Q1 2024 Playa Hotels & Resorts NV Earnings Call
Good day and welcome to the Playa hotels and resorts Q1, 2024 earnings conference call.
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I would now like to turn the conference at Ryan humor.
Ryan: Please go ahead.
Ryan: Thank you very much Hugo good morning, everyone and welcome again to Playa hotels, <unk> resorts first quarter 2024 earnings conference call.
Ryan: 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.
Ryan: 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 Securities and Exchange Commission.
Ryan: At our Investor Relations website at investors to Playa resorts dotcom, what's the company's recent releases.
Ryan: In addition, reconciliation to GAAP of the non-GAAP financial measures, we will discuss on this call were included in yesterday's press release.
Ryan: Today's call Bruce <unk>, Chairman and Chief Executive Officer will provide comments on the first quarter demand trends and key operational highlights I will then review our first quarter results and our outlook for 2024, Bruce will wrap up the call with some concluding remarks before we turn it over to Q&A with that I'll turn the call over to Bruce.
Bruce: Okay. Thanks, Brian Good morning, everyone and thank you for joining us before we dive into our results all commentary on comparable full year 'twenty 'twenty four kpis is synonymous with our legacy portfolio as the dual Palm Beach was closed for a portion of Q1 2023 and the dual clutch of Carnival sold during Q4 2023 industrial.
Bruce: Not be comparable for the full year metrics.
Brian: Our first quarter results exceeded our expectations coming in well above the high end of our expected adjusted EBITDA range.
Speaker Change: Better than expected results were broad based across our segments driven by strong demand during the high season.
Speaker Change: He has owned resort EBITDA of $124 million in the first quarter of 2024 included the significant year over year foreign currency exchange headwind of approximately $4 8 million due to the appreciation of the Mexican peso.
Speaker Change: Fit from business interruption insurance proceeds of approximately $400000 and a modest EBITDA contribution from Juul Palm Beach resort.
Speaker Change: Q1, 2024, we estimate that FX headwinds were a negative 160 basis point impact on our reported owned resort EBITDA margin and 170 basis points drag on our legacy portfolio, which excludes the jewel resorts in the Dominican Republic.
Speaker Change: Business interruption proceeds favorably impacted resort margins by approximately 10 basis points adjusted.
Speaker Change: Adjusting for all of these factors underlying owned resort EBITDA growth was up approximately 17% in the first quarter for the total portfolio.
Speaker Change: Approximately 11% from the comparable portfolio.
Speaker Change: The strength in bookings that we began to see during the second half of 2023 carried into the first quarter, particularly into Mexico.
Speaker Change: Demand was notable across our portfolio with all segments reporting positive year over year Revpar growth. Despite the difficult growth comparison from last year's first quarter and the headwind from the shift of the Easter holiday in 2024.
Speaker Change: Our results from the Yucatan were once again quite exceptional on a currency adjusted basis with occupancy in line with the first quarter of 2019, but still trailing our 2018 peak and ADR growth of nearly 3% year over year.
Speaker Change: Our operations team continued to execute at a high level on the Yucatan delivering currency neutral margin expansion of approximately 240 basis points year over year on mid single digit Revpar growth.
Speaker Change: As you May recall following the realignment of key management personnel, we've been revisiting various processes staffing models procurement practices since the second quarter of 2023 and the results of our efforts route really began to show in the second half of 2023 as ADR growth moderated.
Speaker Change: As we've mentioned on previous earnings call. The process improvements will be iterative and we will continue increasing efficiency, where possible to help offset the impacts of rising wages and inflation and various expense categories.
Speaker Change: Do you believe we can hold FX neutral margin steady year over year in the Yucatan in 2024.
Speaker Change: Positive low single digit to mid single digit ADR growth.
Speaker Change: Spike continuing underlying wage pressure.
Speaker Change: In the Pacific.
Speaker Change: ADR growth was anticipated to be negative as a result of a large mice group buyout legacy rates from 2020.
Speaker Change: Over the buyout led to a record high first quarter occupancy rate for the segment, resulting in year over year Revpar growth of six 2%.
Speaker Change: The strong revenue performance combined with our cost control efforts delivered 320 basis points of currency neutral resort margin expansion year over year in the Pacific.
Speaker Change: Additionally, we have decided to accelerate our renovation plans to the Pacific now expect the construction disruption impact on EBITDA to be at the high end of the previously communicated range.
Speaker Change: We believe this is the best path forward to capitalize on the increased mice demand, we are seeing and position our resort in Los Cabos for a strong high season in 2026 and beyond.
Speaker Change: <unk> Hi, it's either Los Cabos has not had any major renovation work done since the renovation that occurred following hurricane Odile in 2014.
Speaker Change: Turning to the D. R. We completed the sale of the dual pump to Kona in late December of 2023.
Speaker Change: The dual Palm Beach was closed for a significant portion of Q1 2023, which we expect will lead to a meaningful year over year increase in EBITDA during 2024.
Speaker Change: It's also in the segment were aided by the comparison from 2023, but the core comparable resort resorts also had a very strong quarter with double digit revpar growth and mid teens underlying EBITDA growth.
