®
A N N U A L R E P O R T
2021
®
Nieuwezijds Voorburgwal 104 | 1012 SG Amsterdam, the Netherlands | +31.68.255.8430
3950 University Drive, Suite 301 | Fairfax, VA 22030 | 571.529.6000
1560 Sawgrass Corporate Parkway, Suite 140 | Sunrise, FL 33323 | 954.453.4531
Blvd. Kukulcan M27, LT 1-02 UC27, 2 LOC B 01 B | Zona Hotelera, Cancun, Benito Juarez
Quintana Roo, Mexico C.P. 77500 | Marina Town Center
+52.998.881.8470
AMSTERDAM
FAIRFAX
FORT LAUDERDALE
CANCUN
P L AYA R E S O R T S .C O M
Hyatt Ziva Rose Hall VALUED SHAREHOLDERS:
The second year of the pandemic can best be described as
a tale of two halves for Playa. The first half of the year was
fraught with uncertainty regarding the sustainability of
demand and the uncertainty of continued, and new, travel
restrictions. To enhance our liquidity position and protect
the financial stability of the Company, we took several
measures to drastically reduce our operational expenses and
raised capital through the capital markets and the sale of
non-core assets. The uncertainty of the first half of 2021
quickly transitioned to an environment defined by surging
pent-up demand and record Average Daily Rates (ADR)
and resort margins. Our focus throughout 2021 continued
to be on our guests and delivering the safest guest experience
possible at our resorts, while executing on our strategic
objectives to drive growth in 2022 and beyond.
2021 Financial performance highlights
Despite the on-going disruption from the COVID-19
pandemic, the fundamentals of our business improved
through the year as vaccination rates increased and flight
capacity into our markets climbed. Following a temporary
set-back at the start of the year from the implementation
of the CDC’s testing requirements for all international
travelers to enter the United States, we saw a staggering
increase in demand, leading to our on-the-books revenue
pacing position for the second half of 2021, and beyond, far
exceeding levels seen in any prior year. Given the continued
pace of bookings from historic pent-up demand and recent
capital investments in our resorts, we made a strategic
decision to focus on maximizing ADR and establishing
our competitive positioning at the high end of the market
which was the key driver of our profit performance during
the second half of the year. This was particularly evident in
our ADR gains, which led to exceptional Owned Resort
EBITDA Margin performance despite occupancy rates
remaining well below pre-pandemic levels.
Putting this all together, Playa went from generating a $2.5
million adjusted EBITDA loss during the first quarter
on occupancy of just 31.6%, to a strong fourth quarter
finish with positive adjusted EBITDA of $47 million and
occupancy of 66.3%.
At the segment level, Mexico led the way throughout the year
as its consistent travel policies led to a quicker recovery in
consumer demand and flight capacity. As the year progressed,
the Dominican Republic also experienced a sharp recovery
in occupancy and international visitor arrivals, particularly
as travel restrictions for several European countries began
easing in the second half of the year. While Jamaica was
a strong segment for us pre-pandemic, it has lagged our
other segments during the recovery due to more stringent
travel restrictions. We are confident however that there are
no major structural challenges for any of our segments to
achieving a healthy recovery, but are braced for the recovery
to remain uneven.
Significantly improved liquidity profile
We entered 2021 generating negative free cash flow on a
monthly basis with limited visibility to sustained cash
generation. With that in mind, in early January we raised
approximately $138 million of capital through an equity
offering and paid off the outstanding balance on our
Revolving Credit Facility, while obtaining a favorable
amendment with respect to our financial covenants. We also
sold two resorts in Mexico during the first half of the year
for a total gross consideration of nearly $90 million to help
enhance our liquidity position and make further progress on
increasing our percentage of branded hotels.
Our business fundamentals sustainably turned the corner
during the third quarter of the year as occupancy rates
improved and ADR gains drove substantial margin
increases. We exited 2021 with approximately $270 million
of cash and a fully undrawn balance on our Revolving
Credit Facility.
Continued progress on strategic imperatives
Although the pandemic continued to present challenges
during 2021, we did not lose sight of our strategic goals and
continued to make significant progress on them during 2021.
Our focus on brand partnerships with globally recognized
brands with robust loyalty databases, combined with
investments in our own direct-booking capabilities in recent
years, continued to be a significant competitive advantage
as third-party channels lagged during the recovery of 2021.
We expected our mix of direct sourced business to decline
in 2021 as compared to 2020 as the severely depressed
third-party channels improved and MICE groups began
to return but our direct mix exceeded our expectations,
with FY 2021 direct booked revenues representing over
49% of the Company’s managed revenues. This, of course,
supported our decision to focus on ADR gains during
2021. With respect to our progress on expanding brand
relationships, we were pleased to announce a new strategic
partnership with Wyndham Hotels & Resorts, resulting in
the conversion of two of our existing resorts in Mexico to
the newly created Wyndham Alltra brand during the fourth
quarter of 2021. With a database of over 92 million loyalty
members, Wyndham is a leader in the mid-scale segment
and an ideal partner to assist us with accelerating growth
for the Company in that segment. Finally, our previous
major capital projects, the Hyatt Ziva & Zilara Cap Cana
and our Hilton All-Inclusive resorts, are now meaningful
profit drivers and we are confident in our investment return
targets as these resorts continue to mature and resonate with
guests. The Hyatt Ziva & Zilara Cap Cana has established
itself as a top resort in the Caribbean, leading to premium
ADR performance and Adjusted Property EBITDA Margin
of over 40% during the fourth quarter of 2021.
I have said this many times during the past two years, but the
passion, adaptability, and determination of our associates has
been the key to our success, particularly during the recovery.
I am very proud of our entire team and look forward to
growing our business together in 2022.
JEWEL GRANDE MONTEGO BAY RESORT & SPA
As we look ahead to 2022, we began the year with strong
momentum from a successful holiday period carrying over
on the bookings front into the new year. Our revenue on-the-
books for each quarter of 2022 exceeds the elevated levels we
experienced in 2021. As travel restrictions continue to ease,
we are optimistic about our ability to capture our fair share
of the market. With ample liquidity and several global brand
partnerships, we will be looking to opportunistically expand
our portfolio of managed rooms to drive shareholder returns.
We made great progress over the past year on the corporate
responsibility front, culminating in the recent publishing
of our Task Force on Climate-Related Financial Disclosure
and other ESG performance data, which can be found on
our investor site. Finally, we recently announced a new
growth initiative: The Playa Collection, which will provide
members certain benefits and amenities at designated Playa
owned and/or managed resorts. We look forward to sharing
news on our progress on our growth drivers in the future.
Thank you for your confidence and support as we continue
to transform the all-inclusive industry.
