Playa Hotels & Resorts(PLYA) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2019 was $15.8 million, a 39% decrease compared to the same period last year [21] - Comparable net package RevPAR decreased by 2.7% during the quarter, with a 160-basis-point decline in occupancy and a 70-basis-point decrease in rate [21] - Comparable net package RevPAR in the Dominican Republic decreased by 30.8%, driven by a 19.7-point decrease in occupancy and an 8% decrease in ADR [26] Business Line Data and Key Metrics Changes - In Jamaica, comparable net package RevPAR increased just under 8%, and property-level EBITDA increased by 30% [25] - The Pacific Coast saw a net package RevPAR increase of 9%, with owned-resort EBITDA increasing by 57% [23][24] - In the Yucatan, comparable net package RevPAR declined by 5.5%, with a 6.3% decline in ADR [22] Market Data and Key Metrics Changes - The Dominican Republic experienced a 30.8% drop in comparable RevPAR, with a significant impact on EBITDA margins [26][17] - Direct bookings increased significantly, with 23% of Playa-managed room nights being direct, up 620 basis points year-over-year [9] - European-sourced business improved from 32% in Q1 to 45% in August and September [31] Company Strategy and Development Direction - The company is focused on increasing direct bookings to at least 50% by 2023 and is investing in technology to enhance customer experience [9][12] - Strategic partnerships with globally recognized brands like Hilton and Hyatt are seen as key to driving high-value guests [10] - The company is exploring asset sales to unlock value while continuing operational initiatives to improve sales and profits [42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the Dominican Republic, despite slower-than-expected progress [19][41] - The company anticipates a sizable ramp in free cash flow generation in 2020 as newly renovated properties come online [12] - Management highlighted the importance of maintaining rate integrity to support long-term EBITDA growth [30] Other Important Information - The company repurchased approximately 846,000 shares at an average price of $7.54 per share during Q3 [18] - The impact of the Thomas Cook bankruptcy resulted in an $800,000 write-off [35] - The company expects net leverage to peak in the high 5s or low 6s during Q4 but to de-lever quickly in 2020 [37] Q&A Session Summary Question: Status of investigations in the Dominican Republic - Management noted that there is a lack of official information, but media reports indicate that the FBI concluded investigations without linking deaths to alcohol tainting [47] Question: Plans for non-managed properties in the Dominican Republic - Management indicated that they do not foresee shutting down non-managed properties, as they expect positive cash flow during the high season [50] Question: Stability in the Yucatan market - Management confirmed that Cancun is stabilizing, while Playa del Carmen remains softer due to ongoing renovations [53] Question: Return expectations for Hyatt Cap Cana - Management expects mid-teens EBITDA in the first year, with potential risks due to broader market conditions [58] Question: Impact of competitive discounting in the Dominican Republic - Management acknowledged the risk of competitive discounting but emphasized the strong performance of branded properties [60]