Speaker Change: Finally, Jamaica had another solid quarter with occupancy increasing year over year, reaching Q1, 2019 levels and mid single digit ADR growth. Despite a significant headwind from lower group mix year over year.
Speaker Change: The segment was off to a good start in 2024, but the U S State Department's travel advisory notice for Jamaica on January 23rd has had a negative impact on the segment near term as cancellations picked up meaningfully thereafter.
Speaker Change: Although the travel advisory doesn't pertain specifically to our resorts as much as the major metropolitan areas in other regions of the country and the level of the travel advisory was unchanged from the prior advisory.
Speaker Change: Coverage at this advisory noticed so significant.
Speaker Change: Difficultly greater than prior warnings.
Speaker Change: Since you make us all rapid improvement as we move through February giving us a sense of optimism that the impact would be fairly short lived.
Speaker Change: Demand for the summer season did not continue to improve leading to a significantly higher negative impact than we previously anticipated.
Speaker Change: Bulk of the impact experienced so far in Jamaica has been for Q2 and Q3 with revenue pacing down mid teens, while our fourth quarter pacing is holding up much better with a low single digit decline.
Speaker Change: Looking at demand as a whole we saw steady demand through the quarter and the pacing into the summer season remains strong outside of Jamaica.
Speaker Change: In aggregate during the first quarter of 2024 48, 4% apply your owned and managed transient revenues booked were booked direct mm 300 basis points year over year.
Speaker Change: Decline was driven by fewer world of Hyatt redemption bookings following a spike during the first quarter of 2023 ahead of a change in the conversion rates per point redemptions, which pulled forward quite a bit of demand during.
Speaker Change: During the first quarter of 2020 for Playa resorts Dot com accounted for approximately 11, 3% of our total player one advantage transient room night bookings.
Speaker Change: <unk> to be a critical factor in our customer sourcing and ADR gains.
Speaker Change: Taking a look at who is traveling roughly 41, 7% of the Playa owned and managed transient room night stays in the quarter came from our direct channels.
Speaker Change: The graphic like the biggest change in our guest mix during the first quarter was our Canadian sourced guests next which increased 100 and 110 basis points year over year following several quarters of year over year declines.
Speaker Change: While this is encouraging our Canadian guests make still has plenty of room to improve because it is only approximately two thirds recovered versus pre pandemic levels.
Speaker Change: Asian sourced guest mix improved modestly year over year. It remains the most depressed as it is still only approximately 25% recovered versus pre pandemic levels.
Speaker Change: Our visibility remains a critical factor of our success is our booking window is just over three months during the first quarter.
Speaker Change: Finally on the capital allocation front, we repurchased approximately $32 $4 million or supply of stock during the first quarter.
Speaker Change: And an additional $17 4 million, thus far in the second quarter, bringing our total repurchases since resuming our program in September 2022.
Speaker Change: Approximately $280 million or approximately 22% of the shares outstanding.
Speaker Change: Once again I would like to thank all of our associates will continue to deliver world class service in the face of unexpected challenges and rising operating costs.
Speaker Change: Our unwavering passion and dedication to service from the heart is what truly sets play a part.
Speaker Change: That I will turn the call back over to Ryan to discuss the balance sheet and our outlook.
Ryan: Thank you very much Bruce again before I begin all references to expense and margin Kpis are on a currency neutral basis, and also excludes business interruption proceeds unless otherwise stated.
Ryan: As we mentioned in our first quarter results were well ahead of our expectations as demand remained strong throughout the quarter healthy demand easing pressure from food and beverage prices and our cost efficiency efforts led to reported margin expansion.
Ryan: Of 140 basis points year over year, which included 160 basis point headwind from foreign exchange and a 10 basis point benefit from business interruption proceeds.
Ryan: As well as 160 basis point tailwind, but the two dual resorts in the Dominican Republic. So taken altogether underlying reported resort EBIT margins increased 290 basis points year over year in the first quarter.
Ryan: Adjusting for FX and business interruption, our legacy portfolio delivered 140 basis points of resort margin expansion.
Ryan: On the cost front food.
Ryan: Food and beverage costs continued to be a favorable continue to be favorable as a result of lower input prices and cost efficiency efforts by our operations team.
Ryan: Costs were also favorable in the quarter, reflecting our efficiency measures, but wage inflation generally remains a headwind as Bruce mentioned, we are undertaking efforts to streamline and improve our procurement processes across the entire portfolio and take advantage of our scale. These efforts are really just beginning to bear fruit from the heavy lifting undertaken in 2023, and we expect the benefits to.
Ryan: As the company moves throughout 2024 and beyond as our cost savings are averaging mid single digit to high single digit improvements per category. We estimate we've only penetrated approximately 30% of the potential procurement savings, thus far with half of the savings flowing through our cost during the fourth quarter of 2023.
Ryan: Underlying expense inflation has remained steady since our last update but any changes in our margin expectations for the year, resulting from higher construction disruption and deleveraging in Jamaica from weaker demand.
Ryan: Turning to our my skirt business, our 2024 net my script business on the books is approximately $65 million up roughly 12% compared to the same time last year. Our mice business is much more balanced on a year over year basis compared to what we experienced during 2023 2023 lapped incredibly difficult comparisons in the second half of the year.