Sincerely,
Bruce D. Wardinski
Chairman and CEO
OUR RESORTS
MEXICO
HYATT ZILARA CANCUN
HYATT ZIVA CANCUN
HYATT ZIVA LOS CABOS
310 Rooms | Adults-Only
Cancun, Mexico
547 Rooms | All-Ages
Cancun, Mexico
591 Rooms | All-Ages
Los Cabos, Mexico
HYATT ZIVA PUERTO
VALLARTA
335 Rooms | All-Ages
Puerto Vallarta, Mexico
HYATT ZIVA RIVIERA
CANCUN*
438 Rooms | All-Ages
Cancun, Mexico
WYNDHAM ALLTRA
RESORTS CANCUN
458 Rooms | All-Ages
Cancun, Mexico
WYNDHAM ALLTRA RESORTS
PLAYA DEL CARMEN
287 Rooms | Adults-Only
Playa Del Carmen, Mexico
JAMAICA
HILTON PLAYA DEL CARMEN
THE YUCATAN RESORT*
524 Rooms | Adults-Only
Playa Del Carmen, Mexico
60 Rooms | Adults-Only
Playa del Carmen, Mexico
HYATT ZILARA ROSE HALL
HYATT ZIVA ROSE HALL
344 Rooms | Adults-Only
Montego Bay, Jamaica
276 Rooms | All-Ages
Montego Bay, Jamaica
JEWEL GRANDE MONTEGO
BAY RESORT & SPA*
217 Rooms | All-Ages
Montego Bay, Jamaica
*Managed by Playa Hotels & Resorts, owned by a third party
SANCTUARY CAP CANA*
WYNDHAM ALLTRA RESORTS PLAYA DEL CARMEN
DOMINICAN REPUBLIC
HILTON ROSE HALL
RESORT & SPA
495 Rooms | All-Ages
Montego Bay, Jamaica
JEWEL PARADISE COVE
BEACH RESORT & SPA
310 Rooms | Adults-Only
Runaway Bay, Jamaica
HYATT ZILARA
CAP CANA
375 Rooms | Adults-Only
Cap Cana, Dominican Republic
HYATT ZIVA CAP CANA
SANCTUARY CAP CANA*
375 Rooms | All-Ages
Cap Cana, Dominican Republic
324 Rooms | Adults-Only
Cap Cana, Dominican Republic
HILTON LA ROMANA
ADULT RESORT
356 Rooms | Adults-Only
La Romana, Dominican Republic
OWNED BY PLAYA HOTELS & RESORTS,
MANAGED BY A THIRD PARTY
HILTON LA ROMANA
RESORT
418 Rooms | All-Ages
La Romana, Dominican Republic
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
Management of
Sanctuary Cap Cana
DEC
2013
DEC
2014
JAN
2015
NOV
2015
MAR
2017
OCT
2017
Hyatt Zilara &
Hyatt Ziva Rose Hall
Playa Goes
Public
DEC
2019
NOV
2018
SEP
2018
JUN
2018
Hyatt Zilara &
Hyatt Ziva Cap Cana
Grand Opening
Began conversion of
Hilton Playa del Carmen
& Hilton La Romana
Hilton Alliance
Announced
Sagicor Transaction
Complete
MAY
2020
MAY
2021
SEP
2021
DEC
2021
Sale of Jewel Dunn’s
River & Jewel
Runaway Bay
The Yucatan Resort
Playa del Carmen,
Tapestry Collection by Hilton
Grand Opening
Hyatt Ziva Riviera
Cancun
Grand Opening
Strategic Alliance
with Wyndham Hotels
and Conversion
of Two Resorts
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, 2021
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)
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
The Netherlands
98-1346104
Nieuwezijds Voorburgwal 104
1012 SG Amsterdam,
the Netherlands
(Address of Principal Executive Offices)
Not Applicable
(Zip Code)
+ 31 6 82 55 84 30
(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)
PLYA
Name of Each Exchange on Which Registered
The Nasdaq Stock Market LLC
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 ☒ 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
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
(§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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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, 2021, the aggregate market value of the registrant's ordinary shares, €0.10 par value, held by non-affiliates of the registrant was approximately $928.6
million (based upon the closing sale price of the registrant's ordinary shares on June 30, 2021 on the Nasdaq).
As of February 21, 2022, there were 165,778,067 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference portions of the registrant's Proxy Statement for its 2022 annual general meeting of shareholders to
be held on May 12, 2022.
Playa Hotels & Resorts N.V.
TABLE OF CONTENTS
FISCAL YEAR ENDED DECEMBER 31, 2021
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
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.
Intentionally Omitted
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.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
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
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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, results of operations, liquidity and financial condition.
Likewise, our consolidated financial statements and 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,” “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. Currently, one of the most significant factors that could
cause actual outcomes to differ materially from our forward-looking statements is the adverse effects of the current COVID-19
pandemic on our financial condition, results of operations and prospects, the airlines that service the locations where we own resorts,
the short and longer-term demand for travel, the global economy and the local economies where we own resorts, and the financial
markets. As a result of the COVID-19 pandemic, we have experienced severely reduced occupancy levels at our resorts compared to
historic levels and we continue to experience lower occupancy as compared to pre-pandemic levels. The extent to which the
COVID-19 pandemic will continue to impact us and consumer behavior will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, continuing
resurgences of the virus and its variants, including the Delta and Omicron variants, the government actions taken to contain the
pandemic or mitigate its impact, the speed, continuing effectiveness and distribution of vaccines (including boosters) and treatment
therapies, the rate of public adoption of COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and
containment measures, including the magnitude of its impact on unemployment rates, labor-force availability, disruption in the supply
chain for materials, and consumer discretionary spending, among others. The following factors, among others, could also cause
actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:
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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”), Hilton Worldwide Holdings,
Inc. (“Hilton”), and Wyndham Hotels & Resorts, Inc. (“Wyndham”);
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;
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 utilities, labor or other resort costs;
our ability to obtain and maintain financing arrangements on attractive terms or at all;
our ability to obtain and maintain ample liquidity to fund operations and service debt;
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;
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the ability of our guests to reach our resorts given government mandated travel restrictions, as well as changes in demand
for our resorts resulting from government mandated safety protocols and/or health concerns;
the effectiveness of our internal controls and our corporate policies and procedures;
changes in personnel and availability of qualified personnel;
extreme weather events, such as hurricanes and floods, which may increase in frequency and severity as a result of climate
change, and other natural disasters;
limited visibility with respect to future bookings;
outbreak of widespread contagious diseases other than COVID-19;
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.
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.
Risk Factor Summary
We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the
readability and accessibility of our risk factor disclosures. We encourage our shareholders to carefully review the full risk factors
contained in this Annual Report on Form 10-K in their entirety for additional information regarding the risks and uncertainties that
could cause our actual results to vary materially from recent results or from our anticipated future results.
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The effects of the ongoing COVID-19 pandemic are having a significant material adverse effect on our business, results of
operations, cash flows and financial condition and if the pandemic is long-lasting these effects could be severe.
General economic uncertainty and weak demand in the lodging industry could have a material adverse effect on us.
• We are exposed to significant risks related to the geographic concentration of our resorts, including weather-related
emergencies, natural disasters, and instability in government and public safety, which could have a material adverse effect on
us.
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Terrorist acts, armed conflict, civil unrest, criminal activity and threats thereof, and other international events impacting the
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.
The success of our resorts that bear the name of our third-party brand partners will depend substantially on the success of
such brands. There is a risk that we and the third-party brands may not succeed in marketing these brands and that we may
not receive the anticipated return on the investment incurred in connection with the rebranding, which could have a material
adverse effect on us.
If we are not able to satisfy the requirements imposed by our major brand partners, our relationship with these partners could
deteriorate, which could have a material adverse effect on us.
There are very limited restrictions on the ability of our brand partners, including Hyatt, to compete with us.
There is increased competition from global hospitality branded companies in the all-inclusive market segment.
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• We are exposed to fluctuations in currency exchange rates.
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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.
Given the beachfront locations of our resorts, we are particularly vulnerable to extreme weather events, such as hurricanes,
which may increase in frequency and severity as a result of climate change and adversely affect our business.
