Q4 2019 Earnings Call
Okay.
Excuse me, ladies and gentlemen, he says the operator. He these convince is scheduled to begin momentarily until that time. He line, we can be thinks in old.
Once again, ladies and gentlemen, today's conference is scheduled to begin momentarily.
Until that time he line will again be place untold. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by welcome to the fourth quarter earnings.
At this time all participants are in other sent only mode now.
After the speaker presentation, there will be a question answer session.
Thank you asked the question you will need to press Star then to number one and your telephone.
If you will require any further assistance you May press Star zero.
With that I would now like to kinda constraints over your speaker today Mr. right level. Thank you. Please go ahead Sir.
Thank you very much Myra good morning, everyone and welcome to Playa hotels and resorts fourth quarter 2019 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 companys actual results to differ materially from one it's 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 annual report on form 10-K, which we filed at the end of February with the Securities Exchange Commission, we've updated our Investor Relations website, and investors that Playa resorts dot com with todays.
Presentation in recent releases.
In addition, a reconciliation to GAAP of the non-GAAP financial measures. We discussed on this call were included in yesterday's press release.
Today's call Bruce Wardinsky, Vice Chairman and Chief Chief Executive Officer will provide some comments in the fourth quarter and key operational highlights I will then address our fourth quarter results in the 2020 outlook. Bruce will then wrap the call with <unk> with some concluding remarks before we turn over to keep an eye well that turnover diverse.
Great. Thanks, Ryan Good morning, everyone and thanks for joining US. We appreciate your interest employer I'll begin today by reviewing several of our fourth quarter strategic accomplishments and then give some high level thoughts on the operating environment as well as give an update on our near term initiatives and outlook. I'll, then turn the call over to Ryan to discuss our fourth quarter results.
And our 2020 outlook in detail.
Now turning to our fourth quarter results at a high level, our fourth quarter fundamentals were largely as expected. If you recall on her last earnings call. We mentioned that we had begun to see signs of stabilization in the Yucatan Peninsula, particularly in Cancun strong close in bookings led to a moderate decline in revpar in Q4 in the Yucatan segment.
We can't Kuhn posting positive growth imply you don't Carmen continuing to dragged down segment results. We believed to close in bookings were driven by pent up demand following week bookings in September due to hurricane Dorian.
The Pacific was down in line with our expectations as we telegraphed in the last call given a softer group booked position Jamaica also suffered from a difficult comparison in the fourth quarter, but was additionally impacted by weaker overall market visitation and difficult comparisons.
Turning to the Dominican Republic.
And the market recovery, there that continues to progress positively.
Fourth quarter, we experienced a 29.8% drop in comparable Revpar 700000 dollar loss and EBITDA in the D.R.
If you recall, we were expecting a comparable revpar decline of approximately 35% driven by growing spread between our branded and non branded hotels.
Hilton La Romano and dreams put tokana performed largely as expected during the fourth quarter, but better than expected close in bookings at the dreams Palm Beach drove comparable segment revpar growth upside.
Well, we are encouraged by the performance at this hotel, we're not changing our outlook nor view, the nor view of the market.
This better than expected topline performance didn't flow through to EBITDA as we decided to invest in the guest experience during the opening or two new properties in the segment to facilitate future EBITDA growth.
We remain focused on growing our direct bookings and lowering our customer acquisition costs are confident we're on target with our five year plan to increase consumer direct business for at least 50% by 2023.
In aggregate during the fourth quarter of 2019, 25.4% of apply your Manish room nights stayed were direct up 560 basis points year over year, and 33.9% of rooms booked were direct.
580, 580 basis points year over year.
Moreover, our loyal direct customers also tend to have an eye or a higher HDR as they represented 36.2% of or revenue booked during the quarter for future periods.
Generally as we think about direct booking growth partnering with globally recognized us brand is key to driving the highest value guests at the lowest possible cost to our resorts by reducing customer acquisition cost increasing our total addressable market mitigating the impact of supply growth and minimizing the negative effects of competition.
After Hilton in Hyatt branded properties, we're seeing strong increases in direct bookings as well as more group business, specifically related to group hi, It's even zilara coopcana are very strategic resource reply.
