Q2 2022 Playa Hotels & Resorts NV Earnings Call
Good morning, and welcome to Playa hotels, <unk> resorts second quarter earnings Conference call.
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I'd like to turn the call over Mr. Wang. Please go ahead.
Thank you very much Nick good morning, everyone and welcome to Playa hotels and resorts second quarter 2022 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.
Got you know 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 Securities and Exchange Commission.
We've updated our Investor relations website at investors that Playa resorts dotcom at the company's recent releases. In addition reconciliation to GAAP of the non-GAAP financial measures. We discussed on this call were included in yesterday's press release on.
On today's call Bruce why didn't keep vice Chairman and Chief Executive Officer will provide comments on the second quarter and key operational highlights.
I will then address our second quarter results and our outlook for the wrap up the call with some concluding remarks before we turn it over to Q&A that I'll turn the call over to Bruce great.
Great. Thanks, Ryan Good morning, everyone and thank you for joining us.
This momentum continued during the second quarter. The supply you generated the highest second quarter adjusted EBITDA in the company's history as our occupancy rate continued to rebuild and our ADR growth compared to 2019 accelerated to approximately 40%.
As of July 24th our Playa owned to managed revenue on the books for the third quarter is pacing up nearly 35% year over year and nearly 75% versus 2019.
In the fourth quarter is pacing up nearly 20% year over year, and nearly 60% higher versus 2019.
Based on our business on the books, we continue to expect our Q3 and Q4 ATR to grow at a high single digit rate year over year, we have not observed any meaningful changes to cancellation activity or booking demand, but we are prepared to adjust our costs and staffing appropriately. If we were to see a pullback in the consumer demand.
<unk>.
I want to remind everyone that not that long ago, we like many others in our industry. We're forced to go to zero percent occupancy and then slowly rebuild back to our baseline over the past two years, so any adjustments needed to adapt to a changing demand environment or quite fresh and our memory, We will act accordingly.
If the conditions call for it.
Book lead times at the healthiest levels, we have ever experienced we're confident in our ability to effectively manage through any potential slowdown. Although we are not seeing anything on the horizon at this time.
As we look ahead to the upcoming high season, we are pleased with our revenue and ADR pacing, which have continued to build since our last call led by demand in the <unk> segment.
I still believe the recovery in leisure travel is far from complete and the consumer trial and awareness of the all inclusive experience also have a long runway.
Today's inflationary environment, our relative value proposition has become incredibly compelling despite our ADR gains. This value continues to be reflected in our strong guest satisfaction scores and the pace of our bookings, which are significantly ahead of last year on both revenue and ADR for the second half of 2022.
It is important to note that all of these positive trends are occurring without us recapturing a full customer demand dynamic yet they're still groups of customers, particularly families with young children that are not traveling get due to lingering pandemic concerns as evidenced by the modest uptick in bookings we experienced following the removal of.
The U S S testing entry requirement. Additionally.
Additionally to date, we have not seen a full recovery of our international markets, particularly Asia certain parts of Europe , and our Canadian gas.
Finally, I want to highlight that although our headline ADR growth compared to 2019 has been robust I would like to remind everyone that the headline growth is benefiting approximately three percentage points from the noncash O T. A billing methodology change highlighted in our earnings release, approximately 13 percentage points from asset dispositions of lower ADR resort.
And the addition of our Hyatt cap Cana resort.
These are important considerations when contemplating our ADR growth sustainability and the compelling value we continue to offer our guests.
Strategically, we still believe that ceding some occupancy in favor of ADR, mainly at our Hyatt resorts is the best path forward for Playa as it establishes us as the right leader from a competitive standpoint, and our respective market and its more manageable from an operation standpoint.
With a growing inflationary pressure not only impacting consumers globally, but also the cost of operations for businesses. We are focused on pricing to continue offering a fantastic value toward guests, while dealing with the economic reality of higher operating expenses.
Second quarter fundamentals once again exhibited an acceleration in growth versus the comparable period in 2019 with occupancies continuing to ramp up particularly in Jamaica the.
The strength in the business was broad based with ADR growth and occupancy gains leading to healthy margin performance, despite the challenging cost environment.
