Playa Hotels & Resorts N.V. Q1 2023 Earnings Call
[music].
Good morning, and welcome to the Playa hotels and resorts first quarter 2023 earnings conference call all participants will be in a listen only mode.
Need assistance. Please signal a conference specialist by pressing the star key followed by veto. After today's presentation. There will be an opportunity to ask question to ask a question. You May Press Star then one on attached on phone to withdraw. Your question. Please press Star then two please note. This event is being recorded.
I'd now like to turn the conference over to Ryan you know what.
The company. Please go ahead.
Thank you very much less an IV.
Everyone and welcome to Playa hotels, <unk> resorts first quarter 2023 earnings call before we begin I'd like to remind participants that many of our comments today will be considered forward looking statements and are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from what has been communicated.
Forward looking statements made today are effective only as of today and the company undertakes no obligation to update forward looking statements for a discussion of some of the factors that could cause our actual results to differ. Please review the risk factors section of our quarterly 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 dotcom with today's recent releases.
Reconciliations to GAAP and non-GAAP financial measures, we discuss on this call were included in yesterday's press release.
On today's call Bruce word Inscape, why is chairman and Chief Executive Officer will provide comments on the first quarter demand trends and key operational highlights I will then address our first quarter results and our outlook Bruce will 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.
Thanks, Ryan and good morning, everyone and thank you for joining us I would like to wish everyone. A happy Cinco de Mayo and say personally I'd much rather be one of our resorts in Mexico than in our office in Fairfax, but I hope people are enjoying it wherever they are our first quarter results exceeded our expectations as the momentum in our business continued through the remainder of the Hiseq.
With broad based strength shown across all of our markets.
One housekeeping item before we begin the fundamental but before we begin the fundamental review of the quarter, we will be sunset in comparisons to 2019 and resuming traditional year over year commentary exclusively for todays discussion.
Players owned resort EBITDA of $109 4 million in the first quarter was the highest in the company's history. Despite the significant negative impact from the two jewel resorts in the Dominican Republic that transitioned to Playa management and foreign currency headwinds.
The better than expected EBITDA was driven by year over year ADR growth in our legacy portfolio of nearly 17%, bringing the reported ADR growth for the quarter to approximately 27.4% as a reminder, our expectation was that the first quarter would represent the highest year over year ADR growth for 2023 as well.
<unk> the impact from Omicron last year. Additionally.
Additionally, our operations teams executed extremely well at the resort level, delivering 50 basis points of resort margin expansion on a reported basis. Despite an approximate 180 basis points of FX drag from the appreciation of the Mexican peso.
Our legacy portfolio resort margins, excluding the jewels improved 160 basis points year over year inclusive of a 180 basis point foreign currency drag.
As I mentioned fundamental strength during the quarter was broad based with our core legacy portfolio, surpassing 80% occupancy for the first time post pandemic and all geographies reporting double digit year over year ADR gains.
Jamaica had another strong quarter reporting the highest year over year, ADR and resort margin expansion among our segments aided by a significant increase in mice revenue during the first quarter as the recovery and normalization of that market continued.
In Mexico, the Yucatan once again led the way on the occupancy rate for Playa, while growing ADR double digits year over year and.
In the Pacific Coast reported its best occupancy rate during the post pandemic period as well.
As I mentioned, both segments were negatively impacted by the sharp move in the Mexican peso during the quarter and both would have seen improved margins year over year, excluding the impact of FX.
In the Dominican Republic.
Our legacy Dr resorts, excluding the jewel Palm Beach, and Jewel Punta Cana resorts, which we are attempting to sell also achieved their highest occupancy rate in the post pandemic period, while driving approximately 22% year over year ADR growth.
Yielding nearly 300 basis points of resort margin expansion year over year.
The two jewel resorts in the Dr segment results were in line with the expectations, we laid out on our last earnings call.
Presenting an approximate $10 million year over year EBITDA drag.
