Playa Hotels & Resorts - Q1 2024

Transcript

Operator (participant)

Good day, and welcome to the Playa Hotels & Resorts Q1 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Ryan Hymel. Please go ahead.

Ryan Hymel (EVP and CFO)

Thank you very much, Ziko. Good morning, everyone, and welcome again to Playa Hotels & Resorts' First Quarter 2024 Earnings Conference Call. Before we begin, I'd like to remind participants that many of our comments today will be considered forward-looking statements and are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from what has been communicated. Forward-looking statements made today are effective only as of today, and the company undertakes no obligation to update forward-looking statements. For discussion of some of the factors that could cause our actual results to differ, please review the Risk Factors section of our quarterly report on Form 10-Q, which we filed last night with the Securities and Exchange Commission. We've updated our investor relations website at investors.playaresorts.com with the company's recent releases.

In addition, reconciliations to GAAP of the non-GAAP financial measures we will discuss on this call were included in yesterday's press release. Today's call, Bruce Wardinski, Playa's Chairman and Chief Executive Officer, will provide comments on the first quarter demand trends and key operational highlights. I'll then review our first quarter results and our outlook for 2024. Bruce will wrap up the call with some concluding remarks before we turn it over to Q&A. With that, I'll turn the call over to Bruce.

Bruce Wardinski (Chairman and CEO)

Okay, thanks, Ryan. Good morning, everyone, and thank you for joining us. Before we dive into our results, all commentary on comparable full year 2024 KPIs is synonymous with our legacy portfolio, as the Jewel Palm Beach was closed for a portion of Q1 2023, and the Jewel Punta Cana was sold during Q4 2023, and thus would not be comparable for the full year metrics. Our first quarter results exceeded our expectations, coming in well above the high end of our expected Adjusted EBITDA range. The better-than-expected results were broad-based across our segments, driven by strong demand during the high season.

Playa's owned resort EBITDA of $124 million in the first quarter of 2024 included a significant year-over-year foreign currency exchange headwind of approximately $4.8 million due to the appreciation of the Mexican peso, a benefit from business interruption insurance proceeds of approximately $400,000, and a modest EBITDA contribution from the Jewel Palm Beach resort. For Q1 2024, we estimate that FX headwinds were a negative 160 basis points impact on our reported owned resort EBITDA margin and 170 basis points drag on our legacy portfolio, which excludes the Jewel Resorts in the Dominican Republic. Business interruption proceeds favorably impacted resort margins by approximately 10 basis points.

Adjusting for all of these factors, underlying owned resort EBITDA growth was up approximately 17% in the first quarter for the total portfolio and up approximately 11% for the comparable portfolio. The strength in bookings that we began to see during the second half of 2023 carried into the first quarter, particularly into Mexico, but the demand was notable across our portfolio, with all segments reporting positive year-over-year RevPAR growth, despite the difficult growth comparison from last year's first quarter and the headwind from the shift of the Easter holiday in 2024. Our results in the Yucatan were once again quite exceptional on a currency-adjusted basis, with occupancy in line with the first quarter of 2019, but still trailing our 2018 peak, and ADR growth of nearly 3% year-over-year.

Our operations team continued to execute at a high level in the Yucatan, delivering currency-neutral margin expansion of approximately 240 basis points year-over-year on mid-single-digit RevPAR growth. 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 as 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 of rising wages and inflation in various expense categories.

We believe we can hold FX neutral margins steady year-over-year in the Yucatan in 2024 on positive low single-digit to mid single-digit ADR growth, despite continuing underlying wage pressure. In the Pacific, ADR growth was anticipated to be negative as a result of a large MICE group buyout at legacy rates from 2020. However, the buyout led to a record high first quarter occupancy rate for the segment, resulting in year-over-year RevPAR growth of 6.2%. The strong revenue performance, combined with our cost control efforts, delivered 320 basis points of currency-neutral resort margin expansion year-over-year in the Pacific. Additionally, we've decided to accelerate our renovation plans to the Pacific and now expect the construction disruption impact on EBITDA to be at the high end of the previously communicated range.

We believe this is the best path forward to capitalize on the increased MICE demand we are seeing and position our resort in Los Cabos for a strong high season in 2026 and beyond. As a reminder, the Hyatt Ziva Los Cabos has not had any major renovation work done since the renovation that occurred following Hurricane Odile in 2014. Turning to the DR, we completed the sale of the Jewel Punta Cana in late December of 2023, and the Jewel Palm Beach was closed for a significant portion of Q1, 2023, which we expect will lead to a meaningful year-over-year increase in EBITDA during 2024. Results in the segment were aided by the comparison from 2023, but the core comparable resort, resorts also had a very strong quarter, with double-digit RevPAR growth and mid-teens underlying EBITDA growth.

