From Secluded Retreats to Investment Goldmines: The Rise of Luxury Resorts

In the pre-pandemic era, resorts were a niche interest—akin to mastering one-handed backflips. They fascinated a few but left mainstream hotel investors perplexed. Resorts were often dismissed as relics of package holidays with limited cultural engagement, apart from high-end brands like Aman Resorts, which occupied an exclusive market segment.

The pandemic shifted this perspective dramatically. Suddenly, having a resort-like compound became highly desirable. As travel resumed, the appeal of resorts has persisted, and the trend is set to continue.

The evolution began before 2020 with NH Hotels’ 2018 partnership with Apple Leisure Group to introduce AMResorts’ brands to Europe, including the upscale all-inclusive Amigo. These resorts, now featuring luxury amenities like yachts and high-end experiences, have overcome the stigma associated with package holidays. Marriott, for instance, has even explored incorporating all-inclusive options within its Ritz-Carlton brand.

InterContinental Hotels also entered the fray with a long-term agreement with Iberostar Hotels & Resorts, while Hyatt expanded significantly by acquiring Apple Leisure Group for $2.7 billion in 2021, effectively doubling its resort portfolio.

This shift is not merely a pandemic blip but part of a broader, long-term strategy. Hyatt’s recent acquisition of Mr & Mrs Smith highlights its commitment to luxury, lifestyle, and resort hotels, which now constitute over 40% of its portfolio. Similarly, Accor plans to open more than 1,200 hotels in the next five years, boosting its resort count by over 20%.

Marriott’s strategic licensing deal with MGM Resorts, covering 40,000 rooms in key U.S. markets, emphasizes its focus on expanding its resort offerings. Carlton Ervin, Marriott’s Global Development Officer, highlighted the group’s growth in all-inclusive resorts, noting that Marriott is a leading operator in this segment globally.

In a significant move, Singapore’s sovereign wealth fund GIC has acquired a 35% stake in Hotel Investment Partners (HIP), which owns resorts in Southern Europe. This investment, alongside Blackstone’s majority share, aims to transform the hotel landscape in the region.

For investors, managing high-end resorts presents unique challenges. Loyalty programs, while beneficial for brand engagement, often negatively impact profit margins as rewards are typically redeemed in resort locations where rates are lower. Additionally, the wear and tear from natural elements require higher capital expenditure for maintenance compared to city hotels.

Ultimately, the resort sector is now in a competitive race to offer exceptional, experience-driven stays. The focus is on delivering personalized, unique experiences that go beyond traditional amenities, demanding expert management to meet the evolving expectations of guests and owners alike.