NASDAQ:PLYA Playa Hotels & Resorts Q1 2023 Earnings Report $13.44 -0.01 (-0.04%) As of 10:21 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Playa Hotels & Resorts EPS ResultsActual EPS$0.31Consensus EPS $0.31Beat/MissMet ExpectationsOne Year Ago EPS$0.19Playa Hotels & Resorts Revenue ResultsActual Revenue$273.80 millionExpected Revenue$264.40 millionBeat/MissBeat by +$9.40 millionYoY Revenue Growth+24.70%Playa Hotels & Resorts Announcement DetailsQuarterQ1 2023Date5/5/2023TimeAfter Market ClosesConference Call DateFriday, May 5, 2023Conference Call Time11:00AM ETUpcoming EarningsPlaya Hotels & Resorts' Q1 2025 earnings is scheduled for Monday, May 5, 2025, with a conference call scheduled at 8:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Playa Hotels & Resorts Q1 2023 Earnings Call TranscriptProvided by QuartrMay 5, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to the Playa Hotels and Resorts First Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, There will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ryan Hino with the company. Operator00:00:30Please go ahead. Speaker 100:00:32Thank you very much, Vasunavi. Good morning, everyone, and welcome to Playa Hotels and Resorts' Q1 2023 earnings call. Before we begin, I'd like to remind participants that many of our comments today will be considered forward looking statements and are subject to numerous risks and uncertainties that may cause For a discussion of some of the factors that could cause our actual results to differ, please review the Risk Factors section of our quarterly report on Form 10 Q, which we filed last night with the SEC. We've updated our Investor Relations website at investors. Flyerresorts.com with today's recent releases. Speaker 100:01:15In addition, reconciliations to GAAP of the non GAAP financial measures we discuss on this call were included in yesterday's press release. On today's call, Bruce Wardinski, Playa's Chairman and Chief Executive Officer will provide comments on the Q1 demand, trends and key operational highlights. I will then address our Q1 results and our outlook. Bruce will wrap up the call with some concluding remarks before we turn it over to Q and A. With that, I'll turn the call over to Bruce. Speaker 200:01:38Great. Thanks, Ryan. Good morning, everyone, and thank you for joining us. I would like to wish everyone a happy Cinco de Mayo and say personally, I'd much rather be at one of our resorts in Mexico than in our office in Fairfax, but I hope people are enjoying it wherever they are. Our Q1 results exceeded our expectations as the momentum in our business continued through the remainder of the high season with broad based strength shown across all of our markets. Speaker 200:02:03One housekeeping item before we begin, the fundamental But before we begin the fundamental review of the quarter, we will be sunsetting comparisons to 2019 and resuming traditional year over year commentary exclusively for today's discussion. Playa's owned resort EBITDA of $109,400,000 in the Q1 was the highest in the company's history, Despite the significant negative impact from the 2 Jewel Resorts in the Dominican Republic that transitioned to Playa Management and foreign currency headwinds. The better than expected EBITDA was driven by year over year ADR growth in our legacy portfolio of nearly 17%, bringing the reported ADR growth for the quarter to approximately 27.4%. As a reminder, Our expectation was that the Q1 would represent the highest year over year ADR growth for 2023 as we lap the impact from omicron last year. Additionally, our operations teams executed extremely well at the resort level, delivering 50 basis points of Resort margin expansion on a reported basis despite an approximate 180 basis points FX drag from the appreciation of the Mexican peso. Speaker 200:03:15The core legacy portfolio resort margins excluding the jewels improved 160 basis points year over year inclusive of 180 basis point foreign currency drag. As I mentioned, fundamental strength during the quarter was broad based, With our core legacy portfolio surpassing 80% occupancy for the first time post pandemic and all geographies reporting double digit year over year ADR gains. Jamaica had another strong quarter reporting the highest year over year ADR and resort margin expansion among our segments, aided by a significant increase in MICE revenue during the Q1 as the recovery and normalization of that market continued. In Mexico, the Yucatan once again led the way on occupancy rate for Playa, while growing ADR double digits year over year. And the Pacific Coast reported its best occupancy rate during the post pandemic period as well. Speaker 200:04:12As I mentioned, Both segments were negatively impacted by the sharp move in the Mexican peso during the quarter and both would have seen improved margins year over year excluding the impact of FX. In the Dominican Republic, our legacy Doctor Resorts, Excluding the Jewel Palm Beach and Jewel Punta Cana Resorts, which we are attempting to sell, also achieved their highest occupancy rate in the post pandemic period, while driving approximately 22% year over year ADR growth, yielding nearly 300 basis points of resort margin expansion year over year. The 2 Jewel Resorts in the Doctor segment results were in line with the expectations we laid out on our last earnings call, representing an approximate €10,000,000 year over year However, we expect the profit drag from these resorts to improve during the Q2. We do not have any information to share with Back to the timing of the disposition of the 2 resorts, but hope to have more to share on that in the future. On the booking front, Demand has remained strong despite the broader macroeconomic concerns, and we have achieved our goal of increasing Playa's transient consumer direct revenue mix of bookings, excluding the Doctor. Speaker 200:05:24Jules, to at least 50% by 2023. In aggregate, during the Q1 of 2023, 51.4 percent of Playa owned and managed transient revenues booked were booked direct, up 160 basis points year over year, growing year over year for the 3rd straight quarter. During the Q1 of 2023, playaresorts.com accounted for approximately 10% of our total playa owned and managed room night bookings continuing to be a critical factor in Our customer sourcing and ADR gains. Taking a look at who is traveling, roughly 36% of the Playa owned and managed room night Stays in the quarter came from our direct channels, down 100 basis points year over year as our group mix improved significantly year over year by 4 60 basis points. Our OTA mix has remained the most depressed channel compared to pre pandemic levels. Speaker 200:06:22Geographically, the biggest change in our guest mix during the Q1 was the continued recovery of our Canadian guest mix, which was up approximately 400 basis points year over year, as well as our Mexican sourced guest mix, which was up 300 basis points. Our European sourced guest mix was down significantly again year over year, but in line with pre pandemic levels. Our Asian sourced guest mix Improved modestly year over year, but remains the most depressed as it is only approximately 75% to 80% recover. Our visibility remains a critical factor of our success as our booking window remained at just over 3 months. Once again, I would like to thank all of our associates that have continued to deliver world class service in the face of pandemic related challenges And rising operating costs. Speaker 200:07:14Their unwavering passion and dedication to service from the heart is what truly sets Playa apart. Finally, on the capital allocation front, we purchased approximately $41,000,000 worth of Playa stock during the Q1 And an additional $20,000,000 thus far in the second quarter, bringing our total repurchases since resuming our program in September 2022 to just over $107,000,000 We continue to believe that our stock provides a tremendous value relative to the fundamentals And share repurchases are a phenomenal use of capital for our free cash flow. With that, I will turn the call back over to Ryan to discuss the balance sheet And our outlook. Speaker 100:08:00Thank you, Bruce. Good morning again. I'll begin with a recap of the segment fundamentals, followed by an overview of our balance sheet and expected uses of cash and conclude with our updated outlook. Before I begin, I'd like to highlight that beginning with the Q1 of 2023, we've elected to on property room upgrade revenue from non package revenue to package revenue to be consistent with industry trends. We've recasted prior period as well to conform with the current period presentation. Speaker 100:08:29And a reconciliation of the changes made to the prior reporting for Our Q1 results exceeded our expectations as a result of higher ADR growth and easing pressure from energy costs leading to resort margin expansion of approximately 50 basis point year over year despite a nearly 180 basis point headwind from foreign exchange and a 240 basis point headwind from the 2 JUUL The Dominican Republic. The ADR strength is broad based with all segments reporting double digit year over year ADR growth excluding again the dual assets in the Doctor. As this was the 1st Q1 we've had in the post pandemic period with no significant COVID related challenges. On the cost front, I mentioned on our last earnings call, we began to see stabilization in food and beverage and utilities costs on a per unit basis in the middle of 2022, and we're hopeful that the inflationary pressure from these two areas will begin to ease as we moved into 2023 and lap the surge that occurred around the start of 2022. We began to see signs of improvement during the Q4 and that carried over into the Q1. Speaker 100:09:37Although it's nice to see some cost relief, these expenses can be volatile quarter to quarter as usual. At the segment level, Jamaica led the way in year over year ADR and occupancy growth and margin improvement. The segment experienced its highest group room night mix, Helping yield ADR and closing the gap versus other segments ADR improvement compared to the pre pandemic period. As a reminder, Jamaica got off to a slower start in 2022 due to the Omicron variant having a disproportionate impact on the segment given its COVID testing requirements at the time. On the margin front, Jamaica once again benefited from better than expected food and beverage and utilities expenses. Speaker 100:10:12Keep in mind that when comparing results