All inclusive resorts have just caliber with meeting space to handle large incentive groups and the destination like went to kind of more often than not doing incredibly well and they will serve to boost bookings that are other drx group or other group properties. The Hyatt Ziva, Los Cabos hides, even though I used to Lora is hall and to a certain extent hi, Stephen King could be.
Because we will now be able to fulfill meeting planners three year rotation cycle all in house without them, having to go outside her portfolio to provide the variety that destinations their clients desire.
As I mentioned Q4 was not a strong group quarter for player.
As we look out to 2020 mice business on the books plus advanced negotiation group business in the pipeline at the end of the fourth quarter should translate to flat to modest to modestly positive rep revpar growth in 2020 in the Pacific.
For the portfolio as a whole or mice business book for 2020 is up mid teens year to date versus the same time last year.
Now I'd like to touch on some of our ongoing tech technological strategic initiatives, we continue to invest in the business launching an expanding on several initiatives, including our book direct initiative I've already mentioned aimed at improving the customer experience lowering our customer acquisition costs and most importantly, driving growth in early 2019.
And we began the soft rollout of a new end to end up sell and Rebook technology has selected resorts by using sophisticated algorithms you'd identifies and real time, new revenue opportunities, including selling ancillary items and additional room packages to targeted guest. This technology will also enable us to accept more of the room upgrades.
<unk> bid as we move further back through the booking window and enter a seasonally slower period of the year.
We finished enabling the entire portfolio with this technology during the fourth quarter.
During the first quarter of 2019, we launched our proprietary travel agent portal on which travel agents can now make commissioned reservations directly without having to go through a tour and travel operator. This effectively removes a layer of cost that previously existed saving playa roughly 7% a 9% in commissions per booking wallets.
The same time, maintaining the economics for the travel agent on a basic booking and improving the economics in the case of Upsells are pre booked ancillary revenues.
To date bookings via our website have been inline with our modest expectations as an our view the real growth potential isn't 2020 now that agents can book a commissionable end to end vacation inclusive of air ground transportation excursions, sweet exclusive dinners and luxury spot appointment and luxury spot appointments. We're now.
Life with the ability to booked flights and ancillary services for a complete vacation package as of February onest or direct to consumer website Playa resorts Dot com is pacing ahead of our expectations with 37.8 million of gross revenue on the books for 2020 versus 22 million in 2090.
Let's now turn to the rollout of our new yield management system. We went live with our first property in Q1 2019 and expanded into two more properties. During Q2, we made further progress during Q3 and are now live in nearly all of our hotels will operate the new system in parallel with our current forecasting process for at least a year.
Year to fine tune it leveraging historical data and judgment of our marketing teams an important step given the seasonality of our business. We expect a real benefit of the system to show up in our financial results starting in late 2020.
On the share repurchase front during the fourth quarter, we purchased approximately 442000 shares outstanding at an average price of 766 per share for 3.4 million between January Onest in February 27, we repurchased an additional 340.1 thousand shares at an average price of 735 cents.
Program program conception, we've repurchased a total of approximately 2.2.
Million shares at an average price of 758 over $16.5 billion.
In conclusion, given the 2020 presidential election General global travel concerns due to the krona virus, which I will touch on momentarily and the uncertainty with respect to the D.R. recovery and the cadence of are ramping new assets, we felt the need to exercise prudence as we approach our 2020 planning and guidance.
Given these uncertainties, we're giving a wider range for 2020, EBITDA guidance, which we hope proves to be conservative and will be updated as we move through the year. We continue to expect a sizable ramp in our free cash flow generation as our newly renovated Hilton properties come online along with contribution from the brand New Hyatt Ziva and Solara Coopcana.
We are cautiously optimistic about our ability to achieve the goals. We have said return capital to shareholders as we continue to unlock value.
With respect to the Corona virus. It is important to note. There are no confirmed cases of the krona virus in Mexico, Jamaica, where the Dominican Republic today, and we're in constant contact with the World Health organization and the CDC to maintain the highest standards of prevention.
We're working with our travel industry partners to make navigate this crisis and given the significant flight restrictions from the affected areas. We have waves cancellation fees from anyone that is traveling from mainland China, Hong Kong Macau up to 30 days prior to arrive letter resorts.