Finally, Jamaica had another solid quarter, with occupancy increasing year-over-year, reaching Q1 2019 levels and mid-single-digit ADR growth, despite a significant headwind from lower MICE group mix year-over-year. The segment was off to a good start in 2024, but the U.S. State Department's travel advisory notice for Jamaica on January 23rd has had a negative impact on the segment near term, as cancellations picked up meaningfully thereafter. Although the travel advisory doesn't pertain specifically to our resorts as much as the major metropolitan areas in other regions of the country, and the level of the travel advisory was unchanged from the prior advisory, the press coverage of this advisory notice was significant, significantly greater than prior warnings. Bookings in Jamaica saw a rapid improvement as we moved through February, giving us a sense of optimism that the impact would be fairly short-lived.

But demand for the summer season did not continue to improve, leading to a significantly higher negative impact than we previously anticipated. Bulk of the impact experienced so far in Jamaica has been for Q2 and Q3, with revenue pacing down mid-teens, while our fourth quarter pacing is holding up much better with a low single digit decline. Looking at demand as a whole, we saw steady demand through the quarter, and the pacing into the summer season remained strong outside of Jamaica. In aggregate, during the first quarter of 2024, 48.4% of Playa owned and managed transient revenues booked were booked direct, down 300 basis points year-over-year.

The decline was driven by fewer World of Hyatt redemption bookings following a spike during the first quarter of 2023, ahead of a change in the conversion rate for point redemptions, which pulled forward quite a bit of demand. During the first quarter of 2024, playaresorts.com accounted for approximately 11.3% of our total Playa-owned and managed transient room night bookings, continuing to be a critical factor in our customer sourcing and ADR gains. Taking a look at who is traveling, roughly 41.7% of the Playa-owned and managed transient room night stays in the quarter came from our direct channels. Graphically, the biggest change in our guest mix during the first quarter was our Canadian source guest mix, which increased 110, 110 basis points year-over-year, following several quarters of year-over-year declines.

While this is encouraging, our Canadian guest mix still has plenty of room to improve, as it is only approximately two-thirds recovered versus pre-pandemic levels. Asian source guest mix improved modestly year-over-year. It remains the most depressed, as it is still only approximately 25% recovered versus pre-pandemic levels. Our visibility remains a critical factor of our success as our booking win-window was just over 3 months during the first quarter. Finally, on the capital allocation front, we repurchased approximately $32.4 million worth of Playa stock during the first quarter and an additional $17.4 million thus far in the second quarter, bringing our total repurchases since resuming our program in September 2022 to approximately $280 million or approximately 22% of the shares outstanding.

Once again, I would like to thank all of our associates who have continued to deliver world-class service in the face of unexpected challenges and rising operating costs. Their unwavering passion and dedication to service from the heart is what truly sets Playa apart. With that, I will turn the call back over to Ryan to discuss the balance sheet and our outlook.

Ryan Hymel (EVP and CFO)

Thank you very much, Bruce. Again, before I begin, all references to expense and margin KPIs are on a currency neutral basis and also exclude business interruption proceeds unless otherwise stated. As we mentioned, our first quarter results were well ahead of our expectations as demand remained strong throughout the quarter. Healthy demand, easing pressure from food and beverage prices, and our cost efficiency efforts led to reported margin expansion of 140 basis points year-over-year, which included a 160 basis point headwind from foreign exchange and a 10 basis point benefit from business interruption proceeds, as well as a 160 basis point tailwind from the two Jewel resorts in the Dominican Republic. So taken altogether, underlying reported resort EBITDA margins increased 290 basis points year-over-year in the first quarter.

Adjusting for FX and Business Interruption, our legacy portfolio delivered 140 basis points of resort margin expansion. On the cost front, food and beverage costs continued to be favorable as a result of lower input prices and cost-efficiency efforts by our operations team. Labor costs were also favorable in the quarter, reflecting our efficiency measures, but wage inflation generally remained a headwind. As Bruce mentioned, we are undertaking efforts to streamline and improve our procurement processes across the entire portfolio and take advantage of our scale. These efforts are really just beginning to bear fruit from the heavy lifting undertaken in 2023, and we expect the benefits to accelerate as the company moves throughout 2024 and beyond, as our cost savings are averaging mid-single-digit to high single-digit improvements per category.

We estimate that we've only penetrated approximately 30% of the potential procurement savings thus far, with half of the savings flowing through our costs during the fourth quarter of 2023. Underlying expense inflation has remained steady since our last update, with any changes in our margin expectations for the year resulting from higher construction disruption and deleveraging in Jamaica from weaker demand. Turning to our MICE group business, our 2024 net MICE group business on the books is approximately $65 million, up roughly 12% compared to the same time last year. Our MICE business is much more balanced on a year-over-year basis compared to what we experienced during 2023, as 2023 lapped incredibly difficult MICE comparisons in the second half of the year. Finally, turning to the balance sheet.

We finished the quarter with a total cash balance of $285.3 million, and total outstanding interest-bearing debt of approximately $1.09 billion. We currently have no outstanding borrowings on our $225 million revolving credit facility. Our net leverage on a trailing basis stands at 2.8 times, excluding lease capitalization. We anticipate our cash CapEx spend for full year 2024 to be approximately $110 million-$120 million for the year, partitioned out between approximately $40 million-$50 million for maintenance and other critical CapEx, and the remainder designated for ROI-oriented projects. This increase is largely due to the acceleration of the previously discussed renovation at our Hyatt Ziva Los Cabos resort.

