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.