The coastlines of a number of the regions where our resorts are concentrated have experienced elevated levels of sargassum
seaweed in recent years.
Our insurance may not be adequate to cover our potential losses, liabilities and damages, the cost of insurance may continue
to increase materially, including as a result of extreme weather events that may be related to climate change, and we may not
be able to secure insurance to cover all of our risks, all of which could have a material adverse effect on us.
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.
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.
• 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.
•
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.
• 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.
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The agreements which govern our various debt obligations impose restrictions on our business and limit our ability to
undertake certain actions.
Our variable rate indebtedness is priced using a spread over the London Interbank Offered Rate (“LIBOR”) and subjects us to
interest rate risk, which could cause our debt service obligations to increase significantly.
• 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.
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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).
The seasonality and cyclical nature of the lodging industry could have a material adverse effect on us.
The increasing use of Internet travel intermediaries by consumers could have a material adverse effect on us.
Cyber risk and the failure to maintain the integrity of internal or guest data could harm our reputation and result in a loss of
business and/or subject us to costs, fines, investigations, enforcement actions or lawsuits.
Information technology systems, software or website failures or interruptions could have a material adverse effect on our
business or results of operations.
• 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.
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Our existing resorts and resorts that we may acquire may contain or develop harmful mold that could lead to liability for
adverse health effects and costs of remediating the problem, either of which could have a material adverse effect on us.
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.
• 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.
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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”), 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.
Certain companies affiliated with Sagicor Group Jamaica Limited (collectively “Sagicor”) own a significant number of our
ordinary shares and have representation on our Board, and may have interests that differ from those of our other shareholders.
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.
If, based on Mexican law, the accounting value of our ordinary shares is derived more than 50% from property in Mexico, it
could 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.
6
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, 2021, we owned and/or managed a total portfolio consisting of 22
resorts (8,366 rooms) located in Mexico, Jamaica and the Dominican Republic. Playa’s strategy is to leverage its globally
recognized brand partnerships and proprietary in-house direct booking capabilities to capitalize on the growing popularity of the all-
inclusive resort model and reach first-time all-inclusive consumers in a cost effective manner. We believe that this strategy should
position us to generate attractive returns for our shareholders, build lasting relationships with our guests, and enhance the lives of
our associates and the communities in which we operate.
We 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:
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Prime beachfront locations;
Globally recognized U.S. hotel brand partners;
Convenient air access from major and secondary North American markets and international gateway markets;
Strategic locations in popular vacation destinations with strong local government commitments to tourism;
High quality standards and 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,
while at the same time providing Playa more predictable revenue, expense and occupancy rates than traditional full-service hotel
business models. Generally, all-inclusive leisure 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 Hyatt, Hilton and Wyndham, three of the preeminent globally recognized hotel brands.
We believe that partnering with Hyatt, Hilton and Wyndham in the development and management of all-inclusive resorts
throughout the Caribbean, Mexico and Latin America provides us with unique advantages, including the following:
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Access to worldwide reservation systems, global marketing scale, and over 250 million combined hotel loyalty members
to drive revenue growth;
Higher propensity for guests to book direct, which results in significantly improved returns over bookings from wholesale
channels such as tour operators and online travel agencies;
Lower customer acquisition costs, and higher net Average Daily Rates (ADRs);
Higher net asset value for branded resorts affiliated with global franchisors;
Brand partners are also focused on maximizing returns;
Immediate customer recognition for new or converted resorts;
Significant incremental opportunity with exposure to new consumers, who may not be familiar with the all-inclusive
model;
Access to guests from different regions globally, creating a better segmentation mix, reducing the risk from an owner’s
perspective;
Stronger marketing and public relations presence through affiliate global hospitality brands;
Branded resorts tend 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;
Branded resorts have lower failure rates; and
Consumer confidence and trust in globally recognized brands.
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In the fourth quarter of 2019, we completed and opened our first ever ground-up development project, the 750-room Hyatt Ziva
and Hyatt Zilara Cap Cana. We also completed significant renovation work at the 524-room Hilton Playa del Carmen All-Inclusive
Resort, 356-room Hilton La Romana All-Inclusive Adult Resort and the 418-room Hilton La Romana All-Inclusive Family Resort as
part of the rebranding and conversion of those respective resorts. In the fourth quarter of 2021, we rebranded two of our existing
resorts in Mexico and launched the new Wyndham Alltra all-inclusive brand.
Other resorts in our portfolio operate under the Dreams, Jewel and Sanctuary brands.
We consider each of our resorts 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 Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and
Note 18 to the accompanying Consolidated Financial Statements.
Impact of COVID-19
The COVID-19 pandemic and the public health measures that have been undertaken in response have had and continue to have
a significant adverse impact on the global economy, the travel and hospitality industries and our business since the first quarter of
2020. Refer to Part II, Item 7. Management's Discussions and Analysis of Financial Condition and Results of Operations - Impact
of COVID-19 Pandemic for a discussion of the impact COVID-19 is having on our business, results of operations and financial
condition.
Our Competitive Strengths
We believe the following competitive strengths distinguish us from other owners, operators, developers and acquirers of all-
inclusive resorts:
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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 and La
Romana 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 operate resorts located in four main geographic markets and
feature a range of price points, which we believe diversifies our offering, helps foster loyalty among our guests and drives
repeat business. We operate resorts under eight distinct brands. Having multiple brands to offer owners and developers is
essential to our ability to secure management agreements and attractive acquisitions since having a portfolio of brands
mitigates the risks of brand-on-brand supply growth and subsequent cannibalization and expands our addressable market.
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 offers value, ease of planning 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.
Strong Relationships with Top Brands. Our partnerships with Hyatt, Hilton and Wyndham, three globally recognized
hospitality brands, differentiate our resorts from our competitors. The selection of Playa as a strategic partner of Hyatt,
Hilton and Wyndham 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. For the
year ended December 31, 2021, $457.9 million, or 88.8%, of our Total Net Revenue (as defined in Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations) was generated from resorts
under the Hyatt, Hilton and Wyndham brands.
Our strategic relationship with Hyatt under our Hyatt Strategic Alliance Agreement, as amended, 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. In 2021, we entered into an omnibus third amendment to our franchise
agreements with Hyatt for our Hyatt Ziva and Hyatt Zilara resorts in Mexico and Jamaica which prohibits Hyatt from
opening, owning or authorizing other parties (whether under a license or franchise agreement from Hyatt or otherwise) to
open or operate Hyatt Ziva and Hyatt Zilara resorts in certain agreed upon geographical areas in proximity to our Hyatt Ziva
and Hyatt Zilara resorts for a five year period after the effective date of the amendment.
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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. 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 over 30 million
members as of December 31, 2021), 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 us to increase the number of bookings made through lower cost
sales channels, such as direct bookings through Hyatt as well as our company and resort websites.
