Bookings continued to gain momentum for all-inclusive resort owner and operator Playa Hotels & Resorts in the third quarter despite macroeconomic uncertainty and rates more than 50% over pre-pandemic levels.
Speaking during Playa's third-quarter earnings call, President and CEO Bruce Wardinski said revenue on the books for the first quarter of 2023 is almost 40% higher than the start of 2022, but the company is "prepared to adjust our costs and staffing appropriated if we were to see a pullback in the consumer-demand environment."
"I want to remind everyone that not long ago we — like many others in our industry — were forced to go to zero-percent occupancy, and slowly we've built back to our baseline over the past two years," he said. "The adjustments needed to adapt to a changing demand environment are quite fresh in our memory, and we will act accordingly if the conditions call for it."
Wardinski said Playa is making the most of the high-inflationary environment, with rate gains making up the bulk of revenue growth in late 2022.
Playa saw a 10.5% year-over-year increase in net package average daily rates to $343.28. That increase was coming off already record-high rates for the company.
The strong rate environment, combined with a 14.5-percentage-point increase in occupancy to 73.8%, drove up net package revenue per available room 37.5% year over year to $253.17.
Wardinski said early returns from the fourth quarter look strong as well. Revenue on the books for the fourth quarter are up 16% year over year and up 52% compared to the same period in 2019.
So far, the data indicates continued strong demand and a lengthening booking window, driven in part by high airfares, Wardinski said.
"If you look at the airlines, everyone advises that the prices are going up and if you want to get a good deal, you better book early," he said.
Executive Vice President and Chief Financial Officer Ryan Hymel said an elongated booking window allows Playa "to be more nimble and thoughtful."
"In a downside scenario, it allows us to see things faster than our peers may be able to and [it] allows us to make decisions on product offerings, staffing levels and things like that," he said.
Looking forward, Playa officials said they'll look to prioritize achieving higher rates over driving demand to their resort.
"We still believe that ceding some occupancy in favor of ADR — mainly at our Hyatt resorts — is the best path forward for Playa as it establishes us as the rate leader from a competitive standpoint in our respective markets and is more management from an operations standpoint," Wardinski said. "With growing inflationary pressure impacting both consumers globally and the cost of operations for businesses, we are focused on pricing to continue offering a fantastic value to our guests while managing the economic reality of higher operating expenses."
The lone disruption in the quarter came from Hurricane Fiona in the Dominican Republic in late September, which resulted in the closures of the Hyatt Ziva & Zilara Cap Cana and the Hilton La Romana.
"Although there was no structural damage to either resort, the water buildup and repairs at our [food-and-beverage] outlets required additional attention," Wardinski said. "We felt it was prudent to temporarily shut down the resorts to perform the cleanup and repairs as quickly as possible to ensure we return to the level of service and quality our guests have come to expect from us. The repair work is progressing nicely and will likely be completed ahead of schedule in time for the high season."
Hymel said the adult section of the Hilton La Romana already reopened as of Nov. 1, and the adult section of the Hyatt property is slated to reopen on Nov. 15.
"Everything is moving full speed ahead," he said.
Playa executives said the disruption in the Dominican Republic was somewhat isolated, and demand to the market remains strong.
"The airport never shut down, not for any time at all," Hymel said. "The overall market is incredibly strong, so there's really not lingering effects on our bookings. As we highlighted, our [first quarter] is not impacted at all, so I think things are going to be incredibly positive there."
Both the Dreams Palm Beach and the Dreams Punta Cana remained "open and operational," according to Playa's earnings release.
During the quarter, the company completed the conversion of the Wyndham Alltra Riviera Nayarit. Wyndham Alltra is a new upper midscale all-inclusive resort brand formed through a strategic alliance between Playa and Wyndham Hotels & Resorts.
Playa also announced the first all-inclusive Kimpton property in September — the Kimpton Hacienda Tres Ríos Resort, Spa & Nature Park — which is slated to open in early 2024.
Third-Quarter Performance
Wardinski said Playa reported its highest adjusted earnings before interest, taxes, depreciation and amortization on record during the third quarter at $44.9 million, which marked a 41.2% increase over 2021 figures. The company also saw a 1.2 percentage point increase in adjusted EBITDA margin to 22.9%.
Playa estimated a $2.9 million negative impact on owned-resort EBITDA from Hurricane Fiona.
For the first three quarters of 2022, net package RevPAR was up 89.4% year over year to $268.35.
As of press time, Playa's stock was trading at $5.82 a share, down 27% year to date. The Nasdaq Composite was down 33% for the same period.