Q4 2020 Playa Hotels & Resorts NV Earnings Call
[music].
Good morning, and welcome to the Playa hotels fourth quarter 2020 earnings call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star can you followed by zero.
After todays presentation, there will be an opportunity to ask a question to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded.
I'd now like to turn the conference over to Ryan email. Please go ahead.
Thank you very very much and good morning, everyone and welcome again to Playa hotels <unk> resorts fourth 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 factors section of our annual report on form 10-K, which we filed last night with the Securities and Exchange Commission, we've updated our Investor Relations website.
And investors that Playa resorts dot com, but the Companys 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.
It's called Bruce word Inscape, Playa as chairman and Chief Executive Officer will provide some comments on the fourth quarter and key operational highlights and I will then address our fourth quarter results, our liquidity situation and our outlook. Bruce will then 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.
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 continues to recovery process from the pandemic.
I'll begin today by reviewing our fourth quarter results by geographic segment, then share some learnings on the operational front as we continue to adapt to changing travel restrictions.
And then wrap up with insights into the current booking environment. I'll, then turn the call over to Ryan to discuss our balance sheet discuss our results and provide color on our outlook.
I'm very pleased to be able to say that our business continued to recover during the fourth quarter as we reopened nearly every one of our properties in the year finished on a high note with an incredibly strong holiday period.
Once again, our operations team and hotel associates showcase their commitment to service at the highest levels and demonstrated superb flexibility in dealing with the ongoing changes.
As a result of new Covid restrictions and protocols.
Their dedication and hard work combined with safety measures taken to protect our guests have helped maintain market leadership at many of our hotels since our reopening.
During the fourth quarter, our business in the Yucatan continue to build on early momentum from Q3 with our occupancy is improving each month of the quarter, while maintaining our ADR discipline.
Singer arrivals into the market also improved each month of the quarter on both an absolute and year over year decline basis.
As you recall, Mexico did not have any travel restrictions in place with respect to pre flight COVID-19 testing or mandatory quarantine for international tourists. Upon arrival and importantly has remained consistent with respect to these policies. This has led to less consumer confusion versus other destinations and has helped.
Business confidence during the reopening.
Similarly, the Dominican Republic remove their testing requirements for entry into the country in September and passenger arrivals into the point of kind of airport meaningfully improved as we entered our high season.
Our flagship Hyatt Viva is Laura top corner with our first asset in the segment to open and has continued to ramp up sequentially each month.
And La Romana reopened in November and has also shown a nice trajectory during the high season, but the segment's performance has was weighed down by our two externally managed properties, which have lagged behind our branded hotels in the segment.
Moving on to Jamaica. Unfortunately, we have seen no material improvement in Jamaica, as we believe the country's entry requirements weighed on visitation growth and led to a very modest increase in air lift during the fourth quarter as compared to the third quarter.
Finally, the Pacific Coast started the fourth quarter off with very healthy levels of occupancy and airlift trajectory that was indicating this market to be the most likely to be the first to achieve 2019, kpa levels, but air lift trends deteriorated as the quarter progressed as travel and quarantine restrictions tightened in key sourcing markets.
Particularly California.
Importantly, our occupancy decline has fared better than the passenger arrivals decline in the Yucatan, Jamaica and the Dominican Republic.
Our focus remains on providing a safe enjoyable guest experience.
<unk> cash burn maintaining great leadership and positioning ourselves for maximum profit capture as we anticipate that pent up demand will return later in 2020 one.
I believe the pandemic accelerated many trends affecting consumer behavior that we're already in motion.
The most notable for us being the shift to direct booking channels.
Our focus on direct booking channel has enabled us to ramp occupancy fat faster than many third party relying competitors and is leading to share gains we realized our current mix shift of direct bookings will naturally move lower as other channels rebound in many of the pandemic restrictions are loosened. However, we are confident our company is on target.
Our five year plan to increase consumer direct business to at least 50% by 2023.
In aggregate during the fourth quarter of 2000 2055, 9% of revenues booked were direct.
<unk> 22 points year over year, reflecting the relative strength of our direct channel and our business model as a whole versus most of our competition during.
During the fourth quarter Playa resorts Dot com accounted for 29, 6% of our total revenue bookings up 13 six points year over year low.
Looking ahead to 2021 as of February 15th Playa Resorts Dot Com has generated $49 1 million of bookings for 2021 versus $36 7 million for 2020 at the same time last year as we look ahead, our direct channels continue to recover at a much faster rate than indirect particularly.
Really the extremely challenged tour operator segment.
On the marketing front, we have significantly increased our local in country marketing efforts and believe this strategic move is paying off during this difficult time, particularly in markets where travel restrictions remain.
