Playa Hotels & Resorts N.V.

good morning and welcome to the playa hotels and resorts first quarter 2023 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 then one on a touchstone 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 Hemo with the company. Please go ahead.

Thank you very much, Ms. Navi. Good morning, everyone, and welcome to Playa Hotels and Resorts' first quarter 2023 earnings 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 quarterly report on Form 10Q, which we filed last night with the SEC. We've updated our investor relations website at investors.plyoresorts.com with today'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 Radinsky, Playa's Chairman and Chief Executive Officer, will provide comments on the first quarter demand, trends, and key operational highlights. I will then address our first 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. I would like to wish everyone a happy Cinco de Mayo and say personally, I'd much rather be at one of our resorts in Mexico than in our office in Fairfax, but I hope people are enjoying it wherever they are. Our first quarter results exceeded our expectations as the momentum in our business continued through the remainder of the high season with broad-based strengths shown across all of our markets. One housekeeping item before we begin, the fundamental, before we begin the fundamental review of the quarter. We will be sunsetting comparisons to 2019 and resuming traditional year-over-year commentary exclusively for today's discussion. Playa's owned resort EBITDA of $109.4 million in the first quarter was the highest in the company's history, despite the significant negative impact from the two jewel resorts in the Dominican Republic that transitioned to Playa Management and foreign currency headwinds. The better-than-expected EBITDA was driven by year-over-year ADR growth in our legacy portfolio of nearly 17%, bringing the reported ADR growth for the quarter to approximately 27.4%. As a reminder, our expectation was that the first quarter would represent the highest year-over-year ADR growth for 2023, as we lapped the impact from Omicron last year. Additionally, our operations teams executed extremely well at the resort level, delivering 50 basis points of resort margin expansion on a reported basis, despite an approximate 180 basis points FX drag from the appreciation of the Mexican peso. The core legacy portfolio resort margins, excluding the jewels, improved 160 basis points year over year, inclusive of 180 basis point foreign currency drag. As I mentioned, fundamental strength during the quarter was broad-based. with our core legacy portfolio surpassing 80% occupancy for the first time post-pandemic, and all geographies reporting double-digit year-over-year ADR gains. Jamaica had another strong quarter, reporting the highest year-over-year ADR and resort margin expansion among our segments, aided by a significant increase in mice revenue during the first quarter as the recovery and normalization of that market continued. In Mexico, the Yucatan once again led the way on occupancy rate for playa, while growing ADR double digits year over year. And the Pacific Coast reported its best occupancy rate during the post-pandemic period as well. As I mentioned, both segments were negatively impacted by the sharp move in the Mexican peso during the quarter, and both would have seen improved margins year over year, excluding the impact of FX. In the Dominican Republic, our legacy DR resorts excluding the Jewel Palm Beach and Jewel Punta Cana Resorts, which we are attempting to sell, also achieved their highest occupancy rate in the post-pandemic period, while driving approximately 22% year-over-year ADR growth, yielding nearly 300 basis points of resort margin expansion year-over-year. The two Jewel Resorts in the DR segment results were in line with the expectations we laid out on our last earnings call, representing an approximate 10 million year-over-year EBITDA drag. However, we expect the profit drag from these resorts to improve during the second quarter. We do not have any information to share with respect to the timing of the disposition of the two resorts, but hope to have more to share on that in the future. On the booking front, demand has remained strong despite the broader macroeconomic concerns, and we have achieved our goal of increasing Playa's transient consumer direct revenue mix of bookings, excluding the DR jewels, to at least 50% by 2023. In aggregate, during the first quarter of 2023, 51.4% of Playa-owned and managed transient revenues booked were booked direct, up 160 basis points year-over-year, growing year-over-year for the third straight quarter. During the first quarter of 2023, PlayaResorts.com accounted for approximately 10% of our total Playa-owned and managed room-night bookings, continuing to be a critical factor in our customer sourcing and ADR gains. Taking a look at who is traveling, roughly 36% of the apply, own, and manage room night stays in the quarter came from our direct channels, down 100 basis points year over year, as our group mix improved significantly year over year by 460 basis points. Our OTA mix has remained the most depressed channel compared to pre-pandemic levels. Geographically, the biggest change in our guest mix during the first quarter was the continued recovery of our Canadian guest mix. which was up approximately 400 basis points year-over-year, as well as our Mexican source guest mix, which was up 300 basis points. Our European source guest mix was down significantly again year-over-year, but in line with pre-pandemic levels. Our Asian source guest mix improved modestly year-over-year, but remains the most depressed, as it is only approximately 75% to 80% recovered. Our visibility remains a critical factor of our success, as our booking window remained at just over three months. 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 and rising operating costs. Their unwavering passion and dedication to service from the heart is what truly sets Playa apart. Finally, on the capital allocation front, We purchased approximately $41 million worth of Playa stock during the first quarter and an additional $20 million thus far in the second quarter, bringing our total repurchases since resuming our program in September 2022 to just over $107 million. We continue to believe that our stock provides a tremendous value relative to the fundamentals, and share repurchases are a phenomenal use of capital for a free cash flow. With that, I will turn the call back over to Ryan to discuss the balance sheet and our outlook.

