David Brillembourg (right) of Brilla Group and Michael Shindler of Hard Rock Hotels and Casinos.
NASSAU, the Bahamas—As the all-inclusive resort concept continues to grow throughout the Caribbean region, so does the question surrounding how and when global brands will embrace the business model as a standard way of conducting business where it is warranted.
Executives speaking during Thursday’s “View from the Top” general session panel at the HVS Caribbean Hotel Investment Conference & Operations Summit said it’s only a matter of time before it happens.
“The whole inclusive animal ... Americans are starting to realize they want that level of value,” said Kenny Blatt, vice chairman and principal of Caribbean Property Group, which owns several branded all-inclusive resorts in its portfolio of eight properties, including the Hilton Papagayo Costa Rica Resort & Spa.
Hard Rock Hotels and Casinos got involved in the all-inclusive arena when it opened its 1,790-room property in Punta Cana, Dominican Republic, in 2011 and its 1,499-room Hard Rock Hotel Megapolis Panama in Panama City this year.
“We had the flexibility with our outlets and size to embrace the all inclusive,” said Michael Shindler, executive VP of hotels and casinos for the rock ‘n’ roll-themed chain of assets. “We have been able to keep the feeling of the all-inclusive experience.”
Part of that process included putting the brand’s stamp on operational issues favored by owners, he added.
Blatt said brands for the last 10 years have been trying to figure out how to make the all-inclusive model work. However, the road often ends when property-improvement plans needed to bring resorts up to the appropriate standards are considered.
“Someone’s got to figure it out because that’s what the customer is going to want,” he said.
“I don’t think they work every place,” said Rich Cortese, senior VP of Caribbean operations and development for Aimbridge Hospitality. “What the brands miss in the all-inclusive market is you have to meet what the all-inclusive customer wants, not what the brands want to give them.”
“If you don’t have five restaurants, even if you are a 100-room all inclusive, it’s not going to work,” he added. “It can’t work in every location because of the operating costs.”
Other topics addressed
The panel addressed a number of other topics, including gaming, airlift, cash flow and performance as the 200 attendees gathered at the Atlantis resort:
Gaming: With a growing footprint throughout the region, gaming in the Caribbean tends to be more of an amenity rather than the primary driver of business as it is in traditional gaming destinations, the panelists said. “It’s an amenity, but it gives you some nice incremental (net operating income),” Blatt said, adding that Wall Street doesn’t always favor the gaming component.
Airlift to the Caribbean: Blatt said JetBlue has been a savior throughout the Caribbean as it has added flights in the wake of American Eagle’s pullback from the market.
Cash flow: Getting properties across the region up to standards in terms of quality and services offered is a big concern, the panelists said. “The biggest challenge and opportunity is how owners can generate sufficient cash flow to renovate the products,” Blatt said, adding that smaller operators in the region don’t have cash because they aren’t branded and weren’t required to put in capital expenditure cash reserves. Cortese said Aimbridge’s management agreement includes a requirement that owners set aside a minimum of 2% of revenue into capital reserve.
Good performances: The panelists agreed that the performances of hotels throughout the Caribbean have been getting better after spending a couple of years floundering because of the recession. David Brillembourg, chairman and CEO of real estate private equity firm Brilla Group, said there has been strong growth in the Riviera Maya in Mexico and there has been heavy investing being done in Colombia, especially in Cartagena. “The market is starting to come back selectively,” Brillembourg said, adding that the expectations of buyers is starting to line up closer to what sellers are expecting.
However, there are challenges ahead. Superstorm Sandy’s devastation in the Northeast U.S. could have lingering effects into the first quarter of 2013 for the Caribbean because that region is a big source of visitors for the Caribbean, Cortese said.
“The end of the year and first quarter are huge for those markets,” added Shindler.