Playa expects Hyatt, Hilton deals to grow all-inclusive
 
Playa expects Hyatt, Hilton deals to grow all-inclusive
07 JUNE 2019 8:16 AM

Deals with Hyatt Hotels Corporation and Hilton provide better distribution for Playa Hotels & Resorts, which it believes will help fuel growth in the already expanding all-inclusive segment.

MIAMI—Executives of Playa Hotels & Resorts see the combination of the most prominent U.S. hotel brands' distribution platforms and the growing appeal of the all-inclusive segment as a powerful recipe for success.

Speaking with Hotel News Now during the recent Caribbean Hotel and Resort Investment Summit, Playa EVP and Chief Development Officer Fernando Mulet said his company’s long-standing partnership with Hyatt Hotels Corporation has proven out that thesis, and the company’s now year-old deal with Hilton will take it to the next level.

He noted while there’s definitely the possibility of adding more brands to their portfolio, growing the Hyatt and Hilton partnerships are the immediate focus.

“We need to, at this time, strengthen (the relationship) and help these two brands to grow (in the all-inclusive space),” Mulet said. “We have a lot of growth potential to add Hiltons and Hyatts both in new destinations and in (existing) destinations.”

Playa, which was part-owned by Hyatt before going public in 2017, has six resorts under the Hyatt Ziva and Hyatt Zilara brands with two more in the pipeline and three branded as Hilton resorts.

In total, Playa has 21 resorts with 7,914 rooms across Mexico, Jamaica and the Dominican Republic. The company operates all but four of its properties, and owns all but two—the Sanctuary Cap Cana in the Dominican Republic.

Playa also won the CHRIS Transaction of the Year award for the company’s $300-million acquisition of Sagicor Group Jamaica Limited.

That deal added five resorts with 1,455 rooms, all on Jamaica’s North Coast, to Playa’s portfolio. Two of those properties became Hilton resorts.

The brand relationships extend beyond just hotel brands, Mulet noted, with the company partnering with clothing and lifestyle brand Panama Jack on resorts in Cancun and Playa del Carmen.

A changing distribution landscape
Mulet said a big reason his company viewed the Hilton and Hyatt deals as essential is they see “a change in distribution in our industry,” with a shift away from complete control by tour operators.

“We’ve been building a distribution platform that allows us to go directly to the final consumer and reduce the (distribution) cost,” he said, noting ballooning distribution costs is a problem for “more intermediated models traditional to the all-inclusive sector.”

Brand relationships are key, he noted, because Playa isn’t positioned as a consumer-facing brand in the same way as its direct competitors are, such as Meliá Hotels International.

Mulet is hopeful the deals will help spur additional demand in the already growing all-inclusive space, as more guests with loyalty and trust in those U.S. brands view the segment as a more appealing travel option.

“They feel safe with Hyatt and Hilton,” he said. “So it’s opened that door and helped open the possibility to reach new customers.”

He said access to the Hilton and Hyatt brand channels has drawn in some guests who have not experienced travel to all-inclusive resorts before and feedback from those customers has been overwhelmingly positive.

Investor education required
Playa is also in the unique position of being the only publicly traded U.S. company to specialize in the ownership of all-inclusive resorts in the Caribbean and Latin America.

While that provides a clear opportunity to draw in investors who believe the segment will continue to grow, it also presents the challenge of having to educate those more familiar with the traditional real estate investment trusts and C-corps in the hotel industry.

“There are no clear comparisons (in terms of publicly traded companies), so there’s a bit of an educational process,” Mulet said. “It’s an industry not that well known, but you when experience an all-inclusive stay, it’s hard to go back. When they see the unique locations we have, our investors are very much supportive of (our branding strategy), but it requires education constantly because it’s a completely different model.”

The other publicly listed hotel ownership platforms have clear biases to U.S. assets, but Mulet noted that’s unlikely to ever be the case for Playa, simply because the operational model of an all-inclusive resort is most difficult stateside. He said travelers generally have different attitudes within the U.S., as well.

“It’s difficult to replicate the cost structure (in the U.S.), and in terms of the experience, guests want to see more than just the resort,” he said, noting U.S. travelers are drawn to more urban destinations. “So they don’t see the value of paying for an all-inclusive when their plan is to venture out.”

He does see the potential for growth outside the core markets of Latin America and the Caribbean, though, with various destinations in Europe and Asia offering the right mix of cost structures and traveler appeal.

Markets closer to home that the company is targeting for growth include St. Lucia, Antigua, Aruba, Curaçao, Colombia and Costa Rica, Mulet said.

He said the recipe for a successful all-inclusive resort destination is strong airlift, political stability, strong infrastructure and established safety and security. Ideally, any resort would be within one-hour’s drive of an international airport.

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