Also, as a reminder, effective April 15th, 2023, we entered into two interest rate swaps to mitigate the floating interest rate risk in our term loan due 2029. We entered into a 2- and 3-year contract, both of which have a fixed notional amount of $275 million and carry fixed SOFR rates of 4.05% and 3.71%, respectively. Separately, we've implemented foreign exchange hedges on approximately half our Mexican peso exposure for 2024, which should greatly reduce the volatility of the impact of our reported EBITDA this year. Based on the exchange rates at the time we entered into the FX forwards, we estimate the full-year 2024 EBITDA impact from the Mexican peso year-over-year to be approximately $7 million-$10 million, which is slightly better than our previous outlook of $7 million-$11 million.

Nearly 75% of the impact is expected to be in Q1 2024, and nearly 100% of it in the first half of the year, based on current spot rates. On the capital allocation front, as Bruce mentioned, we repurchased an additional $32.5 million of stock during the first quarter, an additional $17.5 million so far in Q2 2024. Since we began repurchasing shares last September, we've purchased over 36.6 million shares, or approximately 22% of our shares outstanding at the time. We still have over $145 million remaining on our existing repurchase authorization.

With our leverage ratios at or near 3x, the anticipated free cash flow generation of the business, and the attractive valuation of our stock, we believe repurchasing shares is still a very compelling use of capital and tend to use our discretionary capital to repurchase shares going forward, depending on market conditions. Now turning our attention to our outlook for 2024. First, I'd like to remind everyone of the unique items affecting comparability of our financials compared to 2023 before we dive into the outlook. First, with foreign exchange, as a reminder, the appreciation of the Mexican peso had a $24.5 million impact on Adjusted EBITDA in 2023. Business interruption.

As a reminder, in 2023, we recognized $6.1 million of BI proceeds, with $4.3 million of that coming in the second quarter of 2023, and approximately $900,000 in Q3 and Q4, respectively. The DR Jewels, they recorded an EBITDA loss of approximately $15 million in 2023 and negatively impacted owned resort margins by approximately 280 basis points. Roughly a third of their loss occurred during the first quarter of 2023, as the Jewel Palm Beach, as a reminder, was closed for the majority of the quarter. So with all that in mind, looking forward, we continue to expect full year 2024 adjusted EBITDA to be between $250 million-$275 million, which includes the following key considerations and inputs.

We expect occupancy to be up low single-digit percentage points for the total portfolio and down modestly for the legacy portfolio. This change reflects the travel advisory having a continuing negative impact on demand into Jamaica. We expect ADR growth of mid-single digits for the total portfolio and low single digits for the comparable legacy portfolio. The driving force of the delta between the two is a positive 360 basis point impact from removing the lower ADR room night mix from the Jewel Punta Cana that we sold last year, and partially offset by the ramping occupancy at the Jewel Palm Beach Resort. We expect RevPAR growth of high single digit to low double digit for the total portfolio and low single digit for the legacy portfolio.

We estimate that the disposition of the Jewel Punta Cana Resort and ramping occupancy at the Jewel Palm Beach Resorts contributes approximately 900 basis points to 2024 RevPAR, but the vast majority of that contribution being the result of disposing the Jewel Punta Cana Resort last year, and only a modest contribution to RevPAR from the Jewel Palm Beach Resort, as improving occupancy is partially offset by the negative mix of Palm Beach's ADR. We still expect foreign exchange headwinds, as we mentioned, of approximately $7 million-$10 million year-over-year, based on current exchange rates and net of any FX forwards. As Bruce mentioned, we expect construction disruption impact of high single-digit dollars of EBITDA in the Pacific and at the Hyatt Zilara Cancun.

Inflation, as we've mentioned several times on the call, we've been diligently working to improve our efficiency, and we believe we've lowered our margin leverage hurdle to approximately 4% ADR rate growth to hold margins flat on a currency and business interruption adjusted basis. We expect a modest net negative impact from annualizing corporate expense increases from 2023, partially offset from higher and growing fee income. With respect to the cadence of our profitability, we expect the first quarter to show the most robust profit in a year, given the Q1 2023 comparison, which included a $5 million loss at the DR Jewels. The drag from construction disruption and the weaker demand in Jamaica are likely most pronounced in the second and third quarter and hopefully improve somewhat in the fourth quarter. So now turning our attention to the second quarter.

We expect reported occupancy to be in the low 70% and reported package ADR to increase mid-single-digit percentage on a year-over-year basis. We expect owned resort EBITDA margins to decline significantly year-over-year, given the $4.3 million of business interruption proceeds recorded in Q2 of last year, which was a positive 180 basis points impact to the comparison period and continuing foreign exchange headwinds in Mexico, which are expected to negatively impact margins by approximately 80-100 basis points. Altogether, we expect Q2 owned resort EBITDA, $67 million-$72 million. Expect The Playa Collection and management fee income of $2 million-$3 million. Corporate expense of roughly $15 million-$16 million, which includes a negative FX impact. Finally, adjusted EBITDA of $54 million-$59 million. Given our booking window, we're currently 90% booked for the second quarter.