We have implemented contactless QR code access router resorts as both a safety measure and as a driver of non package revenue and to facilitate the overall ease of the guest experience.
Non package revenue continues to be one of the pleasant surprises of the recovery driven by pent up demand and an improved offering we have also received.
<unk> quite a bit of media attention around our work and learn from Paradise initiative, which takes advantage of the current remote work environment for many people throughout the U S. We continue to believe that we offer a fantastic socially distanced vacation experience given our large resort footprints in the holiday period performance further reinforced the view that we will.
A market leader as the recovery progresses.
Our fourth quarter momentum carried into the new year as revenue pacing in the Dominican Republic, and Mexico for Q1 improved versus the pace at the time of our last earnings call and also in absolute versus Q4.
We were very pleased to not see the same cancellation uptick on a net basis that many others in the travel complex saw during the fourth quarter really reinforcing the pent up demand thesis and perhaps suggesting he was an easier decision to skip holiday travels rather than cancel a much needed vacation.
However, as I'm sure. It comes as no surprise the announcement of the new CDC guidelines for international arrivals to the U S has had a negative impact on our bookings and has disrupted the improvement we had been seeing during the high season in 2021, thus far with the guidelines having been put into action on January 26.
It is still relatively early and difficult to assess the full impact we moved quickly to secure testing capacity on property at our resorts where possible at no cost to our guests to make the vacation experience as seamless as possible again, I am incredibly proud of our operations team and their ability to adapt to the <unk>.
Rapid Lee changing environment, minimizing guest disruption to the extent possible thus.
Thus far and again it is still too early to assess the impact of the CDC guidelines. The demand deterioration has not been as bad as we feared using Jamaica as a proxy for testing a version, which is likely a function of one widespread nature of this guideline being more of a new norm that travelers have to accept and two are.
<unk> is working hard to educate and answer questions regarding the changes in providing free antigen tests onsite where possible.
Another positive early takeaway is that we have already tested over 15000 guests have had far less than 1% test positive for COVID-19. So far Ryan will share more details on this shortly.
With that I will turn the call back over to Ryan to discuss the balance sheet and what we are seeing in the operating environment.
Thank you Bruce and good morning, again, everyone as Bruce mentioned I'll first give you an update on our liquidity and balance sheet and then review the fundamentals of the quarter and then finish off with a discussion of forward bookings and market trends.
Starting with the balance sheet and liquidity much like last quarter. We've included a monthly cash bridge on page seven of our earnings release to help guide our discussion.
We began the quarter with 190 $195 million of unrestricted cash and our burn rate improved each month of the quarter.
Turning approximately 17, 14 and $11 million during the months of the quarter with December including our $2 5 million quarterly principal payment on our credit facilities and a $1 5 million of contractually obligated bonus payment to our hotel employees.
This points to a strong underlying December cash burn as a result of the holiday season, great performance and higher ADR.
These figures also include incremental launch and startup operating operating expenses for the additional hotels reopened during the quarter we.
We do however, expect that Q1 2021 cash burn to be higher than that than the December burn rate given there would be no benefit from a strong December holiday season, as well as the recent CDC guideline change, we exited the quarter with approximately $147 million in unrestricted cash and much like previous quarters given the.
Extremely limited visibility into our future business, we will not be providing burn rate nor EBIT guidance.
Another item to note as capex spend of approximately $6 $5 million during the fourth quarter, four and a half of which was associated with payments discussed on our last earnings call for Capex at Hyatt cap Cana and the Hilton La Romana, we expect Capex spend for 'twenty 'twenty, one in the ballpark of roughly 13% to $18 million per the year. This spend is comprised of approximately.
Similarly, 40% for maintenance Capex.
Approximately $5 million and final payments for the Hilton conversions and Hyatt cap Cana.
And a roughly $4 million Pip at the Hilton Rose Hall, which will be funded from our existing restricted cash balance.
All of the aforementioned efforts bring us to a total unrestricted cash balance of $147 million as of the end of the year also as a reminder, we have just under $26 million of additional restricted cash on the balance sheet from our June financing.
On the other side of the Ledger. We currently have no outstanding borrowings on our revolving credit facility and total outstanding interest bearing debt of $1. One 8 billion our debt balance reflects actions we have taken thus far in 2021 to further enhance our liquidity position, namely we raised $138 million of net proceeds from.
And equity issuance in January with the bulk of the money used to pay down our $85 million revolving credit facility as required by a recent amendment and extension to our credit agreement.
I want to highlight a few points first we do not have any debt maturities until our revolver matures in January of 2024, aside from a $17 million tranche of our revolving credit facility that matures in April of 2022 and.
