This article is from the WeChat public account "Space Secret Exploration" (ID: MESPACE007), author: Li Sangen.
Since its inception, the all-inclusive resort has been a very special existence in the leisure tourism market, both from the product itself and the operating model. Recently, from Hyatt Group's $2.7 billion acquisition of Apple Leisure Group, to the world's largest portfolio of all-inclusive luxury resort brands, to Wyndham's launch of the first all-inclusive vacation brand, the epidemic has barely curbed the hotel giants' desire to expand the all-inclusive market. A full-blown all-inclusive battle for the all-inclusive business may have begun, and the standards for such products may be redefined in the near future.
International hotel players have entered the market
The biggest deal in the second half of 2021 was Hyatt's acquisition of Apple Leisure Group for $2.7 billion. For Hyatt, the brightest jewel in the crown of the deal is ALG's resort brand management arm, AMResorts. The resort brand management's AMR series is a portfolio of brands with 102 properties and more than 33,000 rooms in 10 countries, and the addition of the AMR series will make Hyatt the world's top luxury all-inclusive resort operator.
Just in early October, Wyndham Hotels & Resorts, the world's largest hotel franchise, announced the launch of its 22nd brand, Wyndham Alltra, a brand of all-inclusive resorts. This is the first time the company has established a standalone all-inclusive brand, and at the same time as launching the brand, Wyndham began building a strategic alliance with Playa Hotels & Resorts.
In addition, Marriott has reached an agreement with Blue Diamond Resorts, a subsidiary of The Sunwing Travel Group, and its 20 all-inclusive resorts have recently officially joined marriott's soft brand Autograph Collection. At this point, Marriott International Group officially entered the top ten in the number of all-inclusive hotel portfolios in the world. Hilton also launched its own all-inclusive hotel in July this year.
As can be seen from the data provided by the Asia Travel Big Data Research Institute, international hotel groups have more than two brands in the all-inclusive market. In the future, the competition for vertical segmentation brands will become more intense.
"All Inclusive", as the name suggests, everything will be included in the price of the vacation product. This concept of an integrated vacation package that includes dining, accommodation and entertainment appeals to many cost-conscious travelers. Like cruise ships, the all-inclusive product uses a way to neatly pack guests' vacations from start to finish, the only difference being that the hotel is the destination and guests will always stay in one place. All-inclusive vacation products emerged in Europe in the 1950s, and in the 1970s and 1980s, the business model spread to the Caribbean and Mexico. At the time, a big part of its appeal was security. Visitors can lie on the beach and sunbathe, dine in restaurants, play golf on the course, and don't have to leave the hotel and take out their wallets.
When the epidemic came, all kinds of hotels, all-inclusive resorts, and cruise lines suffered major blows to varying degrees. Unlike giant ships trapped at sea, the safety qualities of all-inclusive resorts are revealed at this time, namely the vast space and abundant open-air advantages that allow them to resume operations as early as the summer of 2020. With the ups and downs of the pandemic and most cruise ships still on hold, this hidden gem has also become dazzling in the eyes of cautious travelers and hotel investors looking for a new way out.
Different paths to march
Decades ago, the traditional hotel players have long discovered this market opportunity, but they have always maintained an unhurried and cautious attitude on the road of layout, and they try to observe what brands are suitable for all-inclusive from the continuous testing of the water. The following three points can be seen that hotel groups have gone from trial to development in this unique market.
01 Establish strategic alliances
Strategic alliances are the most secure way for hotel groups to test the waters of the all-inclusive space. Finding a reliable leader in the all-inclusive space and holding hands to open the door to this "new world" has become the first choice of traditional hotel giants such as Wyndham, Hyatt and Hilton.
The history of the strategic alliance dates back to 2003. At the time, Wyndham signed a 10-year strategic alliance agreement with Viva Resorts, and since then eight hotels in the Bahamas, Mexico and the Dominican Republic have been renamed Viva Wyndham and incorporated into Wyndham's portfolio. The recently launched independent brand Wyndham Alltra has joined forces with playa Hotel & Resorts, which is more familiar to the public.
Looking back at the history of hotel groups on this road of entry, the most important thing that cannot be ignored is the "dream lover" in the hearts of giants - Playa Hotel & Resorts. Playa is the lead owner, operator and developer of the All Inclusive Resort in the Golden Beachfront area, owning or managing 22 resorts in Mexico, Jamaica and the Dominican Republic. Its first alliance with Heritage Hotels Group was in 2015 with hyatt and launch of two new brands: the family-friendly Hyatt Ziva and the adult-only Hyatt Zilara. While Hyatt's acquisition of ALG has created some uncertainty about how Hyatt and Playa handle their alliance, there is no denying that this mutually beneficial alliance has brought substantial benefits to both parties, and the Hyatt House Resort cancun under construction will still open later this year.