Our strategic alliance with Hilton affords us the opportunity to expand into markets in the Caribbean, Mexico, and South and
Central America while obtaining access to Hilton’s global portfolio of brands and over 128 million Hilton Honors members
as of December 31, 2021. We have successfully converted two of our resorts into three Hilton all-inclusive resorts, and under
our agreement with Hilton we have 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 Wyndham affords us the opportunity to obtain access to Wyndham’s global portfolio of brands
and over 92 million loyalty members as of December 31, 2021 and provides us with an exclusive right to own or operate
Wyndham Alltra all-inclusive resorts for a five year period commencing on December 1, 2021 (the “Brand Launch Date”) in
Mexico, Jamaica, the Dominican Republic and certain other Caribbean and Latin American destinations (collectively, the
“Exclusive Territories”), subject to certain termination rights by Wyndham on the third anniversary of the Brand Launch Date
and the extension of our exclusivity right subject to achieving certain development milestones. Our strategic alliance also
grants us a right of first offer to manage Wyndham Alltra all-inclusive resorts located outside of the Exclusive Territories
during the initial exclusivity period and any extension. During 2021, we successfully converted two of our resorts in Mexico
into Wyndham Alltra all-inclusive resorts.
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Proprietary Direct Booking Capabilities. To further support the direct booking benefits of partnering with globally
recognized brands, we have invested in our own in-house direct booking platform to optimize our customer acquisition
costs and build guest loyalty. These investments allowed our resorts to recover faster from the COVID-19 pandemic given
the slower pace of recovery in wholesale/third-party channels. Bookings generated on playaresorts.com have increased
from $16.9 million in 2018 to $107.1 million in 2021 and accounted for 20.9% of our Owned Net Revenue (as defined in
Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations) for the year
ended December 31, 2021. We will continue to invest in this effort to improve our selling capabilities and adapt to
consumer demand.
Integrated and Scalable Operating Platform. We believe we have developed a scalable resort management platform
designed to improve operating efficiency at the 20 resorts we currently manage. Our platform enables us to integrate
additional resorts we may acquire, manage resorts owned by third-parties and potentially internalize the management of the
two 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, portfolio-wide basis.
Advantageous Exposure to Leisure Travel. Our beachfront resort portfolio skews our customer mix to be composed of
approximately 90% leisure travelers. We believe that this concentration positions us to recover faster from the effects of the
COVID-19 pandemic and market recessions than many of our lodging peers, as historically the leisure segment of the
travel market has tended to rebound faster than the business-oriented segment.
Focus on Safety Measures. As we adjusted to a new operating environment during the COVID-19 pandemic, we have
experienced the luxury of having expansive footprints, numerous dining outlets, and predominantly outdoor and open
designs at the majority of our resorts, which has provided us flexibility to redesign the layout of our resorts with social
distancing and safety precautions in mind. Furthermore, we have implemented an enhanced mobile app that incorporates
contactless QR codes to augment and facilitate the guest experience at all of our managed properties. We have also
incorporated safety practices from our brand partners, government agencies and various health experts to develop our Playa
Safe StayTM operating protocols. We believe that our protocols and the association with globally recognized, responsible
brands that consumers know and trust are a competitive advantage.
Experienced Leadership with a Proven Track Record. Our senior management team has significant experience in the
lodging industry, including operating all-inclusive resorts.
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Bruce 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
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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 January 31, 2022, 1.6% of our
outstanding ordinary shares were beneficially owned by Mr. Wardinski.
Greg Maliassas, our Chief Operating Officer, has over 20 years of experience in the hospitality and lodging
industry. Mr. Maliassas previously served as Senior Vice President Operations for the luxury brands of Accor
Hotels in Central & Eastern Europe, Benelux and Switzerland, overseeing a portfolio of over 45 hotels.
Ryan Hymel, our Chief Financial Officer, has over 19 years of experience working within the hospitality sector
and is a founding member of our management team, beginning with Playa at its inception in 2006. 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.
Fernando Mulet, our Chief Investment Officer, has over 19 years of experience in the hospitality industry, and is a
founding member of our management team, beginning with Playa at its inception in 2006. Mr. Mulet previously
served as the Director of International Investments & Asset Management with Highland Hospitality Corporation
and prior to that worked for Barceló Hotels & Resorts.
Tracy Colden, our Executive Vice President and General Counsel, has over 30 years of experience in the
hospitality and lodging industry. She previously served as Executive Vice President and General Counsel for
Highland Hospitality Corporation, and as Executive Vice President and General Counsel of Crestline Capital
Corporation. Ms. Colden was also an Assistant General Counsel at Host Marriott Corporation.
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Our Business and Growth Strategies
Since the first quarter of 2020, our primary focus has been on responding to the operational, financial and safety challenges
presented by the COVID-19 pandemic and that continues to be our primary focus, along with positioning ourselves to capitalize on
what we believe to be significant pent-up demand for leisure travel to our markets as the travel restrictions and public health concerns
imposed as a result of COVID-19 recede. As conditions continue to improve, our traditional business and growth strategies described
below will move to the forefront.
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:
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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. We believe that our extensive experience in all-inclusive resort operations, direct
booking strategy, 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 the resorts
we own that are currently managed by a third-party. 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. Our website uses search engine and metasearch optimization tools aimed at driving
direct bookings (i.e., bookings through our website or our brand partner websites), which is our lowest cost customer
acquisition channel. As a result, we benefited from more direct business at our Playa-managed resorts in 2020 and 2021.
Our percentage of direct stays increased from 37.6% of room nights in 2020 to 47.1% in 2021 and our percentage of direct
bookings, including future stays, increased from 47.3% of room nights in 2020 to 49.4% in 2021.
We also 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
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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, Hilton, and Wyndham, we have greatly increased our direct access
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. For example, in May 2020, we completed the sale of the Jewel Dunn’s River Beach
Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark. In February 2021, we completed the sale of the Dreams
Puerto Aventuras and in June 2021, we completed the sale of the Capri Resort. We plan to use proceeds from these and
other asset sales to pay down debt, reinvest in projects within our existing portfolio or pursue new growth opportunities.
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 offerings are sold. Key components of this sales and marketing program include:
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Developing programs aimed at targeting consumers directly through:
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Our company and resort websites;
The Hyatt website and toll free reservation system;
The World of Hyatt® guest loyalty program;
The Hilton website and toll free reservation system;
The Hilton Honors guest loyalty program;
The Wyndham website and toll free reservation system;
The Wyndham Rewards guest loyalty program; and
Our toll free reservation system that provides a comprehensive view of inventory in real time, based on demand;
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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:
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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;
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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:
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Search engine optimization;
Targeted online and bounce-back advertising;
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Social media presence via channels 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
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Activating a targeted public relations plan to generate positive exposure and awareness in both traditional and digital media.
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 for last minute high need periods. This multi-pronged strategy is designed to increase Net
Package RevPAR (as defined in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations) as well as generate strong occupancy through all of the resorts’ seasons.
Corporate Responsibility and Sustainability
Our ESG Committee, which is overseen by the Nominating and Governance Committee of our Board, is an organization-wide
task force with representation from multiple areas of the Company dedicated to obtaining a broader reach for idea generation and
effectively promoting best practices and cross-collaboration related to corporate social responsibility and sustainability. Our ESG
Committee oversees Playa’s commitment to incorporating environmental sustainability, social responsibility and governance into our
daily operations at all levels with an emphasis on reducing our environmental impact, mitigating risks, improving our communities
and driving value for all our stakeholders. The ESG Committee reports directly to the Nominating and Governance Committee
regarding Playa’s activities over corporate social responsibility and sustainability matters and the external reporting thereof (including
matters relating to diversity and inclusion). The Nominating and Governance Committee updates the Board on the activities of the
ESG Committee.