However, we expect the profit drag from these resorts to improve during the second quarter.
We do not have any information to share with respect to the timing of the disposition of the two resorts, but hope to have more to share on that in the future.
On the booking front demand has remained strong despite the broader macroeconomic concerns and we have achieved our goal of increasing playa as transient consumer direct revenue mix of bookings, excluding the Dr jewels to at least 50% by 2023.
In aggregate during the first quarter of 2023 51, 4% apply our owned and managed transient revenues booked were booked direct.
Up 160 basis points year over year growing year over year for the third straight quarter.
During the first quarter of 2023, Playa resorts Dot com accounted for approximately 10% of our total Playa owned and managed room night bookings continuing to be a critical factor in our customer sourcing and ADR gains.
Taking a look at who is traveling roughly 36% of the Playa owned and managed room night stays in the quarter came from our direct channels down 100 basis points year over year as our group mix improved significantly year over year by 460 basis points our.
Our O T. A mix has remained the most depressed channel compare to pre pandemic levels.
Geographically the biggest change in our guest mix during the first quarter was the continued recovery of our Canadian guests mix, which was up approximately 400 basis points year over year as well as our Mexican sourced guest mix, which was up 300 basis points, our European sourced guests, Mexico is down significantly again year over year.
But in line with pre pandemic levels, our Asian sourced guest mix improved modestly year over year modestly year over year, but remains the most depressed as it is only approximately 75% to 80% recover.
Our visibility remains a critical factor of our success as our booking window remained at just over three months.
Once again I would like to thank all of our associates that have continued to deliver world class service in the face of pandemic related challenges.
And rising operating costs their unwavering passion and dedication to service from the heart is what truly sets <unk> apart.
Finally on the capital allocation front, we purchased approximately $41 million worth of Playa stock during the first quarter and an additional 20 million thus far in the second quarter, bringing our total repurchases since resuming our program in September 22022 to just over $107 million.
We continue to believe that our stock provides a tremendous value relative to the fundamentals and share repurchases are a phenomenal use of capital for our free cash flow.
With that I will turn the call back over to Ryan to discuss the balance sheet and our outlook.
Thank you Bruce.
Again, I'll begin with a recap of the segment fundamental followed by an overview of our balance sheet and expected uses of cash and conclude with our updated outlook before I begin I'd like to highlight that beginning with the first quarter of 2023, we've elected to reclassify on property room upgrade revenue from non package revenue to package revenue to be.
Distant with industry trends, we've recast the prior period as well to conform with the current period presentation.
And a reconciliation of the changes made to the prior reporting for 2021 and 2022 can be found in our investor deck on slide five.
Turning to the fundamentals first our first quarter results exceeded our expectations as a result of higher ADR growth and easing pressure from energy costs, leading to resort margin expansion of approximately 50 basis points year over year. Despite nearly 180 basis point headwind from foreign exchange.
And a 240 basis point headwind from the two jewel properties in the Dominican Republic.
ADR strength of the broad based with all segments reporting double digit year over year ADR growth, excluding again, the jewel assets and the Dr.
This was the first Q1, we've had in the post pandemic period with no significant COVID-19 related challenges on the cost front as I mentioned in our last earnings call. We began to see stabilization in food and beverage and utilities costs on a per unit basis in the middle of 2022, and we're hopeful that the inflationary pressure from these new areas or begin to ease as we move into 2023 and.
The surge that occurred around the start of 2022.
We began to see signs of improvement during the fourth quarter and that carried over into the first quarter.
Although it's nice to see some cost relief these expenses can be volatile quarter to quarter as usual.
At the segment level, Jamaica led the way in year over year, ADR and occupancy growth and margin improvement.
The segment experienced its highest group room night mix, helping yield ADR and closing the gap versus other segments ADR improvement compared to the pre pandemic period.