And our term loan does not mature until April of 2024.
Secondly, we are able to draw on the revolving credit line, where the need to arise.
And three should the need arise the covenant relief period now has been extended until March 31 of 2022.
On a final note we closed on the sale of the dreams ports were having tourists in February for a total consideration of $32 million, which is net of legal fees and other costs.
I would now like to turn your attention to our group business at.
At the time of our last earnings call, we had roughly $1 $6 million of group business on the books for the fourth quarter of which $1 1 million actually state the bulk of the difference rebooked for future periods. We've been extremely successful in our efforts to retain group business has been impacted by Covid Rebooking nearly 84% of our group business that has been impacted by Covid for <unk>.
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Our 2021 group business had been quite fluid and currently we are well behind where we were pacing at the same time last year.
We are encouraged by the recent pickup in group bookings, we've been experiencing which included the single biggest my sales day in the company's history coming during the final week of February.
With our 2022 group business on the books at over $20 million in building and providing a nice base to help yield manage we are optimistic that 2022 should be a great year for playa.
Again, given the uncertainty and timing of the rollout of the vaccine to the general population, we would not be surprised if there was further movement in our group business during 2021, but as of now we have roughly $12 million of group business on the books with the majority of it with the majority of its spread evenly between Q2 and Q4 of 2021.
On the leisure side of group business, our wedding sales continued to improve during the fourth quarter with revenues on the books for 2021 ahead of our internal forecast and currently sitting at approximately half of 2019 actual wedding revenue, which is very encouraging with respect.
To advance deposits as of February 28, we had just under $27 million sitting with us versus 23 at the time of our last earnings call with over 70% of that related to stays in 2020. One of those 2021 deposits just under $10 million related to groups.
And as a reminder, the majority of our leisure business does not pay in advance and there are no deposits to refund with most of our leisure cancellations.
Now moving onto the fundamentals of our business starting in the Yucatan as Bruce mentioned fundamentals improved each month of the quarter as Occupancies ramped alongside air lift into the market. This improvement had carried into the first quarter until the change into the CDC guidelines, we believe that most of our competitors have reopened thus far in the Yucatan and pricing has remained rational.
As far.
Despite the available rooms, and ramping Occupancies ADR growth remains solid as the fourth quarter progressed, our occupancy decline as Bruce mentioned has fared far better than the decline in arrivals into cancun further reinforcing our belief that our direct channels are providing a competitive advantage.
Although it is quite a way away similar to what others have said about the second half of 2021 demand for the second half of 2021 has begun to accelerate and we believe it has the utmost importance to maintain price integrity and allocate inventory accordingly.
Revenue on the books for the Yucatan and the second half of 2021 is up both against 2020 and 2019 at the same time last year.
Now turning to the Pacific, We decided to open Hyatt <unk>, Los Cabos as part of our second phase of openings as the resort is usually more relying on group business and doesn't have any of that any of our other resorts nearby to help cluster demand given the recovery in airlift into the Los Cabos market, which had been leading all of our markets in which we operate in Alaska.
Those came out of the gates very strongly unfortunately as the quarter progressed, the airlift began to deteriorate as travel restrictions began weighing on demand.
The reported IATA, which opened on October one also followed a similar pattern of demand it laps as Los Cabos. The specific segment experienced a larger deceleration in demand in January versus the yucatan, reflecting a less geographically diverse customer mix. However, similar to the Yucatan, although the near term is still likely to remain.
Uneven revenue is on the books for the second half of 2021 are up both versus 2020, and 2019 and the Pacific.
We began opening our resorts in the Dominican Republic in July starting with the news evens alarm cop Kana in our managed sanctuary popcorn in late July the government imposed COVID-19 testing requirements center of the country immediately.
And the momentum we were seeing in the region. The government. However promptly removed the COVID-19 testing requirements in mid September and are Dr. Bookings picked up right away, giving us a sense of optimism as we move into the high season.
Our lift into this market remained extremely depressed throughout most of the third and fourth quarter, but picked up meaningfully in December as we moved into the high season.
Similar to what we're seeing in the Yucatan, we are materially outperforming the traffic into the destination is.
The Hyatt Devens alarm Com has captured market leadership and has become the destination and the very highly exclusive market.
The performance of this asset during this tumultuous period reinforces our belief that our targeted stabilized EBIT for this property still remains intact.
We believe our direct sourcing strategy is enabling us to take share and maintained excellent pricing.
Looking ahead revenue on the books for the second half of 2021 at the Playa managed assets in the Dominican is well ahead of both 2020 and 2019 levels at the same time last year.