Our mix of Asian customers is 4% with mainland China, representing less than 1% of total gas.
Total Asian source revenue was less than $9 million in 2019 with 27% in Q1, 26% in Q2, 34% in Q4 at the same point in time last year, we had approximately 50% of our total years production on the books with approximately 40% of that already recognized in January.
February our current full year Asian source pacing is down 10% with Q2 Asian business down approximately 20% and reflected in our guidance for Q2, we've just over $1 million currently on the books also important to note. The vast majority of our Asian business comes to Ziva into Laura.
And Ken hotels that should be able to replace the business given the appropriately time.
With that I'll turn the call back over to Ryan to discuss fourth quarter results and our 2020 outlook.
Thank you very good morning, again, everyone. Our fourth quarter adjusted EBITDA was $20 million, representing a 46% decrease versus last year as Bruce mentioned strong close in bookings in King soon with the bright spot in the quarter what specific in the Dominican inline with expectations, we outlined on the last call.
Comparable net package Revpar decreased 6% during the quarter on 130 basis point decline in occupancy and a 450 basis point decrease in rate.
Excluding the de our comparable resort level EBITDA margins compressed by just under 500 basis points, primarily as a result of our investments in our shared services center and operating leverage in light of old Revpar declines.
Comparable net non package revenue was down just over 3% in the fourth quarter and total net non package revenue was down four.
For the full year 2019, we generated adjusted EBITDA of 150.7 million with comparable net package revpar declining 3.4%.
The decline in full year Revpar led to comparable resort EBITDA margin erosion of only 230 basis points for the year.
In the Yucatan comparable net package Revpar declined a little over 1% in the quarter on a 3.4% 80, our decline and 180 basis point higher occupancy as again the market benefited from stronger close in bookings, particularly in Cancun.
Comparable owned property level resort EBITDA margin in the region, which reflects both can't couldn't plateau, Carmen decreased 4.2 million or 22% margins in the segment, we're getting impacted by increases in expenses related to sales and marketing repairs and maintenance in or shared services facility, though which should lead to margin benefits over the medium to long term.
On the Pacific Coast net package Revpar decreased 2.5% driven by 4.3% decrease in HDR, and a 1.4% increasing occupancy own resort EBITDA decreased 1.5 million or 20% driven by 57% declining group room nights, which weighed on revpar.
In an 18% decline in non package revenue in the quarter as a result of just lower group mix.
Now turning to Jamaica comparable net package Revpar decreased 5% driven by a 6.2% decrease in HDR and a 90 basis point increase in occupancy. The Revpar decline was driven by weaker international passenger arrivals in Q4, specifically in November.
Decline of 16% of group room nights in a very tough comparison from Q4 property level EBITDA decreased 3%, reflecting the lower revpar performance, while margins held steady.
As a reminder, sajid core portfolio was folded into the plant portfolio in June 2018, and became comparable in Q3 at 2019. The one exception is the 88 room century tower, which wasn't opened in 2018 will not be comparable until 2020.
The results that are Sajid core portfolio continued to meet or exceed our expectations with property level EBITDA of roughly $30 million in 2019.
We're very very proud of the work teams are doing in Jamaica, and we're thankful for the ongoing partnership with Sajid core.
Looking forward, we're expecting another solid year in 2020 from our properties in the Jamaican segment.
Now turning to the Dominican Republic will again try and give you as much information as we can to help you with your models and give you better visibility into our outlook for the quarter comparable net package Revpar decreased just under 30% driven by 13 point decrease in occupancy and a 14% decrease in 80, our comparable EBITDA margins compressed 12 point.
Four percentage points, which was an improvement versus the roughly 18 or 19% decline reported in Q3, as we had more lead time to rightsize staffing and opex newly remodeled Hilton La Maana and the newly remodeled deepens, our copco on a combined for a small EBITDA loss, but still a small improvement over Q3, but elevated levels of staffing.
Marketing pressured profits as we made a conscious decision to invest in the guest experience during the opening months at these resorts.
On our last earnings call, we highlighted the slowdown we saw in late September de our bookings and the growing spread between our branded and non branded properties as a quarter unfolded. The Hilton Lauer Mana and Dream spent to kinda performed in line with projections, while dreams Palm Beach finished 800 basis points ahead of the for forecast driving the revpar outperformance versus our previous guidance of down mid 30%.
