Q4 2021 Playa Hotels & Resorts NV Earnings Call
Good day and welcome to the Playa hotels <unk> resorts fourth quarter 2021 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your tongue.
The phone keypad and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Mr. Ryan Campbell. Please go ahead.
Thank you very much Chuck good morning, everyone and welcome to Playa hotels, <unk> resorts fourth 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 that 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, but the SEC.
We've updated our Investor relations website at investors that Playa resorts dotcom, but to the Companys recent releases.
In addition, reconciliations to GAAP of the non-GAAP financial measures. We discussed on this call were included in yesterday's press release.
On today's call Bruce word Inscape, pliers, Chairman and Chief Executive Officer will provide comments on the fourth quarter and key operational highlights I will then address our fourth quarter results and our outlook for his wrap up the call with some concluding remarks before we turn it over to Q&A I'll turn the call over to Bruce.
Great. Thanks, Ryan Good morning, everyone and thank you for joining us.
I'm sure. Most of you have had a chance to review our fourth quarter results reported last night, so let's get into the discussion of fourth quarter fundamentals. Once again improved sequentially with Occupancies in flight capacity continuing to ramp up particularly in the Dominican Republic. The strength in the business was consistent and broad based with occupancy improving.
Sequentially, each month and similar year over year ADR advances as well.
That is to say the ADR gains were not only driven by pricing during the peak demand holiday period.
In fact, they have been remarkably steady on a percentage basis for the last six months more importantly, our fourth quarter 2021 results represent the highest resort margin percentage and absolute EBITDA for any of our historical fourth quarters.
While this may seem like an obvious mandate I'm incredibly proud of how the entire organization is working together to execute our strategy.
I truly believe that each functional area Playa is improving each day and it couldn't be happening at a more critical time.
Booking front following the slowdown in the summer our sales picked up dramatically during the first two months of the fourth quarter, reaching new weekly sales peaks in October and November before slowing down in December likely due to the outbreak of the omicron barrier.
Omicron had a modest impact on potential close in bookings for December January its impact was relatively short lived as our weekly rep as our weekly revenue bookings surged in January with.
With several consecutive record setting weeks I believe we are still in the early innings of the resurgence in travel.
Likely be a multiyear process to find equilibrium given that travel was a universal love for so many of us in the pre pandemic era.
With that in mind I'm pleased to share with you that our pacing figures for 2022 remained elevated compared to pre pandemic levels and are successfully lapping 2021 .
I believe we offer an incredible relative value even with the recent ADR gains and that is being recognized by more travelers as our awareness grows.
It is also becoming more likely that we're going to get a permanent repricing for off peak periods.
Suddenly I don't think the idea of going to Mexico in August sounds all that back.
Brian will share the details on our booking trends with you momentarily.
Looking at our segments, Mexico continues to perform well for us posting another quarter of exceptional underlying topline kpis and margins international passenger arrivals exceeded 2019 levels in September for the first time since the beginning of the pandemic and have not looked back.
Moving on to the Dominican Republic, we experienced our biggest sequential occupancy improvement in the quarter. We were hopeful for this segment as we entered the quarter given our forward bookings and the forecasted increase in flight capacity.
But the performance in the quarter exceeded our expectations.
As you may recall, the D or had the biggest mix of European gas in the pre pandemic period, which was a drag on his performance, particularly particularly in our mid scale properties.
Once again, our flagship Hyatt Stephens, Laura cap, Ghana led the way and it has had it has established itself as a rate leader in the market with the resort EBITDA margin exceeding 40% during the fourth quarter with occupancy only in the low Sixty's <unk>.
Source progress M ramp it gives us further confidence that we can achieve our goal of 12% to 15% stabilized cash on cash returns on our investment there.
The segment's profit performance was weighed down by our two externally managed properties, which have lagged behind our globally branded resorts in the segment with respect to rate gains and also yield a significantly lower absolute ADR compared to work globally branded imply our managed resorts.
Turning to Jamaica, the segment's recovery largely stalled out compared to our other geographic segments and its third quarter results as the back to back variant waves had a disproportionate impact there given the more stringent entry testing requirement.
The impact has lingered into the first quarter of 2022, but bookings in Jamaica are picking up for the rest of the year and the impact is diminishing as we look out to Q2 and beyond.
Our focus on direct channels continues to pay off and we are confident that play as well on target with our five year plan to increase consumer direct business to at least 50% by 2023 and.