in Jamaica Other segments that Jamaica generally has higher operating costs in other segments and typically experiences higher ADRs as well. Looking at our other segments, Yucatan Peninsula continued to deliver strong results with sequential occupancy improvements to a post pandemic high of almost 84% and reported year over year ADR growth of roughly 15%. Reported owned resort EBITDA margins were down slightly 20 basis points year over year, namely as a result of the 370 basis point negative impact from foreign exchange. Food and beverage and utilities expenses were favorable year over year on a currency neutral basis, while other labor costs, specifically union negotiations, negatively impacted margins. Margins were also favorably impacted by the timing Sales and marketing spend. Speaker 100:10:59The Pacific Coast had another fantastic quarter year over year with ADR improvement up 19% leading to robust Margin performance as utility expenses were less of a headwind year over year. The Pacific Coast also experienced significantly higher year over year MICE group mix, helping drive an increase in non package revenue per Sole Broom. Segment margins were negatively impacted approximately 3.50 basis points, again a result of the sharp fluctuation in the Mexican peso. In the Dominican Republic, our legacy resorts, the Hyatt Cap Cana and the Hilton La Romana grew ADR 20% year over year with occupancy of nearly 82%. Underlying non packaged revenue per sold room growth at these resorts was also stellar due to a higher mix of MICE groups. Speaker 100:11:44As a reminder, we reported our Hilton and Hyatt properties a bit ahead of schedule following the disruption in the Q4 related to Hurricane Fiona, just in time for the high season. The fundamental improvement year over year yet led to resort margins at these resorts approaching 50%. As food and beverage and utilities expense pressure eased on a year over year basis compared to the Q4. The segment performance was dragged down by the 2 Jewel properties we recently assumed management of, though the performance was in line with our expectations. We continue to expect the performance of these 2 jewels to improve sequentially next quarter, while we execute the sale process of the resorts. Speaker 100:12:19Turning to our MICE Group business. Our 2023 net MICE Group business on the books Approximately $55,000,000 versus $50,000,000 at the time of our last earnings call and is well ahead of our final full year 2019 MICE revenue of 32,000,000 Looking ahead to 2024, we currently have $29,000,000 of rice revenue on the books, well ahead of where we were at the same time last year. Finally, turning to the balance sheet. We finished the quarter with a total cash balance of approximately $282,000,000 and total outstanding interest bearing debt of just under 1,100,000,000 We currently have no outstanding borrowings on our $225,000,000 credit facility and our net leverage on a trailing basis stands at 3.1 times. We anticipate our cash CapEx spend for full year 2023 to be approximately $70,000,000 to $90,000,000 for the year, partitioned out between $35,000,000 to $40,000,000 for maintenance CapEx and the remainder to more ROI oriented projects. Speaker 100:13:15Also Effective April 15, we entered into 2 interest rate swaps to mitigate floating rate risk in our new 2022 term loan. We entered into a 2 3 year contract and each have a fixed notional amount of $275,000,000 for a total of $550,000,000 And each contract carries fixed SOFR rates of 4.05% and 3.71% respectively. And again, on the capital allocation front, as Bruce mentioned, we purchased $41,000,000 of stock in the Q1. And with our leverage ratio as well below 4 times, The anticipated free cash flow generation of the business and the attractive valuation of our stock, we believe repurchasing shares is a very compelling use of capital and intend to continue to use discretionary capital to repurchase shares going forward, depending of course on market conditions. We will also continue to invest in our business, Deliver value to our guests and shareholders, but the bar is high for new projects on a risk adjusted basis given the valuation of our stock. Speaker 100:14:14Now turning our attention to our 2023 outlook. Our RevPAR growth outlook has improved, driven by higher ADR gains for every quarter of the year, Well, occupancy has largely remained steady. We now expect full year adjusted EBITDA of $265,000,000 to $285,000,000 which is an increase from our last call and that is inclusive of a $20 plus 1,000,000 negative impact from the appreciation of the Mexican peso, 15 1,000,000 of which is expected to hit in Q2 through Q4 assuming today's spot rate. Our core legacy portfolio EBITDA forecast has continued to improve, driven by ADR gains I just mentioned. We are also forecasting a slower ramp at the 2 Jewel properties in the Dominican Republic in the second half of the year as they were unable to make up ground after missing the key summer selling season. Speaker 100:15:12For the Q2, we expect reported occupancy in the low 70s, which includes a mid single digit drag from the 2 JUUL properties in the Doctor. We expect Q2 reported ADR to grow low double digits on a year over year basis. This is compared to the previously expected high single digit to low Double digits. And owned resort EBITDA margins to expand year over year despite an approximately $5,000,000 year over year EBITDA drag in the Doctor from the 2 Jewel properties and continuing FX headwinds. So putting it all together, we expect Q2 owned resorts EBITDA of $79,000,000 to $83,000,000 management and Playa collection fee income of $2,500,000 to $3,000,000 corporate expense of $14,000,000 to $15,000,000 all leading to consolidated adjusted EBITDA guidance of $66,000,000 to $71,000,000 Given our booking window, we are currently 90% booked for the 2nd quarter. Speaker 100:16:14For the second half of twenty twenty three, we expect reported occupancy to be in the mid-70s and year over year ADR growth to be up again mid single digits on a reported basis. We expect legacy owned resort EBITDA margins to be flat to modestly up on a year over year basis in the second half of the year with the 2 Jewel properties in the Doctor to be a drag on EBITDA during the second half of the year. So to recap, the following are key inputs to consider as you think about our full year 2023 outlook. We expect full year occupancy to be slightly higher than in 2022, adjusting for extraneous factors and low double digit to mid teens ADR growth for the full year. We expect resort margins to improve year over year despite the significant drag from the Doctor. Speaker 100:16:58Jules and again a $20 plus 1,000,000 impact from foreign exchange headwinds. Anticipate a better inflation rate of our cost basket as compared to what we've experienced during 2022, although it will likely continue to be elevated. We have good visibility on our labor costs and see the wage increases slightly higher than what we experienced in 2022, but we're experiencing lower cost inflation in food and beverage Utilities during the Q1 of 2023. And while we hope the lower prices persist, these categories can again be quite volatile. We again anticipate roughly $14,000,000 to $15,000,000 per quarter in corporate expense and $2,500,000 roughly per quarter in management and play collection fee income. Speaker 100:17:36We hope this framework helps guide you as you fine tune your models and gives you further insights to what we're seeing and expecting. With that, I'll turn it back over to Bruce for some closing remarks. Speaker 200:17:46Great. Thank you very much, Ryan. With the increasing uncertainty in the macro backdrop, we are diligently focused on the areas within our control We're carefully monitoring the landscape. We continue to believe the price certainty and amazing value provided by Playa's all inclusive resorts resonates with travelers even in the face of an uncertain economic backdrop. With that, we'll open up the line for any questions. Operator00:18:13Thank you. We will now begin the question and answer session. Our first question comes from Patrick Scholes with Churler Securities. Please go ahead. Speaker 300:18:46Hi, good morning everyone. Speaker 100:18:48Good morning. Speaker 300:18:50Good morning. A couple of questions here. First one is, Just to be clear, with the $20,000,000 negative FX impact in your guidance, to be clear, your prior EBITDA guidance did not assume any impact. Is that correct? So that $20,000,000 is all in you? Speaker 100:19:08That is correct. Speaker 300:19:10Okay. Thank you. Next question, and I jokingly say we are moving on Past COVID because we're going to talk about seaweed here. I keep reading in headlines about this horrible seaweed In the middle of the Atlantic heading westward, any thoughts about potential impact or do you have any You know, conservatism baked into your numbers around that? Speaker 200:19:41No, I mean that is a seasonal occurrence. It happens every single summer. There are some scientists who say it's going to be a little worse this year, but the nice thing about it is it goes everywhere. So it goes to Florida, it goes to all of the Caribbean Islands, it goes everywhere, and people keep traveling. So We have a variety of mechanisms we have in place at all of our resorts to deal with it, and I think we manage it relatively well. Speaker 200:20:16But it is what it is, and it's been something we've had for literally the entire time Playa has been in existence. Speaker 300:20:23Okay. Thank you. And then just one last high level question, a long term question here. Actually, I'll have one more question out of that as well. In 3 markets right now, what are your long term intentions for Possibly diversifying continuing to diversify geographically beyond 3 markets? Speaker 200:20:47Sure. That's a great question, Patrick. Our goal, certainly pre pandemic, we were looking at pretty wide ranging geographic Expansion in different parts of the world. And obviously, the pandemic kind of cut those plans short. But from our standpoint, all inclusive is a product, is a concept that, as we said in our remarks, resonates incredibly well with You've seen more and more interest from hotel companies, brands, investors, everybody in all inclusive Because it's driven by the consumers' desire to go to all inclusive. Speaker 200:21:29The price certainty, the value proposition of it It's very strong. So there's a very long history of All