Q3 2024 Playa Hotels & Resorts NV Earnings Call

November 7, 2024

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Speaker Change: Being recorded I would now like to turn the conference over to Ryan <unk>. Please go ahead.

Speaker Change: Thank you very very much Dave good morning, everyone and welcome again supply hotels and resorts third quarter 2024 earnings conference call before we begin I would 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.

Ryan: Thank you very very much Dave good morning, everyone and welcome again supply hotels <unk> resorts third quarter 2024 earnings conference call before we begin I would 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.

Speaker Change: 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 dot.

Speaker Change: Calm the Companys recent releases.

Speaker Change: The company's recent releases.

Speaker Change: In addition, reconciliation to GAAP of the non-GAAP financial measures discussed on this call were included in yesterday's release.

Speaker Change: On today's call Bruce <unk>, <unk>, Chairman and Chief Executive Officer will provide comments on the second quarter demand trends and key operational highlights I will then review our third quarter results and our outlook for the fourth quarter, Bruce a 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.

Speaker Change: Today's golf resort Inscape, Pliers, Chairman and Chief Executive Officer will provide comments on the second quarter demand trends and key operational highlights I will then review our third quarter results and our outlook for the fourth quarter for us to 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: Thanks, Brian Good morning, everyone and thank you for joining us our third quarter results exceeded our expectations led by steady underlying performance in our Yucatan, and Dominican Republic segments, and improving demand in the Pacific Coast and Jamaica. Following the disruption in bookings due to hurricane barrel underlying demand reverted back to trend across our segments for us.

Bruce: Thanks, Brian Good morning, everyone and thank you for joining us.

Bruce: Third quarter results exceeded our expectations led by steady underlying performance in our Yucatan, and Dominican Republic segments, and improving demand in the Pacific Coast and Jamaica. Following the disruption in bookings due to hurricane barrel underlying demand reverted back to trend across our segments for a slightly improved in the case of Jamaica.

Bruce: Slightly improved in the case of Jamaica.

Speaker Change: He has owned resort EBITDA of $36 6 million in the third quarter of 2024 included a benefit from business interruption insurance proceeds of approximately.

<unk> owned resort EBITDA of $36 6 million in the third quarter of 2024 included a benefit from business interruption insurance proceeds.

Bruce: Of approximately $700000 in Q3 of 2024 compared to the $1 billion in business interruption proceeds we received in Q3 2023.

Bruce: $700000 in Q3 of 2024 compared to the $1 billion in business interruption proceeds we received in Q3 2023.

Bruce: Excluding business interruption, the upside compared to the expectations shared on our last earnings call was driven by one better than expected close in demand in the Pacific Coast in Jamaica, and Jamaica, and better than expected ADR growth in the Yucatan in Dominican Republic.

Bruce: $1 million of higher fee income driven by the continued ramp of the Playa collection.

Bruce: Two 1 million of higher fee income driven by the continued ramp of the Playa collection.

Bruce: <unk> 1 million of lower corporate expense, which was partially timing related with some of the expected expense falling into the fourth quarter.

Bruce: Or a favorable year over year foreign currency exchange tailwind of approximately $2 9 million, which was higher than we anticipated given the sharp drop in the U S. Dollar Mexican peso conversion rate in the weeks ahead of our second quarter earnings report, we felt it would be prudent to approach guidance for the potential reversal of the favorable move in mind.

Bruce: A favorable year over year foreign currency exchange tailwind of approximately $2 9 million, which was higher than we anticipated.

Bruce: The sharp drop in the U S dollar Mexican peso conversion rate in the weeks ahead of our second quarter earnings report, we felt it would be prudent to approach guidance with a potential reversal of the favorable move in mind.

Bruce: The dollar peso exchange rate continued to move in a favorable manner throughout the quarter.

Bruce: For Q3, 2024, we estimate that foreign exchange was a 170 basis points tailwind for both our reported owned resort EBITDA margin and on our legacy portfolio margins.

Bruce: This interruption proceeds received in Q3 2024 favorably impacted resort margins by approximately 40 basis points, but was an approximate 10 basis point net headwind on a year over year basis as the amount of business interruption proceeds received was slightly lower year over year.

Bruce: Adjusting for all of these factors underlying owned resort EBITDA growth was down approximately 36% in the third quarter for the total portfolio and down approximately 39% for the legacy portfolio, reflecting one the significant impacts of hurricane barrel to the construction disruption in the Pacific Coast.

Bruce: Three the U S State Department travel advisory on our Jamaican segment.

Bruce: We expect our underlying EBITDA growth to improve substantially in the fourth quarter compared to the negative 36% in the third quarter as the fourth quarter will have one less of an estimated impact from hurricane barrel, two plus disruption in Los Cabos three improving demand in the Pacific coast in Jamaica and for expected overall.

Bruce: Strength in fundamentals for the holiday period.

Bruce: At the segment level our teams in the Yucatan did an excellent job on the cost front. Despite the challenges presented by hurricane barrel occupancy.

Bruce: At the segment level our teams in the Yucatan did an excellent job on the cost front. Despite the challenges presented by hurricane barrel.

Bruce: Currency declined 270 basis points year over year in the third quarter driving currency neutral margins to decline by approximately 450 basis points year over year and underlying EBITDA growth of negative 17%.

Bruce: Occupancy declined 270 basis points year over year in the third quarter driving currency neutral margins to decline by approximately 450 basis points year over year and underlying EBITDA growth of negative 17%.

Bruce: As you May recall following the realignment of key management personnel, we've been revisiting various processes staffing models and procurement practices since the second quarter of 2023 and the results of our efforts really began to show in the second half of 2023.

Bruce: U S ADR growth moderated as we've mentioned on previous earnings calls the process improvements will be iterative and we will continue increasing efficiency where possible to help offset the impacts.

Bruce: Improvements will be iterative and we will continue increasing efficiency where possible to help offset the impacts.

Bruce: Rising wages and inflation in various expense categories, but the contribution from our expense initiatives will taper on a year over year basis moving forward as we lap the implementation of our measures.

Bruce: In the Pacific our planned renovation work in this segment continued during the third quarter with the peak of the guests impacting construction work taking place during Q3.

Bruce: In the Pacific our planned renovation work in this segment continued during the third quarter with the peak of the guest impacting construction work taking place during Q3.

Bruce: Demand began to firm up as we move through the peak of the construction disruption and while this has been encouraging the increased demand is coming at lower <unk> given the ongoing construction, we anticipate completing the bulk of the renovations ahead of the holidays with the remaining rooms to be completed in early 2025.

Bruce: Turning to the Dominican Republic completed the sale of the dual point to counter resort in late December of 2023, and the dual Palm Beach resort was closed for a significant portion of Q1 2023 and sold in the third quarter of this year.

Bruce: Turning to the Dominican Republic.

Bruce: The sale of the joint account a resort in late December of 2023, and the dual Palm Beach resort was closed for a significant portion of Q1 2023 and sold in the third quarter of this year.

Bruce: Remaining core resorts in this segment continued to perform well on an underlying basis, we expect year over year occupancy and ADR to increase in the fourth quarter. Following the dip in Q3 as a result of hurricane barrel.

<unk> core resorts in this segment continued to perform well on an underlying basis.

Bruce: Expect year over year occupancy and ADR to increase in the fourth quarter. Following the dip in Q3 as a result of hurricane barrel.

Bruce: As previously mentioned year over year comparisons in the segment were also impacted by the receipt of $1 million of business interruption proceeds during the third quarter of 2023 and $700000 of business interruption proceeds received in Q3 2024.

Bruce: Finally, Jamaica third quarter was largely as expected with the approximate 30% revpar decline driving a material decline in resort EBITDA.

Bruce: As we outlined on our last earnings call. The segment was starting to regain its footing, especially for the fourth quarter, but the recovery was significantly disrupted by hurricane barrel in late June.

Bruce: We outlined on our last earnings call. The segment was starting to regain its footing, especially for the fourth quarter because the recovery was significantly disrupted by hurricane barrel in late June.

Bruce: Although the physical property impact a barrel was not significant it had a meaningful impact on demand for the summer and early fall period, and both the Caribbean and the Yucatan is both destinations where in the direct path of the storm. However, the recovery resumed as we move through the quarter and <unk> in the market adjusted lower as we look ahead to the fourth quarter and first half.

Bruce: Although the physical property impact a barrel was not significant it had a meaningful impact on demand for the summer and early fall period in both the Caribbean and the Yucatan is both destinations where in the direct path of the storm. However, the recovery resumed as we move through the quarter and <unk> in the market adjusted lower as we look ahead to the fourth quarter and first.

