All risks included?
As one of the world’s biggest tour operators boards a seemingly unstoppable industry bandwagon by making one of its favourite brands all-inclusive, what does the boom in these all-in resort packages imply for the travel insurance sector? Robin Gauldie investigates
First published in ITIJ 127, August 2011
As one of the world’s biggest tour operators boards a seemingly unstoppable industry bandwagon by making one of its favourite brands all-inclusive, what does the boom in these all-in resort packages imply for the travel insurance sector? Robin Gauldie investigates
Born in Jamaica almost 30 years ago, the all-inclusive concept has expanded from there to other Caribbean isles, and to destinations in Mexico, the Pacific, the Mediterranean, the Red Sea and the Indian Ocean. Security and peace of mind are big selling points, and are coupled now with value for money and ease of holiday budgeting.
But does this sense of security within a cosy cocoon where all needs are provided for – plus the temptations of a virtually round-the-clock booze and fun culture – actually create issues or opportunities for travel insurers?
According to the 2010 Consumer Trends survey carried out for the Association of British Travel Agents (ABTA), 19 per cent of UK holidaymakers fail to buy travel insurance. But some all-inclusive resorts are not as squeaky clean as they claim to be, leading to a growing ‘compensation culture’ from clients who become ill or are injured within the resort.
Might all-inclusive clients who believe that they will be vacationing in a risk-free environment be even less likely than most holidaymakers to take out adequate cover? Sean Tipton, ABTA senior press officer, thinks the reverse is true. “As with all other package holidays, tour operators selling inclusives do insist that clients have travel insurance,” he points out. Tipton suggests that because most all-inclusive clients buy the whole package through a tour operator – who must insist that they have some form of travel cover – they may actually be more likely to be adequately insured than independent travellers.
operating costs are squeezed, and in some places quality, health and safety are at risk of being compromised
According to Gordon ‘Butch’ Stewart, founder of the Sandals luxury all-inclusive empire and self-styled ‘King of the All Inclusives’: “The winning formula is to find out what people want, give it to them, and exceed their expectations.” It’s a concept that in these cash-strapped times is capturing more hearts and minds than ever before: pay one all-inclusive price for your flights, accommodation, food, drink, activities and entertainment and you won’t need to spend another cent throughout your stay.
But, seductive as it seems, the all-inclusive concept has its special risks and not all its operators manage to make Stewart’s ‘winning formula’ work for them or their guests.
Sold on value for money, there is relentless pressure on tour operators to keep prices down. That pressure is passed on to the resorts, which contract their beds to holiday companies. Inevitably, operating costs are squeezed, and in some places quality, health and safety are at risk of being compromised. Some popular all-inclusive destinations have become bywords for claims for compensation after outbreaks of food poisoning, salmonella and other infections. The Dominican Republic, for example, where tourism is overwhelming dominated by the all-inclusive sector, has struggled for years to throw off a reputation for such outbreaks.
Around the world, standards of medical care for all-inclusive clients vary widely between brands and destinations. SuperClubs, one of the biggest names in the Caribbean with brands including Breezes, Grand Lido and Hedonism, boasts registered nurses at all resorts during regular office hours, with a qualified MD on call 24 hours daily.
To date, most all-inclusive resorts have grown up in destinations that have an adequate standard of emergency healthcare by international standards. All inclusive resort developers generally choose to build not at remote locations, but on sites close to or within existing resort areas, so they have access to medical emergency and evacuation facilities that is as good as access to those facilities from conventional resort hotels. In many cases, medevac access may be even better, as many upscale all-inclusives have their own helipad.
‘Ambulance chasers’
Meanwhile, the growth of the all-inclusive sector has been paralleled by a mini-boom in the number of law practices offering ‘no win, no fee’ legal actions in pursuit of compensation payments for everything from ‘holiday tummy’ to watersports accidents.
“The Dominican Republic is often sold as a luxury Caribbean destination, but the experience of tourists in recent years has shown that standards of health and safety are often sadly lacking,” says Andrew Morton, a specialist holiday claims solicitor at international law firm Pannone.
Egypt is another popular destination where all-inclusive resorts have blossomed (accounting for 78 per cent of bookings from the UK last year), with a concomitant increase in compensation claims, Morton adds.
In 2008 and 2009 and again in 2010, Pannone was instructed in group actions against one Egyptian all-inclusive, the Movenpick Resort Taba, from guests who suffered food poisoning symptoms, he says. In April 2011, another holiday claims legal practice, Simpson Millar Solicitors, said it had been instructed by clients returning from the Holiday Village Turkey in the resort of Sarigerme after a food poisoning outbreak caused by the salmonella bacterium (salmonellosis).
From the ambulance-chasing lawyer’s point of view, all-inclusive resorts are sitting ducks. Selling safety, security and value for money, they implicitly lay themselves open if they fail to provide any of these. “They do tend to be a more attractive target for ambulance chasers just because of the sheer numbers of people they serve,” says ABTA’s Sean Tipton.
Since guests rarely leave the property, it is harder for them to shift the blame for outbreaks of illnesses related to poor food hygiene standard – a tactic that has often been used to attempt to deny compensation claims.
“Salmonella food poisoning is not caused by over-indulgence of food, climate change, heat or an airborne virus, and any advice given to the contrary would be irresponsible,” notes Simpson Millar’s holiday illness claims supervisor, Simon Lomax, on the firm’s web site.
The Holiday Village Turkey is one of the all-inclusive resorts in the portfolio of First Choice, one of the UK brands of the German-owned TUI group, and Lomax says Simpson Millar has also handled compensation claims relating to other First Choice Holiday Villages in Rhodes, Egypt and Spain.