Turning to mix and sourcing we continue to be validated in our belief that our partnership with Hilton will be transformative with respect to consumer sourcing during the fourth quarter, 20% of the room nights stayed at Hilton La Romano were booked direct versus 8% in Q4 of last year.
We also made the decision to pivot to more European sourcing.
For the D.R. as a result, our European source business has improved from 32% in Q1 to 46% in Q4, albeit a lower packaging here.
With respect to group bookings at Hyatt Coopcana, but the property opened in the market concerns slowly easing group sales have dramatically improved in the first two months of 2020.
As we look ahead to 2020, we continue to believe the best strategy for Premier assets like the Hilton head room on high Topcon eyes to maintain rate integrity to support and multi year ramp in EBITDA similar what we saw an experience that diva cancun and what we're seeing today at Hyatt's and Rose Hall.
While we are encouraged by first the performance of Dreams Palm Beach in the fourth quarter two the trends we've seen thus far in Q1 2020 and three the recent improvement in airport visitation data as Bruce mentioned, we're not yet materially changing our market view.
We expect one the back half loaded year as the hilton's and highest got kind of ramp and as we lap the steep decline in the D.R. that began in June 2019.
And to the market faces ongoing headwinds from the absence of airlifted to 737, Max issues and three the new property ramps tend to be nonlinear and our ability to market. The Hilton our Mana family side has been limited during construction, resulting in a large spread between the family and adult side.
With respect to comparable Revpar growth.
We expect Q1 comparable GR revpar growth to be down roughly 30%, which is similar to the Q4 results of 2019 and total de our revpar to be down low to mid double digits.
With respect to EBITDA. The two dreams properties were present immaterial drag to 2020 EBITDA as a total over 1100 rooms and in 2018 performed quite well recorded 25 million of combined resort EBITDA and in 26 and 2019 in the first half reported 16 million of EBITDA.
The EBITDA drag from the two hotels is not expected to be a severe in the first half of 2020 compared to the second half of 2019, even if we assume the same revpar declines given the high season 80, Arne Revpars are roughly 50% higher than they are in the low season.
Given our cautious revpar outlook for the DRM market, we think the appropriate range for margins at Hyatt Coopcana is something into high teens to low twentys and at the Hilton lower amount that we feel comfortable that we can achieve low to mid 20% EBITDA margins in a more conservative revpar scenario.
Turning to the balance sheet cash flows as of year end, we had 21 million in cash on hand, 60 million outstanding borrowings on our revolver and total outstanding debt of just over 1 billion year to date, we've already paid back 15 million of outstanding borrowings on our revolver and expect to repay the remaining balance during the first half 2020.
Well, there major renovations and development projects complete we're forecasting capex of roughly 30 to 40 million with roughly two thirds of that going towards maintenance capex maintenance capex and the remaining capital needed for finishing our major capital projects that spilled over into 2020.
Our forecasted use of cash does not include additional share repurchases as they depend on market conditions and other factors and may be commenced or suspended from time to time as always we'll update you out update you on that front as the year progresses.
Our current leverage is higher than we would like but we expect to Delever quickly in 2020 is the hilton's and got kind of ramp their EBITDA contributions and we believe adjusting our leverage levels for the six significant investments in our properties as appropriate.
As a reminder, in March of 2018, we locked library, 2.5% on 800 million of our term loan through March of 2023.
Now turning our attention to the 2020 outlook. We are forecasting 2020, EBITDA of 160 million to 175 million and that's based on total portfolio revpar growth of flat to down low single digits as I mentioned before we're expecting a stronger second half of 2020, driven by the ramp of our newly renovated Hilton hotels.
And the Hyatt Coopcana and easier comparisons as we lap the DRG Klein into the second half.
Excluding the IDR, we're expecting modest total total portfolio Revpar growth once again led by the Jamaica segment.
The low end of our guidance range assumes that 2020 looks very similar to 2019 with respect to total revpar growth. Despite the addition of the Hyatt Coopcana in a full year of the renovated hilton's.
As we get more clarity on the impact of the global travel from krona virus and given the percentage of our EBITDA that is generated earlier in the year, we'll look to fine tune our range as the year progress is just as Bruce mentioned.
