Note 16. Subsequent events
In preparing the interim Condensed Consolidated Financial Statements, we have evaluated subsequent events through May 4, 2023, which is the date the financial statements were issued.
During the period from April 1, 2023 through April 30, 2023, we purchased 2,147,034 ordinary shares at an average price of $9.29 per share. As of April 30, 2023, we had $149.3 million remaining under our $200.0 million share repurchase program.
Effective April 15, 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk on our 2022 Term Loan, which incurs interest based on SOFR. The interest rate swaps each have a fixed notional amount of $275.0 million and are not for trading purposes. The fixed rates paid by us on the interest rate swaps are 4.05% and 3.71%, and the variable rate received resets monthly to the one-month SOFR rate. The interest rate swaps mature on April 15, 2025 and April 15, 2026, respectively.
The following discussion and analysis of Playa Hotels & Resorts N.V.’s (“Playa”) financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Playa and its subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward looking statements. Forward-looking statements are subject to various factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including the risks described under the sections entitled “Risk Factors” of our Annual Report on Form 10-K, filed with the SEC on February 23, 2023 and in this Quarterly Report on Form 10-Q, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. The following factors, among others, could also cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•general economic uncertainty and the effect of general economic conditions, including inflation, rising interest rates and a potential economic recession, on consumer discretionary spending and the lodging industry in particular;
•the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;
•changes in economic, social or political conditions in the regions we operate, including changes in perception of public-safety, changes in unemployment rates and labor force availability, and changes in the supply of rooms from competing resorts;
•the success and continuation of our relationships with Hyatt Hotels Corporation (“Hyatt”), Hilton Worldwide Holdings, Inc. (“Hilton”), and Wyndham Hotels & Resorts, Inc. (“Wyndham”);
•the volatility of currency exchange rates;
•the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future;
•our failure to successfully complete acquisition, expansion, repair and renovation projects in the timeframes and at the costs and returns anticipated;
•changes we may make in timing and scope of our development and renovation projects;
•significant increases in construction and development costs;
•significant increases in utilities, labor or other resort costs;
•our ability to obtain and maintain financing arrangements on attractive terms or at all;
•our ability to obtain and maintain ample liquidity to fund operations and service debt;
•the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which we operate;
•the ability of our guests to reach our resorts given government mandated travel restrictions, such as those related to COVID-19, or airline service/capacity issues, as well as changes in demand for our resorts resulting from government mandated safety protocols and/or health concerns, including those related to COVID-19;
•the effectiveness of our internal controls and our corporate policies and procedures;
•changes in personnel and availability of qualified personnel;
•extreme weather events, such as hurricanes, floods and extreme heat waves, which may increase in frequency and severity as a result of climate change, and other natural disasters;
•public health crises, such as a resurgence of COVID-19 or the outbreak of other contagious diseases;
•dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;
•the volatility of the market price and liquidity of our ordinary shares and other of our securities; and
•the increasingly competitive environment in which we operate.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this quarterly report, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements).
Overview
Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. As of March 31, 2023, Playa owned and/or managed a total portfolio consisting of 26 resorts (9,756 rooms) located in Mexico, Jamaica, and the Dominican Republic:
•In Mexico, we own and manage the Hyatt Zilara Cancún, Hyatt Ziva Cancún, Wyndham Alltra Cancún, Wyndham Alltra Playa del Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva Puerto Vallarta, and Hyatt Ziva Los Cabos;
•In Jamaica, we own and manage the Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Grande Montego Bay Resort & Spa, and Jewel Paradise Cove Beach Resort & Spa;
•In the Dominican Republic, we own and manage the Hilton La Romana All-Inclusive Family Resort, the Hilton La Romana All-Inclusive Adult Resort, Hyatt Zilara Cap Cana, Hyatt Ziva Cap Cana, Jewel Palm Beach, and Jewel Punta Cana; and
•We also manage nine resorts on behalf of third-party owners.
Playa’s strategy is to leverage its globally recognized brand partnerships and proprietary in-house direct booking capabilities to capitalize on the growing popularity of the all-inclusive resort model and reach first-time all-inclusive resort consumers in a cost-effective manner. We believe that this strategy should position us to generate attractive returns for our shareholders, build lasting relationships with our guests, and enhance the lives of our associates and the communities in which we operate.
For the three months ended March 31, 2023, we generated net income of $42.7 million, Total Revenue of $273.8 million, Net Package RevPAR of $355.27 and Adjusted EBITDA of $98.5 million. For the three months ended March 31, 2022, we generated net income of $42.7 million, Total Revenue of $219.6 million, Net Package RevPAR of $285.00 and Adjusted EBITDA of $76.9 million.
Our Portfolio of Resorts
As of March 31, 2023, the following table presents an overview of our resorts and is organized by our four geographic business segments: the Yucatán Peninsula, the Pacific Coast, the Dominican Republic and Jamaica.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name of Resort | | Location | | Brand and Type | | Operator | | Year Built; Significant Renovations | | Rooms |
Owned Resorts | | | | | | | | | | |
Yucatán Peninsula | | | | | | | | | | |
Hyatt Ziva Cancún | | Cancún, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1975; 1980; 1986; 2002; 2015 | | 547 |
Hyatt Zilara Cancún | | Cancún, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2006; 2009; 2013; 2017 | | 310 |
Wyndham Alltra Cancún | | Cancún, Mexico | | Wyndham (all ages) | | Playa | | 1985; 2009; 2017 | | 458 |
Hilton Playa del Carmen All-Inclusive Resort | | Playa del Carmen, Mexico | | Hilton (adults-only) | | Playa | | 2002; 2009; 2019 | | 524 |
Wyndham Alltra Playa del Carmen | | Playa del Carmen, Mexico | | Wyndham (adults-only) | | Playa | | 1996; 2006; 2012; 2017 | | 287 |
Pacific Coast | | | | | | | | | | |
