Image: Hyatt Ziva Riviera Cancun
The all-inclusive model is proving to be very resilient as Playa moves out of the pandemic and into the future, with sights on Europe, Saudia Arabia, and beyond.
Can you tell us your vision for the Playa Hotels & Resorts brand? Where do you see the most growth?
Playa’s strategy is to leverage its globally recognized brand partnerships and proprietary in-house direct booking capabilities to capitalize on the growing popularity of the all-inclusive resort model and reach first-time all-inclusive consumers in a cost-effective manner. We believe this strategy should position us to generate attractive returns for our shareholders, build lasting relationships with our guests, and enhance the lives of our associates and the communities in which we operate.
We have strategic relationships with Hyatt, Hilton, and Wyndham, three of the preeminent globally recognized hotel brands. We believe that partnering with them in the development and management of all-inclusive resorts throughout the Caribbean, Mexico, and Latin America provides us with unique advantages, including the following: (a) Access to worldwide reservation systems, global marketing scale, and over 250 million combined hotel loyalty members to drive revenue growth; (b) Higher propensity for guests to book direct, which results in significantly improved returns over bookings from wholesale channels such as tour operators and online travel agencies; (c) Significant incremental opportunity with exposure to new consumers, who may not be familiar with the all-inclusive model; (d) Access to guests from different regions globally, creating a better segmentation mix, reducing the risk from an owner’s perspective.
We believe that we are well positioned to grow our portfolio through acquisitions and partnerships in the all-inclusive segment of the lodging industry. We believe that our extensive experience in all-inclusive resort operations, direct booking strategy, brand relationships, scalable management platform, and ability to offer Nasdaq-listed ordinary shares to potential resort sellers will make us a preferred asset acquirer.
Also, we seek to pursue new management agreements and continue to grow our portfolio of third-party managed hotels. As we keep growing our presence in main markets in the Caribbean and Mexico, we capitalize on our scalable and integrated all-inclusive management platform to deliver a higher and maximized operating margin to ensure our partners meet their investment goals.
How has the uncertainty of the current market influenced development strategies?
We came out of this crisis stronger than ever; the all-inclusive hotel business model has demonstrated to be very resilient and still has a lot of space for further improvement. After 2020, when we had to close several of our properties.
In 2021, Playa recovered almost 70% (67.8%) of the EBITDA achieved in 2019, and it’s on track to finish the year 2022, with figures much higher than those achieved in 2019.
One of the main objectives of Playa is to provide exceptional service to our clients, which in most cases makes them return to the hotels that we operate in Mexico and the Caribbean. We have started our vacation club to keep these clients close to us and gradually continue to grow the company.
From a development perspective, our industry is changing, and we are proud to be part of this transformation. The future of our industry will be marked by the presence of new skilled players/operators, technological distribution channels with a worldwide reach, and a strong global brand presence. We have taken important steps to be the best long-term partner for owners and investors by offering the path to successfully implement differentiated all-inclusive resort concepts managed under US Global Brands. Due to the crisis, we noticed more independent owners looking to partner with Global Brands to differentiate its products and grant access to a more robust distribution channel. Independent owners are mostly looking for the scale that global brands can provide. Brand affiliation can drive occupancy on the upswing, as global hotel companies’ reservation systems, loyalty programs, and marketing initiatives can easily reach/capture a wider audience through direct channels at lower acquisition costs when net rates are falling.
Are you venturing into new markets in the near future?
As the industry considerably continues to grow, becomes more sophisticated, and competition increases, we acknowledge the necessity to diversify our portfolio geographically and improve our footprint where we already have a stabilized presence. We currently own 17 resorts and operate 5 to third parties in markets such as Mexico, the Dominican Republic, and Jamaica. We see a lot of potential for expansion in several Caribbean islands, Central America, South America, and Europe. Also, we have recently announced our interest in beginning the conceptualization and operation of all-inclusive resorts in Saudi Arabia, where we see a unique opportunity to provide the Kingdom with the latest in world-class hospitality offerings.
One of the significant challenges of global expansion is to adapt our business model to the different cultures and needs of each country. We understand that we cannot bring the all-inclusive model to all markets, but this is where we take advantage of our experience and knowledge of the industry to be able to offer the best hotel product to each of these markets, we can adapt to enhance the way we operate.
As the all-inclusive segment continues to prove its business model and ability to boost performance, we see a higher interest from big brands to enter the all-inclusive market, given the growth potential and attractive investment returns.
The model has proven to be functional and profitable, which has opened the eyes of institutional investors and family offices. Thanks to this, investment in all-inclusive resorts has grown considerably in recent years.
How are you future-proofing your business with inflation concerns and a potential recession on the horizon?
Of course, we have concerns about the economic crisis, which will significantly impact the
purchasing power of customers. We do not expect people to stop traveling but rather to adapt how they travel. Customers are being more discerning going forward and looking for brands they can trust. We think that will be an advantage that plays well into our strengths since we have a proven track record of working with the US. Global brands.
To mitigate this risk, we seek product differentiation by partnering with different brands.
Today we are in the upper midscale, upper upscale, upscale, and Luxury segments, which helps us have a wide range of options for our clients. It will be important to take advantage of our customers’ loyalty and experience in the sector so that new travelers will continue arriving at our hotels.
Are there any new projects that you are working on?
With ample liquidity and several global brand partnerships, we will be looking to opportunistically expand our portfolio of managed rooms to drive shareholder returns.
This year we hope to start operations with new brands that are not in our operating portfolio, seeking the best mix to offer brands with excellent recognition that can be adapted to our all-inclusive operating system.
We have recently been chosen as the preferred operator for all-inclusive hotels with Marriott, and we are currently working with our partners to convert the Sanctuary Cap Cana into a Luxury Collection All-Inclusive Resort by Marriott. This is a strategic move for the company’s global expansion and to increase our presence with unique brands in different segments with the best all-inclusive hotel operation.