inclusive in Europe, in the Mediterranean, in North Africa, certainly in the countries that we are in, some other Caribbean countries And some down in Latin America. All of those kind of markets, ones that are big enough To support kind of the lift that we think is required to be successful, we're interested in expanding. But I think you'll see in the next 1 to 5 years Playa expanding into new markets. So we think There's great opportunities there. Speaker 200:22:19And with the success that we have Pat, it's been 10 years now. So we've been managing all inclusive resorts for 10 years and we have built up a very strong reputation as to Our quality level. And so I think it is the time to expand and I think you'll see that in the very near future. Speaker 300:22:39Okay. Thank you. I'm actually all set. Thanks. Speaker 200:22:43Thank you. Operator00:22:46The next question comes from Tyler Badri with Oppenheimer. Please go ahead. Speaker 400:22:52Hey, thanks. Good morning. So first question just on the Q2 outlook in terms of bumping up, what you're expecting for ADR. Just talk a little bit more about that what's Change in terms of what you're seeing for the Q2? Speaker 100:23:07I think it's anything that's materially changed other than the fact that our base Fundamentals of our legacy portfolio have continued to move up. We haven't seen any sort of signs from the consumer's propensity to pay our rates. Our NPS scores continue to be top and best in class throughout their markets and brands. And so it's just a continuation of the strategy Bruce laid in place at the beginning of COVID. So, It's really, really nice to see. Speaker 400:23:34Okay. And then I mean, if the outlook for the back half of the year on the ADR side of things, I mean, still up Mid single digits. I mean, anything worth calling out there? I mean, just continued strength in terms of leisure travel, etcetera? Yes. Speaker 400:23:50No, nothing to Speaker 100:23:51point out. Our messaging has always been, we're focused on what we can control in our portfolio. We're acutely aware of Potential macro discussions in the news and others, but not seeing anything in our numbers at this point. So we're always discussing what could happen and what we would do should something happen. But right now, the outlook for the back half of the year, particularly for that legacy portfolio, continues to be strong. Speaker 400:24:15Okay. And then in terms of the margin outlook, you got some moving pieces there, some positives and then some incremental negatives with the FX And whatnot, in terms of the overall portfolio, I mean, are you still expecting resort margin to be up Year over year despite what's going on with the Jewel Properties and despite the FX issue? Speaker 100:24:40Yes, yes, yes, on a full year basis. Just kind of giving you some of the additional building blocks even for this quarter and just kind of help you think about and frame the rest of the year like As kind of Bruce and I mentioned, our legacy underlying EBITDA margins were up 3.40 basis points. And that's 160 basis points of reported, which I know you can't see because it's varied, but offset by another 180 basis points for FX. And as we mentioned, our and what you can see, the total underlying adjusted EBITDA margins are 2 30 basis points in the quarter, which is the 50 basis points reported, adding back 180 basis point headwind from FX. And so kind of even with that aforementioned FX drag in the JUULS, We were able to expand on resort margins. Speaker 100:25:24And so if you look ahead to the rest of the year based on the business on the books and our forecasts, we don't see a reason today why the legacy portfolio, Excluding the JUUL, shouldn't be able to at least maintain if not grow resort margins. Speaker 400:25:36Okay, great. I'll leave it there and pass it on. Thank you. Speaker 100:25:40Thanks, Alex. Operator00:25:43The next question comes from Yani Asad with Bank of America. Please go ahead. Speaker 100:25:57Are you muted, Danny? Yes. Speaker 500:26:00Hi. Good morning, guys. Can you hear me okay? Speaker 100:26:02Yes. Now we got Speaker 600:26:03you. Speaker 500:26:03Sorry about that. We've heard from some of the other earnings calls in the last couple of weeks about rising property costs and Insurance is always a big ticket item for that kept coming up, but we don't obviously you have different Geographies and markets that you operate in. So just curious to know kind of what the insurance like landscape looks like for Flyas Properties. Speaker 100:26:29In one word, difficult. We kind of highlighted in our last call, so we actually have since completed our insurance renewal. We're in April 12 renewal. And as we anticipated, our insurance outlay and cost increased considerably on a rate for $100 of insured value, but essentially roughly in line with what we outlined and what we were expecting. We won't go into Significant detail on this call is going to bore everyone, but we did make some tweaks to the structure of our policies to help mitigate and some of that Explicit cash outlay in exchange for essentially some partial participation of Playa and some of the risk at higher limits. Speaker 100:27:08But to be clear, in the case of an average storm, our expected cash outlay deductibles will be the same. If we suffered the same large claim that we had in the Doctor last year, our out of pocket expense for deductibles and assumed proceeds From the insurance companies would be exactly the same. Speaker 400:27:27Got it. Okay. Speaker 500:27:28Very helpful. And then, my My other question is just on like management contracts. I know you guys do pursue them. Are there any in your guidance or outlook for the year, Is there anything baked in at all into like kind of entering new contracts for the year? Speaker 100:27:44Yes. So in the guidance, it's just What we have today and the ramp of those that we've recently opened at the end of last year and early this year, so not including any new ones. But It's not a major contributor in 2022, but we expect that to kind of move up into the high single digit management fees This year and then potentially into the double digits next year as we continue to kind of grow that pipeline in that funnel. That's an exciting part of the business. It's not a big needle mover today, It's something that we're acutely focused on now. Speaker 500:28:15Got it. That's it for me. Thank you very much. Speaker 100:28:18Thanks, Danny. Operator00:28:21The next question comes from Chad Beynon with Macquarie. Please go ahead. Speaker 700:28:26Afternoon. Nice quarter and thanks for taking my question. Ryan, in your prepared remarks, you talked about CapEx, which I believe came up versus previously guided, Mainly on the non maintenance piece of that. So can you talk about maybe where those projects are? What returns we should expect On that non maintenance ROI. Speaker 700:28:47And then related to that, how are you thinking about buybacks versus Other renovation projects within the portfolio? Thanks. Speaker 100:28:59Yes. So there's a couple of opportunities in and around our portfolio that you've You've heard us talk about many times. Explicitly talking about what we're planning on doing this year, they're more minor in nature to be completely frank. If you think about our portfolio, the vast majority is branded now and in pretty good shape. We don't have a lot of deferred maintenance or anything like that, but we do have some kind of original Piots that were converted back in 2013 or in the case of the Ziva Las Cabo had its last renovation after in 2015, Right. Speaker 100:29:28So they're coming up on normal kind of cycles for rooms refresh to soft goods things like that and specifically Los Cabos. That Ziva is a big contributor to our MICE Group business, and it needs some work on the Meeting space and public spaces. So what we're doing right now this year or about to start, there'll be some rooms renovations to Ziva in Puerto Vallarta. Again, that's a small Relative EBITDA contributor, it punches outside its way. So there's some light disruption there, but it's fully baked into our numbers. Speaker 100:30:00And then we're just doing public space renovations At the Ziva in Los Cabos, so no room disruption there. Probably expect to do some room renovations at Cabos next year, But that remains to be seen. And then again, doing some public space renovations and some restaurant additional incremental restaurant renovations at our Zilara in Cancun. So admittedly, they're a little more defensive in nature and just kind of keeping up with some of our other brand spanking news even Zalara product. So I don't have explicit guidance on ROI spend there, but it's going to help us maintain if not grow the ADRs we're seeing today, particularly in caboz where there's a lot of competition for And then buybacks versus other projects, like I said, the bar is still high. Speaker 100:30:47There are some opportunities. You've heard Bruce talk about it many times, specifically the Ziva Cancun has some small adjacent land immediately to the kind of north of it, where we could do an additional rooms tower. And so we're working through some of the planning and design phases and permitting phases to be able to do that, because that's something while the bar and return hurdle will be high versus Buyback, that'd be a great use of capital because it's one of our most outstanding, best performing, best margin properties. It quite frankly needs more rooms It already has well over 500 rooms, and it would just be a nice real great incremental return. But other than that, we do have other opportunities in the portfolio, but buybacks So look great when we're trading at 8 ish times consensus. Speaker 700:31:31Indeed. Thank you. And then with respect to MICE For 2022 versus kind of what you're expecting for 2023, can you give us an update on that? And then also, in terms of Non package add ons. Can you just remind us, do you usually see stronger kind of incidents of purchase from MICE guests? Speaker 700:31:52And how does that play into the guide for 2023? Thanks. Speaker 100:31:56Yes. So our MICE business for 2023, we've got $55,000,000 on the books. That's up 5,000,000 From the last time we spoke, that's almost like 1.75 times what we did in 2019 and 2024 is trending up nicely. We've got almost $30,000,000 on the books and that's up roughly 30% versus the same time last year. Yes, MICE groups are big contributors to non packaged and that's why you saw Some