Hyatt Ziva Los Cabos | | Cabo San Lucas, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2007; 2009; 2015 | | 591 |
Hyatt Ziva Puerto Vallarta | | Puerto Vallarta, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1969; 1990; 2002; 2009; 2014; 2017 | | 335 |
Dominican Republic | | | | | | | | | | |
Hilton La Romana All-Inclusive Resort | | La Romana, Dominican Republic | | Hilton (adults-only) | | Playa | | 1997; 2008; 2019 | | 356 |
Hilton La Romana All-Inclusive Resort | | La Romana, Dominican Republic | | Hilton (all ages) | | Playa | | 1997; 2008; 2019 | | 418 |
Jewel Palm Beach | | Punta Cana, Dominican Republic | | Jewel (all ages) | | Playa (1) | | 1994; 2008 | | 500 |
Jewel Punta Cana | | Punta Cana, Dominican Republic | | Jewel (all ages) | | Playa | | 2004 | | 620 |
Hyatt Ziva Cap Cana | | Cap Cana, Dominican Republic | | Hyatt Ziva (all ages) | | Playa | | 2019 | | 375 |
Hyatt Zilara Cap Cana | | Cap Cana, Dominican Republic | | Hyatt Zilara (adults-only) | | Playa | | 2019 | | 375 |
Jamaica | | | | | | | | | | |
Hyatt Ziva Rose Hall | | Montego Bay, Jamaica | | Hyatt Ziva (all ages) | | Playa | | 2000; 2014; 2017 | | 276 |
Hyatt Zilara Rose Hall | | Montego Bay, Jamaica | | Hyatt Zilara (adults-only) | | Playa | | 2000; 2014; 2017 | | 344 |
Hilton Rose Hall Resort & Spa | | Montego Bay, Jamaica | | Hilton (all ages) | | Playa | | 1974; 2008; 2017 | | 495 |
Jewel Paradise Cove Beach Resort & Spa | | Runaway Bay, Jamaica | | Jewel (adults-only) | | Playa | | 2013 | | 225 |
Jewel Grande Montego Bay Resort & Spa (2) | | Montego Bay, Jamaica | | Jewel (all ages) | | Playa | | 2016; 2017 | | 88 |
Total Rooms Owned | | | | | | | | | | 7,124 |
Managed Resorts (3) | | | | | | | | | | |
Sanctuary Cap Cana | | Punta Cana, Dominican Republic | | The Luxury Collection by Marriott (adults-only) | | Playa | | 2008; 2015; 2018 | | 324 |
Jewel Grande Montego Bay Resort & Spa | | Montego Bay, Jamaica | | Jewel (condo-hotel) | | Playa | | 2016; 2017 | | 129 |
The Yucatán Playa del Carmen All-Inclusive Resort | | Playa del Carmen, Mexico | | Tapestry Collection by Hilton (adults-only) | | Playa | | 2012 | | 60 |
Hyatt Ziva Riviera Cancún | | Riviera Maya, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2008; 2021 | | 438 |
Hyatt Zilara Riviera Maya | | Riviera Maya, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2003; 2022 | | 291 |
Seadust Cancún Family Resort (4) | | Cancún, Mexico | | Seadust (all ages) | | Playa | | 2006; 2022 | | 502 |
Kimpton Hacienda Tres Ríos Resort, Spa & Nature Park (5) | | Playa del Carmen, Mexico | | Kimpton (all ages) | | Playa | | 2008; 2023 | | 255 |
Wyndham Alltra Riviera Nayarit | | Nuevo Vallarta, Mexico | | Wyndham (all ages) | | Playa | | 2009; 2022 | | 229 |
Wyndham Alltra Samaná (6) | | Samaná, Dominican Republic | | Wyndham (all ages) | | Playa | | 1994; 1998; 2004; 2023 | | 404 |
Total Rooms Operated | | | | | | | | | | 2,632 |
Total Rooms Owned and Operated | | | | | | | | | | 9,756 |
________
(1) Prior to January 6, 2023, this resort was managed by AMResorts and operated under the Dreams brand.
(2) Represents an 88-unit tower and spa owned by us. We manage the majority of the units within the remaining two condo-hotel towers owned by Sagicor that comprise the Jewel Grande Montego Bay Resort & Spa.
(3) Owned by a third party.
(4) We entered into a management agreement to operate this resort during the second quarter of 2022 and commenced operations in February 2023.
(5) We entered into a management agreement to operate this resort during the second quarter of 2022. The resort is currently undergoing renovations and we expect to commence operations in early 2024.
(6) We entered into a management agreement to operate this resort during the first quarter of 2023. The resort is currently undergoing renovations and we expect to commence operations in the third quarter of 2023.
Results of Operations
Three Months Ended March 31, 2023 and 2022
The following table summarizes our results of operations on a consolidated basis for the three months ended March 31, 2023 and 2022 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Revenue | | | | | | | |
Package | $ | 233,568 | | | $ | 186,815 | | | $ | 46,753 | | | 25.0 | % |
Non-package | 34,045 | | | 29,454 | | | 4,591 | | | 15.6 | % |
The Playa Collection | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management fees | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Cost reimbursements | 3,534 | | | 1,952 | | | 1,582 | | | 81.0 | % |
Total revenue | 273,802 | | | 219,574 | | | 54,228 | | | 24.7 | % |
Direct and selling, general and administrative expenses | | | | | | | |
Direct | 128,968 | | | 106,840 | | | 22,128 | | | 20.7 | % |
Selling, general and administrative | 45,127 | | | 37,239 | | | 7,888 | | | 21.2 | % |
Depreciation and amortization | 19,191 | | | 19,500 | | | (309) | | | (1.6) | % |
Reimbursed costs | 3,534 | | | 1,952 | | | 1,582 | | | 81.0 | % |
| | | | | | | |
Loss on sale of assets | 13 | | | — | | | 13 | | | 100.0 | % |
Direct and selling, general and administrative expenses | 196,833 | | | 165,531 | | | 31,302 | | | 18.9 | % |
Operating income | 76,969 | | | 54,043 | | | 22,926 | | | 42.4 | % |
Interest expense | (29,666) | | | (9,168) | | | (20,498) | | | (223.6) | % |
Other income (expense) | 232 | | | (514) | | | 746 | | | 145.1 | % |
Net income before tax | 47,535 | | | 44,361 | | | 3,174 | | | 7.2 | % |
Income tax provision | (4,816) | | | (1,614) | | | (3,202) | | | (198.4) | % |
Net income | $ | 42,719 | | | $ | 42,747 | | | $ | (28) | | | (0.1) | % |
The tables below set forth information for our total portfolio and comparable portfolio with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA Margin. For a description of these operating metrics and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating Performance” below. For discussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures” below.
Our comparable portfolio for the three months ended March 31, 2023 excludes the Jewel Palm Beach, which was closed for a majority of the first quarter of 2023 as we transitioned the management of the resort to us from a third-party.
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 70.8 | % | | 72.4 | % | | (1.6) | pts | | (2.2) | % |
Net Package ADR | $ | 501.64 | | | $ | 393.90 | | | $ | 107.74 | | | 27.4 | % |
Net Package RevPAR | $ | 355.27 | | | $ | 285.00 | | | $ | 70.27 | | | 24.7 | % |
| ($ in thousands) |
Net Package Revenue(1) | $ | 227,786 | | | $ | 182,730 | | | $ | 45,056 | | | 24.7 | % |
Net Non-package Revenue(1) | 33,787 | | | 29,142 | | | 4,645 | | | 15.9 | % |
The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Net Revenue | 264,228 | | | 213,225 | | | 51,003 | | | 23.9 | % |
Adjusted EBITDA | $ | 98,489 | | | $ | 76,943 | | | $ | 21,546 | | | 28.0 | % |
Adjusted EBITDA Margin | 37.3 | % | | 36.1 | % | | 1.2 | pts | | 3.3 | % |
________
(1)For the three months ended March 31, 2022, includes $2.7 million of on-property room upgrade revenue that was reclassified from non-package revenue to package revenue to conform with current period presentation.
