Playa Hotels & Resorts N.V.

Good day and welcome to the Playa Hotels and Resorts Q1 2024 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 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Ryan Himmel. Please go ahead.

Thank you very much, Zico. Good morning, everyone, and welcome again to Playa Hotels and Resorts' first quarter 2024 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 quarterly 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.plyresorts.com with the company's recent releases. In addition... reconciliations to GAAP of the non-GAAP financial measures we will discuss on this call were included in yesterday's press release. Today's call, Bruce Wardensky, Plies Chairman and Chief Executive Officer, will provide comments on the first quarter demand trends and key operational highlights. I'll then review our first quarter results and our outlook for 2024. 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.

Thanks, Ryan. Good morning, everyone, and thank you for joining us. Before we dive into our results, all commentary on comparable full-year 2024 KPIs is synonymous with our legacy portfolio, as the Jewel Palm Beach was closed for a portion of Q1 2023, and the Jewel Punta Cana was sold during Q4 2023, and thus would not be comparable for the full-year metrics. Our first quarter results exceeded our expectations, coming in well above the high end of our expected adjusted EBITDA range. The better-than-expected results were broad-based across our segments, driven by strong demand during the high season. Playa's owned resort EBITDA of $124 million in the first quarter of 2024 included a significant year-over-year foreign currency exchange headwind of approximately $4.8 million due to the appreciation of the Mexican peso, a benefit from business interruption insurance proceeds of approximately $400,000, and a modest EBITDA contribution from the dual Palm Beach resort. For Q1 2024, we estimate that FX headwinds were a negative 160 basis point impact on our reported owned resort EBITDA margin and 170 basis points drag on our legacy portfolio, which excludes the dual resorts in the Dominican Republic. Business interruption proceeds favorably impacted resort margins by approximately 10 basis points. Adjusting for all of these factors, underlying owned resort EBITDA growth was up approximately 17% in the first quarter for the total portfolio and up approximately 11% for the comparable portfolio. The strength in bookings that we began to see during the second half of 2023 carried into the first quarter, particularly into Mexico, but the demand was notable across our portfolio with all segments reporting positive year-over-year rep par growth despite the difficult growth comparison from last year's first quarter and the headwind from the shift of the Easter holiday in 2024. Our results in the Yucatan were once again quite exceptional on a currency-adjusted basis, with occupancy in line with the first quarter of 2019 but still trailing our 2018 peak, and ADR growth of nearly 3% year-over-year. Our operations team continued to execute at a high level in the Yucatan, delivering currency-neutral margin expansion of approximately 240 basis points year-over-year on mid-single-digit REVPAR growth. As you may recall, following the realignment of key management personnel, we've been revisiting various processes, staffing models, and procurement practices since the second quarter of 2023, and the results of our efforts really began to show in the second half of 2023 as ADR growth moderated. As we've mentioned on previous earnings calls, the process improvements will be iterative, and we will continue increasing efficiency where possible to help offset the impacts of rising wages and inflation in various expense categories. We believe we can hold FX neutral margins steady year-over-year in the Yucatan in 2024 on positive low single-digit to mid-single-digit ADR growth, despite continuing underlying wage pressure. In the Pacific, ADR growth was anticipated to be negative as a result of a large mice group buyout at legacy rates from 2020. However, the buyout led to a record high first quarter occupancy rate for the segment, resulting in year-over-year rep car growth of 6.2%. The strong revenue performance, combined with our cost control efforts, delivered 320 basis points of currency-neutral resort margin expansion year-over-year in the Pacific. Additionally, we've decided to accelerate our renovation plans to the Pacific and now expect the construction disruption impact on Ibidaha to be at the high end of the previously communicated range. We believe this is the best path forward to capitalize on the increased mice demand we are seeing and position our resort in Los Cabos for a strong high season in 2026 and beyond. As a reminder, the Hyatt Ziva Los Cabos has not had any major renovation work done since the renovation that occurred following Hurricane Odile in 2014. Turning to the DR, we completed the sale of the Jewel Punta Cana in late December of 2023, and the Jewel Palm Beach was closed for a significant portion of Q1 2023, which we expect will lead to a meaningful year-over-year increase in EBITDA during 2024. Results in the segment were aided by the comparison from 2023, but the core comparable resorts also had a very strong quarter with double-digit repR growth and mid-teens underlying EBITDA growth. Finally, Jamaica had another solid quarter with occupancy increasing year-over-year, reaching Q1 2019 levels and mid-single-digit ADR growth, despite a significant headwind from lower mice group mix year-over-year. Segment was off to a good start in 2024, but the U.S. State Department's travel advisory notice for Jamaica on January 23rd has had a negative impact on the segment near term, as cancellations picked up meaningfully thereafter. Although the travel advisory doesn't pertain specifically to our resorts as much as the major metropolitan areas in other regions of the country, and the level of the travel advisory was unchanged from the prior advisory, the press coverage of this advisory notice was significantly greater than prior warnings. Bookings in Jamaica saw a rapid improvement as we moved through February, giving us a sense of optimism that the impact would be fairly short-lived. But demand for the summer season did not continue to improve, leading to a significantly higher negative impact than we previously anticipated. Bulk of the impact experience so far in Jamaica has been for Q2 and Q3, with revenue pacing down mid-teens, while our fourth quarter pacing is holding up much better with a low single-digit decline. Looking at demand as a whole, we saw steady demand through the quarter, and the pacing into the summer season remains strong outside of Jamaica. In aggregate, during the first quarter of 2024, 48.4% of Playa-owned and managed transit revenues booked were booked direct on 300 basis points year over year. The decline was driven by fewer World of Hyatt redemption bookings following a spike during the first quarter of 2023 ahead of a change in the conversion rate for point redemptions, which pulled forward quite a bit of demand. During the first quarter of 2024, PlayaResource.com accounted for approximately 11.3% of our total Playa-owned and managed transient room night bookings, continuing to be a critical factor in our customer sourcing and ADR gains. Taking a look at who is traveling, roughly 41.7% of the Playa-owned and managed transient room night stays in the quarter came from our direct channels. Graphically, the biggest change in our guest mix during the first quarter was our Canadian source guest mix, which increased 110 basis points year-over-year following several quarters of year-over-year declines. While this is encouraging, our Canadian guest mix still has plenty of room to improve because it is only approximately two-thirds recovered versus pre-pandemic levels. Asian source guest mix improved modestly year over year. It remains the most depressed as it is still only approximately 25% recovered versus pre-pandemic levels. Our visibility remains a critical factor of our success as our booking window was just over three months during the first quarter. Finally, on the capital allocation front, we repurchased approximately $32.4 million worth of Playa stock during the first quarter and an additional $17.4 million thus far in the second quarter, bringing our total repurchases since resuming our program in September 2022 to approximately $280 million, or approximately 22% of the shares outstanding. Once again, I would like to thank all of our associates. who have continued to deliver world-class service in the face of unexpected challenges and rising operating costs. Their unwavering passion and dedication to service from the heart is what truly sets Playa apart. With that, I will turn the call back over to Ryan to discuss the balance sheet and our outlook.