Thank you, Bruce. Good morning again. I'll begin with a recap of the segment fundamentals, followed by an overview of our balance sheet and expected uses of cash, and conclude with our updated outlook. Before I begin, I'd like to highlight that beginning with the first quarter of 2023, we've elected to reclassify on-property room upgrade revenue from non-package revenue to package revenue to be consistent with industry trends. We've recasted prior period as well to conform with the current period presentation. And a reconciliation of the changes made to the prior reporting for 2021 and 2022 can be found in our investor deck on slide five. To turn to the fundamentals first, our first quarter results exceeded our expectations as a result of higher ADR growth and easing pressure from energy costs leading to resort margin expansion of approximately 50 basis points year over year, despite the a nearly 180 basis point headwind from foreign exchange, and a 240 basis point headwind from the two jewel properties in the Dominican Republic. The ADR strength of the broad-based, with all segments reporting double-digit year-over-year ADR growth, excluding, again, the jewel assets in the DR. As this was the first Q1 we've had in the post-pandemic period with no significant COVID-related challenges. On the cost front, as I mentioned in our last earnings call, we began to see stabilization in food and beverage and utilities costs on a per-unit basis in the middle of 2022, and we're hopeful that the inflationary pressure from these two areas will begin to ease as we moved into 2023 and lap the surge that occurred around the start of 2022. We began to see signs of improvement during the fourth quarter, and that carried over into the first quarter. Although it's nice to see some cost relief, these expenses can be volatile quarter to quarter as usual. At the segment level, Jamaica led the way in year-over-year ADR and occupancy growth and margin improvement. The segment experienced its highest group room-night mix, helping yield ADR and closing the gap versus other segments' ADR improvement compared to the pre-pandemic period. As a reminder, Jamaica got off to a slower start in 2022 due to the Omicron variant having a disproportionate impact on the segment given its COVID testing requirements at the time. On the margin front, Jamaica once again benefited from better-than-expected food and beverage and utilities expenses. Keep in mind that when comparing results in Jamaica versus other segments, that Jamaica generally has higher operating costs than other segments and typically experiences higher ADRs as well. Looking at our other segments, Yucatan Peninsula continued to deliver strong results with sequential occupancy improvements to a post-pandemic high of almost 84% and reported year-over-year ADR growth of roughly 15%. Reported owned resort EBITDA margins were down slightly 20 basis points year-over-year, namely as a result of the 370 basis point negative impact from foreign exchange. Food and beverage and utilities expenses were favorable year over year on a currency neutral basis, while other labor costs, specifically union negotiations, negatively impacted margins. Margins were also favorably impacted by the timing of sales and marketing spent. The Pacific Coast had another fantastic quarter year over year, with ADR improvement up 19%, leading to robust margin performance as utility expenses were less of a headwind year-over-year. The Pacific Coast also experienced significantly higher year-over-year mice group mix, helping drive an increase in non-package revenue per sold room. Segment margins were negatively impacted, approximately 350 basis points, again a result of the sharp fluctuation in the Mexican peso. In the Dominican Republic, our legacy resorts, the Hyatt Capcana and the Hilton La Romana, grew ADR 20% year-over-year, with occupancy of nearly 82%. Underlying non-packaged revenue per sold room growth at these resorts was also stellar due to a higher mix of mice groups. As a reminder, we reported our Hilton and Hyatt properties a bit ahead of schedule following the disruption in the fourth quarter related to Hurricane Fiona, just in time for the high season. The fundamental improvement year-over-year yet led to resort margins at these resorts approaching 50% as food and beverage and utilities expense pressure eased on a year-over-year basis compared to the fourth quarter. The segment performance was dragged down by the two jewel properties we recently assumed management of, though the performance was in line with our expectations. We continue to expect the performance of these two jewels to improve sequentially next quarter while we execute the sale process of the resorts. Turning to our MICE group business, our 2023 net MICE group business on the books is approximately $55 million versus $50 million at the time of our last earnings call and is well ahead of our final full year 2019 MICE revenue of $32 million. Looking ahead