Good day, and welcome to the Playa Hotels' & Resorts Fourth Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Please note that this event is being recorded. I would now like to turn the conference over to Ryan Hymel. Please go ahead..

Thank you very much, Chuck. Good morning, everyone, and welcome again to Playa Hotels & Resorts’ fourth quarter 2021 earnings conference call.

Before we begin, I'd like to remind participants that many of our comments today will be considered forward-looking statements that 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 annual report on Form 10-K, which we filed last night with the SEC.

We've updated our Investor Relations Web site at investors.playaresorts.com with the Company's recent releases. In addition, a reconciliation to GAAP with the non-GAAP financial measures we discuss on this call were included in yesterday's press release.

On today's call, Bruce Wardinski, Playa's Chairman and Chief Executive Officer, will provide some comments on the fourth quarter and key operational highlights. I will then address our fourth quarter results and our outlook. Bruce will then 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..

Great. Thanks, Ryan. Good morning, everyone, and thank you for joining us. I'm sure most of you have had a chance to review our fourth quarter results reported last night. So let's get into the discussion.

The fourth quarter fundamentals once again improved sequentially with occupancies and flight capacity continuing to ramp up particularly in the Dominican Republic. The strength in the business was consistent and broad based, with occupancy improving sequentially each month and similar year-over-year ADR advances as well.

That is to say the ADR gains were not only driven by pricing during the peak demand holiday period. In fact, they've been remarkably steady on a percentage basis for the last six months. More importantly, our fourth quarter 2021 results represent the highest resort margin percentage and absolute EBITDA for any of our historical fourth quarters.

While this may seem like an obvious mandate, I'm incredibly proud of how the entire organization is working together to execute our strategy. I truly believe that each functional area of Playa is improving each day, and it couldn't be happening at a more critical time.

On the booking front, following the slowdown in the summer, our sales ticked up dramatically during the first two months of the fourth quarter, reaching new weekly sales peaks in October and November, before slowing down in December likely due to the outbreak of the Omicron variant.

Though Omicron had a modest impact on potential close in bookings for December January, its impact was relatively short lived as our weekly revenue booking surged in January with several consecutive record setting weeks.

I believe we are still in the early innings of the resurgence in travel, it will likely be a multiyear process to find equilibrium, given that travel was a universal love for so many of us in the pre-pandemic era.

With that in mind, and pleased to share with you that our pacing figures for 2020 to remain elevated compared to pre-pandemic levels, and are successfully lapping 2021. I believe we offer an incredible relative value even with the recent ADR gains, and that has been recognized by more travelers as our awareness grows.

I think it is also becoming more likely that we're going to get a permanent repricing for off peak periods. Suddenly, I don't think the idea of going to Mexico in August stands all that bad. Ryan will share the details on our booking trends with you momentarily.

Looking at our segments, Mexico continues to perform well for us, posting another quarter of exceptional underlying top line KPIs and margins. International passenger arrivals exceeded 2090 levels in September for the first time since the beginning of the pandemic and have not looked back.

Moving on to the Dominican Republic, we experienced our biggest sequential occupancy improvement in the quarter. We were hopeful for the segment as we entered the quarter, given our forward bookings and the forecasted increase in flight capacity, but the performance in the quarter exceeded our expectations.

As you may recall, the DR had the biggest mix of European guests in the pre-pandemic period, which was a drag on his performance, particularly in our particularly in our mid scale properties.

Once again our flagship Hyatt Ziva and Zilara Cap Cana led the way as it has established itself as a great leader in the market, with a resource EBITDA margin exceeding 40% during the fourth quarter, with occupancy only in the low-60s.

The resource progress and ramp give us further confidence that we can achieve our goal of 12% to 15% stabilized cash and cash returns on our investment there.

The segment's profit performance was weighed down by our two externally managed properties, which have lagged behind our globally branded resorts in the segment with respect to rate gains, and also yield a significantly lower absolute ADR compared to our globally branded and Playa managed resorts.

Turning to Jamaica, the segment's recovery largely stalled out compared to our other geographic segments, and its third quarter results. As the back to back variant waves had a disproportionate impact there given the more stringent entry testing requirements.

The impact has lingered into the first quarter of 2022, but bookings in Jamaica are picking up for the rest of the year and the impact is diminishing as we look out to Q2 and beyond.

