The pros and cons of all-inclusive resorts in the Caribbean region was a familiar topic during the opening day of the HVS CHICOS event in the Dominican Republic.
PUNTA CANA, Dominican Republic—The role of all-inclusive resorts throughout the Caribbean region was a common thread during Thursday’s opening day of the HVS Caribbean Hotel Investment Conference & Operations Summit.
The all-inclusive concept was discussed in two panel discussions during the opening session. A breakout session also was devoted to the topic during the first day of the conference, which was held at the all-inclusive Hard Rock Hotel & Casino Punta Cana.
Year-to-date through September, there were 186 all-inclusive properties comprising 63,506 guestrooms in the Caribbean, according to STR, the parent company of Hotel News Now.
“There’s a lot of interest in the all-inclusive, but it really depends on what part of the market you want to be in,” said Bill Sipple, executive managing director of HVS Capital Corporation, during the “Caribbean as an asset class” general session. He questioned whether luxury all-inclusive resorts even exist.
Javier Coll, executive VP and chief strategy officer for Apple Leisure Group, took exception to that comment while speaking on the “All-Inclusive Hotels—Reasons for their success” breakout session.
“All-inclusive can also be luxury,” Coll said, adding that Apple has two 5-diamond all-inclusive hotels. “The stigma of the cheap all-inclusive … we’ve worked hard for the last 10 years and have started to change that.”
Some of the all-inclusive conversation was spurred by Hyatt Hotels Corporation’s announcement of its Hyatt Ziva and Hyatt Zilara all-inclusive resort brands that mark the company’s entry into the segment. Hyatt Ziva Los Cabos and Hyatt Zilara Cancun, which are both owned and managed by Playa Hotels and Resorts, are launching this month and will undergo multimillion dollar renovations in 2014. The next resort in the portfolio, Hyatt Ziva Rose Hall in Jamaica, is undergoing an extensive renovation and will open in late 2014.
Rich Cortese, senior VP of Caribbean operations and development for Aimbridge Hospitality, said during the “Hospitality leaders outlook” general session that Hyatt’s partnership with Playa is essential because Hyatt doesn’t have all-inclusive expertise.
“The (American) companies that want to come into all-inclusive really don’t understand the dynamics of the industry,” Cortese said. “There’s a lot of contradiction to what they’ve been weaned on. It will be interesting to see how it plays out on the management side as well as the tourist side.”
Sipple agreed during the “Asset” general session.
“What will be interesting for the American brands as they get into the all-inclusive market … does the brand have experience?” Sipple said. “It’s a herd mentality on the lending side. (Lenders will ask) do they have experience and the ability to pull it off?”
There also was plenty of talk throughout the day about expanding all-inclusive portfolios.
“We only go to places where we think it will be successful,” Coll said. “It has a lot to do with distribution and a lot to do with (air)lift.”
Apple’s Breathless and Secrets brands are catered to adults only, and the company has four other brands that allow children, Coll said.
Louis Alicea, director of development for Latin America & Caribbean at Wyndham Worldwide, said during the “All-inclusive” breakout session that Wyndham is specifically targeting Wyndham Resorts for all-inclusive candidacy.
Hard Rock’s experience in all-inclusive has been entirely through franchising, said Nelson Parker, head of development for hotels & casinos in the Americas at Hard Rock International, during the “All-inclusive” breakout. The key to success has been to set up zones for adults, children and so on at the resorts so there can be enough experiences to keep guests happy for a week or 10 days.
Speakers pointed to a number of secrets to success of all-inclusive properties.
“The success of the all-inclusive is the tight control on the food and beverage,” Alicea said. “You have to be working hand in hand with your inventories. You have to micro-manage it to be profitable.”
Parker said the company has been surprised by the success of the all-inclusive concept with its weddings and meeting-and-incentives business.
“Now it’s a fairly sizable component of what we are focused on,” he said. “Those kinds of events blew away our projections. We had to go back and think how we could capitalize on that.”
Coll agreed. He said his company averages two weddings per day at each of its 34 properties.
Alicea said multi-generational travel parties are also big business for all-inclusive resorts.
All-inclusives are the end-all, be-all for the Caribbean region, speakers said.
Frank Elias Rainieri, VP of business development & real estate for Grupo Puntacana, said during the “Hospitality leaders” session that his company decided to add some European Plan-oriented properties because of the glut of all-inclusive resorts in Punta Cana.
“We believe there is a big market for having non-all-inclusive hotels,” said Rainieri, whose company has several all-inclusives in its portfolio, which primarily serves the Punta Cana region of the Dominican Republic.
The company has already introduced a Four Points by Sheraton property and is getting ready to open a Westin resort.
Rainieri said most hotels in the area changed to the all-inclusive model because their Spanish owners saw the opportunity for high-volume bookings.
Cortese said there’s room for a select-service hotel or two in every Caribbean market.
“The select-service/limited-service model is a great model … but we have to be careful because there’s no barrier to entry,” said Kenny Blatt, principal and COO of Caribbean Property Group, during the “Hospitality leaders” session. His company’s portfolio includes three Courtyard by Marriott hotels and several all-inclusive properties, big box hotels and luxury resorts.
“It depends on the market,” Hard Rock’s Parker said. “Some of our development partners want to break the mold and go into EP in some markets dominated by all-inclusive.”
The all-inclusive model
Despite what the description implies, all-inclusive hotels generally don’t include everything for one price.
Coll said upper-end items, such as wine and spa visits, can provide incremental revenue.
“You need to focus on service and you can focus on upselling things,” Coll said. “It’s not a huge component, but it allows you to focus on additional revenue once (guests are) in the property.”
Parker said Hard Rock is experimenting with charging for ala carte amenities, such as the Simon Mansion restaurant and Oro nightclub at the Punta Cana property.
And every little bit counts when trying to wrangle the all-inclusive operating model, speakers said.
“The cost controls while providing a quality F&B experience is one of the biggest challenges,” Alicea said. “You have to have the right purchasing network in place to effectively buy on a wholesale basis.”
Coll said the cost of training is a big challenge.
“The human resources are the most challenging component,” Coll said.
He said he anticipates a lot of conversions to the all-inclusive concept, in large part because customers can choose to put away their wallets once they arrive.
“The all-inclusive customer spends more on average then the EP customer in any destination,” Coll said.
“The future is very bright,” Alicea said. “People planning vacations want to have a budget. It’s something the American market is accepting more and more every day.”