As we previously shared with you the disruption from the Omicron Varian had a particularly acute impact on Jamaica earlier, this year, but our bookings for future periods combined with the removal of Jamaica as Covid testing entry requirements gave us a sense of optimism for the remainder of the year Jim.
Jamaica, let our portfolio in occupancy during the second quarter and currently has more occupancy on the books for Q C Q3 than our other segments.
Estimate that airlift capacity growth compared to 2019 into Montego Bay accelerated by nearly 15% by 15% sequentially during the second quarter, which drove international passenger arrivals to finally exceed 2019 levels on a quarterly basis for the first time since the beginning of the pandemic.
Our growth in this segment lag the impressive underlying growth exhibited in our other segment because there's a lag between demand growth and the lift to ADR is higher rate of bookings mix in.
In addition, future bookings in Jamaica had been stronger than our other segments. Following the removal of its testing requirements.
This is all extremely encouraging as we always believe nothing has structurally changed in Jamaica, which was our best performing segment prior to the onset of the pandemic.
This leaves considerable upside from the ongoing recovery in Jamaica, as we head into the second half of 'twenty, two 2022 and into 2023.
Turning to Mexico, which has led the way during the recovery for play out we had another strong quarter led by better than expected close in demand on the Pacific Coast.
The Dominican Republic continued to benefit from the capital investments, we made prior to the pandemic, particularly the high end <unk> kind of resorts, which had another stellar quarter and are now generating a cash on cash return well above the high end of our target range of 12% to 15% on a trailing 12 month basis with a resort EBITDA margin.
That was over 40% in the second quarter.
Our focus on direct channels continues to pay off and we're confident that play is on target with our five year plan to increase consumer direct business to at least 50% by 2023.
In aggregate during the second quarter of 2020% to 42.4% apply a managed room nights booked were booked direct down six one 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.
During the second quarter of 2022, Playa resorts Satcom accounted for 12% of our total Playa managed room night bookings down 10 percentage points year over year.
This is a critical aspect of our business 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 for potential third party managed resource in the future.
Finally, as a reminder, we anticipated that as the world slowly returned to a new normal or mix of direct business would likely fall below 50%, but we still believe it will remain higher than levels seen prior to the pandemic and significantly higher on an absolute basis.
Taking a look at who is traveling a little less than 40% of our Playa managed room nights stayed in the quarter came from our direct channels.
Group and tour, operator mix improved year over year in O T. A mixed paint depressed geographically our U S sourcing increased approximately 10 percentage points compared to Q2, 2019% to 67% of managed room nights, while our South American source business increased nearly 400 basis points in <unk>.
Our opinion guests mixed one percentage point higher.
Given the changing state of travel restrictions, our Canadian and Asian customer mix remains significantly depressed versus pre pandemic levels, our booking window with significantly longer than Q2 2019, a result of the robust pacing figures, we have been sharing with you in recent earnings calls.
Our length of stay during the second quarter was 2% above.
Q2, 2019, and 4% longer than Q2, 2021.
Once again I would like to sincerely. Thank all of our associates that have continued to deliver world class service and the fate of 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 good morning, again, I will first give you an update on our liquidity and balance sheet and then review the fundamentals of the second quarter, and then finish with the discussion of forward bookings and market trends.
As you know we finished the quarter with a total cash balance of just under $349 million as of June 30th. This balance is net of $25 million of mandatory debt repayments. We made stemming from our 2020 asset sales. We currently have no outstanding borrowings on our revolving credit facility and our total outstanding interest bearing debt is $1, one 2 billion.
Our net leverage on a trailing basis now stands at three roughly three five times.
We anticipate our cash capex spend for full year 2022 to be approximately 35 million for the year with roughly $5 million being carried over from the Capex, we did not spend in 2021 as anticipated.
The vast majority of our projected 2022 capex at this point is maintenance related.
Now turning to our <unk> group business, our 2022 net mice group business on the books is approximately $49 million versus $41 million at the time of our last earnings call and as again well ahead of our full year final 2019, nice revenues of $32 million about a third of the $49 million is expected to stay with us in the second half of the.
Year with 40% of that in the third quarter and the remainder in the fourth quarter.
Pacing for 2023 has remained strong with nearly $31 million already on the books, which is roughly two times the amount of nice revenue. We had on the books in July of 2019 for 2020.
