Alejandro Zozaya became CEO of Apple Leisure Group in late 2012 as Bain Capital invested in the formerly family owned travel wholesaler.

By the fall of 2013, Apple Leisure Group had become a vertically integrated packaged travel and hotel management company, specializing in Mexico and the Caribbean, as it acquired Travel Impressions from American Express and, adding them to its existing portfolio of Apple Vacations, AMResorts, Amstar and Unlimited Vacation Club.

Skift spoke with Zozaya about the opportunities and challenges of integrating the brands and simultaneously operating as a wholesaler, distributor and hotel management company in Mexico and the Caribbean.

An edited version of the interview follows:

Skift: Apple Leisure Group has been undergoing a transformation after the last couple of years. What did this buying spree do for you?

Alejandro Zozaya: The doubling up of our distribution not only allowed us to be more successful on the resort side with the openings of new in hotels, in addition to the ones that had just opened in 2013 and 2014, but also made us a stronger management company on the hotel side resulting in the signing of more contracts and stronger pipelines.

The hotel side is also growing significantly. It was already growing fast, but after 2012, and in 2014 following the integration of the two distribution companies the number of new hotels for [Travel Impressions and] grew exponentially.

Now we are an integrated group with four companies on the distribution side: Travel Impressions, Apple Vacations, and Unlimited Vacation Club. Also on the hotel side with Amstar, we have AMResorts, a destination management company that provides transportation and excursion offerings and in-destination assistance to our own, and the other brands, passengers.

Those companies form what is today Apple Leisure Group, the largest tour operator and distribution company in the United States, as well as the only vertically integrated hospitality company in the country.

Skift: In terms of revenue, what’s the biggest part of the business? Is it the distribution side or the hotel side?

Zozaya: In terms of revenue it’s the distribution side. On the distribution side alone, we have close to $2.5 billion in annual sales.

Skift: So the distribution side is the biggest portion of the business and yet because you operate hotels you’re competing against some of your customers so how does that work?

Zozaya: Yeah. It’s a bigger part of the revenues, and the biggest part of the profits of the Group, by far. I wouldn’t say one is more important than the other because the vast majority of our profits come from the hotel companies as the margins from the distribution side are very slim. The success of AMResorts comes from our strong distribution.

That being said, we also have great products and we are great partners to our business travelers. So to answer your question, we have customers and suppliers on both sides of the space.

On the hotel side, only 20 percent of our business comes from our own distribution right now. We’re close to 40 hotels and 15,000 rooms, and we are already the largest in brand in Mexico and the Caribbean. Close to 80 percent of our revenues come from distribution channels other than Apple Vacations, and Travel Impressions. We work with every one of our competitors on the distribution side, as well.

On the other hand, about 18 percent of the total passengers we acquire from Apple Vacations, Travel Impressions and end up at our hotels. That means 82 percent of our passengers end up with other hotel partners, AMResorts’ competitors, who are our business partners on the distribution side.
AMResorts’ competitors are very happy to get our production. They’re happy to be our suppliers, as we treat them well, pay them right and are fair in every aspect including exposure, marketing and pricing.

Skift: You talk about passengers. You don’t own any airlines, right? Are you referring to charter flights?

Zozaya: Correct. Fifty percent of our business comes from charters. The other 50 percent of our business flies commercial, so these are passengers who are buying our packages in conjunction with a commercial airline ticket. The airlines are also our business partners, and they distribute a lot of our packages.

Skift: Are your source markets changing at all and what about your clients, your customers? Is that changing or is it pretty stable?

Zozaya: We’re becoming a little bit more global. On the hotel side, markets outside of the U.S. have become very important. We have more presence now in the English-speaking Caribbean, including in places like Curacao, where the European, particularly the Dutch market, is very, very strong. We’re also growing in Jamaica. Now we have resorts in St. Thomas and Costa Rica, so other markets have grown on the hotel side.

Latin America and South America — Brazil, Chile, Colombia, and of course Mexico — have become much bigger markets for us on the hotel side. A lot of this growth in Mexico, and the domestic market, accounts for about 30 percent of our business.

On the distribution side, because of the acquisition of Travel Impressions,, we are seeing a more sophisticated traveler right now. The vast majority of sales are coming through travel agents, not direct. As a result, the average vacation price is going up.

We also are attracting a new customer that, beforehand, traditionally did not buy packages and especially didn’t buy all-inclusive experiences. The new customers coming to all-inclusive resorts realize that there is top quality choices and alternatives and that they are getting more value for the money.

It’s not the price because it is not cheap, but the value for money and the quality of the experience is what is appealing to a high-end customer, which didn’t happen a few years ago. That sophisticated, high-end, American passenger is now purchasing travel packages and staying at all-inclusive hotels.

Skift: What is the age of this new customer? Is all over a variety of ages?

Zozaya: All over. We clearly see it with the different brands that we sell. Not only our own brands but also other hotel brands. For example, in the Secrets brand, which is adults-only, the average age is about 40, but we have very few customers who are 40 years old. That’s the average, as a lot of honeymooners are in their early 30s or mid-30s. We also have the empty nesters, between 50 to 60 years old, experiencing the Secrets brand.

We have another high-end brand called Breathless that attracts a completely different age bracket; a wealthier and affluent, younger crowd who would typically go other places like South Beach or Vegas.

We also see a lot more families. We see the consumer traveling more often for a shorter length of stay. That’s why the distance from home and the amount of hours of the holiday depend upon not only the length of the flight, but other relevant factors like whether it’s direct or indirect, the distance between the airport and the hotel, and time between arrival and departure. A shorter length of stay has become especially important for families. We have two very strong family brands and the brands from our other hotel sales. We have recognized a boost in families and social groups traveling together.

