By Guy Britton
No Caribbean hotel company is growing faster right now than this one: AMResorts. The Apple Leisure Group subsidiary signed 17 new resort management contracts in 2015, easily the most of any company in the region. And now the company is primed for even more aggressive growth, with plans to open nine new resorts this year. To learn more about the company and its unique ability to transform Caribbean hotels, we talked to Javier Coll, executive vice president and chief strategy officer of Apple Leisure Group.
Explain the unique structure of Apple Leisure Group and the integration of Apple Vacations and AMResorts.
Apple Leisure Group is the nation’s only vertically integrated hospitality company, and it is this business model that truly sets us apart. We are comprised of six subsidiaries: Apple Vacations®, the world’s largest tour operator to Mexico and the Dominican Republic; Travel Impressions®, a prominent U.S. wholesaler possessing an extensive global portfolio; CheapCaribbean.com®, a popular online travel agency specializing in luxury vacation packages and resort accommodations in Mexico and the Caribbean; AMResorts®, provider of marketing and brand management services to six luxury resort brands; Amstar DMC®, a destination management company offering premium airport transfers, tours and excursions; and Unlimited Vacation Club®, AMResorts’ popular guest loyalty program for discerning travelers who expect the very best in a vacation experience.
Each subsidiary brings its own strengths and opportunities to the table, and collectively give the company as a whole the power necessary to continue growing and maintaining its competitiveness within the market. Apple Vacations and AMResorts actually pre-date Apple Leisure Group but were the first two companies to join under the holding company when it was formed in 2013. Through AMResorts, we have been able to carve out our own path within the all-inclusive space and quickly became North America’s fastest growing luxury leisure resort company. Moreover, the integration of Apple Vacations seemed natural and beneficial given that it carries more vacationers to Mexico and the Dominican Republic than any tour operator worldwide. Apple Vacations is also among the nation’s largest tour operators to the Caribbean, Mexico and Costa Rica – areas in which we have various AMResorts properties.
Our vertically integrated business model enables us to send close to 2 million passengers to Mexico and the Caribbean, which provides unparalleled value for Mexican, South America and Caribbean investors. Our focus on the North American traveler has translated into a stronger return for investors as well, since this market has better room rates and higher ancillary revenue compared to Europeans and Canadians. We are able to support this growing group through the highest levels of operations, and our recognizable brands.
Tell us a bit about your newest projects and what’s on the horizon for AMResorts.
Last month we announced our first signed resort brand management deal in Puerto Rico – Dreams® Puerto Rico Resort & Spa. It is scheduled to open October 2018 and will bring the family-friendly brand’s signature Unlimited–Luxury® concept, where everything is included, to the island. Puerto Rico’s strong airlift, no passport requirements and rich natural beauty have consistently made the island a popular choice for U.S. travelers.
We’ve also had several openings recently, including Secrets® Playa Bonita Panama Resort & Spa in January. We recently met with Panama’s Minister of Tourism, Gustavo Him, at the property. We believe the country has great promise and would love the opportunity to grow our footprint within the destination while simultaneously exploring the opportunities to bolster Panama’s tourism sector and help increase the number of visitors each year.
We have continued to grow our footprint in the Caribbean with the opening of Secrets® Papagayo Costa Rica, Secrets Akumal Riviera Maya, and, just this past February, we welcomed Sunscape® Puerto Plata Dominican Republic.
We will open another 9 resorts in 2016:
Breathless® Riviera Cancun Resort & Spa (May 2016)
Dreams® Dominicus La Romana (October 2016)
Now® Onyx Punta Cana (November 2016)
Secrets® Cap Cana Resort & Spa (November 2016)
Dreams® Playa Mujeres Golf & Spa Resort (November 2016)
Breathless® Montego Bay Resort & Spa (December 2016)
Sunscape® Dominican Beach Punta Cana (December 2016)
Sunscape® Bávaro Beach Punta Cana (December 2016)
Zoetry® Montego Bay Jamaica (December 2016)
In previous interviews you have mentioned the importance of investment incentives to encourage tourism development. What are some key incentives?
