Q3 2020 Playa Hotels & Resorts NV Earnings Call
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Please be advised that todays conference is being recorded I would now like to pass the call over to your speaker today Mr., Ryan Hi, Moshe you May begin your conference.
Thank you very much 0.0, good morning, everyone and welcome to Playa hotels, <unk> resorts third quarter 2020 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 a discussion of some of the factors that could cause our actual results to differ. Please review the risk factor section of our annual report on form 10-K, which was filed at the end of February with the Securities and Exchange Commission, we've updated our Investor Relations website.
Investors Dot Playa resorts dot com, but the company's recent releases.
In addition, a reconciliation to GAAP of the non-GAAP financial measures. We discuss on this call were included in yesterday's press release.
On today's call Bruce Wardinsky, plus chairman and Chief Executive Officer will provide some comments on the third quarter and key operational highlights I will then address our third quarter results our liquidity situation in our outlook. Bruce will then wrap up the call with some concluding remarks before we turn it over to you and with that I will turn the call over to Bruce.
Great. Thanks, Ryan Good morning, everyone and thanks for joining US. We appreciate your interest in Playa and hope that all of you are in good health and spirits as the country and the world begins the recovery process from the pandemic.
I'll begin today by reviewing early results at our properties sharing preliminary learnings on the operational front and insights into the booking environment. I'll, then turn the call over to Ryan to discuss our balance sheet dive into our results and provide color on our outlook.
Consistent with respect to these policies it appears as though the lack of restrictions and the monetary considerations and invert invasive testing procedures that comes with them is leading to increased consumer demand and more business confidence, resulting in better airlift capacity and a faster recovery than other markets.
International Air traffic into Kan Coon is shown sequential monthly improvements since reopening.
Importantly, our occupancy decline is there are better than the airlift decline each month since reopening in the Yucatan and the Dominican Republic.
I believe the pandemic accelerated many trends throughout consumer behavior that were already in motion with most notable for us being the shift to direct booking channels are focused on the direct booking channels enabled us to ramp occupancy faster than many third party relying competitors and is leading to share gains.
We realize our current mix shift of direct bookings will naturally move lower as other channels rebound and many of the pandemic restrictions or Lucent. However, we are confident our company is on target with our five year plan to increase consumer direct business to at least 50% by 2023.
An aggregate during the third quarter of 2020, 57% of room nights booked we're direct up 23, two percentage points year over year, reflecting the relative strength of our direct channels and our business model is a whole versus most of our competition.
To give a better gauge of the underlying fundamentals of our direct to consumer website as of October 15th <unk> Dot Com was pacing behind last year with 34 8 million of gross revenue on the books for 2020 versus $52 $3 million in 2019.
During the third quarter play resource Dot com accounted for 27, 5% of our total bookings up 14 percentage points year over year.
Looking ahead to 2021.
Monthly cash bridge on page six of our earnings release to help guide the discussion.
We began the quarter with $251 million of unrestricted cash and as we outlined last quarter, our cash burn rate in a totally closed resort environment would result in a burn rate in the low $20 million per month, and it and as we began to reopen hotels on July 1st we believe that would improve going forward or burn rate. Indeed improved each month of the third quarter burn.
Approximately 18, 15 and $16 million each month, respectively with September, including or 2.5 million dollar quarterly principal payment under a credit facilities.
These figures also include incremental launched startup operating X operating expenses for the additional hotels reopened during the quarter.
We exited the quarter with roughly $195 million, an unrestricted cash and hope to continue to improve our cash burn rate as we move into the high season.
Given the extremely limited visibility into our future business, we will not be providing burn rate or EBITDA guidance will.
Well, we can tell you that the incremental expense that are resorts related to covid are fairly minor and we have staffing in place at our resorts to support higher occupancy levels and we're seeing today.
Another item to note is the Capex men have approximately $9 million during the third quarter $4 million of which was associated with payments discussed on our last earnings call for Hyatt.
