2019 ANNUAL REPORT
PLAYA HOTELS & RESORTS
HYATT ZILARA & HYATT ZIVA CAP CANA
VALUED SHAREHOLDERS:
Playa capped off a pivotal year with the completion of
our flagship ground-up development, the Hyatt Ziva &
Zilara Cap Cana, and of our major hotel conversions, the
Hilton Playa del Carmen Adult Resort and the Hilton
La Romana Adult & Family Resorts. These resorts
represent the entry of these two iconic brands into their
respective markets and will propel us forward in our
strategic objectives of increasing direct booking
penetration, growing our brand partnerships, and
expanding our Caribbean footprint.
The year was not without challenges, specifically in the
Dominican Republic, where media coverage surrounding
the deaths of tourists severely impacted bookings for the
market given perceived safety concerns. We continue to
strongly believe in the long-term potential of the market
and trust that our unique offerings, new assets and
legendary Service from the Heart will position us
for success.
2019 Financial performance highlights
Although we had challenges in both the Yucatan and
the Dominican Republic, we exited 2019 on a positive
note with close-in demand in the Yucatan firming up
and better than expected comparable RevPAR growth in
the Dominican Republic. Jamaica led the way in 2019
with comparable Net Package RevPAR growth of 6.2%
and Owned Resort EBITDA growth of 12.9%. Despite
some difficulties in certain markets, our commitment to
our espoused brand strategy continued to be validated as
our Hyatt branded portfolio grew Net Package RevPAR
+0.3% in 2019 compared to 2018, and significantly
outperformed their respective markets.
Successful opening of the
Hyatt Ziva & Zilara Cap Cana
During the fourth quarter of 2019, we finished
construction of our new 750 room Hyatt Ziva & Zilara
in Cap Cana, Dominican Republic and welcomed our
first guests. These resorts opened to exuberant fanfare
despite turbulent market conditions. The meeting space
at these resorts will help us satisfy the demand for a
three-year rotation cycle sought by many meeting
planners. Group demand has exceeded the demand we
saw at the same point in time for our other resorts with
comparable meeting space. We have high expectations for
this flagship property as it matures and establishes itself as
one of the most outstanding resorts in the Caribbean.
Completion of three Hilton All-Inclusive resorts
in Mexico and the Dominican Republic
In 2018 we announced we had entered into a strategic
alliance with Hilton, and subsequently began converting
two of our resorts into three spectacular Hilton all-inclu-
sive resorts totaling 1,298 rooms. After months of work
re-branding and renovating these resorts, the conversions
were completed in the fourth quarter. These resorts will
offer the more than 100 million members of the Hilton
Honors program a unique, all-inclusive option for point
redemption and gives Playa a steady stream of travelers at
an exceptional customer acquisition cost as these resorts
should be accretive to our direct booking penetration.
Using technology and brand partnerships to lower
customer acquisition costs, increase revenue per
guest and drive increased engagement
Following the launch of playaresorts.com in 2018, we
continued to build on the capabilities and productivity of
the website as we added our Travel Agent Portal, which
will enable travel agents to directly book through our site
without the need for a tour operator, saving 7-9% per
booking. We also added geo-targeting capabilities to our
site during the fourth quarter of 2019 which will help
refine our marketing efforts locally. For the full year 2019,
we generated revenue of $52.5 million through
playaresorts.com, compared to $12.3 million in 2018.
Additionally, in 2019, we introduced a new yield
management system, which will help optimize segments
and type mix to achieve better ADR growth, and a new
upsell technology, which will identify non-package
revenue sales opportunities. The new yield management
system will continue to improve with more booking data
and therefore will be a driver of ADR growth with long
runway of opportunity, benefitting 2021 and beyond.
The roll out of our upsell technology was completed
during the fourth quarter of 2019.
Our technological investments and brand partnerships
have been instrumental in increasing our direct booking
penetration; for the full year 2019, 30.6% of our
managed room nights were booked directly, up from
21.6% in 2018 and 18.2% in 2017. Direct bookings
allow us to communicate directly with guests
throughout each guest’s stay cycle – prior to arrival, while
at the resort, and after each guest’s stay – personalizing
offers for upgrades, ancillary services, and special requests,
all of which should lead to higher guest satisfaction,
repeat visitation, and higher revenues over time.
Personally, I am incredibly proud of the work that nearly
12,000 associates have performed to make our vision of
all-inclusive vacationing come true. Our associates’ hard
work has enabled the growth in our resort portfolio and
established us as a pioneer in the modern all-inclusive
world. The consumer response is evident in our property
rankings, social media engagement, and outperformance
of our resorts versus our competition. With the addition
of our Hilton resorts, we look forward to introducing
everything that an all-inclusive resort can be to an even
greater audience of discerning travelers!
As we look ahead to 2020, the year began with positive
RevPAR growth in the Yucatan and Jamaica and a
continued recovery in the Dominican Republic.
Although the year began with momentum across our
portfolio with robust performance through February, the
HILTON LA ROMANA
spread of COVID-19 has presented the travel industry
with the biggest challenge it has ever faced.
We actively took measures to preserve cash and protect
stakeholders, while we began to prepare for operations
in a new world. Playa will lean on the expertise of our
experienced management team and the excellent
standards established by our brand partners to be leaders
with respect to safety protocols in our markets to ensure
the safety of our guests and associates and emerge as a
market share winner. I believe we will be positioned to
take share from both our direct competition within our
markets and also other vacation alternatives as our
expansive footprint will enable us to offer guests a unique
beach vacation.
We are using the crisis to reevaluate best practices and
processes with respect to hotel operations, marketing, and
our cost structure. Prudence is of the utmost importance,
now more than ever.
Thank you for your confidence and support as we continue
to reshape the all-inclusive industry.
Sincerely,
Bruce Wardinski
Chairman and CEO
OUR RESORTS
HYATT ZILARA CANCUN
HYATT ZIVA CANCUN
HYATT ZILARA ROSE HALL
310 Rooms | Adults-Only
Cancun, Mexico
547 Rooms | All-Ages
Cancun, Mexico
344 Rooms | Adults-Only
Montego Bay, Jamaica
HYATT ZIVA ROSE HALL
HYATT ZIVA LOS CABOS
276 Rooms | All-Ages
Montego Bay, Jamaica
591 Rooms | All-Ages
Los Cabos, Mexico
HYATT ZIVA PUERTO
VALLARTA
335 Rooms | All-Ages
Puerto Vallarta, Mexico
HYATT ZILARA CAP CANA
HYATT ZIVA CAP CANA
375 Rooms | Adults-Only
Cap Cana, Dominican Republic
375 Rooms | All-Ages
Cap Cana, Dominican Republic
PANAMA JACK RESORTS
CANCUN
458 Rooms | All-Ages
Cancun, Mexico
PANAMA JACK RESORTS
PLAYA DEL CARMEN
287 Rooms | All-Ages
Playa Del Carmen, Mexico
SANCTUARY CAP CANA
323 Rooms | Adults-Only
Cap Cana, Dominican Republic
JEWEL GRANDE MONTEGO
BAY RESORT & SPA
217 Rooms | All-Ages
Montego Bay, Jamaica
JEWEL PARADISE COVE
BEACH RESORT & SPA
225 Rooms | Adults-Only
Runaway Bay, Jamaica
HILTON PLAYA DEL CARMEN
524 Rooms | Adults-Only
Playa Del Carmen, Mexico
HILTON ROSE HALL
RESORT & SPA
495 Rooms | All-Ages
Montego Bay, Jamaica
HILTON LA ROMANA
HILTON LA ROMANA
356 Rooms | Adults-Only
La Romana, Dominican Republic
418 Rooms | All-Ages
La Romana, Dominican Republic
OWNED BY PLAYA HOTELS
& RESORTS, MANAGED
BY A THIRD PARTY
Secrets Capri
Dreams Puerto Aventuras
Dreams Palm Beach
Dreams Punta Cana
We Are Playa Hotels & Resorts
OUR BRANDS
OPENINGS AND MILESTONES
Hyatt Ziva Los Cabos
& Hyatt Zilara Cancun
Hyatt Ziva Puerto Vallarta
Hyatt Ziva Cancun
DEC
2013
DEC
2014
JAN
2015
JUL
2015
NOV
2015
MAR
2017
Hyatt Zilara &
Hyatt Ziva Rose Hall
Reposition The Grans
& The Royal
Playa Goes
Public
Management of
Sanctuary Cap Cana
Sagicor Transaction
Complete
Began conversion
of Hilton Playa
del Carmen
OCT
2017
JAN
2018
JUN
2018
SEP
2018
NOV
2018
NOV
2019
Panama Jack Resorts
Grand Opening
Hilton Alliance
Announced
Began conversion
of Hilton
La Romana
Hyatt Zilara &
Hyatt Ziva Cap Cana
Grand Opening
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-K
_______________________________________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 001-38012
Playa Hotels & Resorts N.V.
(Exact name of registrant as specified in its charter)
The Netherlands
98-1346104
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
Prins Bernhardplein 200
1097 JB Amsterdam,
the Netherlands
(Address of Principal Executive Offices)
Not Applicable
(Zip Code)
+ 31 20 571 12 02
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Ordinary Shares, €0.10 par value
( )
Trading Symbol(s)
g y
PLYA
g
Name of Each Exchange on Which Registered
g
NASDAQ
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes YY
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
uu
during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the
past ninety (90) days. Yes
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be pursuant to Rule 405 of Regulation S-T
t
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
ff
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of June 30, 2019, the aggregate market value of the registrant's ordinary shares, €0.10 par value, held by non-affiliates of the registrant was approximately $431.5
million (based upon the closing sale price of the registrant's ordinary shares on June 30, 2019 on the NASDAQ).
f
As of February 21, 2020, there were 129,173,961 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.
Part III of this Annual Report on Form 10-K incorporates by reference portions of the registrant's Proxy Statement for its 2020 annual general meeting of shareholders
to be held on May 14, 2020.
DOCUMENTS INCORPORATED BY REFERENCE
Playa Hotels & Resorts N.V.
TABLE OF CONTENTS
FISCAL YEAR ENDED DECEMBER 31, 2019
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedule
Item 16. Form 10-K Summary
Signatures
Page
6
13
33
34
35
35
35
37
37
59
61
110
110
110
111
111
111
111
111
112
114
115
3
FORWARD-LOOKING STATEMENTS
This annual report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect our current views with
respect to, among other things, our capital resources, portfolio performance and results of operations. Likewise, all of our statements
regarding anticipated growth in our operations, anticipated market conditions, demographics and results of operations are forward-
looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,”kk
“believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,”
“intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.
The forward-looking statements contained in this annual report reflect our current views about future events and are subject to
numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to
differ significantly from those expressed in any forward-looking statement. The following factors, among others, could cause actual
results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
general economic uncertainty and the effect of general economic conditions on the lodging industry in particular;
the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;
changes in economic, social or political conditions in the regions we operate, including changes in perception of public-
safety and changes in the supply of rooms from competing resorts;
the success and continuation of our relationships with Hyatt Hotels Corporation (“Hyatt”) and Hilton Worldwide
Holdings, Inc. (“Hilton”);
the volatility of currency exchange rates;
the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the
future, including the recent rebranding of two of our resorts under the all-inclusive “Hilton” brand and rebranding of
certain resorts acquired from Sagicor (as defined below) in Jamaica;
our failure to successfully complete acquisition, expansion, repair and renovation projects in the timeframes and at the
costs and returns anticipated;
changes we may make in timing and scope of our development and renovation projects;
significant increases in construction and development costs;
significant increases in the cost of utilities;
our ability to obtain and maintain financing arrangements on attractive terms;
the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting
guidance and similar matters in regions in which we operate;
the effectiveness of our internal controls and our corporate policies and procedures and the success and timing of the
remediation efforts for the material weakness that we identified in our internal control over financial reporting;
changes in personnel and availability of qualified personnel;
environmental uncertainties and risks related to adverse weather conditions and natural disasters;
outbreak of widespread contagious diseases;
dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;
the volatility of the market price and liquidity of our ordinary shares and other of our securities; and
the increasingly competitive environment in which we operate.
4
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. The Company
disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or
factors, new information, data or methods, future events or other changes after the date of this annual report, except as required by
applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information
currently available to us (or to third parties making the forward-looking statements).
Unless the context requires otherwise, in this annual report, we use the terms “the Company,” “Playa,” “our company,” “we,”
“us,” “our” and similar references to refer to Playa Hotels & Resorts N.V., a Dutch public limited liability company (naamloze
vennootschap), and, where appropriate, its subsidiaries.
Explanatory Note
At 12:00 a.m. Central European Time on March 12, 2017 (the “Closing Time”), we consummated a business combination (the
“Pace Business Combination”) pursuant to a transaction agreement by and among us, Playa Hotels & Resorts B.V. (our “Predecessor”)
and Pace Holdings Corp. (“Pace”), an entity that was formed as a special purpose acquisition company, for the purpose of effecting a
merger or other similar business combination with one or more target businesses, and New Pace Holdings Corp. In connection with
the Pace Business Combination, which is described in detail in our Current Report on Form 8-K filed with the Securities and
Exchange Commission (“SEC”) on March 14, 2017, we changed our name from Porto Holdco N.V. to Playa Hotels & Resorts N.V. In
addition, in connection with the Pace Business Combination, (i) prior to the consummation of the Pace Business Combination, all of
our Predecessor's cumulative redeemable preferred shares were purchased and were subsequently extinguished upon the reverse
merger of our Predecessor with and into us, and (ii) Pace's former shareholders and our Predecessor's former shareholders received a
combination of our ordinary shares and warrants as consideration in the Pace Business Combination. Our Predecessor was the
accounting acquirer in the Pace Business Combination, and the business, properties, and management team of our Predecessor prior to
the Pace Business Combination are the business, properties, and management team of the Company following the Pace Business
Combination.
l
Our financial statements, other financial information and operating statistics presented in this Form 10-K reflect the results of our
Predecessor for all periods prior to the Closing Time. Our financial statements and other financial information also include the
consolidation of Pace from the Closing Time of the Pace Business Combination to December 31, 2019.
On June 1, 2018, we completed a business combination with certain companies affiliated with Sagicor Group Jamaica Limited
(collectively “Sagicor”) whereby Sagicor contributed to us a portfolio of five all-inclusive resorts, two adjacent oceanfront
developable land sites with a potential density of up to 700 rooms and all of Sagicor's rights to “The Jewel” hotel brand (collectively
the “Sagicor Assets”). The resorts included in the portfolio consist of the 495-room Hilton Rose Hall Resort & Spa, the 268-room
Jewel Runaway Bay Beach Resort & Waterpark, the 250-room Jewel Dunn’s River Beach Resort & Spa, the 225-room Jewel Paradise
Cove Beach Resort & Spa and the 217-room Jewel Grande Montego Bay Resort & Spa (where we own 88 rooms and manage 129
rooms). Previously, the resorts we acquired from Sagicor were managed by an external third-party but we assumed management of
these resorts upon the closing of the transaction. Consideration for the Sagicor Assets consisted of 20,000,000 of our ordinary shares
and $93.1 million in cash. In addition, two individuals nominated by Sagicor joined Playa’s Board of Directors upon the
consummation of the transaction.
Our financial statements and other financial information include the consolidation of the Sagicor Assets from June 2, 2018 to
December 31, 2019.
5
Item 1. Business.
Overview
PART I
Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation
destinations in Mexico and the Caribbean. As of December 31, 2019, we owned and/or managed a total portfolio consisting of 23
resorts (8,690 rooms) located in Mexico, Jamaica and the Dominican Republic. Playa’s strategy is to leverage its globally
recognized brand partnerships in order to capitalize on the gap between the 14% U.S. brand-affiliated room supply in the regions in
which we operate and the nearly 45% of visitors that come from the U.S. This strategy should drive outsized returns for our
shareholders and enhance the lives of our associates and the communities in which we operate.
We believe that the resorts we own and manage are among the finest all-inclusive resorts in the markets they serve. We believe
that our resorts have a competitive advantage due to their location, brand affiliations, extensive amenities, scale and design. Our
portfolio is comprised of all-inclusive resorts that share some combination of the following characteristics:
•
Prime beachfront locations;
• Globally recognized U.S. brand partners;
• Convenient air access from a number of North American and other international gateway markets;
•
Strategic locations in popular vacation destinations in countries with strong government commitments to tourism;
• High quality physical condition; and
• Capacity for further revenues and earnings growth through incremental renovation or repositioning opportunities.
Our all-inclusive resorts provide guests an attractive vacation experience that offers both compelling value and price certainty,
tt
while at the same time providing Playa more predictable revenue, expense and occupancy rates than traditional full-service hotel
business models. All-inclusive guests book and pay further in advance, resulting in lower cancellation rates and incremental sales
of upgrades, premium services and amenities not included in the all-inclusive package pricing.
We have strategic relationships with both Hyatt and Hilton, two of the preeminent globally recognized hotel brands. Hyatt’s
and Hilton’s selection of Playa as its strategic partner in the development and management of all-inclusive resorts throughout the
Caribbean, Mexico and Latin America reflects their confidence and conviction in Playa’s best-in-class stewardship of all-inclusive
resorts and provides us with unique advantages, including the following:
• Access to worldwide reservation systems, global marketing scale, and approximately 125 million hotel loyalty members to
drive revenue growth;
• Higher propensity for guests to book direct, which results in significantly improved returns over bookings from online tour
operators;
• Lower customer acquisition costs, and higher net Average Daily Rates (ADRs);
• Higher Net Asset value for branded hotels affiliated with global franchisors;
• Lower cost of financing for properties affiliated with top tier brands;
• Brand partners are a second set of eyes, focused on maximizing returns;
•
Immediate customer recognition for a new or converted resort;
• Exposure to new consumers, who may not be familiar with the all-inclusive model;
• Access to guests from different regions, creating a better segmentation mix, reducing the risk from an owner’s perspective;
•
Stronger marketing and public relations presence;
• Brands are proven to reduce price sensitivity and encourage purchase decisions, resulting in higher revenues;
• Branded resorts, on average, have higher occupancy than non-branded resorts;
• Branded resorts have higher rates of group business; and
• Branded resorts have lower failure rates.
6
We have an exclusive agreement with Panama Jack International, Inc. (“Panama Jack”), a consumer products company that
focuses on resort clothes and furnishings and sun care products, that provides us with the right to develop and own and/or manage
all-inclusive resorts under the Panama Jack brand in certain regions. We currently own two resorts operated under the Panama Jack
Brand. We also own and operate five resorts in Jamaica that we acquired from Sagicor in June 2018, four of which are operated
under the Jewel brand. Other resorts in our portfolio operate under the Dreams, Sanctuary, and Secrets brands.
In the fourth quarter of 2019, we completed and opened our first ever ground-up development project, the Hyatt Ziva and Hyatt
Zilara Cap Cana. We also completed significant renovation work at the Hilton Playa del Carmen All-Inclusive Resort, Hilton La
Romana All-Inclusive Adult Resort and the Hilton La Romana All-Inclusive Family Resort during the fourth quarter of 2019 as part of
the rebranding and conversion of those respective hotels.
rr
We consider each of our hotels to be an operating segment, none of which meets the threshold for a reportable segment.
For further discussion about our operating segments and financial information about the geographic regions in which we
operate, please see Segment Results in Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 20 to the accompanying Consolidated Financial Statements.
Our Competitive Strengths
We believe the following competitive strengths distinguish us from other owners, operators, developers and acquirers of all-
inclusive resorts:
• Premier Collection of All-Inclusive Resorts in Highly Desirable Locations. We believe that our portfolio represents a
premier collection of all-inclusive resorts. Our award-winning resorts are located in prime beachfront locations in popular
vacation destinations, including Cancún, Playa del Carmen, Puerto Vallarta and Los Cabos in Mexico, Punta Cana in the
Dominican Republic and Montego Bay in Jamaica. Guests may conveniently access our resorts from a number of North
American and other international gateway markets.
• Diversified Portfolio of All-Inclusive Resorts. We currently offer our guests resorts located in four main geographic
markets and across a number of price points. This diversity helps to foster loyalty among our guests and to drive repeat
business. As of December 31, 2019, we operated resorts under eight brands. Having multiple brands to offer owners and
developers is essential to our ability to secure management agreements and high-return acquisitions since having a family
of brands mitigates the risks of brand-on-brand supply growth and subsequent cannibalization.
• Exclusive Focus on the All-Inclusive Model. We believe the all-inclusive resort model is increasing in popularity as more
people come to appreciate the benefits of a high-quality vacation experience that couples value and a high degree of cost
certainty. Because our guests have pre-purchased their vacation packages, we also have the opportunity to earn incremental
revenue if our guests purchase upgrades, premium services and amenities that are not included in the all-inclusive package.
•
•
Integrated and Scalable Operating Platform. We believe we have developed a scalable resort management platform
designed to improve operating efficiency at the 19 resorts we currently manage. Our platform enables us to integrate
additional resorts we may acquire, manage hotels owned by third-parties and potentially internalize the management of the
four resorts we own, but do not manage. Our platform also enables managers of each of our key functions, including sales,
marketing and resort management, to observe, analyze, share and respond to trends throughout our portfolio. As a result,
we are able to implement management initiatives on a real-time and portfolio-wide basis.
Strategic Relationship with Hyatt to Develop All-Inclusive Resorts. Our strategic relationship with Hyatt, which indirectly
beneficially owned approximately 9.2% of our ordinary shares as of December 31, 2019, provides us with a range of
benefits, including the right to operate certain of our existing resorts under the Hyatt Ziva and Hyatt Zilara brands (the
“Hyatt All-Inclusive Resort Brands”) in certain countries and, through December 31, 2021, certain rights with respect to the
development and management of future Hyatt All-Inclusive Resort Brands resorts in Mexico, Costa Rica, the Dominican
Republic, Jamaica and Panama (the “Market Area”).
The Hyatt Ziva brand is marketed as an all-inclusive resort brand for all-ages and the Hyatt Zilara brand is marketed as an
all-inclusive resort brand for adults-only. We believe these brands are currently Hyatt’s primary vehicle for all-inclusive
resort growth and demonstrate Hyatt’s commitment to the all-inclusive model. The Hyatt All-Inclusive Resort Brands have
access to Hyatt’s low cost and high margin distribution channels, such as Hyatt guests using the World of Hyatt® guest
loyalty program (which had approximately 22 million members as of December 31, 2019), Hyatt’s reservation system,
Hyatt's mobile application and website and Hyatt’s extensive group sales business. We believe that our strategic
relationship with Hyatt and the increasing awareness of our all-inclusive resort brands among potential guests will enable
7
us to increase the number of bookings made through lower cost sales channels, such as direct bookings through Hyatt and
our company and resort websites.
•
Strategic Relationship with Hilton to Develop All-Inclusive Resorts. Our strategic alliance with Hilton affords us with the
opportunity to leverage our management expertise and obtain access to Hilton's global portfolio of brands and over 103
million Hilton Honors members as of December 31, 2019. During 2018, we successfully converted two of our resorts into
three Hilton all-inclusive resorts, with the potential to convert, develop or manage up to an additional eight resorts in
certain locations in the Caribbean, Mexico, and South and Central America by 2025. Our strategic alliance with Hilton
further diversifies our portfolio, enables us to reach more potential guests and greatly reduces our customer acquisition
costs.
• Experienced Leadership with a Proven Track Record. Our senior management team has significant experience in the
lodging industry, including operating all-inclusive resorts.
• Mr. Wardinski, our Chief Executive Officer has over 30 years of experience in the hospitality industry, founded
our Predecessor and previously was the Chief Executive Officer of two lodging companies: Barceló Crestline
Corporation, an independent hotel owner, lessee and manager; and Crestline Capital Corporation, a New York
Stock Exchange (“NYSE”) listed hotel owner, lessee and manager. Mr. Wardinski was also the non-executive
chairman of the board of directors of Highland Hospitality Corporation, an NYSE-listed owner of upscale full-
service, premium limited-service and extended-stay properties. Mr. Wardinski held other leadership roles within
the industry including Senior Vice President and Treasurer of Host Marriott Corporation (now Host Hotels and
Resorts (NYSE: HST)) and various roles with Marriott International, Inc. As of December 31, 2019,
approximately 2.3% of our outstanding ordinary shares are beneficially owned by Mr. Wardinski.
• Mr. Stadlin, our Chief Operating Officer and Chief Executive Officer of our resort management company, has over
40 years of experience in the hospitality industry and was employed by Marriott International, Inc. for 33 years
during which he spent 12 years working on its expansion into Latin America.
• Mr. Froemming, our Chief Commercial Officer, has over 23 years of experience in the hospitality industry and
spent 10 years as the sales and marketing leader of Sandals Resorts International, leading the growth of its two
well-known all-inclusive brands, Sandals and Beaches.
• Mr. Hymel, our Chief Financial Officer, has over 17 years of experience working within the hospitality sector. He
previously served as Senior Vice President and Treasurer of Playa and has worked at Barceló Crestline
Corporation and Crestline Capital Corporation, two hotel and resort owners and operators.
Our Business and Growth Strategies
Our goal is to be the leading owner, operator and developer of all-inclusive beachfront resorts in the markets we serve and to
generate attractive risk-adjusted returns above our cost of capital and create value for our shareholders by implementing the following
business and growth strategies:
•
•
Selectively Pursue Strategic Growth Opportunities. The all-inclusive segment of the lodging industry is highly
fragmented. We believe that we are well positioned to grow our portfolio through acquisitions and partnerships in the all-
inclusive segment of the lodging industry, such as the recent acquisition of the Sagicor Assets. We believe that our
extensive experience in all-inclusive resort operations, brand relationships, acquisition, expansion, renovation,
repositioning and rebranding, established and scalable management platform and ability to offer NASDAQ-listed ordinary
shares to potential resort sellers will make us a preferred asset acquirer.
Secure New Management Agreements. We intend to pursue opportunities to capitalize on our scalable and integrated
resort management platform and our expertise and experience with managing all-inclusive resorts, by seeking to manage
all-inclusive resorts owned by third parties for a fee and to potentially, over time, internalize the management of resorts we
own that are currently managed by a third-party. For example, in September 2017, we entered into a long-term agreement
to manage the 323-room Sanctuary Resort in Cap Cana, and in June 2018, we secured a long-term agreement to manage
129 rooms at the Jewel Grande Montego Bay Resort & Spa. We will also look to make minority investments in high return
projects to obtain management agreements.
• Utilization of New Technologies and Leverage of Big Data. We utilize numerous technologies aimed at improving guest
satisfaction and shareholder returns. We recently launched a new website using a new search engine and metasearch
optimization tools aimed at driving direct bookings, our lowest cost customer acquisition channel. As a result, we benefited
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from more direct business at our Playa-managed hotels in 2019. Our percentage of direct stays increased from 17.2% in
2018 to 23.1% in 2019 and our percentage of direct bookings, including future stays, increased from 21.6% in 2018 to
30.3% in 2019.
We also recently launched a new end-to-end technology at select resorts which uses sophisticated algorithms to identify in
real-time what upgrades, packages and pricing to offer guests. This enables us to provide guests with several options to
enhance their experience, while increasing revenue post-booking. Other new technological innovations underway include
our recently launched travel agent portal, which facilitates travel agent bookings without the additional commission layer of
a tour and travel operator, as well as the continued launch of our new yield management system, which should maximize
guest revenues by optimizing both package rates and channel mix.
Additionally, by virtue of our partnerships with Hyatt and Hilton, we have greatly increased our access to member data and
analytics with respect to millions of guests, further enabling us to drive lower customer acquisition costs, bookings and
revenues.
• Disposition of non-core assets. We continuously monitor, review and optimize our portfolio to align with our strategic
vision and maximize our return on invested capital. As part of this ongoing process, we may sell assets that no longer fit
our criteria for capital investment. We will look to use proceeds from asset sales to pay down debt, repurchase common
shares, reinvest in projects within our existing portfolio or pursue new growth opportunities.
Playa’s Hyatt Resort Agreements
For each Playa resort using a Hyatt All-Inclusive Brand, the Hyatt franchise agreements (the “Hyatt Resort Agreements”) grant to
each of Playa and any third party owner for whom Playa serves as hotel operator (each a “Resort Owner”) the right, and such Resort
Owner undertakes the obligation, to use Hyatt’s hotel system and system standards to build or convert and operate the resort subject to
the franchise agreement. Each franchise agreement between Hyatt and such Resort Owner has an initial 15-year term and Hyatt has
two options to extend the term for an additional term of five years each or 10 years in the aggregate. Hyatt provides initial and
ongoing training and guidance, marketing assistance and other assistance to each Resort Owner (and Playa as the resort’s manager) in
connection with the resort’s development and operation. As part of this assistance, Hyatt reviews and approves the initial design and
related elements of the resort. Hyatt also arranges for the provision of certain mandatory services, as well as (at the Resort Owner’s
option) certain non-mandatory services, relating to the resort’s development and operation. In return, each Resort Owner agrees to
operate the resort according to Hyatt’s operating procedures and its brand, quality assurance and other standards and specifications.
This includes complying with Hyatt’s requirements relating to the central reservation system, global distribution systems and
alternative distribution systems. In addition to the Hyatt franchise agreement, each Hyatt franchise Resort Owner enters into additional
agreements with Hyatt pertaining to the development and operation of such new Hyatt All-Inclusive Resort Brand resort, including a
trademark sublicense agreement, a World of Hyatt® guest loyalty program agreement, a chain marketing services agreement and a
reservations agreement.
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We continue to work with Hyatt to jointly improve all aspects of the brand system and standards for the Hyatt All-
Inclusive Resort Brands. Hyatt owns the intellectual property rights relating to the Hyatt All-Inclusive Resort Brands, but we will have
rights to use certain innovations that Hyatt and Playa jointly developed for the Hyatt All-Inclusive Resort Brands.
The Hyatt Strategic Alliance Agreement
We have entered into the Hyatt Strategic Alliance Agreement, as amended by the First Amendment to the Hyatt Strategic Alliance
Agreement (with “Hyatt Strategic Alliance Agreement”) with Hyatt pursuant to which Playa and Hyatt have provided each other a
right of first offer through December 31, 2021, with respect to any proposed offer or arrangement to acquire the rights to own and
operating an all-inclusive resort at the level of quality and service consistent with the Hyatt All-Inclusive Resort Brands (a “Hyatt All-
Inclusive Opportunity”) in the Market Area. If Playa intends to accept a Hyatt All-Inclusive Opportunity, Playa must notify Hyatt of
such Hyatt All-Inclusive Opportunity and Hyatt has 10 business days to notify Playa of its decision to either accept or reject this Hyatt
All-Inclusive Opportunity. If Hyatt accepts the Hyatt All-Inclusive Opportunity, Playa must negotiate in good faith with Hyatt the
terms of a franchise agreement and related documents with respect to such property, provided that Playa acquires such property on
terms acceptable to Playa within 60 days of offering such opportunity to Hyatt. If Hyatt intends to accept a Hyatt All-Inclusive
Opportunity, Hyatt must notify Playa and Playa has to notify Hyatt within 10 business days of its decision to either accept or reject this
Hyatt All-Inclusive Opportunity. If Playa accepts the Hyatt All-Inclusive Opportunity, Hyatt must negotiate in good faith with Playa
the terms of a management agreement and other documents under which Playa would manage such Hyatt All-Inclusive Resort Brand
resort (subject to a franchise agreement between Hyatt and the affiliate of Hyatt that would own such property), provided that Hyatt
acquires such property on terms acceptable to it within 60 days of offering such opportunity to Playa. If Playa or Hyatt fails to notify
each other of its decision or declines its right of first offer within the aforementioned 10 business day period, or if Playa or Hyatt
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determine after good-faith discussions that we cannot reach mutual acceptance of terms under which the development property would
be licensed as a Hyatt Ziva or Hyatt Zilara hotel, such right of first offer will expire and Playa or Hyatt will be able to acquire, develop
and operate the property related to such Hyatt All-Inclusive Opportunity free of any restrictions. In addition, if either party isy
approached by a third party with respect to the management or franchising, as applicable, of an all-inclusive resort in the Market Area,
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and such third party has not identified a manager or franchisor, as applicable, for the resort, the parties will notify each other and
provide an introduction to the third party for the purposes of negotiating a management agreement or franchise agreement, in the case
of Hyatt.
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The Hilton Strategic Alliance Agreement
We have entered into a Strategic Alliance Agreement with Hilton pursuant to which Hilton has granted to Playa, a right of first
offer in the event that Hilton receives a letter of intent from a third party to franchise or manage a hotel under the Hilton all-inclusive
Resort brand (the “Hilton Brand”), within certain countries located in the Caribbean (the “Caribbean Target Markets”) and Mexico,
and certain countries in Central and South America (the “Mexico, Central and South America Target Markets” and collectively withtt
the Caribbean Target Markets, the “Target Markets”) (collectively, the “Area of Exclusivity”). Upon receipt of any such third-party
offer, Hilton shall notify Playa and we will have a period of 150 days from the date of such notice, to submit an application to Hilton
to franchise a hotel in such country under the Hilton Brand. If we choose to submit a franchise application to Hilton, then we agree not
to propose, negotiate, hold discussions or enter into any agreement with a third party to operate, or authorize the operating of a non-
Hilton brand hotel in the country under consideration, until such time as Hilton has approved or denied our franchise application or we
have informed Hilton of our desire not to pursue an application for franchise. In order to maintain our right of first offer in the Area of
Exclusivity, we have agreed to open a total of eight additional Hilton Brand resorts, consisting of at least four hotels in the Caribbean
Target Market (the “Caribbean Development Obligation”) and at least four hotels within the Mexico, Central and South America
Target Market (the “Mexico, Central and South America Development Obligation”), under the Hilton Brand, no later than December
31, 2024 (provided that the last hotel in each market may open in 2025). In each case, the number of rooms in any proposed hotel must
exceed 350. Additionally, we have agreed to certain development milestones (“Development Milestones”) in each of the Target
Markets, including opening one hotel under the Hilton Brand during each calendar year commencing 2021. In November 2018, by
virtue of Playa converting THE Royal Playa del Carmen to the Hilton Playa del Carmen All-Inclusive Resort and the Dreams La
Romana to the Hilton La Romana All-Inclusive Family Resort and the Hilton La Romana All-Inclusive Adult Resort, we successfully
satisfied our Development Milestones through 2021 in each of the Target Markets.
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Playa's Hilton Franchise Agreements
In connection with our strategic alliance with Hilton, we have entered into franchise agreements with Hilton pursuant to which
Hilton has granted to each of Playa and any third-party owner for whom Playa serves as hotel operator the right to operate such hotels
under the Hilton Brand. These franchise agreements have an initial term of 15 years, unless sooner terminated in accordance with their
terms. The franchise agreements also contain customary terms with respect to how we market and operate the hotel under the Hilton
Brand and impose a number of requirements including, among others, that we comply with Hilton’s standards in connection with the
design, construction, refurbishing and operating of our Hilton branded hotels.
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AMResorts Management Agreements
Four of our resorts (Dreams Puerto Aventuras, Secrets Capri, Dreams Punta Cana and Dreams Palm Beach) are operated by
AMResorts pursuant to management agreements that contain customary terms and conditions, including those related to fees,
termination conditions, capital expenditures, transfers of control of parties or transfers of ownership to competitors, sales of the hotels
and non-competition and non-solicitation. These agreements are scheduled to expire in 2022. We pay AMResorts and its affiliates, as
operators of these resorts, base management fees and incentive management fees. In addition, we reimburse the operators for some of
the costs they incur in the provision of certain centralized services. We may also choose to opportunistically sell one or more of these
resorts and redeploy the proceeds from any such sales, subject to certain restrictions under our Senior Secured Credit Facility (as
defined below).
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The Panama Jack Agreement
We entered into a master development agreement (the “Panama Jack Agreement”) with Panama Jack in 2017. Pursuant to the
Panama Jack Agreement, Panama Jack has granted us, subject to our compliance with certain development milestones, the exclusive
right to develop and own and/or to manage resorts under the Panama Jack brand (the “Panama Jack Resorts”) in Antigua, Aruba, the
Bahamas, Barbados, Costa Rica, the Dominican Republic, Jamaica, Mexico, Panama, St. Lucia and, subject to the lifting of various
U.S. sanctions, Cuba. In addition, if Playa wishes to participate in any project to develop, convert or operate any resorts in the
aforementioned countries that we believe in good faith and reasonable judgment are suitable for branding or conversion as a Panama
Jack Resort, we will submit an application to Panama Jack to operate such resort as a Panama Jack Resort pursuant to the terms of the
Panama Jack Agreement. Panama Jack may, in its commercially reasonable discretion, decide to approve or reject our application to
operate a Panama Jack Resort. If Panama Jack approves our application, each such approved resort will be subject to a separate license
agreement with Panama Jack. The Panama Jack Agreement has a 10 year term expiring in 2026, subject to either party's right to
terminate in certain circumstances.
Vacation Package Distribution Channels and Sales and Reservations
Our experienced sales and marketing team uses a strategic sales and marketing program across a variety of distribution channels
through which our all-inclusive vacation packages are sold. Key components of this sales and marketing program include:
• Targeting the primary tour operators and the wholesale market for transient business with a scalable program that supports
shoulder and lower rate seasons while seeking to maximize revenue during high season, which also includes:
• Engaging in cooperative marketing programs with leading travel industry participants;
•
Participating in travel agent tour operator promotional campaigns; and
• Utilizing online travel leaders, such as Expedia and Booking.com, to supplement sales during shoulder and lower rate
seasons;
• Developing programs aimed at targeting consumers directly through:
• Our company and resort websites;
• The Hyatt website and toll free reservation telephone numbers;
• The World of Hyatt® guest loyalty program;
• The Hilton website and toll free reservation system;
• The Hilton Honors guest loyalty program; and
• Our toll free reservation system that provides a comprehensive view of inventory in real time, based on demand;
• Targeting group and incentive markets to seek and grow a strong base of corporate and event business;
• Highlighting destination wedding and honeymoon programs;
•
Participating in key industry trade shows targeted to the travel agent and wholesale market;
• Engaging in online and social media, including:
•
Search engine optimization;
• Targeted online and bounce-back advertising;
•
•
Social media presence via sites such as Facebook, Twitter, Instagram and Pinterest; and
Flash sales and special offers for high need periods;
• Monitoring and managing TripAdvisor and other similar consumer sites; and
• Activating a targeted public relations plan to generate media attention-both traditional and new media including travel
bloggers who focus on vacation travel to Mexico and the Caribbean.
We also seek luxury transient business to provide high rate business during peak seasons, such as winter and spring holidays,
while “bargain hunters” can be targeted through social media for last minute high need periods. This multi-pronged strategy is
designed to increase Net Package RevPAR (as defined in Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations) as well as generate strong Occupancy through all of the resort seasons.
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Insurance
Our resorts carry what we believe are appropriate levels of insurance coverage for a business operating in the lodging industry iny
Mexico, the Dominican Republic and Jamaica. This insurance includes coverage for general liability, property, workers’ compensation
and other risks with respect to our business and business interruption coverage.
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This general liability insurance provides coverage for any claim, including terrorism and hurricane damage, resulting from our
operations, goods and services and vehicles. We believe these insurance policies are adequate for foreseeable losses and on terms and
conditions that are reasonable and customary with solvent insurance carriers.
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Competition
We face intense competition for guests from other participants in the all-inclusive segment of the lodging industry and, to a lesser
extent, from traditional hotels and resorts that are not all-inclusive. The all-inclusive segment remains a relatively small part of the
broadly defined global vacation market that has historically been dominated by hotels and resorts that are not all-inclusive. Our
principal competitors include other operators of all-inclusive resorts and resort companies, such as Barceló Hotels & Resorts, RIU
Hotels & Resorts, IBEROSTAR Hotels & Resorts, Karisma Hotels & Resorts, AMResorts, Meliá Hotels International, Excellence
Resorts and Palace Resorts, as well as some smaller, independent and local owners and operators. We compete for guests based
primarily on brand name recognition and reputation, location, guest satisfaction, room rates, quality of service, amenities and quality
of accommodations.
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In addition, we also compete for guests based on the ability of hotel loyalty program members to earn and redeem loyalty
program points at our Hyatt and Hilton all-inclusive resorts. We believe that our strategic relationship with Hyatt and Hilton, two
globally recognized hotel brand leaders, provides us with a significant competitive advantage.
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico and the Caribbean generally result in the greatest
demand for our resorts between mid-December and April of each year, yielding higher occupancy levels and package rates during thistt
period. This seasonality in demand has resulted in predictable fluctuations in revenue, results of operations and liquidity, which are
consistently higher during the first quarter of each year than in successive quarters.
