Industry divided over all-inclusive options
As reported in the March issue of Hotelier Middle East, sales and marketing experts are a vocal bunch, passionate about the industry in which they work.
On topics including achieving value adds and rate parity, to working with the travel trade versus pushing direct bookings, they are likely to have firm and often differing opinions — as demonstrated in last month’s roundtable report (see It’s a customer’s world, pages 32-36, Hotelier Middle East, March 2011).
But the issue that caused the most consternation of all at this debate was that of all-inclusive hotels — and the impact this product offering would have should it be introduced to luxury markets like Dubai.
The subject was raised by Ibn Battuta Gate and Royal Amwaj director of sales and marketing Andrew Hughes, who revealed that Royal Amwaj on Palm Jumeirah in Dubai, which is scheduled to open later this year, will offer an all-inclusive package.
This was vehemently objected to by Rezidor’s global director of sales and marketing Yigit Sezgin, who spoke from his experience of running all-inclusive properties in locations such as Egypt and Turkey.
Ibn Battuta Gate marketing manager Beth Thomas asserted that offering an all-inclusive package was simply a matter of enabling guest choice, while Kempinski regional director of sales Avsar Koc focused on its impact on the hotel’s business model.
This month, Hotelier picks up the debate and poses the question of the value of all-inclusive hotels to the wider industry, garnering feedback from the travel trade and destination management consultants to hotel investors and major operators.
What are your views on offering guests all-inclusive hotels and all-inclusive hotel packages?
Yigit Sezgin: Having hotels in Egypt as we do and being Turkish and having all-inclusive hotels in the Antalya region, I would say it’s a very dangerous issue.
Andrew Hughes: We’re going to have an all-inclusive option at Royal Amwaj. We believe it’s about guest choice. I think there’s absolutely room for the all-inclusive concept in Dubai and I think as long as you’re giving the customers choice and you’re positioning it as a premium product, not an exclusion-based product, [it will work].
So if a customer buys that experience, if they want to eat the lobster in the à la carte restaurant, they can eat the lobster. If they want three drinks at the pool at lunchtime, they can have three drinks sat by the swimming pool at lunchtime.
Avsar Koc: I think the key word is the all-inclusive option. The days are long gone when you box people in on a single concept.
Beth Thomas: Some guests don’t want to move from the hotel when they go on holiday, other guests might want to do some exploring, other guests, because of business, will be out of the hotel. But it’s got to be guest choice.
Andrew Hughes: I think also it’s a misnomer that it’s not profitable; the maths can show you that an all-inclusive can be highly profitable if it’s managed the right way.
There are certain elements and patterns on consumption on peak days and low days and when people are out of the hotel [to consider] — so I think that once we do this, more resorts in the region will follow suit because we’ll be able to show the profitability.
I think it hasn’t happened here in Dubai because historically F&B has been such an important element in these resorts’ budget lines that the fear is that if we were to go all-inclusive we would lose all of these revenues out of our food and beverage.
It’s almost going to take a new hotel to come in to show the value and to see how effective it is and then others will follow suit.
Yigit Sezgin: I just want to say that I’m sorry, but I totally disagree. It’s a big virus, once you plug it in you can’t get it back. It’s a big danger.
Why do you consider all-inclusive hotels to pose such a danger?
Yigit Sezgin: I’ve seen it in several places. First of all, in the market there’s a big demand for it. You go into any leisure market, feeder markets, in Scandinavia, UK, Germany, there is a serious demand.
What we are trying to do at the moment, for example, is to get one of our properties in Egypt out of being all-inclusive and it’s absolutely impossible.
The thing is people start to choose that and then the tour operators start to threaten you and say: ‘If you don’t give me the option I can’t sell you because this is the demand. I cannot sell only B&B or half board or even full board’.
You start it with exclusive options and higher prices so you keep your margins, [but] there are very few resorts and destinations that I know today that are actually able to hold on to those margins and to the quality because the people who book and spend money in Dubai properties, in the resort properties especially, would not like to be together with the ones that are coming for the all-inclusive option.
Another thing I’d like to say is it’s very dangerous for the local economy, because most of the people that come to all-inclusive options will never leave the hotel so they don’t buy outside, they do not eat outside, they do not drink outside.
