Back in the days of yore – or, for those who measure time this way – pre-pandemic, resorts were something of a specialist interest. Similar to learning one-handed backflips in your free time. You could see how it was fun, but the main hotel investors didn’t understand it and couldn’t really see the point. Why not learn something you could actually use, like a business hotel? And fewer complexities to boot.

The consumer also had mixed emotions about resorts. They were seen as one step along from package holidays. Was there any culture to be had? Were you even allowed off the compound? The exception to this was the ultra-high-end realm of Aman Resorts, but that occupied a very specific niche where few mortals trod.

That all changed during the pandemic, where having a compound became a very good thing to have indeed, and even now, with travel volumes returning to normal, the thrill hasn’t worn off.

The evolution was well underway before 2020, led by groups such as NH Hotels, which in 2018 signed an agreement with Apple Leisure Group to bring AMResorts’  brands to Europe, including its all-inclusive Amigo flag.

All-inclusive came with the same wariness as package holidays, but with strong branding and a move upscale, led by the expertise honed by properties in the Caribbean, they have been gaining traction. They now come with yachts, luxury experiences and high-end amenities, all backed by the reassurance that you pay once and you’re done. Marriott CEO Anthony Capuano has even spoken of all-inclusive at the Ritz Carlton brand.

Marriott isn’t alone. InterContinental Hotels announced a long-term agreement with Iberostar Hotels & Resorts, and Hyatt scooped up Apple Leisure Group – remember them – in 2021 for $2.7bn. The deal saw Hyatt double its global resort footprint through the addition of ALG’s 100-strong AMR Collection brand portfolio.

Unlike renting out rooms to housebound workers looking to get away from their noisy family and flatmates for a few hours, this is a pandemic trend which has entered long-term strategies. Even while it was announcing the return of corporate travel earlier this year, Hyatt completed the acquisition of Mr & Mrs Smith and reported that luxury, lifestyle, and resort hotels now made up over 40% of its portfolio.

In June, Accor announced plans to open more than 1,200 hotels in the next five years, increasing the number of its resorts by more than one-fifth.

That was followed by Marriott’s strategic licensing agreement with MGM Resorts, which encompasses 40,000 rooms in Las Vegas and five other key US markets and would, the group said: “bring us new customers and a host of new experiences that complement Marriott Bonvoy Moments”.

At the company’s security analyst meeting at the end of September, Carlton Ervin, Global Development Officer International at Marriott, told the assembled: “We are the undisputed leader in terms of open resorts around the world. Since this group last met, we’ve signed 15,000 additional rooms of all-inclusive, which shows you how important that is to us. And that’s a really intriguing segment for us for growth. We are the number two upper upscale and luxury all-inclusive operator in the world. And while we are not resting on our luxury laurels, we certainly don’t intend to rest on our leisure laurels.” Ervin went on to talk about the group’s EMEA ambitions, a region which is widely felt to be underrepresented by resorts.

Most recently, Singapore’s sovereign wealth fund GIC has invested in a 35% stake in Hotel Investment Partners, which owns resort hotels in Southern Europe. Blackstone will remain the majority shareholder. “The partners’ cumulative size, scale and capital will bolster our ability to continue the transformation of the hotel landscape in Southern Europe,” said Alejandro Hernández-Puértolas, founder & CEO, HIP.

We have asset-managed many luxury beach resorts across the oceans, from Bali to Bora Bora or Ibiza, and there are often common issues specific to high-end resorts that investors should be aware of and shouldn’t be underestimated. Let’s take two typical examples:

Firstly, apart from being very opaque, the loyalty programmes of certain hotel brands can be very detrimental to the profit margin. By nature, the redeemed points are nearly always used at holiday destinations, and we have many examples when the average rates are always lower at resorts with strong reward programmes. Furthermore, the loyalty programme doesn’t necessarily attract the right customers to your hotel; often, they won’t have the same spending power as a client who is paying the full rate.

All of this will negatively impact the profitability of the hotel. Therefore, this issue should be taken into consideration before selecting an operator. If your resort is already branded, we would recommend that the hotel asset managers carefully monitor the production of the loyalty programme and challenge the source of your customers to avoid paying high commission fees, especially during the high seasons.

Secondly, due to the nature of the location, the elements damage the buildings more rapidly, so additional CapEx spending is often required versus your traditional city hotel. Furthermore, hotel owners need to keep a close eye on the preventive maintenance undertaken by the operator.

Much as we have seen in the traditional luxury segment, we are now in a race to offer ever-more remarkable stays in resorts. Stays must be experience-driven, underpinned with the very best of what a hotel can offer, with moments of surprise and a constant anticipation of what the guest wants. It is a far remove from the traditional image of a resort, with a pool, kid’s club and performance by a local dance troupe in the evening. Delivering this requires expert knowledge or the risk of disappointment from guests and owners alike.