Hilton Splashes Into the Caribbean With All-Inclusive Resort Deal

(Bloomberg) -- All-inclusive resorts, which typically charge budget-conscious travelers a single price for lodging, food and often airfare, have long been the domain of specialty operators. Now the world's second-largest hotel company is wading further into the business.

Hilton Worldwide Holdings Inc. on Monday announced an alliance with Playa Hotels & Resorts NV, a real estate investment trust that specializes in all-inclusive resorts. Playa will convert two Caribbean hotels into Hiltons, and the companies plan to team up on an additional eight resorts by 2025, according to a statement. Hilton currently has 11 such properties in its portfolio.

“Our existing customers, and the customers we're trying to attract, want more resorts,” said Hilton Chief Executive Officer Christopher Nassetta in an interview from Playa del Carmen, Mexico. That is especially true of loyalty-program members “who beat their bodies up traveling on business and want to dream about going to beautiful resorts to relax and rejuvenate,” he said.

All-inclusive resorts became popular in the 1950s as a way to appeal to bargain-hunting vacationers, according to a report last year from Jones Lang LaSalle. In recent years, hotel owners have been applying the model to higher-end properties, sparking “growing curiosity and interest of global management companies,” according to the report.

The niche is still dominated by brands like Sandals Resorts International and Secrets Resorts & Spas. Hyatt Hotels Corp. operates six hotels under two all-inclusive brands, according to the company's website, but those are more the exception than the rule.

Playa, led by CEO Bruce Wardinski, has been seeking to partner with big hotel companies to reduce commissions it pays to tour operators and online-travel agencies and gain access to millions of loyalty members who pay for their vacations with points earned on business travel.

The two hotels that Playa is converting to Hiltons are in Playa del Carmen and La Romana, Dominican Republic. Playa plans to spend as much as $54 million upgrading the two properties, according to a filing today. In February, Playa acquired the Hilton Rose Hall Resort & Spa, in Montego Bay, Jamaica.

“We can access a more sophisticated and higher-paying guest than has typically gone to all-inclusive resorts,” Wardinski said. “Now they see the Hilton flag, and they're going, oh, I'm going to try that.”

All-inclusive resorts in the Caribbean region generated revenue of $3.8 billion in 2017, up from $2.2 billion in 2012, according to lodging-data provider STR Inc.

To contact the reporter on this story: Patrick Clark in New York at pclark55@bloomberg.net

To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, Debarati Roy

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