Perhaps with the former's successful "marriage," Hilton also sees the advantages of Playa Hotel & Resorts' own all-inclusive resort experience. In 2018, the two companies established a strategic alliance to add and renovate resorts owned and operated by Playa. Since then, Hilton has planted several of its own all-inclusive hotel flags in Mexico and the Caribbean.
Compared to the previous two, before Wyndham Hotel Group partnered with Playa Hotel & Resorts, its products were mainly concentrated in Viva Wyndham's eight property portfolios. Understandably, Wyndham, as the only hotel group planning to launch an independent brand Wyndham Alltra for a one-price all-inclusive resort, and its alliance with Playa can be described as finding a "taifu" with both ability and moral integrity for this new "prince".
02 Soft brand attraction
Building alliances is not only the surest way to enter, but also gives these traditional hotel groups a first taste of the sweetness of this delicacy. After that, if you want to gain a foothold in the all-inclusive field and occupy the landmark, you are to use soft brands to attract independent resorts to join. This is also the fastest way to expand the brand's global reach in the all-inclusive field.
In recent years, hotel groups have been keen to develop soft brands as a unique hotel category. In 2020, research institute STR predicts that within five years, global hotel soft brands will surge, and large brands will still integrate. In the one-price all-inclusive market, the "flag change" action of hotel groups is still more frequent, and by 2025, soft brands will cover more single properties.
Location has always been key to the all-inclusive resort grab, from Cancun to the Caribbean to the Maldives. This type of product requires more than just beautiful scenery, and can be connected with local resources and culture, and provide as many activities as possible, which is incomparable to the place. However, with these unique landmarks almost carved up, for hotel groups, the export of soft brands has become another important way outside the alliance.
As mentioned above, Marriott's Autograph Collection has won 20 all-inclusive resorts around the world, and marriott will be seen in seaside resorts such as Mexico, the Dominican Republic, Jamaica, Saint Lucia, Antigua, Grenada and Costa Rica. Hilton's soft brand, QiBin Select, has also included all-inclusive resorts in its portfolio, with the first Qibin Select Playa Del Carmen Resort, which opened in May this year. Another soft brand focused on waterfront cities, Grey Select, also opened its first all-inclusive resort in September.
03 Develop your own brand
Traditional hotel groups see the all-inclusive sector as fertile ground for brand development, and in their eyes, brand awareness alone has a lot of room to rise in this area. Even if a hotel offering is developed into a destination offering that can cover a wide range of projects, the market also needs more vertical segmentation options.
From sophisticated luxury collections to lifestyle brands with personalities, providing a variety of living and parking spaces for different groups of guests is what these hotel players excel at. And when they found a powerful helper in the field of one-price all-inclusive and accumulated a certain degree of experience, starting from their own brand, they gradually derived the hotel business into a tourism business, which is a new action of increasing this "all-inclusive gambling game".
Starting in 2019, Marriott Hotels & Resorts has planned to use 7 of its 30 brands to operate all-inclusive resorts. Through new properties and the renovation of existing Marriott hotels and resorts, the Ritz-Carlton Resort and The Westin Hotel Resort are expected to open in 2023, and marriott hotels and resorts will also be available in 2025.
Marriott executives said in an interview in September that Marriott's vision for growing its brand is to transform the one-price all-inclusive market. Hotels in any price range will be available on an all-inclusive model, and budget resorts also have the potential to align upwards.
Why focus on the all-inclusive market
Traditional hotel groups like Marriott, Hilton, Hyatt and Wyndham are all latecomers in the all-inclusive space. In addition to the retaliatory leisure tourism demand brought about by the epidemic, is this all-inclusive bet really so good? Hotel groups can continue to increase their confidence for several reasons.
01 Hotel players with resources
It is not difficult to see that the confidence of traditional hotel groups comes from their own brands that radiate tourists of different ages. Almost every group has more than 2 soft brands, and there are as many as 2 to 5 brands in different grades.
From traditional seaside resorts to tranquil mountain countryside, traditional hotel brands have long taken advantage of the terrain. The way to renovate its own brand hotel mentioned above is also based on this advantage.
In addition, top hotel groups have been working to build brand awareness for decades to attract more regular customers. Marriott Executives have mentioned that its membership program, Marriott Home, has become a major selling point for developers and hotel owners looking to convert their all-inclusive properties into the Marriott brand, and Marriott's brand influence and distribution capabilities are the best resources for it to enter the one-price all-inclusive space.
02 Strength-based partners
As an alliance partner of Hyatt, Hilton and Wyndham, Playa Hotels & Resorts' strength in operating and managing one-inclusive all-inclusive resorts is evident. As the first company to help global hotel brands enter the space, Playa eliminated the struggling mentality of their initial trials, while its triple identity as a one-price all-inclusive resort operator, developer and owner gave the alliance partners more confidence.
