Professional Documents
Culture Documents
JLL Research
Hotels & Hospitality | 2017
Stakeholder benefits 10
Regional snapshot 18
20 Market highlights
Foreword
The All-Inclusive (AI) concept was originally conceived in the early 1950s by French-based operator Club Med. At the time,
this AI model reflected a pioneering lodging offer that was predicated on the idea that travelers would value an experience
that offered cost certainty, packaging convenience, and an enhanced value proposition associated with offering other
travel-related benefits. The AI model was built around the idea of offering vacation packages that included lodging, meals,
and entertainment embedded in one convenient package price. The notion of this original AI model, which targeted cost-
conscious adult travelers and offered spartan accommodations at economy pricing, has now become somewhat dated,
and industry stakeholders are beginning to witness an evolving model at the cusp of even further transformation in the
resort lodging sector.
The AI model has undergone a dramatic shift over the past 15 years, as established operators witnessed a refinement in
consumer preferences, changing demographics, and booking behaviors and patterns. While the new AI 2.0 model is
still driven by some of the original models drivers and characteristics typically more isolated resort locations, greater
perceived safety/security, and operating efficiencies the concepts growing popularity in the early 1990s, particularly
in key source markets like the US, has led to a reassessment and refitting of a model that is more attuned to todays
hospitality trends: larger guestrooms; variety of food and beverage (including -la-carte) options; top-notch quality design
and materials; alignment with global consumer brands; and sophisticated entertainment venues, among other trends. This
is increasingly becoming the industry norm.
During the same period, a number of operators have further improved their operational efficiencies and ability to
expanded their presence in the AI industry across key sell a wider variety of activities both on- and off- premises.
markets, and this widespread expansion has contributed to Lastly, changes in the vacation ownership industry,
the further diversification and segmentation of the industry. from fee-simple ownership to points-based right-to-use
Some operators continue to focus on providing low-cost- programs, have helped pave the way for the growth of a
based value, while others are focused on positioning their new revenue stream within the AI industry. The creation of
product into higher-quality segments of the market. This vacation clubs, which entails selling the right to future stays
increased product differentiation has not only broadened at discounted prices, has served to not only strengthen
the appeal of the AI model, but has also led to the customer loyalty, but also to bring forward cash payments
emergence of multiple brands within one parent operating while enhancing direct relationships with customers.
company. Naturally, this shift in product positioning also
led to greater diversity of price points and of the market In addition to these more easily perceptible benefits, our
segments to which the industry appeals to: Meetings, research indicates that other, less obvious, benefits have
Incentive, Corporate and Events (MICE); multi-generational contributed to the evolution of the All-Inclusive model.
and traditional families; couples; adventure; weddings; and Among others, these include the enhanced ability to attract,
other market segments. retain and motivate employees; better operational planning
and forecasting; improved supply chain management;
The re-tooling of the models hardware and software has growth in off-property activities that benefit the local
allowed operators to capture an increasing share of the community, while enhancing the authenticity of guest
rapidly growing leisure travel market. All-Inclusive operators experience; increase in non-guest and cross-property guest
are able to better mitigate seasonality, encourage longer use of on-site amenities among cluster properties; and
booking windows, establish grounds for better revenue greater efficiencies of complexed operations.
management, and create hype and growth around new
resort destinations. Companies with robust sales and
marketing arms and/or controlled vertical integration have
Outlook
Although our research indicates that the AI
model is among the fastest-growing in the
region, the establishment of the industry is still
incipient when compared to the more traditional
and widespread European Plan (EP) model,
which has historically been the focus of many
international hotel operators. The transformation
of the AI model in recent years, however, has led
to an increased desire by a variety of stakeholders
to better understand the sectors benefits. The
assertion that this AI 2.0 model is here to stay
would appear to be supported by a number
of tangible factors, including high customer
satisfaction ratings; comparatively rapid growth
of new AI supply in certain destinations; the
conversions of EP hotels to AI in traditionally
EP-dominated destinations; growing curiosity
and interest of global management companies
and institutional investors; as well as the growing
number of strategic alliances and partnerships
between global consumer brands and AI-themed
lodging product.