Our focus on direct channels continues to pay off and we are confident Playa as well on target with our five year plan to increase consumer direct business to at least 50% by 2023.

In aggregate during the fourth quarter of 2021, 41.6% of room nights booked were book direct, down 10.6 percentage points year-over-year, reflecting the continued relative strength of our growth channels, including a significant acceleration in group and third-party source business.

During the fourth quarter of 2021, playaresorts.com accounted for 17.4% of our total room night bookings, down 8.2 percentage point year-over-year. Looking at 2022 as of January 17, playaresorts.com generated approximately 70 million of bookings for 2022 compared to only 40 million for the 2021 comparable period.

This is a critical aspect of our business that I believe many overlook. We at Playa drive a significant portion of our direct revenues in-house, which is now a major competitive advantage for our current portfolio for potential third-party managed resorts in the future.

Finally, as a reminder, we anticipated that as the world slowly returned to normal, our mix of direct business would likely fall below 50%. But we still believe that will remain higher than level sees immediately prior to the pandemic and significantly higher on an absolute dollar basis. Taking a look at who was traveling.

Just over 40% of the Playa managed room night stays in the quarter came from our direct channels, as our group mix improved sequentially and the OTA mix remained significantly depressed.

Geographically, our US sourced business increased approximately 13 percentage points compared to Q4 2019 to 64% of managed room nights, while our South American source business increased 400 basis points. But the biggest change in our business was the return of our European guests, which makes three percentage points higher in Q4 '21 and Q4 '19.

Given the current state of travel restrictions our Canadian and Asian customer mix remained significantly depressed versus pre-pandemic level. Our booking window improved versus Q3 but remained shorter than pre-pandemic levels. Our length of stay during the fourth quarter was in line with Q4 2019 and up nearly 10% versus Q4 2020.

And this trend is expected to continue as we rely less on close in bookings.

Finally, we recently announced a strategic partnership with Wyndham Hotels, which we believe will accelerate growth in the mid scale and upper midscale segments of our portfolioby leveraging Wyndham's sizable database of customer relationships to increase exposure and awareness of the value proposition of the all-inclusive model.

We completed the conversion of two resorts during the fourth quarter and officially welcomed our first guest on December 1st to the new Wyndham Alltra concept in both Cancun and Playa del Carmen. The transition went smoothly from an operational perspective but just as critical for us, Wyndham has been a superb partner to work with behind the scene.

I look forward to sharing more with you about this new relationship in the coming quarters. Once again, I would like to thank all of our associates that have continued to deliver world class service in the face of myriad pandemic related challenges. Their unwavering passion and dedication to service is what truly sets Playa apart.

With that, I'll turn the call back over to Ryan to discuss the balance sheet and our outlook..

Thank you, Bruce. Good morning. Again, I will provide you first with an update on our liquidity and balance sheet, and then review the fundamentals of the fourth quarter. Then finish with the discussion on forward bookings and market trend.

We finished a quarter with a total unrestricted cash balance of approximately $270 million as at the end of the year. And as a reminder, we have $23.5 million of additional restricted cash on the balance sheet from our June 2020 financing.

On the other side of the ledger, we currently have no outstanding borrowings on a revolving credit facility and total outstanding interest-bearing debt of just under $1.15 million.

We anticipate our cash CapEx spend for full year 2022 to be approximately $30 million to $35 million for the year with approximately $5 million of that being carried over from CapEx we did not spend in the fourth quarter as anticipated. The vast majority of our projected 2022 CapEx is maintenance related.

We have roughly $60 million of mandatory debt repayment obligations left over from our asset sales in 2020 and 2021. Turning now to our MICE Group business. While our business on the books in the segment was and remained strong to start the year, we've seen some movement in this segment as a result of Omicron variant.

Our 2022 net MICE Group business on the books is approximately $36 million, which hasn't changed much since the last time, that we spoke and is well ahead of our final full year 2019 MICE revenues of 32 million and ahead of the $33 million we had on the books in early 2020, for that year prior to the onset of the pandemic.

Nearly 83% of this MICE business is slated to stay in the first half of 2022, which is slightly more balanced than our MICE pacing at the time of our last call, as many of our incremental bookings have come for the second half of the year given limited and some movement of existing reservations.

