All-Inclusive hotels have a new look for a new era

People have been buying and selling goods in Europe for millennia but the way in which they do it has changed a lot over the past couple of centuries.

May 30, 2017

Today’s All-Inclusive hotels still tempt vacationers with all-you-can-eat buffets and free flowing drinks, but that’s where the similarities end with the traditional All-Inclusive model.

The All-Inclusive, or AI, vacation has been around since the 1950s when the idea of a comprehensive vacation package that included meals, lodging, and entertainment appealed to cost-conscious travelers. It’s still a popular concept today, but the business model behind that concept has evolved dramatically.

Take, for example, the food in the plentiful buffets found at many All-Inclusive resorts. Today, that food is likely to be locally sourced and sustainable while bespoke cocktails are made with top-shelf liquor. Add large guest rooms with high-end furnishings, sophisticated entertainment, activities for guests of all ages and high-end spas, and the experience is now much more in-line with modern consumer tastes.

“Back in the early days, guest rooms at All-Inclusive resorts were spartan and small,” says Clay Dickinson, Managing Director of JLL’s Hotels & Hospitality Group. “Larger guest rooms of 500 to 600 square feet are becoming the standard. There’s also been a huge improvement in the food offerings to appease guests who expect healthy choices and global flavors.”

Setting new standards

At the upper end of the market, brands have been developing a new luxury All-Inclusive format, or AI 2.0. AMResorts, for example, offers gourmet dining, elegant accommodations, premium drinks, beautiful beaches, and a world-class spa. Meanwhile, Playa Hotels and Resorts is enjoying a re-launch after teaming with Hyatt; under the names Hyatt Zilara and Hyatt Ziva, guests enjoy swim-up suites, authentic dining, and live entertainment. Wyndham Worldwide’s Viva Wyndham Resorts, Marriott International, and Hilton Worldwide have also entered the AI 2.0 arena.

AI 2.0 resorts adjust their strategy for each market instead of taking a one-size-fits-all approach. “One resort may be more health-and-wellness oriented, another may be for romantic couples, and another might cater specifically to families,” says Dickinson.

As multi-generational travel increases, it could be difficult for vacationers to choose just one type of resort. But AI 2.0 has an answer for that in the form of sister properties that allow guests to enjoy the benefits of both resorts.

“Regardless of whether you’re going to any particular resort, there may be a day or two within your vacation that you want to experience what one of the other resorts can give you. Maybe a couple will want a massage and a nice dinner, and for a little bit of an upsell, the grandparents and kids can go to a sister property’s waterpark,” says Dickinson.

Kids and teens-only clubs offering more than simple babysitting services often help add family appeal to what was once more of a singles-scene. Club Med, for example, has joined forces with Cirque de Soleil to offer younger guests circus entertainment and hands-on gymnastics training.

Before, guests may have been content to relax by the pool for a week or two, today’s holidaymakers are more keen to explore their surroundings through immersive cultural experiences or city tours. Although these are generally not included in resorts’ package prices, they offer hotels an additional income stream and even strengthen links with the local community by setting up projects through organizations such as the Sandals Foundation.

The All-Inclusive appeal for operators

Over the last few decades, a growing number of hotels – especially those in destinations with beautiful beaches or other natural attractions, convenient accessibility, and low labor costs – have switched to the All-Inclusive model. Many of these used to offer accommodation under what was known as the ‘European Plan’.

“What used to be a 50-50 or a 60-40 mix between AI and European Plan (EP) hotels 25 years ago has now become almost 100 percent AI,” says Dickinson. “And it’s not just newly built hotels, it’s conversion of formerly EP hotels into AI. EP hotels in certain areas are having a difficult time competing with the AI format.”

But it’s not as simple as adding on food and drink. “There’s more to successful All-Inclusive operations than just operating the individual hotel as an AI,” says Dickinson. Being able to manage and control costs is key. “Usually there are a lot more upfront costs due to the number of food and beverage outlets, the expansiveness of the common areas, and the pool.”

The distribution channel is also different with an AI resort. “There are the wholesale tour operators, the charter airline, and the destination wedding company to consider, says Dickinson. Many AIs, however, control this vertical distribution channel. “Either they own part of it, or they have over years established unbelievable relationships with all the players,” he says.

Keeping guests coming back for more

Building strong relationships with guests is key. Vacation clubs are becoming an increasingly popular way to guarantee repeat visits. “Unlike timeshares, where you have to reduce the room inventory based on the number of timeshares you’ve sold, with vacation clubs, you’re selling the right to discounted travel,” says Dickinson. “This creates loyal customers for hotel operators.”

With appetite for the All-Inclusive model showing no sign of waning, Dickinson believes that the sector will grow at the higher end with more luxury hotels offering All-Inclusive packages. And with the focus on providing authentic traveler experiences, they will continue to form partnerships with associated travel brands and the local community. “Resorts will no longer isolate themselves,” he adds.

Finally, though the Caribbean coast remains a favourite with fans of the All-Inclusive models, new developments could branch out from traditional locations. “AIs will start growing in new areas, such as Hawaii and certain parts of Western Europe — even if labor is expensive,” Dickinson says.

For international travelers, the choice of where to go on their next vacation is only going to get harder.