Also 50% higher than what we shared with you on our last earnings call.
The return of this mice business should provide a good base to help manage yields and drive improved profitability year over year, particularly at our resorts in Cabos Rose Hall and katakana.
Moving onto the fundamentals our second quarter results exceeded our expectations as a result of better than expected ADR and occupancy with respect to the top line occupancy came in slightly above our expectations driven by close in demand in Jamaica and the Pacific Coast.
<unk> also came in above our expectations led by better than anticipated ADR gains in the Dominican Republic at both of our managed properties.
On the cost front as loose as Bruce mentioned the teams have done an excellent job navigating the challenges of the current environment.
Art margins were well ahead of Q2 2019 levels and just 40 bps shy of Q2 2018 resort margins margins benefited from marketing efficiencies given the higher booked revenue position, while food and beverage and utility expenses were higher compared to Q1 due to both inflation inflationary pressures and targeted investments in food and beverage to enhance the guest.
Variance I'd like to remind everyone that some of the factors that may comparing in analyzing our fundamentals versus the 2018 in 2019 periods difficult.
First as a reminder, we closed on the <unk> transaction in June of 2018, and as you know while the Jamaican markets are historically have had higher ADR is on a like for like basis. The operating costs are higher and thus had a lower margin profile.
Secondly, the construction disruption we experienced in 2019 related to our Hilton conversions had the most pronounced impact during the second and third quarters of 2019.
Lastly, the Dominican Republic, as you recall experienced a sharp slowdown related to perceive safety concerns beginning in June of 2019, and led to a material decline in profitability, which carried through the rest of the year.
At the segment level as Bruce mentioned, Jamaica sequential occupancy improvement during the second quarter was the notable standout following the relatively slower start to the year performance in Jamaica improved during the second quarter and we expect further improvement in the second half of 2022 based on the business. We have on the books improved nice booking pace and increasing airlift into the market.
The recovery in Jamaica has the potential to be a meaningful contributor to EBITDA growth in 2023, as a relative ADR growth has been muted versus our other segments and historically comparable resorts.
If you adjust 80 ours in Jamaica for the mix impact of asset dispositions like for like ADR would have only increased at a low double digit growth rate versus 2019. During the first half of 2022, that's lagging comparable resorts by roughly 20% to 40 percentage points.
But the tailwind of the strength in the <unk> segment and the removal of the Covid entry requirements, Jamaica will be particularly exciting for us to monitor in the coming months.
Looking at our other segments. The Yucatan Peninsula continued to deliver strong results driven by higher demand through our direct channels, leading to sequential occupancy improvement and in reported ADR gains of nearly 60% versus Q2 of 2019 or approximately 39% adjusted for OTI Commission adjustments and mix impact from asset dispositions. However.
Cost headwinds in food and beverage and utilities weighed on our second quarter margins in Yucatan, although were still higher than 2019 levels.
The Pacific Coast had a fantastic second quarter, driven by strong demand throughout our direct channels and the mice group segment, which helped offset similar margin pressure from utilities and food and beverage costs.
Finally, our flagship Evens Lara Conrad resorts continue to lead the way in the Dr segment segment with another quarter of strong margin performance.
Results in this segment were once again weighed down by our two externally managed properties, whose 80 yards are still below 2019 levels.
As we look at the second half of the year I continue to be excited about our potential based on how our book of business has been building, we're particularly encouraged by year over year ADR gains and revenue pacing in the second half of the year.
And we expect to lap the second half of 2020 one's record performance, both the third and fourth quarters are pacing significantly ahead of the comparable periods in 2019 and 2021.
In both revenues and ADR.
For the second half of 2022, we expect occupancy occupancy levels to be similar to the occupancy rates reported in the first half of 2022.
And a high single digit year over year, ADR growth, which is an acceleration versus the second quarter and trend when compared to 2019.
Another remember another reminder, on the modeling and comparability fraud the change in the UK billing mail methodology impacting our ADR was implemented during the second quarter of 2021 and should largely become comparable year over year in the third quarter of this year. The second quarter that we just reported was still materially impacted versus Q2 'twenty one as we had many reza.
<unk> on the books ahead of the change which are not subject to the New Commission accounting treatment.
