Playa Hotels & Resorts N.V.

Good day and welcome to the Playa Hotel second quarter 2021 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ryan Emel. Please go ahead.

Thank you, Matt. Good morning, everyone, and welcome again to Playa Hotels and Resorts' second quarter 2021 earnings conference 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 the company's actual results to differ materially from what has been communicated. Forward-looking statements made today are effective only as of today, and the company undertakes no obligation to update forward-looking statements. For a discussion of some of the factors that could cause our actual results to differ, please review the risk factor section of our annual report on Form 10-Q, which we filed last night with the Securities and Exchange Commission. We've updated our investor relations website at investors.plyoresorts.com with the company's recent releases. In addition, a reconciliation to GAAP of the non-GAAP financial measures we discussed on this call were included in yesterday's press release. On today's call, Bruce Hordinsky, Playa's Chairman and Chief Executive Officer, will provide some comments on the second quarter and key operational highlights. I will then address our second quarter results, our liquidity position and outlook. Bruce will then wrap up the call with some concluding remarks before we turn it over to Q&A. With that, I'll turn the call over to Bruce.

Great. Thanks, Ryan. Good morning, everyone, and thanks for joining us. As always, we appreciate your interest in Playa and hope that all of you are in good health and spirits and enjoying the summer. I'm sure most of you have had a chance to review our Q2 results reported last night, so let's begin the discussion. Our second quarter results exceeded our expectations, as the momentum that began in March carried through into the second quarter, driven by strong close-in demand, pricing discipline, and increased airlift into our destinations, all of which led to a spectacular month of June for Playa. All segments reported higher occupancy levels as compared to the first quarter. with many also delivering higher sequential ADRs, a phenomenon we don't typically see in our resort destinations. Importantly, while our guest mix toward premium resorts has boosted reported ADRs, all of our owned and managed resorts also reported same resort ADR growth versus 2019 for the month of May and June. Given we have never managed through such a large-scale reopening with the nuances that the pandemic has presented, Our base case assumption was that our extraordinary revenue on-the-book percentage gains compared to prior years would normalize as we approach the second half of 2021. That has not been the case. Our revenue on-the-book percentage gains have largely remained steady, while ADRs across all segments have continued to build for future periods. In addition, while it is still early, we are not currently seeing any noticeable impact on our bookings or cancellations as a result of the Delta variant. Looking ahead, forecasted airlift into our destinations is expected to increase significantly during the third quarter, but we are not necessarily banking on this, given the fits and starts with the easing of travel for Europeans and Canadians, which account for quite a bit of the expected airlift ramp. Looking at our segments, Mexico has led the way during the recovery, and results there in the second quarter were once again the standout. with comparable occupancies into the high 50s for the quarter, the highest ADRs on an absolute basis, and excellent flow through. Flight capacity in our Pacific segment destinations has significantly outpaced all other destinations, with Los Cabos reporting international passenger arrivals during the second quarter increasing versus 2019, and Puerto Vallarta also crossing that threshold in the month of June. As I mentioned, the quarter finished on a strong note, with occupancy levels in Mexico increasing into the 60s, keeping our resorts in compliance with local occupancy limitations. As is usually the case, there have been some challenges, namely rising COVID-19 cases in recent months in Mexico, likely due to the Delta variant, and the sporadic return of sargassum. With respect to COVID-19 cases, The good news is that fewer than 15 basis points of the nearly 200,000 guests we have tested so far generated positive results. Moving on to Jamaica. Following a strong March, Jamaica surprised us once again during the second quarter, as international passenger arrivals sequentially improved by over 30 percentage points compared to 2019. Our occupancy gains during the quarter were capped off with the month of June approaching 60%. far beyond what we thought was possible at the time of our last earnings call. Demand here continues to build as we look out to the fourth quarter, which is when flight capacity is expected to see a sizable ramp. We are very encouraged by the increased demand in Jamaica, which was our best performing segment prior to the pandemic. And we do not anticipate the market being structurally impaired or on weaker competitive footing, despite its slower start after reopening last year. Similar to Jamaica, the Dominican Republic also experienced a nice sequential increase in international passenger arrivals, which drove our approximately 20% improvement in occupancy versus Q1. Once again, our flagship Hyatt Ziva and Zalara Copcana led the way, as it has established itself as a rate leader in the market, with the resort's EBITDA margins nearing 40% for the second quarter. The resort's progress and ramp give us further confidence in achieving our goal of 12% to 15% stabilized cash-on-cash returns on our investment there. The segment's overall performance was weighed down by our two externally managed properties, which have lagged behind our globally branded resorts in the segment and also yield a significantly lower absolute ADR compared to our globally branded and Playa managed resorts. Our focus on direct channels continues to pay off, and we are confident our company is well on target with our five-year plan to increase consumer direct business to at least 50% by 2023. In aggregate, during the second quarter of 2021, 48.5% of room nights booked were booked direct, down 2.7 percentage points year over year, reflecting the relative strength of our direct channels, but also an acceleration in group and third-party source business. During the second quarter, PlayaResource.com accounted for 22% of our total room night bookings, down 6.5 percentage points year over year. Looking ahead at 2021 as a whole, as of July 15th, PlayaResource.com has generated approximately 102 million of bookings for 2021, compared to 6 million for 2020 at the same time last year, and versus 47.5 million for the 2019 comparable period. As a reminder, we anticipated that as the world slowly returned to normal, our mix of direct business would likely fall below 50%, but still believe it will remain higher than levels seen immediately prior to the pandemic and significantly higher on an absolute dollar basis. Though modest in dollars, non-package revenue continues to be another pleasant surprise of the recovery, driven by pent-up demand and an improved execution on our offerings. Again, it is difficult to gauge if the current levels of non-packaged spend are short-lived, but this has been an area of focus for resort GMs given the attractive margin profile. Finally, I cannot reiterate enough how impressed I am by our team. Their ability to adapt and execute continues to surprise me and our guests. So once again, I would like to thank each and every one of our associates for their dedication and passion to delivering service from the heart. and making Playa a success. With that, I will turn the call back over to Ryan to discuss the balance sheet and our outlook.