And lastly, as you may recall, Jamaica was shaping up to be our strongest market as we approach the third quarter, but momentum stalled out once COVID-19 testing requirements were put into place in Jamaica in early July severely disadvantaging this destination relative to our other locations.
The locally sourced business has helped the occupancies outside of our Hyatt in this market. It has weighed heavily on our ADR in mix of rooms sold we.
We started to see some additional airlift into Montego Bay, beginning in October, but the increases have been modest relative to the potential capacity of the market.
As we said before we would like to see Covid testing requirements relaxed or removed entirely to increased international demand for Jamaica, and so far we've not seen any meaningful change in demand on the positive side as the international return restrictions have not leveled the attractiveness of the destination.
Currently revenue on the books for Jamaica are lagging both 2019 and 2020 for the third quarter of 'twenty 'twenty, one but are nicely ahead of 2019 for the fourth quarter 2021.
Now taking a look at who is traveling nearly 50 per cent of the Playa managed room night stays in the quarter came via our direct channels versus just over 25% in the fourth quarter of 2019, which again, we believe is a function of the continued weakness in the tour operator channel revenue being down roughly 74% and otas being down roughly 858.
While our direct channels only saw an 18% drop.
Geographically, our U S customer sourcing increased 500 basis points to 66% of managed room nights, while Mexican and South American source business, both increased 400 basis points.
Given the state of the travel restrictions, obviously, our Canadian European and Asian mix, all fell dramatically versus Q4 2019.
Our 18 to 34 year old demographic continues to trend ahead of last year, while the 35 to 54 demographic is behind but the over 55 crowd has begun mixing higher.
<unk> point redemption room nights booked increased year over year for our Hyatt properties and decreased slightly as our Hilton during the fourth quarter.
In the quarter Hilton honors room night redemptions were actually up 220 basis points versus last year and accounted for roughly a low double digit room night mix for our Hilton hotels.
World of Hyatt redemptions increased to 120 basis points year over year and were a mid single digit percentage of our room night mix at our Hyatt portfolio.
As we mentioned several times in the past one of the biggest challenges we face in our industry. During the reopening process has been the contraction of the cancellation period to roughly 28 four hours across our portfolio and across the lodging industry generally.
I won't go into too much details 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 than in October began we began to see bookings outpaced cancellation.
Leading to net positive pickup which persisted into January.
Following the change in the CDC guidelines for international entering into the United States cancellations. Once again picked up for about three to four weeks yet we still continue to see net positive pickup as demand persisted for the second half of 2021 and the cancellation activity has since started to normalize you may recall.
That our booking window lead time heading into the fourth quarter was more favorable than the third quarter. Thanks to advanced bookings for the holiday period and the high season.
The increase in cancellation activity as a result of the change in the CDC guidelines has once again shortened our lead time, which makes forecasting difficult in the near term given limited visibility.
In aggregate, our Playa managed revenue on the books for the first quarter 2021 is pacing modestly behind where we were in the fourth quarter of 2020 at the time of our last earnings call at about down 60% versus 2020 at the same time last year, which we think is linked to the recent change in CDC guidelines.
We do expect ADR growth in the first half of the year to be choppy, given the limited visibility and specifically the change in the CDC guidelines hurting rates specifically in the first quarter. We also wanted to remind everyone that we expect our first half cash first half cash burn rate to be worse than our performance in December given the lack of the December Christmas holiday.
The second half of 2021 pacing. However is far more promising for example, Playa managed revenue for the third quarter is pacing ahead of both 2019 and 2020 levels.
Up mid teens versus 2019 and up mid single digits versus 2020, respectively.
The fourth quarter is well ahead of both 2019 and 2020 pace.
Roughly 60% and 20% respectively.
With that I'll turn it back over to Bruce for some closing remarks, great. Thanks Ryan.
So just to recap, we're continuing to navigate the reopening process with an eye on guest safety and minimizing cash burn in the near term to bridges us to bridge us to the second half as vaccination rates increase and demand improves we are operating under the assumption that air lift in demand will not get materially better in the near term and we therefore.
Need to be diligent on our expense control our efforts to shore up our liquidity should hopefully enable us to emerge from this period in a position to capture our share of pent up demand, but also capitalize by growing our EBITDA via high ROI management contracts as our direct booking capabilities have become more attractive for owners in this new norm.
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While a tremendous amount of uncertainty remains the positive signs we saw during the holiday season, combined with a significantly improving vaccination outlook leads us to believe that Playa as a 100% leisure company will be a major beneficiary of pent up consumer demand in the second half of 'twenty 'twenty, one and into the.
The high season of 2022 and beyond.
Thank you very much for your time, and we will now take your questions.
We will now begin the question and answer session.
Ask the question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.
Your question. Please press Star then two.