Top can't Capex that was originally going to be paid in 2020 in 2021 overs required to be paid in 2020 as part of the financing transaction, we close in the second quarter.
One of the last time of our last earnings call.
Roughly 31% of that $23 million related to stays in the fourth quarter of 2020.
Of the Q4 deposits only $2 million related to groups and the rest is reflective of the deposit policy during the holidays.
Another roughly 30% is associated with stays slated for 2021 and the balance is for all periods thereafter.
As a reminder, through the majority of our leisure business does not pay in advance and there are no deposits to refund with most of our leisure cancellations.
All of the aforementioned efforts bring us to a total unrestricted cash balance of approximately 195 million as of September Thirtyth also.
Also as a reminder, we have 27.6 million of additional restricted cash on the balance sheet from our June financing.
On the other side of the Ledger, we have roughly 85 million of outstanding borrowings on our revolving credit facility and a total outstanding debt of $1.27 billion.
I do not have any debt maturities until our revolver matures until April of 2022, and our term loan does not mature until April 2020 four as you may recall in June we reached an agreement to amend our existing revolving credit facility to provide relief for the springing leverage based financial covenant test through and including the second quarter of Twentytwenty one.
One final item to note that we recently signed a purchase and sale agreement for the dreams for direct and tourists.
For consideration of $34.5 million and expect to close that transaction during the first quarter of 2021.
At last quarter, our forward Capex forecasted use of cash does not include additional share repurchases as if we've just decided to suspend buyback activity for now.
Moving on to the fundamentals starting in the Yucatan as Bruce mentioned fundamentals improved each month of the quarter as occupancy is ramped alongside airlift into the market. This improvement has continued into the fourth quarter with October showing steady progress and in October average occupancy of 34%.
We estimate that over 80% of our competitors have reopened in the Yucatan and pricing has remained rational thus far.
Recently, our occupancy decline has fared better than the decline in airlift into can't Kuhn further reinforcing our belief that direct channels are providing a competitive advantage, but realize that appropriately yield managing is of the utmost importance until we get more visibility into airlift and demand gives.
Given the shortened booking window in the market, we feel that we'll be able to react accordingly, if the opportunity presents itself.
In the Pacific, We decided opened the Hyatt Ziva, Los Cabos as part of our second phase of openings. At this resort is usually more reliant on group business and doesn't have any of our other resorts nearby to cluster demand given the recovery in airlift into the Los Cabos market, which leads all of the markets. We operate in Los Cabos has come out of the gates very strong several airlines have made announcements.
About adding more direct flights from the east coast than would be typical pre cobot, which is a testament to the demand for this destination.
Hi, Ziva, Puerto Vallarta, which opened on October Onest has also seen a strong rebound in airlift in in the market, helping to quickly quickly ramp up in occupancy the Pacific segment saw October occupancy ramp to just under 40%.
Throughout our resorts in Mexico. We've also made an active effort to market locally, resulting in our locally sourced mix, increasing over 700 basis points year over year.
We began opening our resorts in the Dominican Republic in July starting with the new Hyatt Ziva Adelaar, Cappadonna and our managed sanctuary Coopcana in late July the government imposed cobot testing requirements to enter the country immediately in Penn impeding. The momentum we are seeing in the region at the time of our last earnings call. The D.R. had been our strongest geographical.
Segment for bookings in the fourth quarter. It was not as it was not seeing the same sort of cancellation activities or other markets. Our occupancy has continued to improve each month during the quarter. Despite the restrictions and no significant change in airlift. The government. However removed the cobot testing requirement in mid September and our D.R. bookings picked up right away, giving us a sense.
Of optimism as we move into the high season.
Airlift into this market remained extremely depressed throughout the third quarter, but has begun to pick up slightly in October with the absolute number of flights per week nearly doubling.
Similar to what we're seeing in the Yucatan, we are materially outperforming the traffic into the destination with.