Bruce: A 2025, our occupancy is pacing close to flat year over year, albeit at lower ADR. This.

Bruce: Half of 2025, our occupancy is pacing close to flat year over year, albeit at lower ADR.

Bruce: This is encouraging as it is the first step toward rebuilding the market and the relative value should aid the destination overtime.

Bruce: Looking at demand as a whole following the significant disruption in booking patterns patterns caused by hurricane barrel, we largely saw demand normalize as we move through the quarter with the status quo segments of the Dominican Republic, and Yucatan Peninsula, returning to underlying trends in the Pacific in Jamaica, actually seeing underlying improvement, particularly for the holiday period.

Bruce: <unk>.

Bruce: Looking at the fourth quarter, our revenue is pacing up low single digits in Yucatan up mid teens in the Dominican Republic, and down low double digits and should make up with the latter marking a significant improvement compared to the approximate 30% decline in the third quarter.

Looking at the fourth quarter, our revenue is pacing up low single digits in Yucatan up mid teens in the Dominican Republic, and down low double digits and should make up with the latter marking a significant improvement compared to the approximate 30% decline in the third quarter or.

Bruce: More importantly, the upcoming high season is continuing to build nicely and the demand looks solid with ADR up low single digits for the total portfolio and up high single digits, excluding Jamaica in aggregate during the third quarter of 2024 46, 2% apply at owned and managed transient revenues booked were booked.

Bruce: Correct up 50 basis points year over year, Playa resorts Dot com accounted for approximately 13% of our total player owned and managed transient room night bookings continuing to be a critical factor in our customer sourcing in ADR gains.

Bruce: <unk> up 50 basis points year over year, Playa resorts Dot com accounted for approximately 13% of our total player owned and managed transient room night bookings continuing to be a critical factor in our customer sourcing and ADR gains.

Bruce: Taking a look at who is traveling roughly 48% of apply at owned and managed transient room night stays in the quarter came from our direct channels geographically, our South American European and Canadian guest mix, all improved meaningfully meaningfully year over year as our American source guest mix continues to normalize.

Bruce: Taking a look at who is traveling roughly 48% of our Playa owned and managed transient room night stays in the quarter came from our direct channels geographically, our South American European and Canadian guest mix, all improved meaningfully meaningfully year over year as our American source guest mix continues to normalize recut.

Bruce: Recovery of our Canadian guest segmentation versus pre pandemic.

Bruce: <unk> of our Canadian guest segmentation versus pre pandemic remains near approximately 80% and our American guest mix is roughly back to pre pandemic levels, our European and South American guest mix remained the most elevated versus pre pandemic at approximately 175% to 200%, while our Asian guest mix was largely unchanged and remains.

Bruce: <unk> near approximately 80% and our American guest mix is roughly back to pre pandemic levels, our European and South American guest mix remained the most elevated versus pre pandemic at approximately 175% to 200%, while our Asian guest mix was largely unchanged and remains only about 25% recovered.

Bruce: Only about 25% recovered our visibility remains a critical factor of our success is our booking window was just over three months during the third quarter.

Our visibility remains a critical factor for our success is our booking window was just over three months during the third quarter.

Bruce: Finally on the capital allocation front, we repurchased approximately $50 million worth of Playa stock during the third quarter and roughly an additional $25 million, thus far in the fourth quarter, bringing our total repurchases since resuming our program in September 2022 to approximately $375 million or approximately 29.

Bruce: Finally on the capital allocation front, we repurchased approximately $50 million worth of client stock during the third quarter and roughly an additional $25 million, thus far in the fourth quarter, bringing our total repurchases since resuming our program in September 2022 to approximately $375 million or approximately 29.

Bruce: Percent of the shares outstanding.

Bruce: Once again I would like to sincerely. Thank all of our associates, who continue to deliver world class service in the face of unexpected challenges from rising operating costs their unwavering passion and dedication to service from the heart is what truly sets <unk> apart.

Speaker Change: Once again I would like to sincerely. Thank all of our associates, who continue to deliver world class service in the face of unexpected challenges from rising operating costs their unwavering passion and dedication to service from the heart is what truly sets <unk> apart with that I will turn the call back over to Ryan to discuss our balance sheet and our outlook.

Bruce: With that I will turn the call back over to Ryan to discuss our balance sheet and our outlook.

Ryan: Thank you Bruce.

Speaker Change: Thank you Bruce.

I'll begin with a recap of the segment fundamentals followed by an overview of our balance sheet and expected uses of cash and conclude with our outlook.

Ryan: I'll begin with a recap of the segment fundamentals followed by an overview of our balance sheet and expected uses of cash and conclude with our outlook.

Ryan: Before I begin all references as a reminder to expense and margin kpis on a currency neutral basis, and also exclude business interruption proceeds unless otherwise stated.

Ryan: I begin all references as a reminder to expense and margin kpis on a currency neutral basis, and also excludes business interruption proceeds unless otherwise stated.

Bruce: Our third quarter results were slightly ahead of our expectations on a fundamental basis as demand improves through the quarter outside of core owned resort operations as Bruce mentioned, given the volatility in the dollar peso exchange rate around the time of our last earnings call. We thought it was prudent to use an exchange rate that was below spot rates at the time of the call leading to an upside from FX in the quarter.

Ryan: Our third quarter results were slightly ahead of our expectations on a fundamental basis as demand improves through the quarter outside of core owned resort operations as Bruce mentioned, given the volatility in the dollar peso exchange rate around the time of our last earnings call. We thought it was prudent to use an exchange rate that was below spot rates at the time of the call leading to an upside from FX in the quarter.

Bruce: As the dollar peso exchange rate remained favorable other factors driving the beat were 701000 business interruption proceeds higher fee revenue from the prior collection and the timing of corporate expenses, all contributed to better than expected adjusted EBITDA.

Ryan: Or is the dollar peso exchange rate remained favorable other factors driving the beat were 701000 business interruption proceeds higher fee revenue from the <unk> collection and the timing of corporate expenses, all contributed to better than expected adjusted EBITDA.

Bruce: Reported owners or EBIT margins declined over 500 basis points year over year, including a net negative impact.

Ryan: Reported owners or EBIT margins declined over 500 basis points year over year, including a net negative impact.

Bruce: 10 basis points from lower business adoption interruption proceeds in the quarter versus last year, and a positive FX tailwind of 170 basis points adjusting for FX and by our underlying margins declined 660 basis points, reflecting the impact of hurricane barrel. The peak disruption of the renovation work in the Pacific and the challenging environment in Jamaica.

Ryan: 10 basis points from lower business interruption.

Ryan: Interruption proceeds in the quarter versus last year, and a positive FX tailwind of 170 basis points.

Ryan: For FX and by our underlying margins declined 660 basis points, reflecting the impact of hurricane barrel. The peak disruption of the renovation work in the Pacific and the challenging environment in Jamaica.

Bruce: On the cost front similar to what we're experiencing in bookings in recent months trends normalized post hurricane barrel and our underlying expense inflation assumptions across the major cost buckets have remained steady since our last update with labor remaining a headwind and food and beverage costs favorably impacting market margins.

Ryan: On the cost front similar to what we're experiencing in bookings in recent months trends normalized post hurricane barrel and our underlying expense inflation assumptions across the major cost buckets have remained steady since our last update with labor remaining a headwind and food and beverage costs favorably impacting market margins.

Ryan: Turning to our <unk> business, our 2024 net mice group business on the books.

Bruce: Turning to our <unk> business, our 2024 net mice group business on the books as.

Bruce: Approximately $68 million up roughly 13% compared to the same time last year for 2025, we have currently $45 million of mice business on the books, which is a decline versus prior year. The decline was expected. However, given the renovation work in the Pacific Coast and lapping a large group buyout of our Los Cabos resort in Q1 of 'twenty four as a reminder.

Ryan: Ultimately $68 million up roughly 13% compared to the same time last year for 2025, we are currently $45 million of mice business on the books, which is a decline versus prior year. The decline was expected. However, given the renovation work in the Pacific Coast and lapping a large group buyout of our Los Cabos resort in Q1 of 'twenty four as a reminder of that.

Bruce: That buyout in the Pacific in Q1 of this year was a legacy contract booked it far below market rates, which resulted in the Q1 Pacific Coast reported occupancy up seven three percentage points year over year, but an ADR decline of just under 3%.

Ryan: Buy out in the Pacific in Q1 of this year with a legacy contract booked it far below market rates, which resulted in the Q1 Pacific Coast reported occupancy up seven three percentage points year over year, but an ADR decline of just under 3%.