Our Board and our ESG Committee are focused on cultivating an energetic, engaged and passionate culture that helps each of our
employees achieve their own personal goals. Playa supports employees through learning and development opportunities, offering a
competitive benefits package and spending time discussing performance and goals of each employee and how Playa can support them
in their future. Playa employees understand and take advantage of our Open-Door Policy to communicate suggestions and concerns to
Playa’s leadership team. We believe that every individual has a voice that adds value to our organization. By listening to our
employees, we learn how to constantly improve and make changes to continuously enhance our working environment.
Environmental
We rely on the beautiful beaches and lush landscapes of our resort destinations to provide a backdrop for our signature service for
our guests, and take responsibility to lead the way in our communities in order to sustain these natural environments and help them
flourish. Our environmental sustainability program, Playa Green, aims to decrease water and energy consumption, reduce waste, and
encourage employees to build and protect our shared communities.
Creating a culture of environmental consciousness with dedicated, focused leadership is of the utmost importance to progressing
forward towards Playa’s sustainability objectives. We provide engaging training materials regarding environmental awareness and
support our sustainability program with regular performance reviews and sharing of best practices among resort managers.
We seek certifications and alignment with leading verification firms and practices to further enhance our efforts. As such, 14 of
our resorts are currently Green Globe certified, with two more underway in the certification process. We use third party energy audits
at most of our resorts to monitor our practices and identify areas for improvement and investment. Additionally, we have a designated
member of property management (who we refer to as a “Green Leader”) responsible for sustainability performance at each resort.
Social
Our associates and communities form the center of our company. We strive to foster a culture of inclusive growth and provide a
respectful and professional workplace to empower all our associates to express what is important to them and to their communities.
We strongly believe that caring for our people is the first step in giving back to our communities. For this reason, we place a large
emphasis on employee training and benefits to nurture a compassionate and productive workplace environment. Our comprehensive
benefits package helps us attract and retain top talent. Furthermore, we provide ongoing training on safety, antibribery, harassment and
discrimination to further nurture the workplace environment. Additionally, we proactively use survey tools and regular performance
reviews to engage with our associates and help them achieve their goals and to improve the workplace.
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Outside of the workplace, we do all we can to enrich our communities by partnering with local organizations, volunteering and
creating opportunities like internship programs and youth career initiatives. One example of how we care for the communities in
which our employees work and live includes the sponsorship of a local school in Jamaica to provide necessities, school supplies and
computers, construct and improve facilities, and promote self-sustainability. We also contribute through wetlands restoration,
constructing homes for employees, assisting local food banks, and supporting children in group homes and people with disabilities.
Although we are international in scope, each community has its own unique needs, characteristics and people. We take pride in
our positive impact and investments we make in our local communities, including in times of disaster and giving our employees the
creative freedom to guide our resources and attention.
Human Capital Resources
Each and every one of our employees plays an integral role in delivering Service From the Heart to our guests and separating us
from our competition. “We take care and motivate our employees—and in turn—they take care of our guests with love” is the
Company’s official philosophy. We stand behind this statement of taking care of our employees and continuously make their health
and safety our top priority, especially amid the ongoing pandemic.
As a result of the COVID-19 pandemic, we have advanced health and safety measures in place and have implemented new
standards and procedures in order to keep employees at all levels of the Company as safe as possible. Furthermore, new protocols and
daily health and safety screenings are in place which include temperature checks and COVID-19 tests. All resort staff is provided with
proper personal protective equipment according to their tasks and hygiene conditions. Onsite medical consultants are conveniently
available for resort employees at no extra cost. Additionally, health insurance is offered to all employees in each of our locations, for
both permanent and contract positions. Employees that are not needed onsite, including corporate employees, are encouraged to work
remotely with additional technical support and resources provided as needed.
At the initial onset of the COVID-19 pandemic and at the request of employees throughout the organization, we established the
Ernesto Oliver Lopez Memorial Fund in honor of a Playa employee who fell victim to the virus. This fund continues to actively accept
donations from employees and community members which directly benefit Playa employees in need, whether that be providing food
and necessities for their family or paying health-related expenses.
All Playa employees undergo a comprehensive orientation and training. In addition to health and safety courses that include a
specific course for respiratory disease prevention implemented in 2020, we offer continuous learning and development with courses on
Playa’s culture, vision and philosophy, guest satisfaction, performance management for leadership, mentoring and coaching, stress
management, emotional intelligence, effective interviewing and talent development, high impact teams, conflict resolution and quality
management. For example, one growth and development opportunity for our high-potential employees is a talent program. Specific
individuals are prepared for future leadership positions within the organization through hands-on training, mentorship and education.
All of our resort leadership teams participate in our talent program in order to allow identified employees to be promoted at their
resort, at another resort within the country, or be relocated within the Playa organization. This program allows Playa to acquire the
best talent, retain and motivate its employees, and succession plan.
The Company places a tremendous emphasis on health and wellness. Throughout the year, employees participate in educational
health seminars, special events such as Breast Cancer Awareness Month and wellness programs both in-person and online, depending
on the employee’s location. An emphasis is placed on preventative healthcare with special efforts including a mammogram truck for
screenings and onsite flu shot distribution. Further, corporate employees are recognized for preventative health screenings, reading
health-related articles and participating in educational wellness-related challenges that include eating a nutritionally balanced diet and
increasing physical activity.
As of December 31, 2021, we directly and indirectly employed approximately 12,300 employees worldwide, significantly all of
which are located at our resorts and regional offices in Jamaica (2,500), Mexico (5,400), and the Dominican Republic (4,300). We
employed approximately 100 employees at our corporate offices in the U.S. and Canada.
AMResorts Management Agreements
Two of our resorts (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 resorts and non-competition and non-
solicitation. 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 could
consider selling one or more of these resorts if the opportunity arises 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 management agreement for the Dreams Punta Cana will expire in 2022 and the management agreement for the Dreams Palm
Beach is scheduled to expire in 2025, subject to our right to terminate the Dreams Palm Beach management agreement without the
payment of a termination fee on or after December 31, 2022 by giving at least ninety (90) days prior notice.
On October 31, 2020, we terminated the management agreement for the Capri Resort, formerly known as the Secrets Capri, with
AMResorts, which was subsequently sold in June 2021. In connection with the termination, we agreed to extend the term of the
management agreement for Dreams Palm Beach to February 2025.
On February 5, 2021, we completed the sale of the Dreams Puerto Aventuras, which was managed by AMResorts.
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 (which was recently acquired by Hyatt),
Meliá Hotels International, Excellence Resorts, RCD Hotels (Hard Rock Hotels & Resorts), Blue Diamond 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. We also compete for guests based on the ability of hotel loyalty program
members to earn and redeem loyalty program points at our Hyatt, Hilton and Wyndham all-inclusive resorts. We believe that our
relationships with Hyatt, Hilton and Wyndham, three globally recognized hotel brand leaders, provides us with a significant
competitive advantage.
Additionally, we compete with other U.S. and European global hospitality brands, such asMarriot t International, Inc., that have
recently entered the all-inclusive segment as a result of increased demand for all-inclusive resort stays. We primarily compete with
these global hospitality brands for third-party management contracts.
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico, Jamaica and the Dominican Republic 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.
The COVID-19 pandemic altered this seasonality trend in both 2020 and 2021 and Net Package ADR was progressively stronger
during the second, third and fourth quarters of 2021 than it was in the first quarter of 2021 and in prior years. See “Impact of
COVID-19 Pandemic” in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for
more information regarding the effects of the COVID-19 pandemic on our results of operations.
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
Net Package RevPAR (as defined in Part II, 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.