We hope all that framework helps guide you as you fine-tune your models and gives further insight into what we're seeing and expecting. With that, I'll turn it back over to Bruce for some closing remarks.

Bruce Wardinski (Chairman and CEO)

Great. Thanks, Ryan. So the year's off to a good start with solid top-line growth, despite the setback in Jamaica from the travel advisory and lapping difficult comparisons from 2023. We remain focused on the areas within our control, such as our expense efficiency efforts and ongoing portfolio optimization. With respect to the portfolio, our Hyatt Ziva Los Cabos was among the first of our resorts to undergo a significant remodel following Hurricane Odile nearly 10 years ago. While the resort has performed extremely well, we expect our current renovation will significantly improve its competitive positioning in this key market. Our other successful early Hyatt renovations and conversions are also approaching the point in their life cycles for a refresh in the coming years, namely Hyatt Zilara Cancun and Hyatt Ziva and Zilara Rose Hall.

We are targeting these resorts for renovations next year, funded by the recycling of capital from non-core asset dispositions. Given the nature of the work involved and the specific footprints of these resorts, we expect the disruption to be greater than what we have recently experienced in the Pacific, which was done over multiple years. We will be back with more information on these projects later this year, but I am incredibly optimistic about the potential for our Hyatt Zilara Cancun, as this resort sits on a prime piece of real estate and has performed well given the limited direct supply growth. The renovation of this resort has the potential to add significant value to the portfolio. Our Hyatt Ziva and Zilara Rose Hall have been significant drivers of the EBITDA since the completion of their conversions in 2016 and have a large established position in the MICE segment.

These resorts, in a key market with limited supply growth and close proximity to the airport in Montego Bay, also have the potential to drive meaningful value for years to come. In addition, we will consider room tower additions adjacent to our existing resorts, which should generate meaningful returns on capital and drive incremental EBITDA, but that is not a high probability near-term endeavor for us. With our ROI projects largely funded with recycled capital, we will continue to redeploy the significant free cash flow we generate into share repurchases and maintaining our market-leading assets, setting us up for success beyond 2024. With that, I'll open up the line for any questions.

Operator (participant)

Thank you. We will now begin the question and answer session. To ask a question, you may press Star, then One on your touchtone phone. 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 then Two. At this time, we will pause momentarily to assemble our roster. The first question is from the line of Smedes Rose with Citi. Please go ahead.

Smedes Rose (Director)

Hi. Thank you. First, Bruce, I guess I just was interested if you could talk a little bit more about what sounds like waning demand into Jamaica. And I'm just kind of wondering, since those warnings have sort of been out for a while, like, why do you think they're having a larger impact in the second quarter? And is it really more sort of corporate groups that are switching out, so you're having to sort of backfill with more transient? Or maybe just sort of talk about sort of the trends there and why you think they're playing out this way.

Bruce Wardinski (Chairman and CEO)

Sure. No, it's a great question. Smedes, I mean, you know, from our standpoint, you know, we can't really answer that. You know, we have a very strong booking window, and we see that the weakness is kind of broad-based. So it's not just on the group side. It's across the transient as well. You know, if you look- I mean, you know, if you look at the quarter, I would say the two things that kind of jumped out, you know, to me, you know, was number one- just the strength of demand, right? Particularly in the high season, but also just the overall strength of demand, and we're seeing it, you know, through the rest of this year.

And the other one is, you know, the concern people had about ADRs and the fact that, you know, we're not seeing, you know, any issue with ADRs, and so they're more than sustainable. And it's what we've always said about the price value relationship and value, you know, is kind of in the eye of the beholder. It's still, in my opinion, you know, relatively cheap and a great value proposition for people to go. So when you look at Jamaica, it really stands out, you know, from the standpoint of we have this very strong demand and we're getting, you know, good rates and why it's, you know, so significant, I really don't know.

You know, I've been in very close contact with Adam Stewart, who's you know, the head of Sandals, and, you know, we intend to, you know, push the government to do something. You know, quite honestly, the government has really been, you know, asleep at the switch and has not done anything proactive to try to address the situation. You know, Sandals has a much higher concentration in the country than even we do. So, you know, we're going to be, you know, pushing to see what we can do. You know, fortunately, you know, what we see for the fourth quarter doesn't look as bad as Q2 and Q3, so that's good news.

I think, again, it shows the resiliency of our business, particularly in the high season, where we generate so much of our EBITDA. But, you know, we need to address this issue short term, and we're not, you know, we're not just sitting idly by. We're trying to do all kinds of initiatives and push it, but it doesn't make sense. I mean, one of the things, for example, is, you know, the areas covered under the travel advisory are really nowhere near Montego Bay in the resort zone. So, you know, if you look at where we are located, you know, which is in, you know, on the north side of the island, completely in the, you know, kind of resort corridor, you know, there's not really any significant issue.