Bruce: Finally, turning to the balance sheet during the second quarter, we again, we repriced our term loan.

Finally, turning to the balance sheet during the second quarter, we again.

Ryan: Repriced our term loan.

Bruce: Which is due 2029, reducing the spread by an additional 50 basis points to sofa, plus 275% saving over $5 million per year and cumulatively over $15 million annually since our original refinancing in December of 'twenty two.

Ryan: Which is due 2029, reducing the spread by an additional 50 basis points to sofa, plus 275% saving over $5 million per year and cumulatively over $15 million annually since our original refinancing in December of 'twenty two.

Bruce: We finished the quarter with a total cash balance of $211 $1 million and total outstanding interest bearing debt at $1 8 billion.

Ryan: <unk> finished the quarter with a total cash balance of $211 $1 million and total outstanding interest bearing debt of $1 8 billion. We currently have no outstanding borrowings on our $225 million revolver.

Bruce: Currently have no outstanding borrowings on our $225 million revolver.

Bruce: Our net leverage on a trailing basis stands at three three times excluding lease capitalization.

Ryan: Our net leverage on a trailing basis stands at three three times excluding lease capitalization.

Ryan: We continue to anticipate our cash capex spend for full year 2024 to be approximately $100 million to $120 million for the year partitioned out between roughly 40% to $45 million 45 to 50 million for maintenance and other critical capex and the remainder are designated for ROI oriented projects.

Bruce: We continue to anticipate our cash capex spend for full year 2024 to be approximately $100 million to $120 million for the year partitioned out between roughly 40% to $45 million 45 to 50 million for maintenance and other critical capex and the remainder are designated for ROI oriented projects.

Ryan: Also as a reminder, effective April 15th we entered into two interest rate swaps to mitigate the floating rate interest.

Bruce: Also as a reminder, effective April 15th we entered into two interest rate swaps to mitigate the floating rate interest.

Ryan: And our term loan.

Bruce: And our term loan.

Ryan: Through 2029, we entered into two and three year contract both of which have a fixed notional amount of $275 million carry fixed sofa rates of four 5% and 371% respectively.

Bruce: <unk> 2029, we entered into two and three year contract both of which have a fixed notional amount of $275 million carry fixed sofa rates of four 5% and 371% respectively.

Ryan: Separately, we have implemented FX hedges on approximately half of our Mexican peso exposure for 2024, which is greatly reduced the volatility of the impact on our reported EBITDA this year.

Bruce: Separately, we have implemented FX hedges on approximately half of our Mexican peso exposure for 2024, which is greatly reduced the volatility of the impact on our reported EBITDA this year.

Ryan: So 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 to be roughly zero to $3 million headwind, which is slightly better than our previous outlook of a $5 million to $8 million headwind.

Bruce: So 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 to be roughly zero to $3 million headwind, which is slightly better than our previous outlook of a $5 million to $8 million headwind.

Ryan: We expect the fourth quarter FX impact to be a favorable approximately $1 million.

Bruce: We expect the fourth quarter FX impact to be a favorable approximately $1 million.

Speaker Change: On the capital allocation front as Bruce mentioned, we repurchased an additional $50 million of stock during the quarter and an additional approximately $25 million. Thus far in Q4 of this year.

Speaker Change: Since we began repurchasing shares in September of 'twenty, two we have repurchased over 48 million shares or over 29% of our float.

Speaker Change: Since we began repurchasing shares in September of 'twenty, two we've repurchased over 48 million shares or over 29% of our float.

Speaker Change: We still have over $50 million remaining on our existing repurchase authorization.

Speaker Change: So our leverage ratios at or near three times, plus the anticipated free cash flow generation of the business and the attractive valuation of our stock. We continue to believe repurchasing shares is a very compelling use of capital and intend to use our discretionary capital to repurchase shares going forward depending of course on market conditions.

Bruce: Our leverage ratios at or near three times, plus anticipated free cash flow generation of the business and the attractive valuation of our stock. We continue to believe repurchasing shares is a very compelling use of capital and intend to use our discretionary capital to repurchase shares going forward depending of course on market conditions.

Bruce: Now turning our attention to our outlook for 2024 first again I'd like to remind every one of the unique items affecting the comparability of our financials compared to 2023 before we dive in so as a reminder, first foreign exchange the Mexican peso and the appreciation of the peso had a $24 $5 million impact on adjusted EBITDA in 2000.

Speaker Change: Now turning our attention to our outlook for 2024 first again I'd like to remind everyone of the unique items affecting the comparability of our financials compared to 2023 before we dive in so as a reminder, first foreign exchange the Mexican peso and the appreciation of the peso had a $24 $5 million impact on adjusted EBITDA and <unk>.

Speaker Change: 23.

Bruce: 23.

Bruce: Is this interruption in 2023, we recognized $6 $1 million of bi proceeds with $4 3 million coming in the second quarter of 2003, and approximately 900 K in Q3, and Q4 of last year respectively.

Speaker Change: Is this interruption in 2023, we recognized $6 $1 million of bi proceeds with $4 3 million coming in the second quarter of 2003, and approximately 900 K in Q3, and Q4 of last year respectively.

Speaker Change: As a reminder, the Dr. Jewel properties, both of which have been sold.

Bruce: As a reminder, the Dr Juul properties, both of which have been sold.

Bruce: Resorts recorded an EBIT loss of approximately $15 million and negatively impacted owned resort margins by 280 basis points.

Speaker Change: <unk> recorded an EBIT loss of approximately $15 million and negatively impacted owned resort margins by 280 basis points.

Speaker Change: Roughly one third of the loss occurred during the first quarter of 2023 is the dual Palm Beach resort was closed for the majority of the quarter.

Bruce: Roughly one third of the loss occurred during the first quarter of 2023 is the dual Palm Beach resort was closed for the majority of the quarter.

Speaker Change: Now turning to our outlook.

Bruce: Now turning to our outlook.

Speaker Change: Currently expect full year 2024, adjusted EBITDA to be $250 million to $255 million, which includes the following key considerations and inputs.

Bruce: Currently expect full year 2024, adjusted EBITDA to be $250 million to $255 million, which includes the following key considerations and inputs.

September 22, we've repurchased over 48 million shares, or over 29% of our float.

Speaker Change: Firstly, our expectation for occupancy is unchanged, we still expect to be up low single digit percentage points for the total portfolio and down low single digits for the legacy portfolio.

Bruce: Our expectation for occupancy is unchanged, we still expect to be up low single digit percentage points for the total portfolio and down low single digits for the legacy portfolio.

Our leverage ratio is at or near three times, plus the anticipated free cash flow generation of the business and the attractive valuation of our stock, we continue to believe repurchasing shares is a very compelling use of capital and intend to use our discretionary capital to repurchase shares going forward, depending of course on market conditions.

Speaker Change: We expect a slight improvement in the total portfolio ADR growth because we now expect mid single digit ADR growth, reflecting the disposition of the jewel Palm Beach resort and.

Bruce: We expect a slight improvement in the total portfolio ADR growth because we now expect mid single digit ADR growth, reflecting the disposition of the jewel Palm Beach resort.

Now turning our attention to our outlook for 2024.

Bruce: And we expect to be up low single digit ADR growth for the legacy portfolio.

Speaker Change: And we expect to be up low single digit ADR growth for the legacy portfolio.

First again, I'd like to remind everyone of the unique items affecting the comparability of our financials compared to 2023 before we dive in.

Bruce: There is currently no change to the Revpar growth of mid single digit to high single digit for the total portfolio and we still expect to be down low single digits for the legacy portfolio.

Speaker Change: Currently no change to the Revpar growth of mid single digit to high single digit for the total portfolio and we still expect to be down low single digits for the legacy portfolio.

So, as a reminder, first foreign exchange, the Mexican peso and the appreciation of the peso had a $24.5 million impact on adjusted EBITDA in 2023.

Bruce: As I mentioned, we still expected FX headwind of approximately zero to $3 million for the full year based on current exchange rates net of our forwards.

Speaker Change: As I mentioned, we still expected FX headwind of approximately zero to $3 million for the full year based on current exchange rates net of our forwards.

Business interruption in 2023 we recognize 6.1 million of BI proceeds with 4.3 million coming in the second quarter of 23 and approximately 900k in Q3 and Q4 of last year respectively.

Bruce: We still expect construction disruption impact in the mid to high teens in the Pacific Coast for the renovations.

Speaker Change: We still expect construction disruption impact in the mid to high teens in the Pacific Coast for the renovations.

