Hilton is the latest major hospitality player to enter into a niche, but growing sector of accommodations.

Hilton announced Monday its partnership with all-inclusive specialist Playa Hotels & Resorts to grow Hilton’s portfolio of all-inclusive resorts in the Caribbean and Latin America. If Playa sounds familiar, it’s because it is the same company that Hyatt worked with back in 2015 to launch Hyatt’s two all-inclusive resort brands, Hyatt Ziva and Hyatt Zilara.

Hilton’s alliance with Playa includes the addition and renovations of two all-inclusive resort properties that will be owned and managed by Playa. Unlike Playa’s partnership with Hyatt, Hilton has decided to use the Hilton Hotels & Resorts brand for its all-inclusive properties, rather than launch new ones.

The two initial resorts to be added under this partnership by the end of 2018 will be the Hilton La Romana, an All-Inclusive Resort (formerly known as the Dreams La Romana), and the Hilton Playa del Carmen, an All-Inclusive Resort (formerly The Royal Playa del Carmen). Hilton and Playa have plans to open eight more all-inclusive resorts together by 2025.

For both Hilton and Playa, the alliance was one that had been in the works for some time, as well as one that both parties see as being mutually beneficial. Hilton has nearly 80 million loyalty members and a broad distribution reach, as well as specialized sales teams for selling group and incentive business, whereas Playa has experience operating all-inclusive resorts where the cost of a stay generally includes the cost of lodging, food, drink, and sometimes even airfare.

Hilton currently operates about nearly a dozen all-inclusive resorts around the world today, including the Hilton Rose Hall Resort & Spa in Jamaica which is owned and operated by Playa.

However, Hilton vice president of development for Latin America, Juan Corvinos, said the new Hilton-Playa partnership demonstrates Hilton’s commitment to accelerate its growth in the all-inclusive market, and that Playa was the ideal partner with which to do so.

“We’ve known Playa for quite some time, and once you visit their hotels, you will see, and customers will see, that they have really figured out the secret sauce [for running all-inclusive resorts],” said Corvinos. “They have the service, the standards — all the things people want in all-inclusive — but they were missing a small piece: distribution. We have those nearly 80 million Hilton Honors members who want to earn and redeem. We both bring complementary attributes.”

For Playa, partnering with brands is the company’s primary strategy for growth in the all-inclusive space.

“Branding has not traditionally been as important for this segment,” said Fernando Mulet, senior vice president and head of development for Playa Hotels & Resorts. “But things are evolving and changing.”

He added, “Hilton doesn’t have positioning or footprints in the markets where we are in, so it’s a natural fit for great synergy here, and both companies can help each other grow in the resort and international all-inclusive space.”

Mulet also said that Playa’s previous work with Hyatt “helped” the company move forward in its alliance with Hilton.

“Seeing how well the partnership with Hyatt and seeing how successful it was helped Hilton and us get to this point,” Mulet said. “We’re ready to grow and develop another relationship with another brand, and we are still going to grow with Hyatt too.” To date, there are four open Hyatt Ziva properties and two Hyatt Zilara resorts.

The All-Inclusive Attraction

Hilton and Hyatt aren’t alone in their ambitions for growing in the all-inclusive accommodations space.

Most recently, Spanish hotelier NH Hotels announced its own partnership with Apple Leisure Partners, the company behind all-inclusive brands such as Secrets and Dreams to expand those brands within Europe, as well as launch a new all-inclusive brand called Amigo Hotels & Resorts.

In June, Marriott International executive vice president and global chief development officer Tony Capuano told Skift that all-inclusive resorts were an area of interest for Marriott as well. “We think it’s obviously a rapidly growing business, and to me, because I have the good fortune to get a bit of global view, it’s not just a platform that makes sense in Caribbean,” Capuano said of all-inclusive resorts.

“They are all looking at all-inclusive resorts,” Bjorn Hanson, an adjunct professor with the New York University Preston Robert Tisch Center for Hospitality and Tourism, said of brands that include Hilton, InterContinental Hotels Group, and Marriott. “But I haven’t yet seen anyone pulling the trigger.”

But the major hotel brands are getting closer to doing so, and they are, slowly but surely, entering a sector of hospitality long dominated by family-owned Spanish hotel chains that include brands such as Melia, Iberostar, and Riu.