In aggregate during the fourth quarter of 2021 41, 6% of room nights booked were booked direct down 10.6 percentage points year over year, reflecting the continued relative strength of our direct channels, including a significant acceleration in group and third party source business.
During the fourth quarter of 2021, Playa resorts Dot com accounted for 17.4% of our total room night bookings down 8.2 percentage point year over year looking at 2022 as of January 17th Playa resorts Dot com generated approximately $70 million of bookings for 2022 compared to only <unk>.
$40 million for the 2021 comparable period.
This is a critical aspect of our business that I believe many overlook we apply and drive a significant portion of our direct revenues in house, which is now a major competitive advantage for our current portfolio for potential third party managed resorts in the future.
Finally, as a reminder, we anticipated that as the world slowly return to normal or mix of direct business would likely fall below 50%, but we still believe it will remain higher than levels seen immediately prior to the pandemic and significantly higher on an absolute dollar basis.
Taking a look at who is traveling.
Just over 40% of our Playa managed room nights room nights stays in the quarter came from our direct channels.
Our group mix improve sequentially in the O T a mix remains significantly depressed.
Geographically, our U S sourcing and Craigs increased approximately 13 percentage points compared to Q4, 2019% to 64% of managed room night, while our South American source business increased 400 basis points.
But the biggest change in our business was the return of our European guests, which makes three percentage points higher than Q4 'twenty one in Q4 19.
Given the current state of travel restrictions, our Canadian and Asian customer mix remains significantly depressed versus pre pandemic levels, our booking window improve versus Q3, but remain shorter than pre pandemic levels.
Our length of stay during the fourth quarter was in line with Q4, 2019 and up nearly 10% versus Q4 2020 and this trend is expected to continue as we rely less on close in bookings.
Finally, we recently announced a strategic partnership with Wyndham hotels, which we believe will accelerate growth in the Midscale and upper Midscale 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.
We completed the conversion of two resorts during the fourth quarter and officially welcomed our first guests on December one to do the new Wyndham Altra concept in both Cancun and Playa del Carmen the transaction excuse me. The transition went smoothly from an operational perspective, but just as critical for US Wyndham has been a superb.
<unk> to work with behind the seats I look forward to sharing more with you about this new relationship in the coming quarters. Once again I would like to thank all of our associates that have continued to deliver world class service in the face of myriad pandemic related challenges.
Their unwavering passion and dedication to service is what truly sets play a part.
With that I'll turn the call back over to Ryan to discuss the balance sheet and our outlook.
Thank you Bruce Good morning, again, I will provide you first with an update on our liquidity and balance sheet and then review the fundamentals of the fourth quarter and finish with a discussion on forward bookings and market trends.
We finished the quarter with a total unrestricted cash balance of approximately $270 million at the end of the year and as a reminder, we have 23 and a half million of additional restricted cash on the balance sheet from our June 2020 financing on.
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 just under 1.15 billion.
We anticipate our cash capex spend for full year 2022 to be approximately $30 million to $35 million for the year with approximately $5 million of that being carried over from Capex, we did not spend in the fourth quarter as anticipated.
The vast majority of our projected 2022 capex is maintenance related.
We have roughly $60 million of mandatory debt repayment obligations leftover from our asset sales in 2020 and 2021 .
Turning now to our mice group business, while our business on the books in the segment was and remains strong to start the year. We've seen some movement in this segment as a result of the AMR conversion.
Our 2022 net mice group business on the books is approximately $36 million, which hasn't changed much since the last time that we spoke and is well ahead of our final full year 2019 mice revenues of $32 million and ahead of the 33 million. We had on the books in early 2020 for that year prior to the onset of.
The pandemic.
Nearly 83% of this mice business slated to say 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 for the second half of the year, given limited space and some movement of existing reservations.
Our pacing for 2023 has remained strong 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 Hyatt resorts in Cabos Rosol and copco.
Moving onto the fundamentals as Bruce mentioned the teams have done an excellent job navigating the current environment.
We continue to expect a similar degree of inflation in the first half of 2022 that we experienced in the second half of 2021 .
Though it is still early we currently do not anticipate expense inflation to be worse in the second half of 2022 .
With respect to top line I believe 2022 it can be a phenomenal year for Playa as I look at how our book of business has been building for future periods, we're particularly encouraged by year over year ADR gains and revenue pacing in the second half of 2022 as we lap the second half of 2020 ones record performance.