Speaker Change: As I mentioned there is no change in underlying expense inflation assumptions as we've mentioned in previous calls we've been diligently working to improve our efficiency and we still believe we've lowered our margin leverage hurdle to approximately 4% ADR growth to hold margins flat on a currency and business interruption adjusted basis.

Bruce: I mentioned there is no change in underlying expense inflation assumptions as we've mentioned in previous calls we've been diligently working to improve our efficiency and we still believe we've lowered our margin leverage hurdle to approximately 4% ADR growth to hold margins flat on a currency and business interruption adjusted basis.

As a reminder, the DR dual properties, both of which have been sold, resorts recorded an EBITDA loss of approximately $15 million and negatively impacted owned resort margins by 280 basis points.

Roughly one-third of the loss occurred during the first quarter of 2023 as the Jewel Palm Beach Resort was closed for the majority of the quarter.

Speaker Change: We expect a modest net negative impact from annualized corporate expense increases from 'twenty, three which again is partially offset by higher and growing fee income, particularly from the ply clicks.

Bruce: Expect a modest net negative impact from annualized corporate expense increases from 'twenty, three which again is partially offset by higher and growing fee income, particularly from the ply collection.

So now turning to our Outlook.

Currently expect full year 2024 adjusted EBITDA to be $250 to $255 million which includes the following key considerations and inputs.

Speaker Change: Turning specifically to our Q4 outlook for the fourth quarter.

Bruce: Turning specifically to our Q4 outlook for the fourth quarter, we expect our reported occupancy to be in the low to mid seventies and reported package ADR to increase mid single digits on a year over year basis.

Speaker Change: <unk> reported occupancy to be in the low to mid seventies and reported package ADR to increase mid single digits on a year over year basis.

Firstly, our expectation for occupancy is unchanged. We still expect to be up low single-digit percentage points for the total portfolio and down low single digits for the legacy portfolio.

We expect owned resort EBITDA margins to decline significantly year over year, given the obvious continued renovation disruption in the Pacific and the.

Bruce: We expect owned resort EBITDA margins to decline significantly year over year, given the obvious continued renovation disruption the Pacific.

We expect a slight improvement in the total portfolio ADR growth because we now expect mid-single-digit ADR growth, reflecting the disposition of the Jewel Palm Beach Resort. And we expect to be up low single-digit ADR growth for the legacy portfolio.

Bruce: And the and the aforementioned $900000 of business interruption proceeds recorded in Q4 of last year, which again was a positive 40 basis point impact to the comparison period.

And the aforementioned $900000 of business interruption proceeds recorded in Q4 of last year, which again was a positive 40 basis point impact of the comparison periods.

Bruce: FX again is expected to positively impact margins by approximately 50 basis points.

Speaker Change: FX again is expected to positively impact margins by approximately 50 basis points.

There's currently no change to the REF bar growth of mid-single-digit to high-single-digit for the total portfolio, and we still expect to be down low-single-digits for the legacy portfolio.

Bruce: Putting it altogether, we expect client collection and management fee income of $2 million to $3 million corporate expense for the quarter of $15 million to $16 million in.

Speaker Change: Putting it altogether, we expect client collection and management fee income of $2 million to $3 million corporate expense for the quarter of $15 million to $16 million and.

And adjusted EBITDA of $48 million to $53 million again, we anticipate that hurricane barrel will have a negative impact on the fourth quarter, but the bulk of the storms disruption was felt in the third quarter given our booking window. We're currently 95% booked for the fourth quarter as of the end of October.

Bruce: And adjusted EBITDA of $48 million to $53 million again, we anticipate that hurricane barrel will have a negative impact on the fourth quarter, but the bulk of the storms disruption is felt in the third quarter given our booking window. We're currently 95% booked for the fourth quarter as of the end of October.

As I mentioned, we still expect a FX headwind of approximately $0 to $3 million for the full year based on current exchange rates, net of our forwards.

We still expect construction disruption impact in the mid to high teens in the Pacific Coast for the renovations.

Hope that this framework helps guide you as you fine tune your models and get further insight in what Theyre seeing and expecting with that I'll turn the call back over to Bruce for some closing remarks.

Speaker Change: Hope that this framework helps guide you as you fine tune your models and get further insight in what we're seeing and expecting with that I'll turn the call back over to Bruce for some closing remarks.

As I mentioned, there's no change in underlying expense inflation assumptions. As we've mentioned in previous calls, we've been diligently working to improve our efficiency and we still believe we've lowered our margin leverage hurdle to approximately 4% ADR growth to hold margins flat on a currency and business interruption adjusted basis.

Bruce: Great. Thanks, Brian.

Bruce: Following the disruption caused by hurricane barrel fundamentals are largely back on track as we near the upcoming high season I'm encouraged by the improvement in Jamaica, and the momentum as we approach the holidays, but we remain mindful that we still face headwinds early in 2025 until we lap the decline in Jamaica, and as we build up higher rate of bookings in the Pacific.

We expect a modest net negative impact from annualized and corporate expense increases from 2023, which again is partially offset by higher and growing fee income, particularly from the ply collection.

Turning specifically to our Q4 outlook for the fourth quarter, we expect reported occupancy to be in the low to mid 70s and reported package ADR to increase mid single digits on a year-over-year basis.

Bruce: Following the anticipated completion of the renovation work in early 2025, the sizable opportunity ahead in 2026 following the renovation of the large incomes and the anticipated ramp in mice business in Los Cabos should create meaningful shareholder value for years to come.

Bruce: Following the anticipated completion of the renovation work in early 2025, the sizable opportunity ahead in 2026 following the renovation of the large incumbents in the anticipated ramp in mice business in Los Cabos should create meaningful shareholder value for years to come.

We expect owned resort EBITDA margins to decline significantly year over year, given the obvious continued renovation disruption in the Pacific and the aforementioned $900,000 of business interruption proceeds recorded in Q4 of last year, which again was a positive 40 basis point impact to the comparison period.

Bruce: We intend to continue executing at a high level and managing costs, while returning free cash flow to shareholders through share repurchases with that I'd like to open up the call for your questions.

Bruce: We intend to continue executing at a high level and managing costs, while returning free cash flow to shareholders through share repurchases.

Speaker Change: I'd like to open up the call for your questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star and then two.

FX, again, is expected to positively impact margins by approximately 50 basis points.

Putting it all together we expect client collection and management fee income of two to three million dollars, corporate expense for the quarter of fifteen to sixteen million,

adjusted EBITDA of $48 to $53 million. Again, we anticipate that Hurricane Beryl will have a negative impact on the fourth quarter, but the bulk of the storm's disruption was felt in the third quarter. Given our booking window, we're currently 95% booked for the fourth quarter as of the end of October.

Speaker Change: Our first question comes from Patrick Scholes with <unk> Securities. Please go ahead.

Hi, good morning, Thank you.

Speaker Change: Hi, good morning, Thank you.

Speaker Change: We hope that this framework helps guide you as you fine-tune your models and gives further insight into what we're seeing and expecting. So with that, I'll turn the call back over to Bruce for some closing remarks.

Bruce:

Brian and Bruce wondering if you could give us.

Bruce: Brian and Bruce wondering if you could give us.

Bruce: Possible.

Speaker Change: Possible.

Bruce: A little bit.

Speaker Change: A little bit.

The initial expectations for 2026, certainly 2025, you're going to have on earnings.

Bruce: Our initial expectations for 2026, certainly 2025.

Great. Thanks, Ryan.

Bruce: Following the disruption caused by Hurricane Beryl, fundamentals are largely back on track as we near the upcoming high season.

Bruce: Earnings from renovation disruption, but how might we think about.

Speaker Change: From renovation disruption, but how might we think about.

I'm encouraged by the improvement in Jamaica and the momentum as we approach the holidays, but we remain mindful that we still face headwinds early in 2025 until we lap the decline in Jamaica and as we build up higher rated bookings in the Pacific following the anticipated completion of the renovation work in early 2025.

Speaker Change: What potentially a range of adjusted EBITDA could be for 2026.

Bruce: What potentially a range of adjusted EBITDA could be for 2026.

Speaker Change: Coming out of the 25 renovations.

Bruce: Coming out of the 25 rentals. Thank you.

Speaker Change: If you can provide.

Bruce: <unk> can provide.

Sure I mean, we're certainly a long way from from giving guidance of 26, but I think it might be helpful to bridge you to 'twenty five and make sure everybody understands those building blocks and then you'll have a good idea for then what could potentially come in.

