Playa Hotels & Resorts NV is the latest company to bemoan the Embassy of the United States of America in Jamaica’s travel advisory which has seen a spike in cancellations over the next five months and tourists being redirected to other regional markets.

This was revealed in the company’s fourth-quarter (Q4) earnings call on February 23 as the hotel owner and management firm noted that the level three advisory, which states “reconsider travel”, garnered much greater press coverage and attention than prior times. This resulted in it sending concerned guests to the Yucatán Peninsula and Pacific Coast in Mexico and Dominican Republic. The travel advisory has remained unchanged since March 2022.

“The segment was off to a good start in 2024, then the US State Department’s travel advisory notice for Jamaica on January 23 has had a negative impact on the second-year term as cancellations picked up meaningfully,” said Bruce Wardinski, Playa chairman & chief executive officer, in his opening remarks to analysts.

Playa operates five hotels and resorts under the Jewel, Hilton and Hyatt brands which brought in US$219.90 million or 23.5 per cent of Playa’s consolidated net revenue. The company noted that its occupancy in December 2023 for Jamaica exceeded the 2018 and 2019 averages with its annualised occupancy at 79.4 per cent. Playa owns four hotels outright in Jamaica and manages 129 rooms at the Jewel Grande Montego Bay Resort & Spa, which results in 3,100 employees being directly and indirectly employed by the Nasdaq listed firm.

“Bookings in Jamaica have since stabilised, but the majority of the cancellations were for stays in the coming months and will be difficult to backfill. Given the warning level was not based on any new instance or data, the impact to this, while unfortunate, will likely to be confined to lost bookings in March through June,” Wardinski added in his remarks surrounding the concern for the Jamaican market.

Jamaica’s tourism market has managed to rebound from a significant shock from the COVID-19 pandemic which brought the sector to a standstill. The Mexican-based Grupo Aeroportuario Del Pacifico (Pacific Airport Group), which manages the Sangster International Airport (SIA) and Norman Manley International Airport (NMIA), reported record passenger traffic in 2023 which exceeded 2019 levels.

Sangster International was able to grow its passenger traffic by 19.6 per cent to 5.21 million passengers passing through the airport in 2023, with December being a record month as 495,100 passengers came through the airport. NMIA also saw 11.9 per cent growth in passenger traffic to 1.75 million passengers as well. SIA also added new routes to London and Toronto with Norse Atlantic UK and Jetlines Canada.

For January 2024, SIA saw traffic rise 9.6 per cent to 491,900 passengers and NMIA saw a 1.6 per cent rise to 148,400 passengers. The air traffic data for February should be out by March 6. The Ian Fleming International Airport even saw its major airline land last Saturday with American Airlines to much fanfare.

The concern surrounding the travel advisory has been sounded by different tourism players including Sandals International Executive Shairman Adam Stewart. Stewart, who is also chairman of the Jamaica Observer, noted recently that cancellations spiked to a peak of 45 per cent after the advisory came out. While he notes that it has subsided thanks to travel advisors, he defended the safety of tourists at his resorts while praising the health facilities in the Montego Bay area.

While most companies on the Jamaica Stock Exchange (JSE) don’t do earnings calls, the limited tourism operators give limited comment at times on the state of play in their quarterly earnings reports. Dolphin Cove Limited noted in its 2018 and 2019 reports the impact that Jamaica’s state of emergency (SOE) declarations and accompanying restrictions had on its operations, which resulted in reduced revenue.

Apart from contending with the travel advisory, Playa noted that the 44 per cent hike in the minimum wage in June resulted in the company’s overall operating expenses rising by 80 to 100 basis points (0.80 – 1.00 per cent) in 2024 compared to the overall 4 – 4.5 per cent increase in operating expenses excluding any foreign exchange impact. Playa’s overall operating expenses in 2023 was US$721.75 million.

Playa also noted that it is carefully watching the state of play with the Jamaican insurance market which has seen numerous firms report a 40-70 per cent increase in annualised premiums. While last year was a massive jump by as much as 50 per cent, Playa noted that its initial conversations with its insurers have been good ahead of its April renewal.

Despite the initial impact the advisory has had on the Jamaican operations, Wardinski doesn’t expect for there to be significant discounting on rates to re-energise interest back to Jamaica. He noted that the last time they would have done any discounting would have been in 2019 during the SOE events, but that they usually have a short shelf life in terms of impact. He noted that even guests who cancelled in the last month to Jamaica were offered no discounts when they offered the alternatives to the Dominican Republic and Mexico.

“They returned positive although they’re not picking up as much as they would normally, right, but it’s slowly building. And so essentially, what we’ve taken out with potential occupancy on the books, but our rate on the books for those periods remained essentially flat to where we were at prior to that. So, this we expect to be shorter term. It’s a lot more information on how that stabilised by the time we get to our next earnings call,” Wardinski closed.