Both the third and the fourth quarters are pacing significantly ahead of the comparable periods in 2019 and are up year over year versus 2021 in both revenues and ADR.
Putting it all together based on what we know today and the fluidity of the virus. We feel it's best to think about 2022 and a half with a little more granular detail for the first half given our visibility and then some directional color for the second half that will firm up later.
So for the first quarter of 2022.
We expect the occupancy rate for the entire portfolio to improve versus the occupancy rate in the fourth quarter of 2021.
At an average daily rate that is approximately low to mid double digit percentage points higher than Q4's reported $325 average package right.
Well this would easily represent the highest ADR player has ever achieved in a quarter.
Percentage increase.
Versus Q1, 2019, and ADR is not to the same magnitude that we experienced in the second half of 2020 . One. This is owing obviously, it's a higher absolute base and our historically highest season.
Yes, you should expect a more tempered margin performance in the first quarter as compared to the second half of 2021 .
Said differently to reach prior peak Q1 margin levels, we will need to be more relying on occupancy to get us there because the ADR increase was not enough to offset the lower occupancies versus 2019.
Also stating the obvious please keep in mind that Q1, particularly January felt some lingering impact from the amo conversion.
As we mentioned the segment hit hardest by the disruption in bookings with Jamaica likely driven by the country's entry testing requirement.
Now looking at the second quarter are pacing at the Playa managed resorts remains strong with revenues up mid forty's percentage points versus the same time in 19, and ATR driving a significant portion of the increase.
On a percentage growth basis compared to 2019, we expect our ADR to accelerate substantially in Q2 versus what we expect to report in Q1.
As we move into the back half of the year, we think the typical interplay between occupancy ADR in Opex for modeling purposes should become easier for you in order to maintain property margins, we experienced in the second half of 2020 , one we would need to grow ADR slightly faster than inflation to account for additional head count to help with higher occupancy levels until we reach it.
Stabilized occupancy and we expect our occupancy to be in the low to mid Seventy's in the second half in line roughly with 2018 in 2019.
I hope that framework helps you as you fine tune your models with that I'll turn it back over to Bruce for some closing remarks.
Great. Thanks, Ryan So in summary.
I'm very optimistic for this new year and the growth ahead for Playa strategically our new partnership with Wyndham and pursuit of third party management contracts should help enhance our growth profile over the intermediate term I also want to take this opportunity to share. Another endeavor that we will expect that we expect will augment our growth profile the <unk>.
Company has entered into a licensing agreement with a third party that will own and operate a membership program apply your collection, which will provide members certain benefits and amenities that are designated player owned <unk> managed resorts we.
We do not expect to play a collection to be a material driver of profits in the near term, but it will hopefully grow into another sourcing channel with a favorable customer acquisition cost profile.
Also as this is being operated by a third party pursuant to a licensing agreement, we will simply be collecting licensing and other ancillary fees from this sourcing channel we.
We do not anticipate any material changes to how we present our financials.
We will continue to look for ways to leverage our expertise leadership and experience in the all inclusive segment to drive strong customer and financial results and to create shareholder value for our investors with that I'll open up the line for any questions.
We will now begin the question and answer session to ask any question you May Press Star then one on your telephone keypad.
Using a speakerphone please pick up your handset before pressing the keys Antwerp jaw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
And the first question will come from Chris Walker with Deutsche Bank. Please go ahead.
Yeah, Hey, Hey, good afternoon guys.
Bruce really interesting comment on the essentially the structurally higher ADR in the in the off peak off peak periods.
That kind of also directly relate to the direct bookings or if you can give us a little color on maybe whether a much lower percentage of your bookings during the off peak periods have been through Otas and other channels historically.
Sure sure Chris that's a great question actually I'm really glad you asked that because I think what you what you see with the ADR increases you know through those shoulder periods is it's across all channels. So certainly we have benefited but we've been benefiting right from our mix change with more direct business, but literally you know all the channels are going up we've.
Been incredibly focused on on rate integrity.
Cross all third parties. So that you know people couldn't do what they used to be able to do in discount not just like us for every every hotel company. So you know with technology, we've been able to be a little little better focus there and then you know our mix is increasing on the on the direct and then you know I think you're starting to see some.
The group segment pick up and it's not just the really big groups. It's a lot of smaller groups too and those can be you know really attractive and not only are they good for the 80 ours, but a lot of the smaller groups.