Speaker Change: Sure I mean, we're certainly a long way from from giving guidance of 26, but I think it might be helpful to bridge you to 25 and make sure everybody understands those building blocks and then you have a good idea for then what could potentially come.

Bruce: The sizable opportunity ahead in 2026 following the renovation of Zalarq and Kuhn in the anticipated ramp in mice business in Los Cabos should create meaningful shareholder value for years to come.

Speaker Change: In 2026, I think thats, the best way to think about it before.

Bruce: We intend to continue executing at high level in managing costs while returning free cash flow to shareholders through share repurchases. With that, I'd like to open up the call for your questions.

Speaker Change: Okay, and then any sort of fundamental assumptions two years out I think thats, probably the best way to do it if that's okay with you see Pat but.

Speaker Change: Any sort of fundamental assumptions two years out I think that's probably the best way to do it if that's okay with you see Pat but.

Speaker Change: Let's start with the 2020.

Speaker Change: Yes, let's start with 2025, so you heard US talk many times about the significant renovation disruption in the Pacific and we've said we've had kind of high teens disruption EBIT of disruptions. So let's call that $20 million that work is largely completed by the end of this year, but there will still be rooms out of service next year in Q1, So we expect.

Speaker Change: Yes, let's start with 2025, so you heard US talk many times about the significant renovation disruption in the Pacific and we've said we've had kind of high teens disruption EBIT disruption. So let's call that $20 million that work is largely completed by the end of this year, but there will still be rooms out of service next year in Q1. So we expect just by.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Patrick Scholz with Truist Securities. Please go ahead.

Speaker Change: By virtue of having rooms back online in Q2 through Q4, we will recoup some of that $20 million.

Speaker Change: Virtue of having rooms back online in Q2 through Q4, we will recoup some of that $20 million.

Speaker Change: Disruption next year, but not all of it so the baseline assumption, we've assumed roughly half of that $20 million. So you get positive right.

Speaker Change: Disruption next year, but not all of it so the baseline assumption, we've assumed roughly half of that 20 million so you'll get positive.

Good morning. Thank you.

Thank you. Bye.

Speaker Change: Brian and Bruce, I wonder if you could give us, if possible,

Speaker Change: Could we outperformed certainly we won't we don't expect that we'll have group substantially next year because groups are booking for 2026 and the sentiment from meeting planners that the rumor at work that we've done there is great, but we don't expect Big group business in 25. So that's why we expect roughly to get half of that back so I'll talk about that the.

a little bit of your initial expectations for 2026. Certainly 2025 you're going to have an earnings hit from renovation disruption, but you know how might we think about

Speaker Change: Positive 10 million for next year.

Speaker Change: you know, what potentially a range of adjusted EBITDA could be for 2026.

Speaker Change: Jamaica is still a wildcard as a reminder, we won't lap the impacts to the travel advisory warning.

Jamaica is still a wildcard as a reminder, we won't lap the impacts to the travel advisory warning until two till Q2 of next year, because our first quarter is still pretty good. This year. So net net our best estimate for the impact of Annualizing that travel advisory warning is a negative $10 million to next year. So.

Speaker Change: coming out of the 2025 renovations, thank you, if you can provide. Yeah, we're-

Speaker Change: Until two till Q2 of next year, because our first quarter was still pretty good. This year. So net net our best estimate for the impact of Annualizing that.

Speaker Change: Sure, I mean we're certainly a long way from from giving guidance to 26, but I think it might be helpful to bridge you to 25 and make sure everybody understands those building blocks so then you have a good idea for then what could potentially come back.

Speaker Change: Travel advisory warning is a negative $10 million to next year, So uptown downtown.

<unk> downtime.

Speaker Change: We've talked about our plans for renovating these lora and Ken Kun I know we've covered the all the reasons why that's a spectacular asset I think is going to drive some nice incremental returns in 2006 and beyond but that property does roughly high teens EBIT. This year. So we'll keep it open through the end of March next year shut it down reopened at the end of the year.

Speaker Change: We've talked about.

Speaker Change: Our plans for renovating these Laura and Ken Kun I know we've covered all the reasons why that's a spectacular asset I think is going to drive some nice incremental returns in 2006 and beyond but that property, that's roughly high teens EBIT. This year. So we'll keep it open through the end of March next year shut it down reopened at the end of the year and so net net it's roughly.

Speaker Change: in 2026?" I think that's the best way to think about it before we start leaving any sort of fundamental assumptions two years out. I think that's probably the best way to do it, if that's OK with you. But let's start with the 2020...

Yeah, let's start with 2025. So, you heard us talk...

Speaker Change: many times about the significant renovation disruption in the Pacific. And we've said, you know, we've had kind of high teens disruption, EBITDA disruption, so let's call that $20 million.

Speaker Change: And so net net it's roughly a $20 million year over year swing because it will obviously lose money and have carrying costs throughout the time its close so thats a down $20 million impact.

Speaker Change: $20 million year over year swing, because it will obviously lose money and have carrying costs throughout the time its close so thats a down $20 million impact you.

Speaker Change: That work is largely completed by the end of this year, but there will still be rooms out of service next year in Q1. So we expect, just by virtue of having rooms back online in Q2 through Q4, we will recoup some of that $20 million.

Speaker Change: You have to remove business interruption that we recorded this year, but then lastly, the nice tailwind is as I'm sure you followed the foreign exchange the Mexican peso has weakened substantially it started doing so in June and July, but really weakened in August and we actually leaned into it and layered on 12 more Mexican peso forwards for 2020.

Speaker Change: disruption next year but not all of it. So the baseline of assumption we've assumed roughly half of that 20 million so you get positive 10.

Speaker Change: But really weakened in August and we actually leaned into it and layered on 12 more Mexican peso forwards for 2025 throughout the year at a weighted average of roughly 19 and a half. So all that means is you're walking into next year with roughly $12 million to $17 million of EBIT in your pocket, mostly first half weighted so add all that up CPAP.

Speaker Change: Can we outperform? Certainly. We won't ... we don't expect that we'll have group substantially next year, because groups are booking for 2026. And the sentiment from meeting planners is that the room Parent worked that we've done there it great, but we don't expect big group business in 205. So that's why we expect roughly to get half of that back. So let's talk about, set the positive 10 million for next year.

Speaker Change: Throughout the year at a weighted average of roughly 19 and a half. So all that means is you're walking into next year with roughly $12 million to $17 million of EBIT in your pocket, mostly first half weighted so add all that up CPAP youre roughly flat to probably down five ish next year for 2025 before you make any assumptions on.

Speaker Change: Youre roughly flat to probably down five ish next year for 2025 before you make any assumptions on operating fundamentals.

Speaker Change: Jamaica, it's still a wild card, as a reminder, we won't lap the impacts of the travel advisory warning.

Speaker Change: <unk> fundamentals.

Speaker Change: Our key assumptions, yet on what will happen with Jamaica, when you start to lap.

Speaker Change: Our key assumptions, yet on what will happen with Jamaica, when you start to lap the travel advisory.

Speaker Change: until Q2 of next year, because our first quarter is still pretty good this year. So, net-net, our best estimate for the impact of annualizing that Travel Advisor Warning is a negative $10 million to next year. So, up 10, down 10.

Speaker Change: Travel advisory.

Speaker Change: Now you said, if they had to 2026th far from guidance you can at least expect that you'd get back the additional $10 million in the Pacific right you would at least get back and hopefully more the $20 million lost.

Speaker Change: Now you can get that to 2026th far from guidance you can at least expect that you'll get back the additional $10 million in the Pacific right you would at least get back and hopefully more the $20 million lost from.

We've talked about our...

Speaker Change: plans for renovating the Zolara in Cancun. I know we've covered all the reasons why, but it's a spectacular asset and I think it's going to drive some nice incremental returns.

Speaker Change: From the Lora can kun and.

Speaker Change: From the <unk> Kun and.

Speaker Change: And then you can start to make assumptions on how the shape of the recovery plays out with Jamaica right now Bruce touched on it and we talked about it in the prepared remarks, we've seen occupancy began to stabilize because of some of our yield management tactics, we've essentially been stimulating demand the old fashion way by lowering <unk> and so the <unk>.

is going to talk about.

Speaker Change: <unk> for occupancy looks good but it's at the expense of ADR. So.

Speaker Change: This is a first step in recovering that market to hopefully in 2026, youre able to start yield managing ADR up as you've kind of returned occupancy to previous level. So net net that puts you in the <unk> plus.

Speaker Change: This is a first step in recovering that market hopefully in 2026, youre able to start yield managing ADR up as you've kind of returned occupancy to previous level. So net net that puts you in the <unk> plus.

