything comes together. You can capture the full revenue cycle of the guest, drive more expensive labor resources and see it come to the bottom line.”
“The whole world is going all-inclusive because it’s convenient—everything’s packaged,” said Alex Zozaya, CEO of Apple Leisure Group, which includes AMResorts. “At the high end, price is not a driver—it’s the experience.”
“It’s a phenomenal model,” said Kenny Blatt, principal and COO of CPG Real Estate. “All the big brands have been trying to get into this world.” He said his company tried the all-inclusive model at a DoubleTree property and a Hilton property, but it just didn’t work.
George Spence, principal of Leading Property Group, said there are six all-inclusive brands with more than 8,000 rooms each in the Caribbean (including Cancun and Riviera Maya in Mexico): Riu, Barceló, AMResorts, Iberostar, Bahia Principe and Blue Diamond. There are nearly 20 other all-inclusive brands in the region.
Lowenstein said all-inclusive resorts are the way for the hotel industry to fight the cruise industry in the Caribbean—which is “growing in an astronomical way.”
“Cruises can be a great way to promote a destination, then we have to have the right model to have them stay for a week at a time,” Lowenstein said.
At least one land-oriented challenge presents problems for all-inclusive properties. Blatt said high labor costs in the region and for all-inclusive properties create a situation in which all-inclusive properties must be able to raise their average daily rates to stay in business.
But there’s another side of the coin, according to Zozaya.
“In the all-inclusive model the break-even (point) is a lot higher because you have a lot of staff,” he said. “Once you get past break even, it is a lot more profitable. It’s a very strong value proposition.”
Blatt said the price point for the all-inclusive model continues to grow. He said operations for the model in Hawaii cost $120 more per person per day than they cost in Jamaica, so rates also have to be higher.
“Would a customer be willing to pay? The answer is yes,” Blatt said. “As long as the customer is willing to pay the extra, the model will work in a high payroll environment.”
“The consumer loves it,” Zozaya said, adding that all-inclusive customers stay about 30% longer than European Plan customers.
Blatt said a key component for a successful all-inclusive model in a destination is for the destination as a whole to build its brand so the consumer is willing to pay extra.
Dave Johnson, president and CEO of Aimbridge Hospitality, agreed.
“When you take a destination that has a lot more to offer than sun, sand, water and golf, the customer says, ‘I’m paying an additional premium. … I gotta commit to being at the resort,’” he said. “Part of the all-inclusive model has to do with what’s the true attraction of the destination.”
Another part of its success is the perception of consumers. Johnson said there’s a big upside for the segment because the all-inclusive model is no longer viewed as a cheap alternative to the European Plan model.
“There will always be both (models), even in a market like the Caribbean,” Johnson said. “Certain high-end customers will say, ‘That’s just not for me.’”
Zozaya agreed that the concept is no longer viewed only as a low-end option for consumers. He pointed to the $650,000-per-key price tag of the under-construction Zoëtry Isla Di Oro Aruba as evidence. That AMResorts property is expected to open in 2018.
“We’re using the same architects, the same standards you’d find in any luxury brand,” Zozaya said.
Panelists also dismissed the notion that all-inclusive resorts are bad for communities because guests tend to stay on property rather than explore the area. More properties are providing options for guests to venture off-site, which give guests opportunities to spend money in the surrounding community as well as helping operators keep their overhead a little lower.
“Every hour the guest spends out of the hotel, we make more money,” Zozaya said.