Before I hand back to Bruce I want to highlight that we've included our historical rooms out of service related to our renovations last year in our financial supplement, which we posted day, our website, which will help you with your models with that I'll turn it back over to Bruce for some closing remarks.
Our fourth quarter performance in Mexico, and the Dominican Republic, our current momentum at the started the year and our group business on the books for 2020 in Jamaica give us a sense of optimism as we begin 2020 that being said as Ryan also highlighted the ramp of the Hyatt Coopcana and our new Hilton's will be critical determinants of our success. This year, but also make the four.
Casting difficult given their new properties.
In addition to the fundamentals behind the scenes, we've gone live with several new technology initiatives aimed at increasing the value engagement and level of satisfaction, we offer a gas and travel industry partners alike. While at the same time enhancing returns for shareholders. We see these initiatives really gathering steam as we work through this year and expect a long tail contribution.
On another front I would like to let you know about our progress on the asset sale side and our capital allocation priorities. Although we're pleased to share with you that we have signed a nonbinding alive for the sale of one of our assets and are currently in discussions I am extremely disappointed to not be able to share news of an asset sale with you today given.
In a sensitivity and stage of the negotiations I cannot comment on any transaction, except to say I am hoping to be able to share exciting news with you in the future.
We're also proceeding with other asset sale processes as well, we will update you when appropriate.
For the potential asset sale in mind I want to reiterate that we're committed to reducing our leverage and returning capital to shareholders, including through our existing buyback program or recognizing the constraint presented by our average daily trading volume a premium tender offer.
Before we go to QNX.
Let me just say that I am incredibly frustrated I.
I'm in frustrated that I cannot announce today that were consummating an asset sale.
I'm frustrated that because of us working and in discussions on asset sales I cannot personally by our stock when in my opinion is trading at a price level dramatically below intrinsic value.
I'm frustrated that the media frenzy surrounding events in the D.R. last year has caused our results there to suffer greatly and to cause our fantastic new height and Hilton resorts in the country to open into a weaker market.
I'm frustrated that in my belief the krona virus may cause people to stop traveling which may affect our 2020 results.
The only solus I get when thinking about all of these frustrations is that they all have one thing in common.
They are temporary.
As frustrated as I am and I am sure are all apply as investors. None of this affects the underlying value of our assets for our future profitability and free cash flow potential.
Playa has gone through some very difficult and frustrating times over the past 18 months and I'm confident that there are better times coming and those investors, who stick with us we'll reap benefits.
I am personally, 100% committed to improving our stock price and driving outsize.
Returns for investors.
Thank you for your time and interest imply a and we will now take your questions.
Thank you at this time, you would like to take any questions and we have group today and as a reminder to ask a question you will need your Chris Sorry, then the number one then your telesales.
To address your question request apparently has.
Please standby will be composite Guinea roster.
We have our first question comes from the line of Chris Woronka. Your line is open. Please go ahead.
Hey, good morning, guys I appreciate all the all the color and data points you you've already provided.
Just a couple of questions I had one is you kind of well get bookings in real time for the for the portfolio and.
Whether you look at it maybe daily or weekly have you noticed any shifts recently in booking behavior and equity related to the virus or not just any anything geographically that stands out recently or any big changes.
I mean, the positive that we mentioned that the close in bookings have remained strong and we're taking a hard line. When it comes to yield management that we don't need to overly discount as we move through the month and then just based on our booking position today, we're not panicking it for behind a lot of that's by design with regards to any of the recent news and Kurt.
Only at this moment.
Aside from the booking statistics that we shared with you on our Asian business already we're not seeing any real change that bookings or cancellations through Wednesday of this week on our aging <unk> Asian pacing it deteriorated roughly 500 basis points of the last month and that's reflected in our guidance and as we mentioned a very small part of our overall that package revenue, but I do want to point out that our guidance.
Does not reflect a global travel epidemic.
Okay Fair enough and then as we think about the D.R. and really wanted to kind of zoom in on the Hilton and ER and the high a cap cotter.
When you compare that to the direct booking percentage for the other hilton's and the other hilton's and hyatt's in your portfolio do you think that stabilizes at a higher level.