Speaker Change: You have to remove business interruption that was recorded this year. But then lastly, the nice tailwind is, you know, as I'm sure you followed the foreign exchange, that Mexican peso has weakened substantially. It started doing so in June and July, but really weakened in August. And we actually leaned into it and layered on.

Speaker Change: Plus $30 million, plus plus so youre somewhere in the potentially $2 75 and above again that's extremely early.

Speaker Change: Plus $30 million, plus plus so youre somewhere in the potentially $2 75 and above.

Speaker Change: Again thats extremely early.

Speaker Change: 12 more Mexican peso forwards for 2025 throughout the year at a weighted average of roughly 19.5. So all that means is you're walking into next year with roughly 12 to 17 million dollars of EBIT in your pocket, mostly first half weighted.

Speaker Change: That's a long way off but then you can layer on incremental growth from the renovations any fundamental growth you expect in the markets and how Jamaica recover. So I know there was a long answer but I thought was important to give you those building blocks.

Speaker Change: That's a long way off but then you can layer on incremental growth from the renovations any fundamental growth you expect in the markets and how Jamaica recover. So I know that was a long answer but I thought was important to give you those building blocks.

Speaker Change: That was great.

Speaker Change: It sounds like you are well prepared for the call to answer any questions. Thank you.

Speaker Change: It sounds like you're well prepared for the call to answer any questions all right. Thank you.

Speaker Change: I appreciate it.

Speaker Change: Yeah.

Thanks, Pat and the next question comes from Smedes Rose with Citi. Please go ahead.

Speaker Change: Thanks, Pat and the next question comes from Smedes Rose with Citi. Please go ahead.

Smedes Rose: Alright. Thank you I just wondered maybe talk.

Speaker Change: Alright. Thank you I just wondered maybe talk.

Smedes Rose: A little bit nearer term you mentioned.

Speaker Change: Near term you mentioned some of the bookings activity, we're seeing in the fourth quarter, but maybe just a little more color around I guess what.

Smedes Rose: Turning to bookings activity, we're seeing in the fourth quarter, but maybe just a little more color around I guess what.

Smedes Rose: Whats called the festive season that we're hearing other companies talk about and then.

Speaker Change: It's called the festive season that we're hearing other companies talk about and then.

Speaker Change: You could maybe just talk a little bit more about the recent announcement that high in the Hyatt made with an all inclusive group in the same regions, who are competing in do you think it matters for you.

Speaker Change: You could maybe just talk a little bit more about the recent announcement that high amid hyatt need.

Speaker Change: With an all inclusive group in the same regions, who are competing when do you think it matters for you.

Speaker Change: One way or the other with them taking over management.

Speaker Change: One way or the other with them taking over management of those.

Speaker Change: Those assets.

Speaker Change: Got that.

Speaker Change: Yes, I'll, let Bruce handle the second one we are still not too dissimilar to what others have said, our festive season looks pretty good.

Speaker Change: Particularly at our Yucatan and Dr segment, both are pacing up for Q4 and for Q1, obviously, Jamaica ADR revenues still pacing down as we Havent reached a reference point by which the travel advisory started to take effect and the Pacific is still largely behind because of the rooms offline, but our steady state markets are pacing.

Bruce: Particularly at our Yucatan and Dr segment, both are pacing up for Q4 and for Q1, obviously, Jamaica ADR revenues still pacing down as we haven't reached the reference point by which the travel advisory started to take effect and the Pacific is still largely behind because of the rooms offline, but our steady state markets are pacing.

Speaker Change: Very well for both Thanksgiving and the festive season, which we're very excited about.

Bruce: Very well for both Thanksgiving and the festive season, which we're very excited about.

None.

Bruce: None.

Speaker Change: On the Hyatt announcement, I think its a great <unk>.

Speaker Change: Deal for Hyatt.

Speaker Change: I think I've said.

Speaker Change: Said, all along is that in our space and this goes back to our founding in 2006 that there is a tremendous opportunity in the all inclusive segment for consolidation. There is a lot of family owner operator companies just like Google can narrow which operates under the Bayou print today.

Speaker Change: Said, all along is that in our space and this goes back to our founding in 2006 that there is a tremendous opportunity in the all inclusive segment for consolidation there.

Speaker Change: A lot of family owner, operator companies, just like Google can narrow which operates under the Bayou print today.

Speaker Change: <unk> brand.

Speaker Change: Brand.

Speaker Change: And I think what it's doing is just.

Speaker Change: <unk>.

Speaker Change: What it's doing is just.

Speaker Change: Really smart strategically they already are the dominant <unk>.

Speaker Change: Really smart strategically.

Speaker Change: They already are the dominant <unk>.

Speaker Change: Major global brand in all inclusive.

Speaker Change: With the original deal with US and then with their acquisition of Apple Apple Leisure group now with this transaction. So I think it's really really strategically smart for them and I think youll continue to see that in other brands doing the same kind of.

Speaker Change: With.

Speaker Change: Original deal with US and then with their acquisition of Apple Apple Leisure group now with this transaction. So I think it's really really strategically smart for them and I think youll continue to see that in other brands doing the same kind of.

Speaker Change: Deals now with regards to how does it impact us quite honestly know number one it's already existing stuff thats out there. So it's not like you are adding new rooms into these markets number two for the most part these properties are different very different than ours there.

Speaker Change: Deals now with regards to does it impact us quite honestly know number one it's already existing stuff thats out there. So it's not like you are adding new rooms into these markets number two for the most part these properties are different very different than ours. They are very large properties with you.

Speaker Change: Very large properties with.

Speaker Change: No.

Speaker Change: Lots and lots of rooms at them.

Speaker Change: Traditionally sell through tour, operator channels and they're at a lower price point than our properties tend to be and they go after quite honestly.

Speaker Change: A different kind of customer so I think it's a great add on for Hyatt and I don't think.

Speaker Change: A different kind of customers. So I think it's a great add on for Hyatt and I don't think.

Speaker Change: Negative for us whatsoever.

Speaker Change: Okay. Thank you.

Speaker Change: Yes.

Speaker Change: The next question comes from Tyler Battery battery with Oppenheimer. Please go ahead.

Speaker Change: And the next question comes from Tyler Battery Battery with Oppenheimer. Please go ahead.

Speaker Change: Thank you and good morning.

Speaker Change: Thank you and good morning, sorry.

So I wanted to talk through a little bit more.

Speaker Change: So I wanted to talk through a little bit more.

Speaker Change: Commentary on Jamaica.

Speaker Change: The first question that I have it sounds like you've been able to build from occupancy.

Speaker Change: First question I have it sounds like you've been able to build from occupancy.

Speaker Change: Our ADR.

Speaker Change: Our other resorts in the market doing the same thing.

Speaker Change: Can you talk about the competitive environment and Jamaica, I don't want to suggest that there is potentially room.

Speaker Change: Bruce on the bottom sort of sort of dynamic here, but how do you think about rebuilding some of the edr in price as the demand starts to come back.

Speaker Change: I don't think there is a race to the bottom it's absolutely fair question.

Speaker Change: I don't think there's a race to the bottom it is absolutely fair question.

Speaker Change: We move throughout this year and started seeing that a lot of the promotional activities that were more short term in nature. We're having just as you would expect a short term impact and then also Bruce had a lot of discussions with other owner operators I'm sure. You can guess, who they are in that destination a lot of people were feeling the same sort of pressures.

Speaker Change: We move throughout this year and started seeing that a lot of the promotional activities that were more short term in nature. We're having just that you would expect a short term impact and then also Bruce that a lot of discussions with other owner operators I'm sure you can guess, who they are and that destination a lot of people were feeling the same sort of pressures.

We also started looking around seeing that there were one or two new resorts not massive but new resorts that came into markets nearby some of ours at lower introductory rates and lower price was moving demand and so we said look let's just take a step back and figure out at what point can we at what price point can we move our occupancy from using round numbers 60.

Speaker Change: We also started looking around seeing that there were one or two new resorts not massive but new resorts that came into markets nearby some of ours at lower introductory rates and that lower price was moving demand and so we said look let's just take a step back and figure out at what point can we at what price point can we move our occupancy from using round numbers 60.

Speaker Change: Something percent to back into the <unk> and we found that with a.

Speaker Change: Something percent to back into the seventies, and we found that with a.

10, 15% ADR decline.

Speaker Change: 10% to 15% ADR decline.

So the nice part is you're building occupancy back up you start to see it pacing flat from an occupancy perspective kind of into the into the high season, which is nice and then allows the revenue management teams to start to yield manage from there.

