Q3 2021 Playa Hotels & Resorts NV Earnings Call
Good day and welcome to the Playa hotels third quarter 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
Today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two.
This event is being recorded I would now like to turn the conference over to Ryan email. Please go ahead.
Thank you very much Matt.
Everyone and welcome again to Playa hotels, <unk> resorts third quarter 2021 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 had 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-Q, which we filed last night with the SEC, we've updated our Investor relations website at investors that Playa resorts Dot com with the company.
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.
Today's call Bruce worried and ski players 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 position 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 it over to Bruce.
Great. Thanks, Ryan Good morning, everyone and thank you for joining us.
As always we appreciate your interest in Playa and hope that all of you are in good health and spirits as we near the holiday season.
I'm sure. Most of you have had a chance to review our third quarter results reported last night, so let's get going with the discussion of third quarter fundamentals once again accelerated sequentially with occupancies picking up his flight capacity into our markets increased versus the second quarter, but the real standout was our substantial net package ADR gains compared to 2019.
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Again this isn't typical for our portfolio during the summer and fall months, but not much has been typical over the past 18 months.
This the sequential improvement was broad based across our geographic markets and resorts as all of our Playa managed resort posted like for like ADR increases as I mentioned on our last earnings call, we weren't quite sure what to expect on the pricing front as we moved into the back half of the year, but the substantial revenue booked revenue book position combined.
With pent up demand has allowed us to maintain pricing as opposed to cutting rates to fill rooms.
With the high season approaching and a healthy amount of revenue already on the books I'm optimistic that this trend will continue.
We did experienced a typical seasonal slowdown in bookings towards the end of the summer it's difficult to parse out how much was the result of increases in Covid cases related to the delta variance versus what we would expect to see from normal booking seasonality.
Just as a reminder, our labor day to Thanksgiving period is typically our slowest period of the year slowest time of the year in any case, the slowdown was fairly short lived and bookings accelerated towards the end of the quarter and into Q4. So so far as well in fact weekly revenue gains the past few weeks have reached prior peaks.
We achieved this spring.
Looking at our segments, Mexico has led the way during the recovery and our results there in the third quarter were once again, the standout with occupancies into the $60 for the quarter. The highest ADR is on an absolute basis and excellent flow through.
Flight capacity into Cancun ramped up nicely during the third quarter, resulting in September international passenger arrivals for the Cancun Airport exceeding 2019 levels for the first time since the beginning of the pandemic.
The results in Mexico, thus far are particularly encouraging as they are an indication of the profit potential for other geographic locations as they normalize with increased airlift.
Moving on to the Dominican Republic, where we experienced a healthy sequential increase in Internet international passenger arrivals that drove our approximate 10 percentage point improvement in occupancy versus Q2, once again, our flagship Hyatt Evens, Laura cop kind of led the way as it has established itself as a great leader in the market with.
The resort EBITDA margin nearing 40% for the third quarter with occupancy only in the high Fifty's the resorts progress and ramp give us further confidence in achieving our goal of 12% to 15% stabilized cash on cash returns on our investment there.
The segment's overall performance was weighed down by our two externally managed properties, which have lagged behind our globally branded resorts.
In the segment and also yield a significantly lower absolute ADR compared to a globally branded imply our managed resorts.
Similar to the D. R. Jamaica also posted increasing occupancy and ADR sequentially each month.
But the pace of flight capacity additions didn't build throughout the quarter as much as our other regions and remains significantly depressed demand here continues to build though as we look out to the fourth quarter and beyond our lead time is improving with the increase in revenue on the books commensurate with the expected increase in flight capacity in the fourth quarter we are.
Very encouraged by the increased demand in Jamaica, which was our best performing segment prior to the pandemic, we do not anticipate the market being structurally impaired or a weaker competitive footing. Despite a slower start after reopening last year.
Our focus on direct channels continues to pay off and we are confident that playa as well on target with our five year plan to increase consumer direct business to at least 50% by 2023.
In aggregate during the third quarter of 2021 41, 4% of room nights booked were booked direct down nine three percentage points year over year, reflecting the relative strength of our direct channels, but also a significant acceleration in group and third party source business during.
During the third quarter Playa resorts Dot com accounted for 18, 7% of our total room night bookings down four three percentage points year over year.
Looking at 2021 as a whole as of October 15th to Playa resorts Dotcom has generated approximately $110 million of bookings for 'twenty, one compared to $52 million for the for the 2019 comparable period.
