Playa Hotels & Resorts N.V.

question you may press star then one on a touch tone phone to withdraw your question please press star and then two please note this event is being recorded i would now like to turn the conference over to ryan heimel please go ahead thank you very very much dave good morning everyone and welcome again supply hotels and resorts third 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 at the SEC. We've updated our investor relations website at investors.plyoresorts.com, 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 release. On today's call, Bruce Wrodynski, Playa's Chairman and Chief Executive Officer, will provide comments on the second quarter, demand trends, and key operational highlights. I'll then review our third quarter results and our outlook for the fourth quarter. 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. Our third quarter results exceeded our expectations, led by steady underlying performance in our Yucatan and Dominican Republic segments and improving demand in the Pacific Coast and Jamaica. Following the disruption in bookings due to Hurricane Beryl, underlying demand reverted back to trend across our segments or has slightly improved in the case of Jamaica. why his own resort EBITDA of $36.6 million in the third quarter of 2024 included a benefit from business interruption insurance proceeds of approximately $700,000 in Q3 2024 compared to the $1 million in business interruption proceeds we received in Q3 2023. Excluding business interruption, the upside compared to the expectations shared on our last earnings call was driven by, one, better-than-expected close in demand in the Pacific Coast and Jamaica, and better-than-expected ADR growth in the Yucatan and Dominican Republic. Two, $1 million of higher fee income driven by the continued ramp of the applied collection. Three, $1 million of lower corporate expense, which was partially timing-related, with some of the expected expense falling into the fourth quarter. or a favorable year-over-year foreign currency exchange tailwind of approximately $2.9 million, which was higher than we anticipated. Given the sharp drop in the U.S. dollar-Mexican peso conversion rate in the weeks ahead of our second quarter earnings report, we felt it would be prudent to approach guidance with a potential reversal of the favorable move in mind. However, the dollar-peso exchange rate continued to move in a favorable manner throughout the quarter. For Q3 2024, we estimate that foreign exchange was a 170 basis points tailwind for both our reported owned resort EBITDA margin and on our legacy portfolio margins. Business interruption proceeds received in Q3 2024 favorably impacted resort margins by approximately 40 basis points, but was an approximate 10 basis point net headwind on a year-over-year basis as the amount of business interruption proceeds received was slightly lower year-over-year. Adjusting for all of these factors, underlying owned resort EBITDA growth was down approximately 36% in the third quarter for the total portfolio and down approximately 39% for the legacy portfolio, reflecting one, the significant impact of Hurricane Beryl, two, the construction disruption in the Pacific Coast, and three, the U.S. State Department travel advisory on our Jamaican segment. We expect our underlying EBITDA growth to improve substantially in the fourth quarter compared to the negative 36% in the third quarter, as the fourth quarter will have, one, less of an estimated impact from Hurricane Beryl, two, less disruption in Los Cabos, three, improving demand in the Pacific Coast and Jamaica, and four, expected overall strength and fundamentals for the holiday period. At the segment level, our teams in the Yucatan did an excellent job on the cost front, despite the challenges presented by Hurricane Beryl. Occupancy declined 270 basis points year over year in the third quarter, driving currency neutral margins to decline by approximately 450 basis points year over year and underlying EBITDA growth of negative 17%. 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, but the contribution from our expense initiatives will taper on a year-over-year basis moving forward as we lap the implementation of our measures. In the Pacific, our planned renovation work in this segment continued during the third quarter, with the peak of the guest impact and construction work taking place during Q3. Demand began to firm up as we moved through the peak of the construction disruption. While this has been encouraging, the increased demand is coming at lower ADRs given the ongoing construction. We anticipate completing the bulk of the renovations ahead of the holidays with the remaining rooms to be completed in early 2025. Turning to the Dominican Republic. We did 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 and sold in the third quarter of this year. Remaining core resorts in this segment continue to perform well on an underlying basis, and we expect year-over-year occupancy in ADR to increase in the fourth quarter following the dip in Q3 as a result of Hurricane Beryl. As previously mentioned, Year-over-year comparisons in the segment were also impacted by the receipt of $1 million of business interruption proceeds during the third quarter of 2023 and $700,000 of business interruption proceeds received in Q3 2024. Finally, Jamaica's third quarter was largely as expected, with the approximate 30% REVPAR decline driving a material decline in resort Eva Doth. As we outlined on our last earnings call, The segment was starting to regain its footing, especially for the fourth quarter, but the recovery was significantly disrupted by 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 and early fall period in both the Caribbean and the Yucatan, as both destinations were in the direct path of the storm. However, the recovery resumed as we moved through the quarter and ADRs in the market adjusted lower. As we look ahead to the fourth quarter and first half of 2025, our occupancy is pacing close to flat year over year, albeit at lower ADRs. This is encouraging as it is the first step toward rebuilding the market and the relative value should aid the destination over time. Looking at demand as a whole, following the significant disruption in booking patterns caused by Hurricane Beryl, we largely saw demand normalize as we moved through the quarter, with the status quo segments of the Dominican Republic and Yucatan Peninsula returning to underlying trends and the Pacific and Jamaica actually seeing underlying improvement, particularly for the holiday period. Looking after the fourth quarter, our revenue is pacing up low single digits in Yucatan, up mid-teens in the Dominican Republic, and down low double digits in Jamaica, with the latter marking a significant improvement compared to the approximate 30% decline in the third quarter. More importantly, the upcoming high season is continuing to build nicely and the demand looks solid, with ADR up low single digits for the total portfolio and up high single digits excluding Jamaica. In aggregate, during the third quarter of 2024, 46.2% of Playa owned and managed transient revenues booked were booked direct, up 50 basis points year over year. PlayaResorts.com accounted for approximately 13% 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 40.8% of applied owned and managed transit room night stays in the quarter came from our direct channels. Geographically, our South American, European, and Canadian guest mix all improved meaningfully year over year as our American source guest mix continues to normalize. Recovery of our Canadian guest segmentation versus pre-pandemic remains near approximately 80%, and our American guest mix is roughly back to pre-pandemic levels. Our European and South American guest mix remained the most elevated versus pre-pandemic at approximately 175% to 200%, while our Asian guest mix was largely unchanged and remains only about 25% recovered. Our visibility remains a critical factor of our success as our booking window was just over three months during the third quarter. Finally, on the capital allocation front, we repurchased approximately $50 million worth of Playa stock during the third quarter, and roughly an additional $25 million thus far in the fourth quarter, bringing our total repurchases since resuming our program in September 2022 to approximately $375 million, or approximately 29% of the shares outstanding. Once again, I would like to sincerely 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.