AMResorts’ Apple Leisure bond nurtures fruitful model
 
AMResorts’ Apple Leisure bond nurtures fruitful model
21 JUNE 2016 8:30 AM

While Apple Leisure Group’s subsidiaries supply AMResorts with 25% of its business, the resort company and its six brands use the all-inclusive model and a luxury mentality to appeal to its guests.

NEW YORK CITY—Being on the expansion fast track in a hotel sector built on providing laid-back and fun experiences is no small feat, but Alex Zozaya is enjoying that equation as AMResorts celebrates its 15th anniversary.

“What is most fun for me is growing and growing very fast. I love to see things happening, and being part of that change,” Zozaya said during the recent NYU International Hospitality Industry Investment Conference. Zozaya founded AMResorts in 2001 and became CEO of parent company Apple Leisure Group in 2013.

Alex Zozaya, Apple Leisure Group

AMResorts has used a third-party management and branding model during the past 15 years to open 44 hotels in the Caribbean, Mexico and Latin America. It manages properties in 23 destinations in eight countries.

The Philadelphia-based company has eight more properties scheduled to open by the end of this year, with another eight scheduled to open in both 2017 and 2018 and one on tap for 2019. After all of those properties open, AMResorts will have 61 hotels comprising 21,500 guestrooms. It has 24,000 employees.

The company’s brands include:

  • Zoëtry Wellness & Spa Resorts, a high-end boutique brand that features properties with fewer than 100 guestrooms;
  • Secrets Resorts & Spas and Breathless Resorts & Spas, which are both adults-only offerings;
  • Dreams Resorts & Spas and Now Resorts & Spas, which are family-oriented resorts; and
  • Sunscape Resorts & Spas, a brand that Zozaya described as “unlimited fun.”

AMResorts has doubled in size every five years, and Zozaya said he expects that trend to continue.

“We’ll be able to go from 60 (hotels) to 120 (hotels) in the next five years,” he said. “The opportunity is huge. The market is still very fragmented, so we have opportunities in the downturn to convert hotels … into our brands and take management contracts with hotels that are underperforming.”

The Secrets Akumal Riviera Maya in Mexico is one of AMResorts’ 44 open properties. It is an adults-only resort with 434 suites. (Photo: AMResorts)

The company is looking to grow in places such as Saint Lucia, Bahamas, Turks and Caicos, Cayman Islands and Saint Martin. That’s where the strength of the overall company comes into play, Zozaya said.

“There are so many places that we already have distribution but we don’t have hotel presence yet,” Zozaya said.

Where it all began
It all started in 1969 when tour operator Apple Vacations was called Atkinson & Mullen Travel—the Mullen family continues to control a major stake in the company—and now includes offshoot companies, including Travel Impressions, CheapCaribbean.com, Amstar DMC, Unlimited Vacation Club and AMResorts—which Zozaya calls the company’s driver.

“It’s very Americanized and high end,” said Zozaya, who spent 13 years with the Fiesta Americana brand owned by Mexico’s Grupo Posadas prior to launching AMResorts. “It’s pretty much in line with the type of customer we’re trying to acquire.”

Its sister companies in the Apple Leisure Group family represent approximately 25% of AMResorts’ business—including 15% from Apple Vacations, Zozaya said. A total of 75% of AMResorts’ business originates in the United States.

“We’re looking for the American that’s willing to travel within one and five hours from their house,” Zozaya said.

Apple Leisure Group employs an asset-light model in which it focuses entirely on management. The company doesn’t franchise, lease or rent properties; nor does it manage properties outside of its family of brands or lease or rent its properties. It relies on a steady core of investors, including Zozaya’s family, which has ownership in 16 of the group’s properties, he said.

Other high net-worth families and individuals own the company’s properties, and in 2012 private-equity firm Bain Capital bought an ownership stake in Apple Leisure Group.

Apple Vacations moves close to 2 million passengers each year, including between 550,000 and 600,000 via charters, Zozaya said. That means it relies on countless other hotel brands to house its clients.

“One component of success for our hotel company and for distribution is to have all the partners in the system and also on the hotel side, other suppliers,” Zozaya said.

All-inclusive model works well
Another component of AMResorts’ success comes in the form of the all-inclusive nature of its business. The concept involved providing guests with wrist bands upon check-in and the most aspects of the stay are included in the average daily rate.

“That’s actually a lot of fun and it’s an interesting part of our industry that that has changed completely—the connotation of all-inclusive,” Zozaya said. “The term we call it is ‘unlimited luxury.’”

Regardless of its moniker, it’s not an easy concept to pull off, he said.

