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Playa Hotels & Resorts (PLYA) 6 Aug 24 2024 Q2 Earnings call transcript

AInvestWednesday, Aug 7, 2024 10:25 pm ET
2min read

In the latest earnings call, Playa Hotels & Resorts presented a mixed picture of resilience and challenges, highlighting the company's ability to navigate through hurdles while showcasing promising growth opportunities. The second quarter results for the company have exceeded expectations, with a strong performance in the Yucatan and Dominican Republic segments. However, challenges in the Pacific and Jamaican segments have posed some hurdles.

Strong Performance in Yucatan and Dominican Republic

The Yucatan and Dominican Republic segments have been a bright spot for Playa Hotels & Resorts, with occupancy and ADR growth driving currency-neutral margin gains. These segments have largely remained unaffected by renovation disruptions or government travel warnings, contributing to the company's overall growth. The Yucatan segment, in particular, has shown exceptional performance, with a nearly 10% underlying EBITDA growth and a currency-neutral margin gain of 210 basis points.

Challenges in the Pacific and Jamaican Segments

On the other hand, the Pacific segment has faced challenges due to planned renovation work, resulting in a decline in occupancy and flat ADR year-over-year. The disruption to the guest experience has been more elevated than anticipated, leading to increased cancellations during the most extensive construction period. In addition, the sale of the Jewel Punta Cana Resort and the closure of the Jewel Palm Beach Resort have impacted the segment's EBITDA.

The Jamaican segment has been hit hard by a U.S. State Department Travel Advisory, resulting in a significant decline in resort EBITDA. The segment was off to a good start in 2024, but the travel advisory notice has had a negative impact on demand, with cancellations picking up significantly. The impact of Hurricane Beryl, which affected both Jamaica and the Yucatan, has added to the challenges in the segment.

Capital Allocation and Outlook

Playa Hotels & Resorts has made strategic moves to mitigate risk and strengthen its financial position. The company has repurchased approximately $314 million of stock since resuming its program in September 2022, representing nearly 25% of the shares outstanding. The company has also repriced its term loan and implemented foreign exchange hedges to reduce volatility and improve cash flow.

Looking ahead, Playa Hotels & Resorts expects full-year adjusted EBITDA to be at the low end of its previously guided range, reflecting the impact of Hurricane Beryl, renovation disruptions, and foreign exchange headwinds. The company is optimistic about the coming high season, with demand looking solid and ADR up high single-digits for the legacy portfolio.

Investor Questions and Management's Response

During the Q&A session, investors and analysts raised concerns about the impact of hurricanes, construction disruptions, and foreign exchange rates on the company's performance. Management provided reassurances and updates on the company's strategic initiatives, including renovation plans, MICE group business, and capital allocation. The company remains confident in its ability to navigate challenges and capitalize on growth opportunities, positioning itself for a strong future in the hospitality industry.

In conclusion, Playa Hotels & Resorts has shown resilience and adaptability in the face of challenges, demonstrating its commitment to delivering value to shareholders. The company's strong performance in the Yucatan and Dominican Republic segments, along with strategic initiatives, position it well for future growth. Despite challenges in the Pacific and Jamaican segments, management's optimism and proactive measures offer a promising outlook for the company.

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