We do not anticipate expense inflation to be materially worse in the second half of 2022 as compared to the first half of the year with the exception of increased insurance costs, which began in the second quarter of 2022 in connection with our regularly scheduled annual policy renewal and some higher F&B and utility costs as a reminder, our cost experienced a step up in inflation.
During the middle of 2021.
So in conclusion, we still expect to hold or grow margins year over year in the second half of the year and lap the second half of 2020 one's record margin performance.
We hope that framework helps guide you as you fine tune your models and gets further insight in what we're seeing and expecting well I'll turn it back over to Bruce for some closing remarks great.
Great. Thanks, Ryan with.
With the increasing uncertainty in the macro backdrop, we are diligently focused on the areas within our control and are carefully monitoring the landscape given our leisure focused the most important factor for our success will be employment as a major uptick in job losses or confidence could potentially derail the shift back to travel in services from durables. However, this.
Mornings job report demonstrates no weakness in the overall labor market. He gives no indications of an impending recession as long as the job market remains strong pliers business outlook should be very positive. We believe the price certainty and amazing value provided by Playa continues to resonate with travelers even in the face of an uncertain economic backdrop.
Finally on the capital allocation front, we have recovered faster than most of US expected just a short time ago and now have a healthy cash balance which naturally begs. The question what is next for Playa.
Our leverage is only now approach our long term target of approximately four times and although financial market conditions aren't ideal at the moment, we anticipate refinancing our debt and extending maturities.
As part of the leverage consideration are nine 5% interest rate property loan recently became callable, which is another potentially attractive use of capital that we believe will save cash provide a solid return help with our debt refinancing and reduce our long term cost of capital separately.
We have been actively working for months on pursuing value added projects that we have yet to announce but which are a time sensitive use of cash on hand.
Finally, if credit markets began to cooperate and our stock continues to remain severely depressed we would be interested in buying back our stock at its current valuation with that I'll open up the line for any questions.
Okay.
Well begin the question and answer session.
The question you May Press Star then one on your thought cellphone.
If youre using a speakerphone please pick up your handset before pressing the keys.
Well, it's all a question. Please press Star then two.
As Tom will pause momentarily to assemble the roster.
Our question comes from Patrick Scholes True Security. Please go ahead.
Hi, Yes, good morning, everyone.
Good morning.
Good morning questions here.
Questions.
For you here.
Certainly.
The valuation on the where it's trading.
As you know, possibly what the value is of the properties.
Oh, yes.
Look certainly very attractive.
Yeah. My question here is.
Would you ever consider.
Doing on a typical property selling off a joint venture piece really.
Yes, Mark to market example of what your properties might be worth.
I think of <unk>.
I am in hospitality that did something somewhat similar with.
They're entertainment segment, where there just aren't a lot of good comps that they sold.
Sold off a small piece of that and certainly was much higher than the street was expecting would you do something to that.
That effect, so that you get.
A good example of really what.
Our work.
I mean.
From an academic standpoint, the answer sure we would consider.
From a realistic standpoint, I'd say, it's less likely I mean, so you think about it first of all Ryan went over what our cash balances. So it's not like you need to sell an asset or even a part of an asset for any cash needs right. Because we have we have a very healthy cash balance. So that's one the second thing I think the bigger overriding reason is you know the.
The opportunity that exists for fly up in buying real estate in our markets is that it's an incredibly inefficient.
Kind of market you don't have you know for example.
Reached like Ryan or others in our markets.
Our competitively bidding on properties all the time and so that there's you know a very efficient market to buy and sell assets and in our case you know that just kind of you know it doesn't exist. It's why you know things don't trade very frequently maybe create some problems for people trying to find a comp.
Theres No question, if we thought there was an opportunity.
To do a joint venture with somebody in sell properties and share and that would really be from.
From a standpoint of growth that we would be growing more than.
By doing something like that then growing less so that's why we would we would do that but I'm you know I'm not I'm not against it you know do I inherently believe that we're undervalued Oh I think we're crazy undervalued I mean, I think if you just look at the the free cash flow, we're generating and as I mentioned.
There is no really indication of any weakness on our horizon I think.