Ryan: Finally, turning to the balance sheet, we finished the quarter with a total cash balance of $285 3 million and total outstanding interest bearing debt.
Ryan: Of approximately $1 9 billion at.
Ryan: We currently have no outstanding borrowings on our $225 million revolving credit facility.
Ryan: Our net leverage on a trailing basis stand at two eight times excluding lease capitalization.
Ryan: Dissipate, our cash capex spend for full year, 'twenty 'twenty four to be approximately $110 million to $120 million for the year partitioned out between approximately 40 to 50 million for maintenance and other critical Capex and.
Ryan: The remainder are designated for ROI oriented projects.
Ryan: This increase is largely due to the acceleration of the previously discussed renovation or a hyatt <unk> Los Cabos resort.
Ryan: Also as a reminder, effective April 15th 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk in our term loan due 2009.
Ryan: We entered into a two and three year contract both of which have a fixed notional amount of $275 million and carry a fixed so for rates of 4.05 and $3 71, respectively.
Ryan: Separately, we then implemented foreign exchange hedges on approximately half our Mexican peso exposure for 2024, which should greatly reduce the volatility of the impact of our reported EBIT. This year.
Ryan: Just on the exchange rates at the time, we entered into the FX forwards. We estimate the full year 2020 for EBIT impact from the Mexican peso year over year to be approximately $7 million to $10 million, which is slightly better than our previous outlook of $7 million to $11 million nearly.
Ryan: Nearly 75% of the impact is expected to be in Q1, 'twenty four and nearly 100% of it in the first half of the year based on current spot rates.
Ryan: Capital allocation front as Bruce mentioned, we repurchased an additional 32 and a half million of stock during the first quarter and an additional 17 and a half plus far in Q2 24.
Ryan: Since we began repurchasing shares last September we've purchased over $36 6 million shares or approximately 22% of our shares outstanding at the time, we still have over $145 million remaining on our existing repurchase authorization.
Ryan: With our leverage ratios at or near three times, the anticipated free cash flow generation of the business and the attractive valuation of our stock. We believe repurchasing shares is still a very compelling use of capital and tend to use our discretionary capital to repurchase shares going forward depending on market conditions.
Ryan: Now turning our attention to our outlook for 2024 first I'd like to remind every one of the unique items affecting comparability of our financials compared to 2023 before we dive into the outlook.
Ryan: First with foreign exchange as a reminder, the appreciation of the Mexican peso had a $24 5 million dollar impact on adjusted EBITDA in 2023.
Ryan: Business interruption as a reminder, in 2023, we recognized $6 1 million of proceeds with $4 $3 million of that coming in the second quarter of 2023, and approximately $900000 in Q3 and Q4, respectively.
Ryan: Dr. Jules they recorded an EBITDA loss of approximately $15 million in 2023 and negatively impacted owned resort margins by approximately 280 basis points.
Ryan: A third of their loss occurred during the first quarter of 2023 is the dual Palm Beach as a reminder was closed for the majority of the quarter.
Ryan: So with all that in mind and looking forward. We continue to expect full year 2024, adjusted EBITDA to be between 250 $275 million, which includes the following key considerations and inputs.
Ryan: We expect occupancy to be up low single digit percentage points for the total portfolio.
Ryan: And down modestly for the legacy portfolio. This change reflects the travel advisory having a continuing negative impact on demand into Jamaica.
Ryan: We expect ADR growth of mid single digits for the total portfolio.
Ryan: And low single digits.
Ryan: The comparable legacy portfolio, the driving force of the Delta between the two is a positive 360 basis point impact from removing the lower ADR room night mix from the dual pumps a corner that we sold last year and partially offset by the ramping occupancy at the dual Palm Beach resort.
Ryan: We expect revpar growth of.
Ryan: High single digit to low double digit for the total portfolio and low single digit for the legacy portfolio.
Ryan: We estimate that the disposition of the dual puts it kind of resort and ramping occupancy at the dual Palm Beach resorts can contributes approximately 900 basis points to 2024, revpar, but the vast majority of that contribution being the result of disposing the dual pump to kind of resort last year and only a modest contribution to revpar from the dual Palm Beach resort as improving occupancy.
Ryan: It was partially offset by the negative mix of palm beaches ADR.
Ryan: We still expect foreign exchange headwinds as we mentioned of approximately $7 million to $10 million year over year based on current exchange rates and net of any FX forwards.
Ryan: As Bruce mentioned, we expect construction disruption impact of high single digit dollars of EBITDA in the Pacific and the Hyatt <unk> Cancun.
Ryan: And inflation as we've mentioned several times on the call we've been diligently working to improve our efficiency and we believe we've lowered our margin leverage hurdle for approximately 4% ADR rate growth to hold margins flat on a currency and business interruption adjusted basis.
Ryan: We expect a modest net negative impact from annualized corporate expense increases from 2023, partially offset from higher and growing fee income.
Ryan: And with respect to the cadence of our profitability, we expect the first quarter to show the most robust profit in the year given the Q1 'twenty two 'twenty three comparison, which included a $5 million loss of the Dr. Jules.