8 FocusOn Report | Americas | 2017
The All-Inclusive
model
Introduction
A close look into the evolution of the All-Inclusive (AI) business model indicates the capture of a greater share of a travelers
wallet when compared to traditional European Plan (EP) hotels. AI resorts are able to exploit operating efficiencies through
more accurate forecasting, yielding higher stabilized occupancy levels and greater economies of scale. The AI platform
also allows operators to create opacity in pricing through the bundling of services, which is one of the models key selling
tenets. As a result, AI operators are able to offer an enhanced and compelling value proposition for guests who value the
benefits of a convenient travel package at a set, upfront price.
Pricing Quoted rate typically includes: Quoted rate typically only includes:
Lodging Taxes Lodging
Food and beverage Gratuities
R ecreational and sports Flights and transfers to/
activities from airport (optional)
Childcare*
Product
Larger facilities More limited footprint
M ultiple food and beverage outlets, activities and Fewer food and beverage outlets
entertainment facilities
Golf, spa and more
Primary distribution
Wholesalers OTAs Brand.com
Tour operators Brand.com Travel agents
Travel agents OTAs
Value drivers
Drive occupancy Drive ADR
Yield management Revenue focus
Cost control focus
Customer loyalty
Club memberships Frequent guest loyalty programs
(Guest pays for future discounts) (Lodging companies compensate hotel owners)
Market type
Predominantly resort-oriented locations Urban or resort locations
*For resorts equipped with childcare facilities Notes: OTAs = Online Travel Agencies; ADR = Average Daily Rate Source: JLL, Market participants
Pure players offer only AI product Hybrid operations offer a mix of EP and AI product Predominantly traditional operators offer mostly EP product
10 FocusOn Report | Americas | 2017
Stakeholder
benefits
All-Inclusive resorts feature several attributes that provide benefits for both the consumer and supplier, and seldom
do these benefits align so perfectly for both - regardless of source market. For instance, the AI sectors typically longer
booking window is a benefit for consumers, as it allows for more time to budget and finance their vacations; similarly,
AI operators benefit from being able to forecast occupancy and guest mix more accurately, which in turn improves
operational efficiency. The adjacent table illustrates some of the key benefits of the AI model to consumers, operators, and
suppliers.
Broadly, the AI business model features numerous strategies All the attributes and benefits highlighted herein
that have proven successful in other industries, such as demonstrate the attractiveness of the AI model for the
packaging, bundling, targeted market segmentation, various stakeholders involved. Our research indicates
and economies of scale. For example, the bundling of generally higher stabilized occupancy levels and a premium
product and services, which increases sales and share in operating margins when compared to traditional EP
of wallet (while providing the end consumer a perceived resorts. This is partially a result of greater distribution
greater value proposition), is common in other industries, control through relationships with travel intermediaries and
such as telecommunications, insurance, and financial seamless vertical integration of many AI operating platforms
services. One of the key benefits of bundling/packaging analyzed, as well as the vacation clubs and strong customer
is the ability to offer opaque pricing such that the lodging relationships. Our conversations with industry participants
accommodations, airfare, and dining are not individually revealed that the shared benefits amongst all the
distinguishable by the end consumer. stakeholders analyzed is expected to solidify the business
models future growth as knowledge and comprehension of
the concept becomes more widespread.
Top industry
thoughts
Today, several key luxury AI players are able to deliver on Market participants also noted that the midscale segment
service quality that is on par with traditional upscale and may present a real opportunity for growth, especially with
luxury EP resorts in the region. In fact, since 2010, a majority the growing prevalence of the AI model and rising middle
of new AI hotels in destinations such as Cancun/Riviera class across several source markets that are key for the
Maya and Punta Cana now offer predominantly luxury AI AI segment. Our research indicates that the midscale AI
resort product. segment is a niche market today when compared to the
growing proportion of upscale/luxury AI product in the
As AI operators race to the top, some industry observers Americas region. Some AI players are anticipating this move
believe the luxury space may become overcrowded in the and pursuing a parallel strategy to open four-star instead
near future and that brand and product differentiation will of five-star AI resorts. Re-positioning existing high-end
become increasingly difficult. Industry participants further AI properties to a lower chain scale can also prove to be
revealed that AI brands will need to keep innovating their an effective solution to quickly adapt to changing client
product and destination offering, while enhancing guest expectations.
experience and nurturing loyalty, something that is already
working well with the introduction of the Vacation Club
concept.