Incentives are imperative to promoting tourism in a destination, and it is something we are seeing more of in the Caribbean. Each country has their own specific set of incentives that hoteliers should become familiar with, whether they are looking to open a new property or rebrand.
A great example of an incentive encouraging tourism development can be found in the Dominican Republic. It’s called the “ley de incentivo turistico,” which translates to the law to incentivize tourism, and it focuses on areas in need of development. The law declares the following exempt for projects related to tourism: income tax for 10 years, transfer tax, real estate taxes, withholding tax in the case of foreign financing, and import tax related to initial FF&E. Any individual investing in a tourism project will also be able to deduct their investments on their tax return.
What are some key factors to consider incorporating independent hotels into the AMResorts portfolio?
We work closely with owners to ensure that the unique identity of each property is maintained while incorporating our brand standards to ensure a consistent and enjoyable experience every time for our guests. Additionally, we offer independent owners a unique value proposition through our vertically integrated business model. Our distribution channels send close to 2 million passengers to the Caribbean and Mexico annually, which is a major advantage for an independent hotelier joining our portfolio. There is no other hospitality company in the United States that can offer this to investors.
What is AMResorts outlook for redevelopment projects. How much opportunity and need is there for redevelopment in the Caribbean?
Rebrandings compared to new developments usually happen in cycle, and we believe we are heading into a redevelopment cycle. The reason for this is that rates are dropping due to the Canadian market struggling with the lower exchange rate. This is forcing some hotels to drop their rates to attract the American market to compensate for the lack of Canadian guests. Also, land is getting very expensive, which forces investors to look for hotels instead of land. This change in cycles will not happen overnight and we anticipate that over the next few years we will see more hotels struggling. They will then look for better management companies to improve their returns and rebrand.
In my opinion, there are two different Caribbeans. The first one is growing and is attractive to investors, who can get good returns on their investments as labor costs are reasonable and energy is inexpensive. The government is also helping with tax incentives and favorable labor laws. Increasing investment also translates to growing interest from airlines, financial institutions and other relevant businesses, all of which creates a positive spiral of growth and opportunity.
There is another Caribbean, however, where the costs are high and incentives are not in place. There are even come countries that are against the all-inclusive model altogether, which in my opinion is close to saying you are against the leisure market itself. Politicians do not want to lose voter support and choose not to enforce measures that will help them compete against “the other Caribbean.” This makes it difficult for investors and developers to invest in certain countries under these circumstances.
In many of your properties you offer a select or preferred sections creating a higher level of service. Is this a trend that will see growth in the future?
Guests of AMResorts’ properties can choose to upgrade their experience be opting to stay in the Preferred Club at Secrets®, Dreams®, and Now® Resorts & Spas, xhale Club at Breathless® Resorts & Spas or the Sun Club at Sunscape® Resorts & Spas. This is just one of the ways that we try to customize the guest experience by offering as many options as we can.
By choosing this upgrade, guests will receive enhanced amenities, access to a private area for check-in and check-out as well as a lounge, and accommodations in premium locations. This is how we are able to appeal to a wide variety of guests. For example, there will always be those that are more interested in the beach, pool or restaurants than the guestroom. Yet, others see everything as important. By creating different categories within the hotel we are able to please all of our guests both from a financial point of view and from a product perspective.
These areas are an important component of our resorts, and we will continue to incorporate them into future properties.
Recently there has been a lot of press about direct bookings and the increased focus on direct bookings from companies like Marriott and Hilton and Choice. Where will that trend be in 5 years?
Direct bookings are certainly much more important for companies like the ones you mentioned because many of their hotels are urban and brands are more of a commodity. When it comes to leisure hotels, however, it is very different.
