Marriott Plays Catch-Up on All-Inclusives as Rivals Push Into Resorts

Marriott International watched one all-inclusive hotel after another open in Latin America and the Caribbean over the past decade without so much as an invitation to partner with property owners. But with the announcement of its own proprietary offerings this month, the chain finally decided to take all-inclusive into its own hands.

That’s according to Marriott Chief Development Officer Anthony Capuano, who told Skift that a lack of a recognizable all-inclusive business greatly hindered the company’s growth in the sector until now.

“We don’t win every deal, but it’s rare that we don’t at least get to step up to the plate and take a swing,” he said. Marriott is now slated to open five new branded luxury resorts in Mexico and the Dominican Republic between 2022 and 2025 after previously exploring some M&A opportunities in the all-inclusive space that didn’t quite fit, Capuano added.

While Marriott attempted to figure out its go-to market strategy, two of the chains top competitors, Hyatt and Hilton, were quick to act and bolster their all-inclusive offerings. Hilton last year announced plans of committing to growing its all-inclusive portfolio through a partnership with Playa Hotels & Resorts, the same company that helped Hyatt launch its two existing all-inclusive brands in 2013 — Hyatt Ziva and Hyatt Zilara. Hyatt now offers six all-inclusive resorts to guests in Jamaica and Mexico, with two others set to open soon in the Dominican Republic.

Marriott will be the latest large hospitality chain to learn that all-inclusive initiatives require higher fixed costs than traditional hotels, according to Flo Lugli, principal of Navesink Advisory Group, a travel industry consulting firm.

The higher costs are associated with running multiple food and beverage offerings, a traditional profit loser for owners, as well as increased labor. Yet margins tend to be better, as hotels can more easily forecast expenses based on expected occupancy that is easier to determine than at transient hotels.

“All-inclusive resorts have a clearer view of total costs and revenue that may come in than a transient hotel model,” said Lugli. They can also purchase supplies in bulk, and operate at the local level, meaning they can negotiate down prices with local entertainers and artists when booking nightly entertainment.”

Marriott’s pending all-inclusive locations will add to the chain’s lone Westin Golf Resort & Spa, Playa Conchal all-inclusive offering in Costa Rica, which the company inherited following the Starwood Hotels & Resorts merger three years ago. According to Capuano, the property has served as the perfect “laboratory” for Marriott to test out how to successfully run all-inclusive resorts.

“We sent a couple of SWAT teams down there, and tried to make sure we really understood what’s different about the customer, the sales process, pricing, and service expectations,” he said. “And we came away saying it’s a lot closer to our model than we thought and that we had the technology infrastructure to jump into the space.”

Prominent Chains Make All-Inclusive Better

Marriott’s growth in the all-inclusive space will be a blend of new builds and hotel conversions, CEO Arne Sorenson said on the company’s second-quarter earnings call Aug. 6. And both developers and owners of existing all-inclusive resorts are jumping at the bit to work with the chain, Capuano added.

Owners are intrigued by plugging into both Marriott’s Bonvoy loyalty program and its revenue management and sales engines. But there is an added element for conversion hotels to consider. Some candidates will have to grow the size of their locations to meet Marriott’s qualifications of what all-inclusive should look like.

“It’s often the case that in the recreation and food and beverage spaces is where hotel conversion candidates either can’t make the leap because they don’t have the physical facilities or they need to do a significant expansion,” Capuano said.

There are enough branded hotels already offering all-inclusive stays in the world. But outside of Club Med and Sandals Resorts, few are known in the U.S., according to Lugli. The inclusion of Marriott will boost the consumer confidence of travelers who are on the fence about whether existing resorts would match their expectations.

This is also the perfect time for brands, such as Hyatt, Hilton, and Marriott to plow ahead in the sector, she added. The target customer of all-inclusive resorts used to be single, budget conscious travelers. That has since shifted to multi-generational families, adventure seekers, and pricier wellness offerings. Millennials additionally are more frequently making all-inclusive a top choice for destination weddings and honeymoons.

“This reminds me a bit of the timeshare industry,” said Lugli. “When brands got into it, they brought a certain level of confidence and expectation for customers.”

Marriott’s Projected All-inclusive Growth

Much like Marriott’s homesharing business launched this spring, the company has little idea how large its all-inclusive portfolio will become, and declined to share internal revenue estimates at this time.

Marriott does, however, expect a disproportionate amount of its early all-inclusive offerings to be in the Caribbean and Latin America. The hotelier has also not ruled opening locations in growing markets, such as Southeast Asia and Eastern Europe.

“How quickly we’ll get there, how big it might be is to be determined. But it is a strategic imperative to continue to grow our resort portfolio,” said Capuano, adding that Marriott will also add to the initial four brands (Autograph Collection, The Ritz-Carlton, Marriott Hotels, and Westin Hotels) it is including in “phase one” development.

The new venture arguably represents a more lucrative opportunity for the chain than homesharing, according to Lugli. Marriott has said it expects its homesharing business to compliment the rest of its portfolio, whereas all-inclusive is more of an extension of what it already offers.

“These are still more conventional hotel rooms and suites, whereas homes and villas are full home offerings,” Capuano said.

The all-inclusive market is also in its infancy, while homesharing has huge recognition in the U.S. due to the emergence of Airbnb and HomeAway, Lugli added.

“For Marriott, all-inclusive may be an easier approach because they run more like hotels and have F&B, housekeeping, and planned activities” she concluded. “They can grow it through direct management or partnerships. Homesharing, apart from check-in, is a different experience.”