With the perceived overcrowding in the AI luxury segment, and a pent-up interest for a more
affordable AI resort experience, we foresee potential growth in the upper-midscale segment in the
medium term, including conversions of existing EP hotels in this market segment to the AI model
or updates to existing AI hotels in order to meet todays AI standards.
- Fernando Fernandez, Vice President of Development for Apple Leisure Group
All-Inclusive: An evolved model takes center stage 13
Seven AI resorts in Mexico and the Caribbean region have been awarded the AAA Five Diamond Award
and over 50 resorts have received the AAA Four Diamond Award.
Top industry
thoughts
Transaction
highlights
1
Institutional capital
PORTFOLIO: Occidental Hotels & Resorts
Historically, institutional capital in the AI
industry across Mexico, Central America, BUYER: Barcel Group
and the Caribbean region has been
BUYER TYPE: Spanish-based hotel company
scarce. While family-owned and vertically-
integrated AI resort companies have long YEAR: 2015
been active in the regional AI hotel resort PORTFOLIO SIZE: A
ddition of 13 hotels totaling
space, primarily as owner-operators, 4,000+ rooms
institutional investors have only recently
developed an interest in the sector. This
is evidenced by the activity of private
2
equity investors such as Bain Capital,
Equity International, and KSL Capital
Partners, which have executed large
portfolio transactions in the AI industry, PORTFOLIO: Decameron Hotels & Resorts
as highlighted here. Other notable BUYER: The Terranum Group & Equity
transactions include the December 2016 International
merger between Playa Hotels & Resorts
and Pace Holdings (a special purpose BUYER TYPE: Private equity
acquisition company established by TPG), YEAR: 2014
which most recently became a publicly-
traded company in March 2017. PORTFOLIO SIZE: 27 hotels totaling 7,600 rooms
3
COMPANY: Playa Hotels & Resorts
(Merged with Pace Holdings in 2016)
currently listed on NASDAQ (PLYA)
TRANSACTION: Initial public offering
YEAR: 2017
PORTFOLIO SIZE: 13 hotels | 6,200 rooms
5
PORTFOLIO:
Club Med Resorts
4
BUYER:
Fosun Group
DEAL SIZE:
939 million
(est. US$1 billion)
Operators are actively looking to increase their portfolio size and move into new destinations.
This capital-intensive ambition will require some external growth, and I wouldnt be surprised
if the sector is restructured in the upcoming years. Major transactions already took place in the
past few years, and we are likely to see additional fusions and acquisitions in the AI segment,
similar to what the traditional lodging sector is experiencing today.
-Mathieu Sauvestre, Director of Development North America at Club Med
Regional
snapshot
56,800
26,800
10,600
9,000
3,500
Cancun/Riviera Maya
1,500
Puerto Vallarta
Costa Rica
0
Guanacaste
The Caribbean and Mexico are considered the birthplace As illustrated in the map, the evolution of the lodging
and epicenter of the contemporary, pure-play All-Inclusive supply in these destinations clearly highlights the
segment, and within the region, 12 key destinations stand impressive growth of the AI segment over the past two
out as major All-Inclusive hot spots. decades, as new AI developments have emerged and
traditional EP hotels have been converted into AI resorts.
All-Inclusive: An evolved model takes center stage 19
1990
40,900
2000
Today
16,200
37,900
4,900
Cuba
8,700
17,600
5,400
2,800
7,300
Puerto Plata
1,900
2,000
1,900
Dominican
Montego Bay Republic Punta Cana
Jamaica
7,100
3,200
4,100
2,000
5,500
1,100
1,000
1,900
1,900
Negril La Romana
Ocho Rios
1,600
1,100
600
(1) Hotel supply based on institutional quality hotels with 100 rooms or more.
(2) Numbers have been rounded up to the nearest hundred.