Our first question today will come from Chris <unk> with Deutsche Bank.
Hey, good morning, guys and appreciate all the all the detail as always very helpful.
I know, it's probably going to be a while before the cancellation policies return back to where they were pre COVID-19. So.
Bruce do you have any are there any opportunities for you guys to kind of.
Protect yourselves, a little bit from what might be some aspirational bookings for whether it's second quarter third quarter is there an opportunity for you guys from kind of take some control of some of the <unk>.
<unk> for people to to cancel last minute or have multiple reservations or something.
Sure.
This is always an interesting point you know obviously as not being a brand company. We don't you know to your point don't control you know many of the policies that are put out by put out by the brands in the hotel industry as a whole I think has been incredibly.
Weak slash inefficient and you know kind of their cancellation policies. Many other many other industries do a much better job than we than we do and then we have them.
The past, but I mean, I think if you look at the situation obviously.
The change in cancellation policies for the hotels for the airlines for pretty much all travel businesses.
As a direct you know <unk>.
Reaction to Covid in the early early part of Covid I think as you're you're coming out of this and you have this tremendous progress on the vaccinations.
Are you going to have a lot of other positives the stimulus bill and other positives related to things that are going to drive demand.
Youre going to see the market kind of dictate.
This whole issue about about cancellations you know what are we doing what can we control.
We can control mainly Chris is right disciplined okay. So we're being Super focused you know as we.
Look at the second half of this year on on maintaining maintaining our right I'm, sorry, maintaining our rates and you're starting to see.
That behavior is reflecting that I think people are.
Being concerned you know about the in availability unavailability of of cheap rates when it gets too high season Ics in next year and so we are seeing pretty good bookings related to that and at our premium resorts were getting premium premium rates and so that's what we are doing to control the situation.
As we progressed through the improvement through the recovery, we will push back and do the things that we're allowed to do to the fullest extent possible to have the toughest cancellation policies, but I think a lot of it is going to be dictated by the markets, which right now I think are going to.
Be in our favor Chris the only other thing we did on the margin with at least during the holiday period, we did enforce TUI cancellation policies, but only during the Christmas week essentially it's one thing we could do.
Okay Fair enough, Thanks, and then Bruce.
Bruce I guess since the last earnings call, we've seen Marriott announced the Sun wing or a blue Diamond deal I just wanted to get your initial thoughts on that I mean in my mind it.
It could be helpful. Overall, right because it's not new it's not new room inventory and this gets more eyeballs on all inclusive and should maybe provide boost the rates in those markets post conversion, but wanted to get your thoughts on that.
Sure I very much agree with the points you just made Chris. So so if you if you look at that that transaction first of all.
I think it's a.
Big positive for Playa to see more all inclusive become affiliated with brands. Okay. In this case, it's not exactly the same as what we're doing because you're a soft brand or a year the autograph brand, but it's still affiliated with the brand is going to go into Marriott system, and I think that's going to drive more eyeballs. Thank you Sir.
And just greater kind of recognition of all inclusive.
A very hot.
Consumer product right the consumers want it that's why Marriott did that Marriott.
It's been looking to aggressively grow you know they did the elegant hotels deal. They did this or they're making a lot of announcements you know because all inclusive is a hot growing segment and is being driven by consumers. So we're very fortunate we were.
First mover I think we have a huge first mover advantage over everybody else in our space and we were also the first mover when it came to brand affiliation. Okay. So the fact that others are doing it now I think it's just a confirmation of the success of our business model and so you know you, particularly look at the Blue Diamond deal.
Blue Diamond is owned by two tour operators by Sun Winging, TUI and the fact that that two tour operators are.
Feeling the need to affiliate with a brand. Okay is really a strong confirmation that their model is not the ideal model. So.
I don't know the expression come on in the water fine Okay. The way I look at it come on in the water's more than fine okay.
And especially for all you people in the Midwest and northeast come on down to our resorts and the water superfine compared to where you are but this is all positive from my perspective, and I will put.
Our resorts head to head on quality of product and operations and service over anybody else. Okay. In our segment and you see it when you've got the highest ziv as Laura complex and cop corner, not only one and two in <unk>.
Number one in the entire country, Okay, our resorts perform incredibly well our operations team.
Just doing a fantastic job pre COVID-19 during COVID-19. It will do a great job post COVID-19. So all of this I think is really positive for the all inclusive segment in particularly positive for Playa and our business model.
Okay very helpful. I appreciate that thanks.
Thanks, Chris.
Our next question will come from Patrick Scholes with true is security.
Hi, Yes, good morning, everyone.
Good morning.
Good morning, Ryan question for you on the.
Run rate of cash burn for <unk> 'twenty, one you mentioned that it would be higher than <unk>.
