How Do All Inclusives Make Money

There is something about all inclusive holidays that makes most people giddy with excitement. The thought that you can arrive at a beautiful beach resort and eat and drink as much as you want for "free" sounds too good to be true. However, is it a good deal? Are you getting value for your money? In this blog, I am going to explore why all inclusive resorts seem like a great choice for a holiday. However, more importantly, I am going to outline how all inclusive vacations are expensive and may be a waste of money.

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What Are All Inclusive Resorts?

There isn't one kind of all inclusive holiday. Every single resort or travel operator can offer its own deal with a list of what is and is not included. However, for the purposes of this article, I am going to talk about what would generally be included at an all inclusive beach holiday in Mexico. Out of all the countries in the world that I have visited (and that is currently around 65), Mexico is the king of all inclusive holidays. In fact, in certain locations in Mexico, it is sometimes hard to find a resort that isn't all inclusive!

What Do You Get At An All Inclusive Beach Resort?

What are all inclusive holidays? In particular, what can you expect at an all inclusive beach resort in Mexico?

First of all, before you arrive, you would be required to pay the full price of your vacation. Normally, this would also include all gratuities. After that, you would be entitled to have:

a hotel room with daily housekeeping;
free use of all of the facilities, such as the pool, gym, lounge chairs at the beach or the pool, ping pong, shuffle board, and so on;
many complimentary classes and activities, such as yoga, pool games, beach volleyball or soccer, crafts; and
lots of entertainment, such as a DJ or live music by the pool, organized games or competitions, nightly singing, dancing or comedy shows.

all inclusive vacations — Throwing water balloons for a beach game at the all inclusive resort.

In addition, you would typically have 24 hour access to "free":

tea, coffee, soda and juice;
alcohol; and .
food.

Limitations To "Free" Food, Alcohol And Activities On All Inclusive Holidays

This does not mean that there aren't extra costs or limitations at all inclusive resorts.

Food at all inclusive resorts

Food is mostly served by buffet at all inclusive resorts. You may be able to separately book a la carte dinner service at specialty restaurants on site (like an Italian or French restaurant), but you will either be limited to 2-3 per week or will be obligated to pay extra. During high season, you may need to make dinner reservations days or sometimes weeks in advance of your arrival depending on the number and popularity of the restaurants included.

Alcohol on all inclusive holidays

"Top shelf" alcohol and a wide selection of wines are not normally included at all inclusive resorts. Each resort will have a list of labels or wines that are available, and others that can be separately purchased. For example, I like to drink gin and tonic. Hendrick's Gin would be considered "top shelf" whereas Tanqueray's Gin (or something similar) would not. Accordingly, at an all inclusive resort, I would likely be offered a gin and tonic with Tanqueray's Gin, but would have to pay extra for one with Hendrick's Gin.

Some activities on all inclusive vacations

There are usually some activities that you would need to pay extra on all inclusive holidays. For example, an all inclusive resort that offers tennis may offer free group lessons, but you would have to pay extra for a private lesson. In addition, spa treatments would not normally be included and would be an additional cost.

As I said earlier, every resort has different facilities and offers different all inclusive deals. You should read carefully what is and is not included before booking any vacation.

Why All Inclusive Resorts Are Great

Over the years, I have been to around eight all inclusive resorts. Here is why they can be amazing.

1. Minimal effort is needed for all inclusive holidays.

It doesn't take too much imagination to understand why all inclusive holidays are great. With very little effort, you arrive at a resort and all of your needs are immediately met. You have access to all the food and beverages that you could possibly want. You have pools and a beach, sports and entertainment facilities, a full schedule of day and evening entertainment, and lots of employees walking around ready to bring you whatever you want. If you prefer, you never have to leave the resort for any reason.

2. All inclusive resorts are a good fit for families.

For families, all inclusive resorts offer something for every age or interest. Many all inclusive resorts have child care or kids' clubs that will either look after kids or entertain them for hours. If your child is old enough, all inclusive resorts allow kids independence and the ability to meet and play with other children from around the world. Within a safe environment, they can go from activity to activity, and even eat on their own in certain places.

3. It is easy to book all inclusive holidays

For many of us overwhelmed with family or work demands, all inclusive holidays are a wonderful treat. There is hardly anything for you to do. Once you figure out where you want to go and how to get there, the only thing left to do is to find the all inclusive resort that is right for you. I normally focus on three factors when booking all inclusive vacations:

Whether the resort has the right facilities for me and my family? For example, we like to play tennis and would prefer an all inclusive resort with tennis courts.
What level of comfort/luxury do we want and what is available?
How much do we want to pay and what can we get for our budget.