It's on the other side of the island, the south side of the island, primarily, and, you know, there's a big mountain range in between. So we're gonna try to communicate some of that and hopefully drive some additional business, but we're at a loss for why it's so significant.

Smedes Rose (Director)

Okay. And then I just wanted to follow up, if I could, just on something you mentioned, sort of at the end of your remarks about the Hyatt Zilara Cancun going under renovation next year. I don't know if you can provide this, but I mean, I would imagine that's one of your bigger sort of EBITDA generators across the portfolio. I mean, can you maybe just speak to... Well, I don't know if you can provide what percentage it is, that would be great. But can you just speak to how you are gonna manage, you know, that EBITDA coming out of that asset and in balancing it against the need for renovation? And I think you've talked about a new room tower there in the past.

Ryan Hymel (EVP and CFO)

Yeah. So to be clear, we're only talking about the Zilara Cancun at this point. We are not referring to any renovation at this point for next year for Ziva Cancun. We're still going through a lot of these plans internally and going through scope, and that's why Bruce mentioned we'll be back, you know, with more information. But what we're specifically talking about is the potential need to target the Zilara in Cancun, which is about a 300-room property, and the Ziva Zilara Hyatt in Rose Hall. So the Zilara, you know, rough figures, has been roughly a high teens, almost $20 million EBITDA contributor for our overall portfolio, you know, you know, adjusting for FX. And so it's a, you know, it, it's a good EBITDA contributor, just given the number of rooms. But as you recall, that property was essentially...

I think I've done this before on a call. I'm using air quotes right now, you can't see me, but it was "converted" to a Hyatt in 2013 when we recapitalized the company, and since then, we've done some things to the ancillary services, like we've renovated the spa, we've renovated the gym, done some things to coffee shops and restaurants. But generally, the rooms have just been repainted and have not been touched since we took over the property, you know, more than 10 years ago. It's essentially lived under the umbrella of the Ziva Cancun up the street. So just given its proximity to the airport, the location in the, in the prime real estate spot, in all the- in the hotel zone in Cancun, it's overdue, quite frankly, for a renovation.

And so, again, scope and timing will come later this year, but in the past, we have discussed, you know, potentially running it through high season or effectively Easter, and then potentially closing the property down for the remainder of the year to contain any lost EBITDA for the last, call it, 8-9 months of the year, and reopening in time for the high season. Again, more information to come there, but that's generally the plan we've discussed in the past.

Bruce Wardinski (Chairman and CEO)

And let me just add to that, just kind of the strategic rationale. So like Ryan said, it's been over 10 years, and we haven't done, you know, rooms renovation. So, you know, just from normal course, you would do that. But I think, you know, the opportunity here at Hyatt Zilara Cancun is even more significant. You know, when we acquired that back in 2013, the rates that were being obtained, you know, for that type of resort in Cancun were good, but not kind of at the exceptional level that we're seeing, you know, for example, with our newer properties like, you know, Hyatt Ziva Zilara Cap Cana, you know, and even Los Cabos.

So I look at Cancun being the number one all-inclusive market and the high level of demand, and the fact that we have a relatively limited number of rooms at Hyatt Zilara Cancun. So, you know, that demand profile is incredibly strong already. And then you know, have the ability to put an exceptional product there on, as Ryan described, you know, probably the best, you know, kind of beach in the hotel zone in Cancun. I just think we really have a great opportunity, so it shouldn't be passed. This isn't just a renovation. This is absolutely an incredible resetting of the floor, okay, for Zilara Cancun.

Smedes Rose (Director)

Great. Thank you. I appreciate it.

Bruce Wardinski (Chairman and CEO)

Thanks.

Operator (participant)

Thank you. The next question is from the line of Chad Beynon with Macquarie. Please go ahead.

Chad Beynon (Managing Director)

Morning. Thanks for taking my question. Bruce, I wanted to ask kind of a two-parter on Jamaica. One, can you just frame out, I'm not sure if you mentioned this in the prepared remarks, but what spring break or kind of the lead up to Easter in Q1, maybe just March in general, looked like versus prior year period. Was there an impact? And then secondly, on the look forward in Jamaica, is your approach to hold ADR and not fill the rooms with locals? I know in the past there was some good demand. Could you just kind of help us think about, you know, what'll be locals versus tourists, in your model right now? Thank you.

Bruce Wardinski (Chairman and CEO)

Sure, sure. And I'll just kind of address the second part, and then I'll pass over to Ryan. He can give you more, you know, kind of on the first quarter and the, you know, EBITDA impact in Easter. But our strategy absolutely is to hold ADR. You know, since we came out of the pandemic, you know, we have been very focused on that, and we don't believe, you know, there's anything, you know, kind of permanent or even longer term from this situation in Jamaica. We need to deal with it. But, you know, whenever you kind of reset your rate structure, I think it's a very slippery slope, and it's challenging to, you know, kind of, you know, regain where you were.

And especially in a hotel like this, which is such a big MICE contributor, you know, that's something, you know, we don't envision doing. You know, we have a, you know, high quality resort. We're going to maintain the high quality of that resort, and ADR, you know, kind of, discipline is critical to that. But then I'll pass it over to Ryan.