sequential step ups in kind of the back half of last year as more groups came back. Speaker 100:32:25You just think about the nature of it. 1, you've got the group or the company who's Having holding the events, right? And so they're spending event dollars and presentation dollars or big celebration on the beach, etcetera. And then the guests who are coming as part of those groups usually are not paying themselves. A lot of times they're either coming by themselves or they're bringing a guest or a spouse. Speaker 100:32:46And so they've got more out of pocket capacity because then they've got extra time to go to the spa or wine upgrades, things like that because they didn't pay for the vacation in the 1st place. So it's a Solid base of non package. And quite honestly why, as you can imagine, our Xevo, Xilar and Cap Cana has been one of the best non package performers Sequentially over the last year because of the influx of MICE business and to the credit of the general manager and the staff there, some of the Neat initiatives they've done on property to continue to push non package. Speaker 700:33:15Okay. Thank you very much. Nice quarter. Speaker 100:33:17Thanks, Chad. Operator00:33:19The next question comes from Smedes Rose with Citi. Please go ahead. Speaker 600:33:26Hi, thanks. I was just wondering if you could just talk kind of bigger picture about what you're seeing on the competitive side in terms of any new Supply coming into the market that you could speak to? Speaker 200:33:38Sure, Smedes. It's not anything significant. So kind of Due to the pandemic, many projects got kind of put on the back burner. I mean, There are new projects happening, but it's not a significant level and it's not impacting Any kind of market dynamics whatsoever. So overall, it's just kind of steady, modest new projects. Speaker 200:34:08Then usually where you're seeing Speaker 100:34:09it, as we've said in the past, where you do see some supplies again further and further away from the airport because the prime mature markets are essentially built. Like Even if the overall Yucatan Peninsula is projecting mid single digit room supply growth, it's less than 2 percentage points in Cancun properties, there's nowhere else to go. So that's the benefit of having been in these markets for as long as we have. Speaker 600:34:34Okay. Thanks. And then I just wanted to ask you maybe a little bit more about the relationship with Wyndham at this point. You've had the Ultra conversions underway for, I guess, a few quarters now. Could you just speak to how that relationship is going? Speaker 600:34:50Are you happy with The lift at those properties since they were rebranded? Speaker 200:34:56Sure. In short, the relationship is going incredibly well. We couldn't be happier with our relationship with Wyndham, and I think it's probably mutual from their standpoint too. The Wyndham Ultra was the brand that they created targeting all inclusive to the Wyndham customer. At that price point in the all inclusive market, that's probably the largest segment of the all inclusive market. Speaker 200:35:26When we were looking at brands that we could partner with, it was very important to us to partner with The highest quality possible brand because that kind of price point segment is so large and so important to us. And The projects we've done so far have performed well. The contribution from Wyndham is solid and growing, and we think it will grow Even more in the future as there are more and more Wyndham Ultras. We are working our development team, working very closely with their development team. And Hopefully, you'll see additional Wyndham Ultra announcements in the near future. Speaker 200:36:07But Overall, I think it's a great opportunity for both us and Wyndham, just because of the number of opportunities. And most of those Our conversion opportunities. So these are not ground ups that take a significant amount of time to get up and going. These are ones that require a modest To a little more significant PIP that can be getting done very quickly and start to deliver higher results Very quickly. And what's happening is owners in our space are seeing the success that we've had, and I think it's going to drive more conversion To the Wyndham Ultra brand. Speaker 600:36:48Okay, thanks. And then can I just pop in one more? Just could you maybe update on where you are on selling the 2 JUUL Properties and maybe kind of what just a little bit more about the process and timing? Speaker 200:37:00Sure. We're well in the process. But as we have said over the years to anyone who's listened to us, in our part of the world, things move a little slower, Okay. And it's just the nature of the beast. But we feel highly confident that we'll conclude transactions, but we can't at this time Give any kind of more clarity or definitive timing on that, but the process has been underway and is moving well. Speaker 600:37:33Okay. Thank you. Speaker 400:37:35Thanks, Piyush. Operator00:37:38Our last question comes from Chris Woronka with Deutsche Bank. Please go ahead. Speaker 800:37:45Hey, good morning, guys. Thanks for all the details so far. Speaker 600:37:50Just had Speaker 800:37:51a question on the going back to the Juul sale. I think you guys, it's around potential disruption impact. I guess the question would be how I think you know that when properties are known to be marketed for sale, sometimes it's tough to get Not only customers, but employees, right? It's just kind of a tough process with the uncertainty. So I mean, how I guess, how what kind of level of conviction do you have in those disruption numbers? Speaker 100:38:23Yes. So I think we feel pretty good. So when you think about it like this, like there's a few contributing factors To kind of how we're seeing the JUULS play out for the rest of the year. So one, you heard us talk about on the last call, the timing and just the overall process of the takeover from those properties essentially at the very beginning of high season, essentially empty and the fact that we needed to do some very small Renovation work while the properties were empty in the 1st couple of months of the year was certainly not ideal. And that, as you can imagine, leads us to missing, Obviously, the high season as well as our summer selling window, particularly to Europeans. Speaker 100:38:59We said it on the call, our booking window has remained at a little over 3 months. So one that makes it hard to sell for kind of the near term if people are traditionally booking 3 ish plus months out and then European, which These two properties index higher to. They roughly in the kind of Q2 and Q3 indexed about 25% European business. And they traditionally book even a little bit further out. So then and then one other thing that we did want to point out while Scheduled seats into all of our destinations are pretty robust and good in Q2 and Q3. Speaker 100:39:31We have seen a reduction in airlift into Punta Cana From Europe. Not exactly sure why, but that also impacts these two properties for the summer, just given again their higher index European customers. And then as you mentioned, there is always going to be some disruption. There are going to be some partners and tour operators and others that know they're up for sale and Are we going to assume the worst that potentially whomever you sell it to may shut it down? So there's always going to be some apprehension there. Speaker 100:40:00But Obviously, we're pretty focused on making sure that these essentially do as best they possibly can while they're under our ownership. I mean, as recently as this morning, I got some updates from the sales and marketing team on some of the strategies and overnight things they put in place and starting to see some pickup for Summertime, so we still have a long way to go. But I can trust you trust me that Bruce is pretty focused on making sure that we make the most out of them while they're still in our care. Speaker 800:40:29Sure. Great. Thanks, Ryan. And then, the segment, as we think about your customer mix Kind of normalizing and maybe it's more of a 24 thing at this point. But can we talk a little bit about channel mix? Speaker 800:40:44And Yes. Does this mean you eventually take a little bit more OTA business back? Or how do you think that all blends into what you're expecting For ADR this year? Thanks. Speaker 300:40:56Yes. I think it's I Speaker 100:40:57don't think it would change too, too much. I mean, the OTAs, as we've said in the last couple of calls, have been the slowest to recover. We've obviously grown dramatically. The direct business over the years, if you heard us talk about, and then the return of MICE, which is We've said from the beginning, we are happy to seed some direct business or especially business from any other channel into My Business Because of the rate profiles and all the non package add ons that they're willing to spend on. And it just fills holes in your business and allows the yield management Seem to yield manage even higher. Speaker 100:41:29So I don't see it changing too, too much, at least with the core owned legacy portfolio that we see today. Speaker 800:41:38Okay. Very helpful. Thanks guys. Good quarter. Speaker 100:41:42Thanks Chris. Operator00:41:46This concludes our question and answer session. I would like to turn the conference back over to Bruce Wardynski for any closing remarks. Speaker 200:41:54Great. Now thank you everyone for participating in our call today. As we said, the Q1 was our from a financial perspective was our best quarter ever. Our Playa team members continue to drive guest satisfaction at incredibly high levels, and we expect the rest of the year to be good. So thank you very much for joining us today, and we look forward to talking to you next quarter. Speaker 200:42:17Thank you. Operator00:42:22The conference is now concluded. Thank you for attending today's presentation. You may all nowRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallPlaya Hotels & Resorts Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Playa Hotels & Resorts Earnings HeadlinesPlaya Hotels & Resorts N.V. Announces Date for First Quarter 2025 Earnings Release | PLYA ...April 19, 2025 | gurufocus.comPlaya Hotels & Resorts N.V. Announces Date for First Quarter 2025 Earnings ReleaseApril 19, 2025 | gurufocus.comReal Americans Don’t Wait on Wall Street’s Next MoveWhat's happening in the markets right now should concern every freedom-loving American who's worked hard and saved smart. Your 401(k) doesn't deserve to be dragged through the mud by tariffs, trade wars, reckless spending, and political standoffs. And you don't have to stand by while Wall Street plays roulette with your future.April 25, 2025 | Premier Gold Co (Ad)Playa Hotels & Resorts NV Announces First Quarter 2025 Earnings Release Date | PLYA stock newsApril 19, 2025 | gurufocus.comPlaya Hotels & Resorts N.V. Announces Date for First Quarter 2025 Earnings ReleaseApril 18, 2025 | investing.comPlaya Hotels & Resorts N.V. Announces Date for First Quarter 2025 Earnings ReleaseApril 18, 2025 | prnewswire.comSee More Playa Hotels & Resorts Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Playa Hotels & Resorts? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Playa Hotels & Resorts and other key companies, straight to your email. Email Address About Playa Hotels & ResortsPlaya Hotels & Resorts (NASDAQ:PLYA) NV engages in the operation of hotels and resorts. The firm's geographical segments include Yucatán Peninsula, Pacific Coast, Dominican Republic, and Jamaica. It owns all-inclusive oceanfront resorts in Cancun, Los Cabos, Montego Bay, Puerto Vallarta, Playa del Carmen, and Cap Cana. The company was founded on March 28, 2013 and is headquartered in Amsterdam, the Netherlands.View Playa Hotels & Resorts ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 9 speakers on the call. Operator00:00:00Good morning, and welcome to the Playa Hotels and Resorts First Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, There will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ryan Hino with the company. Operator00:00:30Please go ahead. Speaker 100:00:32Thank you very much, Vasunavi. Good morning, everyone, and welcome to Playa Hotels and Resorts' Q1 2023 earnings call. Before we begin, I'd like to remind participants that many of our comments today will be considered forward looking statements and are subject to numerous risks and uncertainties that may cause For a discussion of some of the factors that could cause our actual results to differ, please review the Risk Factors section of our quarterly report on Form 10 Q, which we filed last night with the SEC. We've updated our Investor Relations website at investors. Flyerresorts.com with today's recent releases. Speaker 100:01:15In addition, reconciliations to GAAP of the non GAAP financial measures we discuss on this call were included in yesterday's press release. On today's call, Bruce Wardinski, Playa's Chairman and Chief Executive Officer will provide comments on the Q1 demand, trends and key operational highlights. I will then address our Q1 results and our outlook. Bruce will wrap up the call with some concluding remarks before we turn it over to Q and A. With that, I'll turn the call over to Bruce. Speaker 200:01:38Great. Thanks, Ryan. Good morning, everyone, and thank you for joining us. I would like to wish everyone a happy Cinco de Mayo and say personally, I'd much rather be at one of our resorts in Mexico than in our office in Fairfax, but I hope people are enjoying it wherever they are. Our Q1 results exceeded our expectations as the momentum in our business continued through the remainder of the high season with broad based strength shown across all of our markets. Speaker 200:02:03One housekeeping item before we begin, the fundamental But before we begin the fundamental review of the quarter, we will be sunsetting comparisons to 2019 and resuming traditional year over year commentary exclusively for today's discussion. Playa's owned resort EBITDA of $109,400,000 in the Q1 was the highest in the company's history, Despite the significant negative impact from the 2 Jewel Resorts in the Dominican Republic that transitioned to Playa Management and foreign currency headwinds. The better than expected EBITDA was driven by year over year ADR growth in our legacy portfolio of nearly 17%, bringing the reported ADR growth for the quarter to approximately 27.4%. As a reminder, Our expectation was that the Q1 would represent the highest year over year ADR growth for 2023 as we lap the impact from omicron last year. Additionally, our operations teams executed extremely well at the resort level, delivering 50 basis points of Resort margin expansion on a reported basis despite an approximate 180 basis points FX drag from the appreciation of the Mexican peso. Speaker 200:03:15The core legacy portfolio resort margins excluding the jewels improved 160 basis points year over year inclusive of 180 basis point foreign currency drag. As I mentioned, fundamental strength during the quarter was broad based, With our core legacy portfolio surpassing 80% occupancy for the first time post pandemic and all geographies reporting double digit year over year ADR gains. Jamaica had another strong quarter reporting the highest year over year ADR and resort margin expansion among our segments, aided by a significant increase in MICE revenue during the Q1 as the recovery and normalization of that market continued. In Mexico, the Yucatan once again led the way on occupancy rate for Playa, while growing ADR double digits year over year. And the Pacific Coast reported its best occupancy rate during the post pandemic period as well. Speaker 200:04:12As I mentioned, Both segments were negatively impacted by the sharp move in the Mexican peso during the quarter and both would have seen improved margins year over year excluding the impact of FX. In the Dominican Republic, our legacy Doctor Resorts, Excluding the Jewel Palm Beach and Jewel Punta Cana Resorts, which we are attempting to sell, also achieved their highest occupancy rate in the post pandemic period, while driving approximately 22% year over year ADR growth, yielding nearly 300 basis points of resort margin expansion year over year. The 2 Jewel Resorts in the Doctor segment results were in line with the expectations we laid out on our last earnings call, representing an approximate €10,000,000 year over year However, we expect the profit drag from these resorts to improve during the Q2. We do not have any information to share with Back to the timing of the disposition of the 2 resorts, but hope to have more to share on that in the future. On the booking front, Demand has remained strong despite the broader macroeconomic concerns, and we have achieved our goal of increasing Playa's transient consumer direct revenue mix of bookings, excluding the Doctor. Speaker 200:05:24Jules, to at least 50% by 2023. In aggregate, during the Q1 of 2023, 51.4 percent of Playa owned and managed transient revenues booked were booked direct, up 160 basis points year over year, growing year over year for the 3rd straight quarter. During the Q1 of 2023, playaresorts.com accounted for approximately 10% of our total playa owned and managed room night bookings continuing to be a critical factor in Our customer sourcing and ADR gains. Taking a look at who is traveling, roughly 36% of the Playa owned and managed room night Stays in the quarter came from our direct channels, down 100 basis points year over year as our group mix improved significantly year over year by 4 60 basis points. Our OTA mix has remained the most depressed channel compared to pre pandemic levels. Speaker 200:06:22Geographically, the biggest change in our guest mix during the Q1 was the continued recovery of our Canadian guest mix, which was up approximately 400 basis points year over year, as well as our Mexican sourced guest mix, which was up 300 basis points. Our European sourced guest mix was down significantly again year over year, but in line with pre pandemic levels. Our Asian sourced guest mix Improved modestly year over year, but remains the most depressed as it is only approximately 75% to 80% recover. Our visibility remains a critical factor of our success as our booking window remained at just over 3 months. Once again, I would like to thank all of our associates that have continued to deliver world class service in the face of pandemic related challenges And rising operating costs. Speaker 200:07:14Their unwavering passion and dedication to service from the heart is what truly sets Playa apart. Finally, on the capital allocation front, we purchased approximately $41,000,000 worth of Playa stock during the Q1 And an additional $20,000,000 thus far in the second quarter, bringing our total repurchases since resuming our program in September 2022 to just over $107,000,000 We continue to believe that our stock provides a tremendous value relative to the fundamentals And share repurchases are a phenomenal use of capital for our free cash flow. With that, I will turn the call back over to Ryan to discuss the balance sheet And our outlook. Speaker 100:08:00Thank you, Bruce. Good morning again. I'll begin with a recap of the segment fundamentals, followed by an overview of our balance sheet and expected uses of cash and conclude with our updated outlook. Before I begin, I'd like to highlight that beginning with the Q1 of 2023, we've elected to on property room upgrade revenue from non package revenue to package revenue to be consistent with industry trends. We've recasted prior period as well to conform with the current period presentation. Speaker 100:08:29And a reconciliation of the changes made to the prior reporting for Our Q1 results exceeded our expectations as a result of higher ADR growth and easing pressure from energy costs leading to resort margin expansion of approximately 50 basis point year over year despite a nearly 180 basis point headwind from foreign exchange and a 240 basis point headwind from the 2 JUUL The Dominican Republic. The ADR strength is broad based with all segments reporting double digit year over year ADR growth excluding again the dual assets in the Doctor. As this was the 1st Q1 we've had in the post pandemic period with no significant COVID related challenges. On the cost front, I mentioned on our last earnings call, we began to see stabilization in food and beverage and utilities costs on a per unit basis in the middle of 2022, and we're hopeful that the inflationary pressure from these two areas will begin to ease as we moved into 2023 and lap the surge that occurred around the start of 2022. We began to see signs of improvement during the Q4 and that carried over into the Q1. Speaker 100:09:37Although it's nice to see some cost relief, these expenses can be volatile quarter to quarter as usual. At the segment level, Jamaica led the way in year over year ADR and occupancy growth and