Comparable Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 75.8 | % | | 71.9 | % | | 3.9 | pts | | 5.4 | % |
Net Package ADR | $ | 502.68 | | | $ | 409.48 | | | $ | 93.20 | | | 22.8 | % |
Net Package RevPAR | $ | 381.06 | | | $ | 294.23 | | | $ | 86.83 | | | 29.5 | % |
| ($ in thousands) |
Net Package Revenue | $ | 227,174 | | | $ | 175,412 | | | $ | 51,762 | | | 29.5 | % |
Net Non-package Revenue | 33,715 | | | 28,102 | | | 5,613 | | | 20.0 | % |
The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Net Revenue | 263,544 | | | 204,867 | | | 58,677 | | | 28.6 | % |
Adjusted EBITDA | $ | 100,917 | | | $ | 74,653 | | | $ | 26,264 | | | 35.2 | % |
Adjusted EBITDA Margin | 38.3 | % | | 36.4 | % | | 1.9 | pts | | 5.2 | % |
Total Revenue and Total Net Revenue
Our Total Revenue for the three months ended March 31, 2023 increased $54.2 million, or 24.7%, compared to the three months ended March 31, 2022.
Our Total Net Revenue for the three months ended March 31, 2023 increased $51.0 million, or 23.9%, compared to the three months ended March 31, 2022. The increase was due to the following:
•a 27.4% increase in Net Package ADR as a result of:
•a higher meetings, incentives, conventions and events (“MICE”) group contribution to our guest mix; and
•a benefit from the lower mix of rooms sold at Jewel Punta Cana and the closure of Jewel Palm Beach for the majority of the three months ended March 31, 2023, as we transitioned management to us from a third-party. Excluding these resorts, Net Package ADR increased 17.1%.
•Net Non-package Revenue for the three months ended March 31, 2023 increased $4.6 million, or 15.9%, compared to the three months ended March 31, 2022 despite a decrease of $2.0 million compared to the three months ended March 31, 2022 due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect.
•the above increases were partially offset by a decrease in Occupancy of 1.6 percentage points as a result of reduced Occupancy at the Jewel Punta Cana and Jewel Palm Beach due to the transition of management to us from a third-party. The Jewel Palm Beach was also closed for the majority of the first quarter in 2023 as a result of this transition.
The following table shows a reconciliation of Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to Total Revenue for the three months ended March 31, 2023 and 2022 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase/Decrease |
| 2023 | | 2022 | | Change | | % Change |
Net Package Revenue | | | | | | | |
Comparable Net Package Revenue | $ | 227,174 | | | $ | 175,412 | | | $ | 51,762 | | | 29.5 | % |
Non-comparable Net Package Revenue | 612 | | | 7,318 | | | (6,706) | | | (91.6) | % |
Net Package Revenue | 227,786 | | | 182,730 | | | 45,056 | | | 24.7 | % |
| | | | | | | |
Net Non-package Revenue | | | | | | | |
Comparable Net Non-package Revenue | 33,715 | | | 28,102 | | | 5,613 | | | 20.0 | % |
Non-comparable Net Non-package Revenue | 72 | | | 1,040 | | | (968) | | | (93.1) | % |
Net Non-package Revenue | 33,787 | | | 29,142 | | | 4,645 | | | 15.9 | % |
| | | | | | | |
The Playa Collection Revenue | | | | | | | |
Comparable The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
Non-comparable The Playa Collection Revenue | — | | | — | | | — | | | — | % |
The Playa Collection Revenue | 726 | | | 296 | | | 430 | | | 145.3 | % |
| | | | | | | |
Management Fee Revenue | | | | | | | |
Comparable Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Non-comparable Management Fee Revenue | — | | | — | | | — | | | — | % |
Management Fee Revenue | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
| | | | | | | |
Total Net Revenue | | | | | | | |
Comparable Total Net Revenue | 263,544 | | | 204,867 | | | 58,677 | | | 28.6 | % |
Non-comparable Total Net Revenue | 684 | | | 8,358 | | | (7,674) | | | (91.8) | % |
Total Net Revenue | 264,228 | | | 213,225 | | | 51,003 | | | 23.9 | % |
Compulsory tips | 6,040 | | | 4,397 | | | 1,643 | | | 37.4 | % |
Cost Reimbursements | 3,534 | | | 1,952 | | | 1,582 | | | 81.0 | % |
Total revenue | $ | 273,802 | | | $ | 219,574 | | | $ | 54,228 | | | 24.7 | % |
Direct Expenses
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the three months ended March 31, 2023 and 2022 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase/Decrease |
| 2023 | | 2022 | | Change | | % Change |
Direct expenses | $ | 128,968 | | | $ | 106,840 | | | $ | 22,128 | | | 20.7 | % |
Less: compulsory tips | 6,040 | | | 4,397 | | | 1,643 | | | 37.4 | % |
Net Direct Expenses | $ | 122,928 | | | $ | 102,443 | | | $ | 20,485 | | | 20.0 | % |
Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our Net Direct Expenses were $122.9 million, or 46.5% of Total Net Revenue, for the three months ended March 31, 2023 and $102.4 million, or 48.0% of Total Net Revenue, for the three months ended March 31, 2022. Direct operating expenses fluctuate based on various factors, including changes in Occupancy, labor costs, utilities, repair and maintenance costs and
license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increase or decrease as a result of changes in revenues.
Net Direct Expenses for the three months ended March 31, 2023 increased $20.5 million, or 20.0%, compared to the three months ended March 31, 2022. Net Direct Expenses at our comparable properties increased $23.3 million, or 23.9%, compared to the three months ended March 31, 2022 primarily due to the following:
•increased operating expenses associated with higher Occupancy levels for our comparable portfolio as a result of the corresponding recovery in our operations compared to the three months ended March 31, 2022, during which time occupancies were negatively affected by the Omicron variant and COVID-19 related travel restrictions; and
•appreciation of the Mexican Peso compared to the three months ended March 31, 2022, which primarily impacted labor and food and beverage expenses for the three months ended March 31, 2023.