Ryan: The drag from construction disruption and the weaker demand in Jamaica or likely most pronounced in the second and third quarter and hopefully improve somewhat in the fourth quarter.
Ryan: And now turning our attention to the second quarter, we expect reported occupancy it could be in the low 70%.
Ryan: And reported package ADR to increase mid single digit percentage on a year over year basis.
Ryan: We expect owned resort EBITDA margins to decline significantly year over year, given the $4 $3 million of business interruption proceeds recorded in Q2 of last year, which was a positive 180 basis point impact to the comparison period and continuing foreign exchange headwind in Mexico, which are expected to negatively impact margins.
Ryan: By approximately 80 to 100 basis points.
Ryan: And altogether, we expect Q2 owned resort EBITDA.
Ryan: $67 million to $72 million.
Ryan: Expect Playa collection and management fee income of $2 million to $3 million.
Ryan: Corporate expense of roughly $15 million to $16 million, which includes a negative FX impact.
Ryan: Finally, adjusted EBITDA of $54 million to $59 million.
Ryan: Given our booking window, we're currently 90% booked for the second quarter.
Ryan: Hope all that framework helps guide you as you fine tune your models and gets further insight in what we're seeing and expecting with that I'll turn it back over to Bruce for some closing remarks, great. Thanks Ryan.
Bruce: The year is off to a good start with solid top line growth. Despite the setback in Jamaica from the travel advisory and lapping difficult comparisons from 2023.
Bruce: We remain focused on the areas within our control such as our expense efficiency efforts and ongoing portfolio optimization.
Bruce: Respect to the portfolio are Hyatt <unk>, Los Cabos was among the first of our resorts to undergo a significant remodel following hurricane O deal nearly 10 years ago and while the resort has performed extremely well we expect our current renovation well.
Bruce: Difficultly improve its competitive positioning in this key market.
Bruce: Our other successful early Hyatt renovations and conversions are also approaching the point in their life cycles for a refresh in the coming years, namely, it's Laura Ken Kun Hyatt <unk> Rose Hall.
Bruce: We are targeting these resorts for renovations next year funded by the recycling of capital from non core asset dispositions.
Bruce: The nature of the work involved and the specific footprints of these resorts, we expect the disruption to be greater than what we have recently experienced the Pacific which was down over multiple years.
Bruce: It will be back with more information on these projects later this year, but I'm incredibly optimistic about the potential for our Hyatt <unk> Cancun as this resort sits on the crime piece of real estate and has performed well given the limited direct supply growth.
Bruce: The renovation of this resort has the potential to add significant value to the portfolio are.
Bruce: Our highest evens of Lauder Rose Hall have been significant drivers of EBITDA since the completion of their conversions in 2016 and have a large established position in the <unk> segment.
Bruce: These resorts in a key market with limited supply growth in close proximity to the airport in Montego Bay also have the potential to drive meaningful value for years to come.
Bruce: And we will consider room tower additions adjacent to our existing resorts, which should generate meaningful returns on capital and drive incremental EBITDA, but that is not a high probability near term endeavor for us with our ROI projects largely funded with recycled capital we will continue to redeploy the significant free cash flow.
Bruce: We generate into share repurchases and maintaining our market leading assets setting us up for success beyond 2024.
Speaker Change: With that I'll open up the line for any questions.
Bruce: Yeah.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on the Dutch tone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question.
Speaker Change: Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question is from the line of Smedes Rose with Citi. Please go ahead.
Speaker Change: Okay.
Smedes Rose: Hi, Thank you.
Smedes Rose: First Bruce I guess I'm just interested if you could talk a little bit more about.
Smedes Rose: What sounds like waning demand into Jamaica, and then just kind of wondering since there's.
Smedes Rose: Warnings have sort of been out for a while like why do you think there.
Smedes Rose: Having a larger impact.
Speaker Change: And in the second in the second quarter and is it really more sort of corporate groups that are switching out so you're having to sort of backfill with more transient or maybe just sort of talk about.
Speaker Change:
Speaker Change: The trends there and why do you think of that playing out this way.
Speaker Change: Sure no. It's a great. It's a great question Smedes I mean from our standpoint, we can't really answer that you know we have a you know.
Speaker Change: Very strong booking window, and we see that the weakness is kind of broad based so it's not just on the group side. Its across you know it's across the transient as well you know if you you look I mean, if you look at the quarter I would say the two things that kind of jumped out to.
Speaker Change: To me you know was was number one just the strength of demand right, particularly in the high season, but also just the overall strength of demand and we're seeing it through the rest of this year and the other one is you know the concern people had about <unk> and the fact that you know we're not seeing.
Speaker Change: Any issue with ADR and so they're more than sustainable and it's it's what we've always said about the price value relationship and value.
Speaker Change: Is this kind of in the eye of the Boulder, It's still in my opinion, you know relatively cheap and a great value proposition for people to go. So when you look at you make are it really stands out from the standpoint of we have this very strong demand and we're getting you know.
Speaker Change: Good rates and why it's so significant I really don't know.
Speaker Change: You know I've been in very close contact with with Adam Stewart Who's Who's the head of Sandoz and we intend to.
Adam Stewart: Push the government to do something you know quite honestly. The government has really been you know asleep at the switch and has not done anything proactive to try to address the situation in sandals has a much higher concentration in the country. Then then either we do so you know we're gonna be we're going to be.