With an estimated 20% to 25% of rooms back online and puts a kona market at the end of September we believe our direct sourcing strategy is enabling us to take share and maintain excellent pricing.
As you May recall, Jamaica is shaping up to be our strongest market as we approach Q3, but the momentum stalled out once cobot testing requirements were put into place in Jamaican early July severely disadvantaging this destination relative to our other locations.
The locally sourced business has helped the occupancy outside of our highest in this markets such as the Hilton The Jewel Paradise Cove has weighed on our LDR in mix of rooms sold we're starting to see some additional airlift in Montego Bay in October which is increase occupancy levels at the higher Roes holds up Hi Rose Hall in October, but we would like to see the cobot testing requirements.
Relaxed or removed entirely to increase international demand.
Until that happens, we do not expect demand to improve in this destination.
On the competitive front, we estimate that roughly half the room inventory in Montego Bay remains closed I'd.
Now taking a look at who is traveling rough.
Roughly 50% of the stays in the quarter came via our direct channels versus 23% in Q3 of 2019, which we believe was a function of the weakness in the tour, operator channel, which was down 90% and weakness in the OTA channel, which was down 84%, while our direct channels were only saw a roughly 59% drop.
Geographically, our U.S sourcing increased 700 basis points to 62% of our manage room nights.
Mexican source business increased 300 basis points, South American and Jamaican both increased 100 basis points.
Given the state of travel restrictions, our Canadian and European mix, both felt 500 basis points in our agent Asian source mix fell 300 basis points.
Our 18 to 34 year old age demographic continues to trend ahead of last year, while the 35 to 54 demographic lags and the over 55 crowd remains relatively flat.
Our point redemption room nights booked increased year over year for both Hilton and Hyatt during the quarter, which is extremely encouraging.
Hilton honors redemptions were up 110 basis points and account for just under 10% of the bookings mix for our Hilton hotels.
World of Hyatt redemptions increased 150 basis points year over year and are approaching a mid single digit percentage of our booking mix at our Hyatt portfolio.
We've mentioned several times the one of the biggest challenges we face in our industry. During the reopening process has been the contraction of the cancellation period to roughly 24 hours across our portfolio and across the lodging industry generally much.
Much like last quarter I won't go into too much detail due to competitive reasons, but we did see cancellation activity leading up to the reopening of our resorts across the board, which was in line with our internal projections.
Cancellation activity recently, however has leveled off and we are adding net revenue for future periods, which is an important milestone for us we shared on our last call and our revenue on the books for the fourth quarter of 2020 was down around 35% versus the same time last year, and we expected that number to continue to trend lower.
Our overall pacing did trend lower as expected until early September when the pacing began to stabilize one school schedules became clear followed by an actual improvement in October until a brief disruption at the hands of Hurricane Delta improvement seen in October was the first upticks since before the pandemic.
The rate of cancellations has leveled off allowing the accelerating demand to result in net booking gains I also want to note that as we move into the high season, we are seeing a slight change in the booking window.
As the reopening began in Q3 the average lead time for our stays was less than one month across the portfolio versus roughly two and a half months a year ago.
While it steadily improved in Mexico. It has lagged our other markets as we look ahead, our long dated room nights on the books for Q4 is significantly greater than what we experienced in Q3, but that is typical during the holiday period. This.
This is encouraging however that provides us a base of business with a continuation of the strength of close in demand leading to potential upside, especially as airlift continues to be added to our destinations.
For the fourth quarter, our revenues on the books are a little less than half of what they were for Q4 2019 at the same time last year.
But that said I will turn it back over to Bruce for some closing remarks.
Great. Thanks, Ryan.
So just to recap with the bulk of the portfolio re opened for business. Our focus is on controlling what we can which is delivering the best experience possible in the current environment continuing to grow our direct business managing costs to minimize cash burn and optimizing our portfolio.