Net Direct Expenses consists of the following ($ in thousands):
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase/Decrease |
| 2023 | | 2022 | | Change | | % Change |
| | | | | | | |
Food and beverages | $ | 28,487 | | | $ | 24,240 | | | $ | 4,247 | | | 17.5 | % |
Guest costs | 5,715 | | | 7,601 | | | (1,886) | | | (24.8) | % |
Salaries and wages | 47,195 | | | 35,878 | | | 11,317 | | | 31.5 | % |
Repairs and maintenance | 5,955 | | | 4,588 | | | 1,367 | | | 29.8 | % |
Utilities and sewage | 10,557 | | | 10,317 | | | 240 | | | 2.3 | % |
Licenses and property taxes | 881 | | | 795 | | | 86 | | | 10.8 | % |
Incentive and management fees | 41 | | | 1,112 | | | (1,071) | | | (96.3) | % |
Franchise / license fees | 13,518 | | | 10,139 | | | 3,379 | | | 33.3 | % |
Transportation and travel expenses | 1,655 | | | 1,302 | | | 353 | | | 27.1 | % |
Laundry and cleaning expenses | 1,653 | | | 1,406 | | | 247 | | | 17.6 | % |
Property and equipment rental expense | 2,173 | | | 1,306 | | | 867 | | | 66.4 | % |
Entertainment expenses and decoration | 3,144 | | | 2,376 | | | 768 | | | 32.3 | % |
Office supplies | 352 | | | 299 | | | 53 | | | 17.7 | % |
Other operational expenses | 1,602 | | | 1,084 | | | 518 | | | 47.8 | % |
Total Net Direct Expenses | $ | 122,928 | | | $ | 102,443 | | | $ | 20,485 | | | 20.0 | % |
Comparable portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase/Decrease |
| 2023 | | 2022 | | Change | | % Change |
| | | | | | | |
Food and beverages | $ | 28,344 | | | $ | 23,007 | | | $ | 5,337 | | | 23.2 | % |
Guest costs | 5,574 | | | 7,260 | | | (1,686) | | (23.2) | % |
Salaries and wages | 45,898 | | | 34,186 | | | 11,712 | | 34.3 | % |
Repairs and maintenance | 5,693 | | | 4,343 | | | 1,350 | | 31.1 | % |
Utilities and sewage | 10,184 | | | 9,601 | | | 583 | | 6.1 | % |
Licenses and property taxes | 866 | | | 690 | | | 176 | | 25.5 | % |
Incentive and management fees | — | | | 613 | | | (613) | | (100.0) | % |
Franchise / license fees | 13,518 | | | 10,139 | | | 3,379 | | 33.3 | % |
Transportation and travel expenses | 1,597 | | | 1,179 | | | 418 | | 35.5 | % |
Laundry and cleaning expenses | 1,634 | | | 1,353 | | | 281 | | 20.8 | % |
Property and equipment rental expense | 2,164 | | | 1,274 | | | 890 | | 69.9 | % |
Entertainment expenses and decoration | 3,137 | | | 2,309 | | | 828 | | 35.9 | % |
Office supplies | 349 | | | 271 | | | 78 | | 28.8 | % |
Other operational expenses | 1,537 | | | 992 | | | 545 | | 54.9 | % |
Total Net Direct Expenses | $ | 120,495 | | | $ | 97,217 | | | $ | 23,278 | | | 23.9 | % |
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the three months ended March 31, 2023 increased $7.9 million, or 21.2%, compared to the three months ended March 31, 2022. The increase was primarily driven by higher levels of Occupancy for our comparable portfolio which resulted in a $2.0 million increase in travel agent and tour operator commissions expenses, a $1.3 million increase in credit card commissions, and a $0.8 million increase in advertising expenses. We also experienced a $1.6 million increase in corporate personnel costs and a $0.8 million increase in insurance expenses as a result of higher insurance premiums.
Depreciation and Amortization Expense
Our depreciation and amortization expense for the three months ended March 31, 2023 decreased $0.3 million, or 1.6%, compared to the three months ended March 31, 2022 as we did not add or dispose of significant balances of property and equipment in either period.
Interest Expense
Our interest expense for the three months ended March 31, 2023 increased $20.5 million, or 223.6%, compared to the three months ended March 31, 2022. The increase in interest expense was driven primarily by a $17.5 million increase related to an unfavorable change in fair value of our interest rate swaps and a $6.8 million increase from our $1.1 billion term loan issued in the December 2022 debt refinancing (the “2022 Term Loan”), which incurs interest based on SOFR plus a margin of 4.25%. These increases were partially offset by a $4.7 million decrease in interest expense due to the repayment of the entire outstanding balance of our former additional senior secured credit facility (the “Additional Credit Facility”) and our former property loan agreement (the “Property Loan”) in December 2022 in connection with the December 2022 debt refinancing.
Cash interest paid was $21.4 million for the three months ended March 31, 2023, representing a $3.2 million, or 17.5% increase as compared to the three months ended March 31, 2022. The increase in cash interest paid was primarily driven by a $6.6 million increase from our 2022 Term Loan. This increase was partially offset by a $3.9 million decrease in cash interest paid due to the repayment of the entire outstanding balance of our Additional Credit Facility and Property Loan in connection with our December 2022 debt refinancing.
Income Tax Provision
For the three months ended March 31, 2023, our income tax provision was $4.8 million, compared to a $1.6 million income tax provision for the three months ended March 31, 2022. The increase of $3.2 million was primarily driven by a $0.5 million increased tax provision associated with higher pre-tax book income from our taxpaying entities as a result of the corresponding recovery in our operations compared to the three months ended March 31, 2022, during which time our results were negatively affected by the Omicron variant and COVID-19 related travel restrictions, a $1.6 million increased tax provision associated with unfavorable foreign exchange rate fluctuations, primarily at our Mexico entities, and a $0.4 million increased tax provision associated with 2022 tax true-ups recorded for our Dominican Republic entities based on the expected APA tax rates.
Key Indicators of Financial and Operating Performance
We use a variety of financial and other information to monitor the financial and operating performance of our business. Some of this is financial information prepared in accordance with U.S. GAAP, while other information, though financial in nature, is not prepared in accordance with U.S. GAAP. For reconciliations of non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measure, see “Non-U.S. GAAP Financial Measures.” Our management also uses other information that is not financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate the financial and operating performance of our portfolio. Our management uses this information to measure the performance of our segments and consolidated portfolio. We use this information for planning and monitoring our business, as well as in determining management and employee compensation. These key indicators include:
•Net Package Revenue
•Net Non-package Revenue
•Owned Net Revenue
•Management Fee Revenue
•Total Net Revenue
•Occupancy
•Net Package ADR
•Net Package RevPAR
•Net Direct Expenses
•EBITDA
•Adjusted EBITDA
•Adjusted EBITDA Margin
•Owned Resort EBITDA
•Owned Resort EBITDA Margin
•Comparable Non-U.S. GAAP Measures
Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total Net Revenue and Net Direct Expenses
“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations and premium room upgrades, food and beverage services, and entertainment activities, net of compulsory tips paid to employees. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Revenue is recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized.
“Net Non-package Revenue” includes revenue associated with premium services and amenities that are not included in net package revenue, such as dining experiences, wines and spirits, and spa packages, net of compulsory tips paid to employees. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue is recognized after the completion of the sale when the product or service is transferred to the customer. Food and beverage revenue not included in a guest's all-inclusive package is recognized when the goods are consumed.
“Owned Net Revenue” represents Net Package Revenue and Net Non-package Revenue. Owned Net Revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition. In analyzing our Owned Net Revenues, our management differentiates between Net Package Revenue and Net Non-package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day.
“Management Fee Revenue” is derived from fees earned for managing resorts owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of resort revenue, and an incentive fee, which is computed as a percentage of resort profitability. Management Fee Revenue was a minor contributor to our operating results for the three months ended March 31, 2023 and 2022, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our business in the future to the extent we are successful in entering into more management contracts.
“Total Net Revenue” represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue. “Cost Reimbursements” is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance. Cost Reimbursements is derived from the reimbursement of certain costs incurred by Playa on behalf of resorts managed by Playa and owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on operating income or net income.
“Net Direct Expenses” represents direct expenses, net of compulsory tips paid to employees.
Occupancy
“Occupancy” represents the total number of rooms sold for a period divided by the total number of rooms available during such period. The total number of rooms available excludes any rooms considered “Out of Order” due to renovation or a temporary problem rendering them inadequate for occupancy for an extended period of time. Occupancy is a useful measure of the utilization of a resort’s total available capacity and can be used to gauge demand at a specific resort or group of properties during a given period. Occupancy levels also enable us to optimize Net Package ADR (as defined below) by increasing or decreasing the stated rate for our all-inclusive packages as demand for a resort increases or decreases.