to 2024, we currently have $29 million of revenue on the books, well ahead of where we were at the same time last year. Finally, turning to the balance sheet, we finished the quarter with a total cash balance of approximately $282 million and total outstanding interest-bearing debt of just under $1.1 billion. We currently have no outstanding borrowings on our $225 million credit facility, and our net leverage on a trailing basis stands at 3.1 times. We anticipate our cash CapEx spend for full year 2023 to be approximately $70 to $90 million for the year, partitioned out between $35 to $40 million for maintenance CapEx, and the remainder to more ROI-oriented projects. Also, effective April 15th, we entered into two interest rate swaps to mitigate floating rate risk in our new 2022 term loan. We entered into a two- and three-year contract, and each have a fixed notional amount of $275 million for a total of $550 million. And each contract carries fixed SOFR rates of 4.05% and 3.71% respectively. And again, on the capital allocation front, as Bruce mentioned, we purchased $41 million of stock in the first quarter, and with our leverage ratios well below four times the anticipated free cash flow generation of the business, and the attractive valuation of our stock, we believe repurchasing shares is a very compelling use of capital and intend to continue to use discretionary capital to repurchase shares going forward, depending, of course, on market conditions. We will also continue to invest in our business to deliver value to our guests and shareholders, but the bar is high for new projects on a risk-adjusted basis, given the valuation of our stock. Now turning our attention to our 2023 outlook. Our REVPAR growth outlook has improved, driven by higher ADR gains for every quarter of the year, while occupancy has largely remained steady. We now expect full-year adjusted EBITDA of $265 million to $285 million, which is an increase from our last call. And that is inclusive of a $20-plus million negative impact from the appreciation of the Mexican peso. Fifteen... million of which is expected to hit in Q2 through Q4, assuming today's spot rate. Our core legacy portfolio EBITDA forecast has continued to improve, driven by ADR gains I just mentioned. We are also forecasting a slower ramp of the two jewel properties in the Dominican Republic in the second half of the year, as they were unable to make up ground after missing the key summer selling season. For the second quarter, we expect reported occupancy in the low 70s, which includes a mid-single-digit drag from the two dual properties in the DR. We expect Q2 reported ADR to grow low double digits on a year-over-year basis. This is compared to the previously expected high single digits to low double digits. And own resort EBITDA margins to expand year-over-year, despite an approximately $5 million year-over-year EBITDA drag in the DR from the two dual properties and continuing FX headwinds. So putting it all together, we expect Q2 owned resort EBITDA of $79 to $83 million, management and playa collection fee income of $2.5 to $3 million, corporate expense of $14 to $15 million, all leading to consolidated adjusted EBITDA guidance of $66 to $71 million. Given our booking window, we are currently 90% booked for the second quarter. For the second half of 2023, we expect reported occupancy to be in the mid-70s and year-over-year ADR growth to be up, again, mid-single digits on a reported basis. We expect legacy-owned resort EBITDA margins to be flat to modestly up on a year-over-year basis in the second half of the year, with the two jewel properties in the DR to be a drag on EBITDA during the second half of the year. So to recap, the following are key inputs to consider as you think about our full-year 2023 outlook. We expect full-year occupancy to be slightly higher than in 2022, adjusting for extraneous factors, and low double-digit to mid-teens ADR growth for the full year. We expect resort margins to improve year-over-year, despite the significant drag from the DR jewels, and again, a $20-plus million impact from foreign exchange headwinds. We anticipate a better inflation rate of our cost basket as compared to what we've experienced during 2022, although it'll likely continue to be elevated. We have good visibility on our labor costs and see the wage increases slightly higher than what we experienced in 2022, but we're experiencing lower cost inflation in food and beverage and utilities during the first quarter of 2023. And while we hope the lower prices persist, these categories can again be quite volatile. We again anticipate roughly 14 to 15 million per quarter in corporate expense, and $2.5 million roughly per quarter in management and implied collection fee income. We hope this framework helps guide you as you fine-tune your models and gives you further insight to what we're seeing and expecting. With that, I'll turn it back over to Bruce for some closing remarks. Great.

