Hotel Brands Bet on All-Inclusive Resorts to Counter Covid-19 Slump

Wyndham Hotels & Resorts Inc. said this week it is launching an alliance with Playa Hotels & Resorts, an operator, developer and owner of all-inclusive resorts. The deal marks Wyndham’s first foray into the all-inclusive business, and it follows in the footsteps of other big hotel brands.

Hyatt Hotels Corp. in August agreed to buy the all-inclusive-resort manager Apple Leisure Group for $2.7 billion, and Marriott International Inc. said Tuesday that it has added 20 new all-inclusive resorts to its portfolio under the Autograph Collection Hotels brand.

Big hotel brands decided that they wanted to add more leisure-focused hotels, said Scott Berman, a principal and hospitality-industry leader at professional-services firm PwC.

The industry’s interest in all-inclusive resorts started years ago, but the pandemic added another boost. All-inclusive resorts, an area the biggest brands had mostly avoided in the past, offer an easy opportunity for growth.

“The industry is convinced that leisure will continue to drive the recovery,” Mr. Berman said.

Resorts in Mexico and the Caribbean had few visitors last year, but visits to the properties surged this year as newly vaccinated people were more willing to travel and as countries eased border restrictions.

Wyndham’s chief executive, Geoff Ballotti, said he expects leisure travel to continue growing after the pandemic, partly because the adoption of remote work means people have the flexibility to extend a weekend trip or perform their job for a longer stretch from a resort. He said Wyndham’s hotels are already experiencing an uptick in bookings for Sunday and Monday nights, which are traditionally less busy.

The first two hotels under Wyndham’s new Alltra brand (short for all-inclusive travel for all) will be on Mexico’s Yucatán Peninsula, and the companies are looking to expand the model to other locations. Playa will manage the properties, while Wyndham is providing its brand and sales apparatus for a fee.

All-inclusive resorts started in Europe in the 1950s, Mr. Berman said. In the 1970s and 1980s the business model spread to the Caribbean and Mexico. At the time, a big part of the appeal was safety, Mr. Berman said. Tourists could lie on the beach, eat at restaurants and play golf without ever having to leave their heavily guarded hotel or having to take out their wallets. Until recently, the sector was dominated by local brands.

Hyatt first got into the all-inclusive business in 2013. The company’s CEO, Mark Hoplamazian, wrote in an email that the Apple acquisition will push the share of leisure hotel rooms in the company’s portfolio to over 50%, from around 45%.

“The human experience of taking time for personal renewal and also connecting with family, friends and loved ones is in extremely high demand given the challenges we have all faced over the past 20 months,” he wrote. This, he added, will boost leisure travel for years to come.

All-inclusive resorts still face headwinds. The recent boom in travel might be short-lived, particularly if new, dangerous Covid-19 variants spread. As more cruise ships leave shore, competition over tourists might increase and push down rates.

Still, a growing global middle class should lead to more demand in the long run, particularly in Asia, said Gregory Miller, a hotel analyst at Truist Securities Inc. “I think beyond the Caribbean, there’s probably a very healthy runway of all-inclusives for decades to come,” he said.

Write to Konrad Putzier at [email protected]