Ryan Hymel (EVP and CFO)

Then, Chad, to be clear, your question is around this, the impact to March from these travel warning or to May?

Chad Beynon (Managing Director)

I guess maybe if you could think about, like, spring break this year versus spring break last year.

Ryan Hymel (EVP and CFO)

Yeah.

Chad Beynon (Managing Director)

It doesn't sound like March was impacted, but I know it's not a same store, same week comparable.

Ryan Hymel (EVP and CFO)

Yeah, correct. You know, for us, you know, you know, the fact that Easter, the Semana Santa week, was within March, it certainly helps a little bit, you know, for Q1, but it certainly hurts April. For us, you know, Easter week, particularly in the Mexican or the Spanish-speaking countries, you know, kind of marks the unofficial end of our high season, so the further out it goes, the better. So next year, when it's in, I think, the second or third week of April, it's a, it's a definitive positive to Q2 and just generally a definitive positive to Playa because it elongates the high season. So for us, it was kind of a minimal impact to, to Q1 on the positive side, but it definitely hurts Q2.

Chad Beynon (Managing Director)

Okay, thanks. Lastly, any update in terms of Jewel Palm Beach, how you're thinking about, you know, hanging on to this property, marketing it, divesting it? What's the M&A market like out there?

Bruce Wardinski (Chairman and CEO)

Yeah, no, we are actively marketing the property, and we're hopeful to be able, you know, to announce something in the near future. But we are actively marketing the property.

Chad Beynon (Managing Director)

Okay. Thank you both. Appreciate it.

Bruce Wardinski (Chairman and CEO)

Thank you.

Ryan Hymel (EVP and CFO)

Thanks.

Operator (participant)

Thank you. The next question is from the line of Tyler Batory with Oppenheimer. Please go ahead.

Jonathan Sullivan (Associate Analyst)

Good morning. This is Jonathan on for Tyler. Thanks for taking my question. Maybe following up on Jamaica and understanding the dust hasn't fully settled yet, but can you talk about the disruption there and how it compares maybe to past travel advisories or interruptions you've seen over the years?

Ryan Hymel (EVP and CFO)

It's funny that you asked that. Thanks for the question. So it's... I mean, it's been a substantial swing, you know, mostly concentrated as where we sit today in Q2 and Q3. It's actually, as far as the impact and the swing for what we were expecting for Q2 RevPAR, prior, you know, at the beginning of the year versus where we sit today, it's actually almost right on par with some issues we had in late 2019 with the, you know, some crummy news cycles that came out in the DR. If you just look at a full year basis to kind of put some numbers around it, you know, just using round figures, we were expecting, you know, the Jamaica segment to be up low single digit RevPAR.

Now, you know, based on where we sit today, it's expected to be down mid-single digits. So that's a high single-digit to potentially, you know, double-digit RevPAR swing in a few months here. So it's certainly, as Bruce mentioned earlier, I won't recap it all, you know, a lot worse than, than we thought. And again, it's not that there's just a, an increasing number of cancellations, it more so has to do with demand. What we're picking up on a daily basis is below traditional trend lines from what we've expected at the beginning of this year or what we, what we were able to experience last year. So, you know, the, the marketing team has done a number of different, you know, sales blitzes and tactics that, you know, have a nice impact for a couple of days. The demand falls back off again.

You know, one of the questions to me earlier, they targeted some, a lot of local groups as well, who obviously wouldn't be worried about a travel advisory, and also Canadians as well. So we've seen peaks and valleys, but just generally, we're just below a traditional trend line from a booking basis. So the summer's essentially shot, and as Bruce mentioned, Q4 looks okay, but we'll have to see how that works throughout the rest of the summer, given our booking window's around 100 days.

Jonathan Sullivan (Associate Analyst)

Okay, very, very helpful, Ryan. And then maybe following up on that booking window discussion, can you, can you talk about the booking window for the MICE group business in Jamaica? Just trying to get a sense of maybe potential implications for 2025 from this near-term headwind.

Ryan Hymel (EVP and CFO)

Yeah. So they traditionally book at least, you know, at the absolute shortest, maybe 9 months out, but it's traditionally 12-18 months. So it certainly would have a potential impact on 2025. And again, not going into too much detail yet, but as also Bruce mentioned, you know, those potential plans to look at also renovating, you know, the Jamaica asset as well, which would have an impact. But that's our traditional booking window is has the last couple of months been around 90-100 days, with the exception of MICE, that books further out.

Jonathan Sullivan (Associate Analyst)

Okay, very good. Last one for me, if I could, maybe on the relationship with Hyatt. Any updated thoughts on that relationship and kind of what percentage of Hyatt stays are redemption stays?