Adam Stewart: Pushing just to see what we can do.
Adam Stewart: Fortunately you know what we see further for the fourth quarter doesn't look as bad as Q2 and Q3. So that's good news and I think again it shows the resiliency of our business, particularly in the high season, where we generate so much of our EBITDA, but we need we need to address this issue short term and we're not.
Adam Stewart: We're not just sitting idly by we're trying to do all kinds of initiatives and push it but it doesn't make sense I mean, one of the things. For example is you know the the areas covered under the travel advisory are really nowhere near Montego Bay and the resort zone. So if you look at where we are located which is.
Adam Stewart: And you know on the north side of the island completely.
Adam Stewart: Kind of a resort corridor, they're there's not really any significant issue. It's on the other side of the island that's outside of the island, primarily and you know Theres a big mountain range in between so we're going to try to communicate some of that and hopefully drive some additional business, but we're at a loss or why its so significant.
Speaker Change: Okay, and then I just wanted to follow up if I could just on something you mentioned sort of at the end of your remarks about the Hyatt <unk> Cancun going under renovation next year.
Speaker Change: I don't know if you can provide this but I mean I would imagine that's one of your bigger sort of EBITDA generators across the portfolio. I mean can you maybe just speak to well I don't know if you can provide what percentage of those that would be great. But can you just speak to how you are going to manage.
Speaker Change:
Speaker Change: EBITDA coming out of that asset and balancing that against the need for renovation and I think you've talked about a new room tower there in the past.
Speaker Change: Yeah, so to be clear, we're only talking about theres, a lora can kuhn at this point, we are not referring to any renovation at this point for next year for Ziv I can't get we're still going through a lot of these plans are internally and going through scope and that's what Bruce mentioned, we'll be back with more information, but what we're specifically talking about is the potential need to target that as a law.
Speaker Change: Laura in Cancun, which is about a 300 room property and as Evens Laura.
Speaker Change: Hyatt in Rose Hall, so theres, a lora rough figures has been roughly a high teens almost $20 million EBITDA contributor.
Speaker Change: For our overall portfolio you know adjusting for FX and so it's a it's a good EBIT contributor just given the number of rooms, but as you recall that property was essentially and I think I've done this before on the call I'm using air quotes right now you can't see me, but it was converted to a hyatt in 2013, when we recap the company and <unk>.
Speaker Change: We've done some things to the ancillary services like we've renovated the spa, we renovated the gym done some things to coffee shops, and restaurants, but generally the rooms have just been repainted and have not been touched since we took over the property and a more than 10 years ago and it's essentially lived under the umbrella of the zebra cant Kuhn off the street. So just given its proximity.
Speaker Change: The airport the location and are in the Prime real estate spot in all of the in the hotel zone in Cancun, It's overdue quite frankly for a renovation and so again scope and timing will come later this year, but in the past we have discussed.
Speaker Change: Potentially running it through high season, or effectively Easter and then potentially closing the property down the remainder of the year to contain any lost EBITDA for the blast fall at eight to nine months of the year and reopening in time for the highest again more information to come there, but that's generally the plan we've discussed in the past and let me just add to that just kind of the strategic rationale.
Speaker Change: Ryan said, it's been over 10 years, and we haven't done a rooms renovation. So you know just from normal course, you would do that but I think the opportunity here at Solara, Ken Kun is even even more significant when we acquired that back in 2013, the rates that were being obtained for that type of resort in.
Speaker Change: In Cancun, where were you more good but not kind of at the exceptional level that we're seeing for example, with our newer properties like hi, it's even some of our top corner, you know and even Los Cabos. So I look it can't cause them being the number one all inclusive market and the high level of demand and the fact that is that we ever reliv.
Speaker Change: Typically limited number of rooms at Hyatt <unk> Cancun. So you know that demand profile is is incredibly strong already and then you have the ability to put an exceptional product there on as Brian described you know probably the best.
Speaker Change: On a beach in the hotels unencumbered cone I, just think we really have a great opportunity. So it shouldn't be past. This isn't just a renovation. This is absolutely an incredible resetting of Oh the floor, okay for Laura can kuhn.
Speaker Change: Great. Thank you I appreciate it.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Chad Beynon.
Chad C. Beynon: With Macquarie. Please go ahead.
Chad C. Beynon: Good morning, Thanks for taking my question Bruce I wanted to ask kind of a two parter on Jamaica. One can you just frame out I'm not sure. If you mentioned this in the prepared remarks, but.
Chad C. Beynon: What spring break or kind of the lead up to Easter in Q1, maybe just March in general.
Chad C. Beynon: Looked like versus prior year period was there an impact and then secondly on the look forward in Jamaica is your approach to hold a D R and not fill the rooms with locals I know in the past there was some good demand.
Chad C. Beynon: Could you just kind of help us think about you know what'll be locals versus tourists are in your model right now thank you.
Speaker Change: Sure sure and I'll, just kind of address the second part and then I'll pass over to Ryan. He can give you more you know kind of in the first quarter, the EBITDA impact and Easter, but our strategy absolutely has to hold ADR. Since we came out of the pandemic. We have been very focused on that and we don't believe.
