Playa praises Jamaica for third quarter performance
Playa Hotels and Resorts NV has once again credited Jamaica’s tourism market for the growth of its business which experienced a four per cent jump in third quarter revenue to US$213.15 million.
The Dutch-based hospitality firm, which operates in Mexico, the Dominican Republic and Jamaica, saw total occupancy across its portfolio of 70.7 per cent in the third quarter from July to September, a decrease relative to the 73.8 per cent in the prior period. The Jamaican portfolio experienced an improvement in occupancy from 75.5-77.6 per cent in the third quarter across its five properties in Montego Bay and Runaway Bay.
This improvement was reflected further in the financials with owned net revenue increasing 14 per cent to US$49.84 million and owned resort EBITDA (earnings before interest, tax, depreciation and amortization) coming in 36 per cent higher at US$15.33 million. The net package ADR (average daily rate) was US$422.23 and net package RevPAR (revenue per available room) of US$327.86 were at least 15 per cent above the 2022 figures which means that the company is generating more revenue at its Jamaican resorts.
“Our core portfolio delivered another strong underlying quarter, once again led by our resorts in Jamaica. While Jamaica had the highest rate of ADR growth and occupancy in the third quarter, our resorts in Mexico were able to deliver foreign currency adjusted year-over-year owned resort margin expansion despite a slight decline in revenues compared to last year,” said Bruce D Wardinski, Playa chairman and chief executive officer, in its earnings release.
The Jamaican segment saw its margins come under pressure from higher insurance and labour costs despite benefiting from better food and beverage and utility expenses. For the overall nine months, owned net revenue increased 29 per cent to US$170.23 million with owned resort EBITDA at US$64.34 million.
Wardinski noted at the company’s earnings call on Friday that they are targeting investments in Jamaica to continue to grow market share at a time when several new hotels are set to come on stream in the coming years. Playa’s gross property, plant and equipment value in Jamaica was US$418 million at the end of September with the company spending US$5.14 million during the period on capital expenditure.
“Although Jamaica had a fantastic year in 2023, there is still plenty of room to go in the recovery in that market. With the improvements made to the Montego Bay Airport and the expected growth in additional flight capacity, we remain extremely optimistic for the Jamaican segment fundamentals,” the CEO added.
He highlighted that the forecasted flights headed into Montego Bay for the next six months are expected to grow in the mid-teens year-over-year, which leads all of their major destinations. He also noted that the recent additions of more flights from Canada are expected to boost growth in the fourth quarter.
Jamaica Tourist Board data showed that stopover arrivals to Jamaica grew 27 per cent to 1.48 million visitors during the first half of 2023 with cruise ship visitors jumping 143 per cent from 285,874 to 694,671 passengers. Most of the stopover arrivals came from the United States of America, which welcomed 1.09 million visitors or 73.7 per cent. Canada had 14.1 per cent or 208,951 visitors, which is a 80 per cent jump year over year.
According to the air traffic reports of Grupo Aeroportuario del Pacífico, SAB de CV (Pacific Airport Group) for October, the Sangster International Airport processed 349,900 passengers, which is a 22 per cent improvement compared to 2019 figures of 287,800 passengers. The airport welcomed Southwest airlines which has the route Montego Bay – Kansas City.
While Playa’s Q3 report (10–Q) showed that operating profit was flat at US$13.59 million, its net loss before tax jumped from US$1.96 million to US$13.31 million largely due to higher interest expense from its latest round of refinancing. After reporting an adjusted net loss of US$9.74 million, Playa’s loss per share of -US$0.06 missed analyst estimates of -US$0.05 albeit the company’s revenue beating estimates by US$4.12 million. The appreciation of the Mexican peso impacted Playa’s owned resort EBITDA by US$8 million.
For the overall nine months, Playa’s revenue grew 14 per cent to US$734.99 million with operating profit coming in 32 per cent higher at US$140.35 million. However, the doubling of its interest expense to US$82.34 million resulted in net profit coming in 26 per cent lower at US$52.85 million. Earnings per share decreased from US$0.43 to US$0.35.
Playa’s total assets decreased six per cent during the nine months to US$1.94 billion with cash moving down from US$283.95 million to $184.41 million. Total liabilities declined to US$1.35 billion as it cut its trade payables by 25 per cent to US$172.49 million with shareholder’s equity decreasing from US$664.86 million to US$589.18 million. The decrease in shareholder’s equity was driven by the company repurchasing 10.01 million ordinary shares during Q3 worth US$76.57 million which were held as treasury shares at the end of the period. Playa has repurchased 20.92 million ordinary shares worth US$167.09 million relative to the US$200 million share repurchase programme established in February. This left it with 138,454,910 ordinary shares at the end of October.
Playa’s share price rallied on Friday from US$7.18 to US$7.45 by the end of trading but was trading at US$7.16 on Tuesday which translated to a market capitalisation of US$990.65 million. Playa is projecting to report EBITDA of US$260-265 million for the 2023 financial year.
“On the booking front, demand improved throughout the summer, building momentum as we approach the high season. With our MICE [meetings, incentives, conferences and exhibitions] group segment pacing up significantly and momentum on the transient side, we are entering 2024 on solid footing,” the CEO closed.