Speaker Change: So the nice part is you're building occupancy back up you start to see it pacing flat from an occupancy perspective kind of into the into the high season, which is nice and then allows the revenue management teams to start to yield manage from there.

Speaker Change: To be clear Q1 will still be a headwind just because.

Speaker Change: To be clear Q1 will still be a headwind just because we had a great Q1, and ADR is will still be down because of the travel advisor, but the hope is and I think a great fantastic goal would be by the time, you're exiting 2025, perhaps you've started to build EBIT backup again, albeit at lower margins, obviously, when you have lower ADR.

Speaker Change: We had a great Q1, and ADR is we'll still be down because of the travel advisor, but the hope is.

Speaker Change: Great Fantastic goal would be by the time, you're exiting 2025, perhaps you've started to build EBITDA backup again, albeit at lower margins. Obviously, when you have lower ADR is higher occupancies, it's going to eat into margin, but then you exit 2025 with a good base of occupancy potentially better and then hopefully have the ability to yield up.

Speaker Change: As higher Occupancies thats going to eat in the margin, but then you exit 2025 with a good base of occupancy potentially better and then hopefully have the ability to yield up from there.

Speaker Change: There is.

Speaker Change: It's nothing scientific other than just getting heads in the beds again.

Speaker Change: Nothing scientific other than just getting heads in the beds again.

Speaker Change: And Bruce mentioned in his prepared remarks as well there is something to be said about the relative value of this will start to show versus our other destinations people still want to go like Okay Jamaica.

Speaker Change: And Bruce mentioned in his prepared remarks as well there is something to be said about the relative value. This will start to show versus our other destinations people still want to go like Okay Jamaica.

Speaker Change: For what it's worth is however, many dollars cheaper to go for a great experience at any one of the resorts there versus adding to the Dr. Mexico, let's check it out so we've seen this play out over time and hopefully we're on the right path here. So this is step one.

Speaker Change: Okay.

Speaker Change: Alright, great follow up question on aircraft.

Speaker Change: Great follow up question on aircraft interiors.

Speaker Change: And to your markets.

Speaker Change: And to your markets I don't know if you could talk a little bit more about what youre seeing especially early next year not sure. If there's been some movements in terms of seats going from different markets just given some of the dynamics.

Speaker Change: If you could talk a little bit more about what youre seeing in especially early next year not sure. If theres been some movements in terms of seats going from different markets just given some of the dynamics in some of the demand trends in Jamaica true.

Speaker Change: The demand trends in direct gotcha.

Speaker Change: Yes, I mean as you saw and you can follow the same day to the airlift into our markets kind of in.

Speaker Change: Yes, I mean as you saw and you can follow the same date of the airlift into our markets.

Speaker Change: Prior to and then through Q1 was quite robust it started to decline across generally all of our markets in Q2, basically low single digits year over year, but still very healthy versus 2019, and basically we've essentially what we saw was airlines start to normalize capacity based on the scheduled seats.

Speaker Change: Basically we've essentially what we saw was airlines start to normalize capacity based on the scheduled seats into the destinations in Q4 and Q1 next year that decline is stabilizing.

Speaker Change: And to the destinations in Q4 and Q1 next year that decline is stabilizing and it still remains at healthy levels versus 2019, So I think what youll see it again based on what is scheduled Q3 kind of at the bottom and then Q4 is starting to work its way back up which is which is nice to see I do think load.

Speaker Change: And it still remains at healthy levels versus 2019, so I think what youll see it again based on what is scheduled Q3 kind of at the bottom and then Q4 is starting to work its way back up which is which is nice to see I do think load factors or should be able to kind of help mitigate the magnitude of this decline.

Speaker Change: <unk> should be able to kind of help mitigate the magnitude of this decline.

People have asked us to Tyler Okay, you've seen airlift go down into Canada, who and why are you seeing massive hits your resorts part of it is just the basic level.

Speaker Change: People have asked us to Tyler Okay, you've seen airlift go down into Canada, who and why are you seeing massive hits your resorts part of it is just a basic level.

Speaker Change: Our assets are located in a prime location in the hotel zone, very very close to the airport or at most 45 minutes away and when you think about our assets and Playa del Carmen.

Speaker Change: Our assets are located in a prime location in the hotel zone, very very close to the airport or at most 45 minutes away. When you think about our assets in Playa del Carmen.

Speaker Change: So maybe.

Speaker Change: <unk> been stealing share from some of those folks that are further away further into loom or places, Florida, North like plan will Harris and others.

Speaker Change: But also at the same time it comes to the going back to the original decision by Bruce and the team to focus on ADR and not having our hotels stood at 90% full coming out of Coke and so if there are declines.

Speaker Change: But also at the same time it comes to the going back to the original decision by Bruce and the team to focus on ADR and not having our hotels that at 90% full coming out of Coke and so if there are declines.

Speaker Change: In air lift into the market and our relative value that we presented the customer still resonates we're fine with it because we can still get 70% to 80% occupancies without blinking.

Speaker Change: In airlift into the markets and our relative value that we presented the customers still resonates we're fine with it because we can still get 70% to 80% occupancies without blinking.

Speaker Change: Okay.

And then the last question is just housekeeping on FX and appreciate the numbers in the details in the guidance.

Speaker Change: And then the last question is just housekeeping on FX and appreciate that the numbers in the details in the guidance.

Speaker Change: When we look at the EBITDA impact would you provided for Q4 and for 2025.

Speaker Change: When we look at the EBITDA impact would you provided for Q4 and for 2025, what sort of spot rate is assumed.

Speaker Change: What sort of spot rate is assumed for that impact how much of your 2025 exposure is hedged at this point is there an easy way to think about the potential sensitivity to EBITDA, depending on what might happen with the currency.

Speaker Change: For that impact.

Speaker Change: How much of your 2025 exposure is hedged at this point is there an easy way to think about the potential sensitivity to EBITDA, depending on what might happen with the currency.

Speaker Change: So let's start with Q4, the midpoint of our guidance assumes 19, which is slightly stronger than spot rates. The peso went on a wild ride on Tuesday during the election, but basically finished flat and it's a little stronger today, but still above 19, so if the FX weakens or gets a little or stays where it is.

Speaker Change: Where it is or kind of gets closer to 20 that kind of helps lead to outperformance in our guidance range.

Speaker Change: Or kind of gets closer to 20 that kind of helps lead to outperformance in our guidance range.

Speaker Change: When you think about next year, we hedged roughly it's not a perfect number because as you can imagine the quantum of Mexican peso expenses, while moves as we forecast out, but we've hedged roughly 70% to 75% of our Mexican peso denominated expense base.

Speaker Change: And when you think about next year, we hedged roughly it's not a perfect number because as you can imagine the quantum of Mexican peso expenses, while moves as we forecast out, but we've hedged roughly 70% to 75% of our Mexican peso denominated expense base.

Speaker Change: And the rates that we put in.

Speaker Change: At a at the time, we did it in August.

Speaker Change: Obviously, it was a curve, but essentially at a weighted average of little over $19 five for the full year. So based on that $19 five and based on where the.

Speaker Change: That was a curve, but essentially at a weighted average of little over $19 five for the full year.

Speaker Change: So based on that $19, five and based on where the.

Speaker Change: Where the rates were this year and where we expect them to remain for the rest of this year.

Speaker Change: Where the rates were this year and where we expect them to remain for the rest of this year. That's how you get to roughly $12 million to $17 million of call. It $15 million of FX tailwind as you walk into next year. So roughly the sensitivity is one point change in <unk>.

Speaker Change: You get to roughly 12% to $17 million of call it $15 million of FX tailwind as you walk into next year. So roughly desensitize. It is one point change in <unk>.

Speaker Change: There's roughly $2 75 ish million dollars of EBITDA per quarter on a hedged basis on an unhedged basis.

Speaker Change: There's roughly $2 75 ish million dollars of EBITDA per quarter on a hedged basis.

Speaker Change: Unhedged basis.

Speaker Change: Right. Okay, Alright, that's helpful. I appreciate that detail. Thank you.

Speaker Change: Okay. Okay, Alright, that's helpful and I appreciate that detail. Thank you.

Speaker Change: And the next question comes from Chad.

Speaker Change: Staying on with Macquarie. Please go ahead.

Chad: Hi, good morning, Thanks for taking my question.

Speaker Change: Hi, good morning, Thanks for taking my question.

Ryan you talked about Capex. This year 100 to 120 can you help us can you can you frame out roughly what it would look at look like in 'twenty five based on.

