The tide may be turning for all-inclusive resorts.
After several years of breakneck growth and booming demand, the sector is beginning to show signs of a slowdown.
"The all-inclusive market is reaching a plateau," said Geoff Millar, co-owner of Phoenix-area agency Ultimate All-Inclusive Travel and Ultimate Hawaii Vacations, which does a significant business with all-inclusives. "And I think one big reason is simply cost. During the boom of the last few years, these resorts have drastically raised their rates."
According to Millar, prices at many all-inclusives have nearly doubled over the past year or two, with this upward shift undermining the value-for-money appeal that once defined all-inclusive vacations. As a result, some all-inclusive loyalists are starting to consider alternatives.
"It's reaching a point now where clients are saying, 'I can explore other vacation options,'" he said. "They're realizing they can get a nice European vacation for the same price it's going to cost them to go to an all-inclusive."
At the same time, Millar added, competition within the all-inclusive sector is at an all-time high, thanks to a recent influx of entrants and development activity.
"I think the all-inclusive resorts are going to have to start adjusting their pricing, because people are still traveling, but they're just not going all-inclusive like they were before," he said. "We're not seeing it at the very upper end, but the middle class and the family market are now more conscious of what they're spending and what they're getting for their money."
Some all-inclusive operators are also seeing demand growth start to level off.
Hyatt reported some pullback within the segment during the company's Q2 earnings call in August, with CEO Mark Hoplamazian citing a "return to prepandemic seasonality" in Mexico and the Caribbean.
Hyatt's Inclusive Collection has more than 100 all-inclusive resorts across Mexico, the Caribbean, Central America and Europe.
According to Hyatt CFO Joan Bottarini, Hyatt's Inclusive Collection enjoyed "a really strong" first quarter with double-digit net package RevPAR. That was followed, however, by a far more modest 3% increase in net package RevPAR for the second quarter. (Hyatt defines net package RevPAR as including revenue derived from the sale of package revenue comprising rooms revenue, food and beverage and entertainment.)
In the Americas, Hyatt saw the Inclusive Collection's net package RevPAR eke out just 2% growth for the quarter.
Sandals Resorts International also has noticed a shift back to more normalized demand trends across its Sandals and Beaches brands.
"Like many in the travel industry, our brands experienced a meteoric rise in bookings post-Covid," said Adam Stewart, executive chairman of Sandals Resorts International.
"While the demand for travel remains robust, we are indeed observing a normalization in booking patterns," he added. "The feverish pace we saw immediately post-pandemic has evolved into a more measured, albeit still strong, flow of reservations. This shift reflects a return to more traditional booking behaviors, where guests are planning their vacations further in advance and with greater consideration."
The same holds true for Grupo Xcaret, which operates the Hotel Xcaret Mexico, Hotel Xcaret Arte and the ultraluxe La Casa de la Playa all-inclusives along Mexico's Riviera Maya.
Rodrigo Motavelazco
"Growth is still happening; however, we are seeing a more challenging environment," said Rodrigo Motavelazco, sales director for Hoteles Xcaret. "We understand that the years to come are going to represent a bigger challenge for us and everyone in the destination [as we see] a little bit of decrease in demand."
Motavelazco added that Mexico's resorts are up against stiff competition in other all-inclusive-heavy markets like the Dominican Republic and Jamaica, but he remained optimistic, asserting that Grupo Xcaret's properties are well positioned to continue capturing outsize market share.
"We are confident as well as thankful to all the agents and tour operators, because we are seeing good numbers this year," said Motavelazco.
That positive outlook is reflected in Grupo Xcaret's expansion plans, which will include the addition of 900 guestrooms to their flagship Hotel Xcaret Mexico resort by fall 2025. That move will double the property's room count.
Amid a broader pullback 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, N.Y., hasn't seen her all-inclusive business slacken this year, which she credits in part to robust group demand.
"I personally haven't seen a slowdown, because I send a lot of groups -- pickleball groups, in particular -- to Club Med," said Dziegiel, who also does brisk business planning all-inclusive travel for jiujitsu groups and large, multigenerational family groups.
"Club Med is also at a lower price point compared to some other brands," Dziegiel added. "And while they have come up in pricing a bit, they haven't, from my experience, doubled or tripled in price. And I also find that when people go to one Club Med, they want to experience other Club Meds."
Club Med's presence in the all-inclusive ski vacation space, Dziegiel said, has also been a key differentiator.
"I have ski groups that go to Club Med every year in France, because it's all-inclusive," she said. "They can get airlift, food, drinks and also ski for less than it would cost them to go to Aspen."