More specific should we think.
The monthly run rate for <unk> similar to say it.
I'm sorry is it fair to think it's similar to October or November obviously, not December is that a fair monthly assumption.
Yeah, It's a fair assumption again as we said to every single time, it's incredibly difficult given the visibility into the markets and the cancellations to give you an accurate picture, but that's not that unreasonable I'm just given what we've seen thus far but like I said without the December holiday, which really helped December.
And then the fact that you've got the CDC guidelines kind of throwing a little bit of a wrench in the near term.
Certainly do not expect it to be as low as you saw in December.
Okay.
And then in India on your most important markets can tune.
And Dominican Republic as far as the competitive landscape as far as opened or closed hotels.
What does that look like right now.
Our hotels, you would say.
Compete against in those areas, yes, I think overall in the Yucatan. The vast majority of the properties are opened just.
Given everything we've seen and as we've said before the fact that the government has not impose any additional restrictions or administrative burdens around entry into the into the market the hotels.
The hall have enjoyed a far more rapid recovery, there certainly not back to par not back to pre COVID-19 levels by any stretch. The D are far fewer hotels opened earlier in the summer like we said, we only opened or is even lower coupon on our managed sanctuary and EBIT I think at the time of our November earnings call.
Are we I think we estimated maybe like 30 or 40 per cent of the rooms, where even open at the time, just given how European centric that market is particularly in the summertime. So the rest of our portfolio, including the Hilton and our two dreams properties. We elected to wait until November December to open. So as of now we think our best guess is probably somewhere between a half.
5% to 75% of the rooms are now finally opening up in the corner.
But that's again purely having to do with the competitive landscape in the in the sourcing of the customers into that market normally.
Okay. Thank you for the color great.
Thank you Beth.
Our next question will come from Chad Beynon with Macquarie.
Okay.
Hi, Good morning, guys. Thanks for taking my question.
Good morning.
Deck on <unk> on slide 31.
You highlighted.
The Capex projects that were completed in 2019 and you reiterated your cash on cash returns in the mid teens I think before we had talked about you know somewhere of I believe an 18 to 24 month ramp, particularly a cap corner just because.
It being a new property, but more of a hypothetical when we get back to total air lift in visitation into D. R.
Back to historical periods and your Occupancies are at a reasonable range, how should we think about how long it will take to get back to kind of a stabilized year or is there still a ramping period, just getting everything going or do you think when everything is back to.
Normal visitation it could it could actually be quicker in terms of achieving that return. Thanks.
Great. Yes, that's a great question, so there's still going to be a ramping period. Okay. So that's the kind of a short answer but I think it's going to be different okay, and the reason, it's going to be different.
Because of the success, we've had particularly at Hyatt <unk> economy.
Establishing that resort.
The Premier resort in the country and so as I mentioned to you.
Rated number one in the whole country.
And put it in.
Whats occurred there is we've also built up a real following both internationally and domestically in the country. So you may not be aware, but in the Dominican Republic. There is a curfew and so that affects everyone in the country, but it particularly affects people in.
Santa Domingo in the city, because you know if you're if you're a curfew didn't any city anywhere in the world. It's you know, it's a challenge and if you've got.
Family or not if you just wanted to get out you know you you have to have options and so the option we presented marketing heavily within the country is our resorts. So we have become.
<unk> kind of.
First pick destination for everybody in Santo Domingo and Youll see that on any given weekend, where people are going similarly internationally. The experience that we've had with with our guests which are primarily American because of the decline in Canadian and European guests into the country during COVID-19.
It's been incredibly successful so all of that is built up I think a lot of recognition of the high quality of the resorts and the experience and we're seeing it in the bookings you know the forward bookings that are coming in the second half of this year. So I think while we're going to have a ramp we're going to have a little bit.
Of a jumpstart on what it would have been so it's not kind of a typical trajectory. So the situation in la Romana is a little different because you know a lot Romano does have a higher European mix and that's going to depend upon when the European travel really comes back and I think that's going to be lagging a little bit compared to the U S. So la romana.
Maybe a little behind that okay. So.
You'll still have probably a little more of a typical ramp in la Romana. We're I think in <unk> you may have the ability to kind of accelerate the ramp a little bit and then when you look at.
At the Hilton Playa del Carmen I think it's going to be a little bit more like top corner because again, the yucatan as we've said repeatedly.
Is running better numbers and better and better results and I think you'll have it there. So so yes, theres going to be ramps, but I think we should benefit a lot more once the spigot gets turned on more fully.
Okay, great. Thanks, and then with respect to all the comments that you've made for the second half bookings, which have been very helpful and obviously dynamic given the CDC guidelines.