This is a critical aspect of our business that I believe many overlook we apply a drive a significant portion of our direct revenue in house, which is now a major competitive advantage for our current portfolio.
Potential managed resorts in the future.
Finally, as a reminder, we anticipated that as the world slowly returned to normal our mix of direct business would likely fall below 50%, but still believe it will remain higher than levels seen immediately prior to the pandemic and significantly higher on an absolute dollar basis.
Though modest in dollars non package revenue continues to be another pleasant surprise of the recovery driven by pent up demand and an improved execution on our offerings.
Again, it is difficult to gauge if the current levels of non package spend are short lived particularly when customers start feeling more comfortable leaving the resorts, but this has been an area of focus for our resort general managers, given the very attractive margin profile.
Finally, we recently announced a strategic partnership with Wyndham hotels, which we believe will accelerate growth in the mid scale and upper mid scale segment of our portfolio by leveraging Wyndham sizable database of customer relationships to increase exposure and awareness of the value proposition of the all inclusive model.
As part of our strategic Alliance agreement, we will be converting two of our resorts in Mexico to the newly created Wyndham Ultra brand during the fourth quarter just in time for the high season, we look forward to sharing more with you on the potential here in the coming quarters.
Once again I would like to thank all of our associates that have continued to deliver world class service setting us apart from the competition and allowing clients to realize tremendous rate gains as customers recognize that we offer a truly superior product.
With that I will turn the call back over to Ryan to discuss the balance sheet and our outlook.
Thank you Bruce Good morning, again, everyone I will first give you an update on our liquidity and balance sheet and then review the fundamentals of the third quarter and then finish it off with a discussion of forward bookings and market trends.
We began the quarter with $238 million of unrestricted cash and as I highlighted in our last earnings call. We had some unique cash outflows during the third quarter that totaled approximately $11 million.
Namely the $4 $5 million payment.
Payment related to the sale of the Capri hotel and $6 $5 million down payment on our insurance policies.
Given the improvement in our fundamentals our core operating activities once again generated cash during the third quarter.
We finished the quarter with a total unrestricted cash balance of $232 million as of September 30th.
As a reminder, we have just under $25 million of additional restricted cash on the balance sheet from our June 2020 financing and.
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 5 billion we.
We anticipate capex spend for full year 2021 to be approximately $21 million for the year, implying roughly $9 million for the fourth quarter. Some of our intended third quarter spend slipped into the fourth quarter.
A little less than half of our full year 2021, Capex will be spent on maintenance with the remainder being spent on payments related to the projects or the roughly $5 million Pip at the Hilton Rose Hall.
Now turning our attention to Mike's group business.
Demand in this segment has remained incredibly strong with the scarcity of meeting space, forcing meeting planners to book further and further out.
Our mice business has rebounded nicely in the second half of 2021, and we currently anticipate about $5 million of mice business to stay at our resorts during the fourth quarter the.
The demand for 2022 and beyond is where we continued to see our greatest games with the meeting planners confidence desire and ability to travel improving as we look ahead and into next year combined with two years of lost meetings demand has far exceeded our expectations. Our 2022 Mics group business on the books is approximately $36 million in increasing.
And compare it to just under $30 million at the time of our last earnings call.
Which puts our current mice revenue on the books well ahead of our final full year 2019, <unk> revenue of $32 million.
And also ahead of the $33 million, we had on the books in early 2020 for that year prior to the onset of the pandemic.
Nearly 90% of this mice business is slated to stay in the first half of 2022, which is slightly more balanced in our mice pacing at the time of our last call as many of our incremental bookings have come in for the second half of the year given limited space.
Our pacing for 2023 is also far ahead versus any comparable period in our history with over $15 million already on the books.
The return of this mice business should provide a nice base to help manage yields and drive improved profitability year over year, particularly at our resorts in Las Cabos Rosol and katakana.
With respect to advanced deposits as of October 8th we had roughly $37 5 million sitting with us versus just under $37 million in the last time of our last call with roughly 34% of that related to stays in the fourth quarter of 2021, and 27% related to stays in Q1 of 2022.
As a reminder, the majority of our leisure business is not paint advance at the time of booking.
Now moving onto the fundamentals starting in the Yucatan as Bruce mentioned Q3 fundamentals improved sequentially versus Q2, despite normally being a seasonally slower period.
The quarter continued the momentum seen in June despite rising COVID-19 cases in the country.
ADR growth remains solid as the quarter progressed aided by strong close in demand. Once again, we believe it is extremely important to maintain price integrity and allocate inventory accordingly, and a rising demand environment.