Thank you very much, Ryan. With the increasing uncertainty in the macro backdrop, we are diligently focused on the areas within our control and are carefully monitoring the landscape. We continue to believe the price certainty and amazing value provided by Flyo's all-inclusive resorts resonates with travelers, even in the face of an uncertain economic backdrop. With that, we'll open up the line for any questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Patrick Schultz with Truist Securities. Go ahead.

Hi. Good morning, everyone. Morning. Good morning. A couple questions here. First one is, Just to be clear, with the 20 million negative FX impact in your guidance, to be clear, your prior EBITDA guidance did not assume any impact. Is that correct? So that 20 million is all in you? That is correct. Okay. Thank you. Next question, and I jokingly say, you know, we are moving on past COVID because we're going to talk about seaweed here. I keep reading in headlines about this horrible seaweed in the middle of the Atlantic heading westward. Any thoughts about potential impact or do you have any, you know, conservatism baked into your numbers around that?

No, I mean, you know, that, you know, is a seasonal occurrence. You know, it happens every single summer. You know, there are some scientists who say it's going to be a little worse this year. But, you know, the nice thing about it is it goes everywhere. So it goes to Florida. It goes to all of the Caribbean islands. It goes everywhere. And people, you know, people keep traveling. So, you know, we have a variety of mechanisms we have in place at all of our resorts to deal with it. And I think we manage it relatively well, you know. But it is what it is, and it's been something we've had for literally the entire time Playa has been in existence.

Okay. Thank you. And then just one last high-level question, a long-term question here. Actually, I'll have one more question out of that as well. In three markets right now, what are your long-term intentions for possibly diversifying, continuing to diversify Playa? geographically beyond three markets?

Sure. That's a great question, Patrick. You know, our goal, you know, certainly pre-pandemic, you know, we were looking at a pretty wide-ranging, you know, geographic expansion, you know, in different parts of the world. And obviously, the pandemic, you know, kind of cut those plans short. But from our standpoint, all-inclusive is a product, is a concept that, as we said in our remarks, resonates incredibly well with consumers. You know, you've seen more and more interest, you know, from hotel companies, brands, investors, everybody in all-inclusive because it's driven by the consumer's desire to go to all-inclusive. The price certainty, the value proposition of it is very strong. So, you know, there's a very, you know, long history of all-inclusive in Europe, in the Mediterranean, in North Africa. You know, certainly in the countries that we are in, some other Caribbean countries, and, you know, some down in Latin America. You know, all of those kind of markets, ones that are big enough to support kind of the lift that we think is required, you know, to be successful, we're interested in expanding. But I think you'll see in the next, you know, one to five years, Playa expanding into new markets. So, you know, we think... You know, there's great opportunities there. And with, you know, the success that we have had, you know, it's been 10 years now. So we've been managing all-inclusive resorts for 10 years. And we have built up a very strong reputation as to our quality level. And so I think it is the time to expand. And I think you'll see that in the very near future.