Our pacing for 2023 has remained strong with over $15 million already on the books. The return of this MICE business should provide a nice base to help manage yields and drive improve profitability year-over-year, particularly at our Hyatt resorts in Cabos, Rose Hall and Cap Cana. Moving on to the fundamentals.

As Bruce mentioned, the teams have done an excellent job navigating the current environment. We continue to expect a similar degree of inflation in the first half of 2022 that we experienced in the second half of 2021. Though it is still early, we currently do not anticipate expense inflation to be worse in the second half of 2022.

With respect to top-line, I believe 2022 can be a phenomenal year for Playa, as I look at how our book of business has been building for future periods. We are particularly encouraged by year-over-year ADR gained and revenue pacing in the second half of 2022, as we lap the second half of 2021 record performance.

Both the third and the fourth quarters are pacing significantly ahead of the comparable periods in 2019 and are up year-over-year versus 2021, in both revenues and ADR.

Putting it all together based on what we know today and the fluidity of the virus we feel it's best to think about 2022 and a half, with a little more granular detail for the first half given our visibility and then some directional color for the second half that will firm up later.

So for the first quarter of 2022, we expect the occupancy rate for the entire portfolio to improve versus the occupancy rate in the fourth quarter of 2021 at an average daily rate that is approximately low to mid double-digit percentage points higher than Q4 reported $325 average package rate.

While this would easily represent the highest ADR Playa has ever achieved in a quarter, the percentage increase versus Q1 2019 in ADR is not to the same magnitude that we experienced in the second half of 2021. This is owing obviously to higher absolute base in our historically highest season.

Thus, you should expect a more tempered margin performance in the first quarter as compared to the second half of 2021. Said differently, to reach prior peak Q1 margin levels, we will need to be more rely on occupancy to get us there because the ADR increase is not enough to offset the lower occupancies versus 2019.

Also stating obviously keep in mind that Q1, particularly January, felt the lingering impact on the Omicron variant. As we mentioned, the segment hit hardest by the disruption in bookings with Jamaica likely driven by the country's entry testing requirements.

Now looking at the second quarter, our pacing as applier managed resorts remain strong with revenues up mid 40 percentage points versus the same time in '19 and ADR driving a significant portion of the increase. On a percentage growth basis compared to 2019, we expect our ADR to accelerate substantially in Q2 versus what we expect to report in Q1.

As we move into the back half of the year, we think the typical interplay between occupancy ADR and OpEx for modeling purposes should become easier for you.

In order to maintain property margins we experienced in the second half of 2021, we will need to grow ADR slightly faster than inflation to account for additional headcount to help with higher occupancy levels until we reach a stabilized occupancy.

And we expect our occupancy to be in the low to mid 70s in the second half, in line roughly with 2018 and 2019. I hope that framework helps you to fine tune your models. With that I'll turn it back over to Bruce for some closing remarks..

Great, thanks, Ryan. So in summary, I am very optimistic for this new year and the growth ahead for Playa. Strategically, our new partnership with Wyndham pursued a third party management contract should help enhance our growth profile over the intermediate term.

I also want to take this opportunity to share another endeavor that we will expect -- that we expect will augment our growth profile.

The company has entered into a licensing agreement with a third-party that will own and operate a membership program for Playa collection which will provide members certain benefits and amenities at designated Playa owned and or managed resorts.

We do not expect Playa collection to be a material driver profits in the near-term, but it will hopefully grow into another sourcing channel with a favorable customer acquisition cost profile.

Also, as this is being operated by third-party pursuant to a licensing agreement, we will simply be collecting licensing and other ancillary fees from the sourcing channel. We do not anticipate any material changes to how we present our financials.

We will continue to look for ways to leverage our expertise, leadership and experience in the All Inclusive segment to drive strong customer financial results and to create shareholder value for our investors. With that, I'll open up the line for any questions..

And the first question will come from Chris Woronka with Deutsche Bank..

Bruce, really interesting comment on the potentially, structurally higher ADR in the off peak periods.

Does that kind of also directly relate to the direct bookings if you can give full color on maybe whether much lower percentage of your bookings during the off peak periods have been through OTAs and other channels historically?.

