Is the all-inclusive tourism model still relevant?
The all-inclusive resort model has existed for years. However, developers and hotel operators are looking to rejuvenate the model to attract high-end international travellers.
Traditionally, all-inclusive resorts have had a negative connotation tied to congalines, bad buffets, and boisterous pool activities. However, many developers and branded operators are revamping this classic hotel model to drive growth in the resort sector in the Caribbean and Latin America.
The all-inclusive model allows hotels to drive superior average daily rates at hotels by offering a value-added to customers. Along with strong occupancy rates to minimise the cost per guest, hoteliers focus on driving various operating costs down.
Thus, operational efficiency is essential to increasing the net operating income while these hotels operate at or near full capacity.
Branded operators are moving towards the all-inclusive model in upper-upscale and luxury properties in the Caribbean and Mexico.
Such luxury concepts include both properties geared towards family-friendly and adult-only hotel guests. The key to a successful all-inclusive strategy is to provide value-added experiences that make vacation easy for travellers.
From an operational perspective, energy and supplier costs must be critically evaluated to identify the correct level of spend needed to offer a sustainable guest experience. For example, added services like golf must be carefully monitored to ensure profitability.
Like any trend, the all-inclusive movement has pros and cons. The resorts tend to be built in remote locations which brings development to rural areas in developing nations. Investment into tertiary markets can improve GDP and reduce unemployment in emerging markets.
However, critics of the all-inclusive model argue that it prevents engagement of the local economy. Leaders of the Americas hotel development industry believe that over time, regional demand will contribute to the growth of high-end all-inclusive resorts. Thus, the development of all-inclusive resorts offers strong upside growth in the mid to long-term.
However, all-inclusive resorts can have a negative impact on local economies. The nature of all-inclusive resorts discourages guests from leaving the resort to explore local attractions.
As a result, this model reduces traveller engagement with local economy. Some governments push back against all-inclusive projects. Naturally, industry leaders argue that the all-inclusive developments drive economic growth through job creation and local supplier contracts. Currently, developers, brands, and local governments are negotiating to create projects that can both drive local economic growth and offer feasible returns for hotel owners and operators.
An extreme example of this shortcoming appears in Tunisia where foreign tour operators collect on profits from tourist arrivals into Tunisia as they sell all-inclusive package to travellers. On a macro level, foreign capital is not received by Tunisia as the tour operators control the distribution.
Further, once on property, hotel guests do not leave the resort and therefore, do not inject foreign capital into the local economy. As the all-inclusive model is revamped in the Caribbean and Latin America, developers and operators must find ways to include local suppliers and employ the local community to drive sustainable growth for the region.
Lily Haydock studied hospitality management at École hôtelière de Lausanne in Switzerland. She is an asset management analyst at Hersha Hospitality Trust, a real estate investment trust in the hospitality sector, based in Pennsylvania, United States.
