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Marriott Goes All In(clusive)

Burgeoning Segment Offers Major U.S. Brands Potential New Avenue Of Growth

Wednesday, August 14, 2019
Dennis Nessler
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Several years ago Hyatt Hotels Corporation took the unprecedented step of formally entering the all-inclusive segment of hospitality. Traditional U.S.-based lodging companies hadn’t previously been willing to venture into what was typically the domain of local management companies in resort-type locations, primarily in Mexico and the Caribbean.

Like many who follow the industry, I wondered at the time at what point they would have some company among the major U.S. brand companies. It took a while but Marriott International ended that suspense this week by announcing the formation of an all-inclusive platform.

Marriott announced it has signed five management agreements for new-build, all-inclusive projects in Mexico and the Dominican Republic to the tune of some $800 million. The resorts are expected to open between 2022 and 2025.

The launch comes as the public company lowered expectations for RevPAR growth in 2019. In an earnings call, Marriott lowered its year-end projections to 1 to 2 percent growth globally. With traditional hotel performance starting to lag throughout the industry, the company is looking to other avenues to find growth and has been exploring the potential of this segment internally for years.

Marriott’s President and CEO Arne Sorenson explained the launch of the new platform in a public statement. “The all-inclusive market is growing rapidly, and our Marriott Bonvoy members would like to see us in this space. We expect to expand our all-inclusive portfolio in popular leisure destinations in the Americas, Europe and Southeast Asia with both new-build projects and property conversions. We’ll be leveraging our well-established full-service and luxury brands,” he said.

Marriott actually was first introduced to the all-inclusive segment when it acquired Starwood Hotels & Resorts in 2016, assuming operations of the 406-room Westin Golf Resort & Spa, Playa Conchal in Costa Rica, but the company is clearly taking it to another level now.

When Hyatt entered the space in 2015 it created two separate and distinct brands, Hyatt Ziva and Hyatt Zilara, for families and adults-only, respectively. Marriott will employ a similar strategy offering an all-inclusive family experience at some of its upscale and luxury branded properties, such as Ritz-Carlton, Luxury Collection, Marriott Hotels, Westin Hotels, Autograph Collection and Delta by Marriott. Meanwhile, the company’s well-known W Hotels brand will be geared for adults only.

The ongoing growth of all-inclusive resorts is largely considered to be a consumer-driven trend appealing to many well-off guests who don’t want to be nickel and dimed during their stay. They’d prefer to pay one price and know what it is ahead of time so they can relax and enjoy their stay. But these resorts also hold great appeal for meeting planners, which was one of the primary motivations for Hyatt jumping into the all-inclusive pool, so to speak. From the standpoint of a meeting planner, this option can not only potentially save them money but lots of time and energy trying to calculate the cost of every meal during an event.

However, just like with traditional hotels when it comes to all-inclusives it’s all about the execution. Having stayed at several all-inclusives I can tell you there is plenty of room for improvement, particularly when it comes to the food & beverage offerings. Very often consumers come back saying the food wasn’t very good or there weren’t enough options or, worse, they didn’t feel they got their money’s worth.

This is a decidedly different model for traditional hotel management companies and maintaining both profitability and guest satisfaction may be more challenging than in traditional full-service properties, for example. There’s a reason that U.S.-based companies have been somewhat reluctant to enter this segment previously.

However, needless to say Marriott jumping into the all-inclusive game should have a profound impact on the segment. For one thing, in what is most definitely a copy cat industry, it’s reasonable to expect other major branded companies to follow suit and join the mix.

Similar to the timeshare business, the branding of all-inclusives should help further legitimize the segment, particularly to U.S. travelers. The real question is how the all-inclusive model will change in the coming years and will any major brand be ‘excluded’ from the segment.
Dennis Nessler    Dennis Nessler
Hotel Interactive®, Inc.
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