Executives speaking at the International Society of Hospitality Consultants share why companies such as Apple Leisure Group, Club Med and Hilton are attracted to the all-inclusive resort concept—and why they’re each seeking more representation in the lucrative segment.
MIAMI—The all-inclusive resort concept is all about common sense, which has led the business model to be as popular, efficient and lucrative as ever, according to speakers at the recent International Society of Hospitality Consultants annual conference.
The concept—which requires consumers to pay in full the cost of lodging, food, beverage and amenities prior to arrival—allows operators to better focus on the product, according to Javier Coll, EVP and chief strategy officer for Apple Leisure Group.
“(Consumers) go to these places, they want to be relaxed. They want to make sure that everything’s taken care of—they don’t want to get no for an answer if their question is reasonable,” Coll said during the “Forward thinking: The Leaders Panel” session. “We make sure our employees understand that this is not about nickel and diming … this is not in the book, this is not our policy. We try to avoid that as much as we can.”
Coll said Apple Leisure sees the importance of getting staff at all of its 55 properties on board with this philosophy.
“We run all-inclusive with an occupancy of 85% throughout the year—that means basically you’re full most of the time,” he said. “Because everything is pre-sold, you don’t have to worry about making sure that at the restaurant you have enough people in it. You can focus on the product.”
The focus in the all-inclusive segment is on consumers’ quests for unique experience, according to Xavier Mufraggi, president and CEO of Club Med North America and Caribbean. The company, created in 1590, has 75 all-inclusive beach and ski locations.
“It’s very important to understand all inclusive is not a package of room, food and drinks,” he said. “What we do in the industry is experiential platforms. … More of an experience, less of being a commodity.”
Coll said companies such as Apple thrive whenever traditional hotels add “resort fees,” other fees or additional mandatory costs beyond the room rate.
“They have done that a lot in the last five years,” Coll said. “That’s where it’s common sense for us.”
All-inclusive resorts do have ancillary revenue opportunities such as spas and premium liquor sales, but because the fundamental offerings are included in the pre-sold product, guests understand long before they arrive what is included—there are no surprises, he added.
That mentality has struck a chord with executives at Hilton, which in September forged a strategic alliance with Playa Hotels & Resorts to increase its all-inclusive footprint.
Juan Corvinos, VP of development for Latin America and the Caribbean at Hilton, said the decision to partner with Playa to enhance its all-inclusive business was based on customer preference.
“Our customers were telling us, ‘you’ve got great city resorts, you’ve got a lot of focused-service midscale all throughout the U.S., and you’ve got over 560 resorts across all the brands (around the) the world—but , we want to have all-inclusive resorts,’” Corvinos said. “I’ve never gotten so much good feedback from our customers in my history at Hilton, people saying we wanted this.”
The alliance may grow larger in the future, he added.
“This partnership is for the Caribbean and some areas of Latin America, but we’re looking forward to more,” Corvinos said. “We had already 11 all-inclusive resorts around the world, but we’re looking to consolidate and give those resorts a little bit more context.”
Companies such as Hilton becoming more interest in the all-inclusive space is not surprising to Coll.
“It’s great because they realize we’re not this little niche done by operators who don’t know anything about the hotel industry,” Coll said. “We’re just a different way, but the product on the outside looks the same. That’s where using an operator to get this learning curve of how to operate an all-inclusive is not surprising.”
The labor-heavy operating model for all-inclusives makes it tougher to be successful in the United States, the speakers said.
“All-inclusive is successful when you can keep a customer’s attention captive most of the time,” Coll said. “It’s not going to be successful in New York; it’s not going to be successful any place you go out of the hotel most of the time. … (For example), you’re going to spend most of your time in a ski resort. In a beach resort, it depends on where the beach resort is. Once you have that covered, there’s the limitation of the labor cost or any other cost.”
Apple has analyzed several locations in the U.S. from the all-inclusive perspective, but the numbers usually don’t pencil out in the right way, Coll said. An exception is Hawaii, where the model could work, he said.
What it takes to be a leader
Leadership was another topic the speakers addressed.
Corvinos said most of his thoughts about leadership comes in the early morning hours when the chance to decompress is more prevalent.
“When I think about leadership nowadays, it’s about how do I make sure with what I currently have I can switch things around and make sure that next year I can deliver more resorts than I delivered this year,” he said. “How do I move the chess pieces around the board?”
Coll said companies striving to be in a leadership position must at times buck the norm. Apple does this by moving 3.6 million passengers from the United States to Mexico and the Caribbean through its Apple Vacations group.
Approximately 16% of those passengers stay at resorts operated by sister company AMResorts—Coll said the company refers to it as operating its hotels with insurance.
“We’re one of the few companies in the United States that have distribution control,” Coll said. “We can control the number of hotels that we sell as a tour operator. Therefore, when the crisis comes, we have more control. We cannot worry that much about if our hotels are going to be full or not. Which is also fun because every time we open a hotel, we’re more worried about what we are going to do as a product than how we are going to fill it.”
The biggest skill a leader has is flexibility, Mufraggi said.
“Most of our job is very pragmatic because we know that, whatever the vision, you have to change your strategy and tactics,” he said. “The second part is to know it’s cyclical.”
For Club Med, that means knowing when to shift attention and focus to certain parts of the world based on economic factors.
“Being able to have pull in different markets from the planet is very important, and to be in control of distribution is very, very important,” Mufraggi said.
He cited the 2008 downturn as an example. The staggered timing of the U.S. and Europe falling into, then recovering from, the crisis helped to provide some stability of business when balancing the different regions, he said.
“For each of our properties, we try to say a property is going to be successful if at least it can be fed by two different regions,” Mufraggi said. “Especially when you have families, a school calendar difference, we can play with the price, we can have a high occupancy.”