President buttons messaging recently has been pretty positive in terms of when we can reach herd immunity I'm wondering if you started to see bookings pick up just in the past couple of weeks and then as it relates to Canada and Europe.
I'm not really sure.
Where those countries are in terms of the messaging from the government to their citizens in terms of when they'll have herd immunity, but yeah have you seen any improvement from from those markets in terms of future bookings so.
So the answer is absolutely, okay, and absolutely coming from U S bookings. Okay. So your question is really good and breaking U S out of out of it.
Other other markets. So so from the U S standpoint, we have absolutely seen it and as Ryan mentioned, we've just hit some really good numbers and net net bookings you know where the cancellations are also coming down to stabilizing to you a little bit more normal levels. So I think a lot of that reflects the optimism of the vaccine roll.
Out.
So I think that's great news right in to say that everyone in the U S will have access to a vaccine by the end of May which indicates to me because theyre trying to over deliver all the time, maybe it will be even faster than that the approval of Johnson <unk> Johnson the deal with Merck.
We're getting close I think in April like you know, it's likely to get Novavax approved so all of those are really positive momentum for us in driving our U S business.
And again.
You look at the current politics going home with the stimulus Bill and it's arguable, whether you need as big a bill or not let's face. It from our standpoint, you know you're going to overheat the economy and people want to go spend money, that's not bad for US. Okay. So a lot of other people on non economists, whether you need that much or not but I think it's good for our business. So both vaccination progress.
And the stimulus are good for us.
Another big thing about the vaccinations as not just the benefit that the U S is going to have I mean for global business and international travel will be successful we need the vaccines to be out everywhere, okay and so your second part of the question is just kind of what's going on with Europe and Canada.
Amazing to me the missteps both markets you know had I saw I thought the U S was going to kind of be.
Little bit of a laggard and we have caught up tremendously, Canada did really well securing doses, but they've had some challenges getting the vaccines out I think that is improving.
For us the Canadian business is most important during the winter. So when that comes back it's really going to be the late part of 2021 into the high season of 2022 and I think by then vaccines in Canada should be fine. If we don't get a lot of Canadian business in the summer typically anyway, So thats alright.
Europe's a little different situation, because especially in the Dominican really it's in the Dominican we do get European business.
And I anticipate that that number is going to be a much lower for us in the summer season of 'twenty, one due to the slow rollout of vaccines, there, but hopefully by the later part of the year Youre going to see that pick up and you know having having lived in Europe for a number of years I can tell you European.
Hans value their vacations more than any other part of the world and so even if they're not able to travel they're typical timeframe, which would be in July and August you know youre going to see some pent up European demand and so I think the fall and winter next year is probably going to be positive there too, but I think all in all these are positive trends for Playa and Chad the only thing.
I mentioned that you asked about last week look I can't tell you, whether it's correlated to anything bite interest that recently, but.
Our net pickup last week was $12 $7 million and that compares to $11 million in 2020 and $10 million in 2019 for what it's worth.
Great. Thanks, guys appreciate it best of luck.
Thanks, Chad.
Our next question comes from Smedes Rose with Citi.
Alright, thank you.
Yes.
Alright.
So now you have sort of limited visibility, but somewhat sad about accelerating cash burn in the first quarter, but then some promising bookings in the second half do you feel fairly confident at this point that you won't have to raise additional capital either true sales.
Equity issuance in order to sort of make it through to the other side here.
Yeah, No I mean from where we sit today, we feel we feel comfortable with what we're seeing currently but again just given the limited visibility and given that we don't know how long the CDC requirements will remain in place or how quickly the vaccine rollout outcome I can never say never but no we feel comfortable where we tried to be.
As targeted as possible in our raise in January to raise enough to make sure that one we could pay off the revolver and have a little extra to make sure. We can see this through to the other side, but given that pro forma for January month end cash if you adjust for the revolver paydown and for the equity raise were sitting around $202 <unk>.
15 to 20 of cash right with a fully undrawn revolver. So we feel we do feel comfortable where we sit today, but recognizing that the future is still very answer.
Okay, and then as part of your equity raise one of your largest holders standard core.
<unk> decided to sell down fairly significantly and I was wondering.
Do you have any sort of color on their decision.
What will there be any changes to the board I believe they had either one or two seats on the board as a result of their ownership.
All we can say at this point so it's important to note that they did sell of their position of their 20 million shares they actually sold nine.
Excluding the $8 5 million shares upstairs to their parent company. So statutory entity sold 10 million shares and is still a 6% holder and still entitled to a board seat.
Okay.
Okay, and then I guess just a final thing I wanted to ask you you called out a material weakness in your 10-K internal controls around tax reporting.