As a reminder, Jamaica got off to a slower start in 2022 due to the omicron variant, having a disproportionate impact on this segment given its COVID-19 testing requirements at the time on.
On the margin front, Jamaica, once again benefited from better than expected food and beverage and utilities expenses keep in mind that when comparing results in Jamaica versus other segments that you make are generally has higher operating costs in our other segments and typically experiences higher ADR as well.
Looking at our other segments Yucatan Peninsula continued to deliver strong results with sequential occupancy improvements to a post pandemic high of almost 84% and reported year over year ADR growth roughly 15%.
Reported owned resort EBITDA margins were down slightly 20 basis points year over year named.
Namely as a result of the 370 basis point negative impact from foreign exchange.
Food and beverage and utilities expenses were favorable year over year on a currency neutral basis, while other labor cost specifically union negotiations negatively impacted margins margins were also favorably impacted by the timing of sales and marketing spend.
The Pacific Coast had another fantastic quarter year over year with ADR improvement up 19%, leading to robust margin margin performance as utility expenses were less of a headwind year over year.
<unk> also experienced significantly higher year over year mice group mix, helping drive an increase in non package revenue per sold room.
Segment margins were negatively impacted approximately 350 basis points again, a result of the sharp fluctuation in the Mexican peso.
In the Dominican Republic, our legacy resorts, the Hyatt cap Cana and the Hilton La Romana grew ADR, 20% year over year with occupancy of nearly 82%.
Underlying non package revenue per sold room growth at these resorts was also stellar due to a higher mix of mice groups.
As a reminder, we reported our Hilton and Hyatt properties a bit ahead of schedule. Following the disruption in the fourth quarter related to Hurricane Fiona just in time for the high season.
The fundamental improvement year over year, yet led to resort margins at these resorts approaching 50% as food and beverage and utilities expense pressure ease on a year over year basis, <unk> compared to the fourth quarter.
The segment performance was dragged down by the two jewel properties, who recently assumed management of the performance was in line with our expectations. We continue to expect the performance of these two jewels to improve sequentially next quarter, while we execute the sale process of the resorts.
Turning to our mice group business, our 2023 net <unk> group business on the books is approximately $55 million versus $50 million at the time of our last earnings call and is well ahead of our final full year 2019, <unk> revenue of $32 million.
Looking ahead to 2024, we currently have $29 million of rice at nice revenue on the books well ahead of where we were at the same time last year.
Finally, turning to the balance sheet, we finished the quarter with a total cash balance of approximately $282 million and total outstanding interest bearing debt of just under $1 1 billion.
We currently have no outstanding borrowings on our $225 million credit facility and.
And our net leverage on a trailing basis stand at three one times.
We anticipate our cash capex spend for full year 2023 to be approximately $70 million to $90 million for the year partitioned out between 35 to 40 million for maintenance Capex and the remainder to more ROI oriented projects.
Also effective April 15th we entered into two interest rate swaps to mitigate floating rate risk and our new 2022 term loan.
We entered into a two and three year contract and each have a fixed notional amount of $275 million for a total of $550 million.
And each contract carries fix.
Fixed silver rates of 4.5% and $3 seven 1% respectively.
And again on the capital allocation front as Bruce mentioned, we purchased $41 million of stock in the first quarter and with our leverage ratios well before well below four times the anticipated free cash flow generation of the business.
And the attractive valuation of our stock we believe repurchasing shares is a very compelling use of capital and intend to continue to use discretionary capital repurchase shares going forward depending of course on market conditions.
We will also continue to invest in our business to deliver value to our guests and shareholders, but the bar is high for new projects on a risk adjusted basis, given the valuation of our stock.
Now turning our attention to our 2023 outlook, our revpar growth outlook has improved driven by higher ADR gains for every quarter of the year.
Occupancy has largely remained steady.
We now expect full year adjusted EBITDA of 265 million to $285 million, which is an increase from our last call.
That is inclusive of a 20 plus million dollars negative impact from the appreciation of the Mexican peso.
