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Even if Sandals Resorts isn't worried about major hotel brands like Marriott entering the all-inclusive space, more hospitality giants are likely to swoop in and start scouring the market for franchise deals. There is too much unbranded supply to ignore.

When the world’s largest hotel company enters your home turf, that might induce panic for some resort operators. But Jamaica-based Sandals Resorts International isn’t exactly shaking in its boots.

Marriott added 19 all-inclusive Carribean resorts to its portfolio earlier this year, putting the hotel company on track to be one of the largest global operators in the sector. Some in the travel orbit saw this as a shot across the bow, given Marriott’s emphasis on the power its branding and loyalty program might bring to the sector.

Sandals, which has massive brand recognition for all-inclusive resorts thanks to extensive advertising across North America, doesn’t see Marriott as an eye-to-eye competitor.

“They’re an incredible company and a very, very powerful company, but we just do things differently,” said Adam Stewart, executive chairman of Sandals Resorts. “It’s an opportunity for their loyalty members to earn points in a non-branded, two-star operation [or] two-and-half stars.”

If that argument sounds familiar, it’s because it’s the same one many have with respect to Marriott’s strategy around vacation rentals: more a benefit to Bonvoy loyalty members than a direct competitor to the likes of Airbnb or Vrbo.

Sandals has been on a growth spurt of its own during the pandemic, announcing plans this spring for three new resorts in Jamaica. The company also bought resorts on the islands of Curacao and St. Vincent over the last year.

The all-inclusive resort company currently operates 20 resorts and three villas across five brands in seven countries. But Sandals owns enough land across the Carribean to comfortably double its size, said Stewart — who took on the role of executive chairman in January following the death of his father and founder of the company, Gordon “Butch” Stewart.

Sandals Resorts International Executive Chairman Adam Stewart (left) with Jamaican Prime Minister Andrew Holness (right) surveying plans for the future Sandals Dunn’s River and Sandals Royal Dunn’s River resorts (Credit: Sandals Resorts International).

It should be noted Marriott’s 19 all-inclusive resorts, owned by Toronto-based Sunwing Travel Group’s hotel division, are expected to fall under the company’s Autograph Collection of upper-upscale to luxury hotels. Marriott’s all-inclusive ambition puts it on track to have 29 resorts in the sector.

Marriott declined to comment for this story.

But Stewart sees greater value to his own company’s hard brands and name recognition rather than a soft brand like the Autograph Collection, which is still tied to Marriott but offers more autonomy to hotel owners around areas like design and amenities. Unlike Marriott’s franchised push into the space, Sandals owns both its brands as well as the underlying real estate.

“We are hyper-focused on the fact that we’re Caribbean people and the Caribbean is our sandbox,” he added. “We are always looking at life through a future lens of what’s the next-generation resort going to look like.”

A Luxury Inflection in Development

Sandals is known for its eponymous brand aimed at couples as well as the more family-friendly Beaches Resorts and others like Fowl Cay Resort in the Bahamas. But Stewart wants to show there is just as much variety within the all-inclusive sector as there is with traditional hotels.

“The all-inclusive segment is a glass ceiling waiting to be broken with each development,” Stewart said.

Sandals is signaling ultra luxury may be its next frontier. The typical development cost of higher-end hotels in the Caribbean where Sandals operates ranges between $120,000 and $580,000 per room, according to a report from construction consultancy firm BCQS International.

But Sandals is spending as much as $1.2 million per room on its future resorts. Rates across the entire company can range from around $500 per night to around $4,000, Stewart said.

The growth trajectory comes as Sandals reports it is back to operating at pre-pandemic performance levels. It plans to further capitalize on its pandemic appeal of operating lower-density resorts of a couple hundred rooms across hundreds of acres compared to 1,000-room or larger megaresorts.

“It’s a business, but we look at it as a member of the family at the dinner table,” Stewart said. “To the degree that we take care of it, it will take care of everything else.”

Not for Sale

Sandals’ growth plans come less than two years after company leaders acknowledged they were exploring a $4.5 billion sale. Those exploratory talks were simply a matter of running a company, Stewart said.

But he is committed to keeping the business in the family. The resort company started in 1981 after Stewart’s father used the money he made selling home appliances to develop a hotel on Jamaica’s North Coast. Sandals has since swelled into a major all-inclusive resort owner and operator while remaining under family control.

“We did exactly what you kind of need to do at some point,” Stewart said of the sale talks. “You need to take a health check, take score of where you are, and take a real good look at the competition around you and what’s going on [in order] to get back to being able to drive the next five years of strategic development.”

Growth is clearly on the table, and Stewart doesn’t necessarily buy the idea that some of the best acquisition deals to be had are already in the rear-view mirror. Not every hotel and resort operator bounced back from the pandemic fallout so quickly, and those will be prime targets once various forms of economic relief and bank flexibility run dry.

“I don’t think the bottom has fallen out by any means for hospitality,” Stewart said. “There will be more casualties of war.”

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Tags: coronavirus, coronavirus recovery, marriott, Sandals Resorts

Photo credit: Sandals Resorts is on its own all-inclusive resort growth spurt, developing properties like Sandals Dunn’s River in Jamaica (rendering pictured). Sandals Resorts

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