Actually, I'm really glad you asked that, because I think what you what you see with the ADR increases through those shorter periods, is it's across all channels. So certainly we have benefited, but we've been benefiting right from our mix change with more direct business, but literally all the channels are going up.

We've been incredibly focused on rate integrity across all third parties, so that people couldn't do what they used to be able to do in discounts, not just like us but every hotel company. So with technology, we've been able to be a little better focus there. And then our mix is increasing on the direct.

And then I think you're starting to see some of the group segment pick up, and it's not just the really big groups, it's a lot of smaller groups, too. And those can be really attractive.

And not only are they good for the ADRs, but a lot of the smaller groups are really good for the non package revenue, believe it or not, kind of on a per person basis, a smaller group can spend a lot more on package revenue. I mean, I'll just give you give you an example.

I was in Mexico last week, and I was in the Dominican Republic first four days of this week. And while I was in the DR, while we were there, we signed a very big group contract for September. That's the kind of thing that's happening now because people are realizing the demand, they're having to figure out when they can get their groups in there.

And the same with people booking their private vacations and other leisure trips. So I think you're just seeing it across all channels. And I think as we said, that this is not a short-term phenomenon, I really believe this is something here to stay..

And then you talked a little bit about supply collection with the new platform for fee growth. You're also right in the process of kind of growing -- you're hopefully growing your management fee base.

Is there a way to just think directionally about where -- is there any kind of cycle on fees as a percentage of total longer term and can just become 10% or 15% of your EBITDA or something roundly like that?.

Well, we don't want to -- today, it's way too early to try to come with a projection. We will have discussions and try to do that in the near future, as we see kind of what the results are from the Playa collection. And it's a little different, as we said, it's a third-party.

So we're not running it ourselves so we just have to see, how things progress, but we're optimistic about it. And if you look at many of our competitors in the all inclusive segment, they drive pretty significant business through that channel.

Some of them that's kind of their main focus, it will not be our main focus, as we've stated, our main focus is direct sales. But this will give us a really good additional channel and people who are loyal to kind of Playa resorts and to our brands and our resorts for them to book.

So it's a really lower cost way for us to get the customers and it's a good benefit for the customers as well. So I think it's going to be successful. And the nice thing about people who are in that channel is they typically come, one to two to three times per year. So that's a really good customer base for us..

And then the last one is, you guys are kind of right about the structural, ADRs being higher and we can kind of hang on to some of this growth in RevPAR. You're gonna be at a much higher base. I know you have a pretty small CapEx plan this year. You have the steep required debt pay down.

But you are still be generating a lot of free cash and leverages probably back down the lower than pre-COVID.

So I mean, where do you prioritize, where do you possibly begin to be able to think about share purchase or some kind of bigger renovation or ROI project?.

So I mean, obviously, you always look at all options. So you mentioned share purchase or ROI projects. From my standpoint, if you look at the success of Hyatt Ziv, Zilara Cap Cana, and where we can invest our money and drive superior returns, that would be our number one objective.

And so as we've talked about in the past kind of pre-pandemic, we had a lot of opportunities of kind of organic growth, projects within our existing portfolio. So we're not talking about new build projects, we're just talking about ROI enhancements. We have a couple properties that could be rebranded.

We have others that we can invest money very strategically in order to drive higher business, and quite honestly what you're saying with the higher ADRs is your are seeing customers are going to have higher standards, they're going to want things. And so I think that's the challenge, but that's really the opportunity. And we are excited about it.

After kind of two years, as I said I was down with, I told you in the Dominican with our team there and I described it to a big group of our team there. And we were using a hockey metaphor. We were in the penalty box, we all were right from COVID. It was the COVID penalty box and it is so exciting to be back out on the ice again.

So that's how I look at it, Chris..

The next question will come from Shaun Kelley with Bank of America..

I want to dig in a little bit, Ryan, just in your booking and outlook comment. Thank you for all the clarity. So now I'm gonna ask for more as we typically do on the sale side.

But can you just -- I just want to start with the second half, because I think that's really when the business is going to be I think operating the way you should, and it's obviously super encouraging that you might be able to lap the rate environment that we had in the second half of last year. I just want to be clear on that though.

Do you think in dollar terms, rates could be -- or is what you're seeing consistent with rates being up in the second half and I'm talking about ADRs being up in the second half relative to second half of '21.