$15 million of which is expected to hit in Q2 through Q4, assuming todays spot rate.
Our core legacy portfolio EBIT forecast has continued to improve driven by ADR gains I just mentioned.
We are also forecasting a slower ramp at the two jewel properties in the Dominican Republic in the second half of the year as they were unable to make up ground after missing the key summer selling season.
For the second quarter, we expect reported occupancy in the low seventies, which includes a mid single digit drag from the two jewel properties in the Dr.
We expect Q2 reported ADR to grow low double digits on a year over year basis. This is compared to the previously expected high single digit to low digit double digits.
And owned resort EBITDA margins to expand year over year, despite an approximately $5 million year over year EBIT drag in the Dr from the tool jewel properties and continuing FX headwinds.
So putting it all together, we expect Q2 owned resort EBITDA.
79% to $83 million.
Management, and Playa collection fee income of two $5 million to $3 million.
Corporate expense of $14 to $15 million, all leading to consolidated adjusted EBITDA guidance of $66 million to $71 million.
Given our booking window, we are currently 90% booked for the second quarter.
For the second half of 2023, we expect reported occupancy to be in the mid seventies and year over year ADR growth to be up again mid single digits on a reported basis.
We expect legacy owned resort EBITDA margin to be flat to modestly up on a year over year basis in the second half of the year.
With the two jewel properties in the Dr to be a drag on EBITDA during the second half of the year.
So to recap the following are key inputs to consider as you think about our full year 2020 outlook.
We expect full year occupancy to be slightly higher than in 2022, adjusting for extraneous factors and low double digit to mid teens ADR growth for the full year.
We expect resort margins to improve year over year. Despite the significant drag from the Dr. Jules and again, a 20 plus million dollars impact from foreign exchange headwinds.
We anticipate a better inflation rate of our cost basket as compared to what we've experienced during 2022, although it will likely continue to be elevated.
We have good visibility on our labor cost and see the wage increase is slightly higher than what we experienced in 2022, but we're experiencing lower cost inflation in food and beverage and utilities during the first quarter of 2023.
And while we hope the lower prices persist these categories can again be quite volatile.
We again anticipate roughly $14 million to $15 million per quarter in corporate expense.
$2 $5 million roughly per quarter and management and fly collection fee income.
We hope this framework helps guide you as you fine tune. Your models gives you further insight to what we're seeing and expecting with that I'll turn it back over to Bruce for some closing remarks.
Great. Thank you very much Ryan.
With the increasing uncertainty in the macro backdrop, we are diligently focused on the areas within our control and are carefully monitoring the landscape. We continue to believe the price certainty and amazing value provided by players all inclusive resorts resonates with travelers even in the face of an uncertain economic backdrop with that.
We'll open up the line for any questions.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys.
Andy is that any time. Your question has been asked and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Patrick Schultz with choice Securities go ahead.
Hi, Yes, good morning, everyone.
Good morning.
Uh huh.
Good morning, a couple of questions here first one is.
Just to be clear with the 20 million negative FX impact in your guidance.
To be clear your prior EBITDA guidance did not assume any impact is that correct. So that is all that is correct.
Okay. Thank.
Thank you.
Next question.
I jokingly say you know we are moving on.
Covid, because we're going to talk about seaweed here I keep reading headlines about this horrible seaweed.
In the middle of the Atlantic heading.
First word.
Any.
It's about potential impact or do you have any.
No.
In services in Beloit baked into your numbers.
Around that.
No I mean that that is a seasonal.
<unk> you know it happens every single summer.
There are some science as you say, it's going to be a little worse this year, but.
The nice thing about it is it goes everywhere. So it goes to Florida. It goes to all of the Caribbean Islands. It goes everywhere and people people keep traveling so.
We have variety of mechanisms we have in place at all of our resorts to deal with it and I think we manage it relatively well.
