All-inclusives diversify, draw wider investment base
All-inclusives diversify, draw wider investment base
06 DECEMBER 2019 8:29 AM

With new sources of funding and a broad base of demand, from honeymooners to families, the all-inclusive segment is evolving across the Caribbean.

MONTEGO BAY, Jamaica—Inbound travel to the Caribbean continues to grow, and demand for all-inclusive hotels and resorts is growing as well, according to executives from some of the region’s largest resort owners and operators in the Caribbean.

As the all-inclusive segment matures and different types of travelers want to experience it, companies are diversifying their offerings. Speakers on a panel addressing trends in the all-inclusive segment at the Caribbean Hotel Investment Conference & Operations Summit said they’re focused on finding new opportunities in the region, both with investment and with concepts.

Traveler preferences
“What we’re seeing now is more segmentation,” said Mauricio Elizondo, development director of Mexico-based Posadas. “On one hand you have family-oriented all-inclusive resorts … and on the other side you have ones more into music, entertainment, art and celebration. So we’re segmenting those two main groups into all our ideas and concepts for the brand.”

Fernando Fernandez, VP of development for Apple Leisure Group, said he’s seen all-inclusives in the Caribbean expand from what they were 20 years ago to a much more diverse product today.

“Customers always have wanted that excellent location, and then, the very (high-end) customers wanted the convenience of paying one fee, and the exclusivity of location,” he said. “Over the years, we focused on those markets where we had distribution, and bringing the tourists there. Now, we have diversified the product and today (we have) resorts that appeal to families, everybody.”

Diane Edwards, president of Jampro, Jamaica’s economic development agency, said Jamaica in particular has seen a lot of diversification in its all-inclusive resorts, designed to appeal to a variety of travelers, from honeymooning couples to families.

That’s important, she said, because all-inclusives make up approximately 80% of Jamaica’s total hotel supply, and diversity is critical in the quest to attract tourists.

“We see a lot of variety,” she said. “There are resorts focused on wellness and exercise, which is a big trend. We attract both family resorts and adults-only resorts. There’s a lot of opportunity.”

Investment and financing
When it comes to financing all-inclusive developments in the Caribbean, panelists said knowing the product, market and demand drivers is key.

Tommaso Sandretto, CEO of development company Sole Resorts, said that while coming up with different and sophisticated offerings is great, it can make financial oversight challenging, since there are so many factors involved. For that reason, the leadership and players behind the projects are critical.

Posadas is asset-light, only owning about 10% of its properties, Elizondo said, so it’s important to understand every part of the deal.

“We have to drill down and understand the investor side,” he said. “Is this an all-inclusive destination that will allow higher returns? Is the guest looking for an all-inclusive option here? If the answers are yes, then we start looking at what brands fit in specific markets.”

Ruben Becerra, VP of corporate affairs and business development at Karisma Hotels & Resorts, said brand choice plays a big role in the investment strategy. Karisma owns some of its properties and also has partnerships to manage resorts under brands like Nickelodeon Hotels & Resorts and Margaritaville Island Reserve Resorts.

“As an investor, one thing that helps is being able to bank on lifestyle brands,” he said, citing the Nickelodeon and Margaritaville brands. “But I’m not saying those are the only two brands—there are plenty of lifestyle brands, and this is a segment of our industry that hasn’t exploded yet, but I think it gives an extra advantage in making sure you get that investment.”

As for who is doing the investing, speakers said the field has opened in recent years.

“Ten years ago, local banks would not have looked at the all-inclusive sector at all; they didn’t really understand the product,” Edwards said. “That has changed tremendously. Partly because … you now have stronger local and regional banks who understand the business model and who are now ready to finance projects with foreign investors and with local investors as well. That’s a big change in the market.”

Becerra said a lot depends on what island or island-nation is at stake.

“Right now the United States is pretty open to investing in Mexico, but in Jamaica, it’s a lot of local (investors),” he said. “In Barbados, we recently made a deal with a developer and the money is coming from a Caribbean family office. So it has a lot to do with the destination itself.”

Sandretto added that “the pool of investors in the U.S. is quite small” now, which he said “is good and bad because it leaves opportunities for smaller (investors), but it also can be complicated and difficult.”

He said understanding the rules and returns specific to all-inclusives is critical, too.

“You need to be able to match the equity with the risk and that is a big job,” he said.

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