INTERNATIONAL REPORT - The tide may be turning for all-inclusive resorts.
After several years of breakneck growth and booming demand,
the sector is beginning to show signs of a slowdown.
“The all-inclusive market is reaching a plateau,” said Geoff
Millar, co-owner of Phoenix-area agency Ultimate All-Inclusive Travel and
Ultimate Hawaii Vacations, which does a significant business with
all-inclusives. “And I think one big reason is simply cost. During the boom of
the last few years, these resorts have drastically raised their rates.”
According to Millar, prices at many all-inclusives have
nearly doubled over the past year or two, with this upward shift undermining
the value-for-money appeal that once defined all-inclusive vacations. As a
result, some all-inclusive loyalists are starting to consider alternatives.
We’re not seeing it at the very upper end, but the middle class and the family market are now more conscious of what they’re spending and what they’re getting for their money.
Geoff Millar
“It’s reaching a point now where clients are saying, ‘I can
explore other vacation options,’” he said. “They’re realizing they can get a
nice European vacation for the same price it's going to cost them to go to an
all-inclusive.”
At the same time, Millar added, competition within the
all-inclusive sector is at an all-time high, thanks to a recent influx of
entrants and development activity.
“I think the all-inclusive resorts are going to have to
start adjusting their pricing, because people are still traveling, but they’re
just not going all-inclusive like they were before,” he said. “We’re not seeing
it at the very upper end, but the middle class and the family market are now
more conscious of what they’re spending and what they’re getting for their
money.”
Some all-inclusive operators are also seeing demand growth
start to level off.
Hyatt reported some pullback within the segment during the
company’s Q2 earnings call in August, with CEO Mark Hoplamazian citing a “return
to prepandemic seasonality” in Mexico and the Caribbean.
Hyatt’s Inclusive Collection has more than 100 all-inclusive
resorts across Mexico, the Caribbean, Central America and Europe.
According to Hyatt CFO Joan Bottarini, Hyatt’s Inclusive
Collection enjoyed “a really strong” first quarter with double-digit net
package RevPAR. That was followed, however, by a far more modest 3% increase in
net package RevPAR for the second quarter. (Hyatt defines net package RevPAR as
including revenue derived from the sale of package revenue comprising rooms
revenue, food and beverage and entertainment.)
In the Americas, Hyatt saw the Inclusive Collection's net
package RevPAR eke out just 2% growth for the quarter.
Sandals Resorts International also has noticed a shift back
to more normalized demand trends across its Sandals and Beaches brands.
This shift reflects a return to more traditional booking behaviors, where guests are planning their vacations further in advance and with greater consideration.
Adam Stewart
“Like many in the travel industry, our brands experienced a
meteoric rise in bookings post-Covid,” said Adam Stewart, executive chairman of
Sandals Resorts International.
“While the demand for travel remains robust, we are indeed
observing a normalization in booking patterns,” he added. “The feverish pace we
saw immediately post-pandemic has evolved into a more measured, albeit still
strong, flow of reservations. This shift reflects a return to more traditional
booking behaviors, where guests are planning their vacations further in advance
and with greater consideration.”
The same holds true for Grupo Xcaret, which operates the
Hotel Xcaret Mexico, Hotel Xcaret Arte and the ultraluxe La Casa de la Playa
all-inclusives along Mexico's Riviera Maya.
“Growth is still happening; however, we are seeing a more
challenging environment,” said Rodrigo Motavelazco, sales director for Hoteles
Xcaret. “We understand that the years to come are going to represent a bigger
challenge for us and everyone in the destination [as we see] a little bit of
decrease in demand.”
Motavelazco added that Mexico’s resorts are up against stiff
competition in other all-inclusive-heavy markets like the Dominican Republic
and Jamaica, but he remained optimistic, asserting that Grupo Xcaret’s
properties are well positioned to continue capturing outsize market share.
“We are confident as well as thankful to all the agents and
tour operators, because we are seeing good numbers this year,” said
Motavelazco.
That positive outlook is reflected in Grupo Xcaret’s
expansion plans, which will include the addition of 900 guestrooms to their
flagship Hotel Xcaret Mexico resort by fall 2025. That move will double the
property’s room count.
Amid a broader pullback in pent-up leisure demand, some
all-inclusive market segments and brands may prove more competitive than
others.
Dana Dziegiel, owner of Gypsea Travels in Utica, New
York, hasn’t seen her all-inclusive business slacken this year, which she
credits in part to robust group demand.
“I personally haven’t seen a slowdown, because I send a lot
of groups – pickleball groups, in particular – to Club Med,” said Dziegiel, who
also does brisk business planning all-inclusive travel for jiujitsu groups and
large, multigenerational family groups.
“Club Med is also at a lower price point compared to some
other brands,” Dziegiel added. “And while they have come up in pricing a bit,
they haven’t, from my experience, doubled or tripled in price. And I also find
that when people go to one Club Med, they want to experience other Club Meds.”
Club Med’s presence in the all-inclusive ski vacation space,
Dziegiel said, has also been a key differentiator.
“I have ski groups that go to Club Med every year in France,
because it’s all-inclusive,” she said. “They can get airlift, food, drinks and
also ski for less than it would cost them to go to Aspen.”