Cyclicality
The lodging industry is highly cyclical in nature. Fluctuations in operating performance are caused largely by general economic
and local market conditions, which subsequently affect levels of business and leisure travel. In addition to general economic
conditions, new hotel and resort room supply is an important factor that can affect the lodging industry’s performance, and over-
building has the potential to further exacerbate the negative impact of an economic recession. Room rates and Occupancy, and thus hh
Net Package RevPAR (as defined in Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations), tend to increase when demand growth exceeds supply growth. A decline in lodging demand, or increase in lodging
supply, could result in returns that are substantially below expectations, or result in losses, which could have a material adverse effect
on our business, financial condition, liquidity and results of operations. Further, many of the costs of running a resort are fixed rather
than variable. As a result, in an environment of declining revenues the rate of decline in earnings is likely to be higher than the rate of
decline in revenues.
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Intellectual Property
We own or have rights to use the trademarks, service marks or trade names that we use or will use in conjunction with the
operation of our business, including certain of Hyatt’s and Hilton’s intellectual property under the Hyatt Resort Agreements and our
franchise agreements with Hilton. We also have rights to certain of Panama Jack’s intellectual property under the Panama Jack
Agreement and related agreements. In the highly competitive lodging industry in which we operate, trademarks, service marks, trade
names and logos are very important to the success of our business.
Corporate Information
Playa Hotels & Resorts N.V. was organized as a public limited company (naamloze vennootschap) under the laws of the
Netherlands in December 2016. Our registered office in the Netherlands is located at Prins Bernhardplein 200, 1097 JB Amsterdam.
Our telephone number at that address is +31 20 571 12 02. We maintain a website at www.playaresorts.com, which includes additional
contact information. All reports that we have filed with the Securities and Exchange Commission (the “SEC”) including this Annual
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Report on Form 10-K and our current reports on Form 8-K, can be obtained free of charge from the SEC’s website at www.sec.gov or
through our website.
Employees
As of December 31, 2019, we directly and indirectly employed approximately 12,000 employees worldwide at our corporate
offices and on-site at our resorts.
Item 1A. Risk Factors.
The following discussion concerns some of the risks associated with our business and should be considered carefully. These riskskk
are interrelated and you should treat them as a whole. Additional risks and uncertainties not presently known to us may also
materially and adversely affect our business operations, the value of our ordinary shares and our ability to pay dividends to our
shareholders. In connection with the forward-looking statements that appear in this Annual Report on Form 10-K, in these risk factors
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and elsewhere, you should carefully review the section entitled “Forward-Looking Statements.”
Risks Related to Our Business
General economic uncertainty and weak demand in the lodging industry could have a material adverse effect on us.
Our business strategy depends significantly on demand for vacations generally and, more specifically, on demand for all-inclusive
vacation packages. Weak economic conditions and other factors beyond our control, including high levels of unemployment and
underemployment, in North America, especially the United States and Mexico, Europe and Asia could reduce the level of
discretionary income or consumer confidence in the countries from which we source our guests and have a negative impact on the
lodging industry. We cannot provide any assurances that demand for all-inclusive vacation packages will remain consistent with or
increase from current levels. Furthermore, our business is focused primarily on, and our acquisition strategy targets the acquisition of
resorts in, the all-inclusive segment of the lodging industry (and properties that we believe can be converted into all-inclusive resorts
in a manner consistent with our business strategy). This concentration exposes us to the risk of economic downturns in the lodging
industry broadly and, more specifically, in the leisure dominated all-inclusive segment of the lodging industry. As a result of the
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foregoing, we could experience a prolonged period of decreased demand and price discounting in our markets, which would
negatively affect our revenues and could have a material adverse effect on us, including our business, financial condition, liquidity,
qq
results of operations and prospects.
Terrorist acts, armed conflict, civil unrest, criminal activity and threats thereof, and other international events impacting thett
security of travel or the perception of security of travel could adversely affect the demand for travel generally and demand for
vacation packages at our resorts, which could have a material adverse effect on us.
Past acts of terrorism have had an adverse effect on tourism, travel and the availability of air service and other forms of
transportation. The threat or possibility of future terrorist acts, an outbreak, escalation and/or continuation of hostilities or armed
conflict abroad, civil unrest or the possibility thereof, the issuance of travel advisories by sovereign governments, and other geo-
political uncertainties have had and may have an adverse impact on the demand for vacation packages and consequently the pricing
for vacation packages. Decreases in demand and reduced pricing in response to such decreased demand would adversely affect our
business by reducing our profitability.
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Nine of the 23 resorts in our portfolio are located in Mexico, and Mexico has experienced criminal violence for years, primarily
due to the activities of drug cartels and related organized crime. These activities and the possible escalation of violence or other safety
concerns, including food and beverage safety concerns, associated with them in regions where our resorts are located, or an increase in
the perception among our prospective guests of an escalation of such violence or safety concerns, could instill and perpetuate fear
among prospective guests and may lead to a loss in business at our resorts in Mexico because these guests may choose to vacation
elsewhere or not at all. In addition, increases in violence, crime or civil unrest or other safety concerns in the Dominican Republic,
Jamaica, or any other location where we may own a resort in the future, may also lead to decreased demand for our resorts and
negatively affect our business, financial condition, liquidity, results of operations and prospects.
High levels of Sargassum seaweed may dissuade tourists from visiting the markets our resorts are located in and cost us money tott
remove.
Many of our resorts are beach-front properties that have been exposed to elevated levels of Sargassum seaweed. In recent years,
the amount of Sargassum that has washed up onshore in various geographies has increased. If not removed promptly, the seaweed can
overrun the beach, making it difficult to swim in the water and generating a foul odor if it is allowed to rot. The heightened level of
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Sargassum in recent years has led to negative media coverage and increased awareness of the potential problem and has required
additional operating expenses to remove. Although we do our best to remove the seaweed and prevent the build-up, the exact cause of
overgrowth is unknown.
We are exposed to significant risks related to the geographic concentration of our resorts, including weather-related emergencies
such as hurricanes, which could have a material adverse effect on us.
Our resorts are concentrated in Mexico (accounted for 52.9% of our Total Net Revenue as defined in Item 7), Jamaica (31.9% of
our Total Net Revenue) and the Dominican Republic (15.0% of our Total Net Revenue) for the year ended December 31, 2019. In
addition to the matters referred to in the preceding risk factor, damage to these resorts or a disruption of their operations or a reduction
of travel to them due to a hurricane or other weather-related or other emergency could reduce their revenue, which could have a
material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects. We cannot
assure you that any property or business interruption insurance will adequately address all losses, liabilities and damages. In addition,
all of our resorts are located on beach front properties and are particularly susceptible to weather-related emergencies, such as
hurricanes, or other marine environmental hazards, such as flooding, pollution or algae blooms.
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The all-inclusive model may not be desirable to prospective guests in the luxury segment of the resort market, which could have a e
material adverse effect on us.
Our portfolio is composed predominantly of luxury all-inclusive resorts. The all-inclusive resort market has not traditionally been
associated with the high-end and luxury segments of the lodging industry and there is a risk that our target guests, many of whom have
not experienced an all-inclusive model, will not find the all-inclusive model appealing. A failure to attract our target guests could
result in decreased revenue from our portfolio and could have a material adverse effect on us, including our business, financial
condition, liquidity, results of operations and prospects.
Our relationship with Hyatt may deteriorate and disputes between Hyatt and us may arise. The Hyatt relationship is important to
our business and, if it deteriorates, the value of our portfolio could decline significantly, and it could have a material adverse effect
on us.
We are the only operator of resorts operating under the Hyatt All-Inclusive Resort Brands. However, except for the Hyatt
franchise agreements, we have no contractual right to operate any resort in our current or future portfolio under the Hyatt All-Inclusive
Resort Brands or any other Hyatt-sponsored brands. In addition, in the future, Hyatt, in its sole discretion and subject to its obligations
under the Hyatt Strategic Alliance Agreement in the Market Area, may designate other third parties as authorized operators of resorts,
or Hyatt may decide to directly operate resorts, under the Hyatt All-Inclusive Resort Brands or any other Hyatt brand, whether owned
by third parties or Hyatt itself.
Also, and as described elsewhere in this annual report, subject to its obligations under the Hyatt Strategic Alliance Agreement,
Hyatt is free to develop or license other all-inclusive resorts in the Market Area, even under the Hyatt All-Inclusive Resort Brands.
Additionally, outside of the Market Area, Hyatt is free to develop or license other all-inclusive resorts under the Hyatt All-Inclusive
Resort Brands and other Hyatt brands at any time.
Under the terms of our Hyatt Resort Agreements, we are required to meet specified operating standards and other terms and
conditions. We expect that Hyatt will periodically inspect our resorts that carry a Hyatt All-Inclusive Resort Brand to ensure that we
follow Hyatt’s standards. If we fail to maintain brand standards at one or more of our Hyatt All-Inclusive Resort Brand resorts, or
otherwise fail to comply with the terms and conditions of the Hyatt Resort Agreements, then Hyatt could terminate the agreements
related to those resorts and potentially all of our Hyatt resorts. Under the terms of the Hyatt franchise agreements, if, among other
triggers, (i) the Hyatt franchise agreements for a certain number of Hyatt All-Inclusive Resort Brand resorts are terminated or
(ii) certain persons acquire our ordinary shares in excess of a specified percentage and certain mechanisms in our Articles of
Association fail to operate to reduce such percentage within 30 days, Hyatt has the right to terminate the Hyatt franchise agreements
for all (but not less than all) of our resorts. In that situation, we would be subject to liquidated damage payments to Hyatt, even for
those resorts that are in compliance with their Hyatt franchise agreements. If one or more Hyatt franchise agreements is terminated,
the underlying value and performance of our related resort(s) could decline significantly from the loss of associated name recognition,
participation in the World of Hyatt® guest loyalty program, Hyatt’s reservation system and website, and access to Hyatt group sales
business, as well as from the costs of “rebranding” such resorts and the payment of liquidated damages to Hyatt.
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Hyatt may, in its discretion and subject to its obligations under the Hyatt Strategic Alliance Agreement, decline to enter into Hyatt
franchise agreements for other all-inclusive resort opportunities that we bring to Hyatt, whether we own the properties or manage them
for third-party owners.
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If any of the foregoing were to occur, it could have a material adverse effect on us, including our business, financial condition,
liquidity, results of operations and prospects and the market price of our ordinary shares, and could divert the attention of our senior
management from other important activities.
Our right of first offer in the Hyatt Strategic Alliance Agreement will expire on December 31, 2021 and certain provisions of our
Hyatt franchise agreements impose certain restrictions on us, and such agreements are terminable under certain circumstances,
any of which could have a material adverse effect on us.
Pursuant to the Hyatt Strategic Alliance Agreement, which will expire on December 31, 2021, we and Hyatt will provide each
other the right of first offer with respect to any Hyatt All-Inclusive Opportunity in the Market Area and the right to receive an
introduction to any third party with respect to any management opportunity for us or franchising opportunity for Hyatt, in each case, in
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the Market Area. However, such right of first offer for Hyatt All-Inclusive Opportunities is conditioned on the originating party’s
acquisition of the related property within 60 days of its offer to the receiving party. Accordingly, if, for example, Hyatt determines to
acquire such property subsequent to the expiration of the aforementioned 60 day period, it would be free to do so without any
obligations to Playa in respect of such property.
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Subject to its obligations under the Hyatt Strategic Alliance Agreement, Hyatt is free to develop or license other all-inclusive
resorts in the Market Area, even under the Hyatt All-Inclusive Resort Brands. Additionally, outside of the Market Area, Hyatt is free to
develop or license other all-inclusive resorts under the Hyatt All-Inclusive Resort Brands and other Hyatt brands at any time.
Similarly, subject to our obligations under the Hyatt Strategic Alliance Agreement and the Hyatt Resorts Agreements, we will be
allowed to operate any all-inclusive resort under any brand, such as Hilton and Panama Jack, provided that we implement strict
informational and operational barriers, including marketing, management, development and strategic planning, between our operations
with respect to our operations of such other hotel and our operations with respect to the Hyatt All-Inclusive Resort Brands.
If we do not comply with our obligations to implement these strict informational and operations barriers under the Hyatt franchise
agreements, Hyatt may terminate all (but not less than all) of its franchise agreements with us by providing the notice specified in the
franchise agreement to us, and we will be subject to liquidated damage payments to Hyatt. As a result, such violations could have a
material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects.
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The success of eight of our resorts will depend substantially on the success of the Hyatt All-Inclusive Resort Brands, which exposes
us to risks associated with concentrating a significant portion of our portfolio in a family of two recently developed related
brands. There is a risk that we and Hyatt may not succeed in marketing the Hyatt All-Inclusive Resort Brands and that we may not
receive the anticipated return on the investment incurred in connection with rebranding the eight resorts under the Hyatt All-
Inclusive Resort Brands, which could have a material adverse effect on us.
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Eight of the resorts in our portfolio bear the name of one or both of the Hyatt All-Inclusive Resort Brands. As a result of this
concentration, our success will depend, in part, on the continued success of these recently developed brands. We believe that building
brand value is critical to increase demand and build guest loyalty. Consequently, if market recognition or the positive perception of
Hyatt and its brands is reduced or compromised, the goodwill associated with Hyatt All-Inclusive Resort Brand resorts in our portfolio
would likely be adversely affected. Under the Hyatt Resort Agreements, Hyatt provides (or causes to be provided) various marketing
services to the relevant resorts, and we may conduct local and regional marketing, advertising and promotional programs, subject to
compliance with Hyatt’s requirements. We cannot assure you that we and Hyatt will be successful in our marketing efforts to grow
either Hyatt All-Inclusive Resort Brand. Additionally, we are not permitted under the Hyatt franchise agreements to change the brands
of our resorts operating under the Hyatt All-Inclusive Resort Brands for 15 years (plus any additional years pursuant to Hyatt’s
renewal options) after the opening of the relevant resorts as Hyatt All-Inclusive Resort Brand resorts, even if the brands are not
successful. As a result, we could be materially and adversely affected if these brands do not succeed.
We have agreed to indemnify Hyatt for losses related to a broad range of matters and if we are required to make payments to Hyatt
pursuant to these obligations, our business, financial condition, liquidity, results of operations and prospects may be materially and
adversely affected.
Pursuant to the subscription agreement entered into between Hyatt and us in connection with our Predecessor’s formation
transactions, we have agreed to indemnify Hyatt for any breaches of our representations, warranties and agreements in the subscription
agreement, generally subject to (i) a deductible of $10 million and (ii) a cap of $50 million (other than for breaches of certain
representations, for which indemnification is capped at $325 million). In addition, we have agreed to indemnify Hyatt for certain
potential losses relating to the lack of operating licenses, noncompliance with certain environmental regulations, tax deficiencies and
other matters. The representations and warranties we made and our related indemnification obligations survive for varying periods of
time from the closing date of our Predecessor’s formation transactions in 2013 (some of which have already elapsed) and some
survive indefinitely. If we are required to make future payments to Hyatt pursuant to these obligations, however, our business,
financial condition, liquidity, results of operations and prospects could be materially and adversely affected.
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Our relationship with Hilton may deteriorate and disputes between Hilton and us may arise. The Hilton relationship is important
to our business and, if it deteriorates, the value of our portfolio could decline significantly, and it could have a material adverse
effect on us.
We have a right of first offer to franchise or manage a new Hilton all-inclusive resort under the Hilton Brand in the Target Markets
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through August 7, 2023. However, except for the Hilton franchise agreements, we have no contractual right to operate any resort int
our current or future portfolio under the Hilton Brand or any other Hilton-sponsored brands. In addition, in the future, Hilton, in its
sole discretion and subject to its obligations under the Hilton Strategic Alliance Agreement in the Target Markets, may designate other
third parties as authorized operators of resorts, or Hilton may decide to directly operate resorts, under the Hilton Brand or any other
Hilton-sponsored brand, whether owned by third parties or Hilton itself.
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Also, subject to its obligations under the Hilton Strategic Alliance Agreement, including its obligation to give us a right of first
offer to franchise or manage new resorts under the Hilton Brand in the Target Markets, Hilton is free to develop or license other all-
inclusive resorts in the Target Markets, even under the Hilton Brand. Additionally, outside of the Target Markets, Hilton is free to
develop or license other all-inclusive resorts under the Hilton Brand and other Hilton-sponsored brands at any time.
Under the terms of our Hilton Strategic Alliance Agreement and the Hilton franchise agreements, we are required to meet
specified operating standards and other terms and conditions. We expect that Hilton will periodically inspect our resorts that carry the
Hilton Brand and ensure that we follow Hilton’s standards. If we fail to maintain brand standards at one of our resorts that carry the
Hilton Brand, or otherwise fail to comply with the terms and conditions of the Hilton franchise agreement, then Hilton could terminate
the franchise agreements related to that resort. If one or more Hilton franchise agreements are terminated, the underlying value and
performance of our related resort(s) could decline significantly from the loss of associated name recognition, participation in the
Hilton Honors guest loyalty program, Hilton’s reservation system and website, and access to Hilton group sales business, as well as
from the costs of “rebranding” such resorts and the payment of liquidated damages to Hilton.
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Hilton may, in its discretion and subject to its obligations under the Hilton Strategic Alliance Agreement, decline to enter into nn
Hilton franchise agreements for other all-inclusive resort opportunities that we bring to Hilton, even resorts under the Hilton Brand,
whether we own the properties or manage them for third-party owners.
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If any of the foregoing were to occur, it could have a material adverse effect on us, including our business, financial condition,
liquidity, results of operations and prospects and the market price of our ordinary shares, and could divert the attention of our senior
management from other important activities.
Our right of first offer in the Hilton Strategic Alliance Agreement will expire on August 7, 2023, and could be terminated earlier by
Hilton if we fail to meet certain development milestones, and certain provisions of our Hilton Strategic Alliance Agreement impose
certain restrictions on us, any of which could have a material adverse effect on us.
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Pursuant to the Hilton Strategic Alliance Agreement, which will expire on August 7, 2023, we have the right of first offer to
franchise or manage hotels under the Hilton Brand in the Target Markets, subject to certain conditions set forth in the Hilton Strategic
Alliance Agreement. If we do not submit an application to franchise such new hotel within the 150-day time period specified in the
Hilton Strategic Alliance Agreement, our right of first offer with respect to that particular property will expire. Our application to
franchise such hotel remains subject to Hilton’s normal franchise criteria, so there is no guarantee that Hilton will accept our franchise
application. In addition, during the 150-day period for which our right of first offer remains open for any particular property until the
time when Hilton approves or denies our franchise application or our written confirmation to Hilton that we do not intend to submit a
franchise application, we may not propose to, negotiate, hold discussions or enter into any agreement with any third party to operate,
or authorize the operating of, any independent or non-Brand resorts in the country under consideration. It could take us some time to
evaluate a particular opportunity before submitting a franchise application and Hilton would also need time to review and process our
franchise application; therefore, this restriction may delay or hinder our ability to pursue other opportunities with non-Hilton brands
during this period of time.
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Our right of first offer with respect to resorts under the Hilton Brand is also subject to our obligation to open a minimum number m
of hotels under the Hilton Brand in each Target Market and our achievement of certain development milestones on a year-by-year
basis in each Target Market. Pursuant to the terms of the Hilton Strategic Alliance Agreement, if we do not open a total of eight
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additional Brand resorts by December 31, 2024 (provided that the last hotel in each Target Market may open in 2025), consisting of at
least four resorts in the Caribbean Target Market and at least four resorts within the Mexico, Central and South America Target
Market, in each case under the Hilton Brand and having at least 350 guest rooms, Hilton will have the right to terminate the Strategic
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Alliance Agreement and our right of first offer in the Target Market in which we do not achieve such development obligation may also
be terminated by Hilton. In addition, we have agreed to the Development Milestones, and if we do not open one Brand hotel in each
of the Target Markets during each calendar year beginning 2021 and ending 2025, then Hilton will have the right to terminate the
Strategic Alliance Agreement and our right of first offer in the Target Market in which we do not achieve such Development
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Milestones may also be terminated by Hilton. Our inability to meet the Development Milestones and Hilton’s potential termination of
the Strategic Alliance Agreement could have a material adverse effect on us, including our business, financial condition, liquidity,
results of operations and prospects.
We are required to obtain Hilton’s consent to issue equity securities under certain circumstances or undergo change of control
transactions, which could impede our ability to seek certain strategic opportunities and could have a material adverse effect on us.
Under the terms of the Hilton Strategic Alliance Agreement, Hilton has the right to terminate the Strategic Alliance Agreement if
we permit the transfer of any equity interests in Playa (other than equity securities listed on a securities exchange or quoted in a
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publication or electronic reporting service maintained by the National Association of Securities Dealers, Inc. or comparable
organization) without the prior written consent of Hilton. This restriction on our ability to issue securities could hinder our ability to,
among other things, acquire properties through the issuance of securities in an offering exempt from registration, as we did in the
Sagicor transaction, without jeopardizing our strategic relationship with Hilton, which could have a material adverse effect on us,
including our business, financial condition, liquidity, results of operations and prospects.
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Under the terms of the Hilton franchise agreements, we are obligated to undergo certain consent and/or review procedures,
including providing Hilton with at least sixty days’ advance written notice and providing Hilton with certain applicable information,
before we are permitted to (i) effect the transfer of more than 50% of our equity securities, (ii) undergo a change of control, or (iii)
issue securities in a public or private offering that refers to Hilton or the Hilton franchise agreements in the offering materials. If we
do not comply with these informational and consent requirements, Hilton has the right to terminate the franchise agreements
immediately, without any opportunity for us to cure such breach, and we would be liable to Hilton for liquidated damages. The
termination by Hilton of the franchise agreements and our payment of liquidated damages to Hilton could have a material adverse
effect on us, including our business, financial condition, liquidity, results of operations and prospects.
The success of three of our current resorts, as well as the eight Hilton Brand resorts that we have committed to open under the
Strategic Alliance Agreement, will depend substantially on the success of the recently developed Brand. There is a risk that we and
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Hilton may not succeed in marketing the Hilton Brand and that we may not receive the anticipated return on the investment
incurred in connection with development or rebranding of our resorts under the Hilton Brand, which could have a material
adverse effect on us.
Three of the resorts in our current portfolio bear the name of the Hilton Brand, and we have committed under the Hilton Strategic
Alliance Agreement to add an additional eight Hilton Brand resorts before 2025. As a result of this concentration, our success will
depend, in part, on the continued success of this recently developed brand. We believe that building brand value is critical to increase
demand and build guest loyalty. Consequently, if market recognition or the positive perception of Hilton and its current or potential
brands is reduced or compromised, the goodwill associated with the resorts in our portfolio under the Hilton Brand would likely bey
adversely affected. Under the Hilton franchise agreements, Hilton provides various marketing services to the relevant resorts, and we
are obligated to conduct local and regional marketing, advertising and promotional programs, subject to compliance with Hilton’s
requirements. We cannot assure you that we and Hilton will be successful in our marketing efforts to grow the Hilton Brand.
Additionally, we are not permitted under the Hilton franchise agreements to change the brands of our resorts operating under the
Hilton Brand for 15 years after the opening of the relevant resorts, even if the Hilton Brand is not successful. As a result, we could be
materially and adversely affected if the Hilton Brand does not succeed.
If we fail to maintain or enhance our proprietary resort brands or if we or our third-party owners fail to maintain other brand
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standards, our business, financial condition, liquidity, results of operations and prospects may be materially and adversely affected.
In addition to the Hyatt All-Inclusive Resort Brands and the Hilton Brand, we own and manage resorts that use other brands,
including proprietary brands. If we fail to maintain and enhance our proprietary resort brands, demand for these resorts will suffer. We
cannot assure you that we will be successful in marketing such brands. With respect to resorts we own or manage for third parties that
use other brands, we and such third parties will have to comply with applicable brand standards. These standards will require resort
maintenance and improvements, including investments in furniture, fixtures, amenities and personnel. If we or our third-party property
owners fail to maintain brand standards, or otherwise fail to comply with the terms and conditions of agreements with brand owners,
then our ability and the ability of our third-party owners to use these brands may be terminated, which could cause our business,
financial condition, liquidity, results of operations and prospects to be materially and adversely affected.
Our industry is highly competitive, which may impact our ability to compete successfully with other hotel and resort brands and
operators for guests, which could have a material adverse effect on us, including our operating margins, market share and
financial results.
We generally operate in markets that contain numerous competitors. Each of our resort brands compete with major chains in
national and international venues and with independent companies in regional markets, including with recent entrants into the all-
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inclusive segment of the lodging industry in the regions in which we operate. Our ability to remain competitive and to attract and
retain guests depends on our success in establishing and distinguishing the recognition and reputation of our brands, our locations, our
guest satisfaction, our room rates, quality of service, amenities and quality of accommodations and our overall value from offerings by
others. If we are unable to compete successfully in these countries, it could have a material adverse effect on us, including our
operating margins, market share and financial results.
New brands, such as Panama Jack Resorts, amenities or services that we launch in the future may not be successful, which could
have a material adverse effect on our business, financial condition, liquidity and results of operations.
We cannot assure you that any new brands, such as the Panama Jack brand, amenities or services we launch will be successful, or
that we will recover the costs we incurred in developing the brands, amenities and services. If new brands, amenities and services are
not as successful as we anticipate, it could have a material adverse effect on our business, financial condition, liquidity and results of
operations.
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We are exposed to fluctuations in currency exchange rates, including fluctuations in (a) the value of the local currencies, in which
we incur our costs at each resort, relative to the U.S. dollar, in which the revenue from each of our resorts is generally
denominated, (b) the currency of our prospective guests, who may have a reduced ability to pay for travel to our resorts, relative to
their ability to pay to travel to destinations with more attractive exchange rates, and (c) the value of local currencies relative to the
U.S. dollar, which could impact our ability to meet our U.S. dollar-denominated obligations, including our debt service payments,tt
any of which could have a material adverse effect on us.
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The majority of our operating expenses are incurred locally at our resorts and are denominated in Mexican Pesos, the Dominican
Peso or the Jamaican dollar. The net proceeds from our outstanding debt borrowings were received and are payable by our subsidiary
Playa Resorts Holding B.V., in U.S. dollars and our functional reporting currency is U.S. dollars. An increase in the relative value of
the local currencies, in which we incur our costs at each resort, relative to the U.S. dollar, in which our revenue from each resort is
denominated, would adversely affect our results of operations for those resorts. Our current policy is not to hedge against changes in
foreign exchange rates and we therefore may be adversely affected by appreciation in the value of other currencies against the U.S.
dollar, or to prolonged periods of exchange rate volatility. These fluctuations may negatively impact our financial condition, liquidity
and results of operations to the extent we are unable to adjust our pricing accordingly.
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Additionally, in the event that the U.S. dollar increases in value relative to the currency of the prospective guests living outside the
United States, our prospective guests may have a reduced ability to pay for travel to our resorts and this may lead to lower Occupancy
rates and revenue, which could have a material adverse effect on us, including our financial results. An increase in the value of the
Mexican Peso, the Dominican Peso or the Jamaican dollar compared to the currencies of other potential destinations may disadvantage
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the tourism industry in Mexico, the Dominican Republic or Jamaica, respectively, and result in a corresponding decrease in the
Occupancy rates and revenue of our resorts as consumers may choose destinations in countries with more attractive exchange rates. In
the event that this appreciation occurs, it could lead to an increase in the rates we charge for rooms in our resorts, which could result in
a decrease in Occupancy rates and revenue and, therefore, negatively impact our business, financial condition, liquidity, results of
operations and prospects.
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Furthermore, appreciation of local currencies relative to the U.S. dollar could make fulfillment of our and our subsidiaries’ U.S.
dollar denominated obligations, including Playa Resorts Holding B.V.’s debt service payments, more challenging and could have a
material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects.
The departure of any of our key personnel, including Bruce D. Wardinski, Alexander Stadlin, Ryan Hymel, and Kevin Froemming,
each of whom have significant experience and relationships in the lodging industry, could have a material adverse effect on us.
We depend on the experience and relationships of our senior management team, especially Bruce D. Wardinski, our Chairman and
Chief Executive Officer, Alexander Stadlin, our Chief Operating Officer, Ryan Hymel, our Chief Financial Officer, and Kevin
Froemming, our Chief Commercial Officer, to manage our strategic business direction. The members of our senior management team
have an average of 30 years of experience owning, operating, acquiring, repositioning, rebranding, renovating and financing hotel,
resort and all-inclusive properties. In addition, our senior management team has developed an extensive network of industry, corporate
and institutional relationships. We can provide no assurances that any of our key personnel identified above will continue their
employment with us. In addition, as previously disclosed, it is expected that Mr. Stadlin will transition from his current role as Chief
Operating Officer to a new role as advisor to the Chief Executive Officer at the end of 2020. The loss of services of any of
Mr. Wardinski, Mr. Hymel, or Mr. Froemming or another member of our senior management team, the inability to find or integrate a
suitable replacement for Mr. Stadlin, or any difficulty attracting and retaining other talented and experienced personnel could have a
material adverse effect on us, including, among others, our ability to source potential investment opportunities, our relationship with
global and national industry brands and other industry participants or the execution of our business strategy.
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We rely on a third party, AMResorts, to manage four of our resorts and we can provide no assurance that AMResorts will manage
these resorts successfully or that AMResorts will not be subject to conflicts harmful to our interests.
Pursuant to management agreements with AMResorts, four of our 23 resorts are managed by AMResorts. Absent payment by us
of significant termination fees, until the expiration of the management agreements in 2022, we are not able to self-manage these
resorts. We can provide no assurance that AMResorts will manage these resorts successfully.
Failure by AMResorts to fully perform the duties agreed to in the management agreements or the failure of AMResorts to
adequately manage the risks associated with resort operations could materially and adversely affect us. We may have differences with
AMResorts and other third-party service providers over their performance and compliance with the terms of the management
agreements and other service agreements. In these cases, if we are unable to reach satisfactory results through discussions and
negotiations, we may choose to litigate the dispute or submit the matter to third-party dispute resolution. In addition, AMResorts
currently owns and/or manages and may in the future own and/or manage other resorts, including all-inclusive resorts in our markets
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that may compete with our resorts.
AMResorts and its affiliates may have interests that conflict with our interests, such as incentives to favor these other resorts over
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our resorts as a result of more favorable compensation arrangements or by ownership interests in these resorts.
Our strategy to opportunistically acquire, develop and operate in new geographic markets may not be successful, which could have
a material adverse effect on us, including our financial condition, liquidity, results of operations and prospects.
In the future, we may acquire or develop and operate resorts in geographic markets in which our management has little or no
operating experience and in which potential guests are not familiar with a particular brand with which the resort is affiliated or do not
associate the geographic market as an all-inclusive resort destination. As a result, we may incur costs relating to the opening, operation
and promotion of such resorts that are substantially greater than those incurred in other geographic areas, and such resorts may attract
fewer guests than other resorts we may acquire. Consequently, demand at any resorts that we may acquire in unfamiliar markets may
be lower than those at resorts that we currently operate or that we may acquire in our existing markets. Unanticipated expenses at and
insufficient demand for resorts that we acquire in new geographic markets, therefore, could materially and adversely affect us,
including our financial condition, liquidity, results of operations and prospects.
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Our resort development, acquisition, expansion, repositioning and rebranding projects will be subject to timing, budgeting and
other risks, which could have a material adverse effect on us.
We may develop, acquire, expand, reposition or rebrand resorts (such as the two resorts we have rebranded under the Panama
Jack brand and the two resorts we have rebranded under the Hilton Brand) from time to time as suitable opportunities arise, taking into
consideration general economic conditions. To the extent that we determine to develop, acquire, expand, reposition or rebrand resorts,
we could be subject to risks associated with, among others:
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construction delays or cost overruns that may increase project costs;
receipt of zoning, Occupancy and other required governmental permits and authorizations;
strikes or other labor issues;
development costs incurred for projects that are not pursued to completion;
investment of substantial capital without, in the case of developed or repositioned resorts, immediate corresponding
income;
results that may not achieve our desired revenue or profit goals;
acts of nature such as earthquakes, hurricanes, floods or fires that could adversely impact a resort;
ability to raise capital, including construction or acquisition financing; and
governmental restrictions on the nature or size of a project.
As a result of the foregoing, we cannot assure you that any development, acquisition, expansion, repositioning and rebranding
project will be completed on time or within budget or if the ultimate rates of investment return are below the returns forecasted at the
time the project was commenced. If we are unable to complete a project on time or within budget, the resort’s projected operating
results may be adversely affected, which could have a material adverse effect on us, including our business, financial condition,
liquidity, results of operations and prospects.
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Climate change may adversely affect our business, which could materially and adversely affect us.
We may be adversely impacted by the consequences of climate change, such as changes in the frequency, duration and severity of
extreme weather events and changes in precipitation and temperature, which may result in physical damage or a decrease in demand
for our properties, all of which are located in coastal beachfront locations that are vulnerable to significant property damage from
severe weather events, including hurricanes. Should the impact of climate change be material in nature, we could be materially and
adversely affected, including our financial condition, liquidity and results of operations. In addition, changes in applicable legislation
and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of the properties in
order to comply with such regulations. Actual or anticipated losses resulting from the consequences of climate change could also
impact the cost or availability of insurance.
Our insurance may not be adequate to cover our potential losses, liabilities and damages and we may not be able to secure
insurance to cover all of our risks, which could have a material adverse effect on us.
The business of owning and managing resorts is subject to a number of risks, hazards, adverse environmental conditions, labor
disputes, changes in the regulatory environment and natural phenomena such as floods, hurricanes, earthquakes and earth movements.nn
Such occurrences could result in damage or impairment to, or destruction of, our resorts, personal injury or death, environmental
damage, business interruption, monetary losses and legal liability.
While insurance is not commonly available for all these risks, we maintain customary insurance against risks that we believe are
typical and reasonably insurable in the lodging industry and in amounts that we believe to be reasonable but that contain limits,
deductibles, exclusions and endorsements. However, we may decide not to insure against certain risks because of high premiums
compared to the benefit offered by such insurance or for other reasons. In the event that costs or losses exceed our available insurance
or additional liability is imposed on us for which we are not insured or are otherwise unable to seek reimbursement, we could be
materially and adversely affected, including our financial results. We may not be able to continue to procure adequate insurance
coverage at commercially reasonable rates in the future or at all, and some claims may not be paid. There can be no assurance that the
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coverage and amounts of our insurance will be sufficient for our needs.
Labor shortages could restrict our ability to operate our properties or grow our business or result in increased labor costs that
could adversely affect our results of operations and cash flows.
Our success depends in large part on our ability to attract, retain, train, manage and engage skilled employees. As of
December 31, 2019, we directly and indirectly employed approximately 12,000 employees worldwide at both our corporate offices
and on-site at our resorts. If we are unable to attract, retain, train, manage, and engage skilled employees, our ability to manage and
staff our resorts could be impaired, which could reduce guest satisfaction. Staffing shortages in places where our resorts are located
also could hinder our ability to grow and expand our businesses. Because payroll costs are a major component of the operating
expenses at our resorts, a shortage of skilled labor could also require higher wages that would increase labor costs, which could
adversely affect our results of operations and cash flows.
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A significant number of our employees are unionized, and if labor negotiations or work stoppages were to disrupt our operations, it
could have a material adverse effect on us.
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Approximately 39% of our full-time equivalent work force is unionized. As a result, we are required to negotiate the wages,
salaries, benefits, staffing levels and other terms with many of our employees collectively and we are exposed to the risk of disruptions
to our operations. Our results could be adversely affected if future labor negotiations were to disrupt our operations. If we were to
experience labor unrest, strikes or other business interruptions in connection with labor negotiations or otherwise, or if we were unable
to negotiate labor contracts on reasonable terms, we could be materially and adversely affected, including our results of operations. In
addition, our ability to make adjustments to control compensation and benefits costs, rebalance our portfolio or otherwise adapt to
changing business needs may be limited by the terms and duration of our collective bargaining agreements.
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Many of our guests rely on a combination of scheduled commercial airline services and tour operator services for passenger
connections, and price increases or service changes by airlines or tour operators could have a material adverse effect on us,
including reducing our Occupancy rates and revenue and, therefore, our liquidity and results of operations.
Many of our guests depend on a combination of scheduled commercial airline services and tour operator services to transport
them to airports near our resorts. Increases in the price of airfare, due to increases in fuel prices or other factors, would increase the
overall vacation cost to our guests and may adversely affect demand for our vacation packages. Changes in commercial airline
services or tour operator services as a result of strikes, weather or other events, or the lack of availability due to schedule changes or a
high level of airline bookings, could have a material adverse effect on us, including our Occupancy rates and revenue and, therefore,
our liquidity and results of operations.
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The ongoing need for capital expenditures at our resorts could have a material adverse effect on us, including our financial
condition, liquidity and results of operations.
Our resorts will have an ongoing need for renovations and other capital improvements, including replacements, from time to time,
of furniture, fixtures and equipment. In addition, Hyatt and Hilton will require periodic capital improvements by us as a condition of
maintaining the use of their brands. These capital improvements may give rise to the following risks:
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possible environmental liabilities;
construction cost overruns and delays;
the decline in revenues while rooms or restaurants are out of service due to capital improvement projects;
a possible shortage of available cash to fund capital improvements and the related possibility that financing for these
capital improvements may not be available to us on favorable terms, or at all;
uncertainties as to market demand or a loss of market demand after capital improvements have begun;
disputes with Hyatt and/or Hilton regarding compliance with the Hyatt Resort Agreements, the Hyatt Strategic Alliance
Agreement and/or our agreements with Hilton; and
bankruptcy or insolvency of a contracted party during a capital improvement project or other situation that renders them
unable to complete their work.
The costs of all these capital improvements or any of the above noted factors could have a material adverse effect on us, including
our financial condition, liquidity and results of operations.
We have substantial debt outstanding currently and may incur additional debt in the future. The principal, premium, if any, and
interest payment obligations of such debt may restrict our future operations and impair our ability to invest in our business.
As of December 31, 2019, our total debt obligations were $1,046.4 million (which represents the principal amounts outstanding
under our term loan (the “Term Loan”) and revolving credit facility (the “Revolving Credit Facility,” and, collectively with the Term
Loan, the “Senior Secured Credit Facility”), excluding a $2.2 million issuance discount and $3.6 million of unamortized debt issuance
costs on our Term Loan. In addition, the terms of the Senior Secured Credit Facility will permit us to incur additional indebtedness,
subject to our ability to meet certain borrowing conditions.
Our substantial debt may have important consequences to you. For instance, it could:
• make it more difficult for us to satisfy our financial obligations;
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require us to dedicate a substantial portion of any cash flow from operations to the payment of interest and principal due
under our debt, which would reduce funds available for other business purposes, including capital expenditures and
acquisitions;
place us at a competitive disadvantage compared to some of our competitors that may have less debt and better access to
capital resources;
limit our ability to respond to changing business, industry and economic conditions and to withstand competitive
pressures, which may adversely affect our operations;
cause us to incur higher interest expense in the event of increases in interest rates on our borrowings that have variable
interest rates or in the event of refinancing existing debt at higher interest rates;
limit our ability to make investments or acquisitions, dispose of assets, pay cash dividends or redeem or repurchase shares;
and/or
limit our ability to refinance existing debt or to obtain additional financing required to fund working capital and other
business needs, including capital requirements and acquisitions.
Our ability to service our significant financial obligations depends on our ability to generate significant cash flow from
operations, which is partially subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our
control, and we cannot assure you that our business will generate cash flow from operations, that future borrowings will be available
to us under the Revolving Credit Facility, or that we will be able to complete any necessary financings or refinancings, in amounts
sufficient to enable us to fund our operations, engage in acquisitions, capital improvements or other development activities, pay our
debts and other obligations and fund our other liquidity needs. If we are not able to generate sufficient cash flow from operations, we
may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital.
Additional debt or equity financing may not be available in sufficient amounts, at times or on terms acceptable to us, or at all, and any
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additional debt financing we do obtain may significantly increase our leverage on unfavorable terms. If we are unable to implement
one or more of these alternatives, we may not be able to service our debt or other obligations, which could result in us being in default
thereon, in which circumstances our lenders could cease making loans to us, lenders or other holders of our debt could accelerate and
declare due all outstanding obligations due under the respective agreements and secured lenders could foreclose on their collateral,
any of which could have a material adverse effect on us.
The agreements which govern our various debt obligations impose restrictions on our business and limit our ability to undertake
certain actions.
The agreements which govern our various debt obligations, including the Senior Secured Credit Facility, include covenants
imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our
ability to take advantage of potential business opportunities as they arise. These covenants place restrictions on our ability to, among
other things:
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incur additional debt;
pay dividends or repurchase shares or make other distributions to shareholders;
• make investments or acquisitions;
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create liens or use assets as security in other transactions;
issue guarantees;
• merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets;
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amend our Articles of Association or bylaws;
engage in transactions with affiliates; and
purchase, sell or transfer certain assets.