Chad C. Beynon: Anything.
Ryan: On a permanent or even longer term from from this situation in Jamaica, we need to we need to deal with it but you know whenever you you kind of reset your rate structure I think it's a very slippery slope and it's challenging to kind of.
Ryan: Regain where you were and especially in a hotel like this which is such a big Mike's contributor that's something we don't envision doing you know we have a high quality resort, we're going to maintain the high quality of that resort in ADR.
Ryan: Discipline is critical to that but then I'll pass it over to Ryan and then Chad to be clear. Your question is around this the impact to March from the travel warning or I guess, maybe if you could think about like spring break this year versus spring break last year. It doesn't sound like March was impacted but I know, it's not a same store same week comparable.
Ryan: Yeah.
Ryan: Yes, correct for us.
Ryan: Now the fact that Easter needs the amount of times a week was within March it certainly helps a little bit for Q1, but it certainly hearts April for us yeah.
Ryan: Easter week, particularly in the Mexican or the Spanish speaking countries.
Ryan: You know kind of marks the unofficial and of our high season. So the further out it goes the better so next year when it's in I think the second or third week of April.
Ryan: The definitive positive to Q2, and just generally a definitive positive to play out because it elongate the high season. So for US it was kind of a minimal impact to Q1 on the positive side, but it definitely hurts Q2.
Speaker Change: Okay. Thanks.
Speaker Change: And then lastly, any update in terms of Joel Palm Beach, how youre thinking about you know hanging onto this property marketing at divesting it what's the with them in a market like out there.
Speaker Change: Yeah. No. We are we are actively marketing the property and we're hopeful to be able to.
Speaker Change: Amounts something in New York in the near future, but we are.
Speaker Change: We're actively marketing the property.
Speaker Change: Okay. Thank you both I appreciate it.
Speaker Change: Thank you. Thank you.
Speaker Change: The next question is from the line of Tyler <unk> with Oppenheimer. Please go ahead.
Speaker Change: Good morning. This is Jonathan on for Tyler Thanks for taking my question.
Jonathan: Maybe following up on Jamaica.
Jonathan: Understanding the dots have been fully settled yet, but can you talk about the disruption there and how it compares maybe to past travel advisories or interruptions, you've seen over the years.
Speaker Change: It's funny that you asked that thanks for the question. So it's I mean, it's been a substantial swing you know mostly concentrated as where we sit today in Q2 and Q3.
Speaker Change: And it's actually it as far as the impact in the swing for what we were expecting for Q2 Revpar.
Speaker Change: Fire at the beginning of the year versus where we sit today, it's actually almost right on par with some.
Speaker Change: Some issues we had in late 2019 with the you know some crummy new cycle that came out in the Dr. If you just look at a full year basis to kind of put some numbers around it you know just using round figures. We were expecting you know the Jamaica segment to be up low single digit Revpar now based on where we sit today expected to be down mid single digits. So that's a high single.
Speaker Change: <unk> potentially.
Speaker Change: Double digit revpar swing in a few months here. So it's certainly as Bruce mentioned earlier I wont recast at all you know a lot worse than we thought and again, it's not that there's just a an increasing number of cancellations at more so it has to do with demand, but we're picking up on a daily basis is below traditional trend line from what we expect at the beginning of this year.
Speaker Change: Are or what we were able to experience last year. So the marketing team has done a number of different.
Speaker Change: Sales blitzes and tactics that have a nice impact for a couple of days the demand falls back off again, they targeted some you know one of the questions need that's earlier that targeted some a lot of local groups as well, who obviously wouldn't be worried about a travel advisory and also Canadians as well so we've seen peaks and valleys, but just generally we're just below a traditional trend line from a book.
Speaker Change: The basis of the summer's essentially shot and as Bruce mentioned for it looks okay, but we'll have to see how that how that works throughout the rest of the summer given our booking windows around 100 days.
Speaker Change: Okay very very helpful. Ryan and then maybe following up on that booking window discussion.
Ryan: Can you talk about the booking window for the group.
Ryan: Group business and can make I'm, just trying to get a sense of maybe potential implications for 2025 from the near term.
Ryan: Yeah. So the it are they de traditionally book at least you know the absolute shortest maybe nine months out, but it's traditionally 12 to 18 months. So it certainly would have a potential impact on 25.
Ryan: Not going into too much detail yet, but it's also Bruce mentioned you know those potential plan to to look at also renovating the Jamaica asset as well, which would have an impact, but that's our traditional booking windows.
Ryan: Last couple of months spent around 90 to 100 days with the exception of mice that books further out.
Speaker Change: Okay very good well last one from me if I could maybe on the relationship with Pi.
Speaker Change: The updated thoughts on that relationship and kind of.
Speaker Change: What percent of Hyatt state or redemption says.
Speaker Change: Yeah. So traditionally our Hyatt redemptions have been around low to mid single digits as a percentage of our of the of the overall business we get from Hyatt.
Speaker Change: But the relationship has been good I mean, you know we've had the benefit of having you know all of these Hyatt haven't been converted now for over 10 years now they're well known in the system that went on in the markets and the NPS scores speak for themselves you know a lot of that has to do with the operations teams at the resorts that are obviously run by us but.