[If you start] then the rest will follow naturally and not everybody is going to do it the way that you do it and it’s an access demand issue; once you do not have the strong demand then people will start to lower the rates like they have done in 2009 and 2010 and then you’ll go into these margin issues, you go into profitability issues, and you cannot deliver what the property needs to offer.
I think it’s very dangerous for your brand.
Avsar Koc: I think the hesitation on all-inclusive relies on the fundamental reason behind the request for all-inclusive — that people want to know exactly how much this holiday is going to cost them. Now is that detrimental to our business and the economy? I’m not so sure.
But if you have it as an option, fine — it’s the customer’s world so you have to give them what they are looking for.
Having said that let’s talk about Dubai — in terms of F&B offerings, hotels in Dubai are superb in terms of variety and we all know that this variety doesn’t come cheap in terms of labour, products, etc.
I think the key word is your product because everything has to be imported. Yes, I’m sure there is a way to crack this, but when you do your P&L for your fine-dining restaurants it’s a difficult playing field.
AH: Look at the success of the cruise sector over the last few years; they have ridden on the back of this need to know how much money I am spending before I travel and it’s not just the likes of Royal Caribbean that have had this success, it’s the likes of Silversea that are hugely successful because the customers get a luxury hotel or cruise experience and they know how much they’re going to spend. If the customer wants that then why fight the demand?
AK: If I was the cruise operator then I wouldn’t do all inclusive. Once you are on board, what are the options?!
AH: The whole point is they’re finding it profitable, I think that’s the key to all of this — there is no point doing all of this if it is not going to be profitable for you.
AK: I think if you are starting a destination and you build your hotels accordingly then [that’s okay], but to shift from what Dubai is offering today to an all-inclusive [offer] that will see in my opinion some damages in your business model — you might end up changing your food and beverage offering.
YZ: There are certain destinations where you might have two or three hotels that are running the majority of the market. If they all decide to come together and choose to offer an exclusive, all-inclusive [option] because that is the demand and they protect their margin, I can understand it.
But this [Dubai] is a luxury destination today — the offerings are extraordinary, the products are extraordinary, the service compared to a lot of other places is extraordinary. . What I am saying is your all-inclusive clientele today is not in Dubai.
AH: Yes, but do you know where they are? They are in the Maldives and Mauritius. There are very successful all-inclusive resorts in these island destinations. All inclusive doesn’t mean ‘cheap Charlie’. It’s all about enjoying a hassle-free holiday experience.
BT: The fact that Dubai hasn’t got that at the moment means we’re missing a trick. I don’t think that suddenly all the hotels in Dubai need to jump on the band wagon.
YZ: But they will, that’s what I’m saying. This is exactly how it starts; in any place that I know this is how it starts.
AH: For the record Jebel Ali Hotel has had an all-inclusive concept for the past year and not every resort in Dubai has followed their lead. It has existed here.
BT: For a city hotel it definitely won’t work; for a beach hotel it depends on the surroundings. If you look at hotels that are more isolated like Jebel Ali, it works for that.
If you look at the Jumeirah Beach strip where there are a lot more dining options, possibly it wouldn’t work for those particular hotels, but we shouldn’t discount it altogether.
YZ: It is for sure an opportunity. There is a market segment there and it’s untouched. Somebody’s going to grab it and do it.
I don’t agree with the Jebel Ali issue. You need to have a strong global communication system and enough inventory in order to push that market that we’re actually talking about.
Normally this is sold by large tour operators that are landing charters into a destination and are able to put that into their brochures and programmes.
I’m saying that it’s an opportunity, but this is my opinion, if I was the ‘mayor’ of Dubai one thing that I would do for sure is I would never allow all-inclusive; it’s never going to happen!
As reported in the March issue of Hotelier Middle East, sales and marketing experts are a vocal bunch, passionate about the industry in which they work.
On topics including achieving value adds and rate parity, to working with the travel trade versus pushing direct bookings, they are likely to have firm and often differing opinions — as demonstrated in last month’s roundtable report (see It’s a customer’s world, pages 32-36, Hotelier Middle East, March 2011).
But the issue that caused the most consternation of all at this debate was that of all-inclusive hotels — and the impact this product offering would have should it be introduced to luxury markets like Dubai.