But it is what it is and it's been something we've had for literally the entire time player has been in existence. So.
Okay.
Thank you and then just.
One last high level question, you have a long term question here.
Actually I'll have one more question on that as well.
In three markets right now what are your long term intentions for possibly diversify and continue to diversify.
Geographically beyond the three markets.
Sure that's a great question Patrick.
Our goal certainly pre pandemic, we were looking at a pretty wide ranging geographic expansion in different parts of the world and obviously the pandemic.
Kind of cut.
Cut those kind of cut those plans.
But from our standpoint, all inclusive is as a product is a concept that as we said in our remarks resonates incredibly well with consumers.
You've seen more and more interest from hotel companies brands investors, everybody and all inclusive because it's driven by the consumer's desire to go to all inclusive.
<unk> certainty the value proposition of it is very strong. So you know there is a very.
Long history of all inclusive in Europe in the Mediterranean and North Africa.
Certainly in the countries that we are in some other Caribbean countries and.
Some down in Latin America all of those.
Those kind of markets ones that are big enough to support kind of the lift that we think is required to be successful we.
We're interested in expanding but I think youll see in the next you know.
One to five years Playa expanding into new markets. So we think.
There's great opportunities there and with the.
The success.
The success that we've had it's been 10 years now so we've been managing all inclusive resorts for for 10 years, and we have built up a very strong reputation as to our quality level and so I think it is the time to expand and I think youll see that in the very near future.
Okay. Thank you I'm actually all set.
Thanks, Okay.
Alright, thank you.
The next question comes from Tyler <unk> with Oppenheimer. Please go ahead.
Hey, Thanks. Good morning. So first question just on the Q2 outlook in terms of bumping up.
You are expecting for ADR, just talk a little bit more about that what's what's changed in terms of what youre seeing.
The second quarter.
I don't think it's anything thats materially change other than the fact that our baseline fundamentals of our legacy portfolio have continued to move up and we haven't seen any any sort of signs from the consumer's propensity to pay our rates. Our NPS scores continue to be top and best in class throughout their markets and brands.
And so it's just a continuation of the strategy Bruce laid in place at the beginning of October So, it's really really nice to see.
Okay, and then maybe just the outlook for the for the back half of the year on the ADR side of things I mean still up mid single digits.
Anything worth calling out there I mean, just continued strength in terms of leisure travel et cetera.
Yes, no nothing nothing to point out.
Messaging has always been.
We're focused on what we can control in our portfolio.
We're acutely aware of potential macro discussions on the news and others, but not seeing anything in our numbers at this point. So we're always discussing what could happen and what we do should something happen, but right now the outlook for the back half of the year, particularly for that legacy portfolio continues to be strong.
Okay.
And then in terms of the margin outlook and you've got some moving pieces there.
Some positives in terms.
Some incremental negatives would be FX and whatnot.
In terms of the overall portfolio me are you still expecting resort margins to be up year over year. Despite.
What's going on with the jewel properties and despite the FX issue.
Yes, yes on a full year basis, just kind of giving you some of the additional building blocks even for this quarter and just kind of help you think about and frame the rest of the year like ours.
Bruce and I mentioned, our legacy underlying EBIT margins were up 340 basis points and that's.
160 basis points of our reported which I know you can't see because it's buried but offset by another 180 basis points for FX and as we mentioned are and what you can see the total underlying adjusted EBITDA margins are 230 basis points in the quarter, which is the 50 basis points reported adding back 180 basis point headwind from FX and so.
Even with the aforementioned FX drag in the duals.
We're able to expand on was our margins. If you look ahead to the rest of the year based on the business on the books in our forecast and we don't see a reason today why the legacy portfolio, excluding the jewel shouldn't be able to at least maintain if not grow resort margins.
Okay great.
I'll leave it there and pass it on thank you. Thanks Alan.
The next question comes from Danny Assad with Bank of America. Please go ahead.