We expect our fourth quarter occupancy to improve sequentially at a slightly higher absolute ADR to that reported in the third quarter.
Representing a gain of roughly 30% versus 2019.
Revenue on the books and the Yucatan for Q1 2022 is up over 30% versus 2019 at the same time for that respective year.
ADR is also pacing up over 20% for Q1 2022 relative to the same point in time in 2019.
In the Pacific The segment reported our highest ADR in the third quarter, but our occupancy gains were more modest as compared to our other locations as this segment, particularly the Hyatt <unk> Los Cabos is.
Still experiencing significantly depressed <unk> revenue.
Looking ahead, we expect our Q4 occupancy to improve sequentially at a similar absolute ADR to that reported in the third quarter.
Revenue on the books for Q1 2022 is up mid teens with ADR is also up mid teens versus 19.
Turning to the Dominican as Bruce mentioned is even the Lora comp kind of led the way. This segment, while our two third party managed resorts are weighing on segment results.
The Dr segment revenue on the books for Q4 of 2021 at the Playa owned and managed resorts is significantly ahead of 2000 1919 levels at the same time of the year driven obviously by the addition of the Devens will archive, Ghana and the renovated Hilton La Romana.
<unk> on the books and the segment is also pacing nicely ahead of 2019 levels.
Externally managed resorts are behind 2019 in both revenue and ADR on the books for both quarters.
We expect Q4 occupancy to improve sequentially at a similar absolute ADR in the Dr as well.
Finally fundamentals in Jamaica ramped nicely during the quarter, but international arrivals into the destination continued to significantly lag 2019 levels and our other geographic segments. We're very happy to see that this segment's begin to stabilize but expect the recovery here to continue to be choppy given the visibility on flights and continuing COVID-19 related travel restrictions currently.
<unk> revenue on the books for Jamaica is lagging versus 2019 for the fourth quarter of 2021 with rates up high single digits.
The primary driver of the drop in pacing with cancellations for the month of October but pacing in November December and continued to improve with December continuously adding net revenue almost every week since our last earnings call.
Revenue on the books for the first quarter of 2022 is modestly ahead of where we were at the same time in 2019 with ADR is up mid teens for the period.
For the fourth quarter, we expect occupancy to be similar to Q3 at a slightly higher ADR before hopefully ramping up more meaningfully in Q1 of 2022.
Now taking a look at who is traveling nearly 42% of the Playa managed room nights stayed in the quarter came from our direct channels as our group mix improve sequentially and OTI mix remained significantly depressed geographically our U S. Sourcing increased 17 points to 72% of managed room nights, while South American source business increased 260 basis points.
Given the current state of travel restrictions, our Canadian and Asian customer mix continues to essentially be zero as compared to nearly 10% of our mix in Q3 of 19.
Our booking window improved versus Q2 and narrowed the gap versus 2019 levels. Despite returning to a shorter penalty free cancellation window during the quarter.
Also our length of stay improve during the quarter nearly returning to 2019 levels and this trend is expected to continue as we rely less on close in bookings.
So in aggregate our revenue on the books for Playa owned and managed resorts for the fourth quarter 2021 is currently pacing up in the high <unk> versus where we were in 2019 at the same time with the ADR is driving the bulk of the revenue increase.
The first quarter 2022 is also pacing ahead of where we were in Q4 of 2019 for Q1 of 2020 up around 40% with ADR is driving roughly half again.
As a reminder, these stats exclude the two externally managed assets in the Dominican Republic, which as I mentioned earlier are both pacing behind 2019 for Q4 and for Q1.
Also these pacing figures, obviously skewed resorts that we manage on behalf of third party owners.
Taken altogether, we expect our Q4 occupancy to continue to improve sequentially at similar to slightly higher <unk> than we saw in the third quarter.
On the cost front, while our Q3 margins were extraordinary compared to historical third quarters. We want you to be aware of the fact that achieving normal or pre pandemic historical margin levels will be much more difficult in the first quarter of 2022, given the absolute productivity of our resorts on both rate and occupancy during what is traditionally our seasonally highest.
Margin quarter said differently, it will be tougher to lap those higher ADR and margin quarters as compared to the slower seasonal periods like we just saw in the third quarter.
Also we still expect the incremental cost pressure as we mentioned on our last call in the upcoming quarters as a result of inflationary pressures on labor utilities in cost of goods as well as the need for higher staffing levels to meet increasing demand and to deliver a premium experience for the premium rates. We are currently yielding.