<unk> are really good for the non package revenue believe it or not kind of on a per person basis or smaller groups can spend a lot more.
Non package revenue.
I'll just give you give you. An example, I was in Mexico last week and I was in the Dominican Republic first four days of this week, while I was in the D. R.
We were there you know we signed a very big group contract for September . Okay. That's the that's the kind of thing that's happening now because people are realizing that the demand you know they were having to figure out when they can get their groups in there and you know and the same with you know people booking their private vacations and other leisure trip. So I think you're just saying it.
Across all channels and and I think as we said that this is not a short term phenomenon I really believe this is this is something here to stay.
Okay, Great and then you talked a little bit about the supply of collection, it's a new platform for fee growth.
Youre also right in the process of kind of growing your hopefully growing your management fee base is there a way to just think directionally about where is there any kind of cycle on fees as a percentage of total.
Longer term I mean can this can this become 10 or 15% of your EBITDAR or something roundly like that but we don't want to you know today, it's way too early to try to come with a projection. We will have discussions you know tried to do that in the near future. As we see you know kind of what the results are from from the platelet collection and its a little different as we said.
It's a third party. So you know we're not running it ourselves. So we just have to see how things progress, but were optimistic about it and if you look at many of our competitors in the all inclusive segment, they drive pretty significant business through that channel.
Some of them that's kind of the main focus it will not be our main focus is as we've stated you know our main focus is direct sales, but this will give us a really good additional channel.
People, who are loyal to you know kind of playa resorts into our brands and our resorts for them to book. So it's a it's a really lower cost way for us to get the customers and it's a good benefit for the customers as well. So I think I think it's going to be successful and the nice thing about people who are in that channel as they typically come you know one to two.
Two to three times per year. Okay. So so that's you know that's a really good customer base for us.
Okay, Great Gotcha, and then the last one is if.
If you guys are kind of right about the structural ADR as being higher and we can kind of hang on to some of this.
Growth in Revpar.
Youre going to be at a much higher but you're gonna be at a much higher base. Don I know you have a pretty small capex plan. This year do you have the required debt pay down, but you're still going to generate a lot of free cash and leverages, probably back down to lower than pre COVID-19 . So I mean, where do you prioritize where do you, possibly begin to be able to think about share.
<unk> or the or some kind of a bigger renovation or ROI project sure. So I mean I you know obviously, you're always looking at all options right. So you mentioned share repurchase or ROI projects from my standpoint, if you look at the success of hides evens Lora cop kana.
Where we can invest our money and drive superior returns that would be our number one objective, okay and so as we've talked about in the past kind of pre pandemic, we had a lot of opportunities.
Kind of organic growth projects within our existing portfolio. So we're not talking about newbuild projects were just talking about.
Roy enhancements, we have a couple of properties you know that that could be rebranded we have others that we can we can invest money very strategically in order to drive higher business and quite honestly, what youre seeing with the higher ADR is you're seeing you know customers are going to have higher standards and theyre going to work.
And so I think that that's the that's the challenge, but that's really the opportunity where we're excited about it after kind of two years and as I said I was down with you know I told you in the Dominican with our team there and I described it to have a big group of our team. There as you know we were we were you know using a hot hockey metaphor.
We're in the in the penalty box, we all work right from Covid. It was kind of the COVID-19 penalty box and it is so exciting to be back out on the ice again, so that's how I look at it Chris.
Okay very good thanks for all the thanks for all the color Bruce Great.
Great. Thank you.
The next question will come from Shaun Kelley with Bank of America. Please go ahead.
I wanted to dig in a little bit Ryan and just kind of your booking an outlook comment. Thank you for all the clarity so now I'm going to ask for more as we typically do on the sell side, but can you.
Can you just I just wanted to start with the second half because I think thats really when the business is going to be I think operating the way you should and it's obviously.
Super encouraging that you might be able to lap the.
The rate environment that we had in the second half of last year.
I just wanted to be clear on that though do you think in dollar terms rates could be or what youre seeing consistent with rates being up in the second half and I'm talking about <unk> being up in the second half relative to second half.
'twenty one is that is that.
Okay starting point.
Yes that is correct John .
Okay.
Then the second question would be sort of following up on QQ.
And I think that's a pretty critical inflection.
Can you help me unpack again, how does the.
Right side of the equation I think you said if I caught it right maybe lower mid forties in revenue dollars, but can you help me think about how the rate side of that is is pacing at least.