Yeah.
Are you muted Dani Zhang.
Hi, Good morning, guys can you hear me Okay now.
Got you sorry about that we've heard from some of the other.
Earnings calls in the last couple of weeks about rising property costs.
Insurance was always a big ticket item for that kept coming up.
Obviously you have different.
Geographies and markets that you operate in so I'm, just curious to know kind of what the insurance like landscape looks like for for fly ash.
Properties.
In one word difficult.
We kind of highlighted in our last call. So we actually have completed our insurance renewal where in April 12th renewal.
And as we anticipated our insurance operating cost increased considerably on a rate per $100.
Of insured value by essentially roughly in line with what we outlined in what we were.
<unk>.
We won't go into significant detail on this call is there to bore everyone, but we did make some tweaks to the structure of our policy to help mitigate.
In your guidance or outlook for the year is there anything baked in at all into like kind of entering new contracts for the year. So in the guidance. It's just explicitly what we have today and the ramp of those that we've recently opened at the end of last year and early this year.
Not including any new ones, but it's not a major contributor in 2022, but we expect that to kind of move up into the high single digit management fees. This year, and then potentially into the double digits next year as we continue to kind of grow that pipeline and that funnel. That's an exciting part of the business is not a big needle mover today, but something.
We're acutely focused on that.
Got it that's it for me thank you very much.
Good morning.
The next question comes from Chad Beynon with Macquarie. Please go ahead.
Afternoon, nice quarter and thanks for taking my question.
Ryan in your prepared remarks, you talked about Capex, which I believe came up versus previously guided mainly on the non maintenance piece of that so can you talk about maybe where those projects are what what returns we should expect on on that non maintenance.
Roy and then related to that how are you thinking about buybacks versus other.
Other.
Other renovation projects within the portfolio yes.
Yes, so there's a couple of opportunities in and around our portfolio that you've heard us talk about many times that explicitly talking about what we're planning on doing this year there are more minor in nature to be completely Frank.
If you think about our portfolio. The vast majority is branded now and in pretty good shape. We don't have a lot of deferred maintenance or anything like that but we do have some kind of original highest that were converted back in 2013 or in the case of this EBIT, Los Cabos had a blast renovation.
After in 2015, right. So they are coming up on normal kind of cycle.
Cycles for rooms refresh of soft goods things like that and specifically Los Cabos.
That veeva is a big contributor to our <unk> business and it needs some work on the.
Meeting space and public spaces. So what we're doing right now this year or about to start there'll be some rooms renovations to veeva and portable yard again, thats, a small relative EBITDA contributor it punches outside its weight. So theres some light disruption there, but it's fully baked into our numbers.
And then we're just doing public space renovations at.
At the Viva and Los Cabos or no room disruption there.
I would probably expect to do some room renovations at Cabos next year, but that remains to be seen and then again doing some public space renovations in some restaurant additional incremental restaurant renovations at ours of Lora in Cancun. So.
Admittedly there are a little more defensive in nature, and just kind of keeping up with some of our other brands banking news evens of Lora product.
So I don't have explicit guidance on ROI spend there, but it's going to help us maintain if not grow the ADR as we're seeing today.
Particularly in Cabos, where theres a lot of competition for group for group business.
Alright, thank you.
Then buybacks versus other projects like I said the bar is still high there are some opportunities you've heard Bruce talk about it many times specifically the <unk>.
<unk> had some small adjacent land immediately to the kind of north of it where we could do an additional rooms tower and so we're working through some of the planning and design phases and permitting phases to be able to do that because that's something while the bar and return hurdle will be high versus buyback that'd be a great use of capital because it's one of our most outstanding best performing best margin proper.
<unk> is quite frankly need more rooms, when it already has well over 500 rooms.
And it would just be a nice real great incremental return, but other than that we do have other opportunities in the portfolio, but buybacks to look right. When we're trading at eight ish times.
Consensus.
