There could be a turning point for all-inclusive resorts.
After several years of rapid growth and booming demand, the sector is now showing the first signs of a slowdown.
“The all-inclusive market is reaching a plateau,” says Geoff Millar, co-owner of Ultimate All-Inclusive Travel and Ultimate Hawaii Vacations in the Phoenix area, which do big business in all-inclusive packages. “And I think a big reason for that is simply cost. During the boom of the last few years, these resorts have increased their prices dramatically.”
According to Millar, prices on many all-inclusives have almost doubled in the last year or two. This upward trend is eroding the value for money that once characterized all-inclusive holidays, and some all-inclusive fans are starting to look for alternatives.
“Now we’re at a point where customers are saying, ‘I can explore other vacation options,'” he said. “They’re realizing they can get a nice vacation in Europe for the same price they would pay for an all-inclusive deal.”
At the same time, Millar added, competition in the all-inclusive sector is greater than ever due to the recent increase in new entrants and development activity.
“I think the all-inclusive resorts are going to have to adjust their prices because while people are still traveling, they’re not offering as many all-inclusives as they used to,” he said. “We’re not seeing that at the high end, but the middle class and family market are now more conscious of what they’re spending and what they’re getting for their money.”
Some all-inclusive providers are also observing a slowdown in demand growth.
Hyatt reported some decline in this segment during its second-quarter conference call in August. CEO Mark Hoplamazian spoke of a “return to pre-pandemic seasonality” in Mexico and the Caribbean.
Hyatt’s Inclusive Collection includes more than 100 all-inclusive resorts in Mexico, the Caribbean, Central America and Europe.
According to Hyatt CFO Joan Bottarini, Hyatt’s Inclusive Collection had a “really strong” first quarter with double-digit net package RevPAR. However, that was followed by a far more modest 3% increase in net package RevPAR in the second quarter. (Hyatt defines net package RevPAR as revenue from the sale of package revenue, consisting of room revenue, food and beverage, and entertainment.)
In the Americas, Hyatt’s Inclusive Collection net RevPAR grew by just 2% during the quarter.
Sandals Resorts International has also seen a return to more normal demand trends for its Sandals and Beaches brands.
“Like many others in the travel industry, our brands experienced a meteoric rise in bookings post-Covid,” said Adam Stewart, CEO of Sandals Resorts International.
“While travel demand remains robust, we are actually seeing a normalization of booking behavior,” he added. “The frenzied pace we experienced immediately after the pandemic has evolved into a more moderate, though still strong, flow of bookings. This shift reflects a return to more traditional booking behavior, with guests planning their vacations further in advance and with greater consideration.”
The same goes for Grupo Xcaret, which operates Hotel Xcaret Mexico, Hotel Xcaret Arte and the ultra-luxury all-inclusive La Casa de la Playa hotels on Mexico’s Riviera Maya.
Rodrigo Motavelazco
“There is still growth, but we see a more difficult environment,” said Rodrigo Motavelazco, sales director of Hoteles Xcaret. “We understand that the coming years will be more challenging for us and everyone in the destination (as we see a slight decline in demand).”
Motavelazco added that Mexico’s resorts face stiff competition in other markets where all-inclusive options are strong, such as the Dominican Republic and Jamaica, but he remained optimistic, stressing that Grupo Xcaret’s properties are well positioned to continue to capture outsized market share.
“We are confident and grateful to all travel agencies and tour operators because we are seeing good numbers this year,” said Motavelazco.
This positive outlook is reflected in Grupo Xcaret’s expansion plans, which call for the addition of 900 guest rooms to its flagship resort, Hotel Xcaret Mexico, by fall 2025. This move will double the property’s room count.
Given a general decline in pent-up leisure demand, some all-inclusive market segments and brands may prove more competitive than others.
Dana Dziegiel, owner of Gypsea Travels in Utica, New York, hasn’t seen a decline in her all-inclusive business this year, which she attributes in part to strong demand for group travel.
“Personally, I haven’t noticed a decline because I send a lot of groups – especially pickleball groups – to Club Med,” said Dziegiel, who also does a lot of business planning all-inclusive trips for jiu-jitsu groups and large, multigenerational family groups.
“Club Med is also more affordable compared to some other brands,” Dziegiel added. “And while prices have gone up a little, in my experience they haven’t doubled or tripled. And I also find that when people go to one Club Med, they want to try other Club Meds as well.”
According to Dziegiel, Club Med’s presence in the all-inclusive ski holiday sector is also an important differentiating factor.
“I have ski groups that go to Club Med in France every year because it’s all-inclusive,” she said. “They get flights, food, drinks and skiing for less than it would cost them to go to Aspen.”