As an asset-heavy company, Playa can form joint ventures with joint venture partners, such as Hyatt Ziva and Hyatt Zilara, developed in cooperation with Hyatt Group, to help them gain a foothold while providing management services.
Meanwhile, in most of the islands of the Caribbean and Mexico, many property owners are largely family-owned businesses that acquired land and developed these projects years ago, and most of them do not intend to sell or have clear plans to trade the asset. When the group proposed plans to expand its soft brand, Playa had already established a good relationship with local single property owners, providing an excellent opportunity for the hotel group to change licenses.
Hilton, Hyatt and Wyndham are not alone on their way to the all-inclusive market, and there is a super comprehensive partner that will provide them with more chips to bet on this all-inclusive space. Playa's operational and management capabilities coupled with the distribution capabilities of traditional hotel groups, the complementary attributes displayed by the two sides will achieve the fantasy effect of "1+1>2".
03 Find a loyal member of the organization
When a traveler plans to go to a destination he has never been to, there are two equally attractive all-inclusive products in front of his eyes: one is the brand he has been staying in and can redeem points, and the other is not, which one will he choose? The answer is actually very clear.
A decade ago, the all-inclusive space was dominated by brands like Club Med, Playa, and Sandals until the arrival of traditional hotels like Marriott, Hilton, Hyatt, and Wyndham in recent years, when loyal members who are passionate about experiencing all-inclusive products have been waiting for years to come to their organizations. Similarly, as collectors and punchers who love the Ritz-Carlton or W brand culture, the brand resorts created by the group also give them more choices to experience.
Whether it's Marriott, Hilton or Wyndham, hundreds of millions of regulars behind each family will have the opportunity to use their long-accumulated points when purchasing a one-price all-inclusive product. These loyal members who are actively "going home" in the all-inclusive market have created a brighter future for the traditional hotel giants to grow this business.
Two major vigilances on the road to "transformation"
Despite these 3 favorable conditions, this does not mean that traditional hotels can sit back and relax when they enter the all-inclusive market. In fact, the all-inclusive holiday concept is not as simple as it is literally understood, and it has great challenges to traditional hotel groups in terms of business model structure, diversified product creation, and vertical distribution channel establishment. Giants on the road to a successful 2.0 version of the all-inclusive hotel, but also need to be wary of the following two points:
01 Transformation of business models
The narrow view that traditional hotels focus on room and F&B revenue in their operations is no longer applicable in the all-inclusive market. To maximize revenue and profits, all-inclusive hotels must go beyond the traditional revenue per available room (RevPAR) measure to include total profit per guest. The current all-inclusive resort has other huge revenue opportunities in addition to one-time package revenue. Guests are increasingly willing to pay for additional spa services, private beach dinners or golf activities in addition to the original packages they purchased to enhance their holiday experience. Under the incremental and auxiliary revenue of hotels, it must bring about the necessary changes in revenue management strategies. Indicators such as RevPAR may not be enough to measure the profitability of future all-inclusive products, they must be used in conjunction with other key indicators, such as GOPPAR and the total profit per room.
In addition, in addition to the strong distribution capabilities of traditional hotel groups, whether they can master more local distribution channels is also the key. For example, Xcaret's Parent-Child Theme Park in Cancun, Mexico, and the other two adventure-themed X-Series parks have partnerships with local all-inclusive hotels, and guests will purchase free or partially discounted park tickets in the package they purchase. This way of providing guests with the opportunity to go outside the hotel reduces the time that guests spend in the hotel in disguise, and at the same time subtly reduces the cost of the hotel's customers.
02 Destination Building Power
In view of the special attributes of the resort, the all-inclusive resort product needs more capital support and more efforts in the compatibility with the surrounding properties. Even if these hotel groups don't own the assets, they still have to find the right owners who are willing to create the right ones for entertainment, dining, and even other entertainment. Although the residential functions provided by brands of different grades can meet the difficult one-price all-inclusive entrants, when the hotel business develops into a cultural tourism business, the building power of each aspect of "eating, traveling and playing" will also be the evaluation standard of these discerning customers.
Traditional hotel groups need to be wary of whether their all-inclusive products can activate the local value chain, and simply occupying a hidden geographical location without providing a wealth of local entertainment facilities will only make guests who want to enjoy all-inclusive vacation products lose their sense of vacation, leaving loyal followers to become birds trapped in cages.
While the hotel group's determination to change the rules of the game is encouraging, it is unknown whether its hotel genes can bring a new experience to all-inclusive enthusiasts in practice. It is worth looking forward to who can become the leader of the new round in the all-inclusive field in the next five years and provide more standardized measurement rules for the resort features of this segment.