Is that an okay starting point?.

Yes, that is correct, Shaun..

And then the second question would be sort of following up on 2Q, because I think that's a pretty critical inflection. Can you help me just unpack again how those -- the rate side of the equation. I think you said up, if I call right, maybe lower mid forties in revenue dollars.

But can you help me think about how the rate side of that is pacing at least, I think Q1 is your highest point. So that's going to be down a bit from Q1.

But is it -- we still up year on year from 2Q '21 or what are the puts and takes there?.

So I think what the message you're trying to get is that, Q1 would be our highest absolute ADR, but on a relative basis versus 2019 would not be as good what we just saw in Q4, because it's a higher base.

And so what I was trying to convey was that while Q2’s ADR would be slightly lower than Q1, it's percentage gain over 19 would be back into the kind of closer to record breaking levels that we've come to expect in the second half of 2021, if that makes sense.

The absolute ADR would go up in Q1, down in Q2, but its relative position over previous years would be higher..

Two last components then would be for the second half, what percentage of those room nights we typically have on the book now? You obviously have a longer booking curve than corporate transient style hotels, but obviously, we want to get a sense of like, how much visibility you'd have in as the sort of booking environment is, I think, increasingly normalizing? So just how would that book of business be trending and how much do we need to fill between here and day of arrival?.

So said differently, so let's just run through the quarter. So Q1 is typically 80% booked as of right now makes sense for two thirds of the way through.

Q2, we're about 60%-ish booked, typically, for now, and then just kind of for the third quarter, I think about it this way like our current revenue on the books for Q3 is a little under 40% of what we were actually reported in Q3 of 2021..

And then the very last thing for me would just be, you mentioned sort of the leverage points around inflation. And obviously, your environment can be slightly different than maybe what we're seeing in, let's call it US hotels and obviously, there's a lot of micro nuances and just US hotel market.

Can you help us unpack the labor inflation environment based on either market or much of -- I'm actually more intrigued on what are you seeing on the labor side? How much of this product costs kind of trying to think about where you might be seeing some of those pinch points, especially what you're seeing on the labor side, how much of a bottleneck that is for Playa?.

As far as staffing availability, labor has not been an issue for us. With the exception of a little bit in Q4, there's a little bit of early, just because of the Omicron transmissibility we had to have people out in quarantine for extra periods of time, much like what the airlines had to deal with.

The Mexican government as an example, lower those 14 periods down for five days from 10 and so there was some days that were shorter staffed. But as far as increases on the pricing and the unit costs, Mexico and the DR both increased minimum wage for 2022 in the teen. DR does that every couple of years, Mexico has done it.

I think this is a third time since took office. On a dollar basis, it doesn't make a huge, huge dent in our overall costs purely because it's only a portion of our line staff salary and wages. And other than that, the biggest component for us kind of on like unit growth is in F&B.

And so it's kind of -- those are the kind of the two pinch points, F&B and then the cost of labor. But like I said, we are fully expecting that what we saw in the second half of the year to continue the first half of this year, but where we sit today we don't see it increasing any more than normal in the back half of the year..

The next question will come from Chad Beynon with Macquarie..

For the first quarter, Ryan, just with your guidance. I think you noted occupancies would be slightly up sequentially. And it looks like the big driver of that increasing would be Jamaica. I think normally, seasonality calls for Q1 over Q4 occupancy increases. Jamaica is currently still slightly below 50%.

When can we start to move up closer to where the rest of the portfolio is?.

Your guess is still as good as mine. I mean, I love seeing that so many other places in the world like UK, and other places that we’re removing restrictions Bahamas remove their entry requirements what last quarter.

And so what we've seen is that like to make it just as you said, was the only period that you look at Q1 pacing, would be the only one that did not increase since our last call. But if you look at like the second half and the second quarter beyond, Jamaica has our highest occupancy on the books against any other segment.

So we're really starting to see an inflection point in the second quarter. And we saw signs of that last year when kind of as you moved into the fall kind of post Delta, when Jamaica just on a relative pricing perspective looks pretty good. And so people said, okay, like, I'm willing to take the chance that I'll test positive and I'll go there.