Thank you very much, Bruce. Again, before I begin, all references to expense and margin KPIs are on a currency-neutral basis and also exclude business interruption proceeds unless otherwise stated. As we mentioned, our first quarter results were well ahead of our expectations as demand remained strong throughout the quarter. Healthy demand, easing pressure from food and beverage prices, and our cost efficiency efforts led to reported margin expansion of 140 basis points year over year, which included 160 basis point headwind from foreign exchange and a 10 basis point benefit from business interruption proceeds, as well as 160 basis point tailwind from the two jewel results in the Dominican Republic. But taken all together, underlying reported resort EBITDA margins increased 290 basis points year-over-year in the first quarter. Adjusting for FX and business interruption, our legacy portfolio delivered 140 basis points of resort margin expansion. On the cost front, food and beverage costs continue to be favorable as a result of lower input prices and cost efficiency efforts by our operations team. Labor costs were also favorable in the quarter, reflecting our efficiency measures, but wage inflation generally remains a headwind. As Bruce mentioned, we are undertaking efforts to streamline and improve our procurement processes across the entire portfolio and take advantage of our scale. These efforts are really just beginning to bear fruit from the heavy lifting undertaken in 2023, and we expect the benefits to accelerate as the company moves throughout 2024 and beyond, as our cost savings are averaging mid-single-digit to high-single-digit improvements per category. We estimate that we've only penetrated approximately 30% of the potential procurement savings thus far, with half of the savings flowing through our costs during the fourth quarter of 2023. Underlying expense inflation has remained steady since our last update, with any changes in our margin expectations for the year resulting from higher construction disruption and deleveraging in Jamaica from weaker demand. Turning to our MICE Group business, our 2024 net MICE Group business on the books is approximately $65 million, up roughly 12% compared to the same time last year. Our mice business is much more balanced on a year-over-year basis compared to what we experienced during 2023, as 2023 left incredibly difficult mice comparisons in the second half of the year. Finally, turning to the balance sheet, we finished the quarter with a total cash balance of $285.3 million and total outstanding interest-bearing debt of approximately $1.09 billion. We currently have no outstanding borrowings on our $225 million revolving credit facility. Our net leverage on a trailing basis stands at 2.8 times, excluding lease capitalization. We anticipate our cash capex spend for full year 2024 to be approximately $110 to $120 million for the year, partitioned out between approximately $40 to $50 million for maintenance and other critical capex, and the remainder designated for ROI-oriented projects. This increase is largely due to the acceleration of the previously discussed renovation at our Hyatt Ziva Los Cabos Resort. Also, as a reminder, effective April 15, 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk in our term loan due 29. We entered into a two- and three-year contract, both of which have a fixed notional amount of $275 million and carry a fixed SOFR rates of 4.05 and 3.71, respectively. Separately, we've implemented foreign exchange hedges on approximately half our Mexican peso exposure for 2024, which had greatly reduced the volatility of the impact of our reported EBITDA this year. Based on the exchange rates at the time we entered into the FX forwards, we estimate the full year 2024 EBITDA impact from the Mexican peso year over year to be approximately 7 to 10 million, which is slightly better than our previous outlook of 7 to 11 million. Nearly 75% of the impact is expected to be in Q1 24, and nearly 100% of it in the first half of the year based on current spot rates. On the capital allocation front, as Bruce mentioned, we repurchased an additional $32.5 million of stock during the first quarter, an additional $17.5 less far in Q2-24. Since we began repurchasing shares last September, we've purchased over 36.6 million shares, or approximately 22% of our shares outstanding at the time. We still have over $145 million remaining on our existing repurchase authorization. With our leverage ratios at or near three times, The anticipated free cash flow generation of the business and the attractive valuation of our stock, we believe repurchasing shares is still a very compelling use of capital and tend to use our discretionary capital route to repurchase shares going forward, depending on market conditions. Now, turning our attention to our outlook for 2024. First, I'd like to remind everyone of the unique items affecting comparability of our financials compared to 2023 before we dive into the outlook. First, with foreign exchange, as a reminder, the appreciation of the Mexican peso had a $24.5 million impact on adjusted EBITDA in 2023. Business interruption, as a reminder, in 2023, we recognized $6.1 million of BI proceeds, with $4.3 million of that coming in the second quarter of 2023, and approximately $900,000 in Q3 and Q4, respectively. The DR jewels, They recorded an EBITDA loss of approximately $15 million in 2023 and negatively impacted owned resort margins by approximately 280 basis points. Roughly a third of their loss occurred during the first quarter of 2023, as the Jewel Palm Beach, as a reminder, was closed for the majority of the quarter. So with all that in mind, looking forward, we continue to expect full-year 2024 adjusted EBITDA to be between $250 million $275 million, which includes the following key considerations and inputs. We expect occupancy to be up low single digit percentage points for the total portfolio and down modestly for the legacy portfolio. This change reflects the travel advisory having a continuing negative impact on demand into Jamaica. We expect ADR growth of mid single digits for the total portfolio and low single digits with a comparable legacy portfolio. The driving force of the delta between the two is a positive 360 basis point impact from removing the lower ADR room night mix from the Jewel Punta Cana that we sold last year and partially offset by the ramping occupancy at the Jewel Palm Beach Resort. We expect rev bar growth of high single digit to low double digit for the total portfolio and low single digit for the legacy portfolio. We estimate that the disposition of the Jewel Punta Cana Resort and ramping occupancy at the Jewel Palm Beach Resort contributes approximately 900 basis points to 2024 REF PAR. But the vast majority of that contribution being the result of disposing the Jewel Punta Cana Resort last year and only a modest contribution to REF PAR from the Jewel Palm Beach Resort as improving occupancy is partially offset by the negative mix of Palm Beach's ADR. We still expect foreign exchange headwinds, as we mentioned, of approximately $7 to $10 million year-over-year based on current exchange rates and net of NAFX forwards. As Bruce mentioned, we expect construction disruption impact of high single-digit dollars of EBITDA in the Pacific and at the high of the Lara Cancun. And inflation, as we've mentioned several times on the call, we've been diligently working to improve our efficiency, and we believe we've lowered our margin leverage hurdle significantly. approximately 4% ADR rate growth to hold margins flat on a currency and business interruption adjusted basis. We expect a modest net negative impact from annualizing corporate expense increases from 2023, partially offset from higher and growing fee income. With respect to the cadence of our profitability, we expect the first quarter to show the most robust profit in the year given the Q1 2023 comparison, which included a $5 million loss at the DR Jewels. The drag from construction disruption and the weaker demand in Jamaica are likely most pronounced in the second and third quarter and hopefully improve somewhat in the fourth quarter. And now turning our attention to the second quarter, we expect reported occupancy to be in the low 70% and reported package ADR to increase mid-single-digit percentage on a year-over-year basis. We expect owned resort EBITDA margins to decline significantly year-over-year given the $4.3 million of business interruption proceeds recorded in Q2 of last year, which was a positive 180 basis point impact to the comparison period, and continuing foreign exchange headwinds in Mexico, which are expected to negatively impact margins by approximately 80 to 100 basis points. And altogether, we expect Q2-owned resort EBITDA $67 to $72 million, Ply collection and management fee income of $2 to $3 million. Corporate expense of roughly $15 to $16 million, which includes a negative FX impact. Finally, adjusted EBITDA of $54 to $59 million. Given our booking window, we're currently 90% booked for the second quarter. We hope all that framework helps guide you as you fine-tune your models and gives further insight into what we're seeing and expecting. With that, I'll turn it back over to Bruce for some closing remarks.