The Senior Secured Credit Facility also requires us to comply with certain financial and other covenants. Our ability to comply
with these agreements may be affected by events beyond our control, including prevailing economic, financial and industry
conditions. These covenants could have a material adverse effect on our business by limiting our ability to take advantage of
financing, mergers, acquisitions or other corporate opportunities. The breach of any of these covenants could result in a default under
the Senior Secured Credit Facility. An event of default under any of our debt agreements could permit such lenders to declare all
amounts borrowed from them, together with accrued and unpaid interest, to be immediately due and payable, which could, in turn,
trigger defaults under other debt obligations and could result in the termination of commitments of the lenders to make further
extensions of credit under the Revolving Credit Facility. If we are unable to repay debt to our lenders, or are otherwise in default under
any provision governing any secured debt obligations, our secured lenders could proceed against us and against any collateral securing
that debt.
Our variable rate indebtedness is priced using a spread over the London Interbank Offered Rate (“(( LIBOR
interest rate risk, which could cause our debt service obligations to increase significantly.
“
”
”) and subjects us to
Borrowings under the Senior Secured Credit Facility are at variable rates of interest and expose us to interest rate risk. If interest
rates increase, our debt service obligations on our existing and any future variable rate indebtedness would also increase and our cash
available to service our other obligations and invest in our business would decrease. Furthermore, rising interest rates would likely
increase our interest obligations on future fixed rate indebtedness. As a result, rising interest rates could materially and adversely affect
our financial condition and liquidity.
dd
In addition, in July 2017, the head of the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR)
announced its intention to phase out the use of LIBOR by the end of 2021. At this time, it is not possible to predict the effect of any
changes to LIBOR, any phase out of LIBOR or any establishment of alternative benchmark rates. At this time, no consensus exists as
to what rate or rates will become accepted alternatives to LIBOR, and it is impossible to predict whether and to what extent banks will
continue to provide LIBOR submissions to the administrator of LIBOR, whether LIBOR rates will cease to be published or supported
before or after 2021 or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere. Such
developments and any other legal or regulatory changes in the method by which LIBOR is determined or the transition from LIBOR
to a successor benchmark may result in, among other things, a sudden or prolonged increase or decrease in LIBOR, a delay in the
publication of LIBOR, and changes in the rules or methodologies applied in calculating LIBOR, which may discourage market
participants from continuing to administer or to participate in LIBOR’s determination and, in certain situations, could result in LIBOR
no longer being determined and published. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee,
a steering committee comprised of large U.S. financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured
aa
22
Overnight Financing Rate, or “SOFR”, a new index calculated by short-term repurchase agreements, backed by Treasury securities.
At this time, it is not possible to definitively predict the effect of any changes to LIBOR, any phase out of LIBOR or any
establishment of alternative benchmark rates, including SOFR. If LIBOR ceases to exist, we may need to amend the terms of our
Senior Secured Credit Facility or any future credit agreements extending beyond 2021 and indexed to LIBOR to replace LIBOR with
SOFR or such other standard that is established, which could have a material adverse effect on us, including on our cost of funds,
access to capital markets and financial results.
Any mortgage debt we incur will expose us to increased risk of property losses due to foreclosure, which could have a material
adverse effect on us.
Incurring mortgage debt increases our risk of property losses because any defaults on indebtedness secured by our resorts may
result in foreclosure actions initiated by lenders and ultimately our loss of the property securing the loan for which we are in default.
For tax purposes, a foreclosure of any nonrecourse mortgage on any of our resorts may be treated as a sale of the property for a
purchase price equal to the outstanding balance of the debt secured by the mortgage. In certain of the jurisdictions in which we
operate, if any such foreclosure is treated as a sale of the property and the outstanding balance of the debt secured by the mortgage
exceeds our tax basis in the property, we could recognize taxable income upon foreclosure but may not receive any cash proceeds.
In addition, any default under our mortgage debt may increase the risk of default on our other indebtedness, including other
mortgage debt. If this occurs, we may not be able to satisfy our obligations under our indebtedness, which could have a material
adverse effect on us, including our financial condition, liquidity (including our future access to borrowing) and results of operations.
We may become subject to disputes or legal, regulatory or other proceedings that could involve significant expenditures by us,
which could have a material adverse effect on us.
The nature of our business exposes us to the potential for disputes or legal, regulatory or other proceedings from time to time
relating to tax matters, environmental matters, government regulations, including licensing and permitting requirements, food and
beverages safety regulations, personal injury, labor and employment matters, contract disputes and other issues. In addition, amenities
at our resorts, including restaurants, bars and swimming pools, are subject to significant regulations, and government authorities may
disagree with our interpretations of these regulations, or may enforce regulations that historically have not been enforced. Such
disputes, individually or collectively, could adversely affect our business by distracting our management from the operation of our
f
business or impacting our market reputation with our guests. If these disputes develop into proceedings or judgments, these
proceedings or judgments, individually or collectively, could distract our senior management, disrupt our business or involve
significant expenditures and our reserves relating to ongoing proceedings, if any, may ultimately prove to be inadequate, any of which
could have a material adverse effect on us, including our financial results.
aa
aa
Some of the resorts in our portfolio located in Mexico were constructed and renovated without certain approvals. The authority
granted to the Mexican government is plenary and we can give no assurance it will not exercise its authority to impose fines,
remediation measures or close part or all of the related resort(s), which could have a material adverse effect on us.
Some of the resorts in our portfolio were constructed and renovated without certain approvals at the time the construction and
renovation work was carried out, as the prior owners of such resorts determined that such approvals were not required under the
Mexican law. We can give no assurance that the Mexican authorities will have the same interpretation of Mexican law as the prior
owners. The authority granted to the Mexican government in this regard is plenary and we can give no assurance the Mexican
government will not exercise its authority to impose fines, to require us to perform remediation/restoration activities and/or to
contribute to environmental trusts, and/or to close part or all of the related resort(s), which could have a material adverse effect on us,
including our business, financial condition, liquidity, results of operations and prospects.
As of 1988, Mexican environmental laws were amended in order to establish that, among other things, any new hotel construction
and certain renovations require the preparation of an environmental impact statement (“MIA”) in order to obtain an Environmental
Impact Authorization (Resolutivo de Impacto Ambiental
ll
). Furthermore, since 2003 depending on each specific project, a supporting
technical report (“ETJ”) is required to obtain an Authorization to Change the Use of Soil of Forestal Land (
((
Autorización de Cambio de
Uso de Suelo en Terrenos Forestales).
((
JJ
With respect to the applicable resorts:
•
Two of the acquired resorts, Panama Jack Resorts Cancún and Hyatt Zilara Cancún, were built prior to implementation of
the MIA in 1988 and, therefore, required no such authorization. However, certain renovations to these resorts were carried
out after 1988 without an MIA because the prior owner determined that no authorization was needed pursuant to an
exception in the Mexican law. We can give no assurance that the Mexican authorities will have the same interpretation of
the applicability of the exception as the prior owner.
23
•
The remaining two resorts, Hilton Playa del Carmen All-Inclusive Resort and Panama Jack Resorts Playa del Carmen,
were constructed after 1988 without the required MIA and ETJ authorizations. Notwithstanding the foregoing, those
resorts were operated by the prior owner, and since our Predecessor’s acquisition at the time of our Predecessor’s
formation transaction have been operated by our Predecessor and us, with no interference in the normal course of
business.
The consequences of failing to obtain the MIA and/or ETJ, as applicable, could result in fines of up to approximately $300,000,
obligations to perform remediation/restoration activities and/or contribute to environmental trusts, and, in the case of a severe
violation, a partial or total closing or a demolition of the relevant resort(s). Although we are not aware of closings or demolitions due
to the failure to obtain the MIA and/or ETJ, no assurance can be given that such action will not be taken in the future.
Our wholly-owned subsidiary Playa Resorts Holding B.V. may be required to obtain a banking license and/or may be in violation
of the prohibition to attract repayable funds as a result of having issued senior notes and borrowing under our Senior Secured
Credit Facility, which could have a material adverse effect on us.
Under the Regulation (EU) No 575/2013 of the European Parliament and of the Council of June 26, 2013 on prudential
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (the “CRR”), which took effect
on January 1, 2014, there is uncertainty regarding how certain key terms in the CRR are to be interpreted.
If such terms are not interpreted in a manner that is consistent with current Dutch national guidance on which Playa Resorts
Holding B.V. (our wholly-owned subsidiary) relies, Playa Resorts Holding B.V. could be categorized as a “credit institution” as a
consequence of borrowing under our Senior Secured Credit Facility if it is deemed to be “an undertaking the business of which is to
receive deposits or other repayable funds from the public and to grant credits for its own account.” This would require it to obtain a
banking license and it could be deemed to be in violation of the prohibition on conducting the business of a bank without such a
license. With respect to the borrowing under our Senior Secured Credit Facility, Playa Resorts Holding B.V. could also be deemed to
be in violation of the prohibition on attracting repayable funds from the public. In each such case, it could, as a result, be subject to
certain enforcement measures such as a warning and/or instructions by the regulator, incremental penalty payments (last onder
dwangsom) and administrative fines (bestuurlijke boete), which all may be disclosed publicly by the regulator.
There is limited official guidance at the EU level as to the key elements of the definition of “credit institution,” such as the terms
“repayable funds” and “the public.” The Netherlands legislature has indicated that, as long as there is no clear guidance at the EU
level, it is to be expected that the current Dutch national interpretation of these terms will continue to be taken into account for the use
and interpretation thereof. Playa Resorts Holding B.V. relies on this national interpretation to reach the conclusion that a requirement
to obtain a banking license is not triggered, and that the prohibitions on conducting the business of a bank without such a license and
on attracting repayable funds from the public have not been violated, on the basis that (i) each lender under our Senior Secured Credit
Facility has extended loans to Playa Resorts Holding B.V. for an initial amount of at least the U.S. dollar equivalent of €100,000 or has
assumed rights and/or obligations vis-à-vis Playa Resorts Holding B.V. the value of which is at least the U.S. dollar equivalent of
€100,000 and (ii) all senior notes which were issued by Playa Resorts Holding B.V. were in denominations which equal or are greater
than the U.S. dollar equivalent of €100,000.
nn
If European guidance is published on what constitutes “the public” as referred to in the CRR, and such guidance does not provide
that the holder of a note of $150,000 or more, such as was the case with our senior notes, or the lenders under our Senior Secured
Credit Facility, each providing a loan the initial amount of which exceeds the U.S. dollar equivalent of €100,000, are excluded from
being considered part of “the public” and the current Dutch national interpretation of these terms is not considered to be
“grandfathered,” then Playa Resorts Holding B.V. may be required to obtain a banking license, and/or may be deemed to be in
violation of the prohibition on conducting the business of a bank without such a license and, with respect to our Senior Secured Credit
Facility, the prohibition on attracting repayable funds from the public and, as a result may, in each case, be subject to certain
enforcement measures as described above. If Playa Resorts Holding B.V. is required to obtain a banking license or becomes subject to
such enforcement measures, we could be materially adversely affected.
u
d
The results of operations of our resorts may be adversely affected by various operating risks common to the lodging industry,
including competition, over-supply and dependence on tourism, which could have a material adverse effect on us.
Our resorts are subject to various operating risks common to the lodging industry, many of which are beyond our control,
including, among others, the following:
•
•
the availability of and demand for hotel and resort rooms;
over-building of hotels and resorts in the markets in which we operate, which results in increased supply and may
adversely affect Occupancy and revenues at our resorts;
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•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
pricing strategies of our competitors;
increases in operating costs due to inflation and other factors that may not be offset by increased room rates or other
income;
international, national, and regional economic and geopolitical conditions;
the impact of war, crime, actual or threatened terrorist activity and heightened travel security measures instituted in
response to war, terrorist activity or threats (including Travel Advisories issued by the U.S. Department of State) and civil
unrest;
the impact of any economic or political instability in Mexico due to unsettled political conditions, including civil unrest,
widespread criminal activity, acts of terrorism, force majeure, war or other armed conflict, strikes and governmental
actions;
the desirability of particular locations and changes in travel patterns;
the occurrence of natural or man-made disasters, such as earthquakes, tsunamis, hurricanes, and oil spills;
events that may be beyond our control that could adversely affect the reputation of one or more of our resorts or that may
disproportionately and adversely impact the reputation of our brands or resorts;
taxes and government regulations that influence or determine wages, prices, interest rates, construction procedures, and
costs;
adverse effects of a downturn in the lodging industry, especially leisure travel and tourism spending;
changes in interest rates and in the availability, cost and terms of debt financing;
necessity for periodic capital reinvestment to maintain, repair, expand, renovate and reposition our resorts;
the costs and administrative burdens associated with compliance with applicable laws and regulations, including, among
others, those associated with privacy, marketing and sales, licensing, labor, employment, the environment, and the U.S.
Department of the Treasury’s Office of Foreign Asset Control and the U.S. Foreign Corrupt Practices Act (“FCPA”);
the availability, cost and other terms of capital to allow us to fund investments in our portfolio and the acquisition of new
resorts;
regional, national and international development of competing resorts;
increases in wages and other labor costs, energy, healthcare, insurance, transportation and fuel, and other expenses central
to the conduct of our business or the cost of travel for our guests, including recent increases in energy costs and any
resulting increase in travel costs or decrease in airline capacity;
availability, cost and other terms of insurance;
organized labor activities, which could cause the diversion of business from resorts involved in labor negotiations, loss of
group business, and/or increased labor costs;
currency exchange fluctuations;
trademark or intellectual property infringement; and
risks generally associated with the ownership of hotels, resorts and real estate, as we discuss in detail below.
Any one or more of these factors could limit or reduce the demand for our resorts or the prices our resorts are able to obtain or
could increase our costs and therefore reduce the operating results of our resorts. Even where such factors do not reduce demand,
resort-level profit margins may suffer if we are unable to fully recover increased operating costs from our guests. These factors could
have a material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects.
The seasonality of the lodging industry could have a material adverse effect on us.
The lodging industry is seasonal in nature, which can be expected to cause quarterly fluctuations in our revenues. The seasonality
of the lodging industry and the location of our resorts in Mexico and the Caribbean will generally result in the greatest demand for our
resorts between mid-December and April of each year, yielding higher Occupancy levels and package rates during this period. This
seasonality in demand has resulted in predictable fluctuations in revenue, results of operations and liquidity, which are consistently
higher during the first quarter of each year than in successive quarters. We can provide no assurances that these seasonal fluctuations
will, in the future, be consistent with our historical experience or whether any shortfalls that occur as a result of these fluctuations will
not have a material adverse effect on us.
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The cyclical nature of the lodging industry may cause fluctuations in our operating performance, which could have a material
adverse effect on us.
The lodging industry is highly cyclical in nature. Fluctuations in operating performance are caused largely by general economic
and local market conditions, which subsequently affect levels of business and leisure travel. In addition to general economic
conditions, new hotel and resort room supply is an important factor that can affect the lodging industry’s performance, and over-
building has the potential to further exacerbate the negative impact of an economic recession. Room rates and Occupancy, and thus
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Net Package RevPAR (as defined in Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations), tend to increase when demand growth exceeds supply growth. A decline in lodging demand, or increase in lodging
supply, could result in returns that are substantially below expectations, or result in losses, which could have a material adverse effect
on us, including our business, financial condition, liquidity, results of operations and prospects. Further, the costs of running a resort
tend to be more fixed than variable. As a result, in an environment of declining revenue, the rate of decline in earnings is likely to be
higher than the rate of decline in revenue.
The increasing use of Internet travel intermediaries by consumers could have a material adverse effect on us.
Some of our vacation packages are booked through Internet travel intermediaries, including, but not limited to, Travelocity.com,
Expedia.com and Priceline.com. As these Internet bookings increase, these intermediaries may be able to obtain higher commissions,
reduced room rates or other significant contract concessions from us. Moreover, some of these Internet travel intermediaries are
attempting to offer lodging as a commodity, by increasing the importance of price and general indicators of quality, such as “three-star
downtown hotel,” at the expense of brand identification or quality of product or service. If consumers develop loyalty to Internet
reservations systems rather than to our booking system or the brands we own and operate, the value of our resorts could deteriorate
and we could be materially and adversely affected, including our financial results.
tt
rr
Cyber risk and the failure to maintain the integrity of internal or guest data could harm our reputation and result in a loss of o
business and/or subject us to costs, fines, investigations, enforcement actions or lawsuits.
We, Hyatt, Hilton, our third-party resort manager and other third-party service providers collect, use and retain large volumes of
guest data, including credit card numbers and other personally identifiable information, for business, marketing and other purposes in
our, Hyatt’s, Hilton’s, our third-party resort manager's and other third-party service providers' various information technology systems,
which enter, process, summarize and report such data. We also maintain personally identifiable information about our employees. We,
Hyatt, Hilton, our third-party resort manager and other third-party service providers store and process such internal and guest data
both at on-site facilities and at third-party owned facilities including, for example, in a third-party hosted cloud environment. The
integrity and protection of our guest, employee and company data, as well as the continuous operation of our, Hyatt’s, Hilton’s, our
third-party resort manager's and other third-party service providers' systems, is critical to our business. Our guests and employees
expect that we will adequately protect their personal information. The regulations and contractual obligations applicable to security
and privacy are increasingly demanding, both in the United States and in other jurisdictions where we operate, and cyber-criminals
have been recently targeting the lodging industry. We continue to develop and enhance controls and security measures to protect
against the risk of theft, loss or fraudulent or unlawful use of guest, employee or company data, and we maintain an ongoing process
to re-evaluate the adequacy of our controls and measures.
nn
t
Notwithstanding our efforts to protect against unauthorized access of our systems and sensitive information, because of the scope
and complexity of their information technology structure, our reliance on third parties to support and protect our structure and data,
and the constantly evolving cyber-threat landscape, our systems and those of third parties on which we rely are vulnerable to
disruptions, failures, unauthorized access, cyber-terrorism, employee error, negligence, fraud or other misuse, and given the
sophistication of hackers to gain unauthorized access to our sensitive information, we may not be able to detect the breach for long
periods of time or at all. These or similar occurrences, whether accidental or intentional, could result in theft, unauthorized access or
disclosure, loss, fraudulent or unlawful use of guest, employee or company data which could harm our reputation, result in an
interruption or disruption of our services or result in a loss of business, as well as remedial and other costs, fines, investigations,
enforcement actions, or lawsuits. As a result, future incidents could have a material adverse impact on us, including our business, our
financial condition, liquidity and results of operations and prospects.
d
r
Information technology systems, software or website failures or interruptions could have a material adverse effect on our business
or results of operations.
We rely on the uninterrupted and efficient operation of our information technology systems and software. Information technology
is critical to our day-to-day operations, including, but not exclusive to guest check-in and check-out, housekeeping and room service,
and reporting our financial results and the financial results of our resorts. We rely on certain third-party hardware, network and
software vendors to maintain and upgrade many of our critical systems on an ongoing basis to support our business operations and to
keep pace with technology developments in the hospitality industry. The software programs supporting many of our systems are
26
licensed to us by independent third-party software providers. An inability to continuously maintain and update our hardware and
software programs or an inability for network providers to maintain their communications infrastructure would potentially disrupt or
uu
inhibit the efficiency of our operations if suitable alternatives could not be identified and implemented in a timely, efficient and cost-
effective manner.
nn
We face risks related to pandemic diseases, including avian flu, H1N1 flu, H7N9 flu, Ebola virus, Coronavirus and Zika virus,
which could materially and adversely affect travel and result in reduced demand for our resorts and could have a material adverserr
effect on us.
Our business could be materially and adversely affected by the effect of, or the public perception or a risk of, a pandemic disease
on the travel industry. For example, the outbreaks of severe acute respiratory syndrome (“SARS”) and avian flu in 2003 had a severe
impact on the travel industry, and the outbreaks of H1N1 flu in 2009 threatened to have a similar impact. Cases of the Zika virus have
been reported in regions in which our resorts are located. In addition, the ongoing Coronavirus outbreak emanating from China at the
beginning of 2020 has resulted in increased travel restrictions and extended shutdown of certain businesses in the region, and a
widespread outbreak of the virus in the U.S. or the regions in which our resorts are located would likely reduce travel and hotel
demand at our resorts. Additionally, the public perception of a risk of a pandemic or media coverage of these diseases, or public
perception of health risks linked to perceived regional food and beverage safety, particularly if focused on regions in which our resorts
are located, may adversely affect us by reducing demand for our resorts. A prolonged occurrence of SARS, avian flu, H1N1 flu, H7N9
flu, Ebola virus, Coronavirus, Zika virus or another pandemic disease or health hazard also may result in health or other government
authorities imposing restrictions on travel. Any of these events could result in a significant drop in demand for our resorts and could
have a material adverse effect on us.
SS
aa
rr
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We may be subject to unknown or contingent liabilities related to our existing resorts and resorts that we acquire, which could have
a material adverse effect on us.
d
Our existing resorts and resorts that we may in the future acquire may be subject to unknown or contingent liabilities for which
we may have no recourse, or only limited recourse, against the sellers. In general, the representations and warranties provided under
the transaction agreements related to our existing resorts and any future acquisitions of resorts by us may not survive the closing of the
transactions. Furthermore, indemnification under such agreements may not exist or be limited and subject to various exceptions or
materiality thresholds, a significant deductible or an aggregate cap on losses. As a result, there is no guarantee that we will recover any
amounts with respect to losses due to breaches by the transferors or sellers of their representations and warranties or other prior
actions by the sellers. In addition, the total amount of costs and expenses that may be incurred with respect to liabilities associated
with these resorts may exceed our expectations, and we may experience other unanticipated adverse effects, all of which may
materially and adversely affect us, including our business, financial condition, liquidity, results of operations and prospects.
d
l
Conducting business internationally may result in increased risks and any such risks could have a material adverse effect on us.
We operate our business internationally and plan to continue to develop an international presence. Operating internationally
exposes us to a number of risks, including political risks, risks of increase in duties and taxes, risks relating to anti-bribery laws, such
as the FCPA, as well as changes in laws and policies affecting vacation businesses, or governing the operations of foreign-based
companies. Because some of our expenses are incurred in foreign currencies, we are exposed to exchange rate risks. Additional risks
include interest rate movements, imposition of trade barriers and restrictions on repatriation of earnings. Any of these risks could have
a material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects.
We could be exposed to liabilities under the FCPA and other anti-corruption laws and regulations, including non-U.S. laws, any of
which could have a material adverse impact on us.
We have international operations, and as a result are subject to compliance with various laws and regulations, including the FCPA
and other anti-corruption laws in the jurisdictions in which we do business, which generally prohibit companies and their
intermediaries or agents from engaging in bribery or making improper payments to foreign officials or their agents or other entities.
The FCPA also requires companies to make and keep books and records and accounts which, in reasonable detail, reflect their
transactions, including the disposition of their assets. We have implemented, and will continue to evaluate and improve, safeguards
and policies designed to prevent violations of various anti-corruption laws that prohibit improper payments or offers of payments to
foreign officials or their agents or other entities for the purpose of conducting business, and we are in the process of expanding our
training program. The countries in which we own resorts have experienced governmental corruption to some degree and, in certain
circumstances, compliance with anti-corruption laws may conflict with local customs and practices. Despite existing safeguards and
any future improvements to our policies and training, we will be exposed to risks from deliberate, reckless or negligent acts committed
by our employees or agents for which we might be held responsible. Failure to comply with these laws or our internal policies could
lead to criminal and civil penalties and other legal and regulatory liabilities and require us to undertake remedial measures, any of
nn
27
which could have a material adverse impact on us, including our business, financial condition, liquidity, results of operations and
prospects.
Our existing resorts and resorts that we may acquire may contain or develop harmful mold that could lead to liability for adverserr
health effects and costs of remediating the problem, either of which could have a material adverse effect on us.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture
problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants.
Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and
symptoms, including allergic or other reactions. Some of the resorts in our portfolio or resorts that we may acquire may contain
microbial matter, such as mold and mildew, which could require us to undertake a costly remediation program to contain or remove
the mold from the affected resort. Furthermore, we can provide no assurances that we will be successful in identifying harmful mold
and mildew at resorts that we seek to acquire, which could require us to take remedial action at acquired resorts. The presence of
significant mold could expose us to liability from guests, employees and others if property damage or health concerns arise, which
could have a material adverse effect on us, including our results of operations.
Illiquidity of real estate investments could significantly impede our ability to sell resorts or otherwise respond to adverse changes in
the performance of our resorts, which could have a material adverse effect on us.
Because real estate investments are relatively illiquid, our ability to sell one or more resorts promptly for reasonable prices in
response to changing economic, financial and investment conditions will be limited. The real estate market is affected by many factors
beyond our control, including:
•
•
•
•
•
•
adverse changes in international, national, regional and local economic and market conditions;
changes in interest and tax rates and in the availability and cost and other terms of debt financing;
changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance
with laws and regulations, fiscal policies and ordinances;
the ongoing need for capital improvements, particularly in older structures;
changes in operating expenses; and
civil unrest, widespread criminal activity, and acts of nature, including hurricanes, earthquakes, floods and other natural
disasters, which may result in uninsured losses, and acts of war or terrorism.
We may decide to sell resorts in the future. We cannot predict whether we will be able to sell any resort for the price or on thett
terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot
predict the length of time needed to find a willing purchaser and to close the sale of a resort.
During the recent economic recession, the availability of credit to purchasers of hotels and resorts and financing structures, such
as commercial mortgage-backed securities, which had been used to finance many hotel and resort acquisitions in prior years, was
reduced. Subsequent to the aforementioned economic recession, such credit availability and financing structures have been
inconsistent from time to time. If financing for hotels and resorts is not available on attractive terms or at all, it will adversely impact
the ability of third parties to buy our resorts. As a result, we may hold our resorts for a longer period than we would otherwise desire
and may sell resorts at a loss.
In addition, we may be required to expend funds to correct defects, terminate contracts or to make improvements before a resort
can be sold. We can provide no assurances that we will have funds available, or access to such funds, to correct those defects or to
make those improvements. In acquiring a resort, we may agree to lock-out provisions or tax protection agreements that materially
restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that
can be placed or repaid on that property. These factors and any others that would impede our ability to respond to adverse changes in
the performance of our resorts or a need for liquidity could materially and adversely affect us, including our financial results.
f
We could incur significant costs related to government regulation and litigation with respect to environmental matters, which could
have a material adverse effect on us.
Our resorts are subject to various international, national, regional and local environmental laws that impose liability for
contamination. Under these laws, governmental entities have the authority to require us, as the current owner of property, to perform
or pay for the clean-up of contamination (including hazardous substances, waste, or petroleum products) at, on, under or emanating
from our property and to pay for natural resource damages arising from such contamination. Such laws often impose liability without
regard to whether the owner or operator or other responsible party knew of, or caused, such contamination, and the liability may be
aa
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joint and several. Because these laws also impose liability on persons who owned a property at the time it was or became
contaminated, it is possible we could incur cleanup costs or other environmental liabilities even after we sell resorts. Contamination at,
on, under or emanating from our resorts also may expose us to liability to private parties for costs of remediation and/or personal
injury or property damage. In addition, environmental laws may create liens on contaminated sites in favor of the government for
damages and costs it incurs to address such contamination. If contamination is discovered on our resorts, environmental laws also may
impose restrictions on the manner in which our property may be used or our business may be operated, and these restrictions may
require substantial expenditures. Moreover, environmental contamination can affect the value of a property and, therefore, an owner’s
ability to borrow funds using the property as collateral or to sell the property on favorable terms or at all. Furthermore, persons who
sent waste to a waste disposal facility, such as a landfill or an incinerator, may be liable for costs associated with cleanup of that
facility.
In addition, our resorts are subject to various international, national, regional and local environmental, health and safety
regulatory requirements that address a wide variety of issues. Some of our resorts routinely handle and use hazardous or regulated
substances and wastes as part of their operations, which are subject to regulation (e.g., swimming pool chemicals). Our resorts incur
costs to comply with these environmental, health and safety laws and regulations and could be subject to fines and penalties for non-
compliance with applicable laws.
Liabilities and costs associated with contamination at, on, under or emanating from our properties, defending against claims, or
complying with environmental, health and safety laws could be significant and could have a material adverse effect on us, including
our business, financial condition, liquidity, results of operations and prospects. We can provide no assurances that (i) changes in
current laws or regulations or future laws or regulations will not impose additional or new material environmental liabilities or (ii) the
current environmental condition of our resorts will not be affected by our operations, by the condition of the resorts in the vicinity of
our resorts, or by third parties unrelated to us. The discovery of material environmental liabilities at our resorts could subject us to
unanticipated significant costs, which could result in significant losses. Please see “Risk Factors — Risks Related to Our Business —
We may become subject to disputes or legal, regulatory or other proceedings that could involve significant expenditures by us, which
could have a material adverse effect on us” as to the possibility of disputes or legal, regulatory or other proceedings that could
adversely affect us.
“
The tax laws, rules and regulations (or interpretations thereof) in the jurisdictions in which we operate may change, which could
have a material adverse effect on us.
We generally seek to structure our business activities in the jurisdictions in which we operate in a manner that is tax-efficient,
taking into account the relevant tax laws, rules and regulations. However, tax laws, rules and regulations in these jurisdictions are
complex and are subject to change as well as subject to interpretation by local tax authorities and courts. There can be no assurance
that these tax laws, rules and regulations (or interpretations thereof) will not change, possibly with retroactive effect, or that local tax
authorities may not otherwise successfully assert positions contrary to those taken by us. In any such case, we may be required to
operate in a less tax-efficient manner, incur costs and expenses to restructure our operations and/or owe past taxes (and potentially
interest and penalties), which in each case could negatively impact our operations. For example, we will need to renegotiate our uu
agreements which determine our taxes in the Dominican Republic, known as advanced pricing agreements, with The Ministry of
Finance of the Dominican Republic at the end of 2020 when our current agreements expire.
d
tt
Increases in property taxes would increase our operating costs, which could have a material adverse effect on us.
Each of our resorts is subject to real estate and personal property taxes, especially upon any development, redevelopment,
rebranding, repositioning and renovation. These taxes may increase as tax rates change and as our resorts are assessed or reassessed by
taxing authorities. If property taxes increase, we would incur a corresponding increase in our operating expenses, which could have a
material adverse effect on us, including our business, financial condition, liquidity, results of operations and prospects.
Risks Related to Ownership of Our Ordinary Shares
The rights of our shareholders and the duties of our directors are governed by Dutch law, our Articles of Association and internal
rules and policies adopted by our board of directors (the “Board”dd ), and differ in some important respects from the rights of
”
shareholders and the duties of members of a board of directors of a U.S. corporation.
rr
Our corporate affairs, as a Dutch public limited liability company (naamloze vennootschap), are governed by our Articles of
Association, internal rules and policies adopted by our Board and by the laws governing companies incorporated in the Netherlands.
The rights of our shareholders and the duties of our directors under Dutch law are different from the rights of shareholders and/or the
duties of directors of a corporation organized under the laws of U.S. jurisdictions. In the performance of its duties, our Board is
required by Dutch law to consider our interests and the interests of our shareholders, our employees and other stakeholders (e.g., our
29
creditors, guests and suppliers) as a whole and not only those of our shareholders, which may negatively affect the value of your
investment.
In addition, the rights of our shareholders, including for example the rights of shareholders as they relate to the exercise of
shareholder rights, are governed by Dutch law and our Articles of Association and such rights differ from the rights of shareholders
under U.S. law. For example, if we engaged in a merger, Dutch law would not grant appraisal rights to any of our shareholders who
wished to challenge the consideration to be paid to them upon such merger (without prejudice, however, to certain cash exit rights
offered under Dutch law in certain circumstances).
We are organized and existing under the laws of the Netherlands, and, as such, the rights of our shareholders and the civil liability
of our directors and executive officers are governed in certain respects by the laws of the Netherlands.
We are organized and existing under the laws of the Netherlands, and, as such, the rights of our shareholders and the civil liability
of our directors and executive officers are governed in certain respects by the laws of the Netherlands. The ability of our shareholders
in certain countries other than the Netherlands to bring an action against us, our directors and executive officers may be limited under
applicable law. In addition, substantially all of our assets are located outside the United States. As a result, it may not be possible for
shareholders to effect service of process within the United States upon us or our directors and executive officers or to enforce
judgments against us or them in U.S. courts, including judgments predicated upon the civil liability provisions of the federal securities
laws of the United States. In addition, it is not clear whether a Dutch court would impose civil liability on us or any of our directors
and executive officers in an original action based solely upon the federal securities laws of the United States brought in a court of
competent jurisdiction in the Netherlands.
a
a
As of the date of this annual report, there is no treaty in effect between the United States and the Netherlands providing for the
reciprocal recognition and enforcement of judgments, other than arbitration awards, in civil and commercial matters. With respect to
choice of court agreements in civil or commercial matters, it is noted that the Hague Convention on Choice of Court Agreements
entered into force for the Netherlands, but has not entered into force for the United States. Accordingly, a judgment rendered by a
court in the United States, whether or not predicated solely upon U.S. securities laws, would not automatically be recognized and
enforced by the competent Dutch courts. However, if a person has obtained a judgment for the payment of money rendered by a court uu
in the United States and files a claim with the competent Dutch court, the Dutch court will in principle give binding effect to a foreign
judgment if (i) the jurisdiction of the foreign court was based on a ground of jurisdiction that is generally acceptable according to
international standards, (ii) the judgment by the foreign court was rendered in legal proceedings that comply with the Dutch standards
of proper administration of justice including sufficient safeguards (behoorlijke rechtspleging) and (iii) binding effect of such foreign
judgment is not contrary to Dutch public order and (iv) the judgment by the foreign court is not incompatible with a decision rendered
between the same parties by a Dutch court, or with a previous decision rendered between the same parties by a foreign court in a
dispute that concerns the same subject and is based on the same cause, provided that the previous decision qualifies for
acknowledgment in the Netherlands. Even if such a foreign judgment is giving binding effect, a claim based thereon may, however, rr
still be rejected if the foreign judgment is not or no longer formally enforceable.
gg
a
Based on the lack of a treaty as described above, U.S. investors may not be able to enforce against us or our directors,
representatives or certain experts named herein who are residents of the Netherlands or countries other than the United States any
judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws.
Under our Articles of Association, and certain other contractual arrangements between us and our directors, we indemnify and
hold our directors harmless against all claims and suits brought against them, subject to limited exceptions. There is doubt, however,
as to whether U.S. courts would enforce such indemnity provisions in an action brought against one of our directors in the United
States under U.S. securities laws.
Each of TPG Global, LLC, Farallon Capital Management, L.L.C., Sagicor and Hyatt own a significant portion of our ordinary
shares and have representation on our Board. Any of these investors may have interests that differ from those of other
shareholders.
As of December 31, 2019, 23.2% of our outstanding ordinary shares were beneficially owned by Cabana Investors B.V. and Playa
Four Pack, L.L.C. (collectively, “Cabana”), each of which is an affiliate of Farallon Capital Management, L.L.C. (“Farallon”). In
addition, two of our directors were designated by Cabana. As of December 31, 2019, 15.1% of our outstanding ordinary shares were
beneficially owned by Jamziv Mobay Jamaica Limited (“Jamziv”), which is owned by JCSD Trustee Services Limited (“JCSD”) and
X Fund Properties (“XFUND”), both affiliates of Sagicor. Two of our directors have been designated by JCSD and XFUND. As of
December 31, 2019, 9.2% of our outstanding ordinary shares were beneficially owned by HI Holdings Playa B.V. (“HI Holdings
Playa”), an affiliate of Hyatt. In addition, one of our directors was designated by HI Holdings Playa and is currently an employee of
Hyatt. As of December 31, 2019, 6.7% of our outstanding ordinary shares were beneficially owned by TPG Pace Sponsor, LLC
(“Pace Sponsor”), an affiliate of TPG Global, LLC. In addition, three of our directors were designated by Pace Sponsor.
30
As a result, these shareholders, individually or collectively, may be able to significantly influence the outcome of matters
submitted for director action, subject to our directors’ obligation to act in the interest of all of our stakeholders, and for shareholder
action, including the designation and appointment of our Board (and committees thereof) and approval of significant corporate
transactions, including business combinations, consolidations and mergers. So long as these shareholders and/or their affiliates
continue to directly or indirectly own a significant amount of our outstanding equity interests and have the right to designate members
of our Board and/or one or more committees thereof, these shareholders may be able to exert substantial influence on us and may be
able to exercise its influence in a manner that is not in the interests of our other stakeholders. These shareholders' influence over our
management could have the effect of delaying, deferring or preventing a change in control or otherwise discouraging a potential
acquirer from attempting to obtain control of us, which could cause the market price of our ordinary shares to decline or prevent our
shareholders from realizing a premium over the market price for our ordinary shares. Prospective investors in our ordinary shares
should consider that the interests of these shareholders may differ from their interests in material respects.
y
Provisions of our Articles of Association or Dutch corporate law might deter or discourage acquisition bids for us that
shareholders might consider to be favorable and prevent or frustrate any attempt to replace or remove our Board at the time of
such acquisition bid.
Certain provisions of our Articles of Association may make it more difficult for a third party to acquire control of us or effect a
change in our Board. These provisions include:
• A provision that our directors are appointed by our General Meeting at the binding nomination of our Board. Such binding
nomination may only be overruled by the General Meeting by a resolution adopted by at least a majority of the votes cast,
if such votes represent more than 50% of our issued share capital.
• A provision that our shareholders at a General Meeting may suspend or remove directors at any time. A resolution of our
General Meeting to suspend or remove a director may be passed by a majority of the votes cast, provided that the
resolution is based on a proposal by our Board. In the absence of a proposal by our Board, a resolution of our General
Meeting to suspend or remove a director shall require a vote of at least a majority of the votes cast, if such votes represent
more than 50% of our issued share capital.
• A requirement that certain actions can only be taken by the General Meeting with at least two-thirds of the votes cast,
unless such resolution is passed at the proposal by our Board, including an amendment of our Articles of Association, the
issuance of shares or the granting of rights to subscribe for shares, the limitation or exclusion of preemptive rights, the
reduction of our issued share capital, the application for bankruptcy, the making of a distribution from our profits or
reserves on our ordinary shares, the making of a distribution in the form of shares in our capital or in the form of assets,
instead of cash, the entering into of a merger or demerger, our dissolution and the designation or granting of authorizations
such as the authorization to issue shares and to limit or exclude preemptive rights. Our General Meeting adopted a
resolution to grant such authorizations to our Board.
• A provision prohibiting (a) a “Brand Owner” (which generally means a franchisor, licensor or owner of a hotel concept or
brand that has at least 12 all-inclusive resorts and that competes with any Hyatt All-Inclusive Resort Brand resort) from
acquiring our ordinary shares such that the Brand Owner (together with its affiliates) acquires beneficial ownership in
excess of 15% of our outstanding shares, or (b) a “Restricted Brand Company” from acquiring our ordinary shares such
that the Restricted Brand Company (together with its affiliates) acquires beneficial ownership in excess of 5% of our
outstanding ordinary shares. Upon becoming aware of either share cap being exceeded, we will send a notice to such
shareholder informing such shareholder of a violation of this provision and granting the shareholder two weeks to dispose
of such excess ordinary shares to an unaffiliated third party. Such notice will immediately trigger the transfer obligation
and suspend the right to attend our General Meeting and voting rights (together, “Shareholder Rights”) of the shares
exceeding the cap. If such excess shares are not disposed by such time, (i) the Shareholder Rights on all shares held by the
shareholder exceeding the share cap will be suspended until the transfer obligations have been complied with, (ii) we will
be irrevocably authorized under our Articles of Association to transfer the excess shares to a foundation until sold to an
unaffiliated third party and (iii) such foundation shall issue depositary receipts for the ordinary shares concerned to the
relevant Brand Owner or Restricted Brand Company for as long as those ordinary shares are held by the foundation.
Such provisions could discourage a takeover attempt and impair the ability of shareholders to benefit from a change in control and
realize any potential change of control premium. This may adversely affect the market price of the ordinary shares.
Our General Meeting has authorized our Board to issue and grant rights to subscribe for our ordinary shares, up to the amount of
the authorized share capital (from time to time) and limit or exclude preemptive rights on those shares, in each case for a period of five
31
years from the date of the resolution. Accordingly, an issue of our ordinary shares may make it more difficult for a shareholder or
potential acquirer to obtain control over our General Meeting or us.
Provisions of our franchise agreements with Hyatt might deter acquisition bids for us that shareholders might consider to be
favorable and/or give Hyatt the right to terminate such agreements if certain persons obtain and retain more than a specified
percentage of our ordinary shares.