Okay. Thank you. I'm actually all set.

Thanks. Thank you.

The next question comes from Tyler Batry with Oppenheimer. Please go ahead.

Hey, thanks. Good morning. So first question, just on the Q2 outlook in terms of bumping up what you're expecting for ADR, just talk a little bit more about that. What's changed in terms of what you're seeing for the second quarter?

I don't think it's anything that's materially changed other than the fact that our baseline fundamentals of our legacy portfolio have continued to move up. We haven't seen any sort of signs from the consumer's propensity to pay our rates. Our NPS scores continue to be top and best in class throughout their markets and brands. And so it's just a continuation of the strategy Bruce laid in place at the beginning of COVID. So it's really, really nice to see. Okay.

And then, I mean, it's the outlook for the... for the back half of the year on the ADR side of things? I mean, still up mid-single digits. I mean, anything worth calling out there? I mean, just continued strength in terms of leisure travel, et cetera?

Yeah, no, nothing to point out. Our messaging has always been we're focused on what we can control in our portfolio and you know, we're acutely aware of potential macro discussions, you know, in the news and others, but not seeing anything in our numbers at this point. So we're always discussing what could happen and what we would do should something happen. But right now, you know, the outlook for the back half of the year, particularly for that legacy portfolio, continues to be strong.

Okay. And then in terms of the margin outlook, you've got some moving pieces there, some Some positives and then some incremental negatives with the FX and whatnot. In terms of this, the overall portfolio, are you still expecting resort margin to be up year over year despite what's going on with the jewel properties and despite the FX issue?

Yeah, yes, you know, on a full year basis. You know, just kind of giving you some of the additional building blocks even for this quarter and just kind of help you think about and frame the rest of the year. Like, you know, as kind of Bruce and I mentioned, our legacy underlying EBITDA margins were up 340 basis points, and that's you know, 160 basis points of reported, which I know you can't see because it's varied, but, you know, offset by another 180 basis points for FX. And as we mentioned, what you can see, the total underlying, you know, adjusted EBITDA margins are 230 basis points in the quarter, which is the 50 basis points reported, adding back 180 basis point headwind from FX. And so, you know, kind of even with that aforementioned FX drag and the Joule's we were able to expand on resort margins. And so if you look ahead to the rest of the year, based on the business on the books and our forecast, we don't see a reason today why the legacy portfolio, excluding the jewels, shouldn't be able to at least maintain, if not grow, resort margins.

Okay, great. All right, I'll leave it there and pass it on. Thank you. Thanks, Alec.

The next question comes from Danny Assad with Bank of America. Please go ahead.

Are you muted Danny?

Hi, good morning guys. Can you hear me? Okay. Yep. Now we got you. Sorry about that. Um, we, we've heard from, you know, some of the other, you know, earnings calls in the last couple of weeks about, you know, rising property costs and, you know, insurance is always a big ticket item for that kept coming up. Um, but we don't, obviously you have different, you know, geographies and markets that you operate in. So just curious to know kind of what the insurance like landscape looks like for, uh, for, fly as properties?

In one word, difficult. You know, we kind of highlighted in our last call, so we actually have since completed our insurance renewal. We're in April 12th renewal. And as we anticipated, our insurance outlaying costs increased considerably on a rate for $100 of insured value, but essentially roughly in line with what we outlined and what we were expecting. You know, we won't go into, you know, significant detail on this call. It'll bore everyone. But we did make some tweaks to the structure of our policies to help mitigate and, you know, some of that explicit cash outlay in exchange for essentially some partial participation of playa and some of the risk at higher limits. But to be clear, in the case of an average storm, our expected cash outlay deductibles will be the same. And said differently, if we suffered the same large claim that we had in the DR last year, our out-of-pocket expense for deductibles and assumed proceeds from the insurance companies would be exactly the same. Got it. Okay.