Great. Thanks, Ryan. So the year's off to a good start with solid top-line growth, despite the setback in Jamaica from the travel advisory and lapping difficult comparisons from 2023. We remain focused on the areas within our control, such as our expense efficiency efforts and ongoing portfolio optimization. With respect to the portfolio, our Hyatt Siva Los Cabos was among the first of our resorts to undergo a significant remodel following Hurricane Odile nearly 10 years ago. While the resort has performed extremely well, we expect our current renovation will significantly improve its competitive positioning in this key market. Our other successful early Hyatt renovations and conversions are also approaching the point in their life cycles for a refresh in the coming years. namely Hyatt-Zalara Cancun, Hyatt-Ziva, and Zalara Rose Hall. We are targeting these resorts for renovations next year, funded by the recycling of capital from non-core asset dispositions. Given the nature of the work involved and the specific footprints of these resorts, we expect the disruption to be greater than what we have recently experienced in the Pacific, which was done over multiple years. We will be back with more information on these projects later this year, but I am incredibly optimistic about the potential for our Hyatt Solara Cancun, as this resort sits on a prime piece of real estate and has performed well given the limited direct supply growth. The renovation of this resort has the potential to add significant value to the portfolio. Our Hyatt Ziva and Zalara Rose Hall have been significant drivers of EBITDA since the completion of their conversions in 2016 and have a large established position in the MICE segment. These resorts in a key market with limited supply growth and close proximity to the airport in Montego Bay also have the potential to drive meaningful value for years to come. In addition, we will consider room tower additions adjacent to our existing resorts, which should generate meaningful returns on capital and drive incremental EBITDA, but that is not a high-probability near-term endeavor for us. With our ROI projects largely funded with recycled capital, we will continue to redeploy the significant free cash flow we generate into share repurchases and maintaining our market-leading assets, setting us up for success beyond 2024. With that, I'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 are 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 2. At this time, we will pause momentarily to assemble our roster. The first question is from the line of Smidis Rose with Citi. Please go ahead.