I think Q1 is your highest is your highest point so that is going to be down a bit from Q1, but is it are we still up year on year from <unk> 21, or what are the puts and takes there yeah. So I think what the message. We were trying to get is that yes, Q1 would be our highest absolute ADR right, but on a relative basis versus 2019.
<unk> would not be as good as what we just saw in Q4, because it's a higher base and sort of what I was trying to convey was that while Q2's ADR would be slightly lower than Q1, it's percentage gain over 19 would be back into the kind of closer to record breaking levels that we've come to expect in the second half.
In 'twenty, one if that makes sense yeah. So the absolute ADR would go up in Q1 down in Q2, but its relative position over previous years would be higher.
Great cool.
Components that would be for the second half what percentage of those room nights. We typically have on the books now you, obviously have a longer booking curve than.
Corporate transient style hotels, but obviously you know we we want to get a sense of like how much visibility you would have in as the sort of booking environment is I think increasingly normalizing. So just how would that book of business be trending and how much do we need to fill between here and day of arrival, yeah. So different.
So, let's just run through the course of Q1 is typically 80% booked as of right now it makes sense for two thirds the way through.
Q2, we're about 60 ish percent books typically for now and then just kind of you know for the third quarter think about it this way like our current revenue on the books for Q3 is a little under 40% of what we were actually reported in Q3 of 2021.
Great understood.
That's helpful. And then the very last thing for me would just be you mentioned sort of the leverage points around inflation and obviously your environment can be slightly different than maybe what we're seeing in.
Call. It U S hotels, and obviously theres a lot of micro nuances in just U S Hotel market can you help us unpack the labor inflation environment based on either market or I'm much I'm actually more intrigued on what are you seeing on the labor side versus how much of that is product cost.
Trying to think about where you might be seeing some of those pinch points, especially what you're seeing on the labor side, how much of a bottleneck that is for playa.
As far as staffing availability labor has not been an issue for us with the exception of a little bit in Q4, there was a little bit of a learning early just because of the omicron Transmissibility and we had to have people out in quarantine for extra periods of time looks like what the airlines had to deal with the Mexican government as an example, lower those quarantine periods down five days from.
10, and so there was some data that were shorter staff, but as far as increases on the pricing and the unit costs are Mexico and the Dr. Both increase the minimum wage for 2022 in the teens. Dr. Does it every couple of years, Mexico has done. It I think this is the third time since and low took office on a dollar percentage.
Basis, it doesn't make a huge dent in our overall cost purely because you know it's only a portion of our line staff salary and wages.
And and other than that the biggest component for us kind of like unit growth it's been F&B.
And so it's kind of those are the kind of the two pinpoint threat F&B and then the cost of labor, but like I said, we are fully expecting that what we saw in the second half of the year to continue the first half of this year, but where we sit today, we don't see it increasing any more than normal in the back half of the year.
Great. Thank you very much thanks, Sean.
The next question will come from Chad Beynon with Macquarie. Please go ahead.
Good afternoon, Thanks for taking my question and nice results.
For the first quarter, Ryan just with your your guidance I think you noted occupancies would be slightly up sequentially and it looks like the big driver of that increasing would be Jamaica, I think normally seasonality calls for Q1 over Q4 occupancy increases.
Jamaica is currently still slightly below 60% when can we start.
It kind of move up closer to where the rest of the portfolio is thanks.
Yeah.
You got to still as good as mine I mean, I love seeing that so many other places in the world like UK and has been in other places of removing restrictions Bahamas remove their entry requirements about last quarter.
And so what we've seen is that like Jamaica, just as you said was the only period that if you look at Q1 pacing with the only one that did not increase since our last call.
But if you look at like the second half in the second quarter beyond.
Jamaica has our highest occupancy on the books against any other segment, so where you really start to see an inflection point is in the second quarter and we saw signs of that last year right. When kind of as you moved into the fall kind of post delta when Jamaica, just kind of on a relative pricing perspective look pretty.
Good right and so people said, okay look I'm willing to take the chance that all tested positive and I'll go there now and work on Pops up obviously, you know more people worried about somebody in their family or their significant other testing positive and not being able to go. So as you can imagine those bookings lag and slowed down there, but our expectation is that hopefully that continues to recover as far as when they.
Pulled off that requirement I have no idea.
Great. Thanks, and then just on the the management contract side or the conversion side of things like what you you announced with with Wyndham.
Or are there still more opportunities in the market and can you just kind of help us gauge.