Net Package ADR
“Net Package ADR” represents total Net Package Revenue for a period divided by the total number of rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the all-inclusive segment of the lodging industry and is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.
Net Package RevPAR
“Net Package RevPAR” is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance statistic in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Owned Resort EBITDA, and Owned Resort EBITDA Margin
We define EBITDA, a non-U.S. GAAP financial measure, as net income or loss, determined in accordance with U.S. GAAP, for the period presented before interest expense, income tax and depreciation and amortization expense. EBITDA and Adjusted EBITDA (as defined below) include corporate expenses, which are overhead costs that are essential to support the operation of the Company, including the operations and development of our resorts. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:
•Other miscellaneous non-operating income or expense
•Pre-opening expense
•Share-based compensation
•Other tax expense
•Transaction expenses
•Severance expense for employee terminations resulting from non-recurring or unusual events, such as the departure of an executive officer or the disposition of a resort
•Gains from property damage insurance proceeds (i.e., property damage insurance proceeds in excess of repair and clean up costs incurred)
•Repairs from hurricanes and tropical storms (i.e., significant repair and clean up costs incurred which are not offset by property damage insurance proceeds)
•Loss on extinguishment of debt
•Other items which may include, but are not limited to the following: contract termination fees; gains or losses from legal settlements; and impairment losses.
We include the non-service cost components of net periodic pension cost or benefit recorded within other income or expense in the Condensed Consolidated Statements of Operations in our calculation of Adjusted EBITDA as they are considered part of our ongoing resort operations.
“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue.
“Owned Resort EBITDA” represents Adjusted EBITDA before corporate expenses and Management Fee Revenue.
“Owned Resort EBITDA Margin” represents Owned Resort EBITDA as a percentage of Owned Net Revenue.
Usefulness and Limitation of Non-U.S. GAAP Measures
We believe that each of Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Total Net Revenue, Net Package ADR, Net Package RevPAR and Net Direct Expenses are all useful to investors as they more accurately reflect our operating results by excluding compulsory tips. These tips have a margin of zero and do not represent our operating results.
We also believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other income or expense), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time. We believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful.
The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our “Board”) and management. In addition, the compensation committee of our Board determines a portion of the annual variable compensation for certain members of our management, including our executive officers, based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.
We believe that Owned Resort EBITDA and Owned Resort EBITDA Margin are useful to investors as they allow investors to measure resort-level performance and profitability by excluding expenses not directly tied to our resorts, such as corporate expenses, and excluding ancillary revenues not derived from our resorts, such as management fee revenue. We believe Owned Resort EBITDA is also helpful to investors that use it in estimating the value of our resort portfolio. Management uses these measures to monitor property-level performance and profitability.
Our non-U.S. GAAP financial measures are not substitutes for revenue, net income or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, our non-U.S. GAAP financial measures should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented.
For a reconciliation of EBITDA, Adjusted EBITDA and Owned Resort EBITDA to net income (loss) as computed under U.S. GAAP, see “Non-U.S. GAAP Financial Measures.”
Comparable Non-U.S. GAAP Measures
We believe that presenting Adjusted EBITDA, Owned Resort EBITDA, Total Net Revenue, Net Package Revenue, Net Non-package Revenue and Net Direct Expenses on a comparable basis is useful to investors because these measures include only the results of resorts owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate Comparable Adjusted EBITDA, Comparable Owned Resort EBITDA, Comparable Total Net Revenue, Comparable Net Package Revenue and Comparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were not owned or in operation during some or all of the relevant reporting period.
Our comparable portfolio for the three months ended March 31, 2023 excludes the Jewel Palm Beach, which was closed for a majority of the first quarter of 2023 as we transitioned the management of the resort to us from a third-party.
A reconciliation of net income as computed under U.S. GAAP to Comparable Adjusted EBITDA is presented in “Non-U.S. GAAP Financial Measures,” below. For a reconciliation of Comparable Net Package Revenue, Comparable Net Non-package Revenue, Comparable Management Fee Revenue and Comparable Total Net Revenue to total revenue as computed under U.S. GAAP, see “Results of Operations.”
Segment Results
Three Months Ended March 31, 2023 and 2022
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for the three months ended March 31, 2023 and 2022 ($ in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Owned Net Revenue | | | | | | | |
Yucatán Peninsula | $ | 88,748 | | | $ | 68,629 | | | $ | 20,119 | | | 29.3 | % |
Pacific Coast | 40,515 | | | 29,104 | | | 11,411 | | | 39.2 | % |
Dominican Republic | 68,769 | | | 69,664 | | | (895) | | | (1.3) | % |
Jamaica | 62,977 | | | 44,264 | | | 18,713 | | | 42.3 | % |
Segment Owned Net Revenue | 261,009 | | | 211,661 | | | 49,348 | | | 23.3 | % |
Other | 564 | | | 211 | | | 353 | | | 167.3 | % |
The Playa Collection | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management fees | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Net Revenue | $ | 264,228 | | | $ | 213,225 | | | $ | 51,003 | | | 23.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Owned Resort EBITDA | | | | | | | |
Yucatán Peninsula | $ | 37,936 | | | $ | 29,458 | | | $ | 8,478 | | | 28.8 | % |
Pacific Coast | 17,523 | | | 12,544 | | | 4,979 | | | 39.7 | % |
Dominican Republic | 26,849 | | | 28,377 | | | (1,528) | | | (5.4) | % |
Jamaica | 27,081 | | | 17,158 | | | 9,923 | | | 57.8 | % |
Segment Owned Resort EBITDA | 109,389 | | | 87,537 | | | 21,852 | | | 25.0 | % |
Other corporate | (13,555) | | | (11,947) | | | (1,608) | | | (13.5) | % |
The Playa Collection | 726 | | | 296 | | | 430 | | | 145.3 | % |
Management fees | 1,929 | | | 1,057 | | | 872 | | | 82.5 | % |
Total Adjusted EBITDA | $ | 98,489 | | | $ | 76,943 | | | $ | 21,546 | | | 28.0 | % |
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 15 to our Condensed Consolidated Financial Statements.