Could you speak to whether you think that can be kind of remedied and what caused that material weakness you called out by your accountants, Yeah. No. It's obviously focus are on the handling of deferred tax liabilities.
That are immediately impacted by.
By PP&E in the Netherlands, and in Mexico is an area we've been focused on for a while and we've invested heavily not only in our larger.
Financial systems like S&P over the last couple of years, but have also rolled out some new tax software and added upgrades to the team.
The immaterial errors had no effect on any of our Kpis cash nor adjusted EBITDA and we think that we should have that remediate that material weakness remediated within 2021, if not earlier in the year.
Okay. Thank you guys.
And if you have any further.
Press Star and then one to join our Q.
Our next question comes from Jonathan Jenkins with channel.
Hi, Good morning, Thanks for taking my questions first one from me just wanted to follow up on the rate discussion I'm curious if you could provide some information on what you are seeing competitors do with rates and Ryan I believe you said pricing remains rational and that you could then but.
Are you seeing any markets trending toward discounting or has it been holding flat and then.
What's your what's your view on holding rate versus discounting to drive incremental demand.
So at least particularly in the first half of 2020, we are seeing competitive discounting in the markets Jamaica for all the reasons. We've discussed has been has been under a mess rate pressure throughout the second half of 2020 and its moving into 2021.
Mexico and the Dr. Wallet remained fairly rational in the fourth quarter as Occupancies are building and kind of like those marginal occupancies build you have seen more competitive discounting in our market and we tried to maintain that rate integrity as much as possible, but it certainly will affect us. This first half of the year just given the CDC.
<unk> and the fact that you know as.
As particularly as other sources of business such as the tour operators and Otas, which are a lower sort of lower ADR sources compared to our direct start to waken back up and kind of build back up our hotels it should bring down some of the rates a little bit now on the other on the second half of the year as Bruce mentioned earlier, just given that we do we already see.
Great booking revenue pace, and we think that bodes well for 2022, all the decisions we're doing from a from a mixing from an inventory and from a pricing is with an eye towards making sure not just the fourth quarter of this year, but more importantly, our high season in 2022 is as best as it can be.
Yeah.
Okay, Great. That's very helpful. And then in terms of the testing requirement for U S. Citizens you guys had mentioned the impact that had on your bookings from.
Do you think that rules still a governor puts a limit on demand right now and even you know.
People have had a chance to digest it and would you expect that the stipulation is lifted.
How much of a positive catalysts might that be for your demand in the near term I think it would be I can't quantify it but I do believe certainly if they lift it.
Youre going to see you should see a pickup in bookings.
When anything like that is announced.
There is naturally just a vacuum of information. So customers first reaction is just to cancel and particularly now when they can cancel both airlines and hotels without any real penalties. They can do so and wait for some additional information. So if someone here is that it's table stakes for all of the hotels everyone. In our destinations are dealing with the same thing so it.
Cook, a week or two for the hotels associates into the owners and operators to digest. It come up with plans you can see universally that everyone's offering to pay for the antigen test we tried to take a little bit more of an offensive maneuver and offer people kind of an extended stay onetime fee to make them feel better about the event that in the event that they test.
And positive.
Any costs for their stay would be covered by Playa. So yeah, I think as Bruce mentioned earlier it comes down to the education and making sure that people feel comfortable but you are right. There are there is a portion of the population that will wait to travel until that flipped it and I'll just add to that I mean, Ryan 100%. You know there is a population that you know I mean.
What percentage of the population is going to wait there are others that I think whether its because they become vaccinated or they've had exposure to it or they feel more confident that they're testing foregoing testing.
Or that when they're there they're going to test negative so you're just seeing it in a lot of it is that people just have to adjust to what are what are the requirements and so you know.
The best thing is to get that lifted and the best way from get that lifted is when the U S has a very high level of kind of herd immunity through combination of exposure and vaccinations.
Okay. Thank you for all the color that's all from me.
Thanks, Sean.
This concludes our question and answer session and I would like to turn the call back over to Bruce where dansky for any closing remarks.
Great well. Thank you again, everyone for joining us today on our call the.
The pandemic has been you know.
Credibly difficult for for our company and for all our team members, but I just want to say.
I am as optimistic as I have been.
From the beginning so it's been just about a year now and I would say this is the most optimistic I've been about there is a light at the end of the tunnel. So it's not going to be tomorrow, but the light is at the end of the tunnel, we can see the light and I just want to thank again.
Everybody.
Playa for everything they have done throughout this.
Horrific time in their professionalism and their dedication to providing our guests with the best experience safe and enjoyable and so hope everybody has a great day and you all stay safe take care Bye bye.
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