The "All Inclusive" format gains momentum in large hotel chains

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The "All Inclusive" format gains momentum in large hotel chains
David Camhi
Source: Berger Singerman
July 23, 2021

We interviewed David Camhi, Partner at the Berger Singerman law firm in Miami. The executive with extensive experience in the hospitality market, shares with us about a trend that has been imposed in recent times

What has been the evolution of the last 5 years from the vision of the hotelier and the tourist?
More than in the last 5 years, in the last decade several things have changed in the all-inclusive space.
On the one hand, the presence of high-end properties in the main destinations has increased dramatically, in particular due to the interest in attracting travelers who are more interested in the quality of the offer of rooms and services (especially gastronomic), which spend as little as possible. This is partly the result of the increase in the number of travelers from the United States, who are increasingly willing to experience the all-inclusive concept and become repeat travelers of the model. But additionally, it is the result of a change in the traveler's demographics, which has allowed the development of concepts that cater to specific groups,
On the other hand, with the growth of the main all-inclusive destinations so that airlines offer hundreds of regular flights from the main cities of the world, and the generalization of the use of the internet to make air and hotel reservations, the control of the occupation has changed from tour operators, wholesalers and travel agents, directly to travelers, who can select the hotel, airline and flight they want, and make their reservations directly with airlines, hotels or OTAs. This implies an important change from the point of view of the hotelier, both the operator and the hotel brand, who can now take full advantage of their distribution channels without having to share the margin with tour operators or wholesalers or compete for their preference. .
A third element that has changed, and which is related to the previous two, is the flattening of the cyclicality of occupations and rates throughout the year, when before there was a marked difference between rates and occupations in the high season (December to March) and the low season (April to December, with peaks in the summer holidays and on certain holidays), today we are seeing more uniformity throughout the year, as a result of the demographic change in the traveler, the prevalence of properties only for adults who do not depend on school holidays, and the expansion of the offer of services in hotels that makes travelers not seek to travel to destinations only to escape winter.
One last element is the new emphasis that the hotel industry places on the concept of “experiences.” All-inclusive hotels now not only compete for the best location, physical characteristics, amenities, food and beverage offerings, but must now also put emphasis on the unique experiences that you can offer your guests.

What benefits are the most prominent in this segment as a business and as a user?
Since the rate includes accommodation, food, drinks, entertainment, taxes and even tips, travelers have a higher level of certainty about the total cost of the vacation. Additionally, to the extent that reservations are generally made several months in advance and the price of the all-inclusive package is sometimes paid at the time of booking, the traveler can enjoy their vacation more because they do not have to think about the budget for each day, or the cost of each item or service you consume.
From a hotelier's point of view, there are several benefits of the model, including (1) the greater certainty in the level of occupancy of the property (due, as I mentioned earlier, to reservations being made several months in advance), which which allows better cost management at the level of public services, inventories and personnel, but also the potential to make a more productive yield management, (2) the potential to seek opportunities to obtain additional income as a result of upsales and the sale of additional services , again as a result of the traveler having already paid the cost of their all-inclusive package and arriving at the property with a different mindset, and (3) the realization of income derived from the full package of services provided to the traveler (accommodation, food, drinks, etc.,whether the traveler consumes them or not), compared to a European plan property, where the hotelier only receives the income derived from accommodation and leases or concessions of consumption and service centers - and competes with consumption centers and service outside the hotel for the attention of the traveler.   

Is there Luxury in All Inclusive, what the user seeks as a service / attention?
As the all-inclusive service has become more sophisticated and higher-quality, it is now appealing to a higher-end customer who previously resisted all-inclusive hotels. It is not necessarily because of a price issue (and the eternal question of whether the concepts of luxury and value can coexist), but it is also the recognition that the all-inclusive concept grants the guest a level of freedom that is in the enjoyment of your vacation with greater intensity, and allows the hotel to offer a higher level of services because it eliminates the transactional element of the relationship between the staff and the guest, where the staff serves the guest without having to worry about it accepting the price and pay for each service.  
Proof of this are recent announcements by Marriott International regarding its plans for Mexico's Riviera Nayarit, which will include the first all-inclusive Ritz-Carlton, and by Hilton, which is also expanding its all-inclusive and luxury expansion plans with the next Conrad Tulum all inclusive.

Why is All Inclusive more popular in the European hotel industry and not so much in the American one?
The Caribbean and Latin America have always been the main markets for the all-inclusive segment. But the creators of the concept were Club Med and the Spanish chains, and their efforts were always directed at the middle-class European traveler, who culturally places an important emphasis on the price of the service they receive. The American traveler, unlike the European, places an important weight on the brand of the services they receive, and the trust that this brand generates. Until very recently, the prevalent brands in the all-inclusive segment were Club-Med and Spanish brands (and certain other small brands) which, except for Sandals, whose presence was limited to Jamaica and a few other Anglo-Saxon Caribbean islands, were unknown. in the mainstream market of the United States.   

What other destinations can be considered outside the Caribbean and Mexico in the Americas?
The factors that ensure the success of an all-inclusive destination is the possibility of having numerous properties of good size, which allow to sustain regular air traffic from the main world urban centers by commercial airlines. This requires that the climate in the destination allows for a beach season of 365 days a year, that the labor cost is reasonable so that a high level of guest service can be offered in a profitable manner, and that there is political stability. and perception of security that allows attracting international travelers and investors to make the millionaire investments required. 
On the other hand, any new destination will be competing with established destinations, unless it offers advantages such as closer proximity to the guests' points of origin. In this sense, I believe that there is great potential for new destinations in North Africa and the Middle East (but they require political stability), and the South Pacific (especially, to attract the growing Chinese middle class).  
What can we expect from the All Inclusive in the next 5 years?
I believe that with the entry of American brands there will be a higher level of consolidation in the segment. Behind the brands will come independent operators and institutional investors from the United States, which will generate a high volume of transactions, the formalization and uniformity of standards, and eventually the commoditization of operating services and other services related to the segment. as has happened in other areas of the hotel industry.
On the other hand, there is no doubt that there is a drive towards luxury. It remains to be seen whether it will lead to the development of true luxury all-inclusive standards that combine luxury and value, or the bastardization of luxury brands to accommodate existing all-inclusive standards. But, in any case, the result of this will have a great impact on the Ieisure hotel industry, and on all market participants, both hoteliers and non-hoteliers.

Could you give a final message for our community?
These are very interesting times to be immersed in this segment of the hotel industry. All the changes that are taking place will result in a highly strengthened and sophisticated segment. The best is yet to come!


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