The market that is growing dramatically is wedding parties. Weddings are related to families because the groups comprise of entire families. Destination weddings are now maybe 20 to 25 percent of our business. We have an average of 400 weddings per hotel per year which equates to more than one wedding per day. Weddings coming from the U.S. have presented a huge change in the market.

Skift: How do all-inclusives fit into the mix and how is it changing?

Zozaya: The consumer is looking for value for money, not necessarily lower prices. Our all-inclusives have very strong differentiators: They’re high-end. They’re appealing to five-star travelers. They’re attracting the travelers who traditionally didn’t like or didn’t go to all-inclusives because of restrictions, because of quality, because of entertainment programs or because of their overall experience.

Our value proposition is bringing the quality to those who didn’t travel to these places or in this fashion and we are very Americanized. We are the Americanized option, I would say. Traditionally all-inclusives were more tailored for the Europeans and Canadians, but they were not so much focused on the U.S. market. The product in itself was not very Americanized.

Our products are very American-friendly, but higher-end American-friendly. When I’m talking about Americanizing the product, I am talking about not just quality but the entertainment, the TV selection, our menus, and our festivities calendars which include Halloween, Thanksgiving, and sporting events.

Skift: Are you adding ancillary options to the all-inclusive packages or are they really all-inclusive?

Zozaya: No. There is “all-inclusive” and then there is true all-inclusive. Number one, we don’t call ourselves all-inclusive; we call it an Unlimited Luxury® package because it’s really different. For example, all of the restaurants are a la carte. We don’t use bracelets. We don’t have any restrictions when it comes to how many times or in which restaurant guests are allowed to have dinner. We include international long distance phone calls. We include the self-service part of the spas like the sauna and the steam bath. Overall we offer butler service, concierge service, we have 24-hour room service, and in-room mini bars and for one of our brands, we even include the laundry service.

We have a free app that is called Unlimited Connectivity that allows our passengers not only to make free phone calls but browse the Internet for free, free texting, free chatting, and access to social media while they’re on vacation. So our packages offer a much stronger value proposition. In the locations where we have golf courses nearby, we offer complimentary green fees. We include a lot more than the traditional all-inclusive, while delivering a higher quality product.

Skift: You make it sound as through everything is going perfectly? What are the challenges? What’s it going to take to get to the next level? What are your priorities?

Zozaya: There are many challenges. Growing and growing right is not always easy- actually it’s never easy. In our case, of course, one of the challenges is the correct integration of Travel Impressions and into Apple Vacations. There is always a big hurdle making sure that each of the brands remain completely independent in terms of its integrity and marketing to their customers, so that’s one thing.

On the other hand, we are always seeking ways to capture the cost synergies that allow us to offer a lot more value for money. For example, we’re changing the whole technology platform. We are changing the approach on the call centers. We now have 11 call centers in different countries. The integration of the different parts on the business and distribution side is always very, very complex.

Also, the consolidation of the airlines in the U.S. has brought the price of the average ticket up significantly. The consumer is trying to find more value for their money, but they are willing to accept a moderate increase on their holidays in order to get more value for their money. We’ve seen the average price per package increase significantly mainly as a result of the air travel being part of the equation.

The other challenge that we have is the competition from domestic destinations and reaching Americans who are not traveling outside of the United States. I think that’s our biggest challenge and also our biggest opportunity. Forty percent of our passengers who travel with our packages and charters say it is the first time they’ve been outside of the country. Not because they didn’t have the money, but because they didn’t have the culture. And for 90 to 95 percent of those new customers, it’s the first time they’ve used a passport and traveled outside of the United States and they come back extremely satisfied.

For everybody in the region, there is a whole new broad market for Americans traveling outside of the country for the first time. I think that’s great news and a challenge because there are great products keeping them in the United States as well.

Another challenge is the big competition of cruise ships; they’re growing dramatically. Cruise ships are continue to do things bigger, better and cheaper.

Also difficult for us are the huge destinations that have absorbed a lot of the leisure markets within the United States, like Orlando or Vegas.

There are so many challenges and opportunities. Not everything is going right, but overall, the market of Americans traveling outside of the United States for leisure to this part of the world is growing along with the growth of Americans buying all-inclusive packages. So all of the macroeconomic numbers are pointing in the right direction.

Skift: How about the negative headlines about Mexico? How is that impacting your business?

Zozaya: That impacts our business, of course, because a lot of our business goes to Mexico. 2014 has been the best year ever in Mexico when it comes to tourism, particularly tourism coming from the United States. That being said, in what has been happening in Mexico in the past months relates particularly to the state of Guerrero which has zero effect on what’s going on in all of the other main tourist destinations: Los Cabos, Cancun, Puerto Vallarta or Cozumel. If the consumer is hearing this is happening in Mexico and generalizes this
situation as a problem of the country, obviously that will affect tourism.

We’re very strong in Mexico but we have more focus in the Caribbean. At the end of the day, our job is to deliver these great vacations to the U.S. consumer. We’re having a good year and I think 2015 is going to be an even greater year. With our integration is going into a new phase, we’re going to have updated technology and we will be a lot more agile.

I just hope that people’s fear of moving around in the world lowers. Not only travel to Mexico but to other places. I also hope we have good news within the U.S. We’ve seen a good year in 2014 and I’m sure that 2015 is going to be a better one.