Very helpful. And then my other question is just on, like, management contracts. I know you guys do pursue them. Are there any, you know, in your guidance or outlook for the year, is there anything baked in at all into like kind of entering new contracts for the year?

Yeah. So in the guidance, it's just explicitly what we have today and the ramp of those that we've recently opened at the end of last year and early this year. So not including any new ones, but, you know, it's not a major contributor, you know, in 2022, but we expect that to kind of move up into the high single digit, you you know, this year and then potentially into the double digits next year as we continue to kind of grow that pipeline and that funnel. That's an exciting part of the business. It's not a big needle mover today, but something that we're acutely focused on now.

Got it. That's it for me. Thank you very much. Thanks, Danny.

The next question comes from Chad Bainan with Macquarie. Please go ahead.

Afternoon. Nice quarter, and thanks for taking my question. Ryan, in your prepared remarks, you talked about CapEx, which I believe came up versus previously guided, mainly on the non-maintenance piece of that. So can you talk about maybe where those projects are, what returns we should expect on that non-maintenance ROI? And then related to that, how are you thinking about buybacks versus other renovation projects within the portfolio? Thanks.

Yeah. So there's a couple of opportunities in and around our portfolio that you've heard us talk about many times, explicitly talking about what we're planning on doing this year. They're more minor in nature, to be completely frank. If you think about our portfolio, the vast majority is branded now and in pretty good shape. We don't have a lot of deferred maintenance or anything like that. But we do have some kind of original Hyatt's that were converted back in 2013, or in the case of the Ziva Las Cabo had its last renovation after in 2015. So they're coming up. on normal kind of, you know, cycles for rooms, refreshes, soft goods, things like that, and specifically Las Cabos, that Ziva is a big contributor to our MICE group business, and it needs some work on the meeting space and public spaces. So what we're doing right now this year, or about to start, there'll be some rooms renovations to Ziva in Puerto Vallarta. Again, that's a small relative Ziva contributor. It punches outside its weight, so there's some light disruption there, but it's fully baked into our numbers. And then we're just doing public space renovations at the Ziva in Los Cabos, so no room disruption there. Probably expect to do some room renovations at Cabos next year, but that remains to be seen. And then, again, doing some public space renovations and some restaurant, you know, additional incremental restaurant renovations at Arzalara in Cancun. So, you know, I admittedly, they're a little more defensive in nature and just kind of keeping up with some of our other brand spanking news, even Zalara product. So I don't have explicit guidance on ROI spend there, but it's going to help us maintain, if not grow the ADRs we're seeing today, you know, particularly in Cabos, where there's a lot of competition for group for group business. And then buybacks versus other projects, like I said, the bar is still high. There are some opportunities. You've heard Bruce talk about it many times, you know, specifically the Ziva Cancun has some small adjacent land immediately to the kind of north of it. where we could do an additional rooms tower. And so we're working through some of the planning and design phases and permitting phases to be able to do that. Because that's something while the bar and return hurdle will be high versus buybacks, that'd be a great use to capital because it's one of our most outstanding, best performing, best margin properties. It quite frankly needs more rooms when it already has well over 500 rooms. And it would just be a nice, real great incremental return. But other than that, we do have other opportunities in the portfolio, but buybacks still look great when we're trading at eight-ish times consensus.

Indeed. Thank you. And then with respect to mice for 22 versus kind of what you're expecting for 23, can you give us an update on that? And then also in terms of non-package add-ons, can you just remind us, do you usually see stronger kind of incidence of purchase from mice guests, and how does that play into the guide for 23? Thanks.