Gauge expectations in terms of what we should generally expect for these types of things on an annual basis can we start to see a couple more each year or or is that kind of a you know.
Somewhat of a ceiling. Thanks.
Sure sure Great John I. Appreciate the question so to answer the first part of your question, Yes, there's more opportunities out there. Okay part part of the reason I've been traveling as you know because theres opportunities trying to get out in front of things meet with people you know things, we weren't able to do during the pandemic I mean, the two big restrictions during the pandemic we're number one.
Everybody had to conserve cash and prepare for the unknown. We're you know we're feeling pretty comfortable that we're kind of beyond that phase, but then the second one is you know really.
Getting out meeting and trying to sell the Playa story and I think you know what's going on right. Now is a player story is selling incredibly well. So we've always said that it's difficult in our segment alright, given the profile of the people who own the properties you know to do these kind of transactions and get people to change having said that.
I think our results are resonating incredibly well across across the segment. The all inclusive segment, particularly with the percentage of direct business that we're driving and that's just so far superior to others. I think that's the competitive advantage that we have so what we're trying to do is get out there and sell the story that you know hey, let let player come in.
You know, let us work with a global brand I'll just put it in our management and very particularly our sales.
And we'll drive more direct business and.
Generate more profit to the bottom line.
What are the numbers of properties you know we could do that's you know very very hard to say, but you know if you. If you said a couple of year I think that's a very conservative number that we could do at least a couple of year and then Chad the management contracts, we have today, even in a COVID-19 impacted year, we did roughly $3 million.
Management fee revenue a little over two we expect that those since those existing contract day. The stabilized you know anywhere kind of mid $5 million to $7 million of management fee revenue and as you're well aware the flows around that's pretty high particularly for taking on contracts in areas, where you've already got existing infrastructure.
That's great. Thanks, guys I appreciate it.
Thanks, Chad.
The next question will come from Smedes Rose with Citi. Please go ahead.
Hi, I just wanted to ask you on the management contract side and then I had another question, but have you seen.
Any.
Increased competition, because with Hyatt so heavily in that business now or are there enough to go around for everybody or is it just more one off opportunities for you and it's not such a big presence.
Sure.
If you look at first of all they've always been there right they've been there and they've been a very successful company I'm speaking specifically about an resorts you know in the number of contracts that they've been able to do so you know there they are a quality company and a strong competitor.
I will say their focus now is broader right. So they're looking over in Europe , and a lot of their new contracts are over in Europe . So.
You know I think you know, while we will see them and we'll you know we'll compete with them, where we're competing and I think the flexibility. We have with you know multiple brands gives you know it gives us a very strong competitive position right I'm, not saying, we're better than them or they are better than us I. Just think we have a strong competitive position.
The bigger thing you should you know kind of focus on it well.
We should focus on is that there are just not as many management contract players in the all inclusive space as there would be pretty much in any other segment of the of the global lodging industry, right, whether it's geographic or or or or product line and so I think that still bodes incredibly well for.
So the real challenge is convincing.
Often family owner operators to kind of partner with Playa.
And let us kind of do our magic that that I think is the biggest challenge.
Okay, and then I just wanted to ask you.
I guess, specifically for cat carrier, but maybe any other markets as well.
Im sure Theres going to be some impact of that I think what youre seeing with US is that we are exceeding the market levels and we're exceeding the market levels due to two big kind of differentiating factors that we have number one it's a percentage we sell direct which is far superior than across the industry segment number two.
Our focus affiliation with global brands, Okay, which also affects the direct but I think those two factors are really big factors and why we are growing faster than the market faster than our competitors. When it comes to increasing increasing 80 hours and so I think that again is somewhat of a.
Permanent.
Permanent kind of feature.
With regards to.
New projects New development.
First of all during the pandemic just like everywhere in the world. Most lodging projects stopped right Tony that were on the drawing board just didn't even occur there were a couple that opened more recently and they were people that said hey, we're just going to plough through the pandemic and obviously they were financially very strong in order to do that so they're open they're there.
Today as far as a lot of new stuff coming now and then when you look, particularly at Cancun proper virtually nothing okay, because there's just no.
Land available to do anything or conversion opportunities. So we feel very good about our positioning with in cancun and within kind of the whole <unk> market as well as in the Dominican and and in Jamaica as well.
Great. Thank you I appreciate that.
Okay. Thanks.
The next question will come from Tyler battery with Janney. Please go ahead.