(3) Percentages are based on total room supply based on the aforementioned criteria (1).
(4) Noted room supply accounts for hotel conversions.
(5) All-inclusive operations include hybrid operations where all-inclusive packages may be offered separately.
(6) Target markets include:
Cancun/Riviera Maya (Cancun; Playa del Carmen; Playa Paraiso; Puerto Aventuras; Puerto Juarez; Puerto Morelos; Riviera Maya; Solidaridad; Tulum; Xpu Ha); Los
Cabos (Cabo San Lucas; Los Cabos; San Jose del Cabo); Puerto Vallarta (Bucerias; Nayarit; Nuevo Vallarta; Puerto Vallarta; Punta de Mita; Punta Mita); Punta Cana
(Bavaro; Higuey; Punta Cana); La Romana (Bayahibe; Juan Dolio; La Romana; San Pedro de Macoris); Puerto Plata; Montego Bay (Montego Bay; St. James); Negril;
Ocho Rios (Ocho Rios, Runaway Bay, St Ann Bay); San Andres Island; Cuba (all cities); Guanacaste (all cities)
20 FocusOn Report | Americas | 2017
Market
highlights
Mexico
AI EP CANCUN/RIVIERA MAYA: Growth in AI supply over the past two
decades has significantly outpaced that of the traditional EP lodging
Today
market. Conversion from EP to AI has also contributed to this growth.
12%
1990
As evidenced in the previous map, the Cancun/Riviera Maya market
represents approximately 30% of the regions AI platform, with almost
+6.7%
60,000 AI rooms. The destinations unique attributes and benefits, AI room supply
34% growth
66% including the convenient airlift, direct accessibility, beach quality, and
vs. +1.6% for EP
affordable labor and cost structure (relative to comparable destinations (CAGR 1990 - 2016)
in the Caribbean), have strongly contributed to the appeal of the
88%
destination and continued success of the AI product in the market.
LOS CABOS: During the late 1980s and early 1990s, Los Cabos
Today attracted a number of luxury EP hotels, as well as high-end residential
27% developments. Soon thereafter, the destination began attracting All-
45%
1990
Inclusive operators such that the proportion of AI room supply when
compared to EP shifted dramatically after 1990. In 1990, both operating
+1,200
platforms (AI and EP) were equally represented in the market in terms of rooms added since
55% 2015, of which 40%
overall room supply. Los Cabos continues to be an attractive market for
are AI
luxury EP product, as evidenced by the entry of six new luxury EP hotels.
73%
Nonetheless, an estimated 73% of the destinations lodging stock is
currently AI, including a number of luxury AI resorts.
35%
1990
have strengthened their presence, and over the past 26 years, the AI
platform has witnessed a growth in market share from 65% to close to
80% of overall room supply. The few new resorts that have been built
2x
number of AI rooms
65% over the past six years have been mainly AI, including Iberostar Playa doubled between
Mita and Secrets Vallarta Bay. Similar to Los Cabos, self-contained 2000 and 2016
78%
destinations like Punta Mita, and the proposed Mandarina, continue
to attract the highest end luxury brands like Four Seasons, Rosewood,
One&Only, and St. Regis.
All-Inclusive: An evolved model takes center stage 21
Dominican Republic
AI EP PUNTA CANA: Of the markets profiled, Punta Cana is the regions
second largest AI destination after Cancun/Riviera Maya. Punta Cana
Today
3% was established almost exclusively as an AI destination, when operators
1990
such as Club Med, Barcel and Meli were drawn to the destinations
pristine beaches and low-cost operating environment. The wave of AI +12%
resort development took off even more with the opening of the Punta AI room
100% Cana International Airport in the 1980s. Over the years, the market has supply growth
(CAGR 1990 - 2016)
continued to expand in the AI space but lately, a few EP hotels have
97% entered the market. Going forward, it will be interesting to observe
whether the critical mass of Punta Cana allows for the creation of self-
contained enclaves in which ultra-luxury EP resorts thrive.