Yeah, so our mice business for 23, we've got $55 million on the books. That's up $5 million from the last time we spoke. That's almost like one and three-quarters times what we did in 2019. And 2024 is trending up nicely. We've got almost $30 million on the books, and that's up roughly 30% versus the same time last year. Yes, MICE groups are big contributors to non-packaged, and that's why you saw some sequential step-ups in kind of the back half of last year as more groups came back. You just think about the nature of it. One, you've got the group or the company who's having and holding the events, right? And so they're spending event dollars and presentation dollars or big celebrations on the beach, et cetera. And then the guests who are coming as part of those groups usually are not paying themselves. a lot of times they're either coming by themselves or they're bringing a guest or a spouse. And so they've got more out-of-pocket capacity because then they've got extra time to go to the spa or wine upgrades, things like that, because they didn't pay for the vacation in the first place. So it's a solid, solid base of non-packaged. And quite honestly, why, as you can imagine, our Ziva and Zalara and Copcana have been one of the best non-packaged performers, you know, sequentially over the last year because of the influx of mice business and to the credit of the general manager and the staff there, some of the you know, neat initiatives they've done on property to continue to push non-package.

Okay. Thank you very much. Nice quarter.

Thanks, Chad.

The next question comes from Smetis Rose with Citi. Please go ahead.

Hi. Thanks. I was just wondering if you could just talk kind of bigger picture about what you're seeing on the competitive side in terms of any new supply coming into the market that you could speak to.

Sure. Sure, Smeets. It's not anything significant. So, you know, kind of, you know, due to the pandemic, many projects got, you know, kind of put on the back burner. I mean, there are, you know, new projects happening, but it's not a significant level and it's not impacting, you know, any kind of market dynamics whatsoever. So, overall, it's just kind of steady, you know, modest new projects.

And then usually where you're seeing it, as we've said in the past, where you do see some supplies, again, further and further away from the airport because the prime mature markets are essentially built. Like, you know, even if the overall Yucatan Peninsula is projecting mid-single-digit room supply growth, it's less than two percentage points in Cancun proper because there's nowhere else to go. So that's the benefit of having been in these markets for as long as we have.

Okay, thanks. And then a... I just wanted to ask you maybe a little bit more about the relationship with Wyndham at this point. You know, you've had the Altra conversions underway for, I guess, a few quarters now. Could you just speak to how that relationship is going? Are you happy with, you know, the list of those properties since they were rebranded?

Sure. You know, in short, the relationship is going incredibly well. You know, we couldn't be happier, you know, with our relationship with Wyndham. And I think it's probably mutual from their standpoint, too. The Wyndham Ultra, you know, was the brand that they created targeting, you know, all inclusive to the Wyndham customer. At that price point in the all-inclusive market, that's probably the largest segment of the all-inclusive market. When we were looking at brands that we could partner with, it was very important to us to partner with the highest quality possible brand because that kind of price point segment is so large and so important to us. And so the projects we've done so far have performed well. The contribution from Wyndham is solid and growing, and we think it will grow even more in the future as there are more and more Wyndham Altruists. We are working, our development team, working very closely with their development team. And, you know, hopefully you'll see, you know, additional Wyndham Ultra announcements in the near future. But, you know, overall, I think it's a great opportunity for both us and Wyndham, you know, just because of the number of opportunities. And most of those are conversion opportunities. So these are not ground ups that take a significant amount of time to get up and going. You know, these are ones that require, you know, a modest to, you know, a little more significant PIP that can be getting done very quickly and start to deliver, you know, higher results very quickly. And what's happening is, you know, owners in our space are seeing, you know, the success that we've had, and I think it's going to drive more conversions to the Windham Ultra brand.

Okay, thanks. And then can I just pop in one more? Just could you maybe update on where you are on selling the two Jewel properties and maybe kind of what, just a little bit more about the process and timing?

