Playa Hotels & Resorts N.V.

Good day and welcome to the Playa Hotel's third 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 the 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 very much, Matt. Good morning, everyone, and welcome again to Playa Hotels and Resorts' third 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 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 SEC. 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 Wardinsky, Playa's Chairman and Chief Executive Officer, will provide some comments on the third quarter and key operational highlights. I will then address our third quarter results, our liquidity position, and our 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 it over to Bruce.

Great. Thanks, Ryan. Good morning, everyone, and thank you for joining us. As always, we appreciate your interest in Playa and hope that all of you are in good health and spirits as we near the holiday season. I'm sure most of you have had a chance to review our third quarter results reported last night, so let's get going with the discussion. The third quarter fundamentals once again accelerated sequentially. with occupancies picking up as flight capacity into our markets increased versus the second quarter. But the real standout was our substantial net package ADR gains compared to 2019 levels. Again, this isn't typical for a portfolio during the summer and fall months, but not much has been typical over the past 18 months. The sequential improvement was broad-based across our geographic markets and resorts, as all of our plyo-managed resorts posted like-for-like ADR increases. As I mentioned on our last earnings call, we weren't quite sure what to expect on the pricing front as we moved into the back half of the year. But the substantial revenue book position combined with pent-up demand has allowed us to maintain pricing, as opposed to cutting rates to fill rooms. With the high season approaching and a healthy amount of revenue already on the books, I'm optimistic that this trend will continue. While we did experience a typical seasonal slowdown in bookings toward the end of the summer, it's difficult to parse out how much was the result of increases in COVID cases related to the Delta variant versus what we would expect to see from normal booking seasonality. Just as a reminder, the Labor Day to Thanksgiving period is typically our slowest period of the year, slowest time of the year. In any case, the slowdown was fairly short-lived and bookings accelerated toward the end of the quarter and into Q4 so far as well. In fact, weekly revenue gains the past few weeks have reached prior peaks we achieved this spring. Looking at our segments, Mexico has led the way during the recovery, and our results there in the third quarter were once again standout, with occupancies into the 60s for the quarter, the highest ADRs on an absolute basis, and excellent flow-through. Flight capacity into Cancun ramped up nicely during the third quarter, resulting in September international passenger arrivals for the Cancun Airport exceeding 2019 levels for the first time since the beginning of the pandemic. The results in Mexico thus far are particularly encouraging as they are an indication of the profit potential for other geographic locations as they normalize with increased airlift. Moving on to the Dominican Republic, where we experienced a healthy sequential increase in international passenger arrivals that drove our approximate 10 percentage point improvement in occupancy versus Q2. Once again, our flagship Hyatt Zeevans Alara 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 third quarter, with occupancy only in the high 50s. 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. Similar to the DR, Jamaica also posted increasing occupancy in ADR sequentially each month. But the pace of flight capacity additions didn't build throughout the quarter as much as our other regions and remained significantly depressed. Demand here continues to build, though, as we look out to the fourth quarter and beyond. Our lead time is improving with the increase in revenue on the books commensurate with the expected increase in flight capacity in the fourth quarter. 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. Our focus on direct channels continues to pay off, and we are confident that Playa is well on target with our five-year plan to increase consumer direct business to at least 50% by 2023. In aggregate, during the third quarter of 2021, 41.4% of room nights booked were booked direct, down 9.3 percentage points year over year, reflecting the relative strength of our direct channels, but also a significant acceleration in group and third-party source business. During the third quarter, PlayaResorts.com accounted for 18.7% of our total room night bookings, down 4.3 percentage points year over year. Looking at 2021 as a whole, as of October 15th, ApplyResource.com has generated approximately $110 million of bookings for 21 compared to $52 million for the 2019 comparable period. This is a critical aspect of our business that I believe many overlook. We apply and drive a significant portion of our direct revenue in-house, which is now a major competitive advantage for our current portfolio and for potential managed resource in the future. Finally, 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-package spend are short-lived or particularly when customers start feeling more comfortable leaving the resorts, but this has been an area of focus for our resort general managers, given the very attractive margin profile. Finally, we recently announced a strategic partnership with Wyndham Hotels, which we believe will accelerate growth in the mid-scale and upper mid-scale segment of our portfolio by leveraging Wyndham's sizable database of customer relationships to increase exposure and awareness of the value proposition of the all-inclusive model. As part of our strategic alliance agreement, we will be converting two of our resorts in Mexico to the newly created Wyndham Ultra brand during the fourth quarter, just in time for the high season. We look forward to sharing more with you on the potential here in the coming quarters. Once again, I would like to thank all of our associates that have continued to deliver world-class service, setting us apart from the competition and allowing Playa to realize tremendous rate gains as customers recognize that we offer a truly superior product. With that, I will turn the call back over to Ryan to discuss the balance sheet and our outlook.