We are operating under the assumption that air lift in demand will not get materially better and we therefore need to be diligent on expense control. We are highly encouraged by the stabilization and booking activity the sequential occupancy increase through October and the demand we are seeing heading into the high season.
So again, thanks for all of your time, and we will now take questions.
Thank you reminded to ask question really depressed firewall on yes, Allison given the guidance question Sam.
Please stand by while the profile like you and a last thing yes.
First question is from Chris Woronka of Keybanc. Your line is open.
Hey, good morning, guys and thanks for all the data points very very helpful.
I did want to ask about first quarter and more to directional sense not not to get nitty gritty numbers, but can you maybe give us a sense as to.
What percentage of the first quarter revenue was on the books at this time last year and maybe just directionally, how you see that filling in this year.
Yeah. So right now the the first quarter is right around 50% behind where it was prior year with revenues on the books, but as I mentioned earlier that has actually increased slightly over the last three or four weeks. We've started to see net gains where our cancellations have leveled off so we see that trending positively for the first time since pre pandemic, but.
As we said many times that I know, you're probably tired of hearing us saying at the cancellation policy makes it a little more difficult to predict how much of that is real.
We talked about on the last call that roughly 75% of the business that we had on the books for Q3 canceled by the time, we got the Q3 and that was similar in Q4 as well. So that's the hardest part when it comes to predicting things, but we have seen net pickup over the last four weeks, which is which is a positive signal.
Yes, that's helpful. And then just a quick follow up on that on the cancellation policies. I mean do you think you think hotels can can delineate wins when they from airlines in terms of what policies might become a little bit more restrictive again or do you think as long as airlines are allowing people to change for free its can be difficult for.
For hotels to push a change.
Let me personally Chris I think it's going to be difficult.
The only advantage, we have being kind of a resort trip and some of the you have to plan a little ahead for us.
Theres, a little less likelihood of people cancel I mean, they're much more likely to cancel kind of a domestic trip for nerve and trend for the weekend or something like that so ours is a little less but having said that as long as the airlines are going to have it which they have to right from a competitive standpoint, they're going to have to offer it and we can't we can't do anything that.
Everybody else's in doing and Thats kind of universally whats going going to happen so and on the positive side of that we do see quite a bit of close end bookings again. It makes it hard to predict but we've seen people book is close in as we got to the data drop which is encouraging but again makes it hard to predict and I'll tell you and I think you know as you.
Continue into kind of the.
No the remote work in the remote schooling environment I think more people are going to be flexible with what they can do so we're seeing some of that and you don't have to go now Christmas week, because your kids go back to school you can go in January when things are different so I really believe it's going to continue to be.
A flexible moving toward that and I was going to ask you question. Chris I mean are you right now junior call from one of our resorts in our work and learn from Paradise.
I wish I was.
Well you need to I want to I want to call me any time once you get down their booking okay, well, it's getting colder appearing in the northeast So you might be on us on to Bruce.
Just had one last question which is.
This is more of a longer term hopefully more and more fun to answer.
Do you guys think you.
You're getting enough from the Hilton and Hyatt and whether you want to talk on collectively or individually, but.
They have these huge or Hilton has 110 million members high it's a lot smaller.
Do you think you can get like more of your fair share of their customers given how small the all inclusive resort portfolios are for both of those companies.
I believe so I mean, one of the main motivation from our standpoint of partnering with our brand partners is that Theyre resort portfolios aren't that significant obviously these are all inclusive resort portfolios were pretty much nonexistent, but even there overall resort portfolios are relatively small and if you if you look at it.
It.
Who's going to be traveling it's going to be leisure business right and it's going to continue to be that for some extended period of time and so whether people are just you know tired of being kind of cooped up or they've got points that they can redeem I think we're going to continue to get business from them and you know as Ryan mentioned.
In his commentary we've seen it it's starting to happen and I think it's going to be happening more going into 2021, and so we're excited about that the air fares remain remain cheap people, who travel have a much higher propensity to travel again.