4. All Inclusive vacations feel "free"

By the time you get to your all inclusive resort, you have normally fully paid for your holiday. That means that after you check-in, you never have to pay for anything again (unless you choose to eat, drink or do things excluded from your all inclusive deal). Accordingly, there is a feeling when you are there that everything is free. Of course, it isn't. You have already paid for it. However, inexplicably, it feels like people are just giving things away and that is just fun.

5. All inclusive resorts allow you to stay on budget

It is easy to stay on budget when you book all inclusive vacations. You identify the resort that you like, the amenities they offer, and the cost that you are prepared to spend. Then, you book and you are done. There isn't a large unexpected bill to pay at the end of your holiday as long as you eat, drink and do what is included at your resort.

What Is Wrong With All Inclusive Vacations?

So at this point, I'm guessing that you totally understand why all inclusive holidays can be great. In fact, you are probably looking at your calendar right now trying to figure out when you can book your next all inclusive vacation. I agree. On its face, all inclusive resorts are wonderful and offer many benefits to travellers.

However, the problem is they are expensive relative to what you are receiving. In addition, you are likely over paying for your holiday. Finally, sometimes (not always), you are receiving worst quality food, drinks and facilities than what you would get elsewhere if it had to compete on a daily basis for your business.

1. Paying for things that you don't want on all inclusive holidays.

Think about it. When you pay your lump sum payment for the cost of your all inclusive vacation, you are paying for everything that you want to eat, drink and do, AND FOR EVERYTHING THAT YOU DON'T! If the all inclusive has a kids club or includes "free" babysitting, then a part of the cost of your holiday will include paying for the kids club or the babysitters, even if you don't have children. If your all inclusive resort has tennis courts and offers free lessons, then a part of the cost of your vacation will include paying for the upkeep of the tennis courts and for the cost of the tennis pro, even if you don't play. This is relevant for everything that is offered on an all inclusive holiday in which you have no interest.

2. Paying for waste at all inclusive resorts

All inclusive holidays encourage waste, overeating, and overindulging. Guess what?? You pay for that too.

If all inclusive resorts offer buffets all day long (as most of them do), then you are paying for the privilege of eating all day long, regardless of whether you want to or not. You may even feel like you should be eating more because you have paid for it, rather than because you are hungry.

Related to this is waste. People waste so much food when it is a buffet and there is a sense that it is "free". Why not take a huge pasta serving or a large slice of beef? Who cares if you don't like it or can't eat all of it, right? You have already paid for it. So, in other words, you are paying for more food than what you would normally eat or want, and you are paying for yours and everyone else's excesses.

3. Quality of food, drink and entertainment can be questionable at all inclusive vacations.

All inclusive resorts have a captive audience. Before you arrive, you have already paid in full for all of your meals, beverages and entertainment. Accordingly, there is little that you can do if you don't like the food or find the entertainment awful, except put up with it or leave the resort and pay for it again elsewhere.

On the flip side, if you are in a "normal" hotel and you don't like its food or entertainment, you go elsewhere. The hotel knows that and will likely work harder to make sure that what it is offering is good and at competitive prices.

We had the unfortunate experience of having terrible food and beverages on one of our all inclusive holidays many years ago. We couldn't find a buffet or a specialty restaurant in our enormous resort that offered decent food. It was so bad that after a couple of days, we left the all inclusive resort every night and went to town for dinner. Of course, we were on the hook for the cost of that meal in addition to the upfront cost of our all inclusive holiday.

In some respects, this was my fault. Prior to booking, I had read the reviews on Tripadvisor about the questionable food and beverages but I simply didn't believe it. I thought that it would be impossible that every buffet, restaurant and bar at a five star resort could be awful. Well, lesson learnt…

All Inclusive Resorts Versus "Normal" Hotels

Now, let me show you a real life example of how you overpay for all inclusive resorts.

Two years ago, we stayed at Iberostar Quetzal, a five star all inclusive beach resort in Playa Del Carmen. Essentially, it offered exactly what I described above. For one flat price, we had as much as we wanted to eat and drink, with plenty to do. We were entitled to eat at 3 speciality restaurants over the course of the week. There were free group tennis lessons, although we separately paid for private lessons. There were lot of games, sports and entertainment included all day and night.

Just a few weeks ago, we stayed at the Izla Hotel on Isla Mujeres, an island 20 minutes by ferry from Cancun. This was not an all inclusive beach resort. Instead, it was a "normal" five star luxury hotel on the beach that included breakfast each morning, use of the fitness facilities, lounge chairs and the pools. That was it.

Which did I prefer? The Izla Hotel hands done! Why? Not only was it better value but I liked the ability to pick and choose where I wanted to eat, how much I wanted to spend, and what activities I wanted to do and pay for. The hotel was full but there was plenty of room around the pool and on the beach. It was calm and relaxing.

Crunching The Numbers

How do the numbers crunch?

