Playa Hotels & Resorts(PLYA) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Playa generated the highest second quarter adjusted EBITDA in the company's history, with occupancy rates continuing to rebuild and ADR growth compared to 2019 accelerating to approximately 40% [8] - As of July 24, revenue on the books for Q3 is pacing up nearly 35% year-over-year and nearly 75% versus 2019, while Q4 is pacing up nearly 20% year-over-year and nearly 60% higher versus 2019 [8] - The company finished the quarter with a total cash balance of just under $349 million, net of $25 million of mandatory debt repayments, and total outstanding interest-bearing debt is $1.12 billion [28] Business Line Data and Key Metrics Changes - The second quarter fundamentals exhibited an acceleration in growth versus the comparable period in 2019, with occupancy gains particularly in Jamaica [16] - Jamaica led the portfolio in occupancy during the second quarter, with airlift capacity growth into Montego Bay accelerating by nearly 15% sequentially [17] - The Dominican Republic benefited from capital investments made prior to the pandemic, with the Hyatt Ziva and Zilara Cap Cana resorts generating a cash-on-cash return well above the target range of 12% to 15% [20] Market Data and Key Metrics Changes - U.S. sourcing increased approximately 10 percentage points compared to Q2 2019 to 67% of managed room nights, while South American source business increased nearly 400 basis points [24] - Canadian and Asian customer mix remained significantly depressed versus pre-pandemic levels, with the booking window significantly longer than Q2 2019 [24] - The company has not observed any meaningful changes to cancellation activity or booking demand, indicating a stable demand environment [9] Company Strategy and Development Direction - The company believes that ceding some occupancy in favor of ADR, mainly at Hyatt resorts, is the best path forward to establish itself as the rate leader in respective markets [15] - The focus on direct channels continues to pay off, with 42.4% of managed room nights booked directly in Q2 2022, reflecting a 6.1 percentage point year-over-year increase [21] - The company anticipates refinancing its debt and extending maturities as part of its capital allocation strategy, with a focus on pursuing value-added projects [48][79] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business outlook as long as the job market remains strong, indicating that the price certainty and value provided by Playa resonate with travelers [46] - The company expects occupancy levels to be similar to the first half of 2022, with high-single-digit year-over-year ADR growth anticipated [41] - Management noted that the recovery in Jamaica has the potential to be a meaningful contributor to EBITDA growth in 2023, with ongoing improvements expected [37] Other Important Information - The company highlighted that ADR growth is benefiting from non-cash OTA billing methodology changes and asset dispositions of lower ADR resorts [14] - The second quarter results exceeded expectations due to better-than-expected ADR and occupancy, particularly driven by demand in Jamaica and the Pacific Coast [32] - The company is actively working on pursuing time-sensitive value-added projects that have not yet been announced [88] Q&A Session Summary Question: Would the company consider selling off a joint venture piece to demonstrate property value? - Management indicated that while they would consider it from an academic standpoint, it is less likely due to a healthy cash balance and the inefficiency of the market for buying and selling assets [56] Question: Were there any concessions made for the new management contract? - Management confirmed that no concessions were made, and the owners were excited to sign the management agreement due to Playa's strong performance [60] Question: Is there any noticeable pressure on occupancy in the resort markets? - Management stated that they are not seeing any notable changes or slowdowns in occupancy, emphasizing the sustainability of their underlying ADR growth [64] Question: What are the organic growth levers for 2023? - Management highlighted the benefits of a normalized first quarter, the recovery in Jamaica, the improving MICE business, and potential capital projects as key growth drivers [73] Question: How is the company managing potential downturns in consumer spending? - Management expressed confidence that all-inclusive resorts perform well during downturns due to their value proposition, and they have levers to manage margins effectively [107] Question: What is the status of international inbound markets? - Management noted that while Europe has shown recovery, Canada and Asia are still lagging significantly behind pre-pandemic levels [109]