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Yucatán Peninsula segment for the three months ended March 31, 2023 and 2022 for the total segment portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 83.8 | % | | 71.9 | % | | 11.9 | pts | | 16.6 | % |
Net Package ADR | $ | 494.08 | | | $ | 436.51 | | | $ | 57.57 | | | 13.2 | % |
Net Package RevPAR | $ | 414.21 | | | $ | 313.83 | | | $ | 100.38 | | | 32.0 | % |
| ($ in thousands) |
Net Package Revenue(1) | $ | 79,254 | | | $ | 60,048 | | | $ | 19,206 | | | 32.0 | % |
Net Non-package Revenue(1) | 9,494 | | | 8,581 | | | 913 | | | 10.6 | % |
Owned Net Revenue | 88,748 | | | 68,629 | | | 20,119 | | | 29.3 | % |
Owned Resort EBITDA | $ | 37,936 | | | $ | 29,458 | | | $ | 8,478 | | | 28.8 | % |
Owned Resort EBITDA Margin | 42.7 | % | | 42.9 | % | | (0.2) | pts | | (0.5) | % |
________
(1)For the three months ended March 31, 2022, includes $1.0 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended March 31, 2023 increased $20.1 million, or 29.3%, compared to the three months ended March 31, 2022. The increase was due to the following:
•an increase in Occupancy of 11.9 percentage points compared to the three months ended March 31, 2022, driven by an increase in demand from Canadian, Mexican and United States sourced guests;
•a 13.2% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix; and
•an increase in Net Non-package Revenue of $0.9 million, or 10.6%, compared to the three months ended March 31, 2022. Net Non-package Revenue includes a decrease of $0.7 million due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect. Excluding this impact, Net Non-package Revenue per sold room increased 2.7% compared to the three months ended March 31, 2022.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended March 31, 2023 increased $8.5 million, or 28.8%, compared to the three months ended March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the Net Package ADR growth, which was partially offset by Occupancy-related increases in resort operating expenses, union-negotiated wage and benefit increases, and a negative impact from the appreciation of the Mexican Peso compared to the three months ended March 31, 2022.
•Owned Resort EBITDA Margin for the three months ended March 31, 2023 was 42.7%, a decrease of 0.2 percentage points compared to the three months ended March 31, 2022. Owned Resort EBITDA Margin was negatively impacted by 370 basis points due to the appreciation of the Mexican Peso compared to the three months ended March 31, 2022. Excluding the impact of foreign exchange rate appreciation, Owned Resort EBITDA Margin would have been 46.4%, an increase of 3.5 percentage points compared to the three months ended March 31, 2022.
Pacific Coast
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Pacific Coast segment for the three months ended March 31, 2023 and 2022 for the total segment portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 79.3 | % | | 66.6 | % | | 12.7 | pts | | 19.1 | % |
Net Package ADR | $ | 541.73 | | | $ | 459.90 | | | $ | 81.83 | | | 17.8 | % |
Net Package RevPAR | $ | 429.80 | | | $ | 306.41 | | | $ | 123.39 | | | 40.3 | % |
| ($ in thousands) |
Net Package Revenue(1) | $ | 35,820 | | | $ | 25,535 | | | $ | 10,285 | | | 40.3 | % |
Net Non-package Revenue(1) | 4,695 | | | 3,569 | | | 1,126 | | | 31.5 | % |
Owned Net Revenue | 40,515 | | | 29,104 | | | 11,411 | | | 39.2 | % |
Owned Resort EBITDA | $ | 17,523 | | | $ | 12,544 | | | $ | 4,979 | | | 39.7 | % |
Owned Resort EBITDA Margin | 43.3 | % | | 43.1 | % | | 0.2 | pts | | 0.5 | % |
________
(1)For the three months ended March 31, 2022, includes $0.3 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended March 31, 2023 increased $11.4 million, or 39.2%, compared to the three months ended March 31, 2022. The increase was due to the following:
•an increase in Occupancy of 12.7 percentage points compared to the three months ended March 31, 2022, driven by an increase in demand from Mexican and Canadian sourced guests;
•a 17.8% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix; and
•an increase in Net Non-package Revenue of $1.1 million, or 31.5%, compared to the three months ended March 31, 2022. Net Non-package Revenue includes a decrease of $0.4 million due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect. Excluding this impact, Net Non-package Revenue per sold room increased 23.2% compared to the three months ended March 31, 2022.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended March 31, 2023 increased $5.0 million, or 39.7%, compared to the three months ended March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the Net Package ADR growth, which was partially offset by Occupancy-related increases in resort operating expenses, union-negotiated wage and benefit increases, and a negative impact from the appreciation of the Mexican Peso compared to the three months ended March 31, 2022.
•Owned Resort EBITDA Margin for the three months ended March 31, 2023 was 43.3%, an increase of 0.2 percentage points compared to three months ended March 31, 2022. Owned Resort EBITDA Margin was negatively impacted by 350 basis points due to the appreciation of the Mexican Peso compared to the three months ended March 31, 2022. Excluding the impact of foreign exchange rate appreciation, Owned Resort EBITDA Margin would have been 46.8%, an increase of 3.7 percentage points compared to the three months ended March 31, 2022.
Dominican Republic
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Dominican Republic segment for the three months ended March 31, 2023 and 2022 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 51.1 | % | | 77.3 | % | | (26.2) | pts | | (33.9) | % |
Net Package ADR | $ | 490.55 | | | $ | 330.61 | | | $ | 159.94 | | | 48.4 | % |
Net Package RevPAR | $ | 250.47 | | | $ | 255.58 | | | $ | (5.11) | | | (2.0) | % |
| ($ in thousands) |
Net Package Revenue(1) | $ | 59,602 | | | $ | 60,818 | | | $ | (1,216) | | | (2.0) | % |
Net Non-package Revenue(1) | 9,167 | | | 8,846 | | | 321 | | | 3.6 | % |
Owned Net Revenue | 68,769 | | | 69,664 | | | (895) | | | (1.3) | % |
Owned Resort EBITDA | $ | 26,849 | | | $ | 28,377 | | | $ | (1,528) | | | (5.4) | % |
Owned Resort EBITDA Margin | 39.0 | % | | 40.7 | % | | (1.7) | pts | | (4.2) | % |
________
(1)For the three months ended March 31, 2022, includes $1.2 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Comparable Portfolio
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 61.8 | % | | 76.9 | % | | (15.1) | pts | | (19.6) | % |
Net Package ADR | $ | 494.31 | | | $ | 360.44 | | | 133.87 | | 37.1 | % |
Net Package RevPAR | $ | 305.71 | | | $ | 277.26 | | | 28.45 | | 10.3 | % |
| ($ in thousands) |
Net Package Revenue | $ | 58,990 | | | $ | 53,500 | | | 5,490 | | 10.3 | % |
Net Non-package Revenue | 9,095 | | | 7,806 | | | 1,289 | | 16.5 | % |
Owned Net Revenue | 68,085 | | | 61,306 | | | 6,779 | | 11.1 | % |
Owned Resort EBITDA | $ | 29,277 | | | $ | 26,087 | | | 3,190 | | 12.2 | % |
Owned Resort EBITDA Margin | 43.0 | % | | 42.6 | % | | 0.4 | pts | | 0.9 | % |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended March 31, 2023 increased $6.8 million, or 11.1%, compared to the three months ended March 31, 2022. The increase was due to the following:
•a 37.1% increase in Comparable Net Package ADR due to a lower mix of sold rooms at the Jewel Punta Cana during the three months ended March 31, 2023, when we transitioned management to us from a third-party. Excluding this resort, Net Package ADR increased 20.1%;
•a decrease in Occupancy of 15.1 percentage points compared to the three months ended March 31, 2022 as a result of reduced Occupancy at the Jewel Punta Cana, as we transitioned the management of the resort to us from a third-party; and
•an increase in Comparable Net Non-package Revenue of $1.3 million, or 16.5%, compared to the three months ended March 31, 2022. Comparable Net Non-package Revenue includes:
•a decrease of $0.5 million due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect.