The market's always waiting for the other shoe to drop in for our business as long as people have income to spend to go on vacation, they're going to go on vacations and you know as long as their health I mean their employment is healthy.
Kind of jobs wages are going up theyre going to continue to do that and you know for US inflation is not a big negative I mean sure do we have some increasingly highlighted we have some increase in food and beverage and utility costs, but overall, we're able to.
Price, our rate's higher than our costs are going up and as long as that exist.
Going to remain a positive dynamic for us. So we're not really fearful of inflation and were not really fearful that our business is going to be declining anytime soon.
Okay.
Thank you.
My next question you recently announced you had.
Landed a new management contract.
Would you.
I guess.
When or where there any concessions you had to make.
I get that.
When we say no.
Yeah, no actually that contract and it's a good example, so I was I was down in Mexico, two weeks ago meeting with the owners of that asset and they were so excited.
<unk>.
Two to get to the point, where we were signing signing that management agreement and the reason being is that they look at our performance being the only public company in the all inclusive space I can tell you that.
People are our competitors all look at our performance and they said your performance and your <unk>.
Properties is dramatically above what we were experiencing experiencing and we wanted you to take over and see what we can do there and so they're excited I think our.
Our prospects for really improving their performance are very very high and so we and they are excited about doing that so concessions absolutely not I mean, it was a very strong third party management agreement and I can tell you we're in discussions with others. So hopefully in the near future, we'll be able to make additional.
Announcements, but.
I think I think it's an exciting time for us because.
Our performance has been very strong.
Even stronger than those in the markets that we operate it.
Hey, congrats on that.
Hum.
I think I, probably know the answer to this one already.
But.
I'm glad you.
On some of the resort market.
Done exceptionally well over the past year, whether it's Miami Beach or Vale at Aspen, We are starting to see some sure.
See growth.
As you obviously you did.
In your numbers in Q2, but as you look at sort of the.
Here in early next year.
Seen any.
Anything noticeable pressure.
Pressure on.
Occupancy.
Thank you.
No no she pattern and that's why we tried to make that point clear. Your your gaps right. We're not seeing any notable and a change of slowdown while we're fully aware of the consumer crosscurrents were not seeing any erosion in our ADR has in their portfolio.
Just to reiterate again like while our headline ADR growth.
Is it the eye popping there are nonorganic drivers impacting those numbers, but our underlying organic like for like is still very impressive and reasonably sustainable and I think in some of those examples like places in South, Florida, and others, you kind of had a captive market a captive audience that had nowhere else to go and.
People may be willing to go to I don't want to disparage any particular markets in south Florida that people may have been willing to go there, but I can tell you what they probably don't want to go back next year and pay the same rates right, particularly with lower staffing levels lower service levels, where we've opted to do the complete opposite and make sure that we're pricing appropriately our pricing is still up but the underlying ADR growth is not.
All while still investing in the product and investing in staffing.
Okay Alright.
Thank you.
Color on all of us.
You bet.
Thank you next question will be from Shaun Kelley Bank of America. Please go ahead.
Hi, everyone. Good morning, Thanks for taking my question so.
I just wanted to dig in a little bit on.
First of all.
Bruce your upfront commentary there about just.
Just the trends you're seeing for Q3 and Q4, so if I kind of got all of this right.
Any directionally you're up.
It was 35% and in revenue in Q3, 20% in revenue in Q4 on.
Bookings, thus far and that's at high single digit rates those are all year over year figures to the balance of sort of a minus b is the occupancy improvement you expect which should get yes.
Like low to mid 70 is similar to what you did in the first half how.
How did I do absolutely you are really good.
Just want to make sure I just want to make sure I caught all of that as the decomposition. So really my question then goes into next year, a little bit right as we do start to cycle.
The recovery part obviously for Playa.
Largely Don Jamaica.
A tailwind to it it's going to last for that you've outlined but help us think about organic growth levers in 'twenty three.
The story for.
Forward as well we are from a consumer perspective, even if things don't roll we've taken a lot of price in that land. So is it slowly building occupancy back up to the <unk> and optimizing the resorts is it or are there other organic opportunities around the properties what can kind of drive.
Mid or high single digit growth next year as we once once we kind of hit.
Hit like let's call it normal some sort of normalized level of demand.