For that for those two assets in the in the Dominican.
I don't think and Mike and I don't think they'll stay blaze any higher.
I think there'll be more consistent with what you see from just hilton's and being part of their.
Part of their global reach and they are much larger loyalty program and I just want to add to it I think just having more hilton's you know I mean, you think about it we only had one Hilton Ah so having now for Hilton's and then having going from six to eight Hyatt I think the more Hilton all inclusive and hides even highs Laura.
Properties, there are theres greater exposure in exposure rather to the Hilton in height customers and I think that's going to benefit us on the direct side. So I think you know just having greater reach more locations, that's going to be a really big positive.
Okay, Great and then just last one is Bruce I understand the comments about the asset sales that you can't really comment what wanted to ask from a from a from a share repurchase standpoint from for for the company.
How do you balance I know you want to get the leverage down and you have some natural deleveraging that should occur with the cash flow, but given that the stock seems to be most dislocated right now how do you guys balance you know.
Taking advantage of that right now versus the cash flow coming in later in the year.
No great Chris that's a really good question.
So we believe if we're able to demonstrate that we can achieve a great multiple for an asset it will reset our stock price so with that in mind you know the proceeds from a first sale will be more stock buyback focused but will remain neutral impact to the balance sheet as we have future asset sales, then they'll probably shift a little more to to de leveraging but that's that's our phone.
Yes.
Okay very helpful. Thanks, guys.
Thanks, Chris.
Our next question comes from glide and Chad Beynon. Your line is open. Please go ahead.
Hi, good morning, Thanks for taking my question.
Hey, John.
Regarding the Oh, you talked about in the fourth quarter de are little bit of margin pressure because of the additional staffing.
In the market do you decided to invest back in the in the region as we think about your guidance and the ramp.
So the margin targets that you talked about for kept calling on and lover motto does that include a reduction in marketing in the back half or is that just.
A natural ramp as the property kind of takes hold and the occupancy improved ex yes, it's a natural ramp we actually so both there's two parts to the kind of additional expenses one was kind of the elevated levels of staffing than we had down there, but too because of the issues. We saw in the D.R.. There's some things that we actually moved up I mean, I'm not a marketing expert but.
Traditionally you'd kind of wait to the property had been open for a couple of months and bring more groups and stuff down there and you show it really coming we actually did a lot of of lot of trips with travel agents partners a lot of media attention to bring people down to the market at late last year in Q4, two really showcased the property earlier, but then you traditionally would because we needed to help.
You know and we weren't going to sit around and wait for outside sources to do that for us. So it's it's a little bit shift a boat, but I think from a marketing perspective, you'll see that more evenly throughout the year notwithstanding the additional money spent in the fourth quarter of 2019.
Okay. Thank you and then back on the capital allocation from Bruce quite clear in terms of your view on where the stock is in the corporate buybacks in the fourth quarter and in quarter to date, but as you think about the capital allocation decision tree or there's still opportunities for JV or sliver equity as you've talked about.
Up to increase your portfolio, where should we push those thoughts back to times when the leverage is lower than where it is now.
No I mean, Theres all you know it all depends on the opportunity, but certainly as opportunities present themselves. You know, we won't Miss something that's really potentially highly profitable and valuable to our growth, but theres no question, I mean, given where the where the stock is today in our leverage situation you know its glaring what the obvious.
Uses of cash need to be from asset sales, so, but that's kind of our position.
Okay completely agree. Thank you very much okay. Thanks, a lot.
Our next question comes from the line.
Hi, There battery your line is open. Please go ahead.
Hey, good morning, Thanks for taking my question.
I wanted to ask a little bit more about the to help and can you talk about the displacement in 2019 from those renovations and discuss how much of that you can you give me back.
And 20, Twond and then when you look longer term.
You just discuss your views on what those two properties could you at stabilization, whether that timeline or the amount of EBITDA contributions changed at all.
Yeah, our stabilized our opinion of where stabilize value could be has has not changed we've been pretty consistent about just it's the shape of the recovery.
We had said that those properties would have about 25 at 30 million of displacement in 2019. They finished at the upper end to that range, we're not expecting that either one of them get back to their 2018 numbers in Twentytwenty. In fact, the low end of our guidance range implies that youd get <unk>.