Then they come back and tell their friends that is kind of a word of mouth and it spreads or they go on social media and so I think it's just going to continue to build going into next year and like you said the what the weather helps I mean.
If we have.
A cold winter is going to be beneficial to us so the northeast the Midwest.
Yes, I think there was also a lot of anx, an overhang from from the election, whatever happens that is going to be behind that I think people are going to be more open to traveling and thats, where I think will benefit in our relationships with Hilton and Hyatt are critical to that.
You mentioned the numbers of members that they have in their frequent stay programs.
That is just not something that our competition can even touch and so just the ability they have been doing a good job with it of just launching out you know.
Promotions or anything like our work and learn from Paradise and different things they put those out there that's.
Thats stuff that our competition just can't even compete with and so I'm very positive that we're going to continue to build on that especially going into 2021 and Chris on the books for Q4, our percentage of Hyatt redemptions for the business on the books is nearing mid single digits for Q4 for Hyatt and in the low double digit percentages for help.
Which would be an increase of 201 hundred basis points, respectively. Over Q3 result, so it's trending in the positive direction.
Okay, Yes, no good to hear very helpful. Thanks, guys.
Thanks, Chris.
Your next question is from Taylor.
<unk> capital markets. Your line is now open.
Hey, good morning, Thanks for taking my questions.
The first one is just a follow up on the.
Our new elaborates on both strength in Aer in the third quarter, especially in Mexico and is that something that has continued into the fourth quarter as well.
Yes, we have seen that so in the third quarter.
Adjusting for the VIP adjustment our rates in the Yucatan were still up almost 10% over prior year, which is again, a testament to the direct strategy and our in our bookings mix.
And in the power of that of that portfolio. There. We are seeing that continue into the fourth quarter as well even in the Pacific Coast, where we only had one hotel opened for six days in the quarter it not being ziva, Los Cabos for that six days right. After reopening it still did 21% occupancy and its rates were only down 3.6% compared to prior year.
Given given the timing of all that Thats actually in my opinion, very very promising and so we're seeing that continue into the fourth quarter and into the first quarter as well.
Okay, Great and then I want to also wanted to follow up on some of the commentary in terms of.
Airlift in to some of your some of your markets I mean at this point do you think that.
The lack of airlift is really one of the primary governors on your your results, especially in places like Mexico. I mean, do you think the demand outstrips the ability of travelers to get to some of your some of your properties.
Yes, 100%, 100%. So I mean, I think what you're going to see is in the airlines airlines need to the flight routes, Okay, and so I think they were incredibly cautious about where to fly in every new plane that they put out there has has a cost component to omid. So they were little cautious.
What you've seen in Mexico is.
The demand has followed the airlift so I don't know the chicken in the egg, but as more airlift has come in to Cancun, Los Cabos, Puerto Vallarta more people are flying in so as our people just started going for business on those routes. They all sit back pictures of the airport and the planes and appliance.
Our crowded if not full and so I believe that what we need and.
It will happen is more more airlift will go into the market.
And that will bring more customers into the market and kind of going back to your previous question about the rates.
We made a very clear decision that it wasnt going to benefit us to just slash rates to try to drive demand is going to this airlift issue right. So there is a limited number of people who are going to people going their main focus isn't on what the rate is it's what is the experience you know are they going to feel safe.
Are they going to have a great time, so our focus has been on maximizing rate and delivering an incredibly strong experience for all of US all of our guests and so thats why I think you're seeing reflected there, but but I believe that the airlines see their planes going in their full or very full they are going to start adding.
More point, you've started to see that and and I think it's going to continue and add a little more data there Tyler while we've seen progression in the right direction sequential growth each month, it became clear that can't good market for international arrivals exited the quarter still down roughly 60, 65% part of air to down roughly 15 Cabos.
Down roughly 40, but then you look at the D.R.