Speaker Change: Also just the Hyatt customers, a higher paying discerning customers. So it's been a really nice marriage between the two and I, obviously, they they bought Apple leisure group.
Speaker Change: Now a few years ago, and they were kind of still working through that but our relationship.
Speaker Change: It's still very very good and I think mutually beneficial to both yeah. I mean, it's been it's been a great 11 years, you know with Hyatt and jointly we really develop the highest even highest Laura brands and I think the exceptional performance of our teams in all three of our countries that we operate in is just a testament to.
Speaker Change: The strength of our operations and then you know the.
Speaker Change: Fantastic properties that we own and operate as.
Speaker Change: Well as you know the great affiliation with Hyatt.
Speaker Change: Okay excellent. Thank you for all the detail that's all for me.
Speaker Change: Thank you.
Speaker Change: The next question is from Gregory Miller with <unk> Securities. Please go ahead.
Gregory Miller: Thanks, Good morning, I'm on for Patrick Scholes.
Gregory Miller: First question I have relates to the Capex plans for Los Cabos, and if you're willing to share.
Gregory Miller: And that for 25.
Gregory Miller: Could you share what your current high level cash on cash return expectations are for your Capex work.
Speaker Change: So in Cabos and this is definitely a definitely more defensive in nature.
Speaker Change: We don't talk about the two resorts in the Pacific as much because it's really just too, but you know they generated nearly $60 million of resort EBITDA in 2023, and Los Cabos as a substantial portion of our mice business.
Speaker Change: I'd say it all the time as I kind of sound like a broken record, but it is not hotel has punched above its weight for a number of years now considering that as Bruce mentioned, we have not done you know quite a bit we've not done any real renovation of that property, particularly in one of the older towers you know since the since the hurricane now it's doubled its EBIT 2019 to 2023 and <unk>.
Speaker Change: In large part due to the mice business and so we want to continue to ensure that we capture that share of that booming nice business. You know for many many years to come. So you know I can tell you the sales and marketing teams internally are happy about the things we are targeting particularly one of the older towers. Some of the meeting space, adding a new gym. It's you know it's attacking.
Speaker Change: The things that had ailed us at that property and for prohibited us from kind of pushing rates or potentially losing business to other newer properties that have come in over the last couple of years.
Speaker Change: Yeah, no explicit cash on cash returns on that because it's something that just needs to be done to protect the value of that real estate and give us a chance to capture that market even further.
Speaker Change: I think the enhancements will make.
Speaker Change: Expanding some of the meeting facilities like the pre function area at the ballroom and different things are going to make us more attractive to a large segment of groups and so you know as Ryan said the mice business. There is really important and that's been really successful you know I think you know the things youre doing or just really positioning us to continue.
Speaker Change: New to maintain you know really strong Mike's business going forward.
Speaker Change: Okay. Thanks appreciate it.
Speaker Change: In fact, I'd like to shift gears on my second question I recognize that the third party management business is a smaller piece of the overall.
Speaker Change: Portfolio, but you did announce some wyndham altra deals in the Dominican Republic recently, I'm curious what opportunities do you see with this brand as a third party manager going forward, what kind of hotels are best suited for conversion and for your operations.
Speaker Change: Yes, I mean, you know as we said and you know you you described it appropriately you know the third party management business is a lower.
Speaker Change: You know kind of profit contributor for US I mean, you know the vast majority of our profit comes from our owned assets. So you know there was a lot of focus on that having said that you know the all inclusive space.
Speaker Change: As you know really dominated by kind of the middle right kind of like the same with most hotel markets around the world in the U S or it's just a huge number of hotel rooms in the middle well. That's certainly the case in all inclusive. So when you look at it at Wyndham altering what excited US you know.
Speaker Change: Working with Wyndham on having the opportunity to convert some of those is just you know the.
Speaker Change: A number of hotels resorts and rooms that could be converted to that brand.
Speaker Change: Many of them could be converted with relatively you know.
Speaker Change: Not insignificant capital, but I mean, there's just more eat more easily done that if you were going through a very high end or a luxury kind of property. So I think theres a lot of opportunity and we're excited to be partners I can't really project. How many you know well will do.
Speaker Change: But we've had some really good success with with the Wyndham Ultra brand and we love working with Wyndham, they're a great partner.
Speaker Change: Thanks, Bruce and that's all from us.
Speaker Change: Thank you.
Speaker Change: The next question is from the line of Christopher Oconnor with Deutsche Bank. Please go ahead.
Chris Jon Woronka: Hey, good morning, guys. Thanks for all the detail so far.
Chris Jon Woronka: Bruce I wanted to kind of revisit Jamaica, a little bit and I you know I. Appreciate you mentioned your youre working with Adam and hopefully.
Chris Jon Woronka: Maybe get the messaging from the Jamaican government up a little bit or the marketing, but is it isn't it isn't part of the issue here.
Chris Jon Woronka: The U S State Department I'm, just curious as to whether you know is there some kind of formula they're using to determine this risk level.
Chris Jon Woronka: Seems a little not very scientific insights to be diplomatic.