Certain provisions of our franchise agreements with Hyatt may make it more difficult for certain third parties to acquire more than
a specified percentage of issued ordinary shares. Our franchise agreements with Hyatt and our Articles of Association both contain a
provision prohibiting (a) a Brand Owner from acquiring issued ordinary shares such that the Brand Owner (together with its affiliates)
acquires beneficial ownership in excess of 15% of issued and outstanding ordinary shares, and (b) a Restricted Brand Company from
acquiring issued ordinary shares such that the Restricted Brand Company (together with its affiliates) acquires beneficial ownership in
excess of 5% of issued and outstanding ordinary shares. Upon becoming aware of either share cap being exceeded, we must send a
notice to such shareholder informing such shareholder of a violation of this provision and granting the shareholder two weeks to
dispose of such excess ordinary shares to an unaffiliated third party. Such notice will immediately trigger the transfer obligation and
suspend the Shareholder Rights of ordinary shares exceeding the share cap. If such excess ordinary shares are not disposed by such
time, (i) the Shareholder Rights on all ordinary shares held by the shareholder exceeding the share cap will be suspended until the
transfer obligations have been complied with and (ii) we will be irrevocably authorized under our Articles of Association to transfer
the excess ordinary shares to a foundation until sold to an unaffiliated third party. Our franchise agreements provide that, if the excess
ordinary shares are not transferred to a foundation or an unaffiliated third party within 30 days following the earlier of the date on
which a public filing is made with respect to either share cap being exceeded and the date we become aware of either share cap being
exceeded, Hyatt will have the right to terminate all (but not less than all) of its franchise agreements with us by providing the notice
specified in the franchise agreement to us and we will be subject to liquidated damage payments to Hyatt. In the event that any Brand
Owner or Restricted Brand Company acquires any ownership interest in us, we will be required to establish and maintain controls to
protect the confidentiality of certain Hyatt information and will provide Hyatt with a detailed description and evidence of such
controls.
y
aa
f
l
tt
Future issuances of debt securities and equity securities may adversely affect us, including the market price of our ordinary shares
and may be dilutive to existing shareholders.
In the future, we may incur debt or issue equity ranking senior to our ordinary shares. Those securities will generally have priority
upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting its
operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences
and privileges more favorable than those of our ordinary shares. Because our decision to issue debt or equity in the future will depend
on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our
future capital raising efforts. As a result, future capital raising efforts may reduce the market price of our ordinary shares and be
dilutive to existing shareholders.
Our shareholders may not have any preemptive rights in respect of future issuances of our ordinary shares.
In the event of an increase in our share capital, our ordinary shareholders are generally entitled under Dutch law to full
n
preemptive rights, unless these rights are limited or excluded either by a resolution of the General Meeting or by a resolution of our
Board (if our Board has been authorized by the General Meeting for this purpose), or where shares are issued to our employees or a
group company (i.e., certain affiliates, subsidiaries or related companies) or where shares are issued against a non-cash contribution, or
in case of an exercise of a previously acquired right to subscribe for shares. The same preemptive rights apply when rights to subscribe
for shares are granted.
Preemptive rights may be excluded by our Board on the basis of the irrevocable authorization of the General Meeting to our
Board for a period of five years from the date of this authorization with respect to the issue of our ordinary shares up to the amount of
the authorized share capital (from time to time). The General Meeting has delegated the authority to issue our ordinary shares and
grant rights to purchase our ordinary shares up to the amount of our authorized share capital (from time to time) to our Board for that
same period.
Accordingly, holders of our ordinary shares may not have any preemptive rights in connection with, and may be diluted by an
issue of our ordinary shares and it may be more difficult for a shareholder to obtain control over our General Meeting. Certain of our
shareholders outside the Netherlands, in particular, U.S. shareholders, may not be allowed to exercise preemptive rights to which they
are entitled, if any, unless a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), is declared
effective with respect to our ordinary shares issuable upon exercise of such rights or an exemption from the registration requirements
is available.
n
32
We are not obligated to and do not comply with all the best practice provisions of the Dutch Corporate Governance Code (the
“DCGC”). This could adversely affect your rights as a shareholder.
As we are incorporated under Dutch law and our ordinary shares have been listed on a government-recognized stock exchange
(i.e., the NASDAQ), we are subject to the DCGC. The DCGC contains both principles and best practice provisions for our Board,
shareholders and the General Meeting, financial reporting, auditors, disclosure compliance and enforcement standards.
The DCGC is based on a “comply or explain” principle. Accordingly, we are required to disclose in our annual management
report publicly filed in the Netherlands, whether or not we are complying with the various provisions of the DCGC. If we do not
comply with one or more of those provisions (e.g., because of a conflicting NASDAQ requirement or U.S. market practice), we are
required to explain the reasons for such non-compliance in our annual management report.
We acknowledge the importance of good corporate governance. However, we do not comply with all the provisions of the DCGC,
to a large extent because such provisions conflict with or are inconsistent with the corporate governance rules of the NASDAQ and
U.S. securities laws that apply to us, or because we believe such provisions do not reflect customary practices of global companies
listed on the NASDAQ. This could adversely affect your rights as a shareholder and you may not have the same level of protection as
a shareholder in a Dutch company that fully complies with the DCGC.
a
a
If, based on Mexican law, the accounting value of our ordinary shares is derived more than 50% from property in Mexico, it could ll
result in the imposition of tax on a selling shareholder who is not eligible to claim benefits under the income tax treaty between
Mexico and the United States or under any other favorable income tax treaty with Mexico.
According to article 161 of the Income Tax Law of Mexico, the transfer by a nonresident of Mexico of shares in an entity where
the accounting value of the transferred shares is derived, directly or indirectly, from more than 50% from immovable property located
in Mexico could be subject to Mexican income tax. The applicable Mexican law does not provide for the method to be followed in
making this calculation. The income tax rate in Mexico for the disposal of shares by nonresidents is currently either 25% of the gross
sale proceeds or, if certain conditions are met, 35% of the net gain. Withholding of 25% of gross sale proceeds is required of the buyer
only if the latter is a Mexican resident. A Mexican nonresident subject to tax under article 161 may be eligible to claim exemption
from taxation or a reduced tax rate under an applicable income tax treaty with Mexico, such as the income tax treaty between Mexico
and the United States. A determination of whether the accounting value of our ordinary shares is derived, directly or indirectly, more
than 50% from immovable property located in Mexico is subject to interpretations of the applicable law and will be affected by
various factors with regard to us that may change over time. If, at the time of a transfer of our ordinary shares, the accounting value of
our ordinary shares is derived, directly or indirectly, from more than 50% from immovable property located in Mexico and article 161
were applied to such transfer, it could result in the imposition of the above-mentioned tax on a selling shareholder who is not eligible
to claim benefits under the income tax treaty between Mexico and the United States or under any other favorable income tax treaty aa
with Mexico.
t
Item 1B. Unresolved Staff Comments.
None.
33
Item 2. Properties.
As of December 31, 2019, the following table presents an overview of our resorts and is organized by our four geographic
business segments: the Yucatán Peninsula, the Pacific Coast, the Dominican Republic and Jamaica.
Location
Brand and Type
Operator
Year Built;
Significant
Renovations
Rooms
Cancún, Mexico
Hyatt Ziva (all ages)
Cancún, Mexico
Cancún, Mexico
Playa del Carmen,
Mexico
Playa del Carmen,
Mexico
Riviera Maya, Mexico
Hyatt Zilara
(adults-only)
Panama Jack (all ages)
Hilton (adults-only)
Panama Jack (all ages)
Secrets (adults-only)
Dreams Puerto Aventuras
Riviera Maya, Mexico
Dreams (all ages)
Pacific Coast
Hyatt Ziva Los Cabos
Cabo San Lucas, Mexico
Hyatt Ziva (all ages)
Hyatt Ziva Puerto Vallarta
Puerto Vallarta, Mexico
Hyatt Ziva (all ages)
Name of Resort
Owned Resorts
Yucatán Peninsula
Hyatt Ziva Cancún
Hyatt Zilara Cancún
Panama Jack Resorts Cancún
Hilton Playa del Carmen All-Inclusive
Resort(1)
Panama Jack Resorts Playa del Carmen
Secrets Capri
Dominican Republic
Hilton La Romana All-Inclusive Resort(2)
Hilton La Romana All-Inclusive Resort(2)
Dreams Palm Beach
Dreams Punta Cana
Hyatt Ziva Cap Cana
Hyatt Zilara Cap Cana
Jamaica
Hyatt Ziva Rose Hall
Hyatt Zilara Rose Hall
La Romana,
Dominican Republic
La Romana,
Dominican Republic
Punta Cana, Dominican
Republic
Punta Cana, Dominican
Republic
Cap Cana, Dominican
Republic
Cap Cana, Dominican
Republic
Hilton (adults-only)
Hilton (all ages)
Dreams (all ages)
AMResorts
1994; 2008
Dreams (all ages)
AMResorts
Hyatt Ziva (all ages)
Playa
Hyatt Zilara (adults-only)
Playa
2004
2019
2019
Playa
Playa
Playa
Playa
Playa
AMResorts
AMResorts
Playa
Playa
Playa(2)
Playa(2)
1975; 1980; 1986;
2002; 2015
2006; 2009; 2013;
2017
1985; 2009; 2017
2002; 2009; 2019
1996; 2006; 2012;
2017
2003
1991; 2009
2007; 2009; 2015
1969; 1990; 2002;
2009; 2014; 2017
1997; 2008; 2019
1997; 2008; 2019
Montego Bay, Jamaica
Hyatt Ziva (all ages)
Montego Bay, Jamaica
Hyatt Zilara (adults-only)
Hilton Rose Hall Resort & Spa
Montego Bay, Jamaica
Hilton (all ages)
Jewel Runaway Bay Beach Resort &
Waterpark
Runaway Bay, Jamaica
Jewel (all ages)
Jewel Dunn’s River Beach Resort & Spa
Ocho Rios, Jamaica
Jewel (adults-only)
Jewel Paradise Cove Beach Resort & Spa
Jewel Grande Montego Bay Resort & Spa(3)
Runaway Bay, Jamaica
Jewel (adults-only)
Montego Bay, Jamaica
Jewel (all ages)
Total Rooms Owned
Managed Resorts
g
Sanctuary Cap Cana(4)
Punta Cana, Dominican
Republic
Sanctuary (adults-only)
Jewel Grande Montego Bay Resort & Spa(3)
Montego Bay, Jamaica
Jewel (condo-hotel)
Total Rooms Operated
p
Total Rooms Owned and Operated
p
Playa
Playa
Playa
Playa
Playa
Playa
Playa
Playa
Playa
2000; 2014; 2017
2000; 2014; 2017
1974; 2008; 2017
1960; 1961; 1965;
2007; 2012
1957; 1970; 1980;
2010
2013
2016; 2017
2008; 2015; 2018
2016; 2017
(1) Effective November 20, 2018, this resort was rebranded into Hilton all-inclusive resorts. Renovations were completed in 2019.
(2) Pursuant to an agreement with Hilton, we rebranded these resorts as Hilton all-inclusive resorts in November 2018. The resorts are still owned and operated by Playa.
(3) We acquired an 88-unit tower and spa as part of the business combination with Sagicor. Additionally, we manage the majority of the units within the remaining two
condo-hotel towers owned by Sagicor that comprise the Jewel Grande Montego Bay Resort & Spa.
(4) Owned by a third party.
34
547
310
458
524
287
291
305
591
335
356
418
500
620
375
375
276
344
495
268
250
225
88
8,238
323
129
452
8,690
Item 3. Legal Proceedings.
In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we believe are
material or would be expected to have, individually or in the aggregate, a material adverse effect on our financial condition, cash flows
or results of operations. The outcome of claims, lawsuits and legal proceedings brought against us, however, is subject to significant
uncertainties. Refer to Note 8 to our financial statements included in “Item 8. Financial Statements and Supplementary Data” of this
Form 10-K for a more detailed description of such proceedings and contingencies.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our ordinary shares have been traded on NASDAQ under the symbol “PLYA” since March 13, 2017.
Shareholder Information
As of February 21, 2020, we had 129,173,961 ordinary shares outstanding that were held by approximately 37 shareholders
of record, which does not include Depository Trust Company participants, beneficial owners holding shares through nominee
names or our employees holding restricted shares granted pursuant to our 2017 Omnibus Incentive Plan that have not vested.
Dividend Policy
We have never paid cash dividends on our ordinary shares and we do not anticipate paying cash dividends in the foreseeable
future. In addition, payments of dividends are restricted by our Senior Secured Credit Facility. We currently intend to retain any
earnings for future operations and expansion. Any future determination to pay dividends will be at the discretion of shareholders
at a General Meeting, subject to a proposal from our Board, and will depend on our actual and projected financial condition,
liquidity and results of operations, capital requirements, prohibitions and other restrictions contained in current or future
financing instruments and applicable law, and such other factors as our Board deems relevant.
Securities Authorized for Issuance Under Equity Compensation Plan
The following table sets forth information regarding securities authorized for issuance under our equity compensation plan,
our 2017 Omnibus Incentive Plan, as of December 31, 2019. See Note 12 to the accompanying Consolidated Financial
Statements for additional information regarding our 2017 Omnibus Incentive Plan.
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
Weighted-average
exercise price of
outstanding
options, warrants
and rights
Number of
securities
remaining for
future issuance
under equity
compensation
plans
—
—
—
—
—
—
7,665,750
—
7,665,750
35
Performance Graph
The graph below compares the cumulative total return for our ordinary shares from March 13, 2017 through December 31,
2019 with the comparable cumulative return of three indices: the Dow Jones United States Travel and Leisure Index (“DOW
JONES US TRAVEL & LEISURE”), the NASDAQ Composite Index (“NASDAQ”), and the Russell 2000 Index (“RUSSELL
2000”). The graph assumes $100 invested on March 13, 2017 in our ordinary shares and the three indices presented.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Issuer Purchases of Equity Securities
The following table sets forth information regarding our purchases of our ordinary shares during the quarter ended
December 31, 2019:
October 1, 2019 to October 31, 2019
November 1, 2019 to November 30, 2019
December 1, 2019 to December 31, 2019
Total number of
shares
purchased
139,649
184,119
118,535
Total number of
shares purchased as
part of publicly
announced
program (2)
139,649
184,119
118,535
Maximum
approximate dollar
value of shares that
may yet be
purchased under
the program
($ in thousands) (2)
88,298
$
86,923
85,992
85,992
Average price
paid per share (1)
7.74
$
7.47
7.85
7.66
Total
442,303
$
442,303
$
_______
(1) The average price paid per share and maximum approximate dollar value of shares disclosed above include broker commissions.
(2) In December 2018, our Board of Directors authorized the repurchase of up to $100.0 million of its outstanding ordinary shares as market
conditions and our liquidity warrant. The repurchase program is subject to certain limitations under Dutch law, including existing repurchase
authorization granted by our shareholders. Repurchases may be made from time to time in the open market, in privately negotiated transactions or
by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or
suspended from time to time without prior notice.
36
Item 6. Selected Financial Data.
The following table includes selected historical financial information which has been derived from the audited Consolidated
Financial Statements. The following information should be read in conjunction with “Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” and all
of the financial statements and notes included elsewhere in this Annual Report on Form 10-K.
Consolidated Statement of Operations Data ($ in thousands, except per share data):
Total revenue
Operating income
Net (loss) income
Net (loss) income available to ordinary shareholders
(Losses) earnings per share - Basic (2)
(Losses) earnings per share - Diluted (2)
Year Ended December 31,
2019
2018 (1)
2017
2016
2015
$
$
$
$
$
$
636,477
25,710
$
$
(4,357) $
(4,357) $
(0.03) $
(0.03) $
617,013
90,597
18,977
18,977
0.16
0.16
$
$
$
$
$
$
559,545
88,669
$
$
(241) $
521,491
84,631
20,216
$
$
$
408,345
58,692
9,711
(9,042) $
(23,460) $
(29,946)
(0.09) $
(0.09) $
(0.46) $
(0.46) $
(0.59)
(0.59)
________
(1) Includes the results of operations of the Sagicor Assets (as defined in Note 4 of the Consolidated Financial Statements included herein) acquired in the
business combination with certain companies affiliated with Sagicor Group Jamaica Limited.
(2) As a result of the Pace Business Combination further described in Note 4 of the Consolidated Financial Statements included herein, the number of
ordinary shares attributable to our Predecessor shareholders is reflected retroactively to the earliest period presented. Accordingly, the weighted-average
number of shares outstanding was adjusted for the retrospective application of the recapitalization for all periods prior to 2017.
Consolidated Balance Sheet Data ($ in thousands):
Property and equipment, net
Cash and cash equivalents
Total assets
Total debt
Total liabilities
Cumulative redeemable preferred shares
Total equity (excluding preferred shares)
________
(1) Includes the Sagicor Assets.
Year Ended December 31,
2019
$ 1,929,914
2018 (1)
$ 1,808,412
2017
2016
2015
$ 1,466,326
$ 1,400,317
$ 1,432,855
$
20,931
$
116,353
$
117,229
$
33,512
$
35,460
$ 2,196,964
$ 2,135,158
$ 1,737,823
$ 1,590,890
$ 1,644,024
$ 1,040,658
$
989,387
$
898,215
$
828,317
$
828,438
$ 1,387,313
$ 1,295,317
$ 1,138,274
$ 1,074,336
$ 1,098,034
$
$
— $
— $
— $
345,951
809,651
$
839,841
$
599,549
$
170,603
$
$
352,275
193,715
Consolidated Statement of Cash Flow Data ($ in thousands):
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Capital expenditures
________
(1) Includes the results of operations of the Sagicor Assets.
Year Ended December 31,
2019
2018 (1)
2017
2016
2015
$
$
$
$
72,188
$
114,430
$
64,191
$
76,181
$
30,799
(203,816) $
(204,586) $
(109,829) $
(19,046) $
(104,147)
36,206
$
89,280
$
119,704
$
(55,815) $
69,662
(208,970) $
(110,851) $
(106,230) $
(19,262) $
(119,704)
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Any reference in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to our financial
condition and results of operations prior to the Pace Business Combination on March 11, 2017 refer to the financial condition and
results of operations of our Predecessor, Playa Hotels & Resorts B.V.
37
This section of this Annual Report on Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons
between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this
Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Overview
Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation
destinations in Mexico and the Caribbean. As of December 31, 2019, Playa owned and/or managed a total portfolio consisting of 23
resorts (8,690 rooms) located in Mexico, Jamaica, and the Dominican Republic. In Mexico, Playa owns and manages Hyatt Zilara
Cancún, Hyatt Ziva Cancún, Panama Jack Resorts Cancún, Panama Jack Resorts Playa del Carmen, Hilton Playa del Carmen All-
Inclusive Resort, Hyatt Ziva Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns and manages Hyatt Zilara Rose Hall,
Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Dunn’s River Beach Resort & Spa, Jewel Grande Montego Bay Resort &
Spa, Jewel Runaway Bay Beach Resort & Waterpark and Jewel Paradise Cove Beach Resort & Spa. In the Dominican Republic, Playa
owns and manages the Hilton La Romana All-Inclusive Family Resort, the Hilton La Romana All-Inclusive Adult Resort, Hyatt Zilara
Cap Cana and Hyatt Ziva Cap Cana. Playa also owns four resorts in Mexico and the Dominican Republic that are managed by a third
party and Playa manages the Sanctuary Cap Cana in the Dominican Republic. We believe that the resorts we own and manage are
among the finest all-inclusive resorts in the markets they serve. All of our resorts offer guests luxury accommodations, noteworthy
architecture, extensive on-site activities and multiple food and beverage options. Our guests also have the opportunity to purchase
upgrades from us such as premium rooms, dining experiences, wines and spirits and spa packages.
For the year ended December 31, 2019, we generated a net loss of $4.4 million, total revenue of $636.5 million, Net Package
RevPAR of $198.28 and Adjusted EBITDA of $150.7 million. For the year ended December 31, 2018, we generated net income of
$19.0 million, total revenue of $617.0 million, Net Package RevPAR of $205.83 and Adjusted EBITDA of $179.0 million. For
discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of
Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.
38
Results of Operations
Years Ended December 31, 2019 and 2018
The following table summarizes our results of operations on a consolidated basis for the years ended December 31, 2019 and
2018 ($ in thousands):
Revenue
Package
Non-package
Management fees
Cost reimbursements
Total revenue
Direct and selling, general and administrative expenses
Direct
Selling, general and administrative
Pre-opening
Depreciation and amortization
Reimbursed costs
Impairment loss
Gain on insurance proceeds
Direct and selling, general and administrative expenses
Direct and selling, general and administrative expenses
Operating income
Interest expense
Interest expense
Other (expense) income
Net (loss) income before tax
Net (loss) income before tax
Income tax benefit (provision)
Net (loss) income
Net (loss) income
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
$
538,088
$
532,090
$
90,157
1,820
6,412
636,477
369,050
125,788
1,452
101,897
6,412
6,168
—
610,767
25,710
(44,087)
(3,200)
(21,577)
17,220
83,190
755
978
5,998
6,967
1,065
5,434
617,013
19,464
340,080
115,975
321
73,278
978
—
(4,216)
526,416
90,597
(62,243)
2,822
31,176
(12,199)
28,970
9,813
1,131
28,619
5,434
6,168
4,216
84,351
(64,887)
18,156
(6,022)
(52,753)
29,419
1.1 %
8.4 %
141.1 %
555.6 %
3.2 %
8.5 %
8.5 %
352.3 %
39.1 %
555.6 %
100.0 %
(100.0 )%
16.0 %
(71.6 )%
(29.2 )%
(213.4 )%
(169.2 )%
(241.2 )%
(123.0)%
$
(4,357) $
18,977
$
(23,334)
The tables below set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package
Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA
Margin. For a description of these operating metrics and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating
Performance,” below.
Our comparable portfolio for the year ended December 31, 2019 excludes the following resorts: Hilton La Romana All-Inclusive
Resort and Hilton Playa del Carmen All-Inclusive Resort, which were under renovation in 2019, Hilton Rose Hall Resort & Spa, Jewel
Runaway Bay Beach Resort & Waterpark, Jewel Dunn’s River Beach Resort & Spa, Jewel Paradise Cove Beach Resort & Spa and
Jewel Grande Montego Bay Resort & Spa, which were acquired on June 1, 2018, and Hyatt Ziva and Hyatt Zilara Cap Cana, a
ground-up development opened during November 2019.
39
Total Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Management Fee Revenue
Total Net Revenue
Adjusted EBITDA
Adjusted EBITDA Margin
Comparable Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Management Fee Revenue
Total Net Revenue
Adjusted EBITDA
Adjusted EBITDA Margin
$
$
$
$
$
$
$
$
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
81.8%
(4.5)pts
77.3%
256.53
198.28
$
$
251.76
205.83
($ in thousands)
517,592
$
87,779
1,820
607,191
514,810
83,044
755
598,609
$
$
$
4.77
(7.55)
2,782
4,735
1,065
8,582
150,694
$
179,031
$
(28,337)
24.8%
29.9%
(5.1)pts
(5.5)%
1.9 %
(3.7)%
0.5 %
5.7 %
141.1 %
1.4 %
(15.8)%
(17.1)%
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
($ in thousands)
79.3%
264.63
209.84
$
$
372,458
$
62,459
1,820
436,737
82.0%
(2.7)pts
264.71
217.12
385,224
63,419
755
$
$
$
(0.08)
(7.28)
(12,766)
(960)
1,065
449,398
(12,661)
112,436
$
128,790
$
(16,354)
25.7%
28.7%
(3.0)pts
(3.3)%
— %
(3.4)%
(3.3)%
(1.5)%
141.1 %
(2.8)%
(12.7)%
(10.5)%
Total Revenue and Total Net Revenue
Our total revenue for the year ended December 31, 2019 increased $19.5 million, or 3.2%, compared to the year ended December
31, 2018. Our Total Net Revenue for the year ended December 31, 2019 increased $8.6 million, or 1.4%, compared to the year ended
December 31, 2018. This increase was driven primarily by an increase in Net Package Revenue of $2.8 million, or 0.5%, and an
increase in Net Non-package Revenue of $4.7 million, or 5.7%. Our non-comparable portfolio, which accounted for a $21.2 million
increase over comparable periods, was the primary driver for the increase in Total Net Revenue.
40
The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue, Management Fee
Revenue and Total Net Revenue to total revenue for the years ended December 31, 2019 and 2018 ($ in thousands):
Net Package Revenue
Comparable Net Package Revenue
Non-comparable Net Package Revenue
Net Package Revenue
Net Non-package Revenue
Comparable Net Non-package Revenue
Non-comparable Net Non-package Revenue
Net Non-package Revenue
Management Fee Revenue
Comparable Management Fee Revenue
Non-comparable Management Fee Revenue
Management Fee Revenue
Total Net Revenue
Comparable Total Net Revenue
Non-comparable Total Net Revenue
Total Net Revenue
Compulsory tips
Cost Reimbursements
Total revenue
Direct Expenses
Year Ended December 31,
Increase/Decrease
2019
2018
Change
% Change
$
372,458
$
385,224
$
(12,766)
145,134
517,592
129,586
514,810
15,548
2,782
62,459
25,320
87,779
1,820
—
1,820
436,737
170,454
607,191
22,874
6,412
63,419
19,625
83,044
755
—
755
449,398
149,211
598,609
17,426
978
(960)
5,695
4,735
1,065
—
1,065
(12,661)
21,243
8,582
5,448
5,434
$
636,477
$
617,013
$
19,464
(3.3)%
12.0 %
0.5 %
(1.5)%
29.0 %
5.7 %
141.1 %
— %
141.1 %
(2.8)%
14.2 %
1.4 %
31.3 %
555.6 %
3.2 %
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the years ended December 31, 2019
and 2018 ($ in thousands):
Direct expenses
Less: compulsory tips
Net Direct Expenses
Year Ended December 31,
Increase/Decrease
2019
2018
Change
% Change
$
$
369,050
$
340,080
$
22,874
17,426
346,176
$
322,654
$
28,970
5,448
23,522
8.5 %
31.3 %
7.3%
Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing
operational expenses. Our Net Direct Expenses for the year ended December 31, 2019 were $346.2 million, or 57.0%, of Total Net
Revenue. Our Net Direct Expenses for the year ended December 31, 2018 were $322.7 million, or 53.9%, of Total Net Revenue.
Net Direct Expenses for the year ended December 31, 2019 increased $23.5 million, or 7.3%, compared to the year ended
December 31, 2018. Net Direct Expenses increased primarily due to the acquisition of the Sagicor Assets, which accounted for $31.7
million, and the opening of the Hyatt Ziva and Hyatt Zilara Cap Cana, which accounted for $4.9 million of the change. This increase
was partially offset by a decrease of $12.1 million due to our development projects under renovation at Hilton La Romana All-
Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort. Direct operating expenses fluctuate based on various factors,
including changes in occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes.
41
Net Direct Expenses consists of the following ($ in thousands):
Total Portfolio
Food and beverages
Salary and wages
Repairs and maintenance
Utilities and sewerage
Licenses and property taxes
Incentive and management fees
Franchise/license fees
Transportation and travel expenses
Laundry and cleaning expenses
Property and equipment rental expense
Entertainment expenses and decoration
Office supplies
Other operational expenses
Total Net Direct Expenses
Comparable Portfolio
Food and beverages
Resort salary and wages
Repairs and maintenance
Utility expenses
Licenses and property taxes
Incentive and management fees
Franchise/license fees
Transportation and travel expenses
Laundry and cleaning expenses
Property and equipment rental expense
Entertainment expenses
Office supplies
Other operational expenses
Total Net Direct Expenses
Year Ended December 31,
Increase/Decrease
2019
2018
Change
% Change
$
84,564
$
79,445
$
130,882
117,209
17,136
37,791
3,010
6,366
21,881
4,825
4,753
3,305
7,684
1,511
22,468
15,826
35,344
3,118
10,848
18,839
4,464
4,322
5,169
7,336
2,346
18,388
5,119
13,673
1,310
2,447
(108)
(4,482)
3,042
361
431
(1,864)
348
(835)
4,080
$
346,176
$
322,654
$
23,522
6.4 %
11.7 %
8.3 %
6.9 %
(3.5)%
(41.3)%
16.1 %
8.1 %
10.0 %
(36.1)%
4.7 %
(35.6)%
22.2 %
7.3 %
Year Ended December 31,
Increase/Decrease
2019
2018
Change
% Change
$
54,921
$
56,291
$
102,927
11,105
24,583
1,822
6,463
17,421
3,471
2,481
2,516
6,231
1,183
99,352
11,027
24,257
1,729
7,927
16,298
3,190
2,620
4,244
5,981
1,967
12,398
13,567
$
247,522
$
248,450
$
(1,370)
3,575
78
326
93
(1,464)
1,123
281
(139)
(1,728)
250
(784)
(1,169)
(928)
(2.4 )%
3.6 %
0.7 %
1.3 %
5.4 %
(18.5 )%
6.9 %
8.8 %
(5.3 )%
(40.7 )%
4.2 %
(39.9 )%
(8.6 )%
(0.4)%
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the year ended December 31, 2019 increased $9.8 million, or 8.5%,
compared to the year ended December 31, 2018. This increase was primarily driven by the acquisition of the Sagicor Assets, which
accounted for a $7.8 million increase, and a $2.7 million increase in share based compensation.
42
Depreciation and Amortization Expense
Our depreciation and amortization expense for the year ended December 31, 2019 increased $28.6 million, or 39.1%, compared to
the year ended December 31, 2018. This increase was primarily due to the acquisition of the Sagicor Assets and the opening of Hyatt
Ziva and Hyatt Zilara Cap Cana, which together accounted for $9.3 million of the increase, and an $18.8 million increase in
depreciation from renovations at the Hilton La Romana All-Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort, which
included accelerated depreciation on asset disposals.
Impairment Loss
We recorded an impairment loss of $6.2 million for the year ended December 31, 2019 due to the loss recognized on the goodwill
of our Panama Jack Playa del Carmen reporting unit during the fourth quarter of 2019. During the year ended December 31, 2018, we
did not record any impairment loss.
Interest Expense
Our interest expense for the year ended December 31, 2019 decreased $18.2 million, or 29.2%, as compared to the year ended
December 31, 2018. The decrease in interest expense was primarily driven by a $13.2 million decrease due to the change in
accounting for our interest rate swaps. In March 2019, we elected to adopt hedge accounting and designate our interest rate swaps as
cash flow hedges. After the adoption of hedge accounting, we recorded the change in fair value of our interest rate swaps through
other comprehensive (loss) income. Prior to our adoption of hedge accounting, the change in fair value of our interest rate swaps was
recognized through interest expense. Additionally, we had a $7.9 million reduction in interest expense due to capitalized interest from
Hilton La Romana All-Inclusive Resort, Hilton Playa del Carmen All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana
renovation projects. The decrease was partially offset by an additional $2.3 million in interest expense related to the issuance of the
$100.0 million add-on to our Term Loan in 2018 to fund the business combination with Sagicor and $0.5 million in interest paid on
our Revolving Credit Facility.
aa
aa
Cash interest paid, excluding the effects of capitalized interest, decreased $2.5 million for the year ended December 31, 2019 as
compared to the year ended December 31, 2018. Cash interest paid on our Term Loan decreased $4.1 million over the comparable
period due to the interest paid in the first half of 2018 included cash interest for November and December of 2017. Prior to the Second
Amendment of our Senior Secured Credit Facility, interest was paid quarterly. This decrease was partially offset by an increase in
interest paid of $1.1 million due primarily to the issuance of the $100.0 million add-on to our Term Loan to fund the business
combination with Sagicor and $0.5 million increase in interest paid on our Revolving Credit Facility
Income Tax Benefit
The income tax benefit for the year ended December 31, 2019 was $17.2 million, an increase of $29.4 million compared to the
year ended December 31, 2018, during which period we reported an income tax provision of $12.2 million. The increased income tax
benefit in the year ended December 31, 2019 was driven primarily by a $13.1 million due to decreased book income, a $17.7 million
benefit related to the measurement of the Dutch deferred tax assets and liabilities pursuant to the Dutch tax rate change and a $10.9
million tax benefit related to the decrease in our valuation allowance. The increase in the income tax benefit was partially offset by an
increased tax expense of $6.2 million associated with other book tax difference, $2.8 million from the rate-favorable jurisdictions and
$2.5 million associated with foreign exchange rate fluctuations.
a
ff
Key Indicators of Financial and Operating Performance
We use a variety of financial and other information to monitor the financial and operating performance of our business. Some of
this is financial information prepared in accordance with U.S. GAAP, while other information, though financial in nature, is not
prepared in accordance with U.S. GAAP. For reconciliations of non-U.S. GAAP financial measures to the most comparable U.S.
GAAP financial measure, see “Non-U.S. GAAP Financial Measures.” Our management also uses other information that is not
financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to
evaluate the financial and operating performance of our portfolio. Our management uses this information to measure the performance
of our segments and consolidated portfolio. We use this information for planning and monitoring our business, as well as in
determining management and employee compensation. These key indicators include:
aa
• Net Package Revenue
• Net Non-package Revenue
• Owned Net Revenue
43
• Management Fee Revenue
• Total Net Revenue
• Occupancy
• Net Package ADR
• Net Package RevPAR
• Adjusted EBITDA
• Adjusted EBITDA Margin
• Owned Resort EBITDA
• Owned Resort EBITDA Margin
• Comparable Non-U.S. GAAP Measures
Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total
Net Revenue and Net Direct Expenses
“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations, food and
beverage services, kids club and entertainment activities, net of compulsory tips paid to employees. Government mandated
compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Revenue is
recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance
deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant
services have been rendered, at which point the revenue is recognized.
nn
“Net Non-package Revenue” represents all other revenues earned from the operations of our resorts, other than Net Package
Revenue, net of compulsory tips paid to employees. Government mandated compulsory tips in the Dominican Republic are not
included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue includes revenue associated with tt
guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa
packages, which are not included in the all-inclusive package. Revenue not included in a guest’s all-inclusive package is recognized
when the goods are consumed.
d
“Owned Net Revenue” represents Net Package Revenue and Net Non-Package Revenue. Owned Net Revenue represents a key
indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and
competition. In analyzing our Owned Net Revenues, our management differentiates between Net Package Revenue and Net Non-
package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage
services and entertainment activities, in contrast to other lodging business models, which typically only include the room
accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants,
bars, activities, and shows and entertainment throughout the day.
“Management Fee Revenue” is derived from fees earned for managing hotels owned by third-parties. The fees earned are
typically composed of a base fee, which is computed as a percentage of resort revenue, and an incentive fee, which is computed as a
percentage of resort profitability. Management Fee Revenue was immaterial to our operations for the years ended December 31, 2019,
2018 and 2017, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our
business in the future as we enter into more management contracts.
“Total Net Revenue” represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue. “Cost
Reimbursements” is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance.
Cost reimbursements is derived from the reimbursement of certain costs incurred by Playa on behalf of resorts managed by Playa and
owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on operating income or net income.
“Net Direct Expenses” represents direct expenses, net of compulsory tips paid to employees.
Occupancy
“Occupancy” represents the total number of rooms sold for a period divided by the total number of rooms available during such
period. The total number of rooms available excludes any rooms considered “Out of Order” due to renovation or a temporary problem
rendering them inadequate for occupancy for an extended period of time. Occupancy is a useful measure of the utilization of a resort’s
total available capacity and can be used to gauge demand at a specific resort or group of properties during a given period. Occupancy
44
levels also enable us to optimize Net Package ADR (as defined below) by increasing or decreasing the stated rate for our all-inclusive
packages as demand for a resort increases or decreases.
Net Package ADR
“Net Package ADR” represents total Net Package Revenue for a period divided by the total number of rooms sold during such
period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the
t
guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the
all-inclusive segment of the lodging industry, and is commonly used to assess the stated rates that guests are willing to pay through
various distribution channels.
tt
Net Package RevPAR
“Net Package RevPAR” is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR
does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it
generally is considered the key performance measure in the all-inclusive segment of the lodging industry to identify trend information
with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating
performance on a consolidated basis or a regional basis, as applicable.
EBITDA, Adjusted EBITDA, Owned Resort EBITDA, Owned Resort EBITDA Margin and Adjusted EBITDA Margin
We define EBITDA, a non-U.S. GAAP financial measure, as net income (loss), determined in accordance with U.S. GAAP, for
the period presented, before interest expense, income tax and depreciation and amortization expense. We define Adjusted EBITDA, a
non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:
• Other (expense) income
•
Pre-opening expense
• Transaction expenses
•
Severance expense
• Other tax expense
• Gain on property damage insurance proceeds
•
Share-based compensation
• Loss on extinguishment of debt
• Other items which may include, but are not limited to the following: management contract termination fees; gains or
losses from legal settlements; repairs from hurricanes and tropical storms; impairment losses and Jamaica delayed opening
accrual reversals.
We include the non-service cost components of net periodic pension cost recorded within other (expense) income in the
Consolidated Statements of Operations in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.
“Owned Resort EBITDA” represents Adjusted EBITDA before corporate expenses and Management Fee Revenue.
“Owned Resort EBITDA Margin” represents Owned Resort EBITDA as a percentage of Owned Net Revenue.
“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue.
Non-U.S. GAAP Measures
Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Total Net Revenue, Net Package ADR, Net Package
RevPAR and Net Direct Expenses are all useful to investors as they more accurately reflect our operating results by excluding
compulsory tips. These tips have a margin of zero and do not represent our operating results.
We also believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA
assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating
results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which
are the principal driver of changes in other expense), and expenses related to capital raising, strategic initiatives and other corporate
r
45
initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative
of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that
occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example,
revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding
these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time. We WW
believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find
Adjusted EBITDA useful.
ff
The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance
indicator by our board of directors (our “Board”) and management. In addition, the compensation committee of our Board determines
the annual variable compensation for certain members of our management based, in part, on consolidated Adjusted EBITDA. We
believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and
management to assess our performance and may (subject to the limitations described below) enable investors to compare the
performance of our portfolio to our competitors.
Our non-U.S. GAAP financial measures are not substitutes for revenue, net income or any other measure determined in
accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For
example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use
Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance
of those companies to our performance. Because of these limitations, our non-U.S. GAAP financial measures should not be considered
as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and
investors should carefully consider our U.S. GAAP results presented.
For a reconciliation of EBITDA, Adjusted EBITDA and Owned Resort EBITDA to net (loss) income as computed under U.S.
GAAP, see “Non-U.S. GAAP Financial Measures.”
Comparable Non-U.S. GAAP Measures
We believe that presenting Adjusted EBITDA, Total Net Revenue, Net Package Revenue, Net Non-package Revenue and Net
Direct Expenses on a comparable basis is useful to investors because these measures include only the results of resorts owned and in
operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of
resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe
these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate Comparable
Adjusted EBITDA, Comparable Total Net Revenue, Comparable Net Package Revenue and Comparable Net Non-package Revenue as
the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were
not owned or in operation during some or all of the relevant reporting period.
Our comparable portfolio for the year ended December 31, 2019 excludes the following resorts: Hilton La Romana All-Inclusive
Resort and Hilton Playa del Carmen All-Inclusive Resort, which were under renovation, Hilton Rose Hall Resort & Spa, Jewel
Runaway Bay Beach Resort & Waterpark, Jewel Dunn’s River Beach Resort & Spa, Jewel Paradise Cove Beach Resort & Spa and
Jewel Grande Montego Bay Resort & Spa, which were acquired on June 1, 2018, and Hyatt Ziva and Hyatt Zilara Cap Cana, a
ground-up development opened during November 2019.
A reconciliation of net income as computed under U.S. GAAP to comparable Adjusted EBITDA is presented in “Non-U.S. GAAP
Financial Measures,” below. For a reconciliation of Comparable Net Package Revenue, Comparable Net Non-package Revenue,
Comparable Management Fee Revenue and Comparable Total Net Revenue to total revenue as computed under U.S. GAAP, see
“Results of Operations.”