Hi, Thank you good afternoon.
Follow up questions here.
In terms of the cost margin side of things can you quantify or put some numbers around just how much costs were up on a percentage basis in Q4 versus pre COVID-19 and what are you expecting in terms of cost increases this year compared with 2019 or 2018.
So just kind of as a reminder, we in a typical year our costs inflate anywhere from 300 to 500 basis points, but if you think about kind of cumulative inflation since either 18 or 2019, depending on how you want to look at it.
Cumulatively our costs have been up.
Roughly 20% since 2018, and roughly 20 in roughly 17% to 19 and if you think about this as kind of a CAGR instead of a cumulative multiyear.
Comparison, the gains really arent that out of line with what you saw in a typically early cycle recovery. So hope.
Hope is that that doesn't continue the rest of this year and where we expected that it shouldn't but thus far we have not been immune to what the rest of the world is today.
Okay.
And in terms of kind of I think your 40% margin on 60% occupancy which is.
Obviously very strong there what sort of margin are you thinking originally in terms of stabilization of the property and then how are you.
Are you thinking about the potential timeline to to reach stabilization and really achieve that 12% to 16% cash on cash return you had talked about.
Our underwriting was probably around where we are today on a margin perspective, and so I think we've only I think we've tried to communicate the last couple of quarters that.
Typical hotels anywhere kind of two to three years. This hotel has been doing so well that we think that timeline to reaching those stabilized kind of returns is accelerated so that could potentially apply.
As implied by the end of this year.
Okay.
I'll leave it there and that's all that's all for me. Thank you.
Thanks Tyler.
The last question will come from Patrick Scholes with Truest. Please go ahead.
Alright, good morning, everyone.
Good morning couple of questions, how should we think about.
If theres any deferred capex.
That you folks have coming up this year.
As far as a modeling question and then if you could just give us your latest high level thoughts on.
Working with Wyndham and going forward.
<unk>.
Your growth story with that thank you.
We expect about $30 million to $35 million of of mostly maintenance Capex. This year. The nice part just give me if you think about the immense amount of expense starting back in 2013, and then heavily in kind of 17, 18, 19 kind of converting and introducing these hyatt Hilton and Wyndham brands to the public and then you think about what we sold in the last couple of years, we saw.
Old assets with lower growth trajectories or had more significant deferred capex our portfolio, where it sits we were very fortunate that during the time when we needed to save capital. We didn't have to take a bunch of deferred capex down the road or anything like that so.
If there was anything critical certainly we didn't ignore it during during pre pandemic times, we expect our maintenance Capex return to kind of the percentage of revenues that we've discussed in the past so roughly 30 to 35 million Bucks.
And I'll, let Bruce talk about the Wyndham Yeah sure. So thanks, Patrick with regards to Wyndham. So like we said we converted the properties on the first of December . So obviously, you had kind of a little bit of.
Omicron impact in December and then into early January so.
Even with that I think if you look at it we're very very pleased with what we're doing so far. So if you kind of look at what we've done with our other brand conversions and how quickly they started generating business through you know the brand channels.
I think we're just as pleased if not more pleased with where we are with with Wyndham and it's very exciting for us because.
At this you know kind of the Midscale upper Midscale price point, there's a lot of all inclusive inventory at that price.
And I think there is.
Great opportunity to really have the playa.
Our relationship with Wyndham Altra to stand out from that crowd and it's a big crowd and so we're excited and we also are excited about more management contract opportunities there too for the same reason right I mean, it's just.
Harder the higher up you go in the price and quality is harder to have multiple properties in a single market where at this price point.
Just a lot more opportunity, but we're super excited to be working with Wyndham, we think they're great. As we mentioned in our prepared remarks are kind of behind the scenes are just really they've been great to work with so we're exciting to expanding the relationship.
Okay, great good to hear thank you. Thank.
Thank you Beth.
This concludes our question and answer session I would like to turn the conference back over to Mr. Bruce <unk> for any closing remarks. Please go ahead great.
Great. Thanks, everybody I think we got with the questions with their prepared remarks of the questions. We were able to cover all of the things that we wanted to cover.
I think we're just excited too to be kind of on the other side of the worst of the pandemic and we're really seeing the benefit of the pent up demand and we think there's just you know are more likely to accelerate that not as we go forward. So we're excited about the prospects for Playa and we appreciate all of the interest from everybody in our comes.
So thank you very much take care.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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