Hi, thank you. First, Bruce, I guess I just was interested if you could talk a little bit more about what sounds like waning demand into Jamaica. And I'm just kind of wondering, since there's warnings have sort of been out for a while. Why do you think they're having a larger impact in the second quarter? And is it really more sort of corporate groups that are switching out, so you're having to sort of backfill with more transient? Or maybe just sort of talk about sort of the trends there and why you think they're playing out this way.

It's a great question. I mean, you know, from our standpoint, you know, we can't really answer that. You know, we have a very strong booking window and we see that the weakness is kind of broad based. So it's not just on the group side. It's across, you know, it's across the transient as well. If you look at the quarter, I would say the two things that kind of jumped out to me was, number one, just the strength of demand, particularly in the high season, but also just the overall strength of demand, and we're seeing it through the rest of this year. And the other one is the concern people had about ADRs and the fact that we're not seeing any issue with ADRs. And so they're more than sustainable, and it's what we've always said about the price-value relationship. And value is... It's kind of in the eye of the polder. It's still, in my opinion, relatively cheap and a great value proposition for people to go. So when you look at Jamaica, it really stands out from the standpoint of we have this very strong demand and we're getting good rates. And why it's so significant, I really don't know. I've been in very close contact with Adam Stewart, who's the head of Sandals. We intend to push the government to do something. Quite honestly, the government has really been asleep at the switch and has not done anything proactive to try to address the situation. Zandals has a much higher concentration in the country than even we do. So, you know, we're going to be pushing to see what we can do. You know, fortunately, you know, what we see for the fourth quarter doesn't look as bad as Q2 and Q3, so that's good news. And I think, again, it shows the resiliency of our business, particularly in the high season where we generate so much of our EBITDA. But, you know, we need to address this issue short term, and we're not, you know, we're not just – sitting idly by where we're trying to do all kinds of initiatives and push it. But it doesn't make sense. I mean, one of the things, for example, is, you know, the areas covered under the travel advisory are really nowhere near Montego Bay in the resort zone. So, you know, if you look at where we are located, you know, which is in, you know, on the north side of the island, completely, you know, kind of resort zone. corridor, you know, there's not really any significant issue. It's on the other side of the island, the south side of the island primarily, and, you know, there's a big mountain range in between. So we're going to try to communicate some of that and hopefully drive some additional business. But we're at a loss for why it's so significant.