46
Segment Results
Years Ended December 31, 2019 and 2018
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort
EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for the years ended
December 31, 2019 and 2018 ($ in thousands):
Owned Net Revenue
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Segment Owned Net Revenue
Other
Management Fee Revenue
Total Net Revenue
Owned Resort EBITDA
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Segment Owned Resort EBITDA
Other corporate
Management Fee Revenue
Total Adjusted EBITDA
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
$
235,788
$
259,393
$
(23,605)
85,219
90,783
193,558
605,348
23
1,820
86,317
125,137
126,702
597,549
305
755
$
607,191
$
598,609
$
(1,098)
(34,354)
66,856
7,799
(282)
1,065
8,582
(9.1)%
(1.3)%
(27.5)%
52.8 %
1.3 %
(92.5)%
141.1 %
1.4 %
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
$
82,534
$
107,884
$
(25,350)
31,618
16,596
55,175
185,923
(37,049)
1,820
31,038
41,228
32,912
213,062
(34,786)
755
580
(24,632)
22,263
(27,139)
(2,263)
1,065
$
150,694
$
179,031
$
(28,337)
(23.5 )%
1.9 %
(59.7 )%
67.6 %
(12.7)%
6.5 %
141.1 %
(15.8)%
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income,
respectively, each as computed under U.S. GAAP, see Note 20 to our Consolidated Financial Statements.
47
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package
Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our
Yucatán Peninsula segment for the years ended December 31, 2019 and 2018 for the total segment portfolio and comparable segment
portfolio:
Total Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
Comparable Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
$
$
$
$
$
$
$
$
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
86.2%
(1.3)pts
84.9%
256.81
218.14
$
$
269.49
232.35
($ in thousands)
205,813
$
29,975
235,788
229,660
29,733
259,393
$
$
$
82,534
$
107,884
$
(12.68)
(14.21)
(23,847)
242
(23,605)
(25,350)
35.0%
41.6%
(6.6)pts
(1.5)%
(4.7)%
(6.1)%
(10.4)%
0.8 %
(9.1)%
(23.5)%
(15.9)%
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
86.5%
(1.0)pts
85.5%
256.94
219.58
$
$
267.50
231.43
($ in thousands)
176,083
$
25,193
201,276
185,416
24,339
209,755
$
$
$
(10.56)
(11.85)
(9,333)
854
(8,479)
72,897
$
84,395
$
(11,498)
36.2%
40.2%
(4.0)pts
(1.2)%
(3.9)%
(5.1)%
(5.0)%
3.5 %
(4.0)%
(13.6)%
(10.0)%
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the year ended December 31, 2019
decreased $8.5 million, or 4.0%, compared to the year ended December 31, 2018. This decrease was primarily driven by a decrease in
Occupancy of 100 basis points and a decrease in Net Package ADR of 3.9%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the year ended December 31, 2019
decreased $11.5 million, or 13.6%, compared to the year ended December 31, 2018. The decrease in Comparable Owned Resort
EBITDA can be attributed to all properties within this segment, primarily due to the decrease in Comparable Owned Net Revenue as
described above. In addition to the revenue decline, all properties within this segment have been affected by increased insurance
premiums and energy costs year over year which contributed to a $0.7 million decrease in Comparable Owned Resort EBITDA
compared to the year ended December 31, 2018.
48
Pacific Coast
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package
Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our
Pacific Coast segment for the years ended December 31, 2019 and 2018 for the total segment portfolio:
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
$
$
$
$
76.5%
(0.1)pts
76.4%
284.99
217.84
$
$
280.43
214.53
($ in thousands)
73,627
11,592
85,219
31,618
$
$
72,510
13,807
86,317
31,038
37.1%
36.0%
$
$
$
$
4.56
3.31
1,117
(2,215)
(1,098)
580
1.1pts
(0.1)%
1.6 %
1.5 %
1.5 %
(16.0)%
(1.3)%
1.9 %
3.1 %
Segment Owned Net Revenue. Our Owned Net Revenue for the year ended December 31, 2019 decreased $1.1 million, or 1.3%,
compared to the year ended December 31, 2018. This decrease was primarily due to a 10 basis points decrease in Occupancy and a
$2.2 million decrease in Net Non-package Revenue, which was partially offset by an increase in Net Package ADR of 1.6%.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the year ended December 31, 2019 increased $0.6 million, or
1.9%, compared to the year ended December 31, 2018. The increase in Owned Resort EBITDA is attributed to continuous cost
management improvements within the segment during the year ended December 31, 2019.
Dominican Republic
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package
Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our
Dominican Republic segment for the years ended December 31, 2019 and 2018 for the total segment portfolio and comparable
segment portfolio:
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
($ in thousands)
64.1%
190.64
122.26
$
$
75,716
15,067
90,783
16,596
$
$
82.2%
(18.1)pts
186.36
153.13
104,858
20,279
125,137
$
$
$
4.28
(30.87)
(29,142)
(5,212)
(34,354)
41,228
$
(24,632)
18.3%
32.9%
(14.6)pts
(22.0)%
2.3 %
(20.2)%
(27.8)%
(25.7)%
(27.5)%
(59.7)%
(44.4)%
Total Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
$
$
$
$
49
Comparable Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
$
$
$
$
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
82.2%
(10.0)pts
72.2%
185.87
134.21
$
$
188.56
155.00
($ in thousands)
54,867
11,741
66,608
17,773
$
$
63,366
13,035
76,401
24,909
$
$
$
$
(2.69)
(20.79)
(8,499)
(1,294)
(9,793)
(7,136)
26.7%
32.6%
(5.9)pts
(12.2)%
(1.4)%
(13.4)%
(13.4)%
(9.9)%
(12.8)%
(28.6)%
(18.1)%
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the year ended December 31, 2019
decreased $9.8 million, or 12.8%, compared to the year ended December 31, 2018. This decrease was driven by a decrease in
Occupancy of 1,000 basis points and a decrease in Comparable Net Package ADR of 1.4%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the year ended December 31, 2019
decreased $7.1 million, or 28.6%, compared to the year ended December 31, 2018. This decrease was due to the performance of all
properties in this segment, but was also impacted by Dreams Punta Cana due to a non-recurring gain from business interruption
insurance proceeds of $1.5 million during the year ended December 31, 2018. The negative press regarding the Dominican Republic,
and corresponding near-term business disruption, had a negative impact on results in this segment for the year ended December 31,
2019.
Jamaica
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package
Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our
Jamaica segment for the years ended December 31, 2019 and 2018 for the total segment portfolio and comparable segment portfolio
and comparable segment portfolio:
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
75.8%
3.2pts
79.0%
289.70
228.89
$
$
290.17
219.97
$
$
$
($ in thousands)
162,436
$
31,122
193,558
107,782
18,920
126,702
(0.47)
8.92
54,654
12,202
66,856
22,263
55,175
$
32,912
$
28.5%
26.0%
2.5pts
4.2 %
(0.2)%
4.1 %
50.7 %
64.5 %
52.8 %
67.6 %
9.6 %
Total Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
$
$
$
$
50
Comparable Portfolio
Occupancy
Net Package ADR
Net Package RevPAR
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Owned Resort EBITDA
Owned Resort EBITDA Margin
$
$
$
$
Year Ended December 31,
Increase / Decrease
2019
2018
Change
% Change
74.0%
0.5pts
74.5%
402.54
299.96
$
$
381.67
282.51
($ in thousands)
67,881
13,910
81,791
25,376
$
$
63,932
11,933
75,865
22,479
$
$
$
$
20.87
17.45
3,949
1,977
5,926
2,897
31.0%
29.6%
1.4pts
0.7%
5.5%
6.2%
6.2%
16.6%
7.8%
12.9%
4.7%
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the year ended December 31, 2019
increased $5.9 million, or 7.8%, compared to the year ended December 31, 2018. This increase was due to the performance of Hyatt tt
Ziva and Hyatt Zilara Rose Hall, which accounted for the full $5.9 million increase in Comparable Owned Net Revenue compared to
the year ended December 31, 2018. This property continues to show positive growth after the completion of renovations in 2017.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the year ended December 31, 2019
increased $2.9 million, or 12.9%, compared to the year ended December 31, 2018.
51
Non-U.S. GAAP Financial Measures
Reconciliation of Net Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
The following is a reconciliation of our U.S. GAAP net income to EBITDA and Adjusted EBITDA for the years ended December
31, 2019, 2018 and 2017 ($ in thousands):
Net (loss) income
Net (loss) income
Interest expense
Income tax (benefit) provision
Income tax (benefit) provision
Depreciation and amortization
EBITDA
Other expense (income) (a)
Share-based compensation
Share-based compensation
Pre-opening expense
Transaction expense (b)
Severance expense (c)
Other tax expense (d)
Jamaica delayed opening accrual reversal (e)
Impairment loss (f)
Gain on property damage insurance proceeds
Loss on extinguishment of debt
Repairs from hurricanes and tropical storms
Non-service cost components of net periodic pension cost (g)
Adjusted EBITDA
Other corporate
Management Fee Revenue
Owned Resort EBITDA
Less: Non-comparable Owned Resort EBITDA (h)
Comparable Owned Resort EBITDA
Comparable Owned Resort EBITDA
Year Ended December 31,
2019
2018
2017
$
(4,357) $
18,977
$
(241)
44,087
(17,220)
101,897
124,407
3,200
8,845
1,452
6,175
515
577
—
6,168
—
—
—
(645)
62,243
12,199
73,278
166,697
(2,822)
6,116
321
9,615
333
1,633
(342)
—
(2,212)
—
—
(308)
$
$
$
150,694
$
179,031
$
37,049
(1,820)
34,786
(755)
185,923
$
213,062
$
38,259
50,241
147,664
$
162,821
$
53,661
9,051
53,131
115,602
1,078
3,765
—
21,708
442
1,778
(203)
—
—
25,120
1,807
(232)
170,865
30,757
(140)
201,482
42,319
159,163
________
(a)
(b)
Represents changes in foreign exchange rates and other miscellaneous expenses or income.
Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including the business
combination with Sagicor in 2018; the redesign and build-out of our internal controls and strategic initiatives, such as the launch of a new resort or
possible expansion into new markets.
aa
(c)
(d)
(e)
(f)
(g)
(h)
Represents expenses incurred for employee terminations.
Relates primarily to a Dominican Republic asset/revenue tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this
expense from Adjusted EBITDA because it is substantially similar to the income tax provision we eliminate from our calculation of EBITDA.
Represents a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of
Hyatt Ziva and Hyatt Zilara Rose Hall. This reversal concluded in the first quarter of 2018.
Represents the impairment loss on the goodwill of our Panama Jack Playa del Carmen reporting unit recognized during the fourth quarter of 2019.
h
Represents the non-service cost components of net periodic pension cost recorded within other expense (income) in the Consolidated Statement of
Operations. Previously, these expenses were presented within direct expense. We include these costs for the purposes of calculating Adjusted EBITDA as
they are considered part of our ongoing resort operations.
Non-comparable Owned Resort EBITDA for the year ended December 31, 2019 includes the Hilton La Romana All-Inclusive Resort, Hilton Playa del
Carmen All-Inclusive Resort, Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach Resort & Waterpark, Jewel Dunn’s River Beach Resort & Spa,
Jewel Paradise Cove Beach Resort & Spa, Jewel Grande Montego Bay Resort & Spa and Hyatt Ziva and Hyatt Zilara Cap Cana.
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico and the Caribbean generally result in the greatest
demand for our resorts between mid-December and April of each year, yielding higher occupancy levels and package rates during thistt
52
period. This seasonality in demand has resulted in predictable fluctuations in revenue, results of operations and liquidity, which are
consistently higher during the first quarter of each year than in successive quarters.
Inflation
Operators of lodging properties, in general, possess the ability to adjust room rates to reflect the effects of inflation. However,
competitive pressures may limit our ability to raise room rates to fully offset inflationary cost increases.
Liquidity and Capital Resources
Our primary short-term cash needs are paying operating expenses, maintaining our resorts, servicing of our outstanding
indebtedness, and funding any ongoing development, expansion, renovation, repositioning and rebranding projects. As of
December 31, 2019, we had $126.3 million of scheduled contractual obligations due within one year.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances
and, if necessary, short-term borrowings under our Revolving Credit Facility which permits borrowings of up to $100.0 million and
which matures on April 27, 2022. We had cash and cash equivalents of $20.9 million as of December 31, 2019, compared to $116.4
million as of December 31, 2018. We plan to fund our development projects with the cash we have on hand, cash generated from
operations and draws on our Revolving Credit Facility. As of December 31, 2019, there was $60.0 million outstanding under our
Revolving Credit Facility. When assessing liquidity, we also consider the availability of cash resources held within local business units
to meet our strategic needs.
Long-term liquidity needs may include existing and future property developments, expansions, renovations, repositioning and
rebranding projects, potential acquisitions and the repayment of indebtedness. As of December 31, 2019, our total debt obligations
were $1,046.4 million (which represents the principal amount outstanding under our Term Loan and Revolving Credit Facility,
excluding a $2.2 million issuance discount on our Term Loan and $3.6 million of unamortized debt issuance costs). We expect to meet
our long-term liquidity requirements generally through the sources available for short-term needs, as well as equity or debt issuances
or proceeds from the potential disposal of assets.
In an effort to maintain sufficient liquidity, our cash flow projections and available funds are discussed with our Board and we
consider various ways of developing our capital structure and seeking additional sources of liquidity if needed. The availability of
additional liquidity options will depend on the economic and financial environment, our credit, our historical and projected financial
and operating performance and continued compliance with financial covenants. As a result of possible future economic, financial and
operating declines, possible declines in our creditworthiness and potential non-compliance with financial covenants, we may have less
liquidity than anticipated, fewer sources of liquidity than anticipated, less attractive financing terms and less flexibility in determining
when and how to use the liquidity that is available.
l
Financing Strategy
In addition to our Revolving Credit Facility, we intend to use other financing sources that may be available to us from time to
time, including financing from banks, institutional investors or other lenders, such as bridge loans, letters of credit, joint ventures and
other arrangements. Future financings may be unsecured or may be secured by mortgages or other interests in our assets. In addition,
we may issue publicly or privately placed debt or equity securities. When possible and desirable, we will seek to replace short-term
financing with long-term financing. We may use the proceeds from any financings to refinance existing indebtedness, to finance resort
projects or acquisitions or for general working capital or other purposes.
Our indebtedness may be recourse, non-recourse or cross-collateralized and may be fixed rate or variable rate. If the indebtedness
is non-recourse, the obligation to repay such indebtedness will generally be limited to the particular resort or resorts pledged to secure
such indebtedness. In addition, we may invest in resorts subject to existing loans secured by mortgages or similar liens on the resorts,
or may refinance resorts acquired on a leveraged basis.
53
Cash Flows
The following table summarizes our net cash provided by or used in operating activities, investing activities and financing
activities for the periods indicated and should be read in conjunction with our Consolidated Statements of Cash Flows and
accompanying notes thereto included in the Consolidated Financial Statements ($ in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net Cash Provided by Operating Activities
Year Ended December 31,
2019
2018
$
$
$
72,188
$
(203,816) $
$
36,206
114,430
(204,586)
89,280
Our net cash from operating activities is generated primarily from operating income from our resorts. For the years ended
December 31, 2019 and 2018, our net cash provided by operating activities totaled $72.2 million and $114.4 million, respectively.
• Net loss of $4.4 million for the year ended December 31, 2019 included significant non-cash income and expenses, including
$101.9 million of depreciation and amortization, $8.8 million of share-based compensation and a $0.7 million gain on the fair
value of our interest rate swaps, offset by changes in our assets and liabilities through the normal course of operations.
• Net income of $19.0 million for the year ended December 31, 2018 included significant non-cash expenses, including $73.3
million of depreciation and amortization, $6.1 million of share-based compensation and a $12.5 million loss on the fair value
of our interest rate swaps, offset by changes in our assets and liabilities through the normal course of operations.
Net Cash Used in Investing Activities
For the years ended December 31, 2019 and 2018, our net cash used in investing activities was $203.8 million and $204.6 million,
respectively.
Activity for the year ended December 31, 2019:
•
Purchases of property and equipment of $209.0 million which includes $112.1 million in cash used for the development of
Hyatt Ziva and Hyatt Zilara Cap Cana and $78.9 million for other development and maintenance capital expenditures.
•
Purchases of intangibles of $3.6 million.
• Receipt of key money of $6.5 million.
Activity for the year ended December 31, 2018:
• Acquisition of the Sagicor Assets for $93.1 million.
•
Purchases of property and equipment of $110.9 million which includes $77.3 million in cash used for the development of
Hyatt Ziva and Hyatt Zilara Cap Cana and $28.4 million for other development and maintenance capital expenditures.
•
Purchases of intangibles of $2.8 million.
Capital Expenditures
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise
y
and license agreements and management agreements. Capital expenditures made to extend the service life or increase the capacity of
our assets, including expenditures for the replacement, improvement or expansion of existing capital assets (“Maintenance Capital
Expenditures”), differ from ongoing repair and maintenance expense items which do not in our judgment extend the service life or
increase the capacity of assets and are charged as expenses as incurred. We have approval rights over capital expenditures made by our
third-party manager as part of the annual budget process for each property they manage. From time to time, certain of our resorts may
be undergoing renovations as a result of our decision to upgrade portions of the resorts, such as guestrooms, public space, meeting
rr
54
space, gyms, spas and/or restaurants, in order to better compete with other hotels in our markets (“Development Capital
Expenditures”).
The following table summarizes our capital expenditures for the years ended December 31, 2019, 2018 and 2017 ($ in
thousands):
Development Capital Expenditures
Hyatt Zilara Cancún
Panama Jack Resorts Cancún
Panama Jack Resorts Playa del Carmen
Hyatt Ziva Puerto Vallarta
Hilton Playa del Carmen All-Inclusive Resort
Hilton La Romana All-Inclusive Resort (1)
Hyatt Ziva and Hyatt Zilara Cap Cana (1) (2)
Hyatt Ziva and Hyatt Zilara Rose Hall (1)
Total Development Capital Expenditures
Maintenance Capital Expenditures (3)
Total Capital Expenditures (4)
Year Ended December 31,
2018
2019
2017
$
— $
1,774
$
—
—
—
17,242
40,464
112,136
—
169,842
21,240
191,082
$
4,178
1,965
644
—
—
77,303
1,198
87,062
18,616
105,678
$
$
3,340
8,799
3,719
2,482
—
—
12,956
11,702
42,998
16,208
59,206
_______
(1) Capital expenditures exclude key money received from the brands.
(2) Developmental capital expenditures for Hyatt Ziva and Hyatt Zilara Cap Cana exclude $56.2 million of cash used to purchase the land, which consists of
the payment of our $10.6 million purchase obligation during the year ended December 31, 2019 and a cash payment of $45.6 million during the year
ended December 31, 2017.
(3) Typically, maintenance capital expenditures equate to approximately 3% to 4% of Total Net Revenue.
(4) Capital expenditures for the year ended December 31, 2019 exclude $4.8 million of custom duty taxes and $13.1 million of capitalized interest. Capital
expenditures for the years ended December 31, 2018 and 2017 exclude $5.2 million and $1.6 million of capitalized interest, respectively.
Net Cash Provided by Financing Activities
Our net cash provided by financing activities was $36.2 million for the year ended December 31, 2019, compared to $89.3 million
provided by financing activities for the year ended December 31, 2018.
Activity for the year ended December 31, 2019:
•
•
•
Purchases of ordinary shares of $13.7 million.
Principal payments on our Term Loan of $10.1 million.
Proceeds from draws on our Revolving Credit Facility of $60.0 million.
Activity for the year ended December 31, 2018:
•
•
Principal payments on our Term Loan of $9.9 million.
Proceeds from debt issuance of $99.5 million.
Dividends
We do not plan on paying cash dividends on our ordinary shares in the foreseeable future. No cash dividends were paid for the
year ended December 31, 2019.
55
Share Repurchases
On December 14, 2018, our Board of Directors authorized the repurchase of up to $100.0 million of our outstanding ordinary
shares as means of returning capital to our shareholders. The repurchase program is subject to certain limitations under Dutch law,
including existing repurchase authorization granted by our shareholders. Repurchases may be made from time to time in the open
market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions
and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the year ended
December 31, 2019, we purchased 1,791,487 ordinary shares at an average price of $7.64 per share. During the fourth quarter of 2019,
we purchased 442,303 ordinary shares at an average price of $7.66 per share. From January 1, 2020 through February 27, 2020 we
purchased an additional 340,109 of our ordinary shares at an average price of $7.35 per share. As of February 27, 2020, we have
purchased a total of 2,178,837 shares and there was approximately $83.5 million remaining under our share repurchase authorization.
Senior Secured Credit Facility
Our subsidiary, Playa Resorts Holding B.V., holds our senior secured credit facility (“Senior Secured Credit Facility”), which
consists of a term loan facility which matures on April 27, 2024 and our Revolving Credit Facility which matures on April 27, 2022.
We borrowed $530.0 million under our initial term loan facility on April 27, 2017 (our “First Term Loan”). We received net proceeds
of approximately $32.5 million from our First Term Loan after prepaying our previous Senior Secured Credit Facility and a portion of
our Senior Notes due 2020 and deducting a debt issuance discount of $1.3 million and unamortized debt issuance costs of $2.6
million.
We borrowed an additional $380.0 million under an incremental term loan facility (our “Second Term Loan” and together with the
First Term Loan, the “Initial Term Loan”) on December 6, 2017. We received no proceeds from the Second Term Loan after full
repayment of our Senior Notes due 2020 and deducting a debt issuance discount of $1.0 million and unamortized debt issuance costs
of $0.2 million.
Our Initial Term Loan bore interest at a rate per annum equal to LIBOR plus 3.25% (where the applicable LIBOR rate had a 1.0%
floor), and interest continued to be payable in cash in arrears on the last day of the applicable interest period (unless we elected to use
the ABR rate in which case, interest was payable on the last business day of each of March, June, September and December).
Effective March 29, 2018, we entered into two interest rate swaps to mitigate the long term interest rate risk inherent in our
variable rate Term Loan. The interest rate swaps have an aggregate fixed notional value of $800.0 million. The fixed rate paid by us is
2.85% and the variable rate received resets monthly to the one-month LIBOR rate.
On June 7, 2018, we entered into the Second Amendment to Amended & Restated Credit Agreement (the “Amendment”), which
amended the Amended & Restated Credit Agreement, dated as of April 27, 2017 (the “Existing Credit Agreement”), governing our
Senior Secured Credit Facility. The Amendment amended the Existing Credit Agreement to, among other things (i) effect an
incremental term loan facility of $100.0 million (the “Third Term Loan” and, together with the Initial Term Loan, the “Term Loan”)
that was incurred pursuant to the exercise of our option to request incremental loans under the Existing Credit Agreement and
(ii) decrease the interest rate applicable to the Term Loan by 0.50% to, at our option, either a base rate plus a margin of 1.75% or
LIBOR plus a margin of 2.75%. The other terms to the Existing Credit Agreement were not affected by the Amendment.
aa
Our Term Loan requires quarterly payments of principal equal to 0.25% of the original principal amount of the Term Loan on the
last business day of each March, June, September and December. The remaining unpaid amount of our Term Loan is due and payable
at maturity on April 27, 2024. We may voluntarily prepay borrowings at any time without premium or penalty, subject to customaryrr
breakage costs in the case of LIBOR-based loans.
Our Revolving Credit Facility bears interest at variable interest rates that are, at the Borrower's option, either based on LIBOR or
based on an alternate base rate derived from the greatest of the federal funds rate plus a spread, prime rate, or a one-month euro-
currency rate plus a spread. We are required to pay a commitment fee ranging from 0.25% to 0.5% per annum (depending on the level
of our consolidated secured leverage ratio in effect from time to time) on the average daily undrawn balance.
The Senior Secured Credit Facility requires that most of our subsidiaries, and in some limited cases the Company, comply with
covenants relating to customary matters, including with respect to incurring indebtedness and liens, paying dividends or making
certain other distributions or redeeming equity interests, making acquisitions and investments, effecting mergers and asset sales,
prepaying junior indebtedness, and engaging in transactions with affiliates.
56
Contractual Obligations
The following table sets forth our obligations and commitments to make future payments under contracts and contingent
commitments as of December 31, 2019 ($ in thousands):
Revolving Credit Facility interest payments (2)(3)
Revolving Credit Facility principal payments (4)
Term Loan principal payments
Term Loan interest payments (5)
Operating lease obligations
Pension obligation
Less than
1 Year(1)
Due in 1 to
3 years
Due in 3 to
5 years
Due in
Over 5 years
Total
$
1,132
$
668
$
60,000
10,100
53,411
991
707
—
20,200
105,257
2,110
1,164
— $
—
956,148
59,415
1,438
1,435
— $
—
—
—
2,929
4,706
1,800
60,000
986,448
218,083
7,468
8,012
Total contractual obligations
$
126,341
$
129,399
$
1,018,436
$
7,635
$
1,281,811
________
(1)
(2)
(3)
The period less than 1 year represents obligations in 2020.
The commitment fee, which may range from 0.5% to 0.25% depending on certain leverage ratios, bore interest of 0.5% on the $40.0 million undrawn
balance of our Revolving Credit Facility as of December 31, 2019.
Draws under the Revolving Credit Facility bear interest at one-month LIBOR plus 3.0%. The weighted average interest rate on the $60.0 million drawn
balance of our Revolving Credit Facility was 4.72% as of December 31, 2019.
(4) We are not contractually obligated to repay the outstanding balance on our Revolving Credit Facility until 2022; however, we plan to repay the
(5)
outstanding balance as of December 31, 2019 in 2020.
The interest commitment on our Term Loan is calculated based on LIBOR plus 275 basis points with a 1% LIBOR floor and the estimated net
settlement of the related interest rate swaps. Projected interest rates range from 4.21% to 5.60%. Payments were calculated using the average forecasted
one-month forward-looking LIBOR curve.
Off Balance Sheet Arrangements
We had no off balance sheet arrangements for the years ended December 31, 2019 and 2018.
Critical Accounting Policies and Estimates
Our Consolidated Financial Statements included herein have been prepared in accordance with U.S. GAAP. The preparation of
these financial statements requires management to make estimates and assumptions that affect the reported amounts and related
disclosures. A number of our significant accounting policies are critical due to the fact that they require us to exercise a higher degree
of judgment and estimation based on assumptions that are inherently uncertain. While we believe our estimates, assumptions and
judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these
estimates under different assumptions, judgments or conditions, which could have a material effect on our financial position, results of
operations and related disclosures.
Business combinations
Assets acquired and liabilities assumed in a business combination are recorded at fair value as of the acquisition date. We use
judgment to determine the fair value of the property or business acquired and to determine the amount of value to allocate to each
identifiable asset or liability. Changes to the significant assumptions or estimates used to determine the fair value of the acquired
assets or liabilities could materially affect the measurement and allocation of fair value as well as the amount, if any, of goodwill
recognized in the business combination.
Property and equipment, net
Useful lives of property and equipment, net
Property and equipment are recorded at cost and depreciated using the straight-line method over an estimated useful life of five to
50 years for buildings, seven to 18 years for fixtures and machinery and four to 12 years for furniture and other fixed assets.
We are required to apply judgment in determining the estimated useful lives of our property and equipment for purposes of
calculating the amount of depreciation expense to record each year with respect to the assets. Changes to the significant assumptions
or estimates of useful lives could materially affect our results of operations.
mm
57
Impairment of property and equipment, net
We are required to apply judgment in determining whether indicators of impairment are present at one or more of our asset
groups, or resorts. The determination as to whether a triggering event exists is based on our knowledge of the industry, historical
experience, market and economic conditions, the business climate, our operations and other relevant facts and circumstances as of the
assessment date.
Judgment is also required in estimating the fair value of our resorts when quantitatively assessing an asset group for impairment.
When determining fair value, we generally rely on discounted cash flow models. Under the discounted cash flow approach, we utilize
various assumptions and estimates including projections of revenues and expenses based on estimated long-term growth rates and
discount rates based on the weighted-average cost of capital. Our estimates of long-term growth and costs are based on historical data
as well as various internal projections and external sources. The weighted-average cost of capital is estimated based on each resort's
cost of debt and equity and a selected capital structure.
Changes in the judgments, estimates or assumptions utilized in our qualitative or quantitative property and equipment impairment nn
testing could result in future impairment losses, which could be material to our results of operations.
Income taxes
We recognize deferred tax assets and liabilities based on the differences between the financial statement bases and tax bases of
our assets and liabilities using currently enacted tax rates for the period in which the deferred tax items are expected to reverse.
Significant judgment is required in the calculation of our tax provision and the resulting tax liabilities as well as our ability to realize
our deferred tax assets. Our estimates of future taxable income can significantly affect our tax provision in a given period. Significant
judgment is required in determining our ability to realize our deferred tax assets related to federal, state and foreign tax attributes
within their carryforward periods, as we estimate the amount and timing of the future reversal of deferred tax items in our projections
of future taxable income. We establish a valuation allowance to reduce deferred tax assets to the amounts we expect to realize in the
future.
o
tt
We recognize tax liabilities related to uncertain tax positions only when we estimate that it is “more likely than not” that the
position will be sustainable based on its technical merits. Assumptions, judgment and the use of estimates are required in determining
if the “more likely than not” standard has been met when developing our provision for income taxes. Changes to the assessment of the
“more likely than not” standard could materially impact our Consolidated Financial Statements.
Goodwill
Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate a potential
impairment.
We are required to apply judgment in determining whether indicators of impairment are present at one or more of our reporting
units. The determination as to whether a triggering event exists is based on our knowledge of the industry, historical experience,
market and economic conditions, the business climate and other relevant facts and circumstances as of the assessment date.
Judgment is also required in estimating the fair value of our reporting units. Under the discounted cash flow approach, we utilize
various assumptions and estimates including projections of revenues and expenses based on estimated long-term growth rates and
discount rates based on the weighted-average cost of capital. Our estimates of long-term growth and costs are based on historical data
as well as various internal projections and external sources. The weighted-average cost of capital is estimated based on each reporting
unit's cost of debt and equity and a selected capital structure. Under the market multiple or market transaction approach, we rely on
assumptions and estimates including comparable asset sales and EBITDA multiples.
Changes in the estimates and assumptions used in our qualitative or quantitative goodwill impairment testing could result in
future impairment losses, which could be material to our results of operations.
Derivative financial instruments
We use derivative financial instruments, primarily interest rate swap contracts, to hedge our exposure to interest rate risk. Such
derivative financial instruments are initially recorded at fair value on the date on which a derivative contract is entered into and are
subsequently remeasured to fair value at period end. Changes in the fair value of a derivative contract that is qualified, designated and
highly effective as a cash flow hedge are recorded in total other comprehensive loss and reclassified into interest expense in the same
period or periods during which the hedged transaction affects earnings. If a derivative contract does not meet this criteria, then the
tt
58
change in fair value is recognized in earnings. The fair value of our interest rate swaps is the present value of estimated future cash
flows, calculated as the difference between the fixed rate paid by us and the variable rate received from our counterparty, multiplied by
the notional principal amount.
tt
The fair value of our interest rate swaps at period end is most significantly affected by our estimate of future one-month London
Interbank Offered Rate (“LIBOR”) interest rates through the contractual period to maturity. It is also affected by changes in our own
and our counterparty's specific credit risk, which are incorporated into the credit valuation adjustment, as well as the discount rate
applied to our estimated future cash flows of the interest rate swaps.
uu
Changes to these significant inputs or estimates could materially affect our recorded interest expense and our results of operations.
aa
Share-based compensation
We have an equity incentive plan that provides for the grant of share options, share appreciation rights, restricted shares, share
units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based
awards, and cash bonus awards. Share-based compensation is measured at the fair value of the award on the date of grant and
recognized as an expense on a straight-line basis over the vesting period.
For awards with market conditions, the conditions are incorporated into the fair value measurement and the compensation
expense is not adjusted if the conditions are not met. The determination of fair value of the market based awards on the date of grant is
subjective and involves significant estimates and assumptions including expected volatility of our shares, expected dividend yield,
expected term and assumptions of whether the awards will achieve performance thresholds. Changes to these estimates and
assumptions could have a material effect on our results of operations in future periods.
For awards with performance conditions, the related compensation expense is based on the probability of achievement. We
recognize expense based on anticipated achievement percentages, which are based on internally-developed projections of future
Adjusted EBITDA. Any changes to our projections will affect the amount of share-based compensation expense we recognize in
future periods.
Fair Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable
from related parties, certain prepayments and other assets, trade and other payables, payables to related parties, derivative financial
instruments, other liabilities including our pension obligation and debt. See Note 17, “Fair value of financial instruments,” to our
Consolidated Financial Statements for more information.
ff
Related Party Transactions
See Note 7, “Related party transactions,” to our Consolidated Financial Statements for information on these transactions.
Recent Accounting Pronouncements
See the recent accounting pronouncements in the “Accounting standards” section of Note 2 to our Consolidated Financial
Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of operations, we are exposed to interest rate risk and foreign currency risk which may impact future income
and cash flows.
Interest Rate Risk
The risk from market interest rate fluctuations mainly affects long-term debt bearing interest at a variable interest rate. We
currently use an interest rate swap (see Note 16 to our Consolidated Financial Statements) to manage exposure to this risk. As of
December 31, 2019, approximately 24% of our outstanding indebtedness bore interest at floating rates and approximately 76% bore
interest at fixed rates. If market rates of interest on our floating rate debt were to increase by 1.0%, the increase in interest expense on
our floating rate debt would decrease our future earnings and cash flows by approximately $2.5 million annually, assuming the
balance outstanding under our Revolving Credit Facility remained at $60.0 million. If market rates of interest on our floating rate debt
59
were to decrease by 1.0%, the decrease in interest expense on our floating rate debt would increase our future earnings and cash flows
by approximately $2.5 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $60.0
million.
Foreign Currency Risk
We are exposed to exchange rate fluctuations because all of our resort investments are based in locations where the local currency
is not the U.S. dollar, which is our reporting currency. For the year ended December 31, 2019 approximately 5.2% of our revenues
were denominated in currencies other than the U.S. dollar. As a result, our revenues reported on our Consolidated Statements of
Operations are affected by movements in exchange rates.
Approximately 80.5% of our operating expenses for the year ended December 31, 2019 were denominated in the local currencies
in the countries in which we operate. As a result, our operating expenses reported on our Consolidated Statements of Operations are
affected by movements in exchange rates.
The foreign currencies in which our expenses are primarily denominated are the Mexican Peso, Dominican Peso and the Jamaican
Dollar. The effect of an immediate 5% adverse change in foreign exchange rates on Mexican Peso-denominated expenses at
December 31, 2019 would have impacted our net income before tax by approximately $8.5 million on a year-to-date basis. The effect
of an immediate 5.0% adverse change in foreign exchange rates on Dominican Peso-denominated expenses at December 31, 2019
would have impacted our net income before tax by approximately $3.1 million on a year-to-date basis. The effect of an immediate
5.0% adverse change in foreign exchange rates on Jamaican Dollar-denominated expenses at December 31, 2019 would have
impacted our net income before tax by approximately $6.2 million.
At this time, we do not have any outstanding derivatives or other financial instruments designed to hedge our foreign currency
exchange risk.
60
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cumulative Redeemable Preferred Shares and Shareholders’ Equity for the Years Ended
December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018 and 2017
Notes to the Consolidated Financial Statements
Financial Statement Schedule
Schedule I - Condensed Financial Information of Registrant
Page
62
63
64
65
66
67
69
106
61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Playa Hotels & Resorts N.V.
Fairfax, VA
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Playa Hotels & Resorts N.V. and subsidiaries (the “Company”) as
of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive (loss) income, cumulative
redeemable preferred shares and shareholders’ equity, and cash flows for each of the three years in the period ended December 31,
2019, and the related notes and the financial statements schedule listed in the Index at Item 15 (collectively referred to as the
“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
tt
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
tt
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
McLean, VA
February 27, 2020
We have served as the Company’s auditor since 2014.
62
(a) Consolidated Financial Statements
Playa Hotels & Resorts N.V.
Consolidated Balance Sheets
($ in thousands, except share data)
ASSETS
Cash and cash equivalents
Trade and other receivables, net
Accounts receivable from related parties
Inventories
Prepayments and other assets
Property and equipment, net
Goodwill, net
Other intangible assets
Deferred tax assets
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade and other payables
Payables to related parties
Income tax payable
Debt
Derivative financial instruments
Other liabilities
Deferred tax liabilities
Total liabilities
As of December 31,
2019
2018
$
20,931
$
$
$
71,250
5,401
16,649
44,691
1,929,914
78,339
8,408
21,381
2,196,964
181,603
7,620
3,252
1,040,658
31,932
24,307
97,941
1,387,313
$
$
116,353
64,770
6,430
15,390
32,617
1,808,412
83,656
6,103
1,427
2,135,158
159,600
4,320
1,899
989,387
12,476
21,602
106,033
1,295,317
Commitments and contingencies (see Note 8)
Shareholders' equity
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 130,967,671 shares
issued and 129,121,576 shares outstanding as of December 31, 2019, and 130,494,734
shares issued and 130,440,126 shares outstanding as of December 31, 2018)
Treasury shares (at cost, 1,846,095 shares as of December 31, 2019 and 54,608 shares
as of December 31, 2018)
Paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders' equity
14,215
14,161
(14,088)
1,001,088
(24,642)
(166,922)
809,651
(394)
992,297
(3,658)
(162,565)
839,841
Total liabilities and shareholders' equity
$
2,196,964
$
2,135,158
The accompanying Notes form an integral part of the Consolidated Financial Statements.
63
Revenue
Package
Non-package
Management fees
Cost reimbursements
Total revenue
Direct and selling, general and administrative expenses
Direct
Selling, general and administrative
Pre-opening
Depreciation and amortization
Reimbursed costs
Impairment loss
Gain on insurance proceeds
Direct and selling, general and administrative expenses
Operating income
Interest expense
Loss on extinguishment of debt
Other (expense) income
Net (loss) income before tax
Income tax benefit (provision)
Net (loss) income
Playa Hotels & Resorts N.V.
Consolidated Statements of Operations
($ in thousands, except share data)
Year Ended December 31,
2018
2017
2019
$
538,088
$
532,090
$
90,157
1,820
6,412
636,477
369,050
125,788
1,452
101,897
6,412
6,168
—
610,767
25,710
(44,087)
—
(3,200)
(21,577)
17,220
(4,357)
—
—
(4,357) $
617,013
559,545
83,190
755
978
340,080
115,975
321
73,278
978
—
(4,216)
526,416
90,597
(62,243)
—
2,822
31,176
(12,199)
18,977
—
—
18,977
481,175
78,230
140
—
310,048
108,176
—
53,131
—
—
(479)
470,876
88,669
(53,661)
(25,120)
(1,078)
8,810
(9,051)
(241)
(7,922)
(879)
(9,042)
(0.09)
(0.09)
$
$
$
Dividends of cumulative redeemable preferred shares
Non-cash dividend to warrant holders
Net (loss) income available to ordinary shareholders
Earnings per share
(Losses) earnings per share - Basic
(Losses) earnings per share - Diluted
$
$
$
(0.03) $
(0.03) $
0.16
0.16
Weighted average number of shares outstanding during the period - Basic
Weighted average number of shares outstanding during the period - Diluted
130,023,463
130,023,463
122,150,851
122,418,500
96,896,498
96,896,498
The accompanying Notes form an integral part of the Consolidated Financial Statements.
64
Playa Hotels & Resorts N.V.
Consolidated Statements of Comprehensive (Loss) Income
($ in thousands)
Net (loss) income
Other comprehensive (loss) income
Pension obligation (loss) gain
Unrealized loss on interest rate swaps
Total other comprehensive (loss) income
Comprehensive (loss) income
Year Ended December 31,
2019
2018
2017
(4,357) $
18,977
$
(241)
(820)
(20,164)
(20,984)
(25,341) $
168
—
168
19,145
$
(107)
—
(107)
(348)
$
$
The accompanying Notes form an integral part of the Consolidated Financial Statements.
65
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6
6
Playa Hotels & Resorts N.V.