The COVID-19 pandemic has significantly impacted the lodging industry in 2020 and 2021. See “Impact of COVID-19
Pandemic” in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for more
information regarding the effects of the COVID-19 pandemic on our results of operations.
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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, Hilton’s and Wyndham’s intellectual property under their respective strategic
alliance and franchise 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.
Insurance
Our resorts carry what we believe are appropriate levels of insurance coverage for a business operating in the lodging industry in
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.
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.
Government Regulation
We have operations and are subject to the laws of the United States and multiple foreign jurisdictions and the rules and
regulations of various governing bodies, which may differ among jurisdictions. Compliance with these laws, rules and regulation has
not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as
compared to prior periods.
See Item 1A. Risk Factors for further information regarding the potential impact of government regulations, including the
following risk factors:
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“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.”;
“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 could incur significant costs related to government regulation and litigation with respect to environmental matters,
which could have a material adverse effect on 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.”; and
“Increases in property taxes would increase our operating costs, which could have a material adverse effect on us.”
Previously Disclosed Information
For additional information about our business, including information about our relationships and agreements with Hyatt and
Hilton, please refer to Part I, Item 1. Business in our Annual Report on Form 10-K for the year ended December 31, 2019.
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 Nieuwezijds Voorburgwal 104, 1012 SG
Amsterdam. Our telephone number at that address is +31 6 82 55 84 30. 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 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.
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Item 1A. Risk Factors.
Risk Factors
The following discussion summarizes material factors that could make an investment in us speculative or risky and should be
considered carefully. These risks 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 and elsewhere, you should carefully review the section entitled “Forward-Looking Statements.”
The effects of the ongoing COVID-19 pandemic are having a significant material adverse effect on our business, results of
operations, cash flows and financial condition and if the pandemic is long-lasting these effects could be severe.
The outbreak of the coronavirus (COVID-19) pandemic has led governments and other authorities around the world to impose
measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans,
border closings, business closures, testing requirements, quarantines and shelter-in-place orders. As a result, the pandemic has
significantly disrupted global travel, and has adversely impacted global commercial activity across the travel, lodging and hospitality
industries. The COVID-19 pandemic has had, and is expected to continue to have, significant adverse impacts on economic and
market conditions and has resulted in a global economic contraction.
The effects of the COVID-19 pandemic on the lodging industry have been unprecedented with global demand for lodging
drastically reduced and occupancy levels reaching historic lows. Due to the rapid and broad spread of the virus and in response to
related governmental restrictions and advisories, reductions in scheduled airline services and potential health risks to our employees
and guests, we temporarily suspended operations at all of our resorts in late March 2020. Our resorts began reopening in July 2020, in
stages, based on incremental easing of government restrictions and advisories and increases in scheduled commercial airline service.
As a result of the suspension of operations at all of our resorts, we had no revenues from resort operations in the second quarter of
2020 and revenues have remained below historical levels, even after all of our resorts reopened. We are continuing to experience
reduced occupancy at our resorts due to the effects of the pandemic, including government-imposed restrictions on travel, such as the
re-entry requirements imposed by the U.S. Centers for Disease Control and Prevention. The extent to which the COVID-19 pandemic
will continue to impact us and consumer behavior will depend on future developments, which are highly uncertain and cannot be
predicted with confidence, including the scope, severity and duration of the pandemic, continuing resurgences of the virus and its
variants, including the Delta and Omicron variants, the government actions taken to contain the pandemic or mitigate its impact, the
speed, continuing effectiveness and distribution of vaccines (including boosters) and treatment therapies, the rate of public adoption of
COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and containment measures, including the magnitude
of its impact on unemployment rates, labor-force availability (including as a result of vaccine mandates), disruption in the supply
chain for materials and consumer discretionary spending, among others. The longer and more severe the pandemic, and actual or even
the possibility of repeat or cyclical outbreaks of the COVID-19 virus, the greater the material adverse effect will be on our business,
financial condition, liquidity, results of operations, prospects, access to equity and credit markets and ability to service our
indebtedness.
There also can be no guarantee that when the effects of the pandemic subside the demand for lodging, and consumer confidence
in travel generally, will recover as quickly and fully as other industries. Additionally, the effects of the pandemic have had, and we
expect will continue to have, a material adverse effect on our ability to consummate acquisitions and dispositions of resorts and our
ability to timely complete planned capital expenditures and other projects.
Additional risks to our business relating to the COVID-19 pandemic include the following:
• We have substantial debt outstanding currently, and our ongoing ability to service our significant financial obligations
depends on our ability to generate significant free cash flow from operations. Our cash flow from operations has been
materially reduced as a result of the COVID-19 pandemic and will continue to be materially reduced for as long as our resorts
are operating below historical levels or if one or more of our resorts are closed again in the future. We cannot assure you that
our business will generate cash flow from operations, that future borrowings will be available to us or permitted under our
Revolving Credit Facility or otherwise, or that we will be able to complete any necessary financings or refinancings, in
amounts sufficient to enable us to pay our debts and other obligations and fund our other liquidity needs;
•
The agreements which govern our various debt obligations impose restrictions on our business, including certain covenants
which limit/prohibit us from incurring additional indebtedness and may materially impact our liquidity and financial
condition and could require us to seek to meet capital needs through asset sales or dilutive equity sales;
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•
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•
•
Commercial airline service has been reduced to many of the regions in which our resorts are located. If scheduled airline
service does not increase or return to normalized levels it could have a material adverse effect on our resort revenues;
Adverse changes in our credit and any ratings could have an adverse impact on our interest expense;
Safety protocols established by certain jurisdictions in which our resorts are located, for example, Jamaica, or re-entry
requirements from countries where our guests originate, such as the United States, have made travel to our resorts more
challenging and less attractive, adversely affecting demand at our resorts;
Increases in crime, theft, vandalism, violence, and other safety and health concerns due to the economic fallout from the
effects of the COVID-19 pandemic in the regions in which our resorts are located, or the perception of such risks among
prospective guests, could reduce demand for our resorts;
• We have been and may continue to be required to recognize significant non-cash impairment charges as a result of material
reductions in our cash flows from operations;
• We have incurred and will continue to incur additional costs related to sanitation and hygiene requirements, social distancing
and other mitigation measures;
•
Steps to reduce costs may negatively impact our reputation and guest loyalty, and future demand at our resorts may suffer as
a result;
• We may experience disruptions as a result of corporate employees working remotely, including risk of cybersecurity
incidents and disruptions to internal control procedures; and
•
In order to raise additional capital to fund our operations and service our indebtedness, we have sold assets and issued equity
securities and we may need to sell further assets or issue additional equity securities in the future at prices that are below the
value of those assets or that may be dilutive to existing shareholders and that may be below what we believe to be the
intrinsic value of our ordinary shares.
In addition, our business could be materially and adversely affected by the effect of, or the public perception or a risk of, other
pandemic diseases. 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 also had an adverse effect. Cases of the Zika virus have been
reported in regions in which our resorts are located. Additionally, the public perception of a risk of another 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 or 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.
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. The possibility of weak economic conditions and other factors beyond our control, such as 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
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,
results of operations and prospects.
We are exposed to significant risks related to the geographic concentration of our resorts, including weather-related emergencies,
natural disasters, and instability in government and public safety, which could have a material adverse effect on us.