Now when Omicron popped up, obviously, more people worried about somebody in their family or significant other testing positive and not being able to go. So as you can imagine those bookings lag slow down there. But our expectation is that hopefully that continues to recover. As far as when they pulled out that requirement, I have no idea..

And then just on the management contract side or the conversion side of things, like you announced with Wyndham, are there still more opportunities in the market and can you just kind of help us gauge expectations in terms of what we should generally expect for these types of things on an annual basis? Can we start to see a couple more each year or is that kind of hit somewhat of a ceiling?.

Yes, there's more opportunities out there. Part of the reason I've been traveling is, because there's opportunities, trying to get out in front of things, meet with people.

Things we weren't able to do during the pandemic, I mean, the two big restrictions during the pandemic, were number one, everybody had to conserve cash and prepare for the unknown, we're feeling pretty comfortable that we're kind of beyond that phase. But then the second one is really getting out meeting and trying to sell the Playa story.

And I think what's going on right now is Playa story is selling incredibly well. So we've always said that it's difficult in our segment, given the profile of the people who own the properties to do these kinds of transactions and get people to change.

Having said that, I think our results are resonating incredibly well across the segment, the all inclusive segment, particularly with the percentage of direct business that we’re driving, and that's just so far superior to others, I think that's the competitive advantage that we have.

So what we're trying to do is get out there and sell the story that, hey, let Playa and come in, let us work with a global brand, let us put in our management and very particularly our sales and we’ll drive more direct business and we’ll generate more profit to the bottom-line.

What are the numbers of properties? We could do that, that's very, very hard to say. But if you said a couple of year, I think that's a very conservative number that we could do at least a couple of years..

And Chad, the management contracts we have today, even in a COVID impacted year we did roughly $3 million of management fee revenue or a little over two. We expect that those existing contracts today to stabilize anywhere kind of mid 5 million to 7 million of management fee revenue.

And as you're well aware, the flow grown that's pretty high but you could be taking on contracts in areas where you've already got existing infrastructure..

The next question will come from Smedes Rose with Citi..

I just wanted to ask you on the management contract side, and then I had another question.

But have you seen any increase, I guess, in competition because what Hyatt being so heavily in that business now, or is there enough to go around for everybody, or is it just more one-off opportunities for you and if they're not such a big presence?.

Smedes, if you look at, first of all, they have always been there. They have been there and they have been a very successful company, I'm speaking specifically about AM Resorts, and the number of contracts that they have been able to do. So they’re a quality company and a strong competitor. I will say their focus now is broader.

So they're looking over Europe and a lot of their new contracts are over in Europe. So I think while we will see them and we will compete with them, where we are competing and I think the flexibility we have with multiple brands gives us a very strong competitive position.

I'm not saying we are better than them or they're better than us, I just think we have a strong competitive position.

The bigger thing you should kind of focus on, well, we should focus on is that, there are just not as many management contract players in the all inclusive space, as there would be pretty much in any other segment of the global lodging industry, whether it's geographic or product line. And so I think that still bodes incredibly well for us.

So the real challenge is convincing, often family owner operators to kind of partner with Playa and let us kind of do our magic, that I think is the biggest challenge..

And then I just wanted to ask you, I guess specifically for Cancun, maybe any other markets as well.

I mean, are your competitors -- do you think also, are they also seeing like the boost in rates versus '19, or is that more unique to you because it's a more branded product or maybe just what you are seeing there? And do you see any new supply coming online that's significant over the next year or so?.

So there is always the fact that, the tide rises all boats. So there sure, there is going to be some impact of that. I think what you're seeing with us is that, we are exceeding the market levels and we are exceeding the market levels due to two big kind of differentiating factors that we have.

Number one is the percentage we sell direct, which is far superior than across the industry segment. Number two, is our focus affiliation with global brands, which also affects the direct. But I think those two factors are really big factors and why we are going faster than the market, faster than our competitors, when it comes to increasing ADRs.

And so, I think that, again is somewhat of a permanent kind of feature. With regards to the new projects, new development, first of all, during the pandemic, just like everywhere in the world, most lodging projects stopped. So any that were on the drawing board just didn't even occur.

There were a couple that opened more recently and they were people that said, hey, we're just going to plow through the pandemic and obviously they were financially very strong in order to do that. So they're open, they are there today. As far as a lot of new stuff coming, no.