Ryan Hymel (EVP and CFO)

Yeah. So, traditionally, our Hyatt redemptions have been around low- to mid-single digits as a percentage of the overall business we get from Hyatt. But the relationship has been good. I mean, you know, we've had the benefit of having, you know, all of these Hyatts having been converted now for over 10 years now. They're well-known in the system, they're well-known in the markets, and the NPS scores speak for themselves. You know, a lot of that has to do with the operations teams at the resorts that are obviously run by us, but also just the Hyatt customers are higher paying, you know, discerning customers. So it's been a really nice marriage between the two. And obviously, they bought Apple Leisure Group, you know, a few years ago, and they're kind of still working through that.

But our relationship is still very, very good and I think mutually beneficial to both.

Bruce Wardinski (Chairman and CEO)

Yeah, I mean, it's been, it's been a great 11 years, you know, with Hyatt and jointly, you know, we really developed the Hyatt Ziva and Hyatt Zilara brands. And I think the exceptional performance of our teams, you know, in all 3 of our, our, countries that we operate in, is just a testament to, you know, the strength of our operations and then, you know, the fantastic properties that we own and operate as well as, you know, the great affiliation with Hyatt.

Jonathan Sullivan (Associate Analyst)

Okay, excellent. Thank you for all the detail. That's all for me.

Operator (participant)

Thank you. The next question is from Gregory Miller with Truist Securities. Please go ahead.

Gregory Miller (Managing Director)

Thanks. Good morning. I'm on for Patrick Scholes. First question I have relates to the CapEx plans for Los Cabos, and if you're willing to share, beyond that for 2025, could you share what your current high level cash on cash return expectations are for your CapEx work?

Ryan Hymel (EVP and CFO)

So in Los Cabos, this is definitely definitely more defensive in nature. It, you know, it's we don't talk about the two resorts in the Pacific as much, you know, because it's really just two. But, you know, they generated, you know, nearly $60 million of resort EBITDA in 2023, and Los Cabos is a substantial portion of our MICE business. You know, I say it all the time, so I kind of sound like a broken record, but it that hotel has punched above its weight for a number of years now, considering that, as Bruce mentioned, we have not done, you know, quite a bit, we've not done any real renovation to that property, particularly in one of the older towers, you know, since the hurricane.

You know, it's doubled its EBITDA from 2019 to 2023, and again, large in part due to the MICE business. And so we want to continue to ensure that we capture that share of that booming MICE business, you know, for many, many years to come. So, you know, I can tell you the sales and marketing teams internally, you know, are happy about the things we are targeting, you know, particularly one of the older towers, some of the meeting space, adding a new gym. It's, you know, it's attacking the things that have ailed us at that property and prohibited us from kind of pushing rates or potentially losing business to other newer properties that have come in over the last couple of years.

So, you know, no explicit cash on cash returns on that because it's something that just needs to be done to protect the value of that real estate and give us a chance to capture that market even further.

Bruce Wardinski (Chairman and CEO)

I think the enhancements will make. Expanding some of the meeting facilities, like the pre-function area at the ballroom and different things, are going to make us more attractive to a large segment of groups. And so, you know, as Ryan said, the MICE business there is really important and has been really successful. You know, I think, you know, the things we're doing are just really positioning us to continue to maintain, you know, really strong MICE business going forward.

Gregory Miller (Managing Director)

Okay, thanks. Appreciate it. I'd like to shift gears on my second question. I recognize that the third-party management business is a smaller piece of the overall portfolio, but you did announce some Wyndham Alltra deals in the Dominican Republic recently. I'm curious, what opportunities do you see with this brand as a third-party manager going forward? What kind of hotels are best suited for conversion and for your operations?

Bruce Wardinski (Chairman and CEO)

Sure. I mean, you know, as we said, you know, you described it appropriately, you know, the third-party management business is a lower, you know, kind of profit contributor for us. I mean, you know, the vast majority of our profit comes from our owned assets. So, you know, there is a lot of focus on that. Having said that, you know, the all-inclusive space is, you know, really dominated by kind of the middle, right? Kind of like the same with most hotel markets around the world. You know, in the U.S., there's just, you know, a huge number of hotel rooms in the middle. Well, that's certainly the case in all-inclusive.

So when you look at Wyndham Alltra, and what excited us, you know, working with Wyndham on having the opportunity, you know, to convert some of those, is just, you know, the broad number of hotels, you know, resorts and rooms that could be converted, you know, to that brand. And many of them could be converted with relatively, you know, not insignificant capital, but I mean, it's just more easily done than if you were going to a very high-end or a luxury kind of property. So I think there's a lot of opportunity, and we're excited, you know, to be partners. I can't really project how many, you know, we'll do, but we've had some really good success with the Wyndham Alltra brand, and, you know, we love working with Wyndham. They're a great partner.

Gregory Miller (Managing Director)

Thanks, Bruce. That's all from us.

Operator (participant)

Thank you. The next question is from the line of Chris Woronka with Deutsche Bank. Please go ahead.

Chris Woronka (Senior Analyst)

Hey, good morning, guys. Thanks for all the details so far. Bruce, I wanna kind of revisit Jamaica a little bit, and I, you know, I appreciate you mentioned your, your work with Adam and, and hopefully, you know, maybe get the messaging from the Jamaican government up a little bit or the marketing. But isn't part of the issue here that the U.S. State Department, I'm just curious as to whether you know, is there some kind of formula they're using to determine this risk level? You know, it seems a little not very scientific, if that's to be diplomatic. Is there anything you can do on this side of the fence?