It's still down roughly 80% you know again, we mentioned that they are adding flights now which is nice, but still down materially in Jamaica still down roughly 70, 80%.
And so that for us the number one gating issue for our ability to kind of increase our results and and be able to forecast more accurately and let me just give kind of a little color on the numbers. The biggest reason for the decline in the Dominican and also effects can cone.
Our the European flights, Okay, and so I think the one reality is given what's going on in Europe, I don't think you're going to see a big rebound in that business I think that can be seen.
Significantly offset by increased demand coming out of the United States. So number one where can Americans goal for leisure trip right. They can't go to Europe again go to Asia. So work and they go they can go to Mexico and the Caribbean and today. There is a good article in the Wall Street Journal talking about people going to.
Mexico, and going to Hawaii, and so I think thats, what we are seeing very positively and so I think.
We're seeing it the airlines are seeing it the customers are saying it. So I think you're going to continue to have the business you add all these factors right Americans can go to other destinations. So theres more demand going into our destinations airlines are starting to fly more or flights. There you have the redemptions increasing.
People, having flexibility with their schedules, whether its work or school schedules. So I think all of that points to improve conditions for us going into into off into the first quarter.
Okay. Appreciate that and then just last question for me is on the the asset sale.
Let's think about the strategic rationale for selling that property and then also if you could touch on how the sale fits into your liquidity planning your liquidity situation.
Much like much like the jewel sales that.
That we announced back in May this particular asset doesnt fit our strategic vision.
It would not be a candidate to be a brand without heavy additional capex and re imagining that that property given its location, which is probably I think of our entire portfolio is the furthest from the airport is bordering almost on on to loom from the Kan Coon Airport.
And just given its heavy reliance on tour operators in the fact that we didn't manage it we think it was probably.
Would be one of the slowest properties to recover from the pandemic. So we wanted to sell that asset to give us some optionality give us some some additional liquidity and allow us to see how things progress.
Into the first quarter and into the first half of next year, just given the fact the visibility. So low you. Let me just say we had had discussions with people pre pre cobot pandemic. This okay and so up you know we were talking about this a long time ago and then when when the crisis hit everybody stop talking because right everybody want.
Good to see what the situation was going forward and then recently the interest.
Pete and came back to us and so that's kind of how this all evolved so we we weren't going to sell at any kind of distressed price. We had no need to do that so it's a little different than you know the situation. We are looking at back when we sold it to each making hotels, we made at the beginning of the crisis, but when we got very strong interest related.
Yes, as Ryan said this is a strategic to us.
We got a good price it helps with our liquidity situation and takes out of our portfolio. A hotel that was just going to need more cash than deliver more cash.
Okay. That's all from me. Thank you very much for the detail. Thanks, Alex.
Your next question is from Smedes Rose from Citibank. Your line is open.
Hi, Thanks.
Given some of the I think the cost savings that you push through the system and it's sort of a shift to more direct bookings et cetera. Can you just maybe talk about what sort of occupancy levels you need now across your portfolio to just sketch kind of breakeven from an EBITDA perspective, maybe either operating level, our corporate wide yes.
Yes, no it's great question so.
As we said before year round just on average our breakeven property levels are roughly 35% to 45%, but as we move into high season and add given the rates that we currently are seeing on the books, we think that in our various destination should be at the lower end of that spectrum much closer to like the mid thirtys to low thirtys as.
Moving to high season.
Okay, but on a year round basis, something like 35 to 40 would be debt.
At least gets you to kind of zero and then north of that you would start generating positive EBITDA at the property level correct.
At the property level and what do you think you need to do to to get to zero at the corporate level or didn't move into positive territory.
A year round around 60% around 60% occupancy, obviously that to move a little bit lower as in as we move into the high season.
But 60% for the year round.
Yes based on rates, you're seeing now okay, yes.
Again, I mean do you have any.