Okay. And then I just wanted to follow up, if I could, just on something you mentioned sort of at the end of your remarks about the Hyatt Viva Solar in Cancun going under renovation next year. I don't know if you can provide this, but I mean, I would imagine that's one of your bigger sort of EBITDA generators across the portfolio. I mean, can you maybe just speak to, well, I don't know if you can provide what percentage it is. That would be great. But can you just speak to how you were going to manage, you know, EBITDA coming out of that asset and balancing it against the need for renovation? And I think you've talked about a new room tower there in the past.

So to be clear, we are only talking about the Zalara Cancun at this point. We are not referring to any renovation at this point for next year for Ziva Cancun. We're still going through a lot of these plans internally and going through scope, and that's why Bruce mentioned we'll be back with more information. But what we're specifically talking about is the potential need to target the Zalara in Cancun, which is about a 300-room property, and the Ziva Zalara in uh, Hyatt in Rose hall. So the Zalara, you know, rough figures has been roughly a high teens, almost $20 million EBITDA contributor, uh, for our overall portfolio, you know, adjusting for FX. And so it's a good contributor just given the number of rooms. But as you recall, that property was essentially, I think I've done this before on a call, I'm using air quotes right now, you can't see me, but it was converted to a Hyatt in 2013 when we recapped the company. And since then, we've done some things to the ancillary services, like we've renovated the spa, we've renovated the gym, done some things to coffee shops and restaurants. But generally, the rooms have just been repainted and have not been touched since we took over the property more than 10 years ago. And it's essentially lived under the umbrella of the Ziva Cancun up the street. So just given its proximity to the airport, the location in the prime real estate spot in the hotel zone in Cancun, it's overdue, quite frankly, for a renovation. And so, again, scope and timing will come later this year. But in the past, we have discussed potentially running it through high season or effectively Easter, and then potentially closing the property down for the remainder of the year to contain any lost EBITDA for the last, call it, eight to nine months of the year and reopening in time for the high season. Again, more information to come there, but that's generally the plan we've discussed in the past.

And let me just add to that just kind of the strategic rationale. So like Ryan said, it's been over 10 years, and we haven't done, you know, a room for innovation. So, you know, just from a normal course, you would do that. But I think, you know, the opportunity here at Zalara Cancun is even more significant. You know, when we acquired that back in 2013, the rates that were being obtained here you know, for that type of resort in Cancun, we're good, but not kind of at the exceptional level that we're seeing, you know, for example, with our newer properties like, you know, Hyatt's, even Solara Capcana, you know, and even Los Cabos. So I look at Cancun being the number one all-inclusive market and the high level of demand. And the fact is that we have a relatively limited number of rooms at Hyatt, Solara, Cancun. So that demand profile is incredibly strong already. And then you have the ability to put an exceptional product there on, as Ryan described, probably the best kind of beach in the hotel zone in Cancun. I just think we really have a great opportunity. So it shouldn't be passed. This isn't just a renovation. This is absolutely an incredible resetting of the floor for Zalara Cancun.

Thank you. I appreciate it.

Thank you. The next question is from the line of Chad Bean with Macquarie. Please go ahead.

Morning. Thanks for taking my question. Bruce, I wanted to ask kind of a two-parter on Jamaica. One, can you just frame out, I'm not sure if you mentioned this in the prepared remarks, but what spring break or kind of the lead up to Easter in Q1, maybe just March in general, looked like versus prior to your period? Was there an impact? And then secondly, on the look forward in Jamaica, is your approach to hold ADR and not fill the rooms with locals? I know in the past there was some good demand. Could you just kind of help us think about, you know, what will be locals versus tourists in your model right now? Thank you.

