Playa Hotels & Resorts N.V.

Good morning and welcome to the Playa Hotels and Resorts Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. 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 Hemel, Executive Vice President and CFO. Please go ahead.

Good morning. Thanks, Gary. Good morning, everyone, and welcome to Playa Hotels and Resorts' third 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 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 factors 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, 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, Playa's Chairman and Chief Executive Officer, will provide comments on the third quarter and key operational highlights. I will then address our third quarter results and our outlook. Bruce will wrap it up 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. Despite persistent fears of a potential slowdown in leisure travel, our business continued to perform very well during the third quarter. Booking demand has also remained strong as we head into our high season. The quarter was not without challenges, however, as Hurricane Fiona caused disruption in our Dominican Republic operations, which I'll touch on momentarily. Playa generated the highest third quarter adjusted EBITDA in the company's history as our compelling value proposition continued to resonate with travelers. As evidenced by our ADR growth compared to 2019, accelerating to approximately 53% on a reported basis, or approximately 33% on a like-for-like basis, adjusted for portfolio mix and non-cash adjustments. As of October 23rd, our playa owned and managed revenue on the books for the fourth quarter is pacing up nearly 16% year-over-year and 52% versus 2019, with ADR gains accounting for the majority of the increases. It is important to note that these figures include the material impact from the resorts we have temporarily closed in the Dominican Republic, weighing on both the comparison versus 2019 and the year-over-year comparison by approximately 20 percentage points. As we look ahead to the first quarter of 2023, revenue is pacing up nearly 40% year-over-year, with ADRs pacing up low double digits. We are pleased with our revenue and ADR pacing, which have continued to build since our last earnings call. led by a 27% increase in the mice segment revenue on the books. Based on our business on the books, we expect our reported Q4 ADR to grow at a high single digit to low double digit rate year over year. We have not observed any meaningful changes to cancellation activity or booking demand outside of the hurricane related activity pertaining to our resorts in the Dominican Republic, 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 long ago we, like many others in our industry, were forced to go to 0% occupancy and slowly rebuild back to our baseline over the past two years. So the adjustments needed to adapt to a changing demand environment are quite fresh in her 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. I still believe the recovery in leisure travel is not yet complete. The consumer trial and awareness of the all-inclusive experience still 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 strong guest satisfaction scores and the pace of our bookings. It is important to note that all of these positive trends are occurring without us recapturing a full consumer demand dynamic yet. There are still groups of customers that have not traveled since the beginning of the pandemic and the lingering impact of the U.S.' 's testing entry requirement and other travel restrictions. Combined with the lengthy lead times indicate that we have some time before all travelers are back in the air. Finally, as I mentioned before, although our headlined ADR growth compared to 2019 has been robust, the headline growth is benefiting approximately 5 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 in 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 Hyatt 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 impacting both consumers globally and the cost of operations for businesses, we are focused on pricing, to continue offering a fantastic value to our guests while managing the economic reality of higher operating expenses. Third quarter fundamentals once again exhibited an acceleration in growth versus the comparable period in 2019, with healthy occupancy and broad-based ADR strength leading to year-over-year margin improvement despite a difficult expense inflation environment and lapping record third quarter margins from the prior year. Our Dominican Republic segment had an outstanding start to the quarter, with July and August ADR up mid single digits year over year, occupancy over 80%, and resort margins expanding. July set a new post-COVID high for international airport arrivals in Punta Cana, followed by a strong August. However, we did experience a setback toward the end of the quarter as a result of Hurricane Fiona, particularly at our Hyatt and Hilton resorts in the Dominican Republic. As we stated in our September press release, although there was no structural damage to either resort, the water buildup and repairs at our F&B outlets required additional attention. We felt it was prudent to temporarily shut down the resorts to perform the cleanup and repairs as quickly as possible to ensure we return to the level of service and quality our guests have come to expect from us. The repair work is progressing nicely and will likely be completed ahead of schedule in time for the high season. While the closing of these resorts has been highly disruptive and unfortunate, I'm extremely pleased with what we have seen on the booking front. As of now, we haven't seen any material impact on bookings for Q1 at either resort and have had no mice groups cancel at Copcana. In fact, most guests were highly encouraged by the earlier than expected reopening of the resorts. We estimate that the closures were and approximate $3 million negative hit to Q3 EBITDA and about 90 points drag on resort margins. We're anticipating a 13 to 15 million impact to Q4 EBITDA. I would like to remind everyone that we carry property and business interruption insurance and have been working closely with our insurance providers to remedy the situation in a timely manner. Turning to Jamaica, the recovery continued to progress in Jamaica with Q3 international passenger arrivals into Montego Bay Airport exceeding 2019 levels following the increase in flight capacity during the second quarter. Bookings have also remained strong for Jamaica segment following the removal of Jamaica's COVID testing entry requirements in April of this year. Jamaica represents the biggest opportunity within our portfolio as ADR growth in the segment has 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. Finally, our resorts in Mexico, which have led the way during the post-pandemic recovery for Playa, had another strong quarter, with our highest segment occupancy as well as double-digit underlying year-over-year ADR growth. Shifting to bookings. focus on direct channels continues to pay off and 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 third quarter of 2022, 43.5% of Playa managed room nights booked were booked direct, up 2.2 percentage points year over year, marking the first year over year increase since our occupancy recovered to over 50%. During the third quarter of 2022, PlayaResource.com accounted for approximately 13% of our total Playa-managed room night bookings, continuing to be a critical factor in our customer sourcing and ADR gains. Taking a look at who is traveling, a little less than 40% of the Playa-managed room night stays in the quarter came from our direct channels, as our group and tour operator mix improved year over year and our OTA mix remained depressed. Geographically, our U.S. and South American customer sourcing remained steady, while our European and Canadian business improved year over year. Given the changing state of travel restrictions, we estimate our Canadian customer mix is still only two-thirds recovered, and our Asian customer mix is only 25% recovered versus pre-pandemic levels for our owned and managed properties. Our booking window of approximately four months is was significantly longer than Q3 2019 as a result of the robust pacing figures we have been sharing with you in recent earnings calls. Once again, I would like to 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.