“Delivering that product with the economies of scale that you have on the back of the house at the same time delivering high quality, that’s what makes it happen,” Zozaya said. “The break-even point in the all-inclusive sector is much higher, but once you pass that break-even point it becomes a lot more profitable.”

Included in that is a well-appointed food-and-beverage experience, which Zozaya admitted is one of his passions. AMResorts’ F&B recipe is to have one restaurant for every 50 guestrooms, he said.

The nature of the all-inclusive concept requires at least one specific trait, according to the CEO.

“You’ve got to be consistent,” Zozaya said. “The length of stay is longer in an all-inclusive even though we promote heavily for the guest to leave the destination, to get out of the hotel, to experience the place because that makes the vacation a lot more unique and extends the length of stay.”

That all-inclusive model helps AMResorts run a system-wide occupancy of approximately 87% each year, according to Zozaya—which means it avoids the peaks and valleys that a traditional hotel must endure.

“We have a lot of groups that are smaller in size, so we have very consistent, high occupancy,” Zozaya said.

Another hallmark of the all-inclusive model that AMResorts uses is the intensive hands-on approach required by employees. The company maintains a ratio of 2.1 employees per available room, Zozaya said.

“Managing the culture of the staff in a consistent way and delivering the product with a smile but also with good quality, I would say that’s a bigger challenge,” Zozaya said. “We’ve been very fortunate, very lucky. We’ve been doing a good job at it, but I would say that’s the biggest challenge.”

The Now Larimar Punta Cana Resort in the Dominican Republic is one of AMResorts’ all-inclusive offerings in the Caribbean. (Photo: AMResorts)

As Americans become more comfortable with customized bundling of products and experiences, the all-inclusive resort concept could eventually take hold in the U.S. like it has in the Caribbean, Zozaya said. The biggest issue for the U.S. expansion of the concept is that is generally requires a low-payroll environment for it to be financially solvent, he said.

“As long as the consumer is willing to pay the premium in the rate that is able to pay for the difference in payroll, that model will work,” Zozaya said. “There are certain destinations in the U.S. that could be very optimal to have all-inclusive, like Hawaii for example.”

He also cited Florida, ski destinations and theme parks as possible all-inclusive environments.

“At the end of the day what really matters is the price of the whole package,” Zozaya said. “In many cases in the U.S., even if the hotels end up being more expensive, maybe flying there is a lot cheaper. So when you put the whole package together, as long as it’s that price that conveys a lot of value for my money, I think it’s a great opportunity. And within the United States I think we have a lot of opportunity to grow.”

However, Apple Leisure Group has nothing in the works at the moment for the mainland U.S., Zozaya said. He wouldn’t rule it out as a growth vehicle once the company’s brand’s becomes firmly rooted.

Cuba is in the plans
The impending opening of Cuba to Americans will have a positive effect on the entire region, and AMResorts is gearing up for it, Zozaya said.

The island nation already is part of Apple Leisure Group’s network as it sold approximately 7,000 vacation packages there in 2015, Zozaya said.

“That’s very small compared to the potential, but it was double what it was the year before,” Zozaya said.

One of the company’s big opportunities comes in the resort management business, he said.

“On the hotel side, which is going to make it a lot more interesting, we are in constant conversations with the Cuban government,” Zozaya said. “We already applied for the permits to operate in Cuba; we already identified which properties to convert into our brands and hopefully that can happen soon.”

Zozaya said the rest of the Caribbean need not worry about the effect of Cuba opening to Americans because of the volume of them traveling abroad.

“We have 8 million new passengers every year—there’s 8 million new Americans wanting to travel out of the United States every year for leisure purposes,” Zozaya said. “The number of Americans as new travelers to the region is going to go to 100 million within the next 10 years, so the market is huge. …

“Cuba is going to help the awareness and it’s going to help drive more Americans to the Caribbean region as a whole, and I’m not concerned about them in a short term hurting any destination.”

2 Comments

  • Hotelguy June 21, 2016 10:25 AM Reply

    Interesting that Apple Vacations only supplies 15% of the business to AM. I would have thought that number would be higher because they can create airlift whenever needed.

  • Christie June 23, 2016 2:33 PM Reply

    Just returned from a vacation at Dreams in Punta Cana and have to say was disappointed as I expected more from them. Hotel room was warm and told the front desk multiple times with no one fixing the issue, refrigerator was continually not stocked, Italian restaurant lasagna tasted like Hamburger Helper macaroni and beach grille opened at 11:30 (0nly food source open at that time until 12:30) and was consistently not ready at "opening". 11:30 meant the person showed up to start setting up/cooking. I am sure for economies of scale they train/run similar programs at each resort but after this experience would probably not choose them again.

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