•a decrease in Net Non-package Revenue as a result of reduced Occupancy at the Jewel Punta Cana during the three months ended March 31, 2023. Excluding this resort, Net Non-package Revenue increased 39.6%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended March 31, 2023 increased $3.2 million, or 12.2%, compared to the three months ended March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the Net Package ADR growth as compared to the three months ended March 31, 2022. Excluding Jewel Punta Cana, Comparable Owned Resort EBITDA for the three months ended March 31, 2023 increased 38.4% compared to the three months ended March 31, 2022.
•Comparable Owned Resort EBITDA Margin for the three months ended March 31, 2023 was 43.0%, an increase of 0.4 percentage points compared to the three months ended March 31, 2022. Comparable Owned Resort EBITDA Margin was negatively impacted by 530 basis points due to reduced Occupancy at the Jewel Punta Cana. Excluding this resort, Comparable Owned Resort EBITDA Margin for the three months ended March 31, 2023 was 48.3%, an increase of 2.8 percentage points compared to the three months ended March 31, 2022.
Jamaica
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Jamaica segment for the three months ended March 31, 2023 and 2022 for the total segment portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Increase / Decrease |
| 2023 | | 2022 | | Change | | % Change |
Occupancy | 82.5 | % | | 67.6 | % | | 14.9 | pts | | 22.0 | % |
Net Package ADR | $ | 500.78 | | | $ | 418.26 | | | $ | 82.52 | | | 19.7 | % |
Net Package RevPAR | $ | 413.24 | | | $ | 282.67 | | | $ | 130.57 | | | 46.2 | % |
| ($ in thousands) |
Net Package Revenue(1) | $ | 53,110 | | | $ | 36,329 | | | $ | 16,781 | | | 46.2 | % |
Net Non-package Revenue(1) | 9,867 | | | 7,935 | | | 1,932 | | | 24.3 | % |
Owned Net Revenue | 62,977 | | | 44,264 | | | 18,713 | | | 42.3 | % |
Owned Resort EBITDA | $ | 27,081 | | | $ | 17,158 | | | $ | 9,923 | | | 57.8 | % |
Owned Resort EBITDA Margin | 43.0 | % | | 38.8 | % | | 4.2 | pts | | 10.8 | % |
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(1)For the three months ended March 31, 2022, includes $0.3 million of on-property room upgrade revenue that was reclassified from net non-package revenue to net package revenue to conform with current period presentation.
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended March 31, 2023 increased $18.7 million, or 42.3%, compared to the three months ended March 31, 2022. The increase was due to the following:
•an increase in Occupancy of 14.9 percentage points compared to the three months ended March 31, 2022, driven by an increase in demand from United States and Canadian sourced guests;
•a 19.7% increase in Net Package ADR as a result of a higher MICE group contribution to our guest mix; and
•an increase in Net Non-package Revenue of $1.9 million, or 24.3%, compared to the three months ended March 31, 2022. Net Non-package Revenue includes a decrease of $0.6 million due to the expiration of our Extended Stay Program in late 2022 as COVID-19-related travel restrictions were no longer in effect. Excluding this impact, Net Non-package Revenue per sold room increased 9.5% compared to the three months ended March 31, 2022.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended March 31, 2023 increased $9.9 million, or 57.8%, compared to the three months ended March 31, 2022. The increase was a result of leveraging a majority of our direct expenses given the Net Package ADR growth, partially offset by Occupancy-related increases in resort operating expenses compared to the three months ended March 31, 2022.
•Owned Resort EBITDA Margin for the three months ended March 31, 2023 increased 4.2 percentage points, or 10.8%, compared to the three months ended March 31, 2022. Owned Resort EBITDA Margin was negatively impacted by 110 basis points due to the timing of sales and marketing expenses and franchise fees compared to the three months ended March 31, 2022.
Non-U.S. GAAP Financial Measures
Reconciliation of Net Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
The following is a reconciliation of our U.S. GAAP net income to EBITDA, Adjusted EBITDA, Owned Resort EBITDA and Comparable Owned Resort EBITDA for the three months ended March 31, 2023 and 2022 ($ in thousands):
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2023 | | 2022 | | | | |
Net income | $ | 42,719 | | | $ | 42,747 | | | | | |
Interest expense | 29,666 | | | 9,168 | | | | | |
Income tax provision | 4,816 | | | 1,614 | | | | | |
Depreciation and amortization | 19,191 | | | 19,500 | | | | | |
EBITDA | 96,392 | | | 73,029 | | | | | |
Other (income) expense (a) | (232) | | | 514 | | | | | |
Share-based compensation | 3,166 | | | 3,356 | | | | | |
Transaction expense (b) | 863 | | | 191 | | | | | |
Other tax expense (c) | — | | | 240 | | | | | |
Repairs from hurricanes and tropical storms (d) | (861) | | | — | | | | | |
Loss on sale of assets | 13 | | | — | | | | | |
Non-service cost components of net periodic benefit | (852) | | | (387) | | | | | |
Adjusted EBITDA | 98,489 | | | 76,943 | | | | | |
Other corporate (e) | 13,555 | | | 11,947 | | | | | |
The Playa Collection | (726) | | | (296) | | | | | |
Management fees | (1,929) | | | (1,057) | | | | | |
Owned Resort EBITDA | 109,389 | | | 87,537 | | | | | |
Less: Non-comparable Owned Resort EBITDA | (2,428) | | | 2,290 | | | | | |
Comparable Owned Resort EBITDA(f) | $ | 111,817 | | | $ | 85,247 | | | | | |
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(a) Represents changes in foreign exchange and other miscellaneous non-operating expenses or income.
(b) Represents expenses incurred in connection with corporate initiatives, such as: system implementations, debt refinancing costs; other capital raising efforts; and strategic initiatives, such as the launch of a new resort or possible expansion into new markets.
(c) Relates primarily to a Dominican Republic asset tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax provision or benefit we eliminate from EBITDA.
(d) Includes significant repair and clean-up expenses incurred from natural events which are not expected to be offset by property damage insurance proceeds. It does not include repair and clean-up costs from natural events that are not considered significant. For the three months ended March 31, 2023, represents a decrease in the expected repair and clean-up expenses for the Jewel Punta Cana related to the impact of Hurricane Fiona.
(e) For the three months ended March 31, 2023 and 2022, represents corporate salaries and benefits of $9.7 million for 2023 and $8.3 million for 2022, professional fees of $1.9 million for 2023 and $1.9 million for 2022, corporate rent and insurance of $1.0 million for 2023 and $1.0 million for 2022, and corporate travel, software licenses, board fees and other miscellaneous corporate expenses of $1.0 million for 2023 and $0.7 million for 2022.
(f) Our comparable portfolio for the three months ended March 31, 2023 excludes the Jewel Palm Beach, which was closed for a majority of the first quarter of 2023 as we transitioned the management of the resort to us from a third-party.