Bruce Wardinski (Chairman and CEO)

So that's it, it's a great question, Chris, and so I have volunteered and we will do this with the Jamaican government, but I have volunteered to go with the Jamaican ambassador here in the United States to go meet with the State Department and actually ask them that question, because it's pretty nonsensical, you know, that you would come out, you know, with an updated travel advisory when nothing has changed, okay? I mean, it'd be like saying, you know, okay, you know, in the middle of a storm, it's going to rain. Okay, well, it is raining, okay? And why are you now telling us it's raining, okay? So I live in the D.C. area. I actually have, you know, friends who work at the State Department.

You know, and I can tell you, it's gonna be an interesting meeting, I'm sure, to find out exactly why they do that, but it doesn't make any sense to me.

Chris Woronka (Senior Analyst)

Okay. That's great. Appreciate that, Bruce. And then a question on... I know you guys, I think, recently wrapped up a renovation in PVR. Are you seeing, you know, kind of expected rate lift there, or would you say that's a little bit more like the Cabo, where it's, you know, somewhat defensive just to kind of bring the property up?

Ryan Hymel (EVP and CFO)

It's more akin to Cabo. We're not done. They're still doing rooms right now. You know, that kind of what Bruce mentioned earlier, you know, that property and then like what we had been doing in Cabo before we decided to accelerate the work at one of the towers, you know, was to kind of do it on a, kind of a little bit in piecemeal and kind of do a third of the rooms at a time. That property, just like Cabo, last major renovation was 2015, so it's due and it's time. So there's potential for uplift in rate. That property, again, does really, really well. It's on a private, you know, kind of really one of the only real kind of private beaches in Puerto Vallarta, so close to the airport.

You know, it's kind of protected on both sides by the mountains, and so it's an excellent asset that needs to be maintained. So for us, it's a little more defensive in nature and maintaining the EBITDA base that we've got there today. It's not a big group house or anything like that. It does pretty well with weddings, but that's about it.

Chris Woronka (Senior Analyst)

Okay, fair enough. Then just last one is, you know, when we think about what you might do on a renovation slash, you know, upgrade of Zilara and think about what you've got down the street with Ziva, is there any thought to, you know, I'm not—just preface this by saying I think your, you know, your rates in the market are terrific, but is there any thought to possibly trying to maybe tap into the Andaz piece of Hyatt? I know that, you know, these Ziva Zilara brands were created kind of for you guys when you launched the concept, you know, over 10 years ago.

But with Andaz, the kind of rate premium they get, is there any way to almost, you know, co-brand or take a Turquoise Tower and, you know, put an Andaz on that and create even further rate separation? Is there anything like that that's possible?

Bruce Wardinski (Chairman and CEO)

I mean, you know, we'll look at that. I mean, it's a good comment. We've always looked at, you know, whenever we reposition a hotel, we look at how do you optimize it from a brand perspective. And so, you know, that's an important part of the equation. But I'll tell you, the opportunity here, really, from my perspective, is to take, you know, take a fantastic located resort with 100% oceanfront views and try to, you know, create a product that maximizes ADR. And I think Hyatt Zilara, I mean, look at what we get, you know, look at what we get in Cap Cana, look at what we get in Rose Hall.

So I think, you know, Hyatt Zilara Cancun can drive a very significant rate in premium if we have the appropriate product, and that's our goal is to get the appropriate product. But having said that, will we consider options? Absolutely.

Ryan Hymel (EVP and CFO)

Just to give you some context, some round figures, because we don't disclose individual resort ADRs, but the... For Q1, the Zilara, in its existing state, did very high $500 of package revenue, a package ADR, $500. Our Ziva Cancun up the street did $150-ish more than that per night, and our Ziva Zilara in Cap Cana, again, a different market but a much newer property, did almost $200 more per night in package ADR. So the gap exists and the opportunity exists. And so, you know, to that property's credit, it's doing really, really well for what it is. And I know you've been there and many others have, and you go in and you're like: Wow, this is just a very different product than you've got up the street.

So, you know, it's if we can kind of decrease that gap and bring that property up. That's very, very high profitability on that higher end.

Bruce Wardinski (Chairman and CEO)

Yeah, and I do want to emphasize, we really think this is a huge opportunity, okay? As we talked about, I think some of the others, you know, are more defensive and protective in nature. This is a huge opportunity, and I'm expecting big, you know, success coming out of this repositioning.

Chris Woronka (Senior Analyst)

Okay, understood. Super helpful. Thanks, guys.

Operator (participant)

Thank you. This concludes our question-and-answer session. I would now like to turn the conference back over to Bruce Wardinsky for closing remarks.

Bruce Wardinski (Chairman and CEO)

Great. Well, thank you everyone for participating. You know, it was a, it was a great quarter, and we're looking forward to, you know, a lot, more going on in the rest of this year. But thank you very much.

Operator (participant)

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