Finally, as we mentioned on our last call the change in billing methodology at our largest OTI partner that is impacting our ADR and costs in Mexico will be approximately 110 basis point drag on Yucatan margins 60 basis point drag on Pacific segment margins and 40 basis point drag on total company margins for the fourth quarter of 2021.
Combining this with the previously mentioned cost pressures and more difficult comparisons will make it harder to achieve historical margin levels than it was in the third quarter.
I'll turn it back over to Bruce for some closing remarks.
Thanks, Brian.
So in summary, we believe all of the pieces necessary to have a successful high season are coming together, namely a healthy book position normalizing flight capacity increase vaccine penetration globally and the resurgence of mice business.
Our focus on execution and service has placed us uniquely at the top of our markets to lead the way in pricing our new partnership with Wyndham is yet another exciting avenue for growth beyond the Covid recovery, we will continue to look for ways to leverage our expertise leadership and experience in the all inclusive segment to create shareholder value.
With that I'll open up the line for any questions.
We will now begin the question and answer session to ask a 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.
If at any time your question Thats been addressed and you'd like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our own.
Our first question will come from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good afternoon, guys and thanks for all the data points, thus far very very helpful.
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You've talked a lot about the pent up wedding business as being a pretty big driver for you next year I Wonder if you can maybe add a little bit of color around that in terms of the the economics of it and just thinking about things like.
Rate compression for non wedding business and also kind of the out of room spend what that looks like.
I'll get back to a higher mix of wording than normal.
Yes, we've actually typically we're talking more about meetings and incentive groups for next year. The wedding business. We saw drop off in 2020, we actually saw it come back more readily in 2021, if you think about the size of a destination wedding, they're typically not 400.
People weddings, and given the fact that all of our.
Spot that our resorts for the ceremonies or even the receptions can be held outdoors. It made people feel a heck of a lot more comfortable and coupled back a lot more comfortable kind of continuing that wedding business. This year.
We drive its usually pretty good rates from that business, but also a lot of non package spend because they're renting out there having a celebration on the beach or in one of the the outdoor spaces up on the roof, depending on the property. So it's a combination of both good ADR and non package spend that makes wedding business. So.
So appealing to us.
Okay. Thanks, Thanks, Brian Thats helpful and then.
On the direct bookings.
Your 42% I think you mentioned was the number for the quarter and you were still able to get.
Nicely higher rates, even though the direct bookings fell a little bit year over year, because you've got higher arc. So going forward, we get back to kind of that 50% longer range target. You think you can kind of maintain or expand these kind of rates or is there something else I'm, just really talking about like for like from the from the direct channels should those.
Rates continue to go higher from where we are today some of the from the Hyatt and Hilton and applied.
I think generally more long term if the broader question is given that kind of leisure spend has been relatively inelastic. During this during this period is can that can that stay given all the things we've done behind the scenes and we believe we believe so one like you said just our continued push toward direct and when we eventually get to kind of run rate, 50% direct we should that should.
It allow us to keep a big portion of those rate gains intact permanently even if consumer sentiment consumer demand changes, but also when you think about like just the relative value of our properties and you think about compared to what's happened in the U S domestically.
We're talking about on the third quarter for instance, our rates were up over 19 almost 40%.
On any given hotel anywhere from $50 to $75 to $80 were not talking about a $400 rate increase right. So we think it's far easier to keep these relative gains because I think we're probably a little too cheap to begin with let me just say Christmas a little confusing.
Looks like we were 50% and we went down to 40% that's a negative it's actually not a negative when you when you parse through all the data and its always complicated because nothing is consistent in this period we're in.
If you look on absolute dollars right in the absolute rate, it's actually doing great. So the direct is great in that part of the reason for the drop was because our group business went up well what do we like about our group business typically we get our highest rates out of our group business. So when you when you look at the potential of both our direct business.
Our group business as Ryan mentioned all of the increases in the higher numbers were seeing for the <unk> business and then rates I think all of them are pointing upward. So so I don't see any negative. It's just like I said, it's just kind of the way the numbers blend do we anticipate that right. We kept saying on the last couple three calls that it was going to.
Go down once the other channels turned off and all you're seeing now as the other channels turned on and we're Super happy to have the group channel turn on as you remember is basically for the last 18 months has basically been zero right and so for us to get back to groups and Brian mentioned the group hotels that will benefit the most those hotels will do incredibly well as that grew.
Spigot gets turned on so I just wanted to I just wanted to clarify that that 41% is not a negative you have to look at the absolute and not just the percentage.
Right right got you understood. Thanks, Thanks, Bruce and then last question is just on.