And then when you look particularly at Cancun proper virtually nothing, okay, because, there is just no land available to do anything or conversion opportunities. So we feel very good about kind of our positioning within Cancun and within kind the whole Riviera market as well as in the Dominican and in Jamaica as well..

The next question will come from Tyler Batory with Janney..

A few follow-up questions here.

In terms of the cost margin side of things, can you quantify or put some numbers around just how much costs were up on a percentage basis in Q4 versus pre-COVID? And then what are you expecting in terms of cost increases this year compared with 2019 or 2018?.

So just kind of as a reminder, in typical year, our cost can play anywhere from 300 to 500 basis points. But if you think about cumulative inflation since either '18 or 2019, depending on how you want to look at it cumulatively our costs have been up roughly 20% since '18 and roughly 17% since '19.

And if you think about this as kind of a CAGR instead of a cumulative multi-year comparison, the gains really aren't that out of line with what you saw on a typical early cycle recovery. So the hope is that that doesn't continue the rest of the year and where we expect that that shouldn’t.

But thus far, we have not been immune to what the rest of the world to see..

And in terms of Cap Cana, I think you're 40% margin on 60% occupancy, which is obviously very strong there.

What sort of margin were you thinking originally in terms of the stabilization at that property? And then how are you thinking about the potential timeline to reach stabilization and really achieve that 12% to 15% cash on cash return you talked about?.

Our underwriting was probably around where we are today on a margin perspective. And so I think we've only -- I think we tried to communicate the last couple quarters that in a typical hotels kind of two to three years, this hotel has been doing so well that we think that timelines are reaching those stabilized returns is accelerated.

So that could potentially imply by the end of this year..

The last question will come from Patrick Scholes with Truist. .

Couple of questions. How should we think about if there's any deferred CapEx that you folks have coming up this year? As far as the modeling question.

And then if you could just give us your latest high level thoughts on working with Wyndham and going forward and your growth story with them?.

We expect about $30 million to $35 million of mostly maintenance CapEx this year. The nice part just think about the immense amount we spent starting back in 2013 and then heavily in kind of '17, '18, '19, kind of converting introducing these Hyatt, Hilton and Wyndham brands to the public.

And then you think about what we sold in the last couple years, we sold out this with lower growth trajectories or has more significant deferred CapEx, our portfolio where it sits, we were very fortunate that during the time when we needed to save capital, we didn't have to take a bunch of deferred CapEx down the road or anything like that.

So if there was anything critical, certainly we didn't ignore it during pre-pandemic time, so we expect our maintenance CapEx to return kind of the percentage of revenues that we've discussed in the past are roughly $30 million $35 million. And I’ll let Bruce talk about the Wyndham..

With regards to Wyndham, so like we said, we converted the properties on the 1st of December. So obviously, you had kind of a little bit of Omicron impact in December and then into early January. So even with that, I think if you look at it, we're very, very pleased with what we're doing so far.

So if you kind of look at what we've done with our other brand conversions and how quickly they started generating business through the brand channel, I think we're just as pleased if not more pleased with where we are with Wyndham.

And it's very exciting for us, because at this kind of the upper midscale price point, there's a lot of all inclusive inventory at that price. And I think there's a great opportunity to really have the Playa relationship with Wyndham Alltra to stand out from that crowd, it's a big crowd and so we're excited.

And we also are excited about more management contract opportunities there too, for the same reason. I mean it's just harder, the higher up you go and the price and quality, it's harder to have multiple properties in the single market where at this price point, there's just a lot more opportunity but we're super excited to be working with Wyndham.

We think they're great as we mentioned in our prepared remarks kind of behind the scenes they are just -- really they've been great to work with. So we're excited to expanding the relationship..

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Bruce Wardinski for any closing remarks. Please go ahead..

Great. Now, thanks, everybody, I think we got with other questions with our prepared remarks and questions we were able to cover and all the things that we wanted to cover, I think we’re just excited to be kind of on the other side of the worst of the pandemic.

And we're really seeing the benefits of the pent up demand, and we think it's just more likely to accelerate the nod as we go forward. So we're excited about the prospects for Playa and we appreciate all of the interest from everybody in our company. So thank you very much. Take care..

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