Playa Hotels & Resorts N.V.

Good morning, everyone, and welcome to the Playa Hotels and Resorts Q4 2022 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 key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Ryan Emil. Please go ahead.

Thanks, Jamie. Good morning, everyone, and welcome to Playa Hotels and Resorts' fourth 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 uncertainty 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-K, which we filed last night with the SEC. 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 releases. On today's call, Bruce Wardinsky, Playa's Chairman and Chief Executive Officer, will provide comments on the fourth quarter, demand trends, and key operational highlights. I will then address our fourth 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. The fourth quarter capped off Playa's best year in a relatively short history as we continue to execute on our strategic objective of increasing the value and service we provide our guests while yielding ADR appropriately as demand and awareness of our high-quality resorts continue to build. Despite persistent fears of a potential slowdown in leisure travel, our business performed well during the fourth quarter and our net bookings for the Playa-owned and managed properties have reached new weekly highs so far in 2023. We have seen no noteworthy changes in cancellation activity, but as we have previously stated, we will adjust our costs and operating protocols accordingly if there were to be a pullback in guest demand. Playa generated the highest fourth quarter adjusted EBITDA and owned resort EBITDA margin 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 67% on a reported basis or approximately 46% on a like-for-like basis adjusted for portfolio mix and non-cash adjustments. I'd like to note that these ADR gains coincide with our own and third-party NPS scores reaching new highs, a true testament to the attractive value proposition of the all-inclusive experience. particularly in an inflationary world. As I mentioned before, although our headline ADR growth compared to 2019 has been robust, the headline growth in the fourth quarter benefited by approximately 20 percentage points from non-cash adjustments, 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. It is also worth noting that the absolute underlying ADR dollar change versus 2019 during the second half of 2022 was less than $100. Strategically, we still believe that ceding 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, is more manageable from an operations perspective and and improves the overall guest experience. Fourth quarter fundamentals exhibited a sequential acceleration in growth versus the comparable period in 2019, and on a year-over-year basis with healthy occupancy and broad-based ADR strength leading to year-over-year margin improvement despite a difficult expense inflation environment, lapping record fourth quarter margins from the prior year and the impact of hurricane-related closures, resort closures in the Dominican Republic. Jamaica had another strong quarter as the recovery accelerated during the fourth quarter, with underlying ADR growth versus 2019 roughly in line with the Yucatan segment and occupancy levels higher than Q4 18, 19, and 21. As a reminder, Jamaica removed COVID-related travel restrictions requirements during the second quarter of 2022, and we anticipated that Jamaica would see demand accelerate as this was our best-performing segment prior to the pandemic, and we didn't believe there were any structural issues that would prohibit demand from recovering. The pace of the recovery in Jamaica has been stellar, and we hope to carry the momentum going forward, particularly as the mice segment there continues to recover. Aided by a higher mix of groups, I am optimistic that the recovery in Jamaica has a healthy runway. In Mexico, the Yucatan led the way on occupancy and saw underlying ADR growth versus 2019 of nearly 50%, while the Pacific Coast reported another quarter of robust ADR growth, up 24% year over year, also aided by the highest fourth quarter group mix we have experienced in that segment. In the Dominican Republic, following the temporary closure of several resorts late in September due to the impact of Hurricane Fiona, we reopened all of the disrupted resorts largely ahead of schedule during the fourth quarter. The properties reopened better than ever. And more importantly, we experienced little to no slippage in booking demand. Finally, over the past few months, we assumed management of the two resorts in the DR that were previously managed by a third party on our behalf and rebranded them as the Jewel Palm Beach and Jewel Punta Cana, respectively. As is usually the case, there was significant disruption during the transition process as the resorts were handed over to us as largely blank slates with insignificant revenues on the book. In addition, we decided to perform some renovation work during the transition period that is not materially expensive from a capital perspective, but will require one of the resorts to be closed for a short period of time in the first quarter. I will discuss our plans for these resorts later on the call. As of mid-February, our Playa owned and managed revenue on the books, excluding the two new jewel properties in the DR, for both the first and second quarter is pacing up over 30% year over year, with ADR gains accounting for roughly one-third of the increases. It is important to note that these figures include the impact from the resorts we temporarily closed in the Dominican Republic as a result of necessary repair work related to Hurricane Fiona. During the post-pandemic period, we began to experience a slight change in our typical seasonal demand patterns as the summer period saw less of a dip in ADR versus high seasons. which we believed would be largely structural and sticky going forward because, frankly, we were previously too inexpensive relative to the product offering and a more pronounced seasonality will likely reemerge as a result of demand pushing up high season pricing, not necessarily as a result of a drop in third quarter pricing as the value is now being better recognized by the consumer. With that in mind, our third quarter revenue On the books, it's pacing up over 20% year over year, with ADR up high single digits, again, driving a significant portion of the increase. We are pleased with our revenue and ADR pacing, which have continued to build since our last earnings call. We are also pacing well ahead of last year in the mice group segment, with further potential to drive more mice business in that segment in the second half of the year. Shifting to bookings. Our focus on direct channels continues to pay off, and we are confident that Playa is on target with our five-year plan to increase transient consumer direct business to at least 50% by 2023. In aggregate, during the fourth quarter of 2022, 43.2% of Playa managed room nights booked were booked direct, up 160 basis points year-over-year, growing year-over-year for the second straight quarter. Excluding group business, approximately 47% of our playa-managed room nights booked were generated via direct channels. During the fourth quarter of 2022, playaresorts.com accounted for approximately 15% of our total playa-managed room night bookings, continuing to be a significant 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 OTA mix improved year over year, though our OTA mix remained depressed compared to pre-pandemic levels. Geographically, the biggest change in our guest mix during the fourth quarter was the resurgence of our Canadian guest mix, which was up approximately 7 percentage points year over year, nearing pre-pandemic Q4 mix levels. Our U.S. guest mix was steady year over year, but remained significantly higher than the pre-pandemic period. Our European source guest mix was down significantly year over year, but in line with pre-pandemic levels. If you recall, we had a rather large surge in European source guests during the fourth quarter of 2021, particularly from Ukraine and Russia, which subsided during 2022. Our Asian source guest mix improved modestly year over year, but remained the most depressed as it is only about 20 to 25 percent recovered. Our booking window of over three months was slightly longer than Q4 2019 as a result of the robust pacing figures we have been sharing with you in our prior earnings calls. 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. Finally, on the capital allocation front, as you may have seen, our Board of Directors reauthorized a $100 million share repurchase program in September of 2022, given the recovery in the business, moderating leverage ratios, and the attractive valuation of our stock. After the reauthorization, we repurchased approximately 7.8 million shares during 2022 and another approximately 1.5 million shares in 2023, or approximately 5.5% of the diluted shares outstanding as of the end of Q3 2022, for total proceeds of approximately $56 million. Given the current valuation of Playa stock, share repurchases have played a bigger role in our capital allocation decisions versus ROI CapEx projects. Taking into consideration the repurchases to date and the company's expected cash generation, our Board of Directors recently approved a new $200 million authorization to provide ample flexibility with respect to the company's capital allocation. While we still fully intend to pursue capital projects, their hurdle becomes that much higher when the stock is so disconnected compared to fundamentals. Also, as part of the capital allocation framework, we have decided not to pursue a significant renovation and repositioning of the two jewel properties we recently took over in the DR. and instead have engaged a broker with the goal of selling the properties in 2023 and to use the proceeds to further fund high-priority projects and to continue to repurchase shares. In the interim, we are confident that we can return these properties to profitability as we increase our sales efforts. With that, I will turn the call back over to Ryan to discuss the balance sheet and our outlook.