Sure. You know, we're well in the process, but, you know, as we have said over the years to, you know, anyone who's listened to us, you know, in our part of the world, things move a little slower, okay? And it's just the nature of the beast. But, you know, we feel highly confident that, you know, we'll conclude transactions, but we can't at this time, you know, give any kind of, you more clarity or definitive timing on that. But, you know, the process has been underway and is moving well.

Okay, thank you. Thanks, Smith.

Our last question comes from Chris Woronka with Deutsche Bank. Please go ahead.

Hey, good morning, guys. Thanks for all the details so far. Just had a question on the, going back to the Juul sale, I think you guys, it's around potential disruption impact. I guess the question would be how, I think, you know, that, you know, when properties are known to be marketed for sale, sometimes it's, it's tough to get, you know, not only customers, but employees, right. It's just a, it's just kind of a tough process with the uncertainty. So I mean, how, how, I guess how, what kind of level of conviction do you have in those disruption numbers?

Yeah, so I think we feel pretty good. So when you think about it like this, like there's a few contributing factors to kind of how we're seeing the jewels play out for the rest of the year. So one, you heard us talk about on the last call, the timing and just the overall process of the takeover from those properties, essentially at the very beginning of high season, essentially empty, and the fact that we needed to do some very small renovation work while the properties were empty, you know, in the first couple months of the year was certainly not ideal. And that, as you can imagine, leads us to missing obviously the high season as well as our summer selling window, particularly to Europeans. You know, we said it on the call, our booking window has remained at a little over three months. So one, that makes it hard to sell for kind of the near term if people are traditionally booking three-ish plus months out. And then Europeans, which these two properties index higher to, they roughly in the kind of Q2 and Q3 indexed about 25% European business. And they traditionally book even a little bit further out. And then one other thing that we did want to point out, while scheduled seats into all of our destinations are pretty robust and good in Q2 and Q3, we have seen a reduction in airlift into Punta Cana from Europe. I'm not exactly sure why, but that also impacts these two properties for the summer, just given, again, their higher index European customers. And then, as you mentioned, there is always going to be some disruption. There are going to be some partners and tour operators and others that know they're up for sale and are always going to assume the worst that potentially whomever you sell it to may shut it down. So there's always going to be some apprehension there. But obviously, we're pretty focused on making sure that these you know, essentially do as best they possibly can while they're under our ownership. I mean, as recently as this morning, you know, I got some updates from the sales and marketing team on some of the strategies and overnight, you know, things they put in place and starting to see some pickup for the summertime. So we still have a long way to go, but I can trust you, you know, trust me that Bruce is pretty focused on making sure that we make the most out of them while they're still in our care.

Sure. Great. Thanks, Ryan. And then the second question, as we think about your customer mix kind of normalizing and maybe it's more of a 24 thing at this point, but can we talk a little bit about channel channel mix and, you know, does this mean you eventually take a little bit more OTA business back or how do you think that all blends into what you're expecting for, uh, for ADR this year? Thanks.

Yeah, I think it's, I don't think it would change too, too much. I mean, the OTAs, as we've said, the last couple of calls have been the slowest to recover. You know, we've obviously grown dramatically, you know, the direct business over the years, if you heard us talk about, and then the return of mice, which is, as we've said from the beginning, we are happy to seed, you know, some direct business or especially business from any other channel into mice business because of the rate profile and all the non-package, you know, add-ons that they're willing to spend on. And it just you know, fills holes in your business and allows the yield management team to yield manage, you know, even higher. So I don't see it changing too, too much, you know, at least with the core owned legacy portfolio that we see today.

Okay. Very helpful. Thanks, guys. Good quarter.

Thanks, Chris.

This concludes our question and answer session. I would like to turn the conference back over to Bruce Wardensky for any closing remarks.

Great. Now, thank you, everyone, for participating in our call today. As we said, the first quarter was our, from a financial perspective, was our best quarter ever. You know, our Playa team members continue to drive, you know, guest satisfaction at incredibly high levels, and we expect the rest of the year to be good. So thank you very much for joining us today, and we look forward to talking to you next quarter. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may all now disconnect.