A shift from affordable to luxury vacations; all-inclusive resorts evolve as institutional brands join the sector

CHICAGO, May 19, 2022 – Originally created to cater to the cost-conscious adult traveler in the 1950s, the all-inclusive (AI) resort sector has undergone a dramatic transformation over the past two decades as traditional hotel brands have entered the space and luxury and upper upscale offerings have emerged.

“The emergence of institutional hotel brands, particularly in the luxury and upper upscale segments, is fundamentally altering the all-inclusive resort landscape and is expected to fuel the sector’s growth over the long-term,” said Zach Demuth, Head of Americas Hotel Research, JLL Hotels & Hospitality Group.

JLL’s Hotels & Hospitality Group has released their latest report, Americas All-Inclusive Resort Sector Trends & Outlook, which dives into the evolution of the all-inclusive resort sector. Key themes include: 

Demand for all-inclusive resorts is surging, with AI resorts in Mexico and the Dominican Republic averaging an occupancy recovery of 77% on a March 2022 TTM basis relative to 2019. New travel preferences, resulting from the Covid-19 pandemic, include the need for a stress-free vacation with limited planning, a relaxing destination with a wellness factor and a lack of travel restrictions and quarantine measures. Another driver of tourism demand is the increase in airlift to key international feeder markets, as well as government and private investments into airport maintenance and expansion and local infrastructure improvements.

Luxury and upper upscale all-inclusive resorts are here to stay driven by growing consumer demand for high-quality experiences and stress-free vacations. As consumer preferences shifted in tandem with changing demographics and technological advancements, the sector began to transform, offering an affordable, but high-quality experience. The rise in demand for high-quality taste in design, F&B and entertainment, has attracted institutional brands to the sector who are drawn to the positive long-term outlook. Increased investment in the space by these brands has resulted in higher-quality offerings, further driving the evolution of the sector.

All-inclusive resorts have proven to be an opportunity for traditional EP hotel brands. According to the report, AI hotel operators today are increasingly adopting a multi-brand model to serve a broader demand base. These brands, often driven by consumer loyalty and strong brand awareness, could shift demand from intermediaries to direct channels. Aside from distribution, the operating model between EP and AI is quite different. For example, where EP hotels view food and beverage outlets as revenue sources, AI resorts view them as cost centers.

Institutional hotel brands have aggressively entered the all-inclusive resort sector via M&A, strategic alliances and brand extensions signaling investor optimism. As more brands enter the AI space, they will likely follow the groundwork arguably laid out by Apple Leisure Group. ALG, which was acquired by Hyatt in 2021, was one of the first “all-in-one" vertically integrated platforms and created a self-contained ecosystem in which it was able to both generate demand via owned booking channels and then service that demand in its managed AI resorts. Following a surge of M&A activity in the AI space, the next phase of expansion appears to be brand extensions, notably by Hilton and Marriott.

As consumer preferences continue to evolve, there is room for additional disruption in the all-inclusive sector. For now, the brands are benefitting from the pent-up demand for high-quality experiences and stress-free vacations coming out of the pandemic, which should continue for the foreseeable future.

JLL’s Hotels & Hospitality Group has completed more transactions than any other hotels and hospitality real estate advisor over the last five years, totaling $83 billion worldwide. The group’s 350-strong global team in over 20 countries also closed more than 7,350 advisory, valuation and asset management assignments. Our hotel valuation, brokerage, asset management and consultancy services have helped more hotel investors, owners and operators achieve high returns on their assets than any other real estate advisor in the world.

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