Playa Hotels & Resorts N.V.

Good day, and welcome to the Playa Hotels and Resorts Q2 2024 earnings 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 touch-tone phone. To withdraw your question, please press star, then two. Recorded. I would now like to turn the conference over to Ryan Heimel. Please go ahead.

Thank you very much, Nick. Good morning, everyone, and welcome to Playa Hotels and Resorts' second 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 10Q, which we filed with the SEC last night. 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 discussed on this call were included in yesterday's press release. On today's call, Bruce Hordinsky, Ply's Chairman and Chief Executive Officer, will provide comments on the second quarter demand trends and key operational highlights. I'll then review our second quarter results and outlook for 2024. Bruce will wrap it up with some concluding remarks before we turn it over to Q&A. With that, I'll turn the call over to Bruce.

Great. Thanks, Ryan. Good morning, everyone, and thank you for joining us. Our second quarter results exceeded our expectations, led by continued momentum in our Yucatan and Dominican Republic segments. The performance is highly encouraging. as these two segments are largely status quo and that there is no renovation disruption in either segment or impact from any government travel warnings. Playa's own resort EBITDA of $75.1 million in the second quarter of 2024 included a year-over-year foreign currency exchange headwind of approximately $1.4 million due to the appreciation of the Mexican peso and a benefit from business interruption insurance proceeds of approximately $1 million. Excluding business interruption, The upside compared to the expectations shared on our last earnings call were driven by strong all-around execution by our operations team and modestly better demand, with FX being less of a headwind than expected in June. For Q2 2024, we estimate that the FX headwinds were a negative 60 basis points impact on both our reported owned EBITDA margin and on our legacy portfolios. Business interruption proceeds received in Q2 2024 favorably impacted resort margins by approximately 45 basis points, while the significant 4.3 million received in Q2 2023 was a margin detractor on a reported basis. Netting out BI from both periods, the net margin impact of BI on reported owned resort margin was approximately 140 basis points. Adjusting for all of these factors, Underlying owned resort EBITDA growth was down approximately 4% in the second quarter for the total portfolio and down approximately 8% for the legacy portfolio, reflecting the impact of the U.S. State Department travel advisory on our Jamaican segment. At the segment level, the results in the Yucatan were once again quite exceptional on a currency-adjusted basis, with occupancy in line with the second quarter of 2023 and ADR growth of just over 3% year-over-year, driving currency neutral margin gains of 210 basis points year over year and nearly 10% underlying EBITDA growth. The expense efficiencies were broad-based across categories, with the most significant change being sequential improvement in insurance as we lapped the sizable 50% plus increase in our insurance premiums from the second quarter of 2023. 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 call, 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, our planned renovation work in this segment began in earnest during the second quarter, specifically in late May. resulting in the expected decline in occupancy in flat ADR year-over-year. Our operations team did an excellent job managing through the decline, with currency-neutral resort margins only declining 300 basis points on a 12% rev-par decline. While the renovation work is progressing as expected, the disruption to the guest experience has been more elevated than previously anticipated in the Pacific. resulting in an increase in cancellations during the most extensive construction period over the summer and estimated full year 2024 construction disruption impact of approximately 15 to 19 million compared to the approximately 10 million of EBITDA we previously expected. Turning to the DR, we completed the sale of the Jewel Punta Cana Resort in late December of 2023 and the Jewel Palm Beach Resort was closed for a significant portion of Q1 2023 which we expect will lead to a meaningful year-over-year increase in EBITDA in 2024. Year-over-year comparisons in the segment were heavily impacted by the receipt of 4.3 million of business interruption proceeds during the second quarter of 2023 and 1 million of business interruption proceeds received in Q2 2024. Excluding BI from both periods in the DR, our underlying EBITDA growth grew 31%, led by our legacy assets, which were up approximately 11% on 6.6% rep part growth. Finally, Jamaica's second quarter was largely as expected, with the approximate 20% rep part decline driving a material decline in resort EBITDA. As we outlined on our last earnings call, the segment was off to a good start in 2024, but the US State Department's travel advisory notice for Jamaica on January 23rd has had a negative impact on the segment, as cancellations picked up meaningfully thereafter, with the bulk of the impact affecting the second and third quarter of 2024. 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. Booking demand for the second half was fairly steady during the second quarter in Jamaica, until the emergence of Hurricane Beryl in late June. Although the physical property impact of Beryl was not significant, it had a meaningful impact on demand for the summer period in both Jamaica and the Yucatan, as both destinations were in the direct path of the storm. We estimate the EBITDA impact from Hurricane Beryl to be approximately 2.5 to 3.5 million in the third quarter in Jamaica specifically, but approximately 6 to 8 million across all of our segments. on a loss of approximately 6% to 9% of revenue. We believe also that, to a lesser extent, new supply delivered to the market during the second quarter into a choppy environment has added some incremental challenges in Jamaica, in a market which would have likely absorbed the additional rooms without much of a problem. Looking at demand as a whole, we saw steady demand through the quarter prior to Hurricane Beryl, with the Legacy DR and Yucatan leading the way, with both segments expecting positive low single-digit to mid-single-digit REVPAR growth in the third quarter prior to barrel. Looking out to the fourth quarter, our revenue is pacing positive high single-digits in the Yucatan, positive mid-single-digits in the DR, and negative high single-digits in Jamaica, with the latter marking a significant improvement compared to the mid-20% decline in the third quarter. More importantly, the coming high season is starting to take shape, and the demand looks solid, with ADR up high single digit for the legacy portfolio. In aggregate, during the second quarter of 2024, 47.4% of Playa owned and managed transient revenues booked were booked direct, up 10 basis points year-over-year. The improvement in the year-over-year change was largely driven by lapping the change in world of high redemption rates, 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 second quarter of 2024, PlayaResorts.com accounted for approximately 12.9% 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 44.4% of the Playa owned and managed transit room night stays in the quarter came from our direct channels. Geographically, the biggest change in our guest mix during the second quarter was once again our Canadian sourced guest mix, which increased 230 basis points year over year. The recovery of our Canadian guest segmentation versus pre-pandemic improved to approximately 80% in the second quarter versus 64% in the first quarter. We also saw increases in our European and South American guest mix on a year-over-year basis, while our Asian guest mix was largely unchanged and remains only about 25% recovered. Visibility remains a critical factor of our success, as our booking window was just over three months during the second quarter. Finally, on the capital allocation front, we repurchased approximately $37 million worth of Playa stock during the second quarter, and an additional $12 million thus far in the third quarter, bringing our total repurchases since resuming our program in September 2022 to approximately $314 million, or approximately 25% 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.