Sure sure well, let's let's step back and look at kind of what what could keep going up and drive it first of all if you recall.
We were definitely impacted in January and February by <unk> right. So we did not have a normal first quarter of 2022, so right away, we're going to have a benefit of Fortunately lets just assume right. Now we don't have another variant that is going to get it. So we should have a more normalized.
Quarter, we're going to have a big benefit there.
Okay is just the the Jamaica effect as you are well aware Jamaica didn't lift their travel restrictions until middle of April . So we have three and a half months that were under travel restrictions that again, we should be able to significantly lap. The results that we did in Jamaica and Jamaica historically has been.
Been a great market for US and then the third big one is mice, okay, and you've seen our mice business continue to improve and then I'd say the final component that may not drive so much in the first quarter, but really it probably in the second half of 'twenty three and then in 'twenty four and beyond is going to be some of the some of the capital.
Projects. So we highlighted that we have these times since the projects, we haven't announced what they are we will announce what they are but across the board our success with our capital investment has been incredible we have really good returns whenever we invest money in the projects that we've identified and not surprisingly.
Are the best returning projects. Okay. So as you look at what we're going to be doing later this year into the beginning of twenty-three those projects are going to generate some really nice kind of organic returns going forward. So I think for all of those components. It paints a very positive picture for 2023 and the only other thing I'd add is just kind of reiterate.
What I said earlier on the Jamaica, and just as a reminder, I mean from an ADR that was traditionally our highest ADR market.
And if you look at how it has performed thus far in the first half of 2022, it's really only been up kind of high excuse me low double digit ADR growth over 2019, which when you compare to what the other guys have done the comparable hotels licensee became kuehne and others. It's lagged by 20 to 40 percentage points.
We've seen increasing airlift already start to build in that market and then while it's small we're going ones and twos, but if you just think about what's opened in the last couple of years, we had the <unk> Arabia Hurricane queuing at the end of last year.
The Hyatt the Lora Riviera Maya management contract that we started taking reservations for for December the <unk> that we just mentioned and they continue to recover the other third party contract that we've already had.
Immense amount of additional revenue, but that that proof point that thesis is starting to build and should add some nice revenue next year and beyond as well.
Thank you for that and then my follow up is sort of the balance sheet capital allocation question. So.
You alluded to the call ability of that I guess and I and a quarter notes so that sounds like.
Obvious maybe first target for something but.
And I'm not super familiar with exactly how much that would.
Just what kind of dollars, we're talking about there or refinancings potential, but just help us think about.
Yes, I mean, maybe capital priority is because it would strike me as youre getting into the three and four times level, you should be you're probably at that place where you want to reload. The maybe the organic growth ask you just actually.
Potential around the properties as is as high as you've demonstrated in the past.
Yeah, and you're absolute right. So we think of it kind of in those in those couple of buckets. So first as Bruce mentioned, the capital market or a little disjointed not ideal at this point, but we certainly anticipate the need to refinance and extend the maturity of our debt is not due until 2024, but certainly something we're focused on as you can imagine I can't say much more than that but it's something that's certainly top of mind and we.
They need some cash to help smooth that process over.
Help smooth that process over and help our overall cost of capital for the long run right and obviously just like you said that nine and a quarter that which would save over $11 million a year in cash interest expense is an obvious choice and it just potentially helps kind of.
Help facilitate a more smooth refinancing whenever that time, maybe if the markets remain a little more disjointed.
Fixed themselves, but then to your point, you're absolutely right Bruce alluded to but we've been actively working for months in preparing in the background our ability to pursue some compelling value added projects that theyre, not yet announced or approved but theyre more time sensitive can be a great use of our liquidity and capital.
Great guys. Thank you very much thanks, Sean great. Thank you.
Thank you our next question from Chris <unk> Deutsche Bank. Please go ahead.
Hey, thank.
Good morning, guys.
Hi, Chris.
Bruce you mentioned the time sensitivity on some of these capex opportunities and I know you didn't want to get into specifics just yet but.
Is that time sensitivity due to something that you think you need to do to maintain or grow market share or is it or is there another angle to the time sensitivity in terms of.
An approval or procurement or something like that yes.
It's more of the ladder.
No.
Just a couple of things some of the dynamics with a couple of properties. That's what it refers to I don't want to overplay.