Indeed, thank you and then with respect to mice for 'twenty, two versus kind of what youre expecting for 'twenty. Three can you give us an update on that and then also in terms of non package add ons can you just remind us do you usually see stronger kind of incidence of purchased from mice.
Guests and how does that play into the guide for 'twenty three thanks, Yes, so our mice business for 23, we've got $55 million on the books, that's up 5 million from the last time, we spoke that's almost like one and three quarters time as what we did in 2019 and 2024 is trending up nicely, we've got almost 30 million.
On the books and that's up roughly 30% versus the same time last year.
Yes mice mice groups are big contributors to non package and that's why he's awesome.
Some sequential step ups in kind of the back half of last year as more groups came back you just think about the nature of it one you've got the group of the company who's having holding the events right until Theyre spending.
Event dollars in presentation dollars are big celebration on the beach et cetera, and then the guests who are coming as part of those groups, usually youre not paying themselves a lot of times, they're either coming by themselves or they're bringing a guest or a spouse and so they've got more out of pocket capacity. Because then they've got extra time to go to the spa or unwind upgrades things like that because they didn't pay for the vacation in the first place so.
It's a solid solid base of non package and quite honestly why as you can imagine our <unk> has been one of the best non package performers sequentially over the last year because of the influx of mice business and to the credit of the general manager and the staff there some of the neat initiatives they've done on property to continue to push on package.
Okay. Thank you very much nice quarter.
Thanks, Ed.
The next question comes from Smedes.
<unk> with Citi. Please go ahead.
Hi, Thanks.
I was just wondering if you could just talk bigger picture about what youre seeing on the competitive side in terms of any new supply coming into the market that you could speak to you.
Sure sure Smedes.
Not anything significant so kind of.
Due to the pandemic many projects Scott got kind of put on the back burner.
There are new projects happening, but it's not a significant level.
Not impacting.
Any kind of market dynamics whatsoever. So overall, it's just kind of steady modest modest new projects, and then usually where youre seeing it as we've said in the past where you do see some supplies again further and further away from the airport because the prime mature markets are essentially built like even if the overall Yucatan peninsula.
Is projecting mid single digit room supply growth is less than two percentage points in cancun properties. There's nowhere else to go so that's the benefit of having been in these markets for as long as we have.
Okay.
Okay. Thanks, and then.
I just wanted to ask maybe a little bit more about the relationship with the Wyndham at this point you've had there.
Altra.
Inversions underway for I guess, a few quarters now could you just speak to how that relationship is going and happy with that.
The lift at those properties since they were rebranded.
Sure.
In short the relationship is going incredibly well, we couldnt be happier.
With our relationship with Wyndham and I think it's probably mutual from their standpoint to.
The Wyndham Altra was the brand that they could.
Created targeting you know all inclusive to the Wyndham customer.
That at that price point in the all inclusive market.
That's probably the largest segment of the all inclusive market. So.
When we were looking at brands that we could partner with it was very important to us to partner with.
The highest quality possible brand because that that kind of price point.
Segment is so large and so important to us and so.
The projects we've done so far have had performed well the contribution from Wyndham is solid and growing and we think it will grow even more in the future as there are more and more Wyndham ultras. We are working our development team working very closely with their development team and hopefully youll see.
Additional Wyndham altra announcements in the near future, but overall I think it's a great opportunity for both us and Wyndham just because of the number of opportunities and most of those are conversion opportunities. So these are not ground up so I'd take a significant amount of time to get up.
Up and going.
These are ones that require.
A modest to you know a.
So a little more significant pip that can be done very quickly and start to deliver higher results very quickly and what's happening is owners in our space are seeing the success that we've had and I think it's going to drive more more conversions to the Wyndham Ultra brand.
Okay. Thanks, and then Greg just pop in one more just could you maybe update on where you are on selling the two jewel properties and maybe kind of just a little bit more about the process.
Timing.