The subject was raised by Ibn Battuta Gate and Royal Amwaj director of sales and marketing Andrew Hughes, who revealed that Royal Amwaj on Palm Jumeirah in Dubai, which is scheduled to open later this year, will offer an all-inclusive package.
This was vehemently objected to by Rezidor’s global director of sales and marketing Yigit Sezgin, who spoke from his experience of running all-inclusive properties in locations such as Egypt and Turkey.
Ibn Battuta Gate marketing manager Beth Thomas asserted that offering an all-inclusive package was simply a matter of enabling guest choice, while Kempinski regional director of sales Avsar Koc focused on its impact on the hotel’s business model.
This month, Hotelier picks up the debate and poses the question of the value of all-inclusive hotels to the wider industry, garnering feedback from the travel trade and destination management consultants to hotel investors and major operators.
What are your views on offering guests all-inclusive hotels and all-inclusive hotel packages?
Yigit Sezgin: Having hotels in Egypt as we do and being Turkish and having all-inclusive hotels in the Antalya region, I would say it’s a very dangerous issue.
Andrew Hughes: We’re going to have an all-inclusive option at Royal Amwaj. We believe it’s about guest choice. I think there’s absolutely room for the all-inclusive concept in Dubai and I think as long as you’re giving the customers choice and you’re positioning it as a premium product, not an exclusion-based product, [it will work].
So if a customer buys that experience, if they want to eat the lobster in the à la carte restaurant, they can eat the lobster. If they want three drinks at the pool at lunchtime, they can have three drinks sat by the swimming pool at lunchtime.
Avsar Koc: I think the key word is the all-inclusive option. The days are long gone when you box people in on a single concept.
Beth Thomas: Some guests don’t want to move from the hotel when they go on holiday, other guests might want to do some exploring, other guests, because of business, will be out of the hotel. But it’s got to be guest choice.
Andrew Hughes: I think also it’s a misnomer that it’s not profitable; the maths can show you that an all-inclusive can be highly profitable if it’s managed the right way.
There are certain elements and patterns on consumption on peak days and low days and when people are out of the hotel [to consider] — so I think that once we do this, more resorts in the region will follow suit because we’ll be able to show the profitability.
I think it hasn’t happened here in Dubai because historically F&B has been such an important element in these resorts’ budget lines that the fear is that if we were to go all-inclusive we would lose all of these revenues out of our food and beverage.
It’s almost going to take a new hotel to come in to show the value and to see how effective it is and then others will follow suit.
Yigit Sezgin: I just want to say that I’m sorry, but I totally disagree. It’s a big virus, once you plug it in you can’t get it back. It’s a big danger.
Why do you consider all-inclusive hotels to pose such a danger?
Yigit Sezgin: I’ve seen it in several places. First of all, in the market there’s a big demand for it. You go into any leisure market, feeder markets, in Scandinavia, UK, Germany, there is a serious demand.
What we are trying to do at the moment, for example, is to get one of our properties in Egypt out of being all-inclusive and it’s absolutely impossible.
The thing is people start to choose that and then the tour operators start to threaten you and say: ‘If you don’t give me the option I can’t sell you because this is the demand. I cannot sell only B&B or half board or even full board’.
You start it with exclusive options and higher prices so you keep your margins, [but] there are very few resorts and destinations that I know today that are actually able to hold on to those margins and to the quality because the people who book and spend money in Dubai properties, in the resort properties especially, would not like to be together with the ones that are coming for the all-inclusive option.
Another thing I’d like to say is it’s very dangerous for the local economy, because most of the people that come to all-inclusive options will never leave the hotel so they don’t buy outside, they do not eat outside, they do not drink outside.
[If you start] then the rest will follow naturally and not everybody is going to do it the way that you do it and it’s an access demand issue; once you do not have the strong demand then people will start to lower the rates like they have done in 2009 and 2010 and then you’ll go into these margin issues, you go into profitability issues, and you cannot deliver what the property needs to offer. I think it’s very dangerous for your brand.
Avsar Koc: I think the hesitation on all-inclusive relies on the fundamental reason behind the request for all-inclusive — that people want to know exactly how much this holiday is going to cost them.