I mean can you guys help us are you thinking that thats, an achievable occupancy number for next year for 2021 from what you're seeing now or how are you kind of thinking about that I realize a lot of visibility so.
Yes so.
You are you are right to me that it's incredibly difficult to handicap at this point you're out there and I can't comment on whether or not that's achievable or not as Bruce mentioned.
The underlying demand is there, but airlift is one of the biggest gating issues.
Airlift and then obviously the restrictions that we've discussed the nauseum in Jamaica, and so it just makes it too hard to predict so I apologize I can't give you concrete answer on that but it's something that we're striving towards obviously, but our focus today is gaining share focusing on direct and keeping the employees and the customers are showing up and coming.
Happy and coming back.
Okay, and then could you just talk about on the asset sales.
You'd have shed for whatever reason you feel like you need to raise incremental capital you know how how many of these kind of smaller non core resorts do you have and I guess how quote.
Quote unquote easy is it to take them to market and sell them. It seems like maybe you're selling them at like nine and a half 10 times EBITDA. So I'm guessing on that but is that.
Yeah, how deep is the market there.
Yes. So you are absolutely right on the advent tourists, we sold about nine and a half times 2019 again, we believe that's irrelevant in this world because I don't believe it will do the EBITDA. It in 2019 anytime soon to be completely honest, but we have a couple of others. We haven't said publicly which ones we'd be targeting but they look and smell a lot like what we.
We've done already they wouldn't be candidates for brands that have some potential needs for capex.
And it doesn't fit our strategy, it's certainly easier than it was at the high the pandemic when it's actually execute these transactions could now stating the obvious people can actually show up in two or the asset airports are open like Bruce mentioned this was actually an asset we had identified for sale prior to all of this and we kind of had to wait for things to reopen in order to do so we were.
We're happy that we were able to sell the two dual back in may but we realize we are fortunate unable to do so because we sold it to a group who resided in country and it made it easier they could literally drive down the street and come see the asset so its easier today and there is still a market of buyers for these assets. So we have a couple others, we would look to do and that would be our first.
Cheapest source of capital at this point.
Okay. Thank you appreciate it thanks.
Okay.
Your next question is from Chad Beynon of Macquarie. Your line is now open.
Hey, guys. This is Aaron Lee on for Chad. Thanks for taking my question.
Hey.
Hey, just wanted to talk about your not package spend a little bit for a bit.
How you see that trending in the next few quarters I know you mentioned in your prepared remarks that it was a positive surprise during the quarter.
Yes, do you expect this strength to continue or is it still ramping.
No.
We've talked about this quite a bit internally because I personally was surprised at the amount of non packaged spend from those people who are coming particularly even in our spot. What we knew was going to be a hot seller were dinners and isolated dinners on the beach and now that we've rolled out as Bruce mentioned this QR code that we can actually sell cabanas and stuff like that to allow people to socially.
Distance anymore.
In a more meaningful manner that stuff, we hadn't done before but the spot sales actually surprised me I'd like to give an example, it ours a laura can kuhn prepay.
Previously on a per gas basis is the highest.
Amount of dollars per guest ever on our higher portfolio, our third quarter. Our dollars per guest were bordering on what we did at its peak last year at that property, obviously, it's a beautiful spots and adults only properties with easier for couples are people to go to the spot, but that surprised even me.
I don't know enough about the psyche of the the customers who are traveling today, but I think it's safe to say that the people who are traveling today.
Our little less risk averse are obviously comfortable getting on planes and stuff like that so does the next wave of people that come who are maybe a little more hesitant today will they be as likely to.
Spend in a spot or something like that my guess is probably you would see those numbers come down a little bit.
Because they may feel comfortable enough to get on planning, Tom, but they may not feel comfortable enough to get us a facial treatment or a massage or something like that.
But that said everything else I think we can continue to see strong positive bookings and non package whether it's.
