Playa Hotels & Resorts(PLYA) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter results exceeded expectations, driven by strong demand and pricing discipline, with occupancy levels increasing compared to the first quarter [7][10] - The company reported a total unrestricted cash balance of approximately $238 million as of June 30, 2021, with no cash burn on a company-wide operational basis during the second quarter [17][18] - ADR growth in Q2 over 2019 was approximately 16%, with property EBITDA margins reaching around 26% at only 50% occupancy [54] Business Line Data and Key Metrics Changes - Mexico led the recovery with comparable occupancies in the high 50s for the quarter, and occupancy levels increased into the 60s by June [9][10] - Jamaica saw a sequential improvement in international passenger arrivals by over 30 percentage points compared to 2019, with occupancy approaching 60% in June [11] - The Dominican Republic experienced a 20% improvement in occupancy versus Q1, driven by the flagship Hyatt Ziva & Zilara Cap Cana, which achieved EBITDA margins nearing 40% [12] Market Data and Key Metrics Changes - The Pacific segment reported significant recovery, with international passenger arrivals exceeding 2019 levels in Las Cabos and Puerto Vallarta [27] - The overall performance of the Dominican Republic was weighed down by two externally managed properties, which lagged behind globally branded resorts [13][28] - The U.S. sourced approximately 77% of managed room nights, reflecting a shift in customer mix due to travel restrictions [30] Company Strategy and Development Direction - The company is focused on growing high-return opportunities leveraging direct booking capabilities and all-inclusive operating expertise [36][37] - Management is currently not pursuing ground-up development projects but is interested in turnkey resort opportunities that are under-branded and under-managed [37] - The company aims to increase consumer direct business to at least 50% by 2023, with 48.5% of room nights booked directly in Q2 2021 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the upcoming high season and 2022, citing strong competitive positioning and rate strength [35] - The company does not foresee significant impacts from the Delta variant on bookings or cancellations as of now [8] - Management acknowledged challenges in the labor market but noted that the situation is not as dire as in the U.S., with vaccination rates among employees being high in the Dominican Republic [80] Other Important Information - The company completed the sale of the Capri hotel, generating net proceeds of just under $50 million, which was partially used to pay down debt [18] - The MICE group business is showing strong demand, with approximately $14 million of group business on the books for 2021, and over $30 million for 2022 [21][22] Q&A Session Summary Question: What are the occupancy caps in Mexico and Jamaica? - Management stated that occupancy caps are not significantly impacting business, with caps at 70% in Quintana Roo and 80% in Puerto Vallarta, and they are focused on driving ADRs [40] Question: How are rates and ADRs expected to perform? - Management indicated that everyone is paying more, and they believe the current rate increases may reset a new floor for future pricing [41][42] Question: What is the outlook for EBITDA and margins? - Management expects that strong ADRs will allow for comparable pre-pandemic property EBITDA margins at lower occupancy levels, despite anticipated cost increases [54][55] Question: How are the externally managed properties performing? - The two externally managed properties are lagging due to being non-branded and reliant on higher-cost tour operator channels, but management hopes for improvement as airlift increases [56][57] Question: What is the competitive landscape like? - Management believes they are gaining market share due to the quality of their properties and service, and they are well-positioned to take advantage of any distressed opportunities that may arise [63][64]