Now is that detrimental to our business and the economy? I’m not so sure. But if you have it as an option, fine — it’s the customer’s world so you have to give them what they are looking for.
Having said that let’s talk about Dubai — in terms of F&B offerings, hotels in Dubai are superb in terms of variety and we all know that this variety doesn’t come cheap in terms of labour, products, etc.
I think the key word is your product because everything has to be imported. Yes, I’m sure there is a way to crack this, but when you do your P&L for your fine-dining restaurants it’s a difficult playing field.
AH: Look at the success of the cruise sector over the last few years; they have ridden on the back of this need to know how much money I am spending before I travel and it’s not just the likes of Royal Caribbean that have had this success, it’s the likes of Silversea that are hugely successful because the customers get a luxury hotel or cruise experience and they know how much they’re going to spend. If the customer wants that then why fight the demand?
AK: If I was the cruise operator then I wouldn’t do all inclusive. Once you are on board, what are the options?!
AH: The whole point is they’re finding it profitable, I think that’s the key to all of this — there is no point doing all of this if it is not going to be profitable for you.
AK: I think if you are starting a destination and you build your hotels accordingly then [that’s okay], but to shift from what Dubai is offering today to an all-inclusive [offer] that will see in my opinion some damages in your business model — you might end up changing your food and beverage offering.
YZ: There are certain destinations where you might have two or three hotels that are running the majority of the market. If they all decide to come together and choose to offer an exclusive, all-inclusive [option] because that is the demand and they protect their margin, I can understand it.
But this [Dubai] is a luxury destination today — the offerings are extraordinary, the products are extraordinary, the service compared to a lot of other places is extraordinary. . What I am saying is your all-inclusive clientele today is not in Dubai.
AH: Yes, but do you know where they are? They are in the Maldives and Mauritius. There are very successful all-inclusive resorts in these island destinations. All inclusive doesn’t mean ‘cheap Charlie’. It’s all about enjoying a hassle-free holiday experience.
BT: The fact that Dubai hasn’t got that at the moment means we’re missing a trick. I don’t think that suddenly all the hotels in Dubai need to jump on the band wagon.
YZ: But they will, that’s what I’m saying. This is exactly how it starts; in any place that I know this is how it starts.
AH: For the record Jebel Ali Hotel has had an all-inclusive concept for the past year and not every resort in Dubai has followed their lead. It has existed here.
BT: For a city hotel it definitely won’t work; for a beach hotel it depends on the surroundings. If you look at hotels that are more isolated like Jebel Ali, it works for that.
If you look at the Jumeirah Beach strip where there are a lot more dining options, possibly it wouldn’t work for those particular hotels, but we shouldn’t discount it altogether.
YZ: It is for sure an opportunity. There is a market segment there and it’s untouched. Somebody’s going to grab it and do it.
I don’t agree with the Jebel Ali issue. You need to have a strong global communication system and enough inventory in order to push that market that we’re actually talking about.
Normally this is sold by large tour operators that are landing charters into a destination and are able to put that into their brochures and programmes.
I’m saying that it’s an opportunity, but this is my opinion, if I was the ‘mayor’ of Dubai one thing that I would do for sure is I would never allow all-inclusive; it’s never going to happen!
The consultant's opinion
Sven Gade, director and head of consulting at PKF The Consulting House and an expert on destination planning, shares his views…
Regarding all-inclusive, it is not surprising that the waves roll high and the opinions straddle the entire range of options. It’s a bit like timeshare, which has as many defenders as opponents.
Generally, all-inclusive is a concept that has developed a distinct market following and carries a group of customers who support the concept and book where it is available.
A risk is that it can end up with a “cheap” image, whereby all is inclusive, but the F&B provided may not of the best quality. Also, guests are often subject to fine print “rules” such as: only house beverages are included — branded or premium goods require separate payment.
This may not go well with an upmarket destination like Dubai — it can potentially erode the reputation and attract the wrong target clientele.
A risk specific to Dubai: all-inclusive has a lot to do with the provision of alcohol and may lead to two issues: overconsumption (because it’s free) and from that undesirable behaviour as a result.
This would have to be managed carefully to avoid bad experiences and strict responses from the authorities, which may spoil the holidays and in turn the reputation of the destination.