Consolidated Statements of Cash Flows
($ in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Year Ended December 31,
2018
2017
2019
$
(4,357) $
18,977
$
(241)
Depreciation and amortization
Amortization of debt discount and issuance costs
Amortization of debt discount and issuance costs
Share-based compensation
Loss on extinguishment of debt
Loss on extinguishment of debt
(Gain) loss on derivative financial instruments
Gain on property damage insurance proceeds
Gain on property damage insurance proceeds
Impairment loss
Deferred income taxes
Deferred income taxes
Amortization of key money
OtherOther
Changes in assets and liabilities:
i
Trade and other receivables, net
Trade and other receivables, net
Accounts receivable from related parties
Inventories
Prepayments and other assets
Trade and other payables
Trade and other payables
Payables to related parties
Income tax payable
Income tax payable
Deferred consideration
Other liabilities
Other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES
Capital expenditures
Acquisition of Sagicor business, net of cash acquired
Contract deposit
Purchase of intangibles
Receipt of key money
Proceeds from disposal of property and equipment
Property damage insurance proceeds
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from debt issuance
Proceeds from borrowings on revolving credit facility
Issuance costs of debt
Repayment of deferred consideration
Repayment of Term Loan
Repayment of Senior Notes due 2020
Recapitalization transaction
Repurchase of ordinary shares
Repurchase of Earnout Warrants
Net cash provided by financing activities
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
CASH AND CASH EQUIVALENTS, END OF THE PERIOD
$
$
101,897
1,371
8,845
—
(708)
—
6,168
(22,947)
(263)
2,472
(9,890)
1,029
(1,218)
(10,742)
1,618
3,300
1,353
—
(5,740)
72,188
(208,970)
—
—
(3,569)
6,500
214
2,009
(203,816)
—
60,000
—
—
(10,100)
—
—
(13,694)
—
36,206
(95,422)
116,353
20,931
73,278
1,523
6,116
—
12,476
(2,212)
—
3,006
—
1,100
(11,536)
(4,935)
(456)
3,396
13,725
1,354
809
—
(2,191)
114,430
(110,851)
(93,128)
—
(2,832)
2,000
22
203
(204,586)
99,499
—
—
—
(9,850)
—
—
(314)
(55)
89,280
(876)
117,229
116,353
$
$
$
$
53,131
2,242
3,765
25,120
—
—
—
1,004
—
928
(3,542)
(319)
(900)
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(8,249)
(1,964)
(4,038)
654
(638)
64,191
(106,230)
—
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(1,003)
—
104
—
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907,725
—
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(2,490)
(366,415)
(495,997)
79,658
—
—
119,704
74,066
43,163
117,229
The accompanying Notes form an integral part of the Consolidated Financial Statements.
67
Playa Hotels & Resorts N.V.
Consolidated Statements of Cash Flows (Continued)
($ in thousands)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of interest capitalized
Cash paid for income taxes, net
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Capital expenditures incurred but not yet paid
Intangible assets capitalized but not yet paid
Interest capitalized but not yet paid
Par value of vested restricted share awards
Right-of-use assets obtained in exchange for new operating lease liabilities
Non-cash issuance of shares in business combination (see Note 4)
Paid-in-kind dividends of cumulative redeemable preferred shares
Purchase of cumulative redeemable preferred shares
Settlement of accrued dividends of cumulative redeemable preferred shares
Par value of ordinary shares issued in exchange for warrants
Non-cash dividend to warrant holders
Non-cash transfer of treasury shares
Year Ended December 31,
2018
2017
2019
$
$
$
$
$
$
$
$
$
$
$
$
$
$
43,089
8,159
20,958
251
41
54
1,393
$
$
$
$
$
$
$
— $
— $
— $
— $
— $
— $
— $
53,420
10,890
484
516
16
22
$
$
$
$
$
$
— $
215,400
$
— $
— $
— $
— $
— $
— $
61,066
21,582
12,605
—
163
17
—
—
7,922
(239,492)
(114,381)
747
879
(80)
The accompanying Notes form an integral part of the Consolidated Financial Statements.
68
Playa Hotels & Resorts N.V.
Notes to the Consolidated Financial Statements
Note 1. Organization, operations and basis of presentation
Background
Playa Hotels & Resorts N.V. (“Playa” or the “Company”) is a leading owner, operator and developer of all-inclusive resorts in
prime beachfront locations in popular vacation destinations. We own and/or manage a portfolio of 23 resorts located in Mexico, the
Dominican Republic and Jamaica. Unless otherwise indicated or the context requires otherwise, references in our consolidated
financial statements (our “Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its
subsidiaries.
Basis of preparation, presentation and measurement
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”).
Note 2. Significant accounting policies
Principles of consolidation
Our Consolidated Financial Statements include the accounts of Playa and our subsidiaries, all of which we wholly own and
control. All intercompany transactions and balances have been eliminated in the consolidation process.
Use of estimates
The preparation of our Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ
materially from those estimates.
We evaluate our estimates and assumptions periodically. Estimates are based on historical experience and on other factors that are
considered to be reasonable under the circumstances. Significant accounting policies that require us to exercise judgment or makeaa
significant estimates include the fair value of assets and liabilities acquired in business combinations, useful lives of property and
equipment, income taxes (including the valuation allowance), commitments and contingencies, long-lived asset and goodwill
impairment testing, fair value of restricted share awards with market and performance conditions and fair value of financial
instruments.
Financial instruments
The Consolidated Balance Sheet contains various financial instruments, including, but not limited to, cash and cash equivalents,
restricted cash, trade and other receivables, accounts receivable from related parties, certain prepayments and other assets, trade and
other payables, payables to related parties, derivative financial instruments, other liabilities including our pension obligation and debt.
tt
Foreign currency
Our reporting currency is the U.S. dollar. We have determined that the U.S. dollar is the functional currency of all of our
international operations. Foreign currency denominated monetary asset and liability amounts are remeasured into U.S. dollars at end-
of-period exchange rates. Foreign currency denominated non-monetary assets, such as inventories, prepaid expenses, fixed assets and
intangible assets, are recorded in U.S. dollars at historical exchange rates. Foreign currency denominated income and expense items
are recorded in U.S. dollars at the applicable daily exchange rates in effect during the relevant period.
t
For purposes of calculating our tax liability in certain foreign jurisdictions, we index our depreciable tax bases in certain assets for
the effects of inflation based upon statutory inflation factors. The effects of these indexation adjustments are reflected in income tax
benefit (provision) in the Consolidated Statements of Operations. The remeasurement gains and losses related to deferred tax assets
and liabilities are reported in the income tax benefit (provision).
69
Foreign exchange gains and losses are presented in the Consolidated Statements of Operations within other (expense) income. We
recognized foreign currency losses of $2.1 million, $0.7 million and $0.7 million for the years ended December 31, 2019, 2018 and
2017, respectively.
aa
Business combinations
For acquisitions meeting the definition of a business combination, the acquisition method of accounting is used. The acquisition
date is the date on which we obtain operating control over the acquired business.
The consideration transferred is determined on the acquisition date and is the sum of the fair values of the assets transferred by us,
d
the liabilities assumed by us and equity interests issued by us. Acquisition-related costs, such as professional fees, are excluded from
the consideration transferred and are expensed as incurred.
Goodwill is measured as the excess of the consideration transferred over the fair value of the net identifiable assets acquired and
d
liabilities assumed. If the consideration transferred is less than the fair value of the net assets acquired and liabilities assumed, the
difference is recorded as a bargain purchase gain in profit or loss.
Property and equipment, net
Property and equipment are stated at historical cost less accumulated depreciation. The costs of improvements that extend the life
of property and equipment, such as structural improvements, equipment and fixtures, are capitalized. In addition, we capitalize soft
costs such as interest, insurance, construction administration and other costs that clearly relate to projects under development or
construction. Start-up costs, ongoing repairs and maintenance are expensed as incurred. Buildings that are being developed or closed
for substantial redevelopment are carried at cost and no depreciation is recorded on these assets until they are put into or back into
service. The useful life of buildings under re-development is re-evaluated upon completion of the projects.
nn
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their
residual values (if any) over their estimated useful lives, as follows:
Buildings
Fixtures and machinery
Furniture and other fixed assets
5 to 50 years
7 to 18 years
4 to 12 years
The assets’ estimated useful lives and residual values are reviewed at the end of each reporting period, with the effect of any
changes in estimates accounted for on a prospective basis.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. No impairment was recognized for the years ended December 31, 2019, 2018 and 2017.
Income taxes
We account for income taxes using the asset and liability method, under which we recognize deferred income taxes for the tax
consequences attributable to differences between the financial statement carrying amounts and the tax bases of existing assets and
liabilities, as well as for tax loss carryforwards. For purposes of these Consolidated Financial Statements, our income tax benefit
(provision) was calculated on a return basis as though we had filed our tax returns in the applicable jurisdictions in which we operate.
Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
earnings in the period when the new rate is enacted. We provide a valuation allowance against deferred tax assets if it is more likely
than not that a portion will not be realized. In assessing whether it is more likely than not that deferred tax assets will be realized, we
consider all available evidence, both positive and negative, including our recent cumulative earnings experience and expectations of
future available taxable income of the appropriate character by taxing jurisdiction, tax attribute carryback and carry forward periods
available to us for tax reporting purposes, and prudent and feasible tax planning strategies.
We have only recorded financial statement benefits and liabilities for tax positions which we believe are more likely than not to be
sustained upon settlement with a taxing authority. We have established income tax accruals in accordance with this guidance where
necessary, such that a benefit is recognized only for those positions which satisfy the more likely than not threshold. Judgment isnn
70
required in assessing the future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax
returns, including the application of the more likely than not criteria. We recognize interest and penalties associated with our uncertain
tax benefits as a component of the income tax benefit (provision).
uu
Commitments and contingencies
We are subject to various legal proceedings, regulatory proceedings and claims, the outcomes of which are subject to uncertainty.tt
We record an estimated loss from a loss contingency, with a corresponding charge to income, if it is probable that an asset has been
impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. Where there is a reasonable
possibility that a loss has been incurred we provide disclosure of such contingencies (see Note 8).
Ordinary shares and paid-in capital
Ordinary shares are classified as equity. Shares are classified as equity when there is no obligation to transfer cash or other assets
r
to the respective holder. Incremental costs directly attributable to the issuance of ordinary shares are recognized as a reduction of
equity, net of any tax effects.
Dividends
We must comply with the provisions of Dutch law, our Articles of Association and the covenants in our Senior Secured Credit
Facility (as defined in Note 15) if we want to pay cash dividends. We currently intend to retain any earnings for future operations and
expansion. Any future determination to pay dividends will be at the discretion of our shareholders at our general meeting of
shareholders (the “General Meeting”), subject to a proposal from our board of directors, and will depend on our actual and projected
financial condition, liquidity and results of operations, capital requirements, prohibitions and other restrictions contained in current or
future financing instruments and applicable law, and such other factors as our board of directors deems relevant.
Preferred Shares
We previously issued cumulative redeemable preferred shares (“Preferred Shares”) that could be converted to ordinary shares at
the option of the holder or redeemed by such holder or us under certain conditions. Preferred Shares were reported as a temporarya
equity instrument (see Note 13). There were no Preferred Shares outstanding as of December 31, 2019 or 2018.
Debt
Debt is carried at amortized cost. Any difference between the proceeds (net of debt issuance costs) and the redemption value is
recognized as an adjustment to interest expense over the term of the debt using the effective interest rate method. Debt issuance costs
are recorded in the Consolidated Balance Sheet as a direct deduction from the carrying amount and amortized over the term of the debt
utilizing the effective interest rate method.
Capitalized interest directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
take a substantial period of time to get ready for their intended use, is recognized as part of the cost of such assets until the time the
assets are substantially ready for their intended use. Capitalized interest is subsequently recognized as depreciation expense in the
Consolidated Statements of Operations once the assets are placed into service.
tt
Goodwill
Goodwill arises in connection with business combinations and is generally allocated to our reporting units, which are also our
operating segments, based on their relative fair values. Goodwill is reviewed for impairment annually or more frequently if events or
changes in circumstances indicate a potential impairment. We completed our most recent annual impairment assessment for our
goodwill associated with the reporting units within our Yucatán Peninsula and Jamaica reportable segments as of July 1, 2019 and
October 1, 2019, respectively, and concluded that goodwill was not impaired as of the testing date. Subsequent to the initial testing
date, we recognized an impairment loss of $6.2 million at our Panama Jack Playa del Carmen reporting unit (see Note 19).
When evaluating goodwill for potential impairment, we are permitted to first assess qualitative factors to determine whether it ist
more likely than not that the fair value of the reporting unit is less than its carrying amount. If we cannot determine qualitatively that
the fair value is in excess of the carrying value, or if we decide to bypass the qualitative assessment for any reporting unit in any
period, we perform a quantitative analysis. The quantitative test is used to identify both the existence of impairment and the amount of
the impairment loss by comparing the estimated fair value of the reporting unit to its carrying value, including goodwill. We generally
estimate the fair value of a reporting unit using a combination of the discounted cash flow approach and the market multiple or market
aa
r
71
transaction approach. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount
equal to the excess, limited to the total amount of goodwill allocated to the reporting unit.
n
Other intangible assets
The useful life for definite lived intangibles is determined to be equal to their economic life. An impairment loss is recognized for
our indefinite or definite lived assets when the amount by which the asset’s carrying amount exceeds its recoverable amount. No
impairment was recognized for the years ended December 31, 2019, 2018 and 2017.
Revenue recognition
Revenue is recognized on an accrual basis when the rooms are occupied and services have been rendered. We primarily derive our
revenue from the following sources:
• Package revenue: Revenues derived from all-inclusive packages purchased by our guests, which include room
accommodations, food and beverage services and entertainment activities, are included in the package revenue line item of
the Consolidated Statements of Operations and are considered one performance obligation. Contract liabilities consist of
advanced deposits received from customers which are deferred until the rooms are occupied and the services have been
rendered. Advance deposits are included in trade and other payables in the Consolidated Balance Sheet. Revenue is measured
at the fair value of the consideration received or receivable, stated net of estimated discounts, rebates and value added taxes
and recognized when our performance obligation of all-inclusive services is considered transferred to the customer.
• Non-package revenue: Revenue associated with upgrades, premium services and amenities that are not included in the all-
inclusive package. This includes, but is not limited to, premium rooms, dining experiences, wines and spirits and spa
packages which are included in the non-package revenue line item of the Consolidated Statements of Operations. Revenue is
recognized based on the agreed upon price after the completion of the sale when the product or service is transferred to the
customer. Food and beverage revenue not included in a guest’s all-inclusive package is recognized when the goods are
consumed.
• Management fees: Management fees are derived from resorts that we manage, typically under long-term contracts with the
property owner. Management fees are typically composed of a base fee, which is computed as a percentage of resort revenue,
and an incentive fee, which is computed as a percentage of resort profitability. We recognize revenue over the term of the
service period as the third-party owners benefit from our management services. Revenue from management contracts is
included in the management fees line item of the Consolidated Statements of Operations.
• Cost reimbursements: Cost reimbursements are derived from the reimbursement of certain costs incurred by Playa on behalf
of resorts managed by Playa and owned by third parties. These revenues are fully offset by reimbursed costs and have no
impact on net income. Cost reimbursements are recognized when agreed upon reimbursable costs are incurred from
managing hotels owned by third-parties and included in the cost reimbursements line item of the Consolidated Statements of
Operations.
Revenue from operations in the Dominican Republic is net of statutory withholding of $3.8 million, $5.0 million and $5.2 million
for the years ended December 31, 2019, 2018 and 2017, respectively.
Cash and cash equivalents
Cash and cash equivalents are comprised of cash balances and highly liquid cash deposits with maturities at the date of the
acquisition of three months or less, which are readily convertible to known amounts of cash and are subject to an insignificant risk of
changes in value. We classify these cash instruments as Level 1. Financial instruments that potentially subject us to a concentration of
credit risk consist of cash on deposit at financial institutions where the deposits are either uninsured or in excess of insured limits and
money market fund balances. Substantially all of our cash is held by financial institutions that we believe are of high-credit quality.
tt
t
Restricted cash
Restricted cash consists of cash balances restricted in use by contractual obligations with third-parties.
Trade and other receivables, net
Trade and other receivables include amounts due from guests and vendors for merchandise sold or services performed in the
ordinary course of business as well as other miscellaneous receivables, such as insurance. Collection of these amounts is expected in
one year or less. When necessary, the carrying amount of our receivables is reduced by an allowance for doubtful accounts that reflects
72
our estimate of amounts that will not be collected. When a trade receivable is considered uncollectible, it is written off against the
allowance for doubtful accounts. Subsequent recoveries of amounts previously written off are credited against the allowance accounts.
Changes in the carrying amount of the allowance for doubtful accounts are recognized as bad debt expense within selling, general and
administrative expenses in the Consolidated Statements of Operations.
Inventories
Inventories consist of food, beverages and other items related to consumption and are valued at the lower of cost or net realizable
value. Cost is determined using the weighted-average cost method, not to exceed the market value.
Advertising costs
Advertising costs are expensed as incurred or the first time the advertising takes place. For the years ended December 31, 2019,
2018 and 2017, we recorded advertising costs of $26.6 million, $27.3 million and $27.5 million, respectively. Advertising costs are
presented in the Consolidated Statements of Operations within selling, general and administrative expenses.
Share-based compensation
We have an equity incentive plan that provides for the grant of share options, share appreciation rights, restricted shares, share
units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based
awards, and cash bonus awards. We recognized share based compensation based on the following scenarios:
• Awards vesting with the passage of time: Share-based compensation is measured at the fair value of the award on the date of
grant and recognized as an expense on a straight-line basis over the vesting period.
• Awards vesting with market conditions: The conditions are incorporated into the fair value measurement and recognized as an
expense on a straight-line basis over the vesting period. The compensation expense is not adjusted if the conditions are not
met. The determination of fair value on the date of grant is subjective and involves significant estimates and assumptions
including expected volatility of our shares, expected dividend yield, expected term and assumptions of whether these awards
will achieve performance thresholds.
• Awards vesting with performance conditions: Compensation expense is recognized when it becomes probable that the
performance criteria specified in the awards will be achieved and, accordingly, the compensation value is adjusted following
the changes in the estimates of shares likely to vest based on the performance criteria.
The effects of forfeitures are recognized in compensation expense when they occur.
Derivative financial instruments
Derivative financial instruments are initially recorded at fair value on the date on which a derivative contract is entered into and
are subsequently remeasured to fair value at period end. As of March 20, 2019, we elected to adopt hedge accounting and designate
our existing interest rate swaps as cash flow hedges. Changes in the fair value of a derivative contract that is qualified, designated and
highly effective as a cash flow hedge are recorded in total other comprehensive (loss) income in our Consolidated Statements of
Comprehensive (Loss) Income and reclassified into interest expense in our Consolidated Statements of Operations in the same period
or periods during which the hedged transaction affects earnings. If a derivative contract does not meet this criteria, then the change in
fair value is recognized in earnings.
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Accounting standards
The following table provides a brief description of recent accounting pronouncements (Accounting Standards Update or “ASU”)
issued by the Financial Accounting Standards Board (“FASB”) that could have a material effect on our financial statements:
Standards adopted
Standard
ASU No. 2016-02,
Leases (Topic 842)
Description
This standard introduces a lessee model that
brings most leases on the balance sheet. This will
increase a lessee’s reported assets and liabilities—
in some cases very significantly. Lessor
accounting remains substantially similar to
current U.S. GAAP.
Date of Adoption
January 2019
ASU No. 2018-02,
Income Statement-
Reporting
Comprehensive
Income (Topic 220)
This standard provides guidance regarding the
treatment of stranded income tax effects in
accumulated other comprehensive income
resulting from the Tax Cuts and Jobs Act of 2017.
Entities can make an election to reclassify these
stranded income tax effects from accumulated
other comprehensive income to retained earnings.
January 2019
Effect on the Financial Statements or Other
Significant Matters
We adopted ASU No. 2016-02 using the
transition method outlined in ASU No.
2018-11, Leases (Topic 842): Targeted
Improvements, resulting in no cumulative
adjustment to accumulated deficit as our lease
portfolio consists solely of operating leases.
Refer to Note 9 for further discussion.
We adopted ASU No. 2018-02 and concluded
that the effect on our Consolidated Financial
Statements was immaterial. The tax effects
presented in accumulated other comprehensive
loss relate to our employee benefit plan and
have been historically immaterial.
74
Standards not yet adopted
Standard
ASU No. 2016-13,
Financial Instruments-
Credit Losses (Topic
326): Measurement
of Credit Losses on
Financial Instruments
(as amended by ASU
No. 2018-19)
Description
This standard amends FASB’s guidance on the
impairment of financial instruments by adding an
impairment model (known as the current expected
credit loss (CECL) model) that is based on
expected losses rather than incurred losses. Under
the new guidance, an entity recognizes as an
allowance its estimate of expected credit losses.
Date of Adoption
January 2020
Effect on the Financial Statements or Other
Significant Matters
The adoption of ASU No. 2016-13 is not
expected to have a material effect on our
Consolidated Financial Statements. Our
financial instruments that are subject to credit
risk primarily include trade accounts
receivable, which are short term in nature.
Further, we evaluated our historical credit
losses of trade accounts receivables for the
years 2014 through 2019, noting that they were
immaterial.
Upon adoption of ASU No. 2016-13, our credit
losses will be determined by applying an
expected loss rate to the outstanding balance of
accounts receivable for each of our reportable
segments (refer to Note 20) and our corporate
entities. The expected loss rates for our
reportable segments and corporate entities were
determined primarily using historical credit
losses, which are not expected to significantly
differ from what is currently expected over the
life of our trade receivables.
We do not expect the adoption of ASU No.
2018-13 to have a material impact on our
disclosures as we do not have any recurring or
nonrecurring Level 3 fair value measurements
as of December 31, 2019.
The standard modifies the disclosure
requirements of ASC 820 by eliminating and
modifying certain disclosures related to the fair
value hierarchy and adding new disclosures
related to Level 3 fair value measurements.
January 2020
January 2020
The standard adds requirements for an entity to
disclose (i) the weighted-average interest
crediting rates used in cash balance pension plans,
(ii) a description of the reasons for significant
gains and losses affecting the benefit obligation
and (iii) an explanation of any other significant
changes in the benefit obligation or plan assets. It
also removes certain disclosures for defined
benefit plans.
We do not expect the adoption of ASU No.
2018-14 to have a material impact on our
disclosures. We do not have a cash balance
pension plan and do not expect gains or losses
on our pension obligation to be material to the
Consolidated Financial Statements based on
our resort portfolio as of December 31, 2019.
The standard aligns the requirements for
capitalizing implementation costs incurred in a
hosting arrangement that is a service contract
with the requirements for capitalizing
implementation costs incurred to develop or
obtain internal-use software.
January 2020
We do not expect the adoption of ASU No.
2018-15 to have a material impact on our
Consolidated Financial Statements as
implementation costs for our hosting
arrangements that are service contracts have
historically been immaterial.
ASU No. 2018-13,
Fair Value
Measurement (Topic
820): Disclosure
Framework-Changes
to the Disclosure
Requirements for Fair
Value Measurement
ASU No. 2018-14,
Compensation-
Retirement Benefits-
Defined Benefit Plans-
General (Subtopic
715-20): Disclosure
Framework—Changes
to the Disclosure
Requirements for
Defined Benefit Plans
ASU No. 2018-15,
Intangibles-Goodwill
and Other-Internal-
Use Software
(Subtopic 350-40):
Customer’s Accounting
for Implementation
Costs Incurred in a
Cloud Computing
Arrangement That is a
Service Contract
ASU No. 2019-12,
Income Taxes (Topic
740): Simplifying the
Accounting for Income
Taxes
The standard simplifies the accounting for income
taxes, eliminates certain exceptions within ASC
740, Income Taxes, and clarifies certain aspects of
the current guidance to promote consistency
among reporting entities.
January 2021
We are in the process of evaluating the impact
of ASU No. 2019-12. We expect the adoption
of this standard to result in changes to deferred
tax liabilities and deferred income tax expense
for our resorts located in the Dominican
Republic, which are subject to hybrid tax
regimes.
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Note 3. Revenue
The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in
Note 20) ($ in thousands):
Package revenue
Non-package revenue
Management fees
Cost reimbursements
Total revenue
Package revenue
Non-package revenue
Management fees
Cost reimbursements
Total revenue
Package revenue
Non-package revenue
Management fees
Total revenue
Performance obligations
Year Ended December 31, 2019
Yucatán
Peninsula
Pacific
Coast
Dominican
Republic
Jamaica
Other
Total
$
212,794
$
76,056
$
75,874
$
173,364
$
— $
538,088
31,282
12,620
15,067
—
—
—
—
—
—
31,164
—
4,678
24
1,820
1,734
90,157
1,820
6,412
$
244,076
$
88,676
$
90,941
$
209,206
$
3,578
$
636,477
Year Ended December 31, 2018
Yucatán
Peninsula
Pacific
Coast
Dominican
Republic
Jamaica
Other
Total
$
236,815
$
75,506
$
104,858
$
114,569
$
342
$
532,090
30,141
13,866
20,279
18,941
—
—
—
—
—
—
—
—
(37)
755
978
83,190
755
978
$
266,956
$
89,372
$
125,137
$
133,510
$
2,038
$
617,013
Year Ended December 31, 2017
Yucatán
Peninsula
Pacific
Coast
Dominican
Republic
Jamaica
Other
Total
$
242,296
$
76,170
$
104,167
$
58,542
$
— $
481,175
34,440
—
14,775
—
19,958
—
9,054
—
$
276,736
$
90,945
$
124,125
$
67,596
$
3
140
143
78,230
140
$
559,545
We recognize revenues when the performance obligations are satisfied by transferring control of the product or service to our
customers as described in Note 2.
We do not disclose the value of unsatisfied performance obligations for contracts with consideration determined by our
performance completed to date or with an expected length of one year or less. Due to the nature of our business, our revenue is not
significantly impacted by refunds. Cash payments received in advance of guests staying at our resorts are refunded to hotel guests if
the guest cancels within the specified time period, before any services are rendered. Refunds related to service are generally
recognized as an adjustment to the transaction price at the time the hotel stay occurs or services are rendered.
Contract assets and liabilities
We do not have any material contract assets as of December 31, 2019 and 2018 other than trade and other receivables on our
Consolidated Balance Sheet. Our receivables are primarily the result of contracts with customers, which are reduced by an allowance
for doubtful accounts that reflects our estimate of amounts that will not be collected.
We record contract liabilities when cash payments are received or due in advance of guests staying at our resorts, which are
presented as advance deposits (see Note 19) within trade and other payables on our Consolidated Balance Sheet. Our advanced
deposits are generally recognized as revenue within one year.
Contract costs
We consider sales commissions earned to be incremental costs of obtaining a contract with our customers. As a practical
expedient, we expense these costs as incurred when the period to be benefited is less than one year.
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Note 4. Business combinations
Business combination with the Sagicor Parties
On February 26, 2018, we entered into a Share Exchange Implementation Agreement with JCSD Trustee Services Limited, X
Fund Properties Limited, Sagicor Pooled Investment Funds Limited, and Sagicor Real Estate X Fund Limited (collectively, the
“Sagicor Parties”), as amended by that certain First Amendment to Share Exchange Implementation Agreement dated May 31, 2018
(as amended, the “Contribution Agreement”). Pursuant to the Contribution Agreement, the Sagicor Parties agreed to contribute a
portfolio of the following assets (the “Sagicor Assets”) to a subsidiary of ours in exchange for consideration consisting of a
combination of our ordinary shares and cash:
• The Hilton Rose Hall Resort & Spa;
• The Jewel Runaway Bay Beach Resort & Waterpark;
• The Jewel Dunn’s River Beach Resort & Spa;
• The Jewel Paradise Cove Beach Resort & Spa;
• The 88 units comprising one of the towers in the multi-tower condominium and spa at the Jewel Grande Montego Bay Resort
& Spa;
• Developable land sites adjacent to the Jewel Grande Montego Bay Resort & Spa and the Hilton Rose Hall Resort & Spa;
• The management contract for the units owned by the Sagicor Parties at the Jewel Grande Montego Bay Resort & Spa; and
• All of the Sagicor Parties’ rights to “The Jewel” hotel brand.
On June 1, 2018 (the “Acquisition Date”), we consummated our acquisition of the Sagicor Assets for total consideration, after
prorations and working capital adjustments, of $308.5 million. We accounted for the acquisition as a business combination in
accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, and allocated the purchase price to the fair
values of assets acquired and liabilities assumed. The business combination with the Sagicor Parties allows us to expand our portfolio
of resorts in the all-inclusive segment of the lodging industry, capitalize on opportunities for growth and create significant operational
synergies.
The following table summarizes the fair value of each class of consideration transferred to the Sagicor Parties on the Acquisition
Date ($ in thousands, except share data):
Cash consideration, net of cash acquired of $0.1 million
Ordinary shares (20,000,000 shares at the Acquisition Date closing price of $10.77 per share, €0.10 par value)
Total purchase consideration
$
$
93,128
215,400
308,528
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Fair values of assets acquired and liabilities assumed
The following table presents our estimates of fair values of the assets that we acquired and the liabilities that we assumed on the
n
Acquisition Date as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 filed with the
SEC on February 28, 2019 and as finalized during the three months ended June 30, 2019 ($ in thousands):
Total purchase consideration
Net assets acquired
Working capital
Property and equipment
Identifiable intangible assets and liabilities
Deferred income taxes
Goodwill
Total net assets acquired
$
June 1, 2018
(as previously reported)
308,528
$
$
Adjustments(1)
June 1, 2018
(as finalized)
— $
308,528
(1,665)
304,299
(449)
(25,582)
31,925
308,528
$
—
(5,950)
—
5,099
851
— $
(1,665)
298,349
(449)
(20,483)
32,776
308,528
________
(1) In addition to the adjustments recorded during the measurement period, we recognized adjustments to deferred income taxes and goodwill representing an
immaterial correction of an error for acquired property and equipment in the third quarter of 2019. The adjustments made in the third quarter of 2019 were
not significant to our previously reported Consolidated Financial Statements.
Property and equipment
Property and equipment primarily consists of the all-inclusive resorts and adjacent developable land sites. We estimated the value
of the acquired property and equipment using a combination of the income and market approaches, which are primarily based on
significant Level 2 and Level 3 assumptions (as described in Note 17), such as estimates of future income growth, capitalization rates,
discount rates, and capital expenditure needs of the Sagicor Assets.
Identified intangible assets and liabilities
The following table presents our estimates of the fair values of the identified intangible asset and liability and their related
estimated useful lives ($ in thousands):
Management contract
Unfavorable ground lease liability
Total identifiable intangibles acquired
Balance Sheet Classification
Other intangible assets
Other liabilities
Estimated Fair
Value
Weighted-Average
Amortization Period
(in years)
$
$
1,900
(2,349)
(449)
20
22
We estimated the value of the management contract using the multi-period excess earnings valuation method, which is a variation
of the income valuation approach. This method estimates an intangible asset’s value based on the present value of its incremental
after-tax cash flows. This valuation approach utilizes Level 3 inputs (as described in Note 17).
Deferred income taxes
Deferred income taxes primarily relate to the fair value of non-current assets and liabilities acquired from the Sagicor Parties,
including property and equipment and intangible liabilities. We calculated deferred income taxes based on the statutory rate in the
jurisdiction of the legal entities where the acquired non-current assets and liabilities are recorded. Deferred tax assets, net of a $0.7
million valuation allowance, were $0.2 million and deferred tax liabilities were $20.7 million related to the acquisition.
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t
Goodwill
The excess of the purchase consideration over the aggregate fair values of assets acquired and liabilities assumed was recorded asd
goodwill. The goodwill recognized is attributable primarily to expected synergies and future growth opportunities of our combined
operations and is not deductible for income tax purposes. Goodwill related to the business combination was recognized at the Jamaica
reportable segment (refer to discussion of our reportable segments in Note 20).
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Pro forma results of operations
The following unaudited pro forma results of operations were prepared as though the business combination was completed on
January 1, 2017. This unaudited pro forma financial information does not necessarily reflect the results of operations of Playa that
actually would have resulted had the acquisition of the Sagicor Assets occurred at the date indicated, nor does it project the results of
operations of Playa for any future date or period ($ in thousands, except per share amounts)
d
a
:
Pro forma revenue
Pro forma net income
Year Ended December 31,
2018
2017
$
$
666,778
31,511
$
$
662,669
3,497
The unaudited pro forma financial information for the years ended December 31, 2018 and 2017 includes adjustments for:
• Depreciation and amortization expense resulting from the estimated fair values of acquired property and equipment and
identifiable definite-lived intangible assets and liabilities, respectively;
• Elimination of the Sagicor Assets’ management fees and interest expense;
•
Interest expense resulting from the issuance of a $100.0 million term loan add-on; and
• Related income tax effects.
For the year ended December 31, 2018, we incurred $2.9 million in transaction costs related to the acquisition and $1.3 million in
n
transaction costs related to the issuance of the $100.0 million term loan add-on. These costs are recorded within selling, general and
administrative expenses in the Consolidated Statements of Operations and are reflected in unaudited pro forma net income for the year
ended December 31, 2017 in the table above.
Sagicor Assets' results of operations
The following table presents the results of the Sagicor Assets' operations, which are recorded within our Jamaica reportable
segment, included in our Consolidated Statements of Operations for the period from the Acquisition Date through December 31, 2018
($ in thousands):
Revenue
Net income
Recapitalization transaction
June 2, 2018 -
December 31, 2018
$
$
55,598
898
At 12:00 a.m. Central European Time on March 12, 2017, we consummated a business combination (the “Pace Business
Combination”) pursuant to that certain transaction agreement by and among us, Playa Hotels & Resorts B.V. (our “Predecessor”), Pace
Holdings Corp. (“Pace”) and New Pace Holdings Corp. (“New Pace”), the effects of which replicated the economics of a reverse
merger between our Predecessor and Pace. In connection with the Pace Business Combination, Pace formed Porto Holdco B.V., a
Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid), as a wholly-owned subsidiary to
facilitate the reverse merger with our Predecessor. Prior to the consummation of the Pace Business Combination, Porto Holdco B.V.
was converted to a Dutch public limited liability company (naamloze vennootschap) and changed its name to Porto Holdco N.V. Upon
the consummation of the Pace Business Combination, our name was changed to Playa Hotels & Resorts N.V.
For accounting and financial reporting purposes, the Pace Business Combination was accounted for as a recapitalization of our
Predecessor because Pace was incorporated as a special purpose acquisition company and considered a public shell company. Our
Predecessor also maintained effective control of the combined entity because our Predecessor's operations comprise the ongoing
operations of the combined entity, our Predecessor's senior management became the senior management of the combined entity and
our Predecessor's directors were appointed to, and constitute the majority of, the combined entity's board of directors. Accordingly, no
step-up in basis of assets or goodwill was recorded.
The Consolidated Financial Statements presented herein are those of our Predecessor for all periods prior to the completion of the
Pace Business Combination. The number of ordinary shares presented as outstanding as of December 31, 2015 totaled 50,481,822 and
consisted of the number of ordinary shares issued to Predecessor shareholders. This number of shares was also used to calculate our
earnings per share for all periods prior to the Pace Business Combination.
79
The consideration received as a result of the Pace Business Combination is summarized as follows ($ in thousands):
Purchase of all of our Predecessor's cumulative redeemable preferred shares (1)
Net cash transferred from Pace
Playa employee offering (2)
Total consideration transferred
$
$
353,873
78,859
799
433,531
________
(1) Balance consisted of the face value of our Predecessor's cumulative redeemable preferred shares (“Preferred Shares”) and their associated paid-in-kind
(“PIK”) dividends as of March 10, 2017, per the terms of the Pace Business Combination.
(2) In connection with the Pace Business Combination, we entered into subscription agreements (the “Subscription Agreements”) with Playa employees, their
family members and persons with business relationships with Playa, pursuant to which those persons agreed to purchase 82,751 ordinary shares for an
aggregate purchase price of $0.8 million.
Note 5. Property and equipment
The balance of property and equipment is as follows ($ in thousands):
Property and equipment, gross
Land, buildings and improvements
Fixtures and machinery
Fixtures and machinery
Furniture and other fixed assets
Construction in progress
Total property and equipment, gross
Accumulated depreciation
Total property and equipment, net
As of December 31,
2019
2018
$
$
1,976,214
$
1,787,727
81,437
228,533
42,083
2,328,267
(398,353)
1,929,914
$
69,396
195,036
106,520
2,158,679
(350,267)
1,808,412
Depreciation expense for property and equipment was $100.8 million, $72.3 million and $52.2 million for the years ended
December 31, 2019, 2018 and 2017, respectively.
For the years ended December 31, 2019, 2018 and 2017, $13.1 million, $5.2 million and $1.6 million of interest expense was
capitalized on qualifying assets, respectively. Interest expense was capitalized using the weighted-average interest rate of the debt.
Hyatt Ziva and Hyatt Zilara Cap Cana development
On July 12, 2017, we acquired the land for the new Hyatt Ziva and Hyatt Zilara Cap Cana in Punta Cana, Dominican Republic for
total consideration of $56.2 million. We paid $45.6 million of the consideration in cash upon closing of the acquisition. The remaining
$10.6 million balance was initially due on the earlier of (i) two years from the beginning of construction of the resorts, or the third
quarter of 2019, or (ii) the opening of the resorts. However, we received an extension and the payment was remitted during the fourth
quarter of 2019.
t
Note 6. Income taxes
Net (loss) income before tax is summarized below ($ in thousands):
Domestic
Foreign
Net (loss) income before tax
Year Ended December 31,
2018
2017
2019
$
$
(7,030) $
(14,547)
(21,577) $
(5,168) $
36,344
31,176
$
(6,066)
14,876
8,810
80
The components of our income tax benefit (provision) for the years ended December 31, 2019, 2018 and 2017 were as follows ($
in thousands):
Current
Domestic
Foreign
Total current income tax provision
Deferred
Domestic
Foreign
Total deferred income tax benefit (provision)
Income tax benefit (provision)
Year Ended December 31,
2019
2018
2017
$
$
(8) $
(1) $
(5,592)
(5,600)
(9,183)
(9,184)
7,684
15,136
22,820
17,220
$
—
(3,015)
(3,015)
(12,199) $
(67)
(7,967)
(8,034)
—
(1,017)
(1,017)
(9,051)
Reconciliation of Netherlands statutory income tax rate to actual income tax rate
A reconciliation of The Netherlands statutory income tax rate to our effective income tax rate from continuing operations is as
follows ($ in thousands):
Income tax benefit (provision) at statutory rate
Differences between statutory rate and foreign
rate
Inflation adjustments
Nondeductible interest and expenses
Debt extinguishment and other
Business interruption proceeds
Goodwill impairment
Other
Foreign exchange rate differences
Dominican Republic tax classification
Dutch and U.S. rate change
Change in valuation allowance
Income tax benefit (provision)
Year Ended December 31,
2019
2018
2017
$
5,394
25.0 % $
(7,794)
25.0 % $
(2,203)
25.0 %
18,836
4,276
(12,043)
—
—
(1,542)
(60)
(6,038)
(6,109)
3,952
10,554
17,220
$
87.3 %
19.8 %
(55.8)%
— %
— %
(7.1)%
(0.3)%
(28.0)%
(28.3)%
18.3 %
48.9 %
79.8 % $
21,629
4,848
(7,963)
—
—
—
(193)
(3,561)
(5,145)
(13,721)
(299)
(12,199)
(69.4)%
(15.6)%
25.5 %
— %
— %
— %
0.7 %
11.4 %
16.5 %
44.0 %
1.0 %
39.1 % $
16,277
5,009
(6,975)
536
(164)
—
229
(3,183)
3,994
(2,590)
(19,981)
(9,051)
(184.8)%
(56.9)%
79.2 %
(6.1)%
1.9 %
— %
(2.6)%
36.1 %
(45.3)%
29.4 %
226.8 %
102.7 %
We are domiciled in The Netherlands and are taxed in The Netherlands with our other Dutch subsidiaries. Dutch companies are
subject to Dutch corporate income tax at a general tax rate of 25%.
For the year ended December 31, 2019, we recognized an income tax benefit of $17.2 million, resulting in an effective tax rate for
the year of 79.8%. The 2019 income tax benefit was driven primarily by an $18.8 million tax benefit from our rate-favorable
tt
jurisdictions, a $4.3 million tax benefit associated with inflation adjustments, a $4.0 million tax benefit on measurement of the Dutch
deferred tax assets and liabilities pursuant to the Dutch tax rate change and a $10.6 million decrease in our valuation allowance. The
income tax benefit was partially offset by the $13.6 million tax expense on non-deductible interest, goodwill impairment expense and
other expenses, a $6.1 million expense associated with our Dominican Republic entities and a $6.0 million tax expense associated with
foreign exchange rate fluctuations.
During the first quarter of 2019, we implemented a new transfer pricing policy, where the intercompany pricing mechanics
between our entities are based on the return on operating assets per applicable guidelines defined by the Organization for Economic
Cooperation and Development. As a result, certain of our hotel entities that were previously in loss positions became profitable, which
resulted in the release of their valuation allowances. Subsequent to the first quarter of 2019, we continued to evaluate our overall
global structure and available tax planning strategies. We also evaluated the potential impact of legislative changes in foreign
81
jurisdictions. During the fourth quarter of 2019, we implemented a second new transfer pricing policy, a cost-plus policy for our U.S.
management companies, effective on January 1, 2020. As a result, our management company which was previously in a loss position
is now expected to be profitable and we released its valuation allowance in the fourth quarter of 2019. The total tax benefit of $20.8
million related to the valuation allowance releases, as well as the other income tax effects related to both policies, have been reflected
in the income tax computation for the year ended December 31, 2019.