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico, Jamaica and Dominican Republic have historically resulted in the greatest demand for our resorts occurring between mid-December and April of each year, yielding higher occupancy levels and package rates during this period. This seasonality in demand has resulted in predictable fluctuations in revenue, results of operations, and liquidity, which are consistently higher during the first quarter of each year than in successive quarters.
Inflation
We have experienced an elevated level of inflationary pressure on our direct resort expenses since the beginning of 2022. Inflation effects were experienced mostly through higher labor costs, food and beverage prices, and utility costs. Although we experienced some improvement during 2023, we expect that costs will likely remain elevated at least through the first half of 2023, but could continue for longer. While we, like most operators of lodging properties, have the ability to adjust room rates to reflect the effects of inflation, competitive pricing pressures may limit our ability to raise room rates to fully offset inflationary cost increases.
Liquidity and Capital Resources
Our net cash provided by operating activities for the three months ended March 31, 2023 was $45.3 million, representing a significant increase over the three months ended March 31, 2022. We believe that our sources of cash, which consist of available cash and cash from operations, together with the available borrowing capacity under our Revolving Credit Facility and our access to the capital markets, will be adequate to meet our cash requirements, including our contractual obligations, over the next twelve months and beyond.
Sources of Cash
As of March 31, 2023, we had $281.5 million of available cash, as compared to $283.9 million as of December 31, 2022. Our primary short-term cash needs are paying operating expenses, maintaining our resorts, and servicing our outstanding indebtedness. We expect to meet our short-term liquidity requirements generally through our existing cash balances, net cash provided by operations, equity issuances or short-term borrowings under our Revolving Credit Facility.
Further, we had no restricted cash balance as of March 31, 2023. As of April 30, 2022, we had approximately $266.9 million of available cash and also had $225.0 million available on our Revolving Credit Facility, which does not mature until January 2028.
We expect to meet our long-term liquidity requirements generally through the sources of cash available for short-term needs, net cash provided by operations, as well as equity or debt issuances or proceeds from the potential disposal of assets.
Cash Requirements
Our expected material cash requirements for the remainder of 2023 and thereafter consist of (i) contractually obligated expenditures, including payments of principal and interest; (ii) other essential expenditures, including operating expenses and maintenance of our resorts; and (iii) opportunistic expenditures, including possible property developments, expansions, renovations, repositioning and rebranding projects, potential acquisitions, the repayment of indebtedness and discretionary repurchases of our securities.
As of March 31, 2023, there have been no significant changes to our “Contractual Obligations” table in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report. As of March 31, 2023, we had $85.6 million of scheduled contractual obligations remaining in 2023 which we expect to pay with available cash.
We are continuing to monitor our liquidity and we may pursue additional sources of liquidity as needed. The availability of additional liquidity options will depend on the economic and financial environment, our credit, our historical and projected financial and operating performance and continued compliance with financial covenants. If operating conditions do not continue to improve, whether as a result of a resurgence of COVID-19 or for other reasons, such as inflation, we may not be able to maintain our current liquidity position or access additional sources of liquidity at acceptable terms or at all.
Financing Strategy
We intend to use other financing sources that may be available to us from time to time, including financing from banks, institutional investors or other lenders, such as bridge loans, letters of credit, joint ventures and other arrangements. Future financings may be unsecured or may be secured by mortgages or other interests in our assets. In addition, we may issue publicly or privately placed debt or equity securities. When possible and desirable, we will seek to replace short-term financing with long-term financing. We may use the proceeds from any financings to refinance existing indebtedness, to finance resort projects or acquisitions or for general working capital or other purposes.
Our indebtedness may be recourse, non-recourse or cross-collateralized and may be fixed rate or variable rate. If the indebtedness is non-recourse, the obligation to repay such indebtedness will generally be limited to the particular resort or resorts pledged to secure such indebtedness. In addition, we may invest in resorts subject to existing loans secured by mortgages or similar liens on the resorts or may refinance resorts acquired on a leveraged basis.
Recent Transactions Affecting Our Liquidity and Capital Resources
The following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our Condensed Consolidated Statements of Cash Flows and accompanying notes thereto ($ in thousands):
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| Three Months Ended March 31, |
| 2023 | | 2022 |
Net cash provided by operating activities | $ | 45,287 | | | $ | 37,648 | |
Net cash used in investing activities | $ | (2,352) | | | $ | (4,436) | |
Net cash used in financing activities | $ | (45,415) | | | $ | (2,624) | |
(Decrease) increase in cash, cash equivalents, and restricted cash | $ | (2,480) | | | $ | 30,588 | |
Cash Flows from Operating Activities
Our net cash from operating activities is generated primarily from operating income of our resorts. For the three months ended March 31, 2023, our net cash provided by operating activities was $45.3 million. For the three months ended March 31, 2022, our net cash provided by operating activities was $37.6 million.
Cash Flows from Investing Activities
Our net cash used in investing activities was $2.4 million for the three months ended March 31, 2023 compared to $4.4 million for the three months ended March 31, 2022.
Activity for the three months ended March 31, 2023:
•Purchases of property and equipment of $10.3 million, primarily for maintenance related expenditures; and
•Property damage insurance proceeds related to the impacts of Hurricane Fiona of $8.0 million.
Activity for the three months ended March 31, 2022:
•Purchases of property and equipment of $4.4 million.
Capital Expenditures
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise and license agreements and management agreements. Capital expenditures made to extend the service life or increase the capacity of our assets, including expenditures for the replacement, improvement or expansion of existing capital assets (i.e., maintenance capital expenditures), differ from ongoing repair and maintenance expense items, which do not in our judgment extend the service life or increase the capacity of assets and are charged to expense as incurred. From time to time, certain of our resorts may be undergoing renovations as a result of our decision to upgrade portions of the resorts, such as guestrooms, public space, meeting space, gyms, spas and/or restaurants, in order to better compete with other resorts in our markets.
Cash Flows from Financing Activities
Our net cash used in financing activities was $45.4 million for the three months ended March 31, 2023 compared to $2.6 million for the three months ended March 31, 2022.
Activity for the three months ended March 31, 2023:
•Principal payments on our 2022 Term Loan of $2.8 million; and
•Repurchases of ordinary shares of $42.6 million.
Activity for the three months ended March 31, 2022:
•Principal payments on our prior Term Loan of $2.5 million.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements included herein have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts and related disclosures. A number of our significant accounting policies are critical due to the fact that they involve higher degree of judgement and estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe our estimates, assumptions and judgments with respect to our such policies are reasonable based upon information presently available. However, actual results may differ significantly from these estimates under different assumptions, judgments or conditions, which could have a material effect on our financial position, results of operations and related disclosures.
We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023. There have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them except for those disclosed in Note 2 to our Condensed Consolidated Financial Statements.
Fair Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, certain prepayments and other assets, trade and other payables, payables to related parties, derivative financial instruments, other liabilities including our pension obligation and debt (excluding the financing lease obligation). See Note 13, “Fair value of financial instruments,” to our Condensed Consolidated Financial Statements for more information.
Related Party Transactions
See Note 6, “Related party transactions,” to our Condensed Consolidated Financial Statements for information on these transactions.
Recent Accounting Pronouncements
See the recent accounting pronouncements in Note 2 to our Condensed Consolidated Financial Statements.