That obviously, we could we can do things faster or a little bit slower, but it's more that there's great opportunities I mean, I guess, if any message I wanted to get across is there's great opportunities and we have a really strong track record of delivering on those kind of projects and we have more projects and we have cash okay. So in the perfect World.
You know, we do even more but but we've prioritized them. So we've looked at the best returning opportunities and that's what we're going to focus on and so I think the <unk>.
Results coming out and it will be probably like beginning in the second half of next year will be positive very positive.
Okay, and just to follow up on that Bruce.
If you do move forward with some of those can you do it in such a way that.
Disruption is minimized because obviously that.
You guys kind of went through that and I guess 2017 2018.
So can we get.
You feel confident.
Wouldn't disrupt the very strong revenue environment to do those yes. So I mean, the things we're talking about Chris are going to have way less of an impact on disruption than we had back in 17 and 18, So thats number one.
And number two we take into account the EBITDA disruption when we're evaluating and prioritizing the projects. So that's definitely one of the key considerations.
It's always frustrating to me.
I look one when I was getting my MBA in finance, everyone told me you know the capital markets were incredibly efficient in the value long term cash flow and they would just kind of back at risk adjusted results and you do the best projects for shareholder value well I've learned you know that's not the case, okay. The capital markets look next quarter and they wanted to see what would your EBITDA is.
Next quarter and I assume if we haven't EBITDA disruption next quarter, that's a permanent impairment of EBITDA, you know and you never get it back.
So.
Somewhere between the practical way the capital market value in the theoretical is what we're focused on but we're going to do projects that make sense for driving shareholder value and that's what we're doing but we definitely keep our eye on you know that your EBITDA disruption issue.
Okay, Great and then.
Last one is.
On the non package revenue.
Really strong number there in Q2.
And both on an absolute basis, but even more impressive on a per occupied room basis can you tell us what drove that was it something.
<unk> can you can you maintain some of that momentum going going forward or is it more just a function of kind of higher pricing on everything at the at the resort. Its a couple of levers there. So one there was a few things that we're putting in place prior to the pandemic that just allowed us to roll it out more quickly like.
Selling.
Private transfer assumed from the airport through our web site. We started we'd already kicked around the idea of selling are charging for cabana usage at the property as well in a in a socially distanced world upon reopening in 2020, everybody. One of those we started building more cabanas and charging more for them, but still offering them in a very competitive price compared to what you would get in South Beach for instance, right.
No.
We were able to do more spot business and so the loss of a sharp we did a nice we have a nice base that already grew throughout the pandemic and now what you're seeing is that you've layered on the return of mice and wedding business, who is doing a lot of events and dinners on the beach and celebrations and things like that I was in Colorado in July as an example, we've hired.
Now three Indian chefs certified chefs and were doing very large Indian weddings, there and the one that I was there with a relatively cheap one and I think it was $275000 over four days right I was blown away with.
The amount of just like the over the top celebration at that at that resort and again that was a relatively cheap one so very focused on that package spent.
Okay Super helpful. Thanks, guys.
Our next question will be from Tyler Battery Oh Oppenheimer. Please go ahead.
Hi, Good morning. Thanks for taking my question can you talk a little bit more about performance within the portfolio with a different brands I mean, obviously the rate commentary holistically very positive.
Is that being more driven by the by the Hyatt Wyndham is for example, I mean are you seeing.
Any weakness in terms of some of the lower rated business within your portfolio.
No nothing yet I mean, certainly the Hyatt have always been kind of the core.
Outperformers in our portfolio compared to kind of the hiltons and the windows, but we're not seeing a slowdown if youre trying to get at the lower end consumer is still thank you.
Even at our Wyndham Altra and the Hilton that's still kind of a mid tier consumer and that business is still very very strong right. Now we have pockets in various markets that are just different from one another like you've heard us say many times that Playa del Carmen that whole market that include the Hilton and now when the mall traffic.
Recovered more slowly than cancun for all obvious reasons, it's had more supply over the years others. Further from the airport is not cancun proper, but we're not seeing any pockets of weakness at the lower end properties vis vis the high end Hyatt.
Okay, Great and then my follow up question, there's a lot of headlines new stories about the challenges for the airline industry issues, but why it's getting canceled rescheduled.