For the year ended December 31, 2018, we recognized an income tax provision of $12.2 million, resulting in an effective tax rate
for the year of 39.1%. The 2018 income tax provision was driven primarily by $13.7 million of tax expense on measurement of the
Dutch deferred tax assets and liabilities pursuant to the Dutch tax rate change, an $8.0 million tax expense on non-deductible interest
and other expenses, a $5.1 million expense associated with our Dominican Republic entities and a $3.6 million tax expense associated
with foreign exchange rate fluctuations. The net income tax expense was partially offset by the tax benefit of $21.6 million from the
rate-favorable jurisdictions and a $4.8 million tax benefit associated with inflation adjustments.
For the year ended December 31, 2017, we recognized an income tax provision of $9.1 million, resulting in an effective tax rate
for the year of 102.7%. The 2017 income tax provision was driven primarily by $20.0 million tax expense due to additional valuation
allowance established on our deferred tax assets, a $3.2 million tax expense associated with foreign exchange rate fluctuations and
a $7.0 million tax expense on non-deductible interest and other expenses. The net income tax expense was partially offset by the tax
benefit of $16.3 million from the rate-favorable jurisdictions, a $5.0 million tax benefit associated with inflation adjustments and
a $4.0 million tax benefit on the reversal of the 2016 tax expense for one of our Dominican Republic entities pursuant to the Advanced
Pricing Agreement (“APA”) signed with Dominican Republic tax authorities in December 2017. This agreement is retroactive to 2016.
aa
We have a taxable presence in a variety of jurisdictions worldwide, most significantly in Mexico, the Netherlands, the Dominicanaa
Republic and Jamaica. We have been granted certain “tax holidays,” providing us with temporary income tax exemptions. Specifically,
three of our entities in the Dominican Republic are under a tax holiday. Inversiones Vilazul, S.A.S, has a tax exemption through
December 31, 2019. Playa Romana Mar B.V. and Playa Dominican Resorts B.V. are tax exempted for 15 years starting in 2019.
Effects of the Dutch Tax Rate Change
On December 18, 2018, the Dutch Senate approved the 2019 tax package. Effective January 1, 2019, the corporate tax rate
reduced from 25% to 22.55% for 2020, and 20.5% for 2021 and forward for amounts in excess of €0.2 million. These adjusted rates
impact the carrying value of our deferred tax assets that are offset by a full valuation allowance. Additionally, our Netherlands entities
have deferred tax liabilities on fixed assets without a valuation allowance. Our Netherlands deferred tax assets decreased $14.4 million
and valuation allowance decreased $14.4 million without resulting in financial impact. Our Netherlands deferred tax liabilities on
fixed assets decreased by $0.7 million, which has a deferred tax benefit of $0.7 million impact to the financial statement at the year
ended December 31, 2018.
tt
On December 17, 2019, the Dutch Senate approved the 2020 tax package, effective January 1, 2020. Compared to the 2019 tax
package, the 2020 tax package increases the corporate tax rate to 25% for 2020 and increases the corporate tax rate to 21.7% for 2021
and forward for amounts in excess of €0.2 million. These adjusted rates increased the carrying value of our deferred tax assets by $4.2
million, which was offset by a full valuation allowance increase of $4.2 million and resulted in no net financial statement impact.
Additionally, our Netherlands deferred tax liabilities on fixed assets increased by $0.2 million, which increased deferred tax expense
by $0.2 million for the year ended December 31, 2019.
Dominican Republic
Taxes in the Dominican Republic are determined based upon APAs approved by the Ministry of Finance of the Dominican
Republic. APAs were signed in December 2017 and remain in effect until 2019 for three of our Dominican Republic hotel entities:
Playa Cana, B.V., Playa Romana Mar, B.V. and Inversiones Vilazul, S.A.S. These APAs were extended through 2020. Pursuant to the
signed APAs, our Dominican Republic entities are subject to the greater of an income tax, asset tax or gross receipts tax. Our newly
built hotel, Playa Dominican Resorts B.V., opened in November 2019 and the APA for this hotel is in the negotiation process.
During 2019, our Dominican Republic entities were not subject to income tax. We projected that they will be subject to income
taxes in some of the foreseeable years. We infer from ASC 740-10-55-144 that under these circumstances, a hybrid tax rate is
applicable to compute deferred tax expenses. As such, for the year ended December 31, 2019, we recorded deferred tax expense of
$5.7 million. We will closely monitor the operations of our Dominican Republic entities and update the computation as necessary on a
y
quarterly basis.
During 2018, some of our Dominican Republic entities were subject to income tax. We projected that they will be subject to
income taxes in some of the foreseeable years. We infer from ASC 740-10-55-144 that under these circumstances, a hybrid tax rate is
82
applicable to compute deferred tax expenses. As such, for the year ended December 31, 2018, we recorded current income tax expense
of $0.3 million and deferred tax expense of $4.8 million.
During 2017, our Dominican Republic entities were not income tax payers and we project the same trend for the foreseeable
future; therefore, our Dominican Republic entities are not subject to income tax accounting under U.S. GAAP. As such, the income tax
expense recorded at December 31, 2016 was reversed at December 31, 2017.
Deferred income taxes
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities
and their tax bases, as well as net operating losses and tax credit carry-forwards. We measure those balances using the enacted taxd
rates we expect will be in effect when we pay or recover taxes. Deferred income tax assets represent amounts available to reduce
income taxes we will pay on taxable income in future years. We evaluate our ability to realize these future tax deductions and credits
by assessing whether we expect to have sufficient future taxable income from all sources, including reversal of taxable temporaryaa
differences, forecasted operating earnings and available tax planning strategies to utilize these future deductions and credits. We
establish a valuation allowance when we no longer consider it more likely than not that a deferred tax asset will be realized.
The tax effect of each type of temporary difference and carry-forward that gives rise to a significant portion of our deferred tax
assets and liabilities as of December 31, 2019 and 2018 were as follows ($ in thousands):
As of December 31,
2019
2018
Deferred tax assets
Advance customer deposits
Trade payables and other accruals
Labor liability accrual
Property and equipment
Lease obligation
Other assets
Net operating losses
Total deferred tax asset
Valuation allowance
Net deferred tax asset
Deferred tax liabilities
$
5,074
$
8,381
1,020
788
1,123
2,564
110,135
129,085
(79,788)
49,297
613
124,121
1,123
125,857
(76,560) $
6,098
5,210
757
766
—
—
98,874
111,705
(94,575)
17,130
1,113
119,800
823
121,736
(104,606)
Accounts receivable and prepayments to vendors
Property and equipment
Other liabilities
Total deferred tax liability
Net deferred tax liability
$
As of December 31, 2019 and 2018, we had $35.1 million and $18.9 million, respectively, of net operating loss carryforwards in
our Mexican subsidiaries that expire in varying amounts from 2020 to 2029.
As of December 31, 2019 and 2018, we had $356.3 million and $349.5 million, respectively, of net operating loss carryforwards
in our Dutch subsidiaries that expire in varying amounts from 2020 to 2027.
As of December 31, 2019 and 2018, we had $56.5 million and $61.0 million, respectively, of net operating loss carryforwards in
our Jamaica subsidiaries. Jamaican NOLs do not expire, however, the utilization is limited to 50% of taxable income before the net
operating loss deduction annually for our legacy Jamaican entity. This 50% cap does not apply to our Jamaican entities formed in 2018
because of the exception that it does not apply during the five years of assessment following the first year of operation of a new trade,
profession, or business.
83
As of December 31, 2019 and 2018, we had $28.5 million and $20.5 million, respectively, of net operating loss carryforwards in
our U.S. subsidiary. These carryforwards generated pre-2018 expire in various amounts from 2034 to 2037, while net operating losses
generated in 2018 and forward do not expire.
As of December 31, 2019 and 2018, we had no net operating loss carryforwards in our Dominican Republic subsidiary.
The ability to utilize the tax net operating losses in any single year ultimately depends upon our ability to generate sufficient
taxable income.
We have made no provision for foreign or domestic income taxes on the cumulative unremitted earnings of our subsidiaries. We
asserted to permanently reinvest the foreign earnings and has no intention to repatriate foreign earnings to the U.S. within the
foreseeable future.
The change in the valuation allowance established against our deferred tax assets for the years ended December 31, 2019, 2018
and 2017 is summarized in the following table ($ in thousands):
December 31, 2019
December 31, 2018
December 31, 2017
Balance at
January 1
Additions
Deductions
Balance at
December 31
$
$
$
(94,575) $
(98,755) $
(81,738) $
(7,008) $
(23,789) $
(19,469) $
21,795
27,969
2,452
$
$
$
(79,788)
(94,575)
(98,755)
The valuation allowance for each period is used to reduce the deferred tax asset to a more likely than not realizable value. As of
December 31, 2019, our valuation allowance relates primarily to net operating loss carryforwards, which we do not expect to utilize,
most notably in Netherlands, and certain legal entities in Mexico and Jamaica.
We are subject to income taxes in a variety of jurisdictions worldwide. For our significant jurisdictions, the earliest years that
remain subject to examination are 2008 for Mexico, 2017 for Netherlands, 2014 for Jamaica and 2016 for the Dominican Republic and
the United States. We consider the potential outcome of current and future examinations in our assessment of our reserve for uncertain
tax positions.
aa
tt
We had no uncertain tax positions as of December 31, 2019, 2018 and 2017.
Note 7. Related party transactions
Relationship with Hyatt
In connection with the Pace Business Combination, all outstanding Preferred Shares of our Predecessor owned by HI Holdings
Playa were purchased at a purchase price of $8.40 per share for $196.0 million in face value and $93.6 million of associated PIK
dividends. Subsequent to the Pace Business Combination, Hyatt continued to be a related party due to its ownership of our ordinary
shares and representation on our Board of Directors.
We pay Hyatt fees associated with the franchise agreements of our resorts operating under the all-ages Hyatt Ziva and adults-only
Hyatt Zilara brands and receive reimbursements for guests that pay for their stay using the World of Hyatt® guest loyalty program.
Relationship with Real Shareholder
In connection with the Pace Business Combination, all outstanding Preferred Shares of our Predecessor owned by the selling
shareholder of Real Resorts (“Real Shareholder”) were purchased at a purchase price of $8.40 per share for $43.5 million in face value
and $20.8 million of associated PIK dividends. Upon the consummation of the Pace Business Combination, the Real Shareholder was
no longer considered a related party because the Preferred Shares were extinguished in connection with the Pace Business
Combination.
The Real Shareholder was one of the lenders of our term loan associated with the Senior Secured Credit Facility, as defined in
Note 15. Additionally, one of our previous offices in Cancún, Mexico was owned by an affiliate of the Real Shareholder, and we
subleased the space from a third party also affiliated with the Real Shareholder. We terminated this lease agreement effective July 1,
2017. Lease payments related to this space were less than $0.1 million for the year ended December 31, 2017.
84
Relationship with Sagicor
In connection with the acquisition of the Sagicor Assets, we issued 20,000,000 of our ordinary shares to affiliates of Sagicor
Group Jamaica Limited (Sagicor”). Sagicor is considered a related party due to the ownership of our ordinary shares by its affiliated
entities and representation on our Board of Directors.
We pay Sagicor for insurance coverage for some of our Jamaica employees and properties. As of December 31, 2018, we were
also owed $4.8 million from Sagicor related to advance deposits and credit card collections which were paid to Sagicor, rather than us,
following the acquisition. As of December 31, 2019, substantially all of this amount has been received.
Sagicor is also a part owner of the Jewel Grande Montego Bay Resort & Spa and compensates us as manager of the property.
Relationship with Sabre
We have a service agreement with Sabre Hospitality Solutions (“Sabre”), a division of Sabre GLBL Inc., for use of a central
reservation and direct booking system. Sabre also provides call center services. Sabre is considered a related party as a member of our
Board of Directors currently serves on the board of Sabre Corporation, the parent company of Sabre GLBL Inc.
Lease with our Chief Executive Officer
One of our offices is owned by our Chief Executive Officer and we sublease the space at that location from a third party.
Transactions with related parties
Transactions between us and related parties during the years ended December 31, 2019, 2018 and 2017 were as follows ($ in
thousands):
Related Party
Hyatt
Sagicor
Sagicor
Sabre
Chief Executive Officer
Hyatt and Real Shareholder
Real Shareholder
Real Shareholder
Transaction
Hyatt franchise fees (1)
Insurance premiums (1)
Cost reimbursements
Booking and call center services (2)
Lease expense (2)
Dividends on the Preferred Shares (3)
Deferred consideration accretion (4)n
Interest expense on related party debt (4)
$
$
$
$
$
$
$
$
Year Ended December 31,
2018
2019
2017
17,423
1,659
5,142
989
745
$
$
$
$
$
— $
— $
— $
16,688
1,765
$
$
— $
— $
989
$
— $
— $
— $
14,105
—
—
—
1,032
7,922
36
372
________
(1) Included in direct expense in the Consolidated Statements of Operations with the exception of certain immaterial fees associated with the Hyatt franchise
agreements, which are included in selling, general, and administrative expense.
(2) Included in selling, general, and administrative expense in the Consolidated Statements of Operations.
(3) Included in dividends of cumulative redeemable preferred shares in the Consolidated Statements of Operations.
(4) Included in interest expense in the Consolidated Statements of Operations.
Note 8. Commitments and contingencies
Litigation, claims and assessments
We are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and
other general liability claims, and workers' compensation and other employee claims. Most occurrences involving liability and claims
of negligence are covered by insurance with solvent insurance carriers. We recognize a liability when we believe the loss is probable
and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in
the aggregate, have a material effect on our Consolidated Financial Statements.
aa
The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits
and losses of group companies can be offset against each other. Our Dutch companies file as a fiscal unity, with the exception of Playa
85
Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V. Playa Resorts Holding B.V. is the head of our Dutch fiscal
unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.
During the third quarter of 2015, we identified and recorded a potential Dutch operating tax contingency resulting from
allocations to be made of certain corporate expenses from 2014 and 2015. We provided all requested documentation to the Dutch tax
authorities and, in the fourth quarter of 2018, they reached their final determination resulting in a gain of $1.2 million reported in other
(expense) income for the year ended December 31, 2018. As of December 31, 2018 and 2019, there was no operating tax contingency
outstanding.
Note 9. Leases
On January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), as described in Note 2, using the
transition method outlined in ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. The adoption of ASU 2016-02 resulted
in no cumulative adjustment to accumulated deficit as our lease portfolio consists solely of operating leases. The comparative periods
presented in our Consolidated Financial Statements are presented in accordance with ASC 840, Leases and do not reflect the impact of
ASU 2016-02. On the date of adoption, January 1, 2019, we recorded right-of-use assets of $5.0 million and lease liabilities of $5.3
million related to our portfolio of operating leases (see Note 19 for balances as of December 31, 2019).
f
We elected the following practical expedients, as provided under the applicable transition guidance:
•
Package of practical expedients, which, among other things, allows us to carry forward our prior lease classifications under
ASC 840, Leases; and
• Recognized lease payments on a straight-line basis over the lease term for all leases with a term of 12 months or less and
were not classified on the balance sheet.
Our administrative offices, located in Virginia, Florida and Cancún, are leased under various lease agreements that extend for
varying periods through 2025, with the option to extend our Cancún and Florida office leases through 2026 and 2030, respectively.
The extension options are reasonably certain to be exercised and included in the amounts recorded. Our administrative offices contain
lease components (e.g., fixed rent payments) and non-lease components (e.g., common-area maintenance, shared service costs and
insurance costs), which we account for separately. The lease components and non-lease components associated with our administrative
offices represent the majority of our lease expense and variable lease expense, respectively.
Our minimum future lease payments under non-cancelable operating leases with third parties and related parties and lease liability
as of December 31, 2019 were as follows ($ in thousands):
As of December 31, 2019
Minimum future lease payments
2020
2021
2022
2023
2024
2025
Thereafter
Total minimum future lease payments
Less: imputed interest
Total lease liability
$
$
991
1,036
1,074
786
652
686
2,243
7,468
(1,260)
6,208
86
Our minimum future lease payments at December 31, 2018 payable under non-cancelable operating leases with third parties and
related parties were as follows ($ in thousands):
2019
2020
2021
2022
2023
Thereafter
Total minimum future lease payments
As of December 31, 2018
$
$
1,199
1,031
1,016
1,044
745
3,394
8,429
The following table presents the components of lease expense and supplemental cash flow information for the year ended
December 31, 2019 ($ in thousands):
Lease expense (1)(2)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash outflows for operating leases
Year Ended December 31,
2019
$
$
2,563
643
________
(1) Includes variable lease and short term lease expenses, which are considered individually immaterial. Our lease expense is reported in direct expense and
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selling, general and administrative expense in the Consolidated Statements of Operations depending on the nature of the lease.
(2) Lease expense under ASC 840, Leases, related to our non-cancelable operating leases, including variable lease cost, was $2.4 million and $2.0 million for
the years ended December 31, 2018 and 2017, respectively.
The following table presents other relevant information related to our leases as of December 31, 2019:
Weighted-average remaining lease term
Weighted-average discount rate (1)
7.95 years
4.54%
________
(1) The discount rates applied to each lease reflects our estimated incremental borrowing rate which was determined based on lending rates specific to the
type of leased real estate.
We rent certain real estate to third parties for office and retail space within our hotels. Our lessor contracts are considered
operating leases and generally have a contractual term of one to three years. The following table presents our rental income for the
year ended December 31, 2019 ($ in thousands):
Leases
Operating lease income (1)
Financial Statement Classification
Non-package revenue
________
(1) Includes variable lease revenue, which is typically calculated as a percentage of our tenant's net sales.
Note 10. Ordinary shares
Year Ended December 31,
2019
$
5,105
As of December 31, 2016, the number of ordinary shares presented as outstanding totaled 50,481,822. On March 12, 2017,
52,982,364 ordinary shares were issued as part of the recapitalization in the Pace Business Combination (see Note 4).
On May 22, 2017, we commenced an offer to exchange 0.1 ordinary shares for each outstanding warrant issued to former
shareholders of Pace, former holders of certain privately placed warrants of Pace and our Predecessor's former ordinary shareholders.
On June 23, 2017, a total of 65,933,459 warrants were tendered, resulting in the issuance of 6,593,321 ordinary shares. On July 17,
2017, 1,066,541 warrants were exchanged for 95,988 ordinary shares.
On December 28, 2017, a member of our Board of Directors waived his previously granted share-based compensation for his
services as a member of our Board, and transferred 7,367 ordinary shares back to us for no consideration. The shares are recorded as
treasury shares on the Consolidated Balance Sheet as of December 31, 2019.
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On June 1, 2018, 20,000,000 ordinary shares were issued as part of the business combination with the Sagicor Parties (see Note
4).
On December 14, 2018, our Board of Directors authorized the repurchase of up to $100.0 million of our outstanding ordinary
shares as market conditions and our liquidity warrant. The repurchase program is subject to certain limitations under Dutch law, ww
including existing repurchase authorization granted by our shareholders. Repurchases may be made from time to time in the open
market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions
and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the three monthsnn
and year ended December 31, 2019, we purchased 442,303 and 1,791,487 ordinary shares, respectively, under the repurchase program.
The shares repurchased are recorded as treasury shares on the Consolidated Balance Sheet as of December 31, 2019.
As of December 31, 2019, our ordinary share capital consisted of 129,121,576 ordinary shares outstanding, which have a par
value of €0.10 per share. In addition, 3,050,376 restricted shares and 20,367 share units were outstanding under the 2017 Plan (as
defined in Note 12). The holders of restricted shares are entitled to vote, but not dispose of, such shares until they vest. The holders of
share units are neither entitled to vote nor dispose of such shares until they vest.
Note 11. Warrants
We previously issued 3,000,000 warrants (the “Earnout Warrants”) which entitle the holders to acquire one ordinary share for
each Earnout Warrant for an exercise price of €0.10 per ordinary share in the event that the price per share underlying the Earnout
Warrants on the NASDAQ is greater than $13.00 for a period of more than 20 days out of 30 consecutive trading days within the fiveff
years after March 11, 2017. The Earnout Warrants expire on March 11, 2022 or earlier upon redemption or liquidation in accordance
with their term.
rr
On August 8, 2018, we repurchased 12,230 of the outstanding Earnout Warrants for less than $0.1 million. The Earnout Warrant
repurchase resulted in a reduction to paid-in capital and had no impact on our Consolidated Statements of Operations for the year
ended December 31, 2018.
As of December 31, 2019, there were 2,987,770 Earnout Warrants outstanding.
Note 12. Share-based compensation
We adopted our 2017 Omnibus Incentive Plan (the “2017 Plan”) to attract and retain independent directors, executive officers
and other key employees and service providers. The 2017 Plan was approved by our Board of Directors and shareholders on
March 10, 2017 and was amended on May 16, 2019 to increase the number of ordinary shares authorized and available for grant
from 4,000,000 shares to 12,000,000 shares. The Compensation Committee of our Board of Directors may award share options,
share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights, performance shares and
other performance-based awards, other equity-based awards and cash bonus awards under the 2017 Plan. As of December 31,
2019, there were 7,665,750 shares available for future grants under the 2017 Plan. Compensation expense related to the 2017 Plan aa
is recorded within selling, general and administrative expenses in the Consolidated Statements of Operations.
Restricted share awards
Restricted share awards consist of restricted shares and restricted share units that are granted to eligible employees, executives,
and board members and consist of ordinary shares (or the right to receive ordinary shares) subject to restrictions and a risk of
forfeiture. Restricted shares issued to employees and executives generally vest over a period of three or five years. Restricted share
units generally vest over a period of three years. For restricted share awards with a three-year vesting period, one-third of thett
award vests on each of the first three anniversaries of the grant date of the award. For restricted share awards with a five-year
vesting period, 25% of the award vests on the third anniversary of the grant date of the award, 25% vests on the fourth anniversary
of the grant date of the award and 50% vests on the fifth anniversary of the grant date of the award. Restricted share awards issued
to our directors for their services as directors generally vest immediately on the grant date of the award.
The vesting of restricted share awards is subject to the holder’s continued employment through the applicable vesting date.
Unvested restricted share awards will be forfeited if the employee’s or the executive’s employment terminates during the vesting
period, provided that unvested restricted share awards will accelerate upon certain terminations of employment as set forth in the
applicable award agreements.
The holders of restricted shares have the right to vote the restricted shares and receive all dividends declared and paid on such
shares, provided that dividends paid on unvested restricted shares will be subject to the same conditions and restrictions applicable
88
to the underlying restricted shares. The holders of restricted share units have no right to vote the underlying shares and may be
entitled to be credited with dividend equivalents in respect of each cash dividend declared and paid by us, in an amount per share
unit equal to the per-share dividend paid on our ordinary shares, which dividend equivalents will be deemed to have been
reinvested in additional restricted share units that are subject to the same terms and conditions applicable to the underlying
restricted share units to which they relate.
Compensation expense for restricted share awards is measured based upon the fair market value of our ordinary shares at the
date of grant and recognized on a straight-line basis over the vesting period.
A summary of our restricted share awards from January 1, 2019 to December 31, 2019 is as follows:
Unvested balance at January 1, 2019
Granted
Vested
Forfeited
Unvested balance at December 31, 2019
Number of Shares
Weighted-Average
Grant Date Fair
Value
1,718,684
$
1,000,184
(472,937)
(88,595)
2,157,336
$
10.19
7.25
9.46
9.30
9.03
The following table provides additional information on our restricted share awards for the years ended December 31, 2019,
2018 and 2017 ($ in thousands, except per share data):
Year Ended December 31,
2019
2018
2017
Weighted-average grant date fair value
Fair value of vested restricted share awards
Share-based compensation expense
$
$
$
7.25
3,600
8,065
$
$
$
10.25
1,963
5,072
$
$
$
10.19
1,545
3,587
As of December 31, 2019, the unrecognized compensation cost related to restricted share awards was $10.8 million and is
expected to be recognized over a weighted-average period of 1.9 years.
Performance share awards
Performance share awards consist of ordinary shares that may become earned and vested based on the achievement of
performance targets adopted by our Compensation Committee. The actual number of ordinary shares that ultimately vest will range
from 0% to 150% of the target award and will be determined at the end of the three-year performance period based on two
performance criteria as defined in the applicable award agreements for the period of performance.
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di
h d
h
hi h
Any ordinary shares that ultimately vest based on the achievement of the applicable performance criteria will be deemed to be
b
vested on the date on which our Compensation Committee certifies the level of achievement of such performance criteria. Except
ifi
d
in connection with certain qualifying terminations of employment, as set forth in the applicable award agreements, the awards
in connection with certain qualifying terminations of employment, as set forth in the applicable award agreements, t
require continued service through the certification date. The holders of these awards have voting rights equivalent to the target
level of ordinary shares granted to the holder and any dividends declared on such shares will be accumulated and paid within 30
days after and to the extent the target ordinary shares vest.
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hi
f h
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d
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b
f
f
f
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The grant date fair value of the portion of the award based on the compounded annual growth rate of our total shareholder
return was estimated using a Monte-Carlo model. The table below summarizes the key inputs used in the Monte-Carlo simulation
($ in thousands):
Performance Award Grant Date
Percentage of
Total Award
Grant Date
Fair Value by
Component
Volatility (1)
Interest
Rate (2)
Dividend
Yield
May 26, 2017
Total Shareholder Return
Adjusted EBITDA Comparison
January 2, 2018
Total Shareholder Return
Adjusted EBITDA Comparison
January 2, 2019
Total Shareholder Return
Adjusted EBITDA Comparison
September 19, 2019
Total Shareholder Return
Adjusted EBITDA Comparison
50% $
50% $
50% $
50% $
50% $
50% $
50% $
50% $
770
1,350
860
1,475
537
900
287
448
27.02%
—%
26.13%
—%
27.78%
—%
25.86%
—%
1.39%
—%
2.00%
—%
2.46%
—%
1.72%
—%
—%
—%
—%
—%
—%
—%
—%
—%
________
(1) Expected volatility was determined based on the historical share prices in our industry.
(2) The risk-free rate was based on U.S. Treasury zero coupon issues with a remaining term equal to the remaining term of the measurement period.
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In the table above, the total shareholder return component is a market condition as defined by ASC 718, Compensation—Stock
Compensation, and compensation expense related to this component is recognized on a straight-line basis over the vesting period.
The grant date fair value of the portion of the awards based on the compounded annual growth rate of our Adjusted EBITDA (as
defined in Note 20) was based on the closing stock price of our ordinary shares on such date. The Adjusted EBITDA component is
a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component is reassessed at
each reporting date based on our estimate of the probable level of achievement, and the accrual of compensation expense is
adjusted as appropriate.
A summary of our performance share awards from January 1, 2019 to December 31, 2019 is as follows:
Unvested balance at January 1, 2019
Granted
Unvested balance at December 31, 2019
Number of Shares
Weighted-Average
Grant Date Fair
Value
523,545
389,862
913,407
$
$
8.26
5.83
7.22
The following table provides additional information on our performance share awards for the years ended December 31, 2019,
2018 and 2017 ($ in thousands, except per share data):
Weighted-average grant date fair value
Share-based compensation expense
Year Ended December 31,
2019
2018
2017
$
$
5.83
780
$
$
8.53
1,045
$
$
7.99
178
As of December 31, 2019, the unrecognized compensation cost related to performance share awards was $0.9 million and is
expected to be recognized over a weighted-average period of 1.7 years.
Note 13. Preferred Shares
Prior to the Pace Business Combination, all of our Predecessor's Preferred Shares were purchased at a purchase price of $8.40 per
share for an aggregate amount of $353.9 million, which consisted of $239.5 million in face value and $114.4 million of associated PIK
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dividends. The Preferred Shares issued by our Predecessor were eliminated and extinguished in 2017 as part of the reverse merger in
the Pace Business Combination. The extinguishment is reflected as a non-cash financing activity in the Consolidated Statements of
Cash Flows.
Note 14. Earnings per share
Prior to the Pace Business Combination, our Preferred Shares and their related accumulated non-cash PIK dividends were
participating securities. If a dividend was declared or paid on our Predecessor’s ordinary shares, holders of our Predecessor’s ordinary
shares and Preferred Shares were entitled to proportionate shares of such dividend, with the holders of our Predecessor's Preferred
Shares participating on an as-if converted basis.
Under the two-class method, basic (losses) earnings per share (“EPS”) attributable to ordinary shareholders is computed by
dividing the net (loss) income attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding
during the period. Net (loss) income attributable to ordinary shareholders is determined by allocating undistributed earnings between
ordinary and preferred shareholders. For periods in which there are undistributed losses, there is no allocation of undistributed
earnings to preferred shareholders.
Diluted EPS attributable to ordinary shareholders is computed by using the more dilutive result of the two-class method, the if-ff
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converted method or the treasury stock method. Under the two-class method, the number of shares used in the computation of diluted
losses per share is the same as that used for the computation of basic earnings per share for participating securities, as the result would
be anti-dilutive. The net income attributable to ordinary shareholders is not allocated to the Preferred Shares until all other reserves
have been exhausted or such loss cannot be covered in any other way. Under the if-converted method, the weighted-average number of
ordinary shares outstanding includes potentially dilutive ordinary shares and assumes the conversion of the outstanding Preferred
Shares of our Predecessor as of the first day of the reporting period. The dilutive effect of awards under our 2017 Plan is reflected in
diluted EPS by application of the treasury stock method.
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Basic and diluted EPS were as follows ($ in thousands, except share data):
Numerator
Net (loss) income
Non-cash dividend to warrant holders
Convertible Preferred Share dividends
Allocation of undistributed earnings to preferred shareholders (1)
Numerator for basic EPS - net (loss) income available to ordinary
shareholders
Add back convertible Preferred Share dividends (1)
Add back of undistributed earnings to preferred shareholders (1)
Numerator for diluted EPS - net (loss) income available to ordinary
shareholders after assumed conversions
Denominator
Denominator for basic EPS - weighted-average shares
Effect of dilutive securities
Unvested restricted share awards
Denominator for diluted EPS - adjusted weighted-average shares
EPS - Basic
EPS - Diluted
EPS - Diluted
Year Ended December 31,
2019
2018
2017
(4,357) $
—
—
—
(4,357)
—
—
(4,357) $
18,977
$
—
—
—
18,977
—
—
18,977
$
(241)
(879)
(7,922)
—
(9,042)
—
—
(9,042)
130,023,463
122,150,851
96,896,498
—
130,023,463
267,649
122,418,500
—
96,896,498
(0.03) $
(0.03) $
0.16
0.16
$
$
(0.09)
(0.09)
$
$
$
$
_______
(1) For the year ended December 31, 2017, no undistributed earnings were allocated to the preferred shareholders of our Predecessor as we had undistributed
losses after deducting Preferred Share dividends of our Predecessor from net income. For the year ended December 31, 2017, Preferred Share dividends
of our Predecessor of $7.9 million were not added back for purposes of calculating diluted EPS because the effect of treating our Predecessor's Preferred
Shares as if they had been converted to their 7,898,432 ordinary share equivalents as of January 1, 2017, was anti-dilutive.
r
ff
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For the years ended December 31, 2019, 2018 and 2017; 2,157,336; 9,482 and 1,265,830 of unvested restricted share awards,
respectively, were not included in the computation of diluted EPS as their effect would have been anti-dilutive.
For the years ended December 31, 2019, 2018 and 2017; 913,407; 523,545 and 265,222 of unvested performance-based equity
awards, respectively, were not included in the computation of diluted EPS after assumed conversions as the performance criteria were
not met as of the end of the respective reporting period.
a
For the years ended December 31, 2019, 2018 and 2017, outstanding Earnout Warrants to acquire a total of 2,987,770; 2,987,770
and 3,000,000 ordinary shares, respectively, were not included in the computation of diluted EPS after assumed conversions becauseaa
the warrants were not exercisable as of the end of the respective reporting period.
Note 15. Debt
Our debt consists of the following ($ in thousands):
Debt obligations
Term Loan (1)
Revolving Credit Facility (2)(3)
y
Total debt obligations
Unamortized discount and debt issuance costs
Discount on Term Loan
Unamortized debt issuance costs on Term Loan
Total unamortized discount and debt issuance costs
Total debt
As of December 31,
2019
2018
$
$
986,448
60,000
1,046,448
(2,168)
(3,622)
(5,790)
1,040,658
$
$
996,548
—
996,548
(2,681)
(4,480)
(7,161)
989,387
________
(1) Borrowings under the Term Loan bear interest at floating rates equal to one-month London Interbank Offered Rate (“LIBOR”) plus 2.75% (where the
applicable LIBOR rate has a 1.0% floor). The interest rate was 4.55% and 5.27% as of December 31, 2019 and 2018, respectively. Effective March 29,
2018, we entered into two interest rate swaps to fix LIBOR at 2.85% on $800.0 million of our Term Loan (see Note 16).
(2) The commitment fee on the undrawn balance of our Revolving Credit Facility may range from 0.5% to 0.25% depending on certain leverage ratios. The
commitment fee was 0.5% on the $40.0 million and $100.0 million undrawn balance as of December 31, 2019 and 2018, respectively.
(3) Draws under the Revolving Credit Facility bear interest at one-month LIBOR plus 3.0%. The weighted-average interest rate on the outstanding balance of
our Revolving Credit Facility was 4.72% as of December 31, 2019.
Aggregate debt maturities for future annual periods are as follows ($ in thousands):
2020 (1)
2021
2022
2023
2024
Thereafter
Total debt maturities
As of December 31,
2019
$
$
70,100
10,100
10,100
10,100
946,048
—
1,046,448
________
(1) We are not contractually obligated to repay the outstanding balance on our Revolving Credit Facility until 2022; however, we plan to repay the
outstanding balance as of December 31, 2019 in 2020.
Senior Secured Credit Facility
Playa Resorts Holding B.V., a subsidiary of ours, holds a senior secured credit facility (“Senior Secured Credit Facility”), which
consisted of a term loan facility which was originally scheduled to mature on August 9, 2018 and a revolving credit facility which was
scheduled to mature on August 9, 2018.
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On April 27, 2017, we entered into the First Amendment to Amended & Restated Credit Agreement (the “First Amendment”),
which amended and restated our Senior Secured Credit Facility, consisting of a $530.0 million term loan (the “First Term Loan”) and
a revolving credit facility (the “Revolving Credit Facility”) with a maximum aggregate borrowing capacity of $100.0 million which
were scheduled to mature on April 27, 2024 and April 27, 2022, respectively. The proceeds received from the First Term Loan were
used to repay our existing term loan, $115.0 million of our Senior Notes due 2020 and for other general corporate purposes.
On December 6, 2017, we amended our Senior Secured Credit Facility and exercised our option to request an incremental term
loan of $380.0 million (the “Second Term Loan”). The interest rate on our First and Second Term Loans was subsequently set to
LIBOR plus 3.25% where the applicable LIBOR rate has a 1.0% floor. The proceeds received from the Second Term Loan were used
to repay our Senior Notes due 2020. The Second Term Loan, repayment of our existing term loan and repayment of our Senior Notes
due 2020 were accounted for as a partial modification and partial extinguishment of debt, which resulted in a loss on extinguishment
of debt of $25.1 million for the year ended December 31, 2017.
On June 7, 2018, we entered into the Second Amendment to Amended & Restated Credit Agreement (the “Second Amendment”),
which amended the First Amendment to, among other things (i) effect an incremental term loan facility of $100.0 million (the
“Incremental Term Loan” and, together with the existing terms loans that were in effect prior to the Second Amendment, the “Term
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Loan”) pursuant to our option to request incremental loans under the Existing Credit Agreement and (ii) decrease the interest rate
applicable to the Term Loan by 0.50% to, at our option, either a base rate plus a margin of 1.75% or LIBOR plus a margin of 2.75%.
The other terms to the Senior Secured Credit Facility were not affected by the Second Amendment.
The obligations under the Senior Secured Credit Facility are guaranteed by (a) substantially all of our material subsidiaries,
subject to certain exceptions and (b) the Company on a limited recourse basis, with such guaranty being collateralized by a lien on the
our ordinary shares.
The obligations are further collateralized by, among other things, a lien on (i) all hotels located in Mexico, (ii) certain personal
property associated with such hotel properties and (iii) pledges of equity interests in certain of our subsidiaries that directly or
indirectly own equity interests in any hotel property or certain management companies.
Financial maintenance covenants
Our Senior Secured Credit Facility requires us to meet a springing leverage ratio financial maintenance covenant, but only if thett
aggregate amount outstanding on our Revolving Credit Facility exceeds 35% of the aggregate revolving credit commitments as
defined in our Senior Secured Credit Facility. On March 19, 2019, we entered into the Third Amendment to Amended & Restated
Credit Agreement (the “Third Amendment”) to exclude the lesser of $50.0 million and the aggregate amount of revolving credit
commitments borrowed in connection with the Hyatt Ziva and Hyatt Zilara Cap Cana development project from the calculation of the
springing leverage ratio for the period July 1, 2019 through June 30, 2020. On July 1, 2020, the springing leverage ratio will be
calculated based on the provisions in the Senior Secured Credit Facility as if the Third Amendment had not taken place. We were in
compliance with all applicable covenants as of December 31, 2019.
Note 16. Derivative financial instruments
Interest rate swaps
Effective March 29, 2018, we entered into two interest rate swaps to mitigate the interest rate risk inherent to our floating rate
debt, including the Revolving Credit Facility and Term Loan. The interest rate swaps are not for trading purposes and have fixed
notional values of $200.0 million and $600.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly
to the one-month LIBOR rate, which results in us fixing LIBOR at 2.85% on $800.0 million of our Term Loan. The interest rate swaps
mature on March 31, 2023.
As of March 20, 2019, we elected to adopt hedge accounting and designate our interest rate swaps as cash flow hedges. Prior to
our adoption of hedge accounting, the change in fair value of our interest rate swaps was recognized through interest expense in the
Consolidated Statements of Operations. Following the adoption, the change in the fair value of our interest rate swaps that qualifies as
effective cash flow hedges is recorded through other comprehensive loss (“OCI”) in the Consolidated Statements of Comprehensive
(Loss) Income. Unrealized gains and losses in accumulated other comprehensive loss (“AOCI”) are reclassified to interest expense as
interest payments are made on our variable rate debt.
93
The following tables present the effect of our interest rate swaps, net of tax, in the Consolidated Statements of Comprehensive
(Loss) Income and Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 ($ in thousands):
Derivative Liabilities Designated as Hedging Instruments
2019
2018
2017
AOCI from our cash flow hedges as of January 1
OC f
f
f
$
— $
— $
Change in fair value
Reclassification from AOCI to interest expense
OCI related to our cash flow hedges for the three months ended March 31
Change in fair value
Change in fair value
Reclassification from AOCI to interest expense
OCI related to our cash flow hedges for the three months ended June 30
OCI related to our cash flow hedges for the three months ended June 30
Change in fair value
Reclassification from AOCI to interest expense
OCI related to our cash flow hedges for the three months ended September 30
Change in fair value
f i
h
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i
Reclassification from AOCI to interest expense
AOCI from our cash flow hedges as of December 31 (1)
$
5,834
24
5,858
14,648
136
14,784
4,912
(324)
4,588
(3,907)
(1,159)
20,164
—
—
—
—
—
—
—
—
—
—
$
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
________
(1) As of December 31, 2019, the total amount expected to be reclassified from AOCI to interest expense during the next twelve months is $6.2 million.
tt
Derivative Liabilities Not Designated as
Hedging Instruments
Interest rate swaps (1)
Financial Statement
Classification
Year Ended December 31,
2018
2017
2019
Interest expense
$
2,715
$
17,093
$
—
________
(1) Includes the change in fair value of our interest rate swaps and the cash interest paid for the monthly settlements of the derivative prior to our hedge
designation date of March 20, 2019.
The following tables present the effect of our interest rate swaps in the Consolidated Balance Sheet as of December 31, 2019 and
December 31, 2018 ($ in thousands):
Derivative Liabilities Designated as Hedging
Instruments
Financial Statement
Classification
As of December 31,
2019
2018
Interest rate swaps
Derivative financial instruments
$
31,932
$
—
Derivative Liabilities Not Designated as
Hedging Instruments
Financial Statement
Classification
As of December 31,
2019
2018
Interest rate swaps
Derivative financial instruments
$
— $
12,476
Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of
the interest rate swaps. We incorporate these counterparty credit risks in our fair value measurements (see Note 17) and believe we
minimize this credit risk by transacting with major creditworthy financial institutions.
Note 17. Fair value of financial instruments
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the
liability would take place between market participants at the measurement date under current market conditions. U.S. GAAP
establishes a hierarchical disclosure framework, which prioritizes and ranks the level of observability of inputs used in measuring fair
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value as follows:
• Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
• Level 2: Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical
or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset
or liability.