The Wyndham announcement with the ultra brand.
That's obviously.
Little bit different segment of the market than most of your well then all of your Hyatt Hilton <unk>.
Branded hotels is there any way to think about the Tam for that for you guys in terms of management contracts I mean, it seems like that's it.
If we look at the worldwide just Caribbean, all inclusive market Theres probably more.
Hotels that fit into that bucket then in your <unk>.
Your higher end bucket, so just thoughts on.
Potential for more management contracts that are sure sure Matt its a great question, Chris and you annualize that 100% correctly. Okay. So so we're so excited to be partner with Wyndham, We love the name Wyndham Altra I think it's a really cool name and kind of all the connotations that that has with all inclusive ultra all.
Those kind of things.
But like you said, it's a huge segment. It is the biggest segment right in all inclusive and we really didn't have any good brand partnership relationship to penetrate that segment and now we do and our arrangement with them is very very favorable to us with some exclusivity rights for three years.
And then the ability to extend that based on milestones that we hit so you know.
That's our goal right our goal is to.
Successfully grow with win them just like we have with our other brand partners.
Really to be able to kind of thrive in a segment that is very different than what you correctly highlighted.
Is occupied by the Hyatt Evens, Laura in the Hilton <unk>.
Brands. So so we just could not be more excited about this and I think youre going to see a lot of growth and just to highlight what is our strategy to be 100% branded we have some opportunities there not all of our properties are as youre well aware. So eventually those are all going to be branded with one of our brand partners and we may add one or two additional brand relationships.
In the future we want to be.
The dominant player when it comes to brand partnerships in the all inclusive space and we're really excited that this wyndham altra is going to really allow us to accomplish a lot.
Okay terrific very helpful. Thanks, Thanks, guys. Thanks.
Thanks, Chris.
Our next question will come from Shaun Kelley with Bank of America. Please go ahead.
Hey, good morning, or good afternoon, everyone and thanks for the all the prepared remarks.
First of all Ryan just wanted to ask a little bit about sort of the ADR levels that youre seeing which are obviously pretty phenomenal. So if we go back to the commentary that we got in early September I think right before our conference you talked about ADR is at that time I think exceeding.
Like sorry.
Sorry, excuse me 2019 levels by around 30% and then Ryan I think and I think I caught it correctly that some of the commentary for adding into the first quarter is that number could be up 40%.
But that may have been a pacing number so could you just kind of maybe break down.
We're moving into 2022.
Trajectory for let's call it occupancy versus rate for what's remaining here in 19, and then rest of remaining here sorry in 'twenty, one and then more importantly kind of point us to 'twenty, two and help us think about that mix.
Yeah sure. So on from a Q4 perspective, we think just kind of taken altogether compared to Q3 Youll see.
Rates in our various segment to be roughly the same as Q3 or step up slightly as you move into Q4 with occupancy moving up sequentially I'm, just given where we are in any given point in this time of year, you've got roughly 95% to 98% of your Q4 booked so we feel pretty good about where things sit for Q4 at this point Q1, you've caught that correctly and that was the pacing.
And so youre right. So the last time, we spoke we gave the numbers at Q1 was significantly ahead of 2019 levels booking for Q1 2000 22020 as.
As you would imagine and we the phenomenon we've seen that we've pulled so much of this demand forward. So as you approach. The reference period, you expect that that revenue on the books to contracts that now anybody can do that in any given year, if they put out a low rate they could build revenue on the books and then you know.
And say Hey look we're my book position Us from a revenue perspective, that's not what we've been seeing so while that revenue on the books position has compressed we've done so by not just maintaining rate, but by increasing it. So when I look out to 2022 short of giving any guidance at this point I would expect occupancy to continue to step up not back to pre COVID-19 levels, yet, but continue to step up at continued <unk>.
The rate gains.
Helpful. And then just sort of going that layer deeper I think I tried this one last quarter, but now we should be.
90 days closer how much typically would you have Q1 is obviously very important seasonally so how much would you typically have on the books for the first quarter right. Now just given can you give us a ballpark or a sense of that yes. Its rider in the mid fifties right at this point right.
Alright, right at 50%.
Okay.
Thank you and then last question would be I mean, obviously a bit slower of a comeback in Jamaica, but some.
<unk> trends are supportive there as well.
Can you talk a little bit about what's going to take to get that market kind of to fully recover and maybe.
Timing around that or what visibility you might have for a bigger improvement in Jamaica.
Yes, Sean.