LA ROMANA: The destination was born in the early 1900s with the
Today establishment of a large sugar mill. In the 1970s, a conglomerate
9%
1990
known as Gulf+Western built what is considered today as one of the
regions most expansive master-planned resort communities - Casa de 7.5x
Campo. After over 40 years of measured growth, the destination has Number by
attracted numerous local residents and international tourists. The vast which the supply
100% of AI rooms was
majority of the lodging stock in La Romana today offers some type of
multiplied between
All-Inclusive package, including Casa de Campo, which was historically
91% 1990 and 2016
thought of as an exclusively traditional (EP) hotel.
PUERTO PLATA: During the late 1970s and early 1980s, the
Today
6%
development of a master-planned hotel project sponsored by the
1990
countrys Central Bank helped position Puerto Plata as the nations
most popular resort destination. Although Puerto Plata has witnessed 4.5%
13% a slowdown in visitation, with the robust growth experienced in Punta AI room supply
Cana, Puerto Plata continues to be one of the countrys most attractive growth
87%
destinations, given its unique set of natural and tourist attributes. vs. +1.6% for EP
(CAGR 1990 - 2016)
94%
Visitor interest appears to be making a comeback, especially following
Carnival Cruise Lines opening of Amber Cove in 2015.
Note: Hotel supply based on institutional quality hotels with 100 rooms or more.
22 FocusOn Report | Americas | 2017
Market
highlights
Jamaica
AI EP
MONTEGO BAY: As the anchor of Jamaicas Northern Coast resorts,
Today Montego Bay has long been considered the emblematic destination
1990
of the Caribbean. Some will argue that Montego Bay is where the All-
Inclusive model truly took off with brands like Sandals and SuperClubs. 0
18% Between 2005 and 2010, the market witnessed considerable AI supply number of EP hotels
growth, aided also by conversion plays (from EP to AI); in a span of with 100 rooms or
82%
five years, supply growth was estimated at around 130%, signaling the more today
growth potential and prevalence of the AI business model in Montego
100% Bay. Today virtually all hotel properties in the market offer All-Inclusive
packages.
Today
10%
1990
OCHO RIOS: The transformation of Ocho Rios from a small fishing
village to a main tourist attraction has been quite remarkable. 3x
Between 2000 and 2016, the number of AI rooms in the area grew by the number of
43% approximately 200%, while the number of EP rooms decreased by 62% AI rooms tripled
57%
due to conversions from EP to AI. Today, the area features over 6,000 between
rooms, 90% of which are all-inclusive. 2000 and 2016
90%
1990
fairly underdeveloped, with a current total of 3,300 rooms. Major AI
development along the beach happened during the late 1980s through
+4.4%
21% AI room supply
the early 2000s, with the addition of a number of new resorts such
growth vs. -2.4%
79% as Sandals Negril, Couples Negril, Couples Swept Away, and Riu Club for EP
Hotel. Since 2005, new hotel development has been very limited, with (CAGR 1990 - 2016)
95%
the construction of the Azul Sensatori Jamaica (opened in 2014), and
the Royalton Negril resort with over 400 rooms (early 2017).
All-Inclusive: An evolved model takes center stage 23
Cuba
AI EP
CUBA: Cubas tourism has historically been resort-oriented as the
Today government heavily promoted international tourism in exclusive resorts.
70%
19%
The AI segment currently represents 81% of the nations hotel room
1990 supply, a number which increases to almost 94% when the urban cities
of Havana and Trinidad are not included in the sample. With the recent of incoming room
reestablishment of diplomatic relations between the USA and Cuba, the supply will be AI
50% 50%
tourism industry is expected to greatly benefit in the near future. Recent
hotel constructions include the Dhawa Cayo Santa Maria, the Royalton
81%
Cayo Santa Maria, and the Iberostar Playa Pilar.
Colombia
Today
SAN ANDRES ISLAND: San Andres is a Colombian island located in the
1990
Caribbean and is considered one of the countrys tourism hot spots.
The lodging supply on the island is relatively limited compared to other 48%
destinations studied in this report, with approximately 1,600 rooms for Decameron resorts
properties with 100 rooms or more. The Colombian-based Decameron represent close to
100%
Hotels & Resorts chain is the only major all-inclusive player present on half of the rooms
the island. Virtually all rooms in San Andres are all-inclusive, as even on the island
100%
traditional EP hotels offer all-inclusive package options to their guests.