margin improvement. The segment experienced its highest group room night mix, Helping yield ADR and closing the gap versus other segments ADR improvement compared to the pre pandemic period. As a reminder, Jamaica got off to a slower start in 2022 due to the Omicron variant having a disproportionate impact on the segment given its COVID testing requirements at the time. On the margin front, Jamaica once again benefited from better than expected food and beverage and utilities expenses. Speaker 100:10:12Keep in mind that when comparing results in Jamaica Other segments that Jamaica generally has higher operating costs in other segments and typically experiences higher ADRs as well. Looking at our other segments, Yucatan Peninsula continued to deliver strong results with sequential occupancy improvements to a post pandemic high of almost 84% and reported year over year ADR growth of roughly 15%. Reported owned resort EBITDA margins were down slightly 20 basis points year over year, namely as a result of the 370 basis point negative impact from foreign exchange. Food and beverage and utilities expenses were favorable year over year on a currency neutral basis, while other labor costs, specifically union negotiations, negatively impacted margins. Margins were also favorably impacted by the timing Sales and marketing spend. Speaker 100:10:59The Pacific Coast had another fantastic quarter year over year with ADR improvement up 19% leading to robust Margin performance as utility expenses were less of a headwind year over year. The Pacific Coast also experienced significantly higher year over year MICE group mix, helping drive an increase in non package revenue per Sole Broom. Segment margins were negatively impacted approximately 3.50 basis points, again a result of the sharp fluctuation in the Mexican peso. In the Dominican Republic, our legacy resorts, the Hyatt Cap Cana and the Hilton La Romana grew ADR 20% year over year with occupancy of nearly 82%. Underlying non packaged revenue per sold room growth at these resorts was also stellar due to a higher mix of MICE groups. Speaker 100:11:44As a reminder, we reported our Hilton and Hyatt properties a bit ahead of schedule following the disruption in the Q4 related to Hurricane Fiona, just in time for the high season. The fundamental improvement year over year yet led to resort margins at these resorts approaching 50%. As food and beverage and utilities expense pressure eased on a year over year basis compared to the Q4. The segment performance was dragged down by the 2 Jewel properties we recently assumed management of, though the performance was in line with our expectations. We continue to expect the performance of these 2 jewels to improve sequentially next quarter, while we execute the sale process of the resorts. Speaker 100:12:19Turning to our MICE Group business. Our 2023 net MICE Group business on the books Approximately $55,000,000 versus $50,000,000 at the time of our last earnings call and is well ahead of our final full year 2019 MICE revenue of 32,000,000 Looking ahead to 2024, we currently have $29,000,000 of rice revenue on the books, well ahead of where we were at the same time last year. Finally, turning to the balance sheet. We finished the quarter with a total cash balance of approximately $282,000,000 and total outstanding interest bearing debt of just under 1,100,000,000 We currently have no outstanding borrowings on our $225,000,000 credit facility and our net leverage on a trailing basis stands at 3.1 times. We anticipate our cash CapEx spend for full year 2023 to be approximately $70,000,000 to $90,000,000 for the year, partitioned out between $35,000,000 to $40,000,000 for maintenance CapEx and the remainder to more ROI oriented projects. Speaker 100:13:15Also Effective April 15, we entered into 2 interest rate swaps to mitigate floating rate risk in our new 2022 term loan. We entered into a 2 3 year contract and each have a fixed notional amount of $275,000,000 for a total of $550,000,000 And each contract carries fixed SOFR rates of 4.05% and 3.71% respectively. And again, on the capital allocation front, as Bruce mentioned, we purchased $41,000,000 of stock in the Q1. And with our leverage ratio as well below 4 times, The anticipated free cash flow generation of the business and the attractive valuation of our stock, we believe repurchasing shares is a very compelling use of capital and intend to continue to use discretionary capital to repurchase shares going forward, depending of course on market conditions. We will also continue to invest in our business, Deliver value to our guests and shareholders, but the bar is high for new projects on a risk adjusted basis given the valuation of our stock. Speaker 100:14:14Now turning our attention to our 2023 outlook. Our RevPAR growth outlook has improved, driven by higher ADR gains for every quarter of the year, Well, occupancy has largely remained steady. We now expect full year adjusted EBITDA of $265,000,000 to $285,000,000 which is an increase from our last call and that is inclusive of a $20 plus 1,000,000 negative impact from the appreciation of the Mexican peso, 15 1,000,000 of which is expected to hit in Q2 through Q4 assuming today's spot rate. Our core legacy portfolio EBITDA forecast has continued to improve, driven by ADR gains I just mentioned. We are also forecasting a slower ramp at the 2 Jewel properties in the Dominican Republic in the second half of the year as they were unable to make up ground after missing the key summer selling season. Speaker 100:15:12For the Q2, we expect reported occupancy in the low 70s, which includes a mid single digit drag from the 2 JUUL properties in the Doctor. We expect Q2 reported ADR to grow low double digits on a year over year basis. This is compared to the previously expected high single digit to low Double digits. And owned resort EBITDA margins to expand year over year despite an approximately $5,000,000 year over year EBITDA drag in the Doctor from the 2 Jewel properties and continuing FX headwinds. So putting it all together, we expect Q2 owned resorts EBITDA of $79,000,000 to $83,000,000 management and Playa collection fee income of $2,500,000 to $3,000,000 corporate expense of $14,000,000 to $15,000,000 all leading to consolidated adjusted EBITDA guidance of $66,000,000 to $71,000,000 Given our booking window, we are currently 90% booked for the 2nd quarter. Speaker 100:16:14For the second half of twenty twenty three, we expect reported occupancy to be in the mid-70s and year over year ADR growth to be up again mid single digits on a reported basis. We expect legacy owned resort EBITDA margins to be flat to modestly up on a year over year basis in the second half of the year with the 2 Jewel properties in the Doctor to be a drag on EBITDA during the second half of the year. So to recap, the following are key inputs to consider as you think about our full year 2023 outlook. We expect full year occupancy to be slightly higher than in 2022, adjusting for extraneous factors and low double digit to mid teens ADR growth for the full year. We expect resort margins to improve year over year despite the significant drag from the Doctor. Speaker 100:16:58Jules and again a $20 plus 1,000,000 impact from foreign exchange headwinds. Anticipate a better inflation rate of our cost basket as compared to what we've experienced during 2022, although it will likely continue to be elevated. We have good visibility on our labor costs and see the wage increases slightly higher than what we experienced in 2022, but we're experiencing lower cost inflation in food and beverage Utilities during the Q1 of 2023. And while we hope the lower prices persist, these categories can again be quite volatile. We again anticipate roughly $14,000,000 to $15,000,000 per quarter in corporate expense and $2,500,000 roughly per quarter in management and play collection fee income. Speaker 100:17:36We hope this framework helps guide you as you fine tune your models and gives you further insights to what we're seeing and expecting. With that, I'll turn it back over to Bruce for some closing remarks. Speaker 200:17:46Great. Thank you very much, Ryan. With the increasing uncertainty in the macro backdrop, we are diligently focused on the areas within our control We're carefully monitoring the landscape. We continue to believe the price certainty and amazing value provided by Playa's all inclusive resorts resonates with travelers even in the face of an uncertain economic backdrop. With that, we'll open up the line for any questions. Operator00:18:13Thank you. We will now begin the question and answer session. Our first question comes from Patrick Scholes with Churler Securities. Please go ahead. Speaker 300:18:46Hi, good morning everyone. Speaker 100:18:48Good morning. Speaker 300:18:50Good morning. A couple of questions here. First one is, Just to be clear, with the $20,000,000 negative FX impact in your guidance, to be clear, your prior EBITDA guidance did not assume any impact. Is that correct? So that $20,000,000 is all in you? Speaker 100:19:08That is correct. Speaker 300:19:10Okay. Thank you. Next question, and I jokingly say we are moving on Past COVID because we're going to talk about seaweed here. I keep reading in headlines about this horrible seaweed In the middle of the Atlantic heading westward, any thoughts about potential impact or do you have any You know, conservatism baked into your numbers around that? Speaker 200:19:41No, I mean that is a seasonal occurrence. It happens every single summer. There are some scientists who say it's going to be a little worse this year, but the nice thing about it is it goes everywhere. So it goes to Florida, it goes to all of the Caribbean Islands, it goes everywhere, and people keep traveling. So We have a variety of mechanisms we have in place at all of our resorts to deal with it, and I think we manage it relatively well. Speaker 200:20:16But it is what it is, and it's been something we've had for literally the entire time Playa has been in existence. Speaker 300:20:23Okay. Thank you. And then just one last high level question, a long term question here. Actually, I'll have one more question out of that as well. In 3 markets right now, what are your long term intentions for Possibly diversifying continuing to diversify geographically beyond 3 markets? Speaker 200:20:47Sure. That's a great question, Patrick. Our goal, certainly pre pandemic, we were looking at pretty wide