Why now? Because it simply makes good business sense, and because attitudes toward all-inclusive resorts are changing.

“Brands correctly believe that all-inclusive resorts will enable them to compete, especially with relationships to guests with loyalty programs, and much more than with rates,” Hanson explained. “It’s not across all demographic profiles, but according to most demographic profiles, consumers believe, both before and after a stay at an all-inclusive, that it was a better deal at an all-inclusive resort than if things had been priced differently.”

Therefore, all-inclusive resorts enable price-sensitive travelers to focus much more on included amenities and on the overall trip experience, rather than fixate on room rate alone.

“Brands like it when consumers believe there was good value, and if there’s an all-inclusive resort within those brands, it’s a pleasant surprise for the consumer, and they think they got a good value,” Hanson continued.

Not only that, but all-inclusive resorts are also thought to generate more revenue per guest than a traditional hotel or resort would, Hanson noted. Because guests generally dine and participate in amenities and activities that are all located at or near the all-inclusive resort, those all-inclusive brands “capture most, if not all, of the revenue.”

According to STR, all-inclusive resorts in the Caribbean region saw revenues of $3.8 billion in 2017, an increase from $2.2 billion in 2012.

These types of properties, too, have always attracted a very global audience, and have been popular with European travelers in particular, who are familiar with brands like the aforementioned, as well as Club Med.

And while not as many resorts are being built today as there are limited- or select-service hotels, Hanson believes that the future of resorts lies in adopting the all-inclusive model. “I think a major phase in the evolution of resorts for global lodging companies will be all-inclusive over the next several years.”

All-Inclusive Challenges

If all-inclusive resorts are so potentially profitable, why haven’t more brands like Hyatt and Hilton entered into the all-inclusive space earlier?

“It hasn’t been easy for them,” Playa’s Mulet said, describing previous efforts from global hotel brands to enter into the all-inclusive resorts market. The all-inclusive model, and the fact that it can be, in some cases, easier to grow in traditional lodging, were primary culprits, he said.

“The way we run hotels on a daily basis, the way we sell hotels through packaging and through tour operators — that was a model that hotel companies didn’t feel the need to get into, because they have so much potential to grow traditional hotels,” Mulet said.

He noted that following the 2008 financial crisis, however, many brands, Hilton included, began taking a more serious look at the all-inclusive resort model, especially as more luxury travelers began seeking packaged travel bargains.

Changing perceptions of all-inclusive resorts have also helped, although, Hanson noted, there are still some who travelers who do not necessarily have a “positive image” of what an all-inclusive resort might be.

“If some portion of the traveling public remembers the old days of Club Med, it was often a mixed reaction,” he said. “You lined up in a hangar at Newark and you had a charter flight and you had plastic beads on our wrist to track how much you were drinking. There might still be some association with that.”

However, Hanson also noted, that in research he conducted 10 years ago, those travelers who stayed at an all-inclusive resort noted positive satisfaction rates, especially for those travelers who traveled as families with young children.

He also noted that today’s Club Med is not like it was back in the 1970s or ’80s and that more all-inclusive resorts, in general, are evolving to offer a wider range of price points and experiences.

The Next Generation of All-Inclusive Resorts

For hotel brands seeking to grow their respective all-inclusive resort portfolios, growing with a partner like Playa can often be a safer bet than trying to launch an all-inclusive brand on their own.

And whether those brands decide to launch new brands, as Hyatt did, or use an existing brand, as Hilton has, is also a deciding factor.

During Hilton’s second quarter earnings call with investors in July, CEO Chris Nassetta said the company was contemplating whether to use existing brands or “create sub brands within those brands that are purely focused on AI [all inclusive].”

Today’s Playa announcement seems to have answered that initial uncertainty.

Nassetta also noted during that same call, “Customers want [all-inclusive resorts],” and “You’ll see us doing more in that space.”

No doubt, Hilton (and Hyatt) won’t be alone in that endeavor, and it’s only a matter of time before other brands join them in the race to offer more all-inclusive resort product.

Photo Credit: The Royal Playa del Carmen in Playa del Carmen, Mexico, is being renovated and will be renamed the Hilton Playa del Carmen, An All-Inclusive Resort, by year's end. Hilton