Sure, sure. And I'll just kind of address the second part, and then I'll pass over to Ryan. He can give you more, you know, kind of on the first quarter and the, you know, EBITDA impact in Easter. But our strategy absolutely is to hold ADR. You know, since we came out of the pandemic, you know, we have been very focused on that, and we don't believe, you know, there's anything – you know, kind of permanent or even longer term from this situation in Jamaica. We need to deal with it. But, you know, whenever you kind of reset your race structure, I think it's a very slippery slope and it's challenging to, you know, kind of you know, regain where you were. And especially in a hotel like this, which is such a big Mike's contributor, you know, that's something, you know, we don't envision doing, you know, we have a, you know, high quality resort. We're going to maintain the high quality of that resort and ADR, you know, kind of a discipline is critical to that, but then I'll pass it over to Ryan.

And then Chad, to be clear, your question is around this, the impact to, to March from these travel warning or.

I guess maybe, maybe if you could think about like, spring break this year versus spring break last year. It doesn't sound like March was impacted, but I know it's not a same store, same week comparable.

Yeah, correct. You know, for us, you know, the fact that Easter, the Semana Santa week was within March, it certainly helps a little bit, you know, for Q1, but it certainly hurts April. For us, you know, Easter week, particularly in the Mexican or the Spanish-speaking countries, kind of marks the unofficial end of our high season. So the further out it goes, the better. So next year when it's in, I think, the second or third week of April, it's a definitive positive to Q2 and just generally a definitive positive to playoff because it elongates the high season. So for us, it was kind of a minimal impact to Q1 on the positive side, but it definitely hurts Q2.

Okay, thanks. And then lastly, any update in terms of Jewel Palm Beach, how you're thinking about, you know, hanging on to this property, marketing it, divesting it? What's the M&A market like out there?

Yeah, no, we are actively marketing the property, and we're hopeful to be able, you know, to announce something in the near future. But we are actively marketing the property.

Okay. Thank you both. Appreciate it.

Thank you. Thank you. The next question is from the line of Tyler Batori with Oppenheimer. Please go ahead.

Good morning. This is Jonathan on for Tyler. Thanks for taking my question. Maybe following up on Jamaica and understanding the dust hasn't fully settled yet, but can you talk about the disruption there and how it compares maybe to past travel advisories or interruptions you've seen over the years?

It's funny that you ask that. Thanks for the question. So it's, I mean, it's been a substantial swing, you know, mostly concentrated as where we sit today in Q2 and Q3. And it's actually, as far as the impact and the swing for what we were expecting for Q2 rev par prior, you know, at the beginning of the year versus where we sit today, it's actually almost right on par with Some issues we had in late 2019 with some crummy news cycles that came out in the DR. If you just look at a full year basis to kind of put some numbers around it, just using round figures, we were expecting... you know, the Jamaica segment to be up low single digit rev bar. Now, you know, based on where we sit today, it's expected to be down mid single digit. So that's a high single digit to potentially, you know, double digit rev bar swing in a few months here. So it's certainly, as Bruce mentioned earlier, I won't recap it all, you know, a lot worse than, than we thought. And again, it's not that there's just a, an increasing number of cancellations. It more so has to do with demand. What we're picking up on a daily basis is below traditional trend lines from what we've expected beginning of this year or what we were able to experience last year. So, you know, the marketing team has done a number of different you know, sales blitzes and tactics that, you know, have a nice impact for a couple of days. The demand falls back off again. They targeted some, you know, one of the questions to me that's earlier, they targeted some, a lot of local groups as well, who obviously wouldn't be worried about a travel advisory and also Canadians as well. So we've seen peaks and valleys, but just generally we're just below a traditional trend line from a booking basis. So the summer is essentially shots. And as Bruce mentioned, four looks okay, but we'll have to see how that works throughout the rest of the summer, given our booking window is around 100 days.

Okay, very helpful, Ryan. And then maybe following up on that booking window discussion, can you talk about the booking window for the mice group business in Jamaica? Just trying to get a sense of maybe potential implications for 2025 from this near-term pedigree.

Yeah, so they traditionally book at least, you know, at the absolute shortest, maybe nine months out, but it's traditionally 12 to 18 months. So it certainly would have a potential impact on 25. And again, not going into too much detail yet, but as also Bruce mentioned, you know, there's potential plans to look at also renovating, you know, the Jamaica asset as well, which would have an impact. But that's our traditional booking window is 25. The last couple months have been around 90 to 100 days, with the exception of mice that books further out.

Okay, very good.