Anywhere from kind of 12 to 13 million back from those from those hill.
So not not even close to half a back what they were doing in 2018, you know given the fact that you know the de ours, obviously still slowly ramping given everything that happened last year and the relative underperformance of plateau Carmen market as compared to can't coon into greater Yucatan.
Again, we are still incredibly excited about the returns and what we said before still stand. It's just about the shape of the recovery and again given everything we've said earlier, we hope that that low end of the range proves to be conservative and we'll update you as the year moves on.
Okay, Great. That's helpful. And then there was a follow up just.
And you could and it sounds like part of the commentary a little bit weaker than then can crude. So can you just talked about the differences and trends between those two markets and what in your mind needs to happen for.
For trends to inflect higher.
And the Yucatan generally.
Yeah, a the differences between those two are there some obvious stuff that you know plateau comments further from the airport.
The way the beaches and the tides were there it suffered far worse from sargassum. The seaweed then can coon did I spent a lot of time last year in both those locations than it was just always far far worse, particularly at our Panama Jack can't go and just the way that beach sits and historically not so much that we're seeing in 2020.
But historically had a lot more supply, particularly lower end supply that came in at that market. There's just fewer places to build in cancun, particularly in Cancun proper people are building till the north.
It's a little bit further further away from the airport.
So those you add those things up at leads to relative underperformance when compared to to Cancun.
Like we said, we kinda noticed it at the on our Q3 call them and we're still seeing it now that there's some signs of stabilization, particularly in Cancun, we still expect that Kankan will outperform plateau Carmen, but like that January was off to an okay start and so we're cautiously optimistic that we've built some some momentum here notwithstanding anything that's going on in the world today.
All right I'll leave it there thank you.
Thanks question. Our next question comes from glider Patrick shows your line is open. Please go ahead.
Hi, good morning, everyone.
Good morning worked out or how would you characterize your sentiment about their trajectory of Dominican Republic today versus say.
I'd say January two months ago January Onest.
How are you feeling in that sort of two month period, better or worse same.
I mean, I think better you know so as we said it it's always tough when you're comparing big negatives and you're saying the big negative was not as big negative as you expected. So.
That's cases, where you know we're improving in the trend lines better. So I mean my opinion you know, it's it's more positive than two months ago is more positive we seen the bookings continue to progress.
Not to be the down here, but the other side of that it that there's still continued airlift issues. That's a prohibitively expensive market to fly into without any of the news that happened last year, but then you layer onto it that theres been capacity shifts from the airlines in the lingering issues the 737 Max.
So that is why we were clear that while we're encouraged by what we're seeing we're not yet changing or outlooks. It's about the change in the rent and any ramp of the recovery. We do not believe at all that that market is impaired.
Indefinitely or anything like that it's just about the shape of the recovery and because so much of the year over year growth in absolute terms or is back half loaded we thought it for into continue to give a wide range and update you on or you know in just a couple of months on our May call. When we have just under a lot more information. So like I said, we're encouraged but we'd like to see some of these other headwinds.
Start to dissipate and write downs and right now they're not.
Okay. Thank you for color on that and then secondly can you give a little color on the.
The sort of the travel makeup of your Asia Pacific customers to Mexico are those all like group tours.
Where the whole group could just cancel out right or is this more sort of individual travelers. It is not group. Okay. So it's primarily you know we have a big percentage of that business, who are honeymooners. So that's been really stable good profitable business for us and then the other piece.
To that tends to be couples are families. So you know it definitely does not group business.
Okay. Thank you that's it thanks, okay. Thanks Scott.
Our next question comes from Leidos Metasearch. Your line is open. Please go ahead.
Thank you again that showed your line is open. Please go ahead.
Hi, sorry can you hear me, yes, okay.
I wanted to ask you a little more on the.
Use of capital, particularly if you're able to sell.
Assets and it seems like you've I mean, you've hinted at being more interested in share repurchase.
I mean, if we are and who knows what's on the verge of a global slowdown in travel and your EBITDA debt to EBITDA as verging on six times now I mean isn't it more prudent to attack the debt first before and you know the stock will take care of itself later or I mean, it seems like you're getting awfully high leverage.
Side.