<unk> the issues is that.
Something that you've noticed in your markets and what is the flight capacity look like in the back half of this year.
Ramping up.
Kind of a little bit more a little bit more a little bit more stable.
Yeah, we've not had any of the cancellation issues that you've seen in kind of longer haul flights in Europe and others. The back half of the year based on the data that we received there has been a.
Fairly large upward revision in Q3 and Q4 on top of what was already happening you heard Bruce mentioned earlier that we finally crossed the threshold in Q2 for positivity in arrivals into Monte go bag and Thats essentially doubling in Q3 and enter into Q4, and then bigger upward revisions.
In can't Kun and <unk>.
Montego Bay, and Los Cabos as well, so not not seeing that show up in any of the numbers.
Okay excellent.
That's all from me I appreciate the detail. Thank you okay. Thanks Alan.
Thank you and again if you have a question. Please press Star then one.
Next question will be from Sabine.
Macquarie. Please go ahead.
Afternoon. Thanks for taking my question guys.
We get a lot of questions from investors just around kind of a macro downturn hypothetical.
Given your model can you talk a little bit about some of the things that you could do if we see a slightly more price sensitive consumer or just kind of a general weaker consumer out there.
To kind of keep.
Keep keep margins at a relatively strong point thanks.
So I'll, let Brian can't get into the details of that but Chad, but I will tell you just from the overall standpoint.
In the all inclusive business now it's been 20 years and I can tell you going through different down cycles, all inclusive does incredibly well in downturns incredibly well and why is that it goes back to the value proposition and the fact that you know exactly what youre going to spend going into it and so it's not like this unknown and so.
I would look at it.
No signs of it and I have quite honestly.
I tend to be more kind of cautious person not negative, but more cautious looking at kind of the downturn I just don't see it first of all but if it comes I think we will benefit much better than kind of traditional players will benefit and.
We do have some levers to pull to manage through that and then ill pass that part over to Ryan I think the only thing I'd add just like more specifically I think it depends a little bit on the property, but if you think about the highest and just generally across our portfolio from the beginning versus Ben.
Adamant about making sure that we're maintaining price and seeding occupancy in favor of ADR to establish that competitive positioning.
And at the same time, so if they were to that environment were to present itself. We're okay with giving up some occupancy because it makes it easier on the ops team and it allows us to kind of continue to price effectively when a rebound where to take place.
It makes that strategy may differ slightly at a lower chain scale property, because you can be more flexible with expenses given the different guest expectations, but in general the marching orders from the beginning of this recovery event in favor right and not overfill the properties.
Great. Thanks, and then separately you mentioned some of the international inbound markets are recovering, but still certainly not where we saw it pre pandemic can you talk a little bit more about Canada.
Canada, Europe Asia Asia, obviously is pretty strong restrictions kind of aware that.
Group of inbound percentages collectively maybe versus where we were pre pandemic and if youre starting to see improvement in that inbound.
Yes, Europe , there are parts of Europe that did.
Actually recover fairly well actually Q1 is as a percentage of our overall room nights Europe was actually higher than it was in 19 by just like a 100 basis points. We did see some choppiness and a few properties in June but that has not continued into July .
So no cause for concern there just recognizing everything thats happened in Europe right over the last couple of months.
Asia, and Canada are still severely lagging as you can imagine I mean, Canada prior to the pandemic was.
Roughly kind of five 8% of the overall room mix in Asia was less than 4% without a massive part of the picture but.
Canada is the one that's lagging most behind.
Thanks, guys appreciate it nice quarter. Thanks, Ed Thank you.
This concludes our question and answer session.
The conference back over to Mr. Bruce <unk> for closing remarks.
Okay, great well again, we appreciate everybody's time today, we think.
The business in the quarter was obviously very very strong we're looking forward to continued strength throughout the rest of the year and into 2023 I think as you picked up from my comments I don't see the world coming to an end. So hopefully it's not going to happen anytime soon and we can continue to really execute at a top level. So again, thanks for participating in our call and.
Go ahead to apply resource I comment book, a stay at one of our resorts. Thank you.
Thank you Paul.
No.
With that in today's presentation, you may now disconnect.
Thank you David.