Our resorts are concentrated in Mexico (which accounted for 51.5% of our Total Net Revenue as defined in Part II, Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations), Jamaica (18.8% of our Total Net Revenue)
and the Dominican Republic (29.0% of our Total Net Revenue) for the year ended December 31, 2021. When the countries and/or the
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regions of these countries in which our resorts are concentrated are adversely impacted by government instability, public-safety issues,
such as crime or power outages, weather-related emergencies, such as hurricanes or floods, or natural disasters, such as earthquakes, a
number of our resorts could be adversely impacted by the same event, 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.
Terrorist acts, armed conflict, civil unrest, criminal activity and threats thereof, and other international events impacting the
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 and violent crime 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, criminal violence, 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.
As of the filing date, ten of the 22 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. There have occasionally been instances of
criminal violence near our resorts. Criminal 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.
The success of our resorts that bear the name of our third-party brand partners will depend substantially on the success of such
brands. There is a risk that we and the third-party brands may not succeed in marketing these brands and that we may not receive
the anticipated return on the investment incurred in connection with the rebranding, which could have a material adverse effect on
us.
17 of the resorts in our portfolio bear the name of one or both of the Hyatt All-Inclusive Resort Brands, the Hilton all-inclusive
resort brand (the “Hilton Brand”) and the Wyndham all-inclusive resort brand (the “Wyndham Brand”). As a result of this
concentration, our success will depend, in part, on the continued success of these 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 any of the Hyatt
All-Inclusive Resort Brands, Hilton Brand or Wyndham Brand is reduced or compromised, the goodwill associated with these resorts
in our portfolio would likely be adversely affected. Under the applicable resort agreements with these partners, Hyatt, Hilton and
Wyndham provide (or cause 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 their requirements. We cannot assure you that we and
our applicable partners will be successful in our marketing efforts to grow any of these brands.
If we are not able to satisfy the requirements imposed by our major brand partners, our relationship with these partners could
deteriorate, which could have a material adverse effect on us.
Under the terms of our franchise agreements with Hyatt, Hilton and Wyndham, we are required to meet specified operating
standards and other terms and conditions. We expect that these brands will periodically inspect our resorts that carry the Hyatt All-
Inclusive Resort Brand, Hilton Brand and Wyndham Brand, as applicable. If we fail to maintain brand standards at one or more of
these resorts, or otherwise fail to comply with the terms and conditions of the applicable franchise agreements, then the applicable
franchise agreements (and in some cases all franchise agreements related to the particular brand) could be terminated. In that situation,
we may be subject to liquidated damage payments. If one or more of these 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
applicable guest loyalty programs, reservation systems and websites, and access to group sales business, as well as from the costs of
“rebranding” such resorts.
There are very limited restrictions on the ability of our brand partners, including Hyatt, to compete with us.
Our strategic relationship with our brand partners, including Hyatt, is an important component of our business and brand strategy.
However, there are very limited restrictions on our brand partners competing with us. For example, 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
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Brands or any other Hyatt-sponsored brands. Hyatt, in its sole discretion, 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. Hyatt is also free to develop or license other all-inclusive resorts in the regions in which we
operate, even under the Hyatt All-Inclusive Resort Brands (subject to certain territorial restrictions included in the Hyatt franchise
agreements). Therefore, Hyatt may decide to compete against our resorts for market share and guests, and we have no contractual right
to partner with Hyatt on opportunities for future resorts.
In addition, Hyatt recently completed an acquisition of Apple Leisure Group (“ALG”), a luxury resort-management services,
travel and hospitality group that manages all-inclusive resorts in many of the regions in which we operate. With ALG’s brand
management platform AMResorts, Hyatt may therefore compete against us for contracts to manage all-inclusive resorts in the
Caribbean, Mexico and Latin America, and its financial and marketing resources, brand name recognition and terms of its
management agreements may cause us to miss out on attractive business opportunities and adversely affect our revenues, growth
strategy and profits. In addition, AMResorts, which currently also manages two of our resorts, may have interests that conflict with
our interests, such as incentives to favor its other resorts over our resorts as a result of more favorable compensation arrangements or
by ownership interests in these resorts.
Under our Strategic Alliance Agreement with Hilton, we have a right of first offer to franchise or manage a new Hilton all-
inclusive resort under the Hilton all-inclusive resort brand (the “Hilton Brand”) within certain countries located in the Caribbean and
Mexico, and certain countries in Central and South America (the “Target Markets”) through August 7, 2023. However, except for the
Hilton franchise agreements, we have no contractual right to operate any resort in 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 (i) 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 and (ii) may 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.
If our brand partners compete with us and our resorts, 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.
There is increased competition from global hospitality branded companies in the all-inclusive market segment.
As demand for all-inclusive stays has increased, we have seen U.S. and European global hospitality branded companies enter the
all-inclusive market segment. Increased competition from global branded hospitality companies may result in reduced market share
and lower returns on investment for us as the increasing interest of global hospitality brands in the all-inclusive segment attracts more
institutional capital to our target markets, increasing competition for the acquisition of hospitality assets. The entrance by global
branded hospitality companies into the all-inclusive market segment may impact our ability to secure third-party management
agreements as global hospitality branded companies are able to offer management agreements bundled with their branding services
and a lower fee structure, resulting in increased competition for the management of all-inclusive resorts.
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,
any of which could have a material adverse effect on us.
The majority of our operating expenses are incurred locally at our resorts and are denominated in Mexican Pesos, Dominican
Pesos or Jamaican dollars. The net proceeds from our outstanding debt borrowings were received and are payable by our subsidiaries
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.
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
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value of the Mexican Peso, the Dominican Peso or the Jamaican dollar compared to the currencies of other potential destinations may
disadvantage 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.
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 our subsidiaries' 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.
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 Wyndham
Alltra all-inclusive 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.
We have seen certain construction timelines lengthen due to competition for skilled construction labor, disruption in the supply
chain for materials, and the impact of COVID-19 generally, and these circumstances could continue or worsen in the future. 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.
Given the beachfront locations of our resorts, we are particularly vulnerable to extreme weather events, such as hurricanes, which
may increase in frequency and severity as a result of climate change and adversely affect our business.
We have been and may continue to be adversely impacted by the consequences of climate change, such as increases in the
frequency, duration and severity of extreme weather events and changes in precipitation and temperature, which have resulted and
may continue to 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 hurricanes, tropical storms and flooding. For example, in 2021, 2020
and 2019, we incurred hurricane and tropical storm repair expenses of $0.5 million, $1.5 million, and $0 million, respectively, which
were not offset by insurance proceeds. Although a majority of our expenses have been offset by insurance proceeds, there is no
assurance that, given the increasing burdens on insurance companies from extreme weather events, we will be able to continue to
obtain adequate insurance against these types of losses, or that our insurers will in the future be in a position to satisfy our claims. In
addition, the costs of insurance against these types of events has increased in recent years. For example, in 2021 our property
insurance costs of our comparable resorts were 17.1% higher than 2018.
In addition, changes in applicable legislation and regulation on climate change could result in increased capital expenditures, such
as a result of changes in building codes or requirements to improve the energy efficiency of the properties.
Climate change also presents additional risks beyond our control which can adversely impact demand for hospitality products and
services, our operations, and our financial results. For example, most of our properties are located at or around sea level, and are
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therefore vulnerable to rising sea levels and erosion. Climate change-related impacts may also result in a scarcity of resources, such as
water and energy, at some or all of the regions in which our results are located. Furthermore, increasing awareness around
sustainability, the impact of air travel on climate change and the impact of over-tourism may contribute to a reduction in demand from
certain guests visiting our resorts.
