THE financial impact of the US travel advisory earlier this year on the hotel business in Jamaica has been laid bare in the recently released financial statements of Playa Hotels & Resorts N V (Playa).

Playa, one of the few hotel businesses operating locally to publicly trade its shares, said in its financial statements on Monday that it suffered a 19 per cent dip in revenues from its Jamaica business during its second quarter. Revenues from the five hotels Playa operates in Jamaica were down by US$10.93 million ($1.69 billion), with the company blaming the US State Department’s travel advisory for the fallout.

The company also expects a further US$3.5-million ($542.09-million) dip in earnings for the third quarter, due to the impact of Hurricane Beryl early last month.

The hospitality firm which operates two Jewel resorts, two Hyatt resorts, and the Hilton Rose Hall Resort & Spa on the north coast of Jamaica, disclosed in February that it saw a spike in cancellations following the US State Department’s updated level-three travel advisory on January 23 which advised US citizens to reconsider travel to Jamaica. Those cancellations have not only resulted in reduced earnings for its Jamaican operations in the second and third quarter, but also lower staffing levels at the Jamaican resorts as occupancy swung from 83.1 per cent in March to 72.1 per cent by the end of June. Playa’s Jamaican occupancy was 82.4 per cent in June 2023.

“We’re hopeful to get progress. We’re hopeful that people see that whatever is included in the advisory really doesn’t have any impact on the north coast of Jamaica, which is where the tourism zone is — Montego Bay, Ocho Rios, Negril, that’s where we’re located. I think the Government is, it is much more focused, and I probably kind of stated that on the last call, so I’m positive about that too. We have an open dialogue with them and we’re hoping that things will improve,” said Bruce D Wardinski, Playa’s founder, chairman and chief executive officer (CEO) in an earnings call with analysts on Tuesday.

Playa’s net Jamaican revenue moved down from US$57.42 million ($8.9 billion) to US$46.49 million ($7.20 billion) for the second quarter. The gravity of the situation was made more apparent through three key financial metrics: owned-resort EBITDA (earnings before interest, tax, depreciation and amortisation), net package ADR (average daily rate), and net package RevPAR (revenue per available room).

EBITDA reflects a company’s earnings by adding back certain non-cash expenses like depreciation and amortisation. The Jamaican EBITDA fell from US$21.92 million ($3.4 billion) to US$13.09 million ($2.03 billion) — a 40 per cent dip which was largely due to the travel advisory and a 0.60 per cent increase in labour costs from the minimum wage jump and related expenses. For context, Playa reported US$64.64 million in revenue and US$27.08 million in EBITDA for the March 2024 period, at the height of the winter tourist season.

The net package ADR effectively reflects the average revenue from the sale of all-inclusive packages earned for an occupied room on a given day. This figure swung from US$454.59 to US$417.18 on a year-over-year basis. This figure was at US$524.92 in March 2024.

The net package RevPAR reflects the net revenue earned per available room in a hotel. This figure fell from US$374.72 to US$300.95, a 20 per cent drop. The March 2024 figure was US$436.46 and US$359.71 for all of 2023.

The situation hasn’t been made any better with the passage of Hurricane Beryl, which is expected to result in a US$2.5 to US$3.5-million impact on Jamaica’s EBITDA. Due to there being no property damage in Jamaica and Yucatán Peninsula, Mexico, the company isn’t expected to put in any insurance claim for business interruption which left Jamaica with some light cosmetic damage to the landscape. The overall EBITDA impact for Playa’s entire portfolio from Beryl will be US$6 to US$8 million, which speaks to a six to nine per cent reduction in revenue.

“So, unless something substantially changes, I don’t expect any improvement until we start lapping these effects in Q2 of next year. So, if you assumed everything remains the same from here on out and nothing changes through the entirety of 2025, at a minimum you will have a significant impact in Q1 of 2025,” the Playa CEO explained on how Hurrican Beryl resulted in cancellation to summer stays and a slowdown in booking pace for Q4.

Grupo Aeroportuario del Pacífico, S A B de C V (Pacific Airport Group) reported a 13.7 per cent decline from 513,700 passengers to 443,400 passengers passing through Sangster International Airport (SIA) in July 2024. Norman Manley International Airport (NMIA) saw a 2.1 per cent decline from 181,900 passengers to 178,000 passengers in July. It should be noted that SIA processes more than 70 per cent of the air traffic for Jamaica.

For the overall six months, Playa’s Jamaican operations have seen net revenue decrease eight per cent to US$111.13 million, with EBITDA down 18 per cent to US$40.17 million. The occupancy over the period was 77.6 per cent, with net package RevPAR at US$368.70.

Wardinski also added, “We believe also that, to a lesser extent, new supply delivered to the market during the second quarter into a choppy environment has added some incremental challenges in Jamaica in a market which would have likely absorbed the additional rooms without much of a problem.”

Playa’s overall Q2 saw revenue decrease five per cent to US$235.48 million ($36.47 billion) stemming from lower package sales. Even with operating expenses remaining flat, operating income slipped 24 per cent to US$37.91 million, with the adjusted EBITDA at US$63.7 million. Playa’s consolidated net profit was down 36 per cent to US$13.17 million ($2.04 billion), with an earnings per share (EPS) of US$0.10.

Playa’s six-month revenue was up three per cent to US$536.11 million, with an operating profit of US$128.21 million and adjusted EBITDA of US$177.17 million. Consolidated net profit increased seven per cent to US$67.51 million with an EPS of US$0.50. Playa is projecting adjusted EBITDA of US$250 to US$275 million for the 2024 fiscal year.

Playa’s total assets were down two per cent over the six months to US$1.90 billion, with cash and cash equivalents at US$233.94 million. Total liabilities and shareholders’ equity was US$1.34 million and US$556.03 million, respectively.

Playa recently signed a management agreement with Marriott International Inc to expand The Luxury Collection brand in Mexico. The Paraiso de la Bonita in Riviera Maya, Mexico, is currently undergoing renovations and is set to open later this year. Playa recently commenced management of Wyndham Alltra Samaná Dominican Republic in March and is set to manage Kimpton Tres Ríos Riviera Maya, Mexico, and Jewel Punta Cana, Dominican Republic, later this year, which are currently being renovated.

Playa’s stock price closed Tuesday at US$7.53, which saw it unable to rebound from Monday’s global asset decline. This leaves Playa’s stock price down 13 per cent in 2024 with a market capitalisation of US$1 billion. Playa repurchased US$69.18 million in shares during the first six months of the year and US$12.08 million in July under its US$200-million share repurchase programme.