Playa Hotels & Resorts(PLYA) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Playa Hotels & Resorts achieved the highest third quarter adjusted EBITDA in the company's history, with ADR growth accelerating to approximately 53% on a reported basis compared to 2019, or approximately 33% on a like-for-like basis [8][12] - As of October 23, revenue for the fourth quarter is pacing up nearly 16% year-over-year and 52% versus 2019, primarily driven by ADR gains [9][10] - The company finished the quarter with a total cash balance of approximately $372 million and no outstanding borrowings on its revolving credit facility, with total outstanding interest-bearing debt at $1.1 billion [28] Business Line Data and Key Metrics Changes - The Dominican Republic segment had a strong start to the quarter, with July and August ADR up mid-single digits year-over-year and occupancy over 80%, but faced disruptions due to Hurricane Fiona [17][20] - Jamaica's recovery progressed, with Q3 international passenger arrivals exceeding 2019 levels, and bookings remained strong following the removal of COVID testing entry requirements [21] - The Mexico segment led the recovery with the highest occupancy and double-digit underlying year-over-year ADR growth [22] Market Data and Key Metrics Changes - U.S. and South American customer sourcing remained steady, while European and Canadian business improved year-over-year, with Canadian customer mix still only two-thirds recovered [25] - The booking window has expanded significantly, allowing for better visibility and planning for future quarters [88] Company Strategy and Development Direction - The company believes that seeding some occupancy in favor of ADR, particularly at Hyatt resorts, is the best path forward to establish rate leadership in competitive markets [15] - Playa is focused on increasing direct bookings to at least 50% by 2023, with 43.5% of managed room nights booked directly in Q3 2022, up 2.2 percentage points year-over-year [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of leisure travel, noting that consumer awareness of the all-inclusive experience has a long runway for growth [12][13] - Despite inflationary pressures, the company's value proposition remains compelling, reflected in strong guest satisfaction scores and booking pace [13][15] - Management is prepared to adjust costs and staffing in response to any potential pullback in consumer demand, although no significant changes have been observed [11][12] Other Important Information - The company anticipates a $13 million to $15 million impact to Q4 EBITDA due to hurricane-related closures, with an estimated $3 million negative hit to Q3 EBITDA [20][44] - The company plans to take over management of two third-party managed resorts in the Dominican Republic during Q4 2022 and early Q1 2023 [47] Q&A Session Summary Question: Competitive environment in markets - Management noted that supply growth is expected to be muted due to rising interest rates, but the strong demand in the lodging industry is a positive sign for the company [55][56] Question: Medium-term impact of Hurricane Fiona - Management indicated that the hurricane's impact was significant but manageable, with no lingering effects on bookings and a quick recovery plan in place [58][62] Question: Bookings from European customers - Management reported that European demand is recovering, with bookings returning to pre-pandemic levels, particularly in the Dominican Republic [67] Question: Direct bookings and their financial impact - Management explained that increasing direct bookings can lead to significant revenue gains, depending on the channel shift and associated costs [70][71] Question: Labor situation in new markets - Management provided insights on wage growth and labor conditions, noting that labor costs have remained stable compared to food and beverage and utility costs [78][82] Question: Expanded booking window - Management discussed that the longer booking window allows for better planning and responsiveness to market changes, driven by consumer behavior shifts [87][88] Question: Progress of Wyndham Alltra brand - Management highlighted that the Wyndham Alltra brand is performing well and presents opportunities for further growth in the market [93]