Playa Hotels & Resorts N.V.

Good morning, and welcome to Playa Hotel, the resort's second quarter earnings conference call. All participants will be in listen-only mode. If you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the call over to Mr. Ryan Eno. Please go ahead.

Thank you very much, Nick. Good morning, everyone, and welcome to Playa Hotels and Resorts' second quarter 2022 earnings conference call. Before we begin, I'd like to remind participants that many of our comments today will be considered forward-looking statements that 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 Securities and Exchange Commission. We've updated our investor relations website at investors.flyerresorts.com with the company's recent releases. In addition, reconciliations 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, Flyers Chairman and Chief Executive Officer, will provide comments on the second quarter and key operational highlights. I will then address our second quarter results and our outlook. Bruce will 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 thank you for joining us. Business momentum continued during the second quarter. Supply generated the highest second quarter adjusted EBITDA in the company's history as our occupancy rate continued to rebuild and our ADR growth compared to 2019 accelerated to approximately 40%. As of July 24th, our playa owned and managed revenue on the books for the third quarter is pacing up nearly 35% year over year and nearly 75% versus 2019. And the fourth quarter is pacing up nearly 20% year over year and nearly 60% higher versus 2019. Based on our business on the books, we continue to expect our Q3 and Q4 ADR to grow at a high single-digit rate year over year. We have not observed any meaningful changes to cancellation activity or booking demand, but we are prepared to adjust our costs and staffing appropriately if we were to see a pullback in the consumer demand environment. I want to remind everyone that not that long ago, we, like many others in our industry, were forced to go to 0% occupancy and then slowly rebuild back to our baseline over the past two years. So any adjustments needed to adapt to a changing demand environment are quite fresh in our memory, and we will act accordingly if the conditions call for it. With our book lead times at the healthiest levels we have ever experienced, we are confident in our ability to effectively manage through any potential slowdown, although we are not seeing anything on the horizon at this time. As we look ahead to the upcoming high season, we are pleased with our revenue and ADR pacing. which have continued to build since our last call, led by demand in the mice segment. I still believe the recovery in leisure travel is far from complete, and the consumer trial and awareness of the all-inclusive experience also have a long runway. In today's inflationary environment, our relative value proposition has become incredibly compelling, despite our ADR gains. This value continues to be reflected in our strongest satisfaction scores and the pace of our bookings, which are significantly ahead of last year on both revenue and ADR for the second half of 2022. It is important to note that all of these positive trends are occurring without us recapturing a full customer demand dynamic yet. There are still groups of customers, particularly families with young children, that are not traveling yet due to lingering pandemic concerns. as evidenced by the modest uptake in bookings we experienced following the removal of the USS testing entry requirement. Additionally, to date, we have not seen a full recovery of our international markets, particularly Asia, certain parts of Europe, and our Canadian guests. Finally, I want to highlight that although our headline ADR growth compared to 2019 has been robust, I would like to remind everyone that the headline growth is benefiting approximately three percentage points from the non-cash OTA billing methodology change highlighted in our earnings release, approximately 13 percentage points from asset dispositions of lower ADR resorts, and the addition of our Hyatt Copcana Resort. These are important considerations when contemplating our ADR growth sustainability and the compelling value we continue to offer our guests. Strategically, we still believe that seeding some occupancy in favor of ADR, mainly at our higher resorts, is the best path forward for playa as it establishes us as the rate leader from a competitive standpoint in our respective markets and is more manageable from an operations standpoint. With the growing inflationary pressure, not only impacting consumers globally, but also the cost of operations for businesses, we are focused on pricing to continue offering a fantastic value to our guests while dealing with the economic reality of higher operating expenses. Second quarter fundamentals once again exhibited an acceleration in growth versus the comparable period in 2019, with occupancies continuing to ramp up, particularly in Jamaica. The strength in the business was broad-based. ADR growth and occupancy gains leading to healthy margin performance despite the challenging cost environment. As we previously shared with you, the disruption from the Omicron variant had a particularly acute impact on Jamaica earlier this year. But our bookings for future periods, combined with the removal of Jamaica's COVID testing entry requirements, gave us a sense of optimism for the remainder of the year. Jamaica led our portfolio in occupancy during the second quarter and currently has more occupancy on the books for Q3 than our other segments. We estimate that airlift capacity growth compared to 2019 into Montego Bay accelerated by nearly 15% sequentially during the second quarter, which drove international passenger arrivals to finally exceed 2019 levels on a quarterly basis for the first time since the beginning of the pandemic. ADR growth in the segment lagged the impressive underlying growth exhibited in our other segments as there is a lag between demand growth and the lift to ADR as higher rated bookings mix in. In addition, future bookings in Jamaica have been stronger than our other segments following the removal of its testing requirements. This is all extremely encouraging as we always believe nothing has structurally changed in Jamaica, which was our best performing segment prior to the onset of the pandemic. This leaves considerable upside from the ongoing recovery in Jamaica as we head into the second half of 2022 and into 2023. Turning to Mexico, which has led the way during the recovery for Playa, we had another strong quarter led by better than expected close in demand on the Pacific Coast. The Dominican Republic continued to benefit from the capital investments we made prior to the pandemic, particularly the Hyatt Ziva Insular at Cap Cana Resorts, which had another stellar quarter and are now generating a cash-on-cash return well above the high end of our target range of 12% to 15% on a trailing 12-month basis with a resort EBITDA margin that was over 40% in the second quarter. Our focus on direct channels continues to pay off. We are confident that Playa is 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 2022, 42.4% of Playa-managed room nights booked or booked direct, down 6.1 percentage points year-over-year, reflecting the continued relative strength of our direct channels, including a significant acceleration in group and third-party source business. During the second quarter of 2022, PlayaResource.com accounted for 12% of our total Playa-managed room night bookings, down 10 percentage points year-over-year. This is a critical aspect of our business that I believe many overlook. We apply a drive a significant portion of our direct revenue in-house, which is now a major competitive advantage for our current portfolio for potential third-party managed resource in the future. Finally, as a reminder, we anticipated that as the world slowly returned to a new normal, our mix of direct business would likely fall below 50%, but we still believe it will remain higher than levels seen prior to the pandemic and significantly higher on an absolute basis. Taking a look at who is traveling, a little less than 40% of the Playa managed room night stays in the corridor came from our direct channels. As our group and tour operator mix improved year over year, and OTA mix remained depressed. Geographically, our U.S. sourcing increased approximately 10 percentage points compared to Q2 2019 to 67% of managed room nights, while our South American sourced business increased nearly 400 basis points. and European guests mixed one percentage point higher. Given the changing state of travel restrictions, our Canadian and Asian customer mix remained significantly depressed versus pre-pandemic levels. Our booking window was significantly longer than Q2 2019, a result of the robust pacing figures we have been sharing with you in recent earnings calls. Our length of stay during the second quarter was 2% above normal, Q2 2019 and 4% longer than Q2 2021. Once again, I would like to sincerely thank all of our associates that have continued to deliver world-class service in the face of pandemic-related challenges. Their unwavering passion and dedication to service is what truly sets Playa apart. With that, I'll turn the call back over to Ryan to discuss the balance sheet and our outlook.