Sean I cant I don't have a crystal ball to say this is when it's going to kind of pivot and pick up again, but just.
Coincidentally I was with the Jamaica and Minister of Tourism last week, and they're doing a lot. So I will say, they're very aware of the situation and I hammered hammered home to him that Hey, we're doing way better in Mexico, and the Dominican and then we are in your country.
We're working on a number of initiatives to get things going back and they are in the right direction.
I think youre going to see a positive trend there sooner rather than later, okay. As my prediction and the nice thing is if you kind of look at where we sit today right.
We're kind of in the eye.
I'll never say the best of all worlds because you know last 18 months have shown us that you can't predict anything.
With certainty, but a lot of the.
Kind of indicators are pointing in the right direction. So what's good about it for US is we're going into our best time of the year, so for things to be kind of all gelling and coming together well.
Here in November going into our high season and into the first quarter of next year.
Couldnt really be happier and so let's just keep our fingers crossed nothing derail that but but I think thats going to be the case and as you just build up the demand and in Orion highlighted a lot of the numbers.
When things fill up just like with the groups as they fill up in Mexico and the Dominican it becomes.
Water balloon and that business is going to get pushed out to places in Jamaica with its slower pace is going to fill up so I'm optimistic about Jamaica.
As we've said before it was doing the best for US. It was the segment performing the best pre pandemic and Theres. No reason there is no fundamental reason for it not to continue to perform well in the future.
Thank you very much thanks.
Thanks, Sean.
Our next question will come from Chad Beynon with Macquarie. Please go ahead.
Hi, good afternoon, Thanks for taking my question.
Wanted to focus on the non package side of things.
Believe sequentially it grew five or $6 million.
And you kind of noted that as a positive in the quarter can you talk about how we should continue to see this ramping is there a certain type of customer Ron you noted that.
Customers are staying longer I would assume that's a positive for non package, but just anything in terms of how we should think about this and given the pacing for <unk> next year should that even further accelerate this thanks.
Yes, it's a great point on the on the mice. So at the <unk> properties that is a big big help to those properties because typically these meetings incentive groups. They are being brought by their companies potentially with a partner or spouse and so it's all paid for so essentially a free vacation for them. So one the big group. That's there is already doing large events on the beach or <unk>.
Inquiries or things like that but then people have free time to then go spend money in the spot. So I think it's a net positive to those resorts that have large meeting space, namely Rose Hall, Cabo and top corner at the other properties I would expect it to.
That acceleration to slow a little bit just because as Bruce mentioned people, particularly those those resorts like in downtown Cancun Riviera Maya people feel more comfortable leaving the resort and kind of wandering around.
I'll spend a little bit less.
The properties that said, we learned quite a bit during this pandemic, we've talked about it now than the last couple of calls, but just the way we sell cabanas end up charging and things like that there's a lot of that that we've learned in the way in People's preferences, I think a lot of that's here to stay so I think we learned quite a bit and we'll be able to maintain some of those gains, but I expect it to slow.
A little bit.
Great. Thanks, and then Brian you talked about how we should think about the fourth quarter and even into the first quarter, but just in terms of price integrity integrity across the portfolio.
Are you seeing there and then more specifically in Dr. With Sievers of Lora are you able to charge the same ADR as some of the other leaders in that market are you already able to.
Achieve what you're kind of set out to when you open a property. Thanks, yeah the rate integrity.
It's been the same since the beginning of this versus made it very clear internally to make sure that we allocate inventory accordingly, and like I said it is you've proven out and what we've been able to show every single quarter with the booked position and the fact that rates that we're not giving up rate to do so which is pretty exciting to say.
As far as the other properties, particularly the brand new dividends along with our expectation is we should be outperforming the market. Obviously I don't have the data on the other resorts but.
We care less about what the competitors are doing these days and more about like what the consumer is willing to pay for these higher end properties, such as though I think the right thing to do and I'll Echo what Ryan said I mean, what we've really learned over over the pandemic and in a lot of it is due to the mix of customers that we've had in a changed right when Europe shut.
<unk> you know a lot of people, who would go to Europe for the summer and go to Europe for the winter vacations or the qualifications of the spring vacations or I go to Europe, all the time and I'm one of those customers right now to look for alternatives well what was available to American <unk>.
Travelers guess, what it was Mexico and the Caribbean and so we got some new people and because of that and because of our newly opened constructed like hi, it's even slower in top corner and the renovated Hilton we had.