Finally, one underlying idea of all-inclusive offers is to keep guests from spending their holiday money outside their resort.
This in turn may prevent visitors from exploring and experiencing Dubai per se — even all-inclusive operators should have to link up with local guides and organisers to ensure that the destination is experienced.
Having said all that, all-inclusive does have distinct source markets and followers, which to date may not really have discovered ‘Destination Dubai’.
It is very possible to offer all-inclusive alongside à la carte packages and/or during low seasons only to increase utilisation — that is after all simply good yield management.
Ask the travel trade
SNTTA Emir Tours manager — M.I.C.E Richard Devadasan said he has seen demand from clients for all-inclusive hotels in the UAE, which he would be keen to sell if available.
“I think to grow the business to our destination we must adapt to what clicks for our customer. Yes we have seen an interest for such an [all-inclusive] offering from clients. All they need is a venue (usually resort type) wherein clients can avail the F&B offerings all day long, even if it has to be from designated outlets,” commented Devadasan.
“We have lost business to other destinations because of the non-availability of such offers from hotels, so yes we will certainly be able to sell this whenever asked, but even otherwise because it will indeed affect the bottom line for the client in the positive sense.”
Chairman and owner of the Vision Destination Management, Ali Zaid Abu Monassar, took a more cautious view, however.
Echoing Rezidor’s Yigit Sezgin’s points he said: “All-inclusive packages are demanded from destinations like Germany and the UK but I think Dubai, with the exception of a few hotels, has never had to do this, because if we start we will never end”.
Monassar continued: “The UAE is famous for its luxury hotels and when it comes to luxury hotels you cannot offer all-inclusive. The only places where you can is in island destinations like the Maldives where there are no other options.
“In Dubai, where you have so many options to dine in a variety of places and you want to be entertained, you have to discover the city. All-inclusive clients tend not to leave the hotel. The destination does not benefit. It would be a disaster.”
He conceded, as did PKF’s Sven Gade, that there could be limited periods when hotels could offer all-inclusive packages — for example, during the summer months when beach hotels are not as full.
But Monassar said this would have to be decided on a “case by case basis” as ultimately, “all-inclusive ends up being cheap”.
But he said generally, people travelling to Dubai didn’t expect these sorts of packages.
“The people that are coming to Dubai are not coming because they want to stay in a hotel and save money. They are coming for the destination — coming for the malls, the fine dining options and the tours — and they know they have to spend money [when they are here].”
Of Royal Amwaj’s plans, Monassar concluded: “The Palm Jumeirah is the icon of Dubai; if we start to offer all-inclusive hotels on The Palm what will happen to all of the other hotels?”.
What the hoteliers said
“There’s no question in my mind that an all-inclusive offering will attract a certain type of the market, perhaps a segment of the market that The Palm wouldn’t otherwise attract. Is that a good thing?
Yes, I think that the broader your offering can be in a market, the bigger the market you have that is available to you. I think what people perceive is typically all-inclusive offerings tend to be at the lower end of the market and while I’m not intimately familiar with the Royal Amwaj offering I don’t think that’s the case.
What I understand of that product, it’s a very upscale offering and, therefore, it will be priced accordingly.
And when you’re attracting that end of the market, I don’t think the people that can afford to stay at a property like that on an all-inclusive basis are necessarily going to be constrained by saying ‘I must have every meal there because I’ve prepaid for it’. That end of the market is a bit different.
Joe Sita, president, IFA Hotel Investments
“There are some associations and clichés with the all-inclusive concept. But I don’t think an all-inclusive at the lower end would happen here in Dubai because it’s not that kind of market.
It is possible there could be an all-inclusive concept in Dubai, but it’s not something which I see spreading like wildfire. It would be very specific and restricted only to beach hotels.
“Abu Dhabi is a pure business [destination] so it would be very difficult to have an all-inclusive offering there. If you are on a beach resort and doing pure leisure holidays then maybe, but it’s something a hotel would have to be looking into very deeply as to how that will affect overall food and beverage.
When you are talking all-inclusive, more often than not you are talking discounted revenue on food and beverage.”
Rene Camilleri, director of global sales, Starwood Hotels & Resorts in the Middle East.