MIAMI—Hyatt Hotels Corporation’s partnership and equity stake with Playa Hotels & Resorts has raised the ante in the all-inclusive resort space as it continues to spark reverberations throughout the hotel industry.
This time the scene was Miami, where the Hyatt-Playa deal was referenced repeatedly throughout the Caribbean Hotel & Resort Investment Summit and the Hotel Opportunities Latin America Investment Conference. The conferences were held back to back at the JW Marriott Marquis. Hyatt’s acquisition of a 20% stake of Playa has other large hotel companies in the United States aggressively exploring the all-inclusive landscape.
“We know the (major U.S. brand) companies are all going to enter the all-inclusive space,” said Bruce Wardinski, Playa’s CEO, during a HOLA general session. “It’s the only segment where they currently don’t have a presence.”
Wardinski told attendees Playa had partnership conversations with most major hotel branding companies before deciding to partner with Hyatt. The result was Hyatt launching the Ziva and Zilara brands catering to family-oriented and adult-only travelers, respectively. That has spurred an eagerness by brand executives to build on foundations that feature only a handful of options for most brands.
Craig Smith, president for the Caribbean and Latin America at Marriott International, appeared to be half kidding when he said during a CHRIS general session: “I doubt if I’ll be in my job in the next couple of years if we’re not in it. … It’s a must-have market. Ten years ago, all-inclusive was seen as the cheaper side of the business. It’s vertical now.”
José Carlos Azcárraga, CEO of Mexico-based Grupo Posadas, said during the HOLA session that the market has done a 180-degree turn from 10 or 15 years ago when the general perception was customers simply couldn’t be happy at all-inclusive properties.
“The all-inclusive product is the same satisfaction level as any other product we have,” Azcárraga said, noting that the company has four all-inclusive resorts open and two under construction.
“I’m a strong believer in the new age of all-inclusive,” said Carlos J. Hernandez Garcia, president and CEO of Pellas Development Group, which is scheduled to open the 447-key Dreams Las Mareas Resort and Spa in Guanacaste, Costa Rica, in November. “I was perfectly convinced given what the market wants: safety, sustainability and all-inclusive. Even in ultra-luxury, there’s room for all-inclusive.”
Pellas is partnering with AMResorts on the Costa Rica property, which is being marketed as “unlimited luxury” instead of the traditional “all-inclusive.”
A long process
Steve Haggerty, Hyatt’s executive VP and global head of real estate and capital strategy, said during the CHRIS general session that the entrance into the all-inclusive sector wasn’t an easy one—including coming up with the brand names.
“It literally took forever,” he said. “You’d be surprised what meaning lawyers can find in a collection of letters.”
Haggerty said the reasoning behind getting into the all-inclusive business wasn’t all because Hyatt could make money. “It’s what the customers want,” he said.
Hyatt needed an operator with an understanding of the model so it could learn the intricacies of all-inclusive, according to Haggerty.
“We needed a partner because it’s a form of operating model; it’s a form of sales and marketing that we want to be associated with from the get-go,” Haggerty said. “We like the path that we’re on.”
That operating model is one that requires unique knowledge, according to the panelists. In Colombia-based Royal Hospitality’s case, not having that knowledge led to a decision to not venture into the all-inclusive arena—despite the belief that Colombia would be a great market for it.
“It is a wonderful segment that obviously everybody has in their sites now,” said Denise Estefan, president of Royal Hotels International. “You have to be careful because not everybody can do it well. It’s a very different operation than a regular hotel.”
For that reason, Royal has no intention of entering the all-inclusive segment, Estefan said.
“It’s something we’ve looked at and decided to stay away from it,” she said. “Our business is corporate.”
A focus on all-inclusives
Apple Leisure Group took the opposite approach. The Bain Capital-owned entity includes AMResorts and Apple Vacations in its portfolio. CEO Alex Zozaya said during the CHRIS session that AMResorts has 12,000 rooms in the Caribbean region.
“The world is going more inclusive,” Zozaya said, adding consumers are used to the all-inclusive mentality when they go to the movies (where they buy the combo pack) and when they buy cars. “Now everything’s included. Everything seems to focus on convenience, more value for your money.”
Zozaya said the instant gratification model plays well for consumers—many of whom have experienced that model on cruise ships and want the same experience on land.
Azcárraga said the demand for all-inclusive options from consumers is impossible to ignore.
“It was almost a missed opportunity for Posadas not getting to this market,” he said. “We believe definitely it’s a strong trend that’s going to keep on going. We’re going to be there for the long run.
“The benefits of it, let me say the most obvious one: It’s what the market wants, and at the end of the day you can’t go against what the market wants,” Azcárraga said.
Three of Posadas’ open all-inclusive resorts were converted from the traditional European plan of pay-as-you-go.
“You see the difference in the people staying and how they are using the property,” Azcárraga said.
Zozaya said the all-inclusive model requires a much higher staff-to-room ratio.
“All-inclusive is about the experience at the pool. … It’s more than just the room,” Smith said, noting amenities such as wireless Internet access and gambling opportunities around the pool are essentials that guests demand.
Being a part of the community
Playa targets world-class beach locations because that type of asset gives the all-inclusive model the best chance to be successful, Wardinski said. The company doesn’t shy away from markets that have a lot of existing supply and more in the pipeline.
“It’s got to have infrastructure; it has to have supply and demand,” Wardinski said. “We’re not afraid of supply. We welcome more hotels to be built at different price points. It’s critical because of the demand and (air)lift. If you don’t have adequate lift, all-inclusive doesn’t work. You have to have enough supply to generate lift.”
Another important element for all-inclusives is a good relationship with the local community and government. Multiple speakers said despite what is often assumed, operators prefer that guests leave the resort to experience the local culture.
“You have to have the community on your side; you have to have great cooperation from the government,” Zozaya said. “It’s not just a self-contained destination where there’s no benefit to anyone outside of the hotel.”
Zozaya said the sky’s the limit for the all-inclusive market, especially in the Caribbean. The company’s tour operators fill about 20% of the all-inclusive rooms, and 75% of its business comes the U.S.
“There’s so much room to triple the number of Americans going to the Caribbean today,” Zozaya said.