Speaker Change: Ryan you talked about Capex. This year 100 to 120 can you help us can you can you frame out roughly what it would look at look like in 2005 based on.

Speaker Change: On the <unk>.

Speaker Change: On the.

Speaker Change: So Laura project, and then how does that kind of fit into the share repurchases.

Laura Kun: Laura project, and then how does that kind of fit into the share repurchases.

Speaker Change: Which had been running really strong lately Bruce I think you said your $50 million left but just help us there on the capital allocation side. Please thanks.

Speaker Change: Yes, yes, I mean, the board has been very supportive of re upping, our authorizations whenever needed and there is still just like Bruce and I are big fans of continue to purchase back our stock our expectation for next year is that the overall capex spend is not too dissimilar from this year, because you'll be finishing some of the work finishing out the work in the Pacific.

Yes, yes, I mean, the board has been very supportive of re upping, our authorizations whenever needed and there is still just like Bruce and I are big fans of continue to purchase back our stock our expectation for next year is that the overall capex spend is not too dissimilar from this year, because you'll be finishing some of the work finishing up the work in the Pacific.

Speaker Change: But then beginning.

Speaker Change: Project in.

Speaker Change: <unk> in.

Speaker Change: In Cancun, which on a per key basis, we're still working through the numbers, but its obviously higher just because of their full renovation and bringing our property to a pretty nice and wonderful high level. So we expect roughly the same quantum again, the nice part is that our free cash flow generation remains incredibly strong.

Speaker Change: In Cancun, which on a per key basis, we're still working through the numbers, but it's obviously higher just because of their full renovation and bringing our property to a pretty nice and wonderful high level. So we expect roughly the same quantum again, the nice part is that our free cash flow generation remains incredibly strong we're still.

We're still converting anywhere from 40% to 50, sometimes it's 5% of our EBITDA into free cash flow after normal fixed expenses. So we have the luxury today of continuing to do is to do both.

Speaker Change: Converting anywhere from 40% to 50, sometimes it's 5% of our EBITDA into free cash flow after normal fixed expenses. So we have the luxury today of continuing to do is to do both.

Speaker Change: Obviously, if something changed in the macro we'd have to rethink it but our consistent stance has been we want to be consistent buyers of our of our stock and continue to thoughtfully reduce our float as we continued to invest in our in our existing property base and the nice part is you've seen us sell some of the noncore assets.

Speaker Change: So thats great.

Speaker Change: That's great and so really once you think about finishing the work in the Pacific and once we get through this law renovation next year the portfolio is largely in pretty good shape.

Speaker Change: So really once you think about finishing the work in the Pacific and once we get through those Laura renovation next year. The portfolio is largely in pretty good shape short of regular maintenance Capex that you do annually.

Speaker Change: Short of regular maintenance Capex that you do annually.

Speaker Change: And I just wanted to emphasize what Ryan said it it's a very key plank of our strategy.

Speaker Change: And I just wanted to emphasize what Ryan said it.

Speaker Change: It's a very key plank of our strategy and we tend to continue to do it.

Speaker Change: Tend to continue to do it we have good amount of cash right now on our balance sheet as Ryan said, we sold non core assets. We have a couple more noncore assets to sell we kind of take that capital redeploy it into into the Capex. When we really target the free cash flow for the stock buybacks, but we've been buying at a very consistent and significant level.

Speaker Change: A good amount of cash right now on our balance sheet as Ryan said, we sold noncore assets. We have a couple more noncore assets to sell we kind of take that capital redeploy it into into the Capex. When we really target the free cash flow for the stock buybacks, but we've been buying at a very consistent and significant level and we intend to continue doing that.

Speaker Change: And we intend to continue doing that.

Speaker Change: Okay, great. Thank you and then can we just talk roughly about some of the expense components.

Speaker Change: Okay, great. Thank you and then.

Speaker Change: Can we just talk roughly about some of the expense components.

Speaker Change: To help us frame out margins, maybe looking looking at that farther out target I know you went over.

Speaker Change: Help us frame out margins, maybe looking looking at that farther out target I know you went over.

The peso impacts margins and what that benefit should be but just as we think about some of the other <unk>.

Speaker Change: The peso impacts margins and what that benefit should be but just as we think about some of the other.

Speaker Change: Items.

Speaker Change: Has anything really changed in let's call. It the past six months and based on kind of where we're seeing energy and utility prices and maybe just kind of cost of food et cetera.

Speaker Change: Is there an opportunity to improve margins on a same store basis. Once some of the disruption is complete thank you.

Speaker Change: Yes, I believe so I mean, we still continue to make headwinds, particularly on F&B in procurement. The team has been a tremendous tremendous asset to us taking advantage of our size and scale and our buying power. So you've heard me talk about it before but F&B is roughly 20 ish a little less percent of our cost backs.

Speaker Change: Yes, I believe so I mean, we still continue to make headwinds, particularly on F&B in procurement. The team has been a tremendous tremendous asset to US who are taking advantage of our size and scale and our buying power. So you've heard me talk about it before but.

Speaker Change: <unk> is roughly <unk>.

Speaker Change: 20 ish, a little less percent of our carfax cost basket and.

Speaker Change: Cost basket and.

Speaker Change: The effort steps, thus far have resulted in 20 to 30 basis points in annualized cost savings permanently and I think we're only 30% to 40% of the way through our addressable base, so theres more to be done there.

Speaker Change: And we expect to kind of continue to focus on that area.

Speaker Change: You heard us talk about we're lapping the impacts of some of these now, but and Youll see us lap those impacts in Q4 of this year, but.

Speaker Change: You heard us talk about we're lapping the impacts of some of these now, but and you will see us lap those impacts in Q4 of this year, but starting the middle of last year, we started to kind of re prioritize some of our staffing models and rethink them coming out of Covid.

Speaker Change: In the middle of last year, we started to kind of re prioritize some of our staffing models and rethink of them coming out of Covid.

Speaker Change: We.

Speaker Change: We read.

Speaker Change: We did our operations team in Mexico brought in a new head of head of operations Who's been a key key components of rethinking our staffing.

Speaker Change: Our operations team in Mexico brought in a new head of head of operations Who's been a key key components of rethinking our staffing because labor remains still a headwind we still every year can test with.

Speaker Change: Cause labor remains still a headwind we still every year can tests with.

Speaker Change: Paul.

Speaker Change: Minimum wage increases.

Paul: Minimum wage increases.

Speaker Change: Increases or union negotiations or any government mandated changes because of a change in president or prime minister of policy or whatever so.

Paul: Increases or union negotiations or any government mandated changes because of a change in president or prime minister of policy or whatever so.

Speaker Change: So it can be just as important but we still expect F&B to be helpful and labor to be a headwind in labor is like roughly 30% of our cost basket. So something we have to contest but.

Paul: So it can be just as important but we still expect F&B to be helpful and labor to be a headwind in labor is like roughly 30% of our cost basket. So something we have to contest but.

Speaker Change: FX is roughly to your question 65, 70% of our overall Opex and so it does play a big big impact and what we do and so that's why our focus has been and will the way we see.

Paul: FX is roughly to your question 65, 70% of our overall Opex and so it does play a big a big impact and what we do and so that's why our focus has been and will the way we.

Speaker Change: Speak to everyone in the investment community about our margins on a constant currency basis, and why we wanted to enter into these hedges to at least remove the volatility on either end and make it a little more predictable because these last couple of years have been more volatile than my entire career at this company, which has been incentives.

Paul: Speak to everyone in the investment community about our margins on a constant currency basis, and why we wanted to enter into these hedges to at least remove the volatility on either end and make it a little more predictable because these last couple of years have been more volatile than my entire career at this company, which has been incentives.

Speaker Change: Because inserted in 2006, so it's been a little bit more difficult to way through but I think if we keep focusing on F&B and procurement and hopefully do our best with labor, we should be able to kind of at least maintain that roughly mid single digit ADR.

Paul: Because inserted in 2006, so it's been a little bit more difficult to Wade through but I think if we keep focusing on F&B and procurement and hopefully do our best with labor, we should be able to kind of at least maintain that roughly mid single digit ADR hurdle rate to maintain margins on a constant currency basis.

Speaker Change: Hurdle rate to maintain margins on a constant currency basis.

Speaker Change: Excellent Thanks, Ron I appreciate it.

Speaker Change: Excellent Thanks, Brian I appreciate it.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Bruce <unk> for any closing remarks.

Bruce: Great. Thanks, everybody. It was a good quarter for us we're looking forward to.

Bruce: Continuing on the strategy that we outlined today and driving value for Playa shareholders. Thank you very much for being part of our call today.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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