The majority of leisure travelers still book using a travel agent. These guests have questions they want answered by either an in-person agent or a knowledgeable phone agent. There are also guests who prefer to book their vacation as a package, including airfare and transfers to and from the resorts. This makes working through a travel agent or OTA especially appealing since they can offer guests special discounts that would not be available through direct bookings.
We have seen our direct bookings increase over the last few years, but mainly within our existing customer base. These guests know the destination and the hotel, so they feel comfortable booking directly.
Airbnb and HomeAway have become significant to the travel industry worldwide. What is the impact in the Caribbean and what is being done about it?
To be clear, hotels have had this type of competitor for decades—take for example, Wyndham. Wyndham Worldwide owns one of the oldest vacation rental brands—the British Hoseasons, (founded in 1940). Airbnb is just a new competitor, and in the competition for leisure travelers, hotels have the upper hand. In general, the vacation rental market is more resilient to global economic downturns than the hotel industry because it is not dependent on business travelers like the hotel industry. There may even be some substitution effect with leisure travelers looking for less expensive accommodation options during times of economic distress, but when it comes to traveling for leisure to a foreign country, and especially to a beach destination, vacation rentals have a long way to go.
In my opinion, the impact will be good for and proportional to the size of each market. For example, we have four or five major Caribbean markets, including Cancun/Riviera Maya, Punta Cana, Jamaica and Cuba. There are more tourists, flights and hotel rooms in these destinations than in any other, and there will be more customers for Airbnb and HomeAway in these destinations than any other.
In general, I am in favor of giving the customer what he or she wants and accommodating market trends. However, it is critical that we all work together on an even playing field, with regulations and taxes applied uniformly to everyone. This is where the challenge exists, because how can this approach be successfully implemented in a region where tourism is often relegated to the second or third tier of the government’s policy agenda?
Can you give your view of recent and likely future developments in Cuba?
Currently, U.S. hotel brands looking to make a move into Cuba will set-up shop in Havana and will most likely enter the market by offering management contracts – like Starwood Hotels & Resorts has demonstrated – to re-flag and manage existing hotels in Havana. However, once Congress decides to lift the economic embargo it has over Cuba and travel for pure leisure is allowed, we’ll start seeing a shift of re-flagged properties move from Havana into the beach areas.
Lifting the embargo makes sense in today’s world and it’s good for both the U.S. and Cuba. Of course, this will take some time to happen. While the specifics are different a good example to look at is what happened in Germany, as it shows what aligned policies and the support of a powerful nation can do for a country that has been isolated.
The Cuban government sees tourism as a strategic sector for the country’s economy. Cuban tourism authorities are working with foreign investors to develop and improve the country’s tourism infrastructure. They want to reinforce the national hotel supply and increase its capacity from 63,000 rooms to 85,000 rooms over the next five years. Cuba counts on these investments to develop infrastructure such as golf courses and resorts to accommodate the increasing numbers of visitors to their shores.
How is AMResorts applying new consumer technology at resorts?
Within participating AMResorts properties, we currently provide our guests the Unlimited Connectivity app, which offers free calling to the U.S., Canada and local land lines, free WiFi throughout the resort, plus the ability to view the daily activity calendar, make a spa appointment, and access dining menus, restaurant times and more. This is all included within the daily rate. We launched Unlimited Connectivity because we know our guests want to have the same access to technology that they enjoy at home.
What’s being done on your properties to prevent the spread of Zika?
At AMResorts, the health and safety of our guests is a top priority. At our properties, we’re reinforcing fumigation procedures by providing insect repellant at no charge in each guest room, collaborating with both housekeeping and minibar staff to ensure doors are kept closed at all times, and ensuring there is no standing water areas in our hotels.
We are also being even more communicative with our guests than usual. We are using direct communication, as well as providing our travel agent partners, hotel employees and others, with the information they need to educate our guests on the measures being taken.