Sure.
Well in the process.
But as we have said over the years to anyone who is listening to us.
And our part of the World things move a little slower okay, and it's just the nature nature of the Beast.
But we feel highly confident that we will conclude transactions, but we can't at this time.
Any kind of.
More clarity or definitive timing on that but but the process has been underway and is moving well.
Yeah.
Okay. Thank you.
Thanks Pete.
Okay.
Our last question comes from Chris <unk> with Deutsche Bank. Please go ahead.
Okay. Good.
Morning, guys. Thanks for all the details so far.
Just got a question on the going back to the jewel sale.
Hi, Thank you guys.
Is there any potential disruption impact I guess the question would be helpful.
Steve.
No.
These are known to be marketed for sale, sometimes it's it's tough to get not.
Not only customers, but employees right just kind of a tough process the uncertainty so I mean, how.
I guess, how what kind of level of conviction of your app and those disruption numbers.
Yes, so I think we feel we feel pretty good. So when you think about it like this like Theres a few contributing factors to kind of how we're seeing the jewel play out for the rest of the year. So one you heard us talk about on the last call the timing and just the overall process of the takeover.
Those properties essentially at the very beginning of high season, essentially empty and the fact that we needed to do some very small renovation work while the properties were empty in.
In the first couple months of the year, but certainly not ideal and that as you can imagine leads us to missing obviously, the high season as well as our summer selling window.
Particularly to Europeans.
We said it on the call our booking window has remained at a little over three months. So one that makes it hard to sell for kind of the near term. If people are traditionally booking three ish plus months out and then Europeans, which these two properties index higher two day roughly in the kind of Q2 and Q3 index are about 25% European business.
And they traditionally book, even a little bit further out.
And then one other thing that we did want to point out while scheduled seats into all of our destinations are pretty robust and good in Q2 and Q3, we have seen a reduction in airlift into points of kind of from Europe .
I'm not exactly sure why but that also impacts these two properties for the summer just given again Theyre higher index European customers and then as you mentioned there is always going to be some disruption there are going to be some partners and tour operators and others that no. They are up for sale and.
Or are we going to assume the worst that potentially whoever whomever you sell it to may shut it down but they are always going be some apprehension there, but obviously, we're pretty focused on making sure that these.
Essentially it was the best they possibly can while they're under our ownership as recently as this morning, I've got some updates from our sales and marketing team on some of the strategies and overnight things they've put in place and starting to see some pick up for the summertime. So we still have a long way to go.
I can just trust me that Bruce is pretty focused on making sure that we make the most out of them, while they're still in our care.
Sure Great. Thanks, Brian .
Sorry.
As we think about your customer mix kind of normalizing and maybe it's more of a 24 thing at this point.
Can we talk a little bit about channel channel mix.
Just mean, you eventually take a little bit more OTT business back or how do you think that all blends into what you're expecting for <unk>.
For Edr this year thanks.
Yeah, I think it's I don't think it would change too too much I mean, the otas as we've said the last couple of calls have been the slowest to recover.
We've obviously grown dramatically the direct business over the years, if you heard us talk about and then the return of mice, which as we've said from the beginning we are happy to cede some direct business or especially business from any other channel.
Into my business because of the rate profile and all the non package.
Add ons that they're willing to spend on and it just fills holes in your business and allows yield management team to yield manage even higher so I don't see it changing too too much.
At least with the core owned legacy portfolio that we see today.
Okay very helpful. Thanks, guys good quarter. Thanks.
Thanks, Chris.
This concludes our question and answer session.
I would like to turn the conference back over to Bruce <unk> for any closing remarks.
Thank you everyone for participating in our call today as we said the first quarter was or from a financial perspective was our best quarter ever.
Our client team members continue to drive.
Satisfaction at incredibly high levels, and we expect the rest of the year to be good. So thank you very much for joining us today and we look forward to talking to you next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.
Okay.
Yes.