First Choice is the first major British tour operator brand to commit itself completely to selling all-inclusive holidays
But these and other claims from its all-inclusive clients have not deterred TUI – which also owns the UK’s largest tour operator, Thomson – from re-branding First Choice as a purely all-inclusive brand in its 2012 programme.
Around 68 per cent of holidays in the company’s existing 2011 programme are all-inclusive packages, and highly publicised compensation cases do not seem to have deterred potential clients. The all-inclusive sector within the British holiday market has grown by 32 per cent since 2004. According to travel industry analyst GfK Ascent, all-inclusive packages now account for 37 per cent of UK package holiday sales, and bookings last summer (2010) were up 21 per cent compared with a lacklustre three per cent for the rest of the holiday business.
First Choice is the first major British tour operator brand to commit itself completely to selling all-inclusive holidays, says Johan Lundgren, TUI’s UK and Ireland managing director, who describes the move as ‘a major travel industry milestone’. “All-inclusive is becoming the holiday of choice for many British consumers, but to date no mainstream holiday company has offered a complete all-inclusive portfolio,” Lundgren says.
Could it even be argued that – by fostering an in-resort, 24-hour holiday drinking culture – all-inclusive operators could share some of the blame for alcohol-related illness and injury?
“Our members’ advice to consumers would always be ‘don’t do anything you wouldn’t do at home’,” says Rachael Sharrocks, press officer at the Association of British Insurers. She points out too that travel insurance providers routinely caution clients that their claim is likely to be turned down if it results from over-consumption of alcohol or use of drugs. But for many, binge drinking and the opportunity to sample experiences that wouldn’t try at home are major selling points of an all-inclusive package.
For adults only
Hedonism II, for example – an all-inclusive, adults-only pioneer since its launch almost 30 years ago – invites its clients to ‘shed your inhibitions and join a party on the nude beach’ and cites its ‘non-judgmental attitude’ as major part of its attraction.
Back when all-inclusive was still in its infancy, I listened to the general manager of a Jamaican all-inclusive resort as he lamented the ability of his British guests to soak up the booze, day after day … after day.
“The Americans come down for a long weekend, maybe three or four nights,” he said. “The first night, they make the most of the free bar, and they order their favourite drinks.
“The next morning, they wake up with a hangover and for the rest of the time they mostly order soft drinks, maybe a beer with lunch or a glass of wine with dinner. During the day they use all the free activities and watersports. They don’t want to be so messed up that they can’t go waterskiing or windsurfing.” He added: “But you Brits? You get off the transfer bus from the airport, you go straight to the bar, and you drink everything in sight until you can’t drink any more. Next day, you wake up and do it all over again, starting with a Bloody Mary for breakfast and ending up with tequila slammers at four in the morning. And some of them do that for two whole weeks.”
Activities such as jet-skiing are not usually on the all-inclusive menu. But most all-inclusive resorts offer them as paid-for extra, provided on-site by the resort’s favoured sub-contractor. Clients who intend to use such facilities should read the small print, say insurers, as most resorts decline responsibility for such optional extras.
"Could it even be argued that – by fostering an in-resort, 24-hour holiday drinking culture – all-inclusive operators could share some of the blame for alcohol-related illness and injury?"
The French-owned Club Méditerranée is often credited with pioneering the all-in concept as early as the 1950s. But Club Med™’s original product – while innovative in its day – fell short of being truly all-inclusive. All meals, and a modicum of wine or beer with lunch and dinner, were included in the package price, along with a range of sports and activities. But guests who wanted more than their allotted ration of mealtime drinks had to pay extra – not with cash, but with Club Med’s own plastic bead currency. Club Med, however, has come a long way from the simple thatched huts of its first resorts. The company is increasingly focusing on its upscale resorts, while disposing of – or upgrading – resorts that no longer match its upmarket standards. First quarter 2011 revenue was up by 9.5 per cent, the company reported, with 21,000 additional customers compared with first quarter 2010 – and the bar is now open all day, with drinks included in the package.
No problem?
The true all-inclusive resort product was born and came of age in Jamaica and the Caribbean in the 1980s, at a time when safety and security were major issues for the island’s tourism industry.
The slogan: “Jamaica: no problem” had been created for the Jamaica Tourist Board by a blue-chip Madison Avenue agency advertising to revive the destination’s flagging tourism. The reality, however, was that Jamaica did have problems, and they would not be resolved by mere slogans. Violent crime, often drug-related, spilled out from the ‘yards’ of ghetto areas to impact on the artificial tourist idylls of resorts such as Ocho Rios, Montego Bay and Negril.
Turning disaster into opportunity, Jamaican entrepreneurs such as Gordon ‘Butch’ Stewart and John Issa launched, then fine-tuned, the all-inclusive concept with properties such as Sandals, which opened in 1981, and Hedonism II, which opened the following year.
The key selling point, initially, was security. This was Jamaica ‘lite’ – all the sun, fun, sea and sand with no need to step outside the discreetly camouflaged chain-link fence of the compound. Though most operators would deny it, staff at some more relaxed resorts would even discreetly supply small quantities of Jamaica’s best-known herb – the only transaction which required cash to change hands.
Hedonism II, which opened in 1982, outside Negril, on the island’s west coast, quickly became a legend for an ‘anything goes’ attitude to 24-hour partying, allowing its middle-aged clients to relive their permissive youth, if only for a few days. Even the cigarettes were free – though that is apparently a thing of the past.
‘Hed II’ was soon followed by a wave of emulators, which tapped into demand for a less rowdy and more sophisticated all-inclusive products. The all-inclusive sector rapidly diversified, with brands calculated to appeal to singles, couples, families and child-free adults. As the all-inclusive concept expands and diversifies into new markets and new destinations, travel insurers may be well advised to look closely at the implications.