ranging geographic Expansion in different parts of the world. And obviously, the pandemic kind of cut those plans short. But from our standpoint, all inclusive is a product, is a concept that, as we said in our remarks, resonates incredibly well with You've seen more and more interest from hotel companies, brands, investors, everybody in all inclusive Because it's driven by the consumers' desire to go to all inclusive. Speaker 200:21:29The price certainty, the value proposition of it It's very strong. So there's a very long history of All inclusive in Europe, in the Mediterranean, in North Africa, certainly in the countries that we are in, some other Caribbean countries And some down in Latin America. All of those kind of markets, ones that are big enough To support kind of the lift that we think is required to be successful, we're interested in expanding. But I think you'll see in the next 1 to 5 years Playa expanding into new markets. So we think There's great opportunities there. Speaker 200:22:19And with the success that we have Pat, it's been 10 years now. So we've been managing all inclusive resorts for 10 years and we have built up a very strong reputation as to Our quality level. And so I think it is the time to expand and I think you'll see that in the very near future. Speaker 300:22:39Okay. Thank you. I'm actually all set. Thanks. Speaker 200:22:43Thank you. Operator00:22:46The next question comes from Tyler Badri with Oppenheimer. Please go ahead. Speaker 400:22:52Hey, thanks. Good morning. So first question just on the Q2 outlook in terms of bumping up, what you're expecting for ADR. Just talk a little bit more about that what's Change in terms of what you're seeing for the Q2? Speaker 100:23:07I think it's anything that's materially changed other than the fact that our base Fundamentals of our legacy portfolio have continued to move up. We haven't seen any sort of signs from the consumer's propensity to pay our rates. Our NPS scores continue to be top and best in class throughout their markets and brands. And so it's just a continuation of the strategy Bruce laid in place at the beginning of COVID. So, It's really, really nice to see. Speaker 400:23:34Okay. And then I mean, if the outlook for the back half of the year on the ADR side of things, I mean, still up Mid single digits. I mean, anything worth calling out there? I mean, just continued strength in terms of leisure travel, etcetera? Yes. Speaker 400:23:50No, nothing to Speaker 100:23:51point out. Our messaging has always been, we're focused on what we can control in our portfolio. We're acutely aware of Potential macro discussions in the news and others, but not seeing anything in our numbers at this point. So we're always discussing what could happen and what we would do should something happen. But right now, the outlook for the back half of the year, particularly for that legacy portfolio, continues to be strong. Speaker 400:24:15Okay. And then in terms of the margin outlook, you got some moving pieces there, some positives and then some incremental negatives with the FX And whatnot, in terms of the overall portfolio, I mean, are you still expecting resort margin to be up Year over year despite what's going on with the Jewel Properties and despite the FX issue? Speaker 100:24:40Yes, yes, yes, on a full year basis. Just kind of giving you some of the additional building blocks even for this quarter and just kind of help you think about and frame the rest of the year like As kind of Bruce and I mentioned, our legacy underlying EBITDA margins were up 3.40 basis points. And that's 160 basis points of reported, which I know you can't see because it's varied, but offset by another 180 basis points for FX. And as we mentioned, our and what you can see, the total underlying adjusted EBITDA margins are 2 30 basis points in the quarter, which is the 50 basis points reported, adding back 180 basis point headwind from FX. And so kind of even with that aforementioned FX drag in the JUULS, We were able to expand on resort margins. Speaker 100:25:24And so if you look ahead to the rest of the year based on the business on the books and our forecasts, we don't see a reason today why the legacy portfolio, Excluding the JUUL, shouldn't be able to at least maintain if not grow resort margins. Speaker 400:25:36Okay, great. I'll leave it there and pass it on. Thank you. Speaker 100:25:40Thanks, Alex. Operator00:25:43The next question comes from Yani Asad with Bank of America. Please go ahead. Speaker 100:25:57Are you muted, Danny? Yes. Speaker 500:26:00Hi. Good morning, guys. Can you hear me okay? Speaker 100:26:02Yes. Now we got Speaker 600:26:03you. Speaker 500:26:03Sorry about that. We've heard from some of the other earnings calls in the last couple of weeks about rising property costs and Insurance is always a big ticket item for that kept coming up, but we don't obviously you have different Geographies and markets that you operate in. So just curious to know kind of what the insurance like landscape looks like for Flyas Properties. Speaker 100:26:29In one word, difficult. We kind of highlighted in our last call, so we actually have since completed our insurance renewal. We're in April 12 renewal. And as we anticipated, our insurance outlay and cost increased considerably on a rate for $100 of insured value, but essentially roughly in line with what we outlined and what we were expecting. We won't go into Significant detail on this call is going to bore everyone, but we did make some tweaks to the structure of our policies to help mitigate and some of that Explicit cash outlay in exchange for essentially some partial participation of Playa and some of the risk at higher limits. Speaker 100:27:08But to be clear, in the case of an average storm, our expected cash outlay deductibles will be the same. If we suffered the same large claim that we had in the Doctor last year, our out of pocket expense for deductibles and assumed proceeds From the insurance companies would be exactly the same. Speaker 400:27:27Got it. Okay. Speaker 500:27:28Very helpful. And then, my My other question is just on like management contracts. I know you guys do pursue them. Are there any in your guidance or outlook for the year, Is there anything baked in at all into like kind of entering new contracts for the year? Speaker 100:27:44Yes. So in the guidance, it's just What we have today and the ramp of those that we've recently opened at the end of last year and early this year, so not including any new ones. But It's not a major contributor in 2022, but we expect that to kind of move up into the high single digit management fees This year and then potentially into the double digits next year as we continue to kind of grow that pipeline in that funnel. That's an exciting part of the business. It's not a big needle mover today, It's something that we're acutely focused on now. Speaker 500:28:15Got it. That's it for me. Thank you very much. Speaker 100:28:18Thanks, Danny. Operator00:28:21The next question comes from Chad Beynon with Macquarie. Please go ahead. Speaker 700:28:26Afternoon. Nice quarter and thanks for taking my question. Ryan, in your prepared remarks, you talked about CapEx, which I believe came up versus previously guided, Mainly on the non maintenance piece of that. So can you talk about maybe where those projects are? What returns we should expect On that non maintenance ROI. Speaker 700:28:47And then related to that, how are you thinking about buybacks versus Other renovation projects within the portfolio? Thanks. Speaker 100:28:59Yes. So there's a couple of opportunities in and around our portfolio that you've You've heard us talk about many times. Explicitly talking about what we're planning on doing this year, they're more minor in nature to be completely frank. If you think about our portfolio, the vast majority is branded now and in pretty good shape. We don't have a lot of deferred maintenance or anything like that, but we do have some kind of original Piots that were converted back in 2013 or in the case of the Ziva Las Cabo had its last renovation after in 2015, Right. Speaker 100:29:28So they're coming up on normal kind of cycles for rooms refresh to soft goods things like that and specifically Los Cabos. That Ziva is a big contributor to our MICE Group business, and it needs some work on the Meeting space and public spaces. So what we're doing right now this year or about to start, there'll be some rooms renovations to Ziva in Puerto Vallarta. Again, that's a small Relative EBITDA contributor, it punches outside its way. So there's some light disruption there, but it's fully baked into our numbers. Speaker 100:30:00And then we're just doing public space renovations At the Ziva in Los Cabos, so no room disruption there. Probably expect to do some room renovations at Cabos next year, But that remains to be seen. And then again, doing some public space renovations and some restaurant additional incremental restaurant renovations at our Zilara in Cancun. So admittedly, they're a little more defensive in nature and just kind of keeping up with some of our other brand spanking news even Zalara product. So I don't have explicit guidance on ROI spend there, but it's going to help us maintain if not grow the ADRs we're seeing today, particularly in caboz where there's a lot of competition for And then buybacks versus other projects, like I said, the bar is still high. Speaker 100:30:47There are some opportunities. You've heard Bruce talk about it many times, specifically the Ziva Cancun has some small adjacent land immediately to the kind of north of it, where we could do an additional rooms tower. And so we're working through some of the planning and design phases and permitting phases to be able to do that, because that's something while the bar and return hurdle will be high versus Buyback, that'd be a great use of capital because it's one of our most outstanding, best performing, best margin properties. It quite frankly needs more rooms It already has well over 500 rooms, and it would just be a nice real great incremental return. But other than that, we do have other opportunities in the portfolio, but buybacks So look great when we're trading at 8 ish times consensus. Speaker 700:31:31Indeed. Thank you. And then with respect to MICE For 2022 versus kind of what you're expecting for 2023, can you give us an update on that? And then also, in terms of Non package add ons. Can you just remind us, do