It would not be an accurate comparison to compare what I paid two years ago against what I paid two weeks ago. Instead, I will pick a future date – March 7 – March 14 – to figure out the current relative costs of both of these experiences. These dates are not during peak demand like Christmas but during regular high season.

A the Izla Hotel, I would pay $152.91 USD per night or $1070.37 USD for these 7 nights for a deluxe ocean view hotel room with breakfast for two people.

At the Iberostar Quetzal, I would pay $421.85 USD per night or $2953 USD for these 7 nights for an all inclusive junior suite ocean front (a comparable room to the Izla Hotel) for two people.

So the difference in cost would be $2953.00 -$1070.37 = $1882.63 USD. In other words, if I book one week at the Izla Hotel as opposed to the Iberostar Quetzal, I would pay a total of $1882.63 USD or $268.95 per day LESS!

Now to be fair, for the week, I would still have to purchase lunches and dinners for two people, plus all the non alcoholic and alcoholic beverages that we may want. If we wanted to do any activities, we would also have to pay separately for them. Would we be able to eat, drink and be entertained in Mexico for less than $268.95 USD per day?

WITHOUT QUESTION!!!!

Izla Hotel

Food and beverages

Lunch by the pool or at the restaurant at the Izla Hotel was between $8.00 – $12.00 USD. Everything was delicious!

As for alcoholic and non-alcoholic beverages at the Izla Hotel, we ordered highballs, mixed and blended drinks (margaritas and daiquiris etc.) for $6.00 USD each; Mexican beers for $3.00 USD each; and soft drinks for $2.00 USD each.

One night, we ate dinner at one of the two hotel restaurants (which was excellent). The rest of the time, we hopped into a cab for $3.00 USD – $5.00 USD each way, and ate at restaurants all over Isla Mujeres. There were dozens and dozens of excellent restaurants from which to choose. You could easily spend as little as $7.00 USD for a take out taco stand. However, that was not really our thing. Instead, every night, we had sophisticated meals with international menus. We ate exceptionally well for $25 USD per person. In addition, it was really nice that the choice was always ours.

Of course, this doesn't even take into account the following:

You may not even want lunch or dinner; and
You could purchase beer and soft drinks from a corner store for half the price. Each hotel room had its own mini-fridge.

Activities

We didn't miss any of the activities that are normally offered at an all inclusive resort. We were quite happy relaxing, reading and swimming by the pool and at the beach. One day, we did pay for a private half day snorkelling excursion at $50 USD per person. However, that would have been considered an extra at the all inclusive resort and we would have had to pay separately for that anyways.

All in all, it would have been difficult to spend half of $268.95 USD per day on food or beverages, much less anything close to $268,95 USD per day. However, whatever you do spend, it would be on exactly what you want and for the price that you are prepared to spend.

Recommendations

Whenever you are contemplating an all inclusive holiday, I would recommend trying to break down your costs to see whether you are getting value for your money. Is this all inclusive resort the deal that you really think it is? Here is how I would do it.

Pick your destination (For example, if you fly into Cancun airport, you could easily go to resorts/hotels in Cancun, Playa Del Carmen, Isla Mujeres, and more).
Identify a couple of all inclusive resorts and "normal" hotels in which you are interested. This could be for a number of reasons, all of them personal to you, such as level of comfort, the amenities that are offered, or the location.
- - Be careful, this could be an absolutely overwhelming task, especially if you are flying into somewhere like Cancun where there are countless resorts and hotels either there or a short drive/ferry away in Playa Del Carmen or Isla Mujeres. I would use booking.com and its filters to help narrow down your choices.

Booking.com

Check on TripAdvisor to make sure that the all inclusive resorts and "normal" hotels that you like have satisfactory reviews.
Find out the total cost of your stay at each of the all inclusive resorts and "normal" hotels for the dates in which you are interested. Figure out the different costs between each of the resorts and hotels.
If one is substantially more expensive than another, try to figure out whether what they offer is actually what you want versus the less expensive choices.
Finally, once you know the cost differences, you can better decide which resort or hotel works best for you, not only from a financial perspective, but also in terms of what each of them are offering for the price.

For a more thorough step by step guide to how to plan a holiday, please refer to my article Planning A Holiday: A Foolproof Guide To Easy Vacation Planning.

Conclusion

All inclusive resorts offer many advantages. With little to no effort and for a lump sum upfront payment, you arrive on your holiday with all of your food, beverages and entertainment ready for you to enjoy. However, it normally comes at a price. Contrary to popular belief, all inclusive holidays are often more expensive than staying at hotels and separately purchasing your food and drinks at restaurants and bars of your own choice. Is it worth it? Maybe….it depends on what is going on in your life and how much extra money you have for a holiday. However, for me, I would much prefer to get as much value for my money as possible. I want to eat, drink and do what I want at a fair price. For that reason, I doubt that I will ever go back to another all inclusive resort again.

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