Great offerings for people and then you get the online reviews and the online reviews kept going up and up and up and that allowed us to really focus on the service. So we have the product focused on the service now we have this new customer right and so we're delivering on the new customer. So the non package spend kind of as an end product of that customer right because.
That customers you're spending more money.
As well this.
A very discerning customer so you know they're not focused as much on rate. They are focused on you know what they're getting for the rate and so that's what we've decided to do and as Ryan said and Thats really true.
We're not looking as always the salespeople, while our competitors are pricing it did and we have to price lower right, where we have to match them and unlike yes, no. Okay. That's not our game plan anymore. Our game plan is we're offering a superior product and we're going to charge a superior price, okay, and thats the game and so going forward.
In this world of scarcity of labor and other things that impact everybody in the world as well as inflation everything is going up in price why would we discount we're not going to discount. So the objective is let's keep premium pricing, okay, let's continue to deliver an exceptional.
Product and service level, and let's get customers, we didn't have before and going into this.
Just recently in Europe, it's still not easy to travel to Europe, you can go there, but it's not easy it's a hedge.
Heck more easy to go to one of our markets and that's what we're going to we're going to show you for the first quarter, we're going to bring people there theyre going to have a great time and very importantly, they are going to pay a high rate.
Thanks, Bruce Thanks, Ron appreciate it.
Yes.
Our next question will come from Smedes Rose with Citi. Please go ahead.
Okay.
Pardon me Smedes your line might be muted.
Okay.
Okay.
Our next question will come from Tyler Tyler Batori with Janney. Please go ahead.
Hi, good afternoon, and thank you.
So quick follow up question on the commentary for the fourth quarter are there occupancy limits in place right now either government mandates or or self imposed that arent better perhaps putting a cap on how much.
Full year.
Your resorts in your properties could be.
That's a change from the last call. There are no more government mandated limits. We do have self imposed limits that look we will still sell sellouts for group business and stuff like that so we make sure that.
We're using those self imposed limits appropriately but.
We're still kind of ramping the business and making sure we do so smartly and more importantly safely for the consumer and the guest experience.
Just because of the CDC still has the testing requirements that come back to the United States, We get a nice preview into.
Positivity rates of everyone that we test the leave our resorts and so it's nice to see the continued extremely extremely low percentages of our overall guest tested.
<unk> for Covid and the last thing we wanted to do is for that to change so generally depending on the hotel and the time of the year, we self imposed around 85%, but again, if we have a sellout for a big group, we're not going to short ourselves there.
Okay I appreciate that.
And then just to tie the loop actually on the group side of things here.
The numbers you provided for 2022 quite strong.
At this point how much space do you even have available I mean, I'm just trying to get a sense of how much higher those bookings numbers could get and also if you could talk about how.
Okay.
Contributing to just driving that number overall higher as well.
Yeah <unk> just overall in the numbers generally is about 40% of that overall business.
Depending on the quarter the timing is a brand new property it essentially solve itself it's spectacular.
You've been there and it's done really really well for us I think obviously in the first half I think I alluded to it earlier the first half of the year, we're probably fairly booked for as far as meeting the incentive business.
There is a little more room in the back half of the year.
From that perspective.
Okay. Okay, Great and then my last question is actually a follow up on <unk> you talked about margin. There I think you said close to 40% but occupancy.
Only only 50%, but that's really quite good.
Any change to your expectations in terms of.
Where margin could stabilize there where EBITDA could stabilize there at that property and any change now versus pre COVID-19 in terms of.
<unk> expects expectations for returns on that property.
Yeah, No I mean, we provided a range I think the midpoint of our range was like around 13 or 14% of our invested capital as of today I'd just makes us more confident in the upper end of that range not ready to move it yet.
Still hasn't even had a full full year open.
Host Covid, but it just makes us all the more comfortable with what we've communicated.
Okay, Great. That's all for me. Thank you.
Thanks Tyler.
Our next question will come from Patrick Scholes with tourists Securities. Please go ahead.
Hi, good afternoon, everyone.
Thanks, Matt.
I have a follow up question on the ultra Wyndham product.
Yes, and the earlier question you had indicated.
Yes, possibly just managing for converting from.
Existing properties that you have.
But in the growth strategy.
Would it be possible that you would also be.
<unk> and.
Converting properties.
<unk> building from the ground up.
Those being in your strategy as well.
Sure sure. Good question, so, let's let's kind of go through them. The first one management contracts absolutely under percent I think youre going to see some movement there.
Our development guys are working really well with the Wyndham development guys I think youre going to see progress. There. So that's number one number two conversion of some of our existing properties. Yes, you look at some of our existing properties that are right at that mid kind of price level I think those would be super candidates to convert we really didn't have the option.