94
• Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing
an asset or liability.
We believe the carrying value of our financial instruments, excluding our debt, approximate their fair values as of December 31,
2019 and 2018. We did not have any Level 3 instruments during any of the periods presented in our Consolidated Financial
Statements.
The following table presents our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of
December 31, 2019 and 2018 ($ in thousands):
Fair value measurements on a recurring basis
Interest rate swap
Fair value measurements on a recurring basis
Interest rate swap
$
$
December 31, 2019
Level 1
Level 2
Level 3
31,932
$
— $
31,932
$
December 31, 2018
Level 1
Level 2
Level 3
12,476
$
— $
12,476
$
—
—
The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of December 31,
2019 and 2018 ($ in thousands):
Financial liabilities not recorded at fair value
Term Loan
Revolving Credit Facility
Total liabilities
Financial liabilities not recorded at fair value
Term Loan
Revolving Credit Facility
Total liabilities
Carrying Value
As of December 31, 2019
Level 1
Fair Value
Level 2
Level 3
$
$
980,658
60,000
1,040,658
Carrying Value
As of December 31, 2018
$
$
989,387
—
989,387
$
$
$
$
— $
—
— $
— $
—
— $
983,214
60,000
1,043,214
Level 1
Fair Value
Level 2
Level 3
— $
—
— $
— $
—
— $
927,025
—
927,025
The following table summarizes the valuation techniques used to estimate the fair value of our financial instruments measured at aa
fair value on a recurring basis and our financial instruments not measured at fair value:
Financial instruments recorded at fair value
Interest rate swaps
Financial instruments not recorded at fair value
Term Loan
Revolving Credit Facility
Valuation Technique
The fair value of the interest rate swaps is estimated based on the expected
future cash flows by incorporating the notional amount of the swaps, the
contractual period to maturity, and observable market-based inputs,
including interest rate curves. The fair value also incorporates credit
valuation adjustments to appropriately reflect nonperformance risk.
The fair value of our Term Loan is estimated using cash flow projections
over the remaining contractual period by applying market forward rates
and discounting back at the appropriate discount rate.
The valuation technique of our Revolving Credit Facility is consistent with
our Term Loan. The fair value of the Revolving Credit Facility generally
approximates its carrying value as the expected term is significantly
shorter in duration.
95
Note 18. Employee benefit plan
In accordance with labor law regulations in Mexico, certain employees are legally entitled to receive severance that is
commensurate with the tenure they had with us at the time of termination. Our pension obligation is a Level 3 financial instrument that
is recorded at fair value and calculated using actuarial valuations by applying the “projected unit credit method.” The fair value as of
December 31, 2019 and 2018 was determined based on the EMSSAH-09 and EMSSAM-09 mortality tables and the application of
certain assumptions including a discount rate, a salary increase and estimated personnel turnover and disability. Liabilities are aa
recognized as other liabilities in the Consolidated Balance Sheets. Actuarial gains and losses are recognized in the Consolidated
Statements of Operations.
The following table sets forth our pension obligation, funded status and accumulated pension obligation ($ in thousands):
Change in pension obligation
Balance at beginning of period
Service cost
Interest cost
Actuarial loss (gain)
Effect of foreign exchange rates
Curtailment
Benefits paid
Acquisitions
Balance at end of period
Underfunded status
Accumulated pension obligation
As of December 31,
2019
2018
5,123
$
795
492
881
384
(171)
(783)
43
6,764
(6,764)
(4,709) $
$
4,456
674
364
(187)
(12)
(17)
(155)
—
5,123
(5,123)
(3,752)
$
$
$
There were no plan assets as of December 31, 2019 or 2018 as contributions are made only to the extent benefits are paid. The
underfunded status of the plan is recorded in other liabilities in the Consolidated Balance Sheets.
The following table presents the components of net periodic pension cost ($ in thousands):
Year Ended December 31,
2019
2018
2017
Service cost
Interest cost
Effect of foreign exchange rates
Amortization of prior service cost
Amortization of gain
Compensation-non-retirement post-employment benefits
Settlement gain
Curtailment gain
Total net periodic pension cost
$
$
795
492
384
1
(20)
(1)
(40)
(171)
1,440
$
$
674
$
364
(12)
25
(18)
(34)
—
(17)
982
$
713
316
149
77
(29)
(53)
(194)
(34)
945
The service cost component of net periodic pension cost is recorded within direct expense in the Consolidated Statements of
Operations. All components of net periodic pension cost other than the service cost component are recorded within other (expense)
income for all periods presented.
96
The weighted-average assumptions used to determine the pension obligation as of December 31, 2019 and 2018 and the net
periodic pension cost for the years ended December 31, 2019, 2018 and 2017 were as follows:
Discount rate
Rate of compensation increase
As of December 31,
2019
2018
2017
7.50%
4.79%
9.55%
4.79%
7.75%
4.79%
The discount rate reflects the current rate at which our pension obligations could be effectively settled on the measurement date.aa
The discount rate was determined by our actuary based on a yield curve constructed from a portfolio of zero-coupon government
bonds for which the timing and amount of cash flows approximate the estimated benefit payments of the plan. The plan’s expected
cash flows are then discounted using the applicable spot rate from the yield curve to determine a single effective discount rate.
The following table represents our expected plan payments for the next five years and thereafter ($ in thousands):
2020
2021
2022
2023
2024
Thereafter
Total expected plan payments
Note 19. Other balance sheet items
Trade and other receivables, net
As of December 31,
2019
$
$
707
551
613
693
742
4,706
8,012
The following summarizes the balances of trade and other receivables, net as of December 31, 2019 and 2018 ($ in thousands):
Gross trade and other receivables (1)(2)
Allowance for doubtful accounts (3)
Total trade and other receivables, net
As of December 31,
2019
2018
$
$
73,015
(1,765)
71,250
$
$
65,363
(593)
64,770
________
(1) The opening balance as of January 1, 2018 was $52.3 million.
(2) Includes $2.0 million in receivables related to property damage insurance claims as of December 31, 2018. There were no such receivables as of
December 31, 2019.
(3) Recognized an additional $0.8 million in bad debt expense during the year ended December 31, 2019 as a result of the bankruptcy of Thomas Cook, one
y
of our travel partners.
Financial instruments that are subject to credit risk consist primarily of trade accounts receivable. Trade accounts receivable are
generated from sales of services to customers in the United States, Canada, Europe, Latin America and Asia. Our policy is to mitigate
this risk by granting a credit limit to each client depending on the client’s volume and credit quality. In order to increase the initially
established credit limit, approval is required from the credit manager. Each hotel periodically reviews the age of the clients’ balances
and the balances which may be of doubtful recoverability.
’
tt
We do not require collateral or other security in support of accounts receivable. Allowances are provided for individual accountsnn
receivable when we become aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy,
deterioration in the customer’s operating results, or change in financial position. If circumstances related to customers change,
estimates of the recoverability of receivables would be further adjusted. We also consider broader factors in evaluating the sufficiency
of our allowances for doubtful accounts, including the length of time receivables are past due, significant one-time events and
historical experience.
97
The gross carrying amount of the trade and other receivables balance is reduced by an allowance for doubtful accounts that
reflects our estimate of amounts that will not be collected. The allowance is based on historical loss experience, specific risks
identified in collection matters and analysis of past due balances identified in the aging detail. We have not experienced any significant
write-offs to our accounts receivable.
The change in the allowance for doubtful accounts for the years ended December 31, 2019, 2018 and 2017 is summarized in the
following table ($ in thousands):
December 31, 2019
December 31, 2018
December 31, 2017
Prepayments and other assets
Balance at
January 1
Additions
Deductions
Balance at
December 31
$
$
$
(593) $
(785) $
(1,061) $
(1,402) $
(338) $
(295) $
230
530
571
$
$
$
(1,765)
(593)
(785)
The following summarizes the balances of prepayments and other assets as of December 31, 2019 and 2018 ($ in thousands):
Advances to suppliers
Prepaid income taxes
Prepaid other taxes (1)
Right of use assets (2)
Contract deposit (3)
Other assets
Total prepayments and other assets
As of December 31,
2019
2018
$
$
7,865
$
12,412
11,156
5,673
2,700
4,885
44,691
$
9,447
7,538
10,240
—
2,700
2,692
32,617
________
(1) Includes recoverable value-added tax and general consumption tax accumulated by our Mexico and Jamaica entities, respectively.
(2) Represents right of use assets recognized in connection with our adoption of ASU 2016-02 on January 1, 2019 (see Note 9).
(3) Represents a cash deposit related to the Sanctuary Cap Cana management contract. The deposit will be used towards a purchase of a partial interest in
f
Sanctuary Cap Cana if we are able to agree on terms. If the purchase is not completed, this amount, together with an additional $0.8 million due, will be
treated as key money.
98
Goodwill
The gross carrying values and accumulated impairment losses of goodwill by reportable segment (refer to discussion of our
reportable segments in Note 20) as of December 31, 2019 and 2018 were as follows ($ in thousands):
Balance at December 31, 2018
Gross carrying value
Accumulated impairment losses
Net carrying value
Activity during the year
Adjustments (1)
Impairment losses
Balance at December 31, 2019
Gross carrying value
Accumulated impairment losses
Net carrying value
Yucatán
Peninsula
Pacific
Coast
Dominican
Republic
Jamaica
Total
$
51,731
—
51,731
— $
—
—
— $
—
—
$
31,925
—
31,925
83,656
—
83,656
—
(6,168)
—
—
—
—
851
—
851
(6,168)
51,731
(6,168)
45,563
$
—
—
— $
—
—
— $
32,776
—
32,776
$
84,507
(6,168)
78,339
$
$
________
(1) Represents adjustments to our goodwill from the business combination with the Sagicor Parties during the measurement period (see Note 4).
Subsequent to our annual impairment test, the operating performance of our Panama Jack Playa del Carmen reporting unit
declined relative to our original expectations and plan. This reporting unit was particularly affected by unfavorable market conditions
in the Yucatán Peninsula region and its financial performance did not recover during the fourth quarter of 2019 consistent with our
other reporting units in the region. The decline in the reporting unit's current and forecasted cash flows was considered a triggering
event for quantitative impairment testing during the fourth quarter of 2019.
h
As a result of our quantitative impairment analysis, we determined that the carrying value of our Panama Jack Playa del Carmen
reporting unit exceeded its fair value and we recognized an impairment loss of $6.2 million for the year ended December 31, 2019.
The impairment loss was equivalent to the total amount of goodwill allocated to this reporting unit.
99
Other intangible assets
Other intangible assets as of December 31, 2019 and 2018 consisted of the following ($ in thousands):
Gross carrying value
Casino and other licenses (1)
Management contract (2)
Enterprise resource planning system (3)
Other
Total gross carrying value
Accumulated amortization
Management contract (2)
Enterprise resource planning system (3)
Other
t
Total accumulated amortization
Net carrying value
Casino and other licenses (1)
Management contract (2)
Enterprise resource planning system (3)
Other
t
Total net carrying value
As of December 31,
2019
2018
$
875
$
1,900
5,187
3,346
11,308
(143)
(437)
(2,320)
(2,900)
875
1,757
4,750
1,026
8,408
$
$
858
1,900
2,246
3,027
8,031
(48)
(67)
(1,813)
(1,928)
858
1,852
2,179
1,214
6,103
________
(1) Our casino licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization.
(2) Represents the fair value of a management contract acquired in the business combination with the Sagicor Parties (see Note 4).
(3) Represents software development costs incurred to develop and implement SAP as our integrated enterprise resource planning (“ERP”) system, of which
$2.6 million and $1.1 million was placed into service in 2019 and 2018, respectively, and are being amortized over a weighted-average amortization
period of 7 years.
RR
aa
Amortization expense on our intangible assets was $1.1 million, $1.0 million and $0.9 million for the years ended December 31,
2019, 2018 and 2017, respectively. Amortization expense relating to intangible assets with finite lives for the years ended December
31, 2020 to 2024 is expected to be as follows ($ in thousands):
2020
2021
2022
2023
2024
Thereafter
Total future amortization expense
As of December 31,
2019
$
$
1,259
1,101
1,066
919
850
2,338
7,533
100
Trade and other payables
The following summarizes the balances of trade and other payables as of December 31, 2019 and 2018 ($ in thousands):
Trade payables
Advance deposits(1)
Withholding and other taxes payable
Interest payable
Payroll and related accruals
Accrued expenses and other payables
Total trade and other payables
________
(1) The opening balance as of January 1, 2018 was $43.9 million.
Other liabilities
As of December 31,
2019
2018
$
$
45,299
$
53,769
46,983
125
14,547
20,880
181,603
$
The following summarizes the balances of other liabilities as of December 31, 2019 and 2018 ($ in thousands):
Pension obligation
Cap Cana land purchase obligation
Lease liabilities (1)
Unfavorable ground lease liability (2)
Key money (3)
Other
Total other liabilities
As of December 31,
2019
2018
$
$
6,764
$
—
6,208
2,187
8,225
923
24,307
$
24,452
57,339
45,274
147
14,251
18,137
159,600
5,123
10,625
—
2,294
1,994
1,566
21,602
________
(1) Represents lease liabilities recognized in connection with our adoption of ASU 2016-02 on January 1, 2019 (see Note 9).
(2) Represents the unamortized balance of the unfavorable ground lease intangible acquired in the business combination with the Sagicor Parties (see Note 4).
(3) Represents the unamortized balance of key money received, which is recorded as a reduction to franchise fees within direct expenses in the Consolidated
Statements of Operations. We received $6.5 million and $2.0 million in 2019 and 2018, respectively.
Note 20. Segment information
We consider each one of our owned resorts to be an operating segment, none of which meets the threshold for a reportable
segment. We also allocate resources and assess operating performance based on individual resorts. Our operating segments meet the
tt
aggregation criteria and thus, we report four separate reportable segments by geography: (i) Yucatán Peninsula, (ii) Pacific Coast,
(iii) Dominican Republic, and (iv) Jamaica. For the years ended December 31, 2019, 2018 and 2017, we have excluded the immaterial
amounts of management fees, cost reimbursements and other from our segment reporting.
Our operating segments are components of the business which are managed discretely and for which discrete financial
information is reviewed regularly by our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, all of whomw
represent our chief operating decision maker (“CODM”). Financial information for each reportable segment is reviewed by the
CODM to assess performance and make decisions regarding the allocation of resources.
The performance of our business is evaluated primarily on adjusted earnings before interest expense, income tax benefit
(provision), and depreciation and amortization expense (“Adjusted EBITDA”), which should not be considered an alternative to net
income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. The performance of our
segments is evaluated on Adjusted EBITDA before corporate expenses and management fees (“Owned Resort EBITDA”).
We define Adjusted EBITDA as net (loss) income, determined in accordance with U.S. GAAP, for the period presented, before
interest expense, income tax benefit (provision), and depreciation and amortization expense, further adjusted to exclude the following
items: (a) other (expense) income; (b) pre-opening expense; (c) share-based compensation; (d) other tax expense; (e) transaction
101
expense; (f) severance expense; (g) Jamaica delayed opening accrual reversal; (i) property damage insurance gain; (j) loss on
extinguishment of debt; (k) impairment loss; and (l) repairs from hurricanes and tropical storms.
There are limitations to using financial measures such as Adjusted EBITDA and Owned Resort EBITDA. For example, other
companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted
EBITDA or similarly named financial measures that other companies publish to compare the performance of those companies to our
performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income or loss generated
by our business or discretionary cash available for investment in our business and investors should carefully consider our U.S. GAAP
results presented in our Consolidated Financial Statements.
The following table presents segment Owned Net Revenue, defined as total revenue less compulsory tips paid to employees, cost
reimbursements, management fees and other miscellaneous revenue not derived from segment operations, and a reconciliation to total
revenue for the years ended December 31, 2019, 2018 and 2017 ($ in thousands):
Owned Net Revenue
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Segment Owned Net Revenue
OtherOther
Management fees
Cost reimbursements
Compulsory tips
Total revenue
Year Ended December 31,
2019
2018
2017
$
235,788
$
259,393
$
85,219
90,783
193,558
605,348
23
1,820
6,412
86,317
125,137
126,702
597,549
305
755
978
22,874
636,477
$
17,426
617,013
$
$
269,043
87,519
124,125
65,381
546,068
3
140
—
13,334
559,545
102
The following table presents segment Owned Resort EBITDA, Adjusted EBITDA and a reconciliation to net income (loss) for the
years ended December 31, 2019, 2018 and 2017 ($ in thousands):
Year Ended December 31,
2018
2017
2019
Owned Resort EBITDA
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Segment Owned Resort EBITDA
Other corporate
Management fees
Total adjusted EBITDA
Interest expense
Depreciation and amortization
Impairment loss
Other (expense) income
Pre-opening expense
Share-based compensation
Other tax expense
Transaction expense
Severance expense
Jamaica delayed opening accrual reversal
Property damage insurance gain
Loss on extinguishment of debt
Repairs from hurricanes and tropical storms
Non-service cost components of net periodic pension cost (1)
Net income before tax
Income tax benefit (provision)
Income tax benefit (provision)
Net (loss) income
$
82,534
$
107,884
$
31,618
16,596
55,175
185,923
(37,049)
1,820
150,694
(44,087)
(101,897)
(6,168)
(3,200)
(1,452)
(8,845)
(577)
(6,175)
(515)
—
—
—
—
31,038
41,228
32,912
213,062
(34,786)
755
179,031
(62,243)
(73,278)
—
2,822
(321)
(6,116)
(1,633)
(9,615)
(333)
342
2,212
—
—
645
(21,577)
17,220
(4,357) $
308
31,176
(12,199)
18,977
$
$
113,754
34,246
37,506
15,976
201,482
(30,757)
140
170,865
(53,661)
(53,131)
—
(1,078)
—
(3,765)
(1,778)
(21,708)
(442)
203
—
(25,120)
(1,807)
232
8,810
(9,051)
(241)
________
(1) Represents the non-service cost components of net periodic pension cost recorded within other (expense) income in the Consolidated Statements of
Operations. We include these costs in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.
The following table presents segment property and equipment, gross and a reconciliation to total property and equipment, net as
of December 31, 2019 and 2018 ($ in thousands):
Segment property and equipment, gross
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Total segment property and equipment, gross
hOther corporate
Accumulated depreciation
Total property and equipment, net
103
As of December 31,
2019
2018
$
$
865,900
$
288,358
667,120
499,569
2,320,947
7,320
(398,353)
1,929,914
$
861,380
285,936
501,624
500,550
2,149,490
9,189
(350,267)
1,808,412
The following table presents segment capital expenditures and a reconciliation to total capital expenditures for the years ended
December 31, 2019, 2018 and 2017 ($ in thousands):
Segment capital expenditures
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Total segment capital expenditures (1)
Other corporate
Total capital expenditures (1)
________
(1) Includes capital expenditures incurred, but not yet paid.
Note 21. Quarterly financial information (unaudited)
Year Ended December 31,
2019
2018
2017
$
28,495
$
16,684
$
3,144
178,599
5,178
215,416
14,512
229,928
$
3,181
79,543
6,262
105,670
5,665
111,335
$
$
25,438
4,484
73,618
12,691
116,231
2,604
118,835
The information for each historical period has been prepared on the same basis as the audited consolidated financial statements
and, in our opinion, reflects all adjustments necessary to present fairly our financial results. Operating results for previous periods do
not necessarily indicate results that may be achieved in any future period.
The following tables set forth the historical unaudited quarterly financial data for the periods indicated ($ in thousands, except
share data):
Total revenues
Operating (loss) income
Net (loss) income
December 31, 2019
143,833
$
(15,403)
(17,924)
September 30, 2019
132,825
$
(16,458)
(30,461)
Three months ended
June 30, 2019
March 31, 2019
$
164,023
$
Net (loss) income available to ordinary
shareholders
(Losses) earnings per share - basic
(Losses) earnings per share - diluted
$
$
$
(17,924) $
(30,461) $
(0.14) $
(0.14) $
(0.23) $
(0.23) $
Three months ended
December 31, 2018
151,782
$
September 30, 2018
142,812
$
$
Total revenues
Operating income
Net (loss) income
Net (loss) income available to ordinary
shareholders
(Losses) earnings per share - basic
(Losses) earnings per share - diluted
$
$
$
10,334
1,040
1,040
0.01
0.01
$
$
$
195,796
47,237
42,988
42,988
0.33
0.33
June 30, 2018
March 31, 2018
145,572
$
18,719
16,821
16,821
0.14
0.14
$
$
$
176,847
55,106
21,817
21,817
0.20
0.20
13,788
(14,239)
(14,239) $
(0.11) $
(0.11) $
2,984
(5,422)
(5,422) $
(0.04) $
(0.04) $
104
Note 22. Subsequent events
For our Consolidated Financial Statements as of December 31, 2019, we evaluated subsequent events through February 27, 2020,
which is the date the Consolidated Financial Statements were issued.
On February 12, 2020 we received $8.5 million in key money in connection with our franchise agreements.
On February 18, 2020 and February 25, 2020, we repaid $10.0 million and $5.0 million, respectively, of the outstanding balance
on our Revolving Credit Facility.
During the period from January 1, 2020 through February 27, 2020, we purchased 340,109 ordinary shares at an average price of
$7.35 per share.
105
(b) Financial Statement Schedule
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Playa Hotels & Resorts N.V.
(Parent Company)
Balance Sheet
($ in thousands)
ASSETS
Cash and cash equivalents
Intercompany receivables from subsidiaries
Prepayments and other assets
Investment in subsidiaries
Total assets
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade and other payables
Intercompany payables to subsidiaries
Total liabilities
Total shareholders’ equity
Total liabilities and shareholders' equity
As of December 31,
2019
2018
$
$
$
327
125
119
809,338
809,909
258
—
258
809,651
809,909
$
9,565
236
226
831,542
841,569
1,715
13
1,728
839,841
841,569
$
$
$
$
The accompanying notes are an integral part of these Condensed Financial Statements.
106
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Playa Hotels & Resorts N.V.
(Parent Company)
Statement of Operations
($ in thousands)
Revenue
Selling, general and administrative expenses
Operating loss
Other (expense) income
Interest income
Interest expense
Net loss before equity in net income of subsidiaries
Equity in net income of subsidiaries
Net (loss) income
Dividends of cumulative redeemable preferred shares
Non-cash dividend to warrant holders
Net (loss) income available to ordinary shareholders
Year Ended December 31,
2019
2018
2017
$
— $
— $
(11,429)
(11,429)
(17)
29
—
(11,417)
7,060
(4,357)
—
—
(4,357) $
$
(8,355)
(8,355)
1,382
—
(197)
(7,170)
26,147
18,977
—
—
18,977
$
—
(4,988)
(4,988)
77
1
(4,117)
(9,027)
8,786
(241)
(7,922)
(879)
(9,042)
The accompanying notes are an integral part of these Condensed Financial Statements.
107
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Playa Hotels & Resorts N.V.
(Parent Company)
Statement of Cash Flows
($ in thousands)
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities
$
4,456
$
(493) $
66,631
For the Year Ended December 31,
2019
2018
2017
INVESTING ACTIVITIES
Investment in subsidiaries
Return of investment in subsidiaries
Net cash used in investing activities
FINANCING ACTIVITIES
Repayment of intercompany loans
Repurchase of ordinary shares
Repurchase of Earnout Warrants
Recapitalization transaction
Net cash (used in) provided by financing activities
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
CASH AND CASH EQUIVALENTS, END OF THE PERIOD
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Non-cash paid-in-kind dividends
Purchase of cumulative redeemable preferred shares
Settlement of accrued dividends of cumulative redeemable preferred shares
Non-cash transfer of treasury shares
Non-cash investment in subsidiaries
Non-cash return of investment in subsidiaries
Par value of vested restricted share awards
Par value of ordinary shares issued in exchange for warrants
Non-cash dividend to warrant holders
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
(13,694)
—
—
(13,694)
(9,238)
9,565
327
$
$
— $
— $
— $
— $
— $
— $
54
$
— $
— $
(7,000)
6,784
(216)
(7,500)
(314)
(55)
—
(7,869)
(8,578)
18,143
9,565
$
$
— $
— $
— $
— $
225,000
$
(9,600) $
$
22
— $
— $
(78,709)
—
(78,709)
(49,447)
—
—
79,658
30,211
18,133
10
18,143
7,922
(239,492)
(114,381)
(80)
—
—
17
747
879
The accompanying notes are an integral part of these Condensed Financial Statements.
108
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Playa Hotels & Resorts N.V.
(Parent Company)
Notes to Condensed Financial Statements
1. Background and basis of presentation
Playa Hotels & Resorts N.V. (“Playa,” “we,” “us,” or the “Company”) was incorporated as a public limited liability company in
the Netherlands concurrent with the Pace Business Combination (as defined in Note 4 of the Consolidated Financial Statements
included elsewhere in this filing). Playa became the parent company (holding) of the Company’s portfolio through its wholly-owned
subsidiary Playa Resorts Holding B.V. When presenting parent company financial statements (our “Condensed Financial Statements”),
the Company accounts for its investment in subsidiaries using the equity method of accounting.
Certain of the Company’s subsidiaries have material restrictions on their ability to pay dividends or make intercompany loans and
aa
advances pursuant to the Senior Secured Credit Facility (as defined in Note 15 of the Company’s Consolidated Financial Statementsnn
included elsewhere in this filing). These Condensed Financial Statements have been prepared in accordance with Rule 12-04,
Schedule I of Regulation S-X, as the restricted net assets of Playa and its subsidiaries constitute more than 25% of the consolidated net
assets of the Company and its subsidiaries. This information should be read in conjunction with the Company’s Consolidated
Financial Statements included elsewhere in this filing.
2. Commitments, contingencies and cumulative redeemable preferred shares
The legal entity has guaranteed liabilities of certain consolidated group companies, as meant in article 2:403 of the Netherlands
Civil Code. The legal entity is therefore jointly and severally liable for the liabilities arising from the legal acts of those group
companies. The Company and its subsidiaries are involved in certain litigation and claims, including claims and assessments withtt
taxing authorities, which are incidental to the conduct of its business.
The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits
and losses of group companies can be offset against each other. Our Dutch companies file as a fiscal unity, with the exception of Playa
Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V. Playa Resorts Holding B.V. is the head of our Dutch fiscal
unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.
During the third quarter of 2015, we identified and recorded a potential Dutch operating tax contingency resulting from
allocations to be made of certain corporate expenses from 2014 and 2015. We provided all requested documentation to the Dutch tax
authorities and, in the fourth quarter of 2018, they reached their final determination resulting in a gain of $1.2 million reported in other
income for the year ended December 31, 2018. As of December 31, 2018 and 2019, there was no operating tax contingency
outstanding.
For a discussion of our cumulative redeemable preferred shares, see Note 13 of the Consolidated Financial Statements included
elsewhere in this filing.
3. Dividends from subsidiaries
We received $8.3 million, $0 million and $75.1 million in cash dividends for the years ended December 31, 2019, 2018 and 2017,
respectively, which are included within operating activities in the Condensed Statement of Cash Flows for all periods presented.
109
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our
Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In
accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this annual report, an evaluation was
carried out under the supervision and with the participation of our management, including our Principal Executive Officer and
Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Principal
Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of
December 31, 2019.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is
defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Management conducted, under the supervision of our Chief
Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of our internal control over financial reporting based
on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on the assessment performed, management concluded that our internal control over financial reporting
was effective as of December 31, 2019.
k
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding
internal control over financial reporting. Management's report was not subject to attestation by the Company’s registered public
accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this annual report.
Remediation of Prior Year Material Weakness
We disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 the following material weakness in our
internal control over financial reporting that existed as of December 31, 2018:
• Our information technology controls, including system access, change management, and segregation of duties were not
sufficiently designed and implemented to address certain information technology risks and, as a result, could expose our
systems and data to unauthorized use or alteration (the “IT Weakness”).
During 2019, we continued to take steps to remediate the identified IT Weakness. We had previously engaged a third-party
consulting firm to assist us with the implementation of SAP, which is a global information technology solution designed to address,
among other items, the elements which gave rise to our material weakness. During 2019, we successfully implemented SAP at all of
our remaining properties, meaning that as of December 31, 2019, SAP was successfully implemented in our corporate entities, at all of
our properties in Mexico, the Dominican Republic and Jamaica. We also successfully completed testing our SAP controls for
effectiveness. Based on our implementation and testing, we concluded that the IT Weakness has been remediated as of December 31,
2019.
Changes in Internal Control Over Financial Reporting
Except for the remediation of the IT Weakness described above, there has been no change in our internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
aa
Item 9B. Other Information.
None.
110
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2020 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2020 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2020 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2020 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2020 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2019.
111
Item 15. Exhibits and Financial Statement Schedules.
PART IV
(1)
Financial Statements
The following financial statements are included under a separate caption “Financial Statements and Supplementary Data” in
Part II, Item 8 of this Annual Report on the Form 10-K and are incorporated herein by reference:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018.
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017.
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2019, 2018 and 2017.
Consolidated Statements of Cumulative Redeemable Preferred Shares and Shareholders' Equity for the years ended
December 31, 2019, 2018 and 2017.
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017.
Notes to Consolidated Financial Statements.
Schedule I - Condensed Financial Information of Registrant
(2)
Financial Statement Schedules
All other financial statement schedules are omitted either because they are not required or are not applicable, or because the
required information is included in the financial statements or notes thereto.
(3)
Exhibits
The following exhibits are filed or furnished, as the case may be, as part of this Annual Report on Form 10-K:
Exhibit
Number
3.1
3.2
3.3
Exhibit Descriptionp
Articles of Association of Playa Hotels & Resorts N.V. (incorporated by reference to Exhibit 3.1 to the Quarterly
Report on Form 10-Q filed by the Registrant on May 8, 2017)
Deed of Amendment to Articles of Association (incorporated by reference to Exhibit 3.1 to the Current Report on
Form 8-K filed by the Company on May 11, 2018)
Board Rules for Playa Hotels & Resorts N.V. (incorporated by reference to Exhibit 3.2 to the to the Quarterly
Report on Form 10-Q filed by the Registrant on May 8, 2017)
4.1**
Description of Securities of Playa Hotels & Resorts N.V.
10.1
10.2
10.3
10.4
10.5
Shareholder Agreement (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-4 filed
by Porto Holdco B.V. with the Securities and Exchange Commission on February 7, 2017)
Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form
S-4 filed by Porto Holdco B.V. with the Securities and Exchange Commission on February 7, 2017)
Form of Playa Investor Subscription Agreements, dated as of March 11, 2017, by and between the Company and
each Playa Investor party thereto (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K
filed by the Registrant on March 14, 2017)
Company Earnout Warrants Agreement (incorporated by reference to Exhibit 10.10 to the Registration Statement
on Form S-4 filed by Porto Holdco B.V. with the Securities and Exchange Commission on February 7, 2017)
Sponsor Earnout Warrants Agreement, dated as of March 10, 2017, by and between the Company and TPG Pace
Sponsor, LLC (formerly, TPACE Sponsor Corp.) (incorporated by reference to Exhibit 10.7 to the Registration
Statement on Form S-4 filed by Porto Holdco B.V. with the Securities and Exchange Commission on February 7,
2017)
112
Exhibit
Number
10.6
10.7*
10.8*
10.9
10.10
10.11
10.12*
10.13*
10.14*
10.15*
10.16
10.17
10.18
10.19
10.20
10.21*
10.22*
10.23*
Exhibit Descriptionp
Director & Officer Indemnification Agreement (incorporated by reference to Exhibit 10.11 to the Registration
Statement on Form S-4 filed by Porto Holdco B.V. with the Securities and Exchange Commission on February 7,
2017)
2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form
S-4 filed by Porto Holdco B.V. with the Securities and Exchange Commission on February 7, 2017)
First Amendment to 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to the Quarterly
Report on Form 10-Q filed by the Registrant on May 7, 2019)
Form of Amended and Restated Franchise Agreement by Franchisee named therein and Hyatt Franchising Latin
America, L.L.C. (incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K filed by the
Registrant on March 14, 2017)
Form of First Amendment to the Amended and Restated Franchise Agreement by Franchisee named therein and
Hyatt Franchising Latin America, L.L.C. (incorporated by reference to Exhibit 10.18 to the Current Report on
Form 8-K filed by the Registrant on March 14, 2017)
Strategic Alliance Agreement, dated as of December 14, 2016, by and between Hyatt Franchising Latin America,
L.L.C. and Playa Hotels & Resorts B.V. (incorporated by reference to Exhibit 10.22 to the Current Report on Form
8-K filed by the Registrant on March 14, 2017)
Form of Restricted Shares Agreement (incorporated by reference to Exhibit 10.27 to the Current Report on Form
8-K filed by the Registrant on March 14, 2017)
Restatement Agreement, dated as of April 27, 2017, by and among Playa Hotels & Resorts N.V., Playa Resorts
Holding B.V., the Guarantors party thereto, Deutsche Bank AG New York Branch and the other lenders party
thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on
April 28, 2017)
Form of Time-Based Restricted Shares Agreement (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed by the Registrant on June 2, 2017)
Form of Performance-Based Restricted Shares Agreement (incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K filed by the Registrant on June 2, 2017)
First Amendment to Amended & Restated Credit Agreement, dated as of December 6, 2017, among Playa Hotels
& Resorts N.V., Playa Resorts Holding B.V., as Borrower, the Guarantors party thereto, Deutsche Bank AG New
York Branch, as Administrative Agent and lender and the other lenders party thereto from time to time
(incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on December
8, 2017)
First Amendment to Strategic Alliance Agreement, dated as of February 26, 2018, by and between Playa Hotels &
Resorts N.V. and Hyatt Franchising Latin America, L.L.C. (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed by the Registrant on February 27, 2018).
Form of Second Amendment to Franchise Agreement by Franchisee named therein and Hyatt Franchising Latin
America, L.L.C. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by the
Registrant on February 27, 2018).
Shareholder Agreement, dated as of May 31, 2018, by and JCSD Trustees Services Limited, X Fund Properties
Limited and Playa Hotels & Resorts N.V. (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed by the Company on June 4, 2018)
Second Amendment to Amended & Restated Credit Agreement, dated as of June 7, 2018, among Playa Hotels &
Resorts N.V., Playa Resorts Holding B.V., as Borrower, the Guarantors party thereto, Deutsche Bank AG New
York Branch, as Administrative Agent and lender and the other lenders party thereto from time to time
(incorporated by reference to Exhibit10.1 to the Current Report on Form 8-K filed by the Company on June 8,
2018)
Executive Employment Agreement, dated as of December 28, 2018, by and between Playa Resorts Management,
LLC, and Bruce D. Wardinski
Executive Employment Agreement, dated as of December 28, 2018, by and between Playa Resorts Management,
LLC, and Ryan Hymel
Executive Employment Agreement, dated as of December 28, 2018, by and between Playa Management USA,
LLC, and Alexander Stadlin
113
Exhibit
Number
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
21.1
23.1
31.1
31.2
32.1
32.2
101
104
*
**
Exhibit Descriptionp
Executive Employment Agreement, dated as of December 28, 2018, by and between Playa Management USA,
LLC, and Kevin Froemming
Amendment to Executive Employment Agreement, dated as of December 16, 2019, by and between Playa Resorts
Management, LLC and Bruce D. Wardinski (incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K filed by the Registrant on December 17, 2019)
Amendment to Executive Employment Agreement, dated as of September 23, 2019, by and between Playa
Management USA, LLC, and Kevin Froemming (incorporated by reference to Exhibit 10.3 to the Current Report
on Form 8-K filed by the Company on September 25, 2019)
Amendment to Executive Employment Agreement, dated as of September 23, 2019, by and between Playa
Management USA, LLC, and Alexander Stadlin (incorporated by reference to Exhibit 10.2 to the Current Report
on Form 8-K filed by the Company on September 25, 2019)
Second Amendment to Executive Employment Agreement, dated as of December 16, 2019, by and between Playa
Management USA, LLC and Alexander Stadlin (incorporated by reference to Exhibit 10.2 to the Current Report
on Form 8-K filed by the Company on December 17, 2019)
Amendment to Executive Employment Agreement, dated as of September 23, 2019, by and between Playa Resorts
Management, LLC, and Ryan Hymel (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-
K filed by the Company on September 25, 2019)
Subsidiaries of Playa Hotels & Resorts N.V.
Consent of Deloitte & Touche LLP, independent registered accounting firm.
Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
The following materials from Playa Hotels & Resorts N.V.’s Annual Report on Form 10-K for the period ended
December 31, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance
Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss)
yy
Income, (iv) Consolidated Statements of Cumulative Redeemable Preferred Shares and Shareholders’ Equity, (v)
Consolidated Statements of Cash Flows, (vi) the Notes to the Consolidated Financial Statements and (vii)
Schedule I - Condensed Financial Information of Registrant
Inline XBRL for the cover page of this Annual Report on Form 10-K for the year ended December 31, 2019, filed
electronically herewith, included in the Exhibit 101 Inline XBRL Document Set.
Management contracts and compensatory plans and arrangements required to be filed as exhibits pursuant to
Item 15(b) of Form 10-K.
Filed herewith
Item 16. Form 10-K Summary.
Not applicable.
114
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
Playa Hotels & Resorts N.V.
Date: February 27, 2020
By: /s/ Bruce D. Wardinski
Bruce D. Wardinski
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signatures
g
/s/ Bruce D. Wardinski
Bruce D. Wardinski
/s/ Ryan Hymel
Ryan Hymel
/s/ Brandon B. Buhler
Brandon B. Buhler
/s/ Daniel J. Hirsch
Daniel J. Hirsch
/s/ Charles Floyd
Charles Floyd
/s/ Richard B. Fried
Richard B. Fried
/s/ Gloria Guevara
Gloria Guevara
/s/ Hal Stanley Jones
Hal Stanley Jones
/s/ Thomas Klein
Thomas Klein
/s/ Elizabeth Lieberman
Elizabeth Lieberman
/s/ Karl Peterson
Karl Peterson
/s/ Arturo Sarukhan
Arturo Sarukhan
/s/ Peter Melhado
Peter Melhado
/s/ Christopher W. Zacca
Christopher W. Zacca
Title
Date
Chairman and Chief Executive Officer (Principal
Executive Officer)
2/27/2020
Chief Financial Officer (Principal Financial Officer)
2/27/2020
Chief Accounting Officer (Principal Accounting Officer)
2/27/2020
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
115
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
2/27/2020
[THIS PAGE INTENTIONALLY LEFT BLANK]
HILTON ROSE HALL RESORT & SPA
EXECUTIVE MANAGEMENT TEAM
BOARD OF DIRECTORS
Bruce Wardinski
Chairman and
Chief Executive Officer
Alex Stadlin
Chief Operating Officer
Ryan Hymel
Executive Vice President
and Chief Financial Officer
Kevin Froemming
Executive Vice President
and Chief Commercial Officer
Tracy M. J. Colden
Executive Vice President
and General Counsel
Fernando Mulet
Executive Vice President
and Chief Development Officer
Pedram Saif
Vice President
Investor Relations & Strategy
Bruce Wardinski
Charles Floyd
Richard B. Fried
Gloria Guevara
Hal Stanley Jones
Elizabeth Lieberman
Karl Peterson
Christopher W. Zacca
STOCKHOLDER INFORMATION
Stock Market Information:
Investor Relations:
Ticker Symbol: PLYA
Market Listed and Traded: NASDAQ
Independent Registered Public
Accounting Firm:
Deloitte & Touche LLP
7900 Tysons One Place, Suite 800
McLean, VA 22102
703.251.1000
Deloitte Accountants B.V.
Gustav Mahlerlaan 2970
1081 LA Amsterdam The Netherlands
(31) (88) 288.2888
3950 University Drive, Suite 301
Fairfax, VA 22030
571.529.6017
Pedram.Saif@Playaresorts.com
Annual Meeting of Stockholders:
June 25, 2020
Transfer Agent:
Computershare
480 Washington Blvd
Jersey City, NJ 07310
201.222.4684
Prins Bernhardplein 200 | 1097 JB Amsterdam, the Netherlands | +31.20.521.4962
AMSTERDAM
3950 University Drive, Suite 301 | Fairfax, VA 22030 | 571.529.6000
FAIRFAX
1560 Sawgrass Corporate Parkway, Suite 140 | Sunrise, FL 33323 | 954.453.4531
FORT LAUDERDALE
Blvd. Kukulcan M27, LT 1-02 UC27, 2 LOC B 01 B | Zona Hotelera, Cancun, Benito Juarez
CANCUN
Quintana Roo, Mexico C.P. 77500 | Marina Town Center
+52.998.881.8470
P L AYA R E S O R T S .C O M