Last one from me, if I could, maybe on the relationship with Pied. Any updated thoughts on that relationship and kind of what percent of Hyde stays or Redemption stays?

Yeah. So traditionally, our Hyatt redemptions have been around low to mid single digits as a percentage of the overall business we get from Hyatt. But the relationship has been good. I mean, you know, we've had the benefit of having, you know, all of these Hyatts having been converted now for over 10 years now. They're well known in the system. They're well known in the markets and the MPS scores. speak for themselves. You know, a lot of that has to do with the operations teams at the resorts that are obviously run by us, but also just the, the highest customers are higher paying, you know, discerning customers. So it's been a really nice marriage between the two. And obviously they, they bought Apple leisure group, you know, a few years ago and they're kind of still working through that, but our relationship is still very, very good. And I think mutually beneficial to both.

Yeah, I mean, it's been a great 11 years, you know, with Hyatt. And jointly, you know, we really developed the Hyatt, Zeev, and Heisler brands. And I think the exceptional performance of our teams, you know, in all three of our countries that we operate in is just a testament to, you know, the strength of our operations and then, you know, the fantastic properties that we own and operate, as well as, you know, the great affiliation with Hyatt.

Okay, excellent. Thank you for all the detail. That's all for me.

Thank you. The next question is from Gregory Miller with Truist Securities. Please go ahead.

Thanks. Good morning. I'm on for Patrick Scholes. First question I have relates to the CapEx plans for Los Cabos and if you're willing to share beyond that for 25. Could you share what your current high-level cash-on-cash return expectations are? for your CapEx work?

So in Cabos, this is definitely more defensive in nature. We don't talk about the two resorts in the Pacific as much because it's really just two, but they generated nearly $60 million of resort EBITDA in 2023, and Los Cabos is a substantial portion of our mice business. I say it all the time, so I kind of sound like a broken record, but that hotel has punched above its weight for a number of years now, considering that, as Bruce mentioned, we have not done any real renovation of that property, particularly in one of the older towers since the hurricane. you know, it's doubled its EBITDAs from 2019 to 2023. And again, large in part due to the mice business. And so we want to continue to ensure that we capture that share of that booming mice business, you know, for many, many years to come. So, you know, I can tell you the sales and marketing teams internally, you know, are happy about the things we are targeting, you know, particularly one of the older towers, some of the meeting space, adding a new gym. It's you know, it's attacking the things that have ailed us at that property and prohibited us from kind of pushing rates or potentially losing business to other newer properties that have come in over the last couple of years. So, you know, no explicit cash on cash returns on that because it's something that just needs to be done to protect the value of that real estate and give us a chance to capture that market even further. I think the enhancements will make

expanding some of the meeting facilities like the pre-function area at the ballroom and different things are going to make us more attractive to a large segment of groups. And so, you know, as Ryan said, the mice business there is really important and has been really successful. And I think, you know, the things we're doing are just really positioning us to continue to maintain, you know, really strong mice business going forward.

Okay. Thanks. Appreciate it. I'd like to shift gears on my second question. I recognize that the third-party management business is a smaller piece of the overall portfolio, but you did announce some Wyndham Ultra deals in the Dominican Republic recently. I'm curious what opportunities do you see with this brand as a third-party manager going forward? What kind of hotels are best suited for conversion and for your operations?

I mean, as we said, and you described it appropriately, the third-party management business is a lower kind of profit contributor for us. I mean, the vast majority of our profit comes from our owned assets, so there is a lot of focus on that. Having said that, the all-inclusive space is is, you know, really dominated by kind of the middle, right? Kind of like the same with most hotel markets around the world, you know, in the U.S. There's just, you know, a huge number of hotel rooms in the middle. Well, that's certainly the case in all-inclusive. So when you look at Wyndham Altram, what excited us, you know, working with Wyndham on having the opportunity, you know, to convert some of those is just, you know, the the broad number of hotels, you know, resorts and rooms that could be converted, you know, to that brand. and many of them could be converted with relatively, you know, not insignificant capital, but, I mean, it's just more easily done than if you were going to a very high-end or a luxury kind of property. So I think there's a lot of opportunity, and we're excited, you know, to be partners. I can't really project how many, you know, we'll do, but we've had some really good success with the Wyndham Ultra brand, and, you know, we love working with Wyndham.

They're a great partner. Thanks, Bruce. That's all from us.

Thank you. The next question is from the line of Chris Voronka with Deutsche Bank. Please go ahead.