No I mean, it's a good point I mean, so what I stated it was kind of.
Kind of our sentiment where we are today, but you know I can't predict where we'll be you know tomorrow, let alone you know probably in a week or a month. So exactly given where you are on leverage it wouldn't it be better to go ahead and get in front of that fits exactly you're quite you can't predict what will happen that Ken that may absolutely be you know what happy.
And so we will you know will meet with the board and we'll have that discussion given all of the you know evidence of our you know.
Business and our prospects as well as the global situation and it may be very well that we do that but let me just comment you know a little bit where you know it it and I won't say it it doesn't matter, but I'll say that you know we can still accomplish both okay and the reason I say that is even with you know a downturn our free cash flow generation is there.
Significant and so as Ryan mentioned, you know, we're gonna be paying off the rest of the revolver in the first half of the year. If we have the proceeds from an asset sale I think we'll have different levers that we can pull so as we look at it you know we will make that determination and we're not going to do anything stupid, we're going to do what's best you know to say.
Secure a great outcome that outcome is de leveraging will de leverage if it's a combination of de leveraging and stock buyback will do that.
Okay, and then I just wanted to ask you you guys have talked a little bit about how you thought the cap kinda asset would ramp up comparing it to you on.
Your can killing properties I mean, it's changed at all in terms of in terms of how you think the first second and potentially third year.
EBITDA generation luck fair.
No no and it again go into my kind of my summary comments about my frustration.
It's definitely you know a temporary issue so hyatt Ziva Andrs Lora Coopcana you know unfortunately opened into a soft market.
Okay. It's you know as Ryan said this isn't something that's going to go on indefinitely. It's you know, it's kind of recovering and I think what's the 737 Max situation is resolved once corona viruses resolve once a lot of things are resolved that asset you know those two hotels are going to be incredibly successful you can go on and you can look.
At the trip advisor ratings, you can go down and you can talk to guess you've been there you know the overall experience is tremendous and what happens in our industry is that you need that you know natural progression to occur you need guests to go to a resort you need great feedback from from their experience you need groups to go to the resort and get great feedback.
And then success breeds success and I think that's what you're going to see we had that situation.
We've had that situation as even to lower Rose Hall, and I think it will be even better here at hyatt's, even to learn how caught it is an incredible asset. It's built for groups. It has more amenities and facilities and efficiencies than any other resort. We have it's got the best Beach of all of our resorts.
The Dominican has had a cloud overhead due to you know the whole media frenzy in and 2019th and then you know it was impacted as Ryan said by flight availability. You know these things will clear out in that resort will do well and even in the meantime, it's going to do better than than the competition. There I mean coopcana is for one.
An incredible location and number two we have the best resort in comp gone up we have the best resort in the Dominican and arguably in the in the Caribbean. So I think it's going to do well, it's just opened into a soft market that's it.
Okay. Thank you. Thank you for your comment.
Thanks, David.
There are no question. This time please continue.
Okay. So you know.
I'll just wrap it up by saying you know, it's it's an uncertain world in you know we have a lot of challenges, but we're not alone. Okay. If I were to to choose where to go in the world right. Now you know I personally would choose to go to one of our locations, but who knows what's going to happen to to.
Hold travel market leisure business everything combined.
You know we've we've seen this before it's hard to predict with this one but I can tell you that you know from the standpoint of our business operations I think things are going as well as they can't given the external situations and work and we will continue to focus on driving you know free cash flow in profitability and that's that's our focus so.
You know we had a good start to the year hopefully that will continue even given the external factors in you know that's gonna be our focus the asset sale discussion we've had I can't comment on any specifics, but I can tell you as we've said before that remains an incredible focus as well for the company. So we we will do that in.
Whether you know speed hospitals use the money to de lever to buy back stock, we will do whats most prudent in the best interest of our shareholders, but we will do that and so with that you know I'd just like to say Oh, you don't hang in there I guarantee you I'm hanging in there I feel more positive you know in this year than I did last year and even.
You know krona virus I think you know this this shall pass so thank you very much for taking your time to listen to our comments today.
Ladies and gentlemen, and this concludes today's conference call. Thank you all for participating you may now disconnect have a great.
Yes.
[music].
[noise] [noise].
[music].
[noise] [noise].