Transfers from the airport private transfers from the airport, where you are with just your family and people will pay for that again booking our cabanas dinners on the beach wine upgrades I don't see that long down anytime soon.
And one thing I'll add to that Ryan said is that one trend. We're noticing is that people are very willing to come to our resorts and we feel very comfortable at our resorts, but they are leaving less frequently okay, and so thats a lot of things that they might have spent by leaving the property whether its excursions are meals outside or any other.
Activities. They are not so so they are trying to.
Enhance their their stay but do it at the resort I think the beneficiary.
Is the non package spend because of that trend.
Got you that's very helpful.
Last one from me for your group bookings.
Are these being be booked for late 2021 or 22002.
Both both we are seeing some books at 2021, but.
You know, it's too hard to handicap, whether or not they'll come or not just.
Just depending on what happens in the world, but for the most part.
Things are moving into the second half of 2021 or into 2022.
Okay awesome, thanks very much.
Thanks Aaron.
Once again to ask a question. Please press star one on your telephone yes.
Your next question is from Gregory you May ask.
Securities. Your line is now open.
Thanks, Good morning.
First question I want to ask relates to the Mexican government can you update us if the government is reconsidering or changing its travel promotion strategy or possibly the reinstatement of the Mexico Tourism Board given the pandemic.
You know there is nothing that I have heard.
That they're making any any changes you know.
President and low has been kind of funny during the whole thing is almost ignored that anything has happened whatsoever anywhere in the world let alone in Mexico with regards to anything.
And so.
I don't believe he is revisited that that that issue I think it's a little.
Let me just say I'm, not because I was going to be a little less necessary or I guess, maybe the impact felt is a little less impactful because a lot of the focus. They did there was not just getting the leisure, but trying to get you know groups and other business, which that has dropped off anyway, and I think that just the fact that there is limited.
US Nations, where Americans in particular can can go to which as you know most of the focus of of the Mexican Tourism Board was geared towards the United States.
I think there's a lot of press that hey here are your options like I said with the today's article important set out very very clearly you know that the.
New options for Americans to travel anywhere is somewhat limited and so I don't think they're going to be doing anything anytime soon as my bet.
Good Thanks Bruce.
On a switch gears and ask about third party management contracts.
There is interest in the past it picking up.
More management contracts are asset light partnerships are.
Are you seeing more opportunities today or into 2021, perhaps and if so what kind of hotels on locations might be opportunities for you.
So we have always had a very strong desire and we've stated it publicly before that we want to grow that part of our business, but it was very necessary to kind of grow up.
Our portfolio as fast as we could and as effectively as we could to get to the point, where we could convince others. Okay. Other owners other financial partners that would make sense to do that okay, and so I think theres always silver linings of any crisis and I'd say one of the silver linings.
This crisis, which will benefit apply in the near and medium term.
Is that as Ryan alluded to.
The biggest drop off in how business is being booked was in the tour operator segment guidance a lot of our competition relies on that segment. This second segment, that's been impacted Zio teekays, that's starting to come back a little bit for the tour operator segment remains incredibly depressed from prior.
Historical levels and so I think as we as we look at.
Things going forward.
We're going to get and have been getting a little more interest from people, who have existing properties or new properties and they see what's going on and they say wow, how come you're doing better than your competition and it's basically because of our direct.
Consumer sales strategy and so I believe we're going to get more business and we are having discussions I can't tell you anything is going to materialize anytime in the immediate or short term, but I can tell you we are having more discussions.
Okay, well I guess, we'll wait to see on Alan that's it from me. Thanks, Okay, great. Thanks.
At this time there are no further questions and I would like to turn it back to the presenters for any further comments.
Okay, well, thanks, again for everybody participating and your interest in imply up.
We don't know any better than anyone else in the world about where things are going to go in the coming weeks and months, but you know as we mentioned on the call today, we're seeing a lot of promising trends and we hope that those trends will continue and that will benefit from that so with that I hope everybody has a great day. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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