Costa Rica
Today
26%
GUANACASTE: Costa Rica, the regions most famous ecotourist
45%
destination, is a recent newcomer in the AI segment. In 1990, the Pacific
1990 coasts Guanacaste province featured no AI resorts. Starting around the
mid-1990s and onwards, major hotel brands such as Barcel, Secrets,
of incoming room
Riu and Dreams developed resorts in the area and introduced the all- supply will be AI
100%
inclusive offer in the region. Even Westin and JW Marriott transformed
their EP properties into AI. By 2000, Guanacaste featured over 1,000 all-
74%
inclusive rooms, a number that has tripled today.
24 FocusOn Report | Americas | 2017
Incoming supplytrends
In the short- and medium-term, large established destinations will remain the primary targets of future AI development,
for previously-mentioned reasons of favorable operating conditions and customer appeal: Mexico, Dominican Republic,
Jamaica. However, the frontier within these established destinations will keep expanding and pushing further, especially
as/if local governments implement required infrastructure programs to develop these destinations. In the Dominican
Republic for example, the local government recently completed a US$265 million modern highway to connect the
unexploited Samana Bay area to Punta Canas International Airport, hoping to position the destination as the next luxury
travel spot in the region. Near Cancun, development will keep pushing the limits towards Isla Blanca to the North and
Tulum to the South, and infrastructure upgrades in the Chetumal area would also encourage development in this area. The
Mexican government will also maintain its goal to develop the Pacific Coast, notably the state-planned resort of Huatulco
on Mexicos southern Pacific coast.
In the medium term, less traditional destinations will enter Overall, in order for emerging destinations to anchor
the radar, such as Costa Rica, Colombia, Panama, Roatan, their market share and for new AI destinations to appear,
Belize, the islands off the North coast of Colombia and the numerous challenging barriers will have to be surpassed:
east coast of Central America. Colombia, unlike most of the offer strong airlift capacity with at least a few key source
other destinations, has the notable advantage of having a markets; build the right infrastructure to support the
strong domestic market potential, which would help feed construction and development of resorts; provide qualified
the demand for AI resorts locally and decrease reliance labor but at reasonable cost; ensure political stability and
on international travelers, even though Cartagena and support; implement favorable legal and fiscal reforms
surrounding areas have recently emerged as increasingly to simplify bureaucracy and processes; provide financial
important international tourist destinations. incentives for outside investors; eradicate security issues;
and finally, educate the trade sector and travel agents
Other islands in the Caribbean could potentially attract AI about the destination. The list is long and although some
operators, such as the Bahamas, Saint Lucia, Antigua, Turks destinations are closer than others to achieving these
& Caicos, Barbados and Grenada where a small AI offering conditions, it may still take years, if not decades, for all of
is already present, but high operating costs and limited these objectives to be met in the region.
airlift are hindering the growth of the AI product in these
destinations.
The large established destinations will continue to grow, however, many less traditional
destinations such a Belize, Roatan, the islands off the north coast of Colombia and the east coast
of Central America should grow at an even faster rate.
- John Issa, Chairman of SuperClubs Collection of Hotels & Resorts
All-Inclusive: An evolved model takes center stage 25
Negril 580
In Puerto Vallarta and Los Cabos, where the incoming lodging supply is predominately EP,
approximately 96% of projects in the pipeline are positioned in the upper-upscale and luxury
segments. Consequently, the addition of these high-end EP hotels is anticipated to slightly alter the
lodging supply composition (AI v. EP) in the near term.
Collier Proctor
Analyst
Americas
collier.proctor@am.jll.com
Special thanks
This report would not have been possible without the contribution of key all-inclusive industry
participants who dedicated time to provide us with their market insights.
JLLs Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor
over the last five years, totaling more than $77.5 billion worldwide. Between negotiating the worlds most extraordinary,
enticing, and profitable property deals, the groups 350-strong global team in over 20 countries also closed more than
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tailor their portfolios and maximize the value of their assets. We are recognized as the global leader in real estate services
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bespoke deal that exceeds your objectives.
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