Chris Jon Woronka: Is there anything you can do on this side of the fence.
Speaker Change: So that's it's a great question, Chris and so I have volunteered and we will do this with the Jamaican government, but I have volunteered to go with the Jamaican ambassador here in the United States to go meet with the state Department and actually spend that question because it's.
Chris Jon Woronka: Pretty nonsensical, you know that you had come out with an updated travel advisory when nothing has changed okay. I mean, it would be like saying, Okay. You know in the middle of a storm, it's going to rain, okay, well. It is raining, okay, and why or why are you now telling us it's raining okay. So so.
Chris Jon Woronka: I live in the D. C area I actually have a friend, who who who work at the state Department.
Chris Jon Woronka: And I can tell you it's going to be an interesting meeting I'm sure to find out exactly why they do that but it doesn't make any sense to me.
Chris Jon Woronka: Okay. That's.
Chris Jon Woronka: That's great appreciate that that Bruce and then.
Chris Jon Woronka: Question on I know you guys I think recently wrapped up a renovation and in PV or are you seeing you know kind of expected rate lift there or would you say, that's a little bit more like Chicago, where it's.
Chris Jon Woronka: Somewhat defensive just kind of bring the bring the property up.
Chris Jon Woronka: Okay.
Chris Jon Woronka: It's more akin to the combo, we're not done there's still doing rooms, right. Now you know that kind of what Bruce mentioned earlier.
Chris Jon Woronka: Property and then like what we had been doing in <unk> before we decided to accelerate the work at one of the towers.
Chris Jon Woronka: I kind of do it on a little bit in piecemeal and kind of do a third of the rooms at a time that property just like Cabo last major renovation with 2015, though would do in a time. So there's potential for uplift in rate that property again does really really well is to on a private you know kind of really one of the only real kind of private beaches and part of a yard or so close to the airport.
Chris Jon Woronka: It's the kind of protected on both sides by the mountains and so it's a excellent asset that needs to be maintained and so for us it's a little more defensive in nature and maintaining the EBIT base that we've got there today, it's not a big group house or anything like that that's pretty well with weddings, but that's about it.
Speaker Change: Okay Fair.
Speaker Change: Fair enough.
Speaker Change: Last one is.
Chris Jon Woronka: You know when we think about what you might do on a on a renovation slash you know upgrade of Zamora and think about what you've got down the street.
Chris Jon Woronka: Uh huh.
Chris Jon Woronka: Is there any thought to.
Chris Jon Woronka: This preface this by saying I think youre your rates in the market are terrific, but is there any thought to possibly trying to maybe tap into the <unk> piece of it.
Chris Jon Woronka: Hi, and I know that he was a lot of brands are created kind of for you guys. When you when you launched the concept.
Chris Jon Woronka: Over 10 years ago, but as with all does the kind of rate premium. They get is there any way to almost co brand or take a turquoise tower and.
Chris Jon Woronka: Put it on doors on that and create even further rate separations or anything like that that's possible.
Speaker Change: You know, we'll we'll we'll look at that I mean, it's a good comment we've we've always looked at you know whenever we repositioned the hotel we look at how do you optimize it from a brand perspective, and so that's an important part of the equation, but but I'll tell you the opportunity to year.
Speaker Change: Really from my perspective is to take you know take.
Speaker Change: Fantastic.
Chris Jon Woronka: Located resort with 100% Ocean front.
Chris Jon Woronka: And try to.
Chris Jon Woronka: Create a product that maximizes ADR and I think highest alara I mean look at what we get you know look see what we get in copper con outlook or what we get in Rose Hall. So I think you know Hyatt <unk> Cancun can drive a very significant rate and in premium if we have the appropriate product and that's.
Chris Jon Woronka: Our goal is to get the appropriate product, but having said that well we consider options absolutely yes to just give you some context.
Chris Jon Woronka: Some round figures, because we don't disclose individual resort E a D ours, but the.
Chris Jon Woronka: For Q1, there's a lora in its existing state did very high $500 a package revenue a package ADR 500 dollar are zebra cant queuing up the street did.
Chris Jon Woronka: <unk> hundred $50 more than that for Knight and or is the law is even though our top corner again, a different market, but a much newer property.
Chris Jon Woronka: Did almost $200 more per night and package ADR. So the gap exists and the opportunity exists and so you know so that property is credit it's doing really really well for what it is and I know you've been there and many others have and you go in you're like Wow. This is just a very different.
Chris Jon Woronka: Product then you've got up the street. So you know if we can kind of decrease that gap and bring that property up that's that's very very high profitability on that higher end and I do want to emphasize we really think this is a huge opportunity again as we talked about because some of the others are more defensive and protective in nature there.
Chris Jon Woronka: This is a huge opportunity and I am expecting big success coming out of this repositioning.
Speaker Change: Okay understood Super helpful. Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Concludes our question and answer session I would now like to turn the conference back over to Bruce <unk> for closing remarks.
Bruce: Alright, well, thank you everyone for participating.
Bruce: It was a it was a great quarter and we're looking forward to you know a lot more going on in the rest of this year, but thank you very much.
Speaker Change: Thank you the conference has now concluded.
Speaker Change: Thank you for attending today's presentation you may now disconnect.
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