To do it with Hyatt or Hilton brands right, because those properties were in at that level, but they're they're really.
Well positions are great properties, Great Beach, and so I think youre going to see some some conversions there and then the third.
Kind of you had to write.
Acquisitions and ground up let me hit the easy one ground up unlikely okay, no no real need to do ground up in today's world, especially at that price point I think as we said this is the biggest segment and all inclusive and that means that there is a whole lot of existing properties out there and so I think the conversion.
<unk>.
From from an existing property, that's really unbranded or under branded to Wyndham Altra is where we see the biggest growth opportunity for us.
Wyndham with their new brand. So we're actively out there in discussions with people.
We made the announcement it was really well received in the in the industry and I think again.
People, who have properties at that price point didn't have ways to work with with Playa and they do now and Theres a lot of excitement and so I'm hopeful in the near future, we'll be able to make more announcements about that I hope that answers your question.
It certainly does thank you very much.
Okay. Thanks, Patrick.
Our next question will come from Smedes Rose with Citi. Please go ahead.
Hi, Thanks, sorry about that earlier I wanted to circle back on your <unk>.
Fourth quarter remarks, sorry to beat a dead horse here, but you you gave some revenue improvement numbers, but then you said at the end of your remarks, Ryan that you have some margin challenges. So I guess my question is would you expect to come in ahead of for 2019 resort EBITDA in the fourth quarter of 'twenty one or.
Some margin.
<unk> offset your revenue improvement.
Yes.
It should be it should be close I mean, the point, we were trying to make is that Q3, just in general on a very seasonal business such as ours as our kind of lowest productivity.
From a rate and a margin perspective, so just said differently just easier to beat 2019 levels.
Q4, traditionally is better from an ADR and better from a margin perspective. So subsequently I would assume that and therefore imply that it's a little bit harder to beat those in the same manner that we did Q3 and kind of put all that together with the fact that I said I expect occupancy to improve sequentially and right to be kind of similar to slightly up.
Would imply that we could be around the same margins in 2019, there. The main point I was trying to get at.
Across was that 2021 becomes more difficult because Q1 is just a higher excuse me Q1, 2022 is a much higher productivity quarter. That's all okay.
Okay, and you mentioned for first quarter of 'twenty, two that ADR is tracking at 20% I think versus first quarter of 19 and is that on a same store number or would that include the cap Cana.
Hi that includes top corner.
Okay. So on a same store number or do you have what the ADR is tracking versus yes.
Two percentage points lower.
It's still we're still doing pretty well, even without a cap on it.
Okay, So it's really being driven by.
That property, you're overall absolute number.
No no no im saying it so I'd say, it's around 20 with popcorn if you take out the renovation properties. It only dropped down a couple percentage points.
So, it's helping but it's not the lion's share by any stretch okay, sorry, Okay. I misunderstood you, but last thing I just wanted to ask you talked about labor inflationary costs.
So are you seeing in these markets. This is kind of what we're seeing in the U S. In terms of shortages of labor and like kind of.
Lower skilled our hourly labor basically getting a higher bid here or kind of what are you seeing in your local markets.
We're seeing inflationary cost pressures.
Like you see in the rest of the world, but we're not seeing shortages of labor for the same reason I think we touched on a little bit last quarter that we saw a little bit harder than some of our destinations where the vaccine availability was lower and particularly when Covid cases are rising three months ago, it's at a little bit harder, but now I mean, the big different now from last time, we spoke.
Both the Dr and Mexico all of our associates, we're at like 99% penetration for vaccination rates in the last time, we spoke and in Jamaica, we were in like 30% or $40 and today, we are in the $70 to almost 80 at our properties and so we've seen some nice.
It makes a lot easier to bring back some of the some of the associates a little more worried it is it has nothing to do with anything you see in the U S with an unemployment benefits being extended or something like that but we're not immune to similar cost and salary and wage inflation.
Pressures that you see elsewhere.
Okay. Thank.
Thank you guys. Thanks.
Thanks.
Sure.
This concludes our question and answer session I would like to turn the conference back over to Bruce <unk> for any closing remarks.
Great. Thanks, I'll be really quick we appreciate.
Everyone's participation in our call today, we're super excited about what went on with our third quarter results and as we've said today going into the fourth quarter more importantly, first quarter of next year, we're very optimistic so hope everyone stays safe.
And you better book at Playa resorts Dot Com now because we're filling up thanks a lot bye.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.