Hey, good morning, guys. Thanks for all the details so far. Bruce, I want to kind of revisit Jamaica a little bit. I appreciate you mentioned your work with Adam and hopefully maybe get the messaging from the Jamaican government up a little bit or the marketing but isn't isn't isn't part of the issue here the US, the State Department, I'm just curious as to whether you know, is there some kind of formula they're using to determine this risk level? You know, it seems a little not very scientific if that to be diplomatic. Is there anything you can do on this side of the fence?

It's a great question, Chris. And so I have volunteered, and we will do this with the Jamaican government, but I have volunteered to go with the Jamaican ambassador here in the United States to go meet with the State Department and actually ask them that question because it's pretty nonsensical that you would come out with an updated travel advisory when nothing has changed. OK, I mean, it'd be like saying, you know, OK, you know, in the middle of a storm, it's going to rain. OK, well, it is raining. OK, and why are you now telling us it's raining? OK, so I live in the D.C. area. I actually have, you know, friends who work at the State Department, you know, and I can tell you it's going to be an interesting meeting, I'm sure, to find out exactly why they do that. But it doesn't make any sense to me.

Okay, that's great. Appreciate that, Bruce. And then a question, I know you guys, I think, recently wrapped up a renovation in PBR. Are you seeing, you know, kind of expected rate lift there? Or would you say that's a little bit more like the Cabo where it's, you know, somewhat defensive just to kind of bring the property up?

It's more akin to Cabo. We're not done. They're still doing rooms right now. You know, that's kind of what Bruce mentioned earlier. That property, and then like what we had been doing in Cabo before we decided to accelerate the work at one of the towers, was to kind of do it on a little bit piecemeal and kind of do a third of the rooms at a time. That property, just like Cabo, last major renovation was 2015, so it was due in its time. So there's potential for uplift in rate. That property, again, does really, really well. It's on a private, kind of really one of the only real kind of private beaches in Puerto Vallarta. It's so close to the airport. You know, it's kind of protected on both sides by the mountains, and so it's an excellent asset that needs to be maintained. So for us, it's a little more defensive in nature in maintaining the EBITDA base that we've got there today. It's not a big group house or anything like that. It does pretty well with weddings, but that's about it.

Okay, fair enough. Just the last one is, you know, when we think about what you might do on a renovation slash, you know, upgrade of Zalara, and think about what you've got down the street with Ziva. Is there any thought to, you know, I'm not, this preface by saying, I think your, you know, your rates in the market are terrific, but is there any thought to possibly trying to maybe tap into the Andaz piece of, of Hyde? I know that, you know, these Ziva Zalara brands were created kind of for you guys when you, when you launched the concept, you know, over 10 years ago, but, but with Andaz, the kind of rate premium they get, is there any, way to almost, you know, co-brand or take a turquoise tower and, you know, put an on-dose on that and create even further rate separations or anything like that that's possible?

I mean, you know, we'll look at that. I mean, it's a good comment. We've always looked at, you know, whenever we reposition a hotel, we look at how do you optimize it from a brand perspective. And so, you know, that's an important part of the equation. But I'll tell you, the opportunity here is, really, from my perspective, is to take, you know, take a fantastic located resort with 100% oceanfront needs and try to, you know, create a product that maximizes ADR. And I think Hyatt Zalara, I mean, look at what we get, you know, look at what we get in Cap Cana, look what we get in Rose Hall. So I think, you know, Hyatt Zalara Cancun can drive a very significant rate in premium if we have the appropriate product, and that's our goal is to get the appropriate product. But having said that, will we consider options? Absolutely.

Just to give you some context, some round figures, because we don't disclose individual resort ADRs, but for Q1, the Zalara in its existing state did very high $500 of package ADRs. Our Ziva Cancun up the street did $150-ish more than that per night. And our Ziva and Zora and Kana, again, a different market, but a much newer property, did almost $200 more per night in package ADR. So the gap exists and the opportunity exists. And so, you know, to that property's credit, it's doing really, really well for what it is. And I know you've been there and many others have. And you go in and you're like, wow, this is just a very different product than you've got up the street. So, you know, if we can kind of decrease that gap and bring that property up, that's very, very high profitability on that hiring.

Yeah. And I do want to emphasize, we really think this is a huge opportunity. Okay. As we talked about, some of the others, you know, are more defensive and protective in nature. This is a huge opportunity and I'm expecting big, you know, success coming out of this repositioning.

Okay, understood. Super helpful. Thanks, guys.

Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Bruce Wadinski for closing remarks.

Great. Well, thank you, everyone, for participating. You know, it was a great quarter, and we're looking forward to, you know, a lot more going on in the rest of this year. But thank you very much.

Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.