you usually see stronger kind of incidents of purchase from MICE guests? Speaker 700:31:52And how does that play into the guide for 2023? Thanks. Speaker 100:31:56Yes. So our MICE business for 2023, we've got $55,000,000 on the books. That's up 5,000,000 From the last time we spoke, that's almost like 1.75 times what we did in 2019 and 2024 is trending up nicely. We've got almost $30,000,000 on the books and that's up roughly 30% versus the same time last year. Yes, MICE groups are big contributors to non packaged and that's why you saw Some sequential step ups in kind of the back half of last year as more groups came back. Speaker 100:32:25You just think about the nature of it. 1, you've got the group or the company who's Having holding the events, right? And so they're spending event dollars and presentation dollars or big celebration on the beach, etcetera. And then the guests who are coming as part of those groups usually are not paying themselves. A lot of times they're either coming by themselves or they're bringing a guest or a spouse. Speaker 100:32:46And so they've got more out of pocket capacity because then they've got extra time to go to the spa or wine upgrades, things like that because they didn't pay for the vacation in the 1st place. So it's a Solid base of non package. And quite honestly why, as you can imagine, our Xevo, Xilar and Cap Cana has been one of the best non package performers Sequentially over the last year because of the influx of MICE business and to the credit of the general manager and the staff there, some of the Neat initiatives they've done on property to continue to push non package. Speaker 700:33:15Okay. Thank you very much. Nice quarter. Speaker 100:33:17Thanks, Chad. Operator00:33:19The next question comes from Smedes Rose with Citi. Please go ahead. Speaker 600:33:26Hi, thanks. I was just wondering if you could just talk kind of bigger picture about what you're seeing on the competitive side in terms of any new Supply coming into the market that you could speak to? Speaker 200:33:38Sure, Smedes. It's not anything significant. So kind of Due to the pandemic, many projects got kind of put on the back burner. I mean, There are new projects happening, but it's not a significant level and it's not impacting Any kind of market dynamics whatsoever. So overall, it's just kind of steady, modest new projects. Speaker 200:34:08Then usually where you're seeing Speaker 100:34:09it, as we've said in the past, where you do see some supplies again further and further away from the airport because the prime mature markets are essentially built. Like Even if the overall Yucatan Peninsula is projecting mid single digit room supply growth, it's less than 2 percentage points in Cancun properties, there's nowhere else to go. So that's the benefit of having been in these markets for as long as we have. Speaker 600:34:34Okay. Thanks. And then I just wanted to ask you maybe a little bit more about the relationship with Wyndham at this point. You've had the Ultra conversions underway for, I guess, a few quarters now. Could you just speak to how that relationship is going? Speaker 600:34:50Are you happy with The lift at those properties since they were rebranded? Speaker 200:34:56Sure. In short, the relationship is going incredibly well. We couldn't be happier with our relationship with Wyndham, and I think it's probably mutual from their standpoint too. The Wyndham Ultra was the brand that they created targeting all inclusive to the Wyndham customer. At that price point in the all inclusive market, that's probably the largest segment of the all inclusive market. Speaker 200:35:26When we were looking at brands that we could partner with, it was very important to us to partner with The highest quality possible brand because that kind of price point segment is so large and so important to us. And The projects we've done so far have performed well. The contribution from Wyndham is solid and growing, and we think it will grow Even more in the future as there are more and more Wyndham Ultras. We are working our development team, working very closely with their development team. And Hopefully, you'll see additional Wyndham Ultra announcements in the near future. Speaker 200:36:07But Overall, I think it's a great opportunity for both us and Wyndham, just because of the number of opportunities. And most of those Our conversion opportunities. So these are not ground ups that take a significant amount of time to get up and going. These are ones that require a modest To a little more significant PIP that can be getting done very quickly and start to deliver higher results Very quickly. And what's happening is owners in our space are seeing the success that we've had, and I think it's going to drive more conversion To the Wyndham Ultra brand. Speaker 600:36:48Okay, thanks. And then can I just pop in one more? Just could you maybe update on where you are on selling the 2 JUUL Properties and maybe kind of what just a little bit more about the process and timing? Speaker 200:37:00Sure. We're well in the process. But as we have said over the years to anyone who's listened to us, in our part of the world, things move a little slower, Okay. And it's just the nature of the beast. But we feel highly confident that we'll conclude transactions, but we can't at this time Give any kind of more clarity or definitive timing on that, but the process has been underway and is moving well. Speaker 600:37:33Okay. Thank you. Speaker 400:37:35Thanks, Piyush. Operator00:37:38Our last question comes from Chris Woronka with Deutsche Bank. Please go ahead. Speaker 800:37:45Hey, good morning, guys. Thanks for all the details so far. Speaker 600:37:50Just had Speaker 800:37:51a question on the going back to the Juul sale. I think you guys, it's around potential disruption impact. I guess the question would be how I think you know that when properties are known to be marketed for sale, sometimes it's tough to get Not only customers, but employees, right? It's just kind of a tough process with the uncertainty. So I mean, how I guess, how what kind of level of conviction do you have in those disruption numbers? Speaker 100:38:23Yes. So I think we feel pretty good. So when you think about it like this, like there's a few contributing factors To kind of how we're seeing the JUULS play out for the rest of the year. So one, you heard us talk about on the last call, the timing and just the overall process of the takeover from those properties essentially at the very beginning of high season, essentially empty and the fact that we needed to do some very small Renovation work while the properties were empty in the 1st couple of months of the year was certainly not ideal. And that, as you can imagine, leads us to missing, Obviously, the high season as well as our summer selling window, particularly to Europeans. Speaker 100:38:59We said it on the call, our booking window has remained at a little over 3 months. So one that makes it hard to sell for kind of the near term if people are traditionally booking 3 ish plus months out and then European, which These two properties index higher to. They roughly in the kind of Q2 and Q3 indexed about 25% European business. And they traditionally book even a little bit further out. So then and then one other thing that we did want to point out while Scheduled seats into all of our destinations are pretty robust and good in Q2 and Q3. Speaker 100:39:31We have seen a reduction in airlift into Punta Cana From Europe. Not exactly sure why, but that also impacts these two properties for the summer, just given again their higher index European customers. And then as you mentioned, there is always going to be some disruption. There are going to be some partners and tour operators and others that know they're up for sale and Are we going to assume the worst that potentially whomever you sell it to may shut it down? So there's always going to be some apprehension there. Speaker 100:40:00But Obviously, we're pretty focused on making sure that these essentially do as best they possibly can while they're under our ownership. I mean, as recently as this morning, I got some updates from the sales and marketing team on some of the strategies and overnight things they put in place and starting to see some pickup for Summertime, so we still have a long way to go. But I can trust you trust me that Bruce is pretty focused on making sure that we make the most out of them while they're still in our care. Speaker 800:40:29Sure. Great. Thanks, Ryan. And then, the segment, as we think about your customer mix Kind of normalizing and maybe it's more of a 24 thing at this point. But can we talk a little bit about channel mix? Speaker 800:40:44And Yes. Does this mean you eventually take a little bit more OTA business back? Or how do you think that all blends into what you're expecting For ADR this year? Thanks. Speaker 300:40:56Yes. I think it's I Speaker 100:40:57don't think it would change too, too much. I mean, the OTAs, as we've said in the last couple of calls, have been the slowest to recover. We've obviously grown dramatically. The direct business over the years, if you heard us talk about, and then the return of MICE, which is We've said from the beginning, we are happy to seed some direct business or especially business from any other channel into My Business Because of the rate profiles and all the non package add ons that they're willing to spend on. And it just fills holes in your business and allows the yield management Seem to yield manage even higher. Speaker 100:41:29So I don't see it changing too, too much, at least with the core owned legacy portfolio that we see today. Speaker 800:41:38Okay. Very helpful. Thanks guys. Good quarter. Speaker 100:41:42Thanks Chris. Operator00:41:46This concludes our question and answer session. I would like to turn the conference back over to Bruce Wardynski for any closing remarks. Speaker 200:41:54Great. Now thank you everyone for participating in our call today. As we said, the Q1 was our from a financial perspective was our best quarter ever. Our Playa team members continue to drive guest satisfaction at incredibly high levels, and we expect the rest of the year to be good. So thank you very much for joining us today, and we look forward to talking to you next quarter. Speaker 200:42:17Thank you. Operator00:42:22The conference is now concluded. Thank you for attending today's presentation. You may all nowRead morePowered by