The coastlines of a number of the regions where our resorts are concentrated have experienced elevated levels of sargassum
seaweed in recent years.
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 in Mexico 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 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 it. Although we do our best to remove the seaweed and prevent the build-up,
the exact cause of overgrowth is unknown.
Our insurance may not be adequate to cover our potential losses, liabilities and damages, the cost of insurance may continue to
increase materially, including as a result of extreme weather events that may be related to climate change, and we may not be able
to secure insurance to cover all of our risks, all of 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.
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
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, 2021, we directly and indirectly employed approximately 12,300 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.
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.
Approximately 41% 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, reductions in service, or other factors
such as inflation, 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.
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 have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of
furniture, fixtures and equipment. In addition, Hyatt, Hilton and Wyndham will require periodic capital improvements by us as a
condition of maintaining the use of their brands. In addition to liquidity risks, these capital improvements may result in declines in
revenues while rooms or restaurants are out of service due to capital improvement projects or other risks. The costs of 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, 2021, our total debt obligations were $1,151.2 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”), our additional senior secured credit facility (the “Additional Credit Facility”), our
property loan agreement (the “Property Loan”) and finance lease obligations, excluding $4.3 million of issuance discounts and $7.7
million of unamortized debt issuance costs. 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, 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 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,
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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:
•
•
incur additional debt;
pay dividends or repurchase shares or make other distributions to shareholders;
• make investments or acquisitions;
•
•
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, Additional Credit Facility and Property Loan require 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, Additional Credit Facility or Property Loan. 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”) and subjects us to
interest rate risk, which could cause our debt service obligations to increase significantly.
A portion of our borrowings, specifically $169.2 million under our Senior Secured Credit Facility and Additional Credit Facility,
bears interest at floating interest rates pegged to LIBOR as it is not hedged by interest rate swaps. On November 30, 2020, the U.S.
Federal Reserve Board, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued a joint
statement expressing support for a plan to cease publication of the one week and two month LIBOR rates after December 31, 2021,
and the remaining LIBOR rates after June 30, 2023, and encouraging banks to transition away from LIBOR prior to its discontinuance.
Accordingly, it is highly likely that the LIBOR indices for the primary LIBOR rates under our Senior Secured Credit Facility and
Additional Credit Facility will be discontinued after June 30, 2023, and, until our Senior Secured Credit Facility and Additional Credit
Facility are modified to provide for a specific benchmark replacement, it is unclear what rate will thereafter apply to such credit
facilities. At this time, it is not possible to predict with certainty the effect of any changes to LIBOR, any phase out of LIBOR or any
establishment of alternative benchmark rates. The New York Federal Reserve has been publishing an alternative reference rate, the
Secured Overnight Financing Rate (“SOFR”), since April 2018 and on July 29, 2021, such rate was formally recommended as a
replacement of LIBOR by a group of major market participants convened by the U.S. Federal Reserve with participation by SEC Staff
and other regulators. While SOFR appears to be the preferred replacement rate for LIBOR, regulators have not required lenders to
transition to SOFR, lenders remain free to offer the replacement rate of their choice, and there can be no assurance as to the effect or
timing of such adoption. The transition to a new index could cause interest rates under our current or future debt agreements to
perform differently than in the past or cause other unanticipated consequences. We continue to evaluate when we might amend the
terms of our credit facilities that are indexed to LIBOR to replace such rate 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.
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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 has exposed us to disputes or legal, regulatory and 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, casinos, 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
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.
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). 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).
With respect to the applicable resorts:
•
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Two of the acquired resorts, Wyndham Alltra 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.
The remaining two resorts, Hilton Playa del Carmen All-Inclusive Resort and Wyndham Alltra 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
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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, which took effect on
January 1, 2014, as amended by Regulation (EU) 2019/876 (the “CRR”), 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.
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.
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;
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;
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•
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•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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, floods, 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. Although the
trend has been disrupted in the last two years by the impacts of the COVID-19 pandemic, 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.
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
Net Package RevPAR (as defined in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of
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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.
Cyber risk and the failure to maintain the integrity of internal or guest data could harm our reputation and result in a loss of
business and/or subject us to costs, fines, investigations, enforcement actions or lawsuits.
We, Hyatt, Hilton, Wyndham, 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, Wyndham’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, Wyndham, 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, Wyndham’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.
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.
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
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
inhibit the efficiency of our operations if suitable alternatives could not be identified and implemented in a timely, efficient and cost-
effective manner.
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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.
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.
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
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 adverse
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 that could impact the timing of a disposition, including adverse changes in economic and market conditions,
changes in interest and tax rates and in the availability and cost and other terms of debt financing, and changes in governmental laws
and regulations.
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.
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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
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
agreements which determine our taxes in the Dominican Republic, known as advanced pricing agreements, with The Ministry of
Finance of the Dominican Republic when our current agreements expire.
In October 2021, the OECD released an outline that describes the conceptual agreement between 136 countries on fundamental
reforms to international tax rules. The OECD outline suggests that these reforms be implemented by 2023, but implementation is
contingent upon the independent actions of participating countries to enact law changes. If enacted into law, in whole or in part, this
proposed change to international tax rules could have a negative impact to our effective tax rate. The outline provides for two primary
“Pillars”, however only Pillar Two, which provides for a global minimum corporate tax rate of 15%, is expected to be applicable to us.
Pillar One is not expected to be applicable as Playa does not expect to meet the €20 billion turnover threshold in the foreseeable future.
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
29
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”, 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.
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
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.
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
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), (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,
still be rejected if the foreign judgment is not or no longer formally enforceable.
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.
30
Sagicor owns a significant number of our ordinary shares and has representation on our Board, and may have interests that differ
from those of our other shareholders.
As of January 31, 2022, approximately 7.5% of our outstanding ordinary shares were beneficially owned by Sagicor Financial
Corporation Limited and its designated director on our Board. As a result, Sagicor may be able to 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 this shareholder and/or its 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, this shareholder 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. This shareholder’s 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 this shareholder may differ from their interests in material respects.
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.
31
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
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.
Moreover, our Board can invoke a cooling-off period of up to 250 days in the event of certain unsolicited takeover offers and
shareholder activism. During a cooling-off period, our General Meeting would not be able to dismiss, suspend or appoint members of
the Board (or amend the provisions in our Articles of Association dealing with those matters) except at the proposal of our Board.
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.
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. We may also issue ordinary shares in a public or private offering at
prices below the current market price of the 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 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.
32
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.
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.
If, based on Mexican law, the accounting value of our ordinary shares is derived more than 50% from property in Mexico, it could
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
with Mexico.
Item 1B. Unresolved Staff Comments.
None.
33
Item 2.Properties.
As of December 31, 2021, 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
Name of Resort
Owned Resorts
Yucatán Peninsula
Hyatt Ziva Cancún
Cancún, Mexico
Hyatt Ziva (all ages)
Hyatt Zilara Cancún
Cancún, Mexico
Hyatt Zilara (adults-only)
Wyndham Alltra Cancún
Cancún, Mexico
Wyndham (all ages)
Hilton Playa del Carmen All-Inclusive
Resort
Playa del Carmen, Mexico
Hilton (adults-only)
Playa
Playa
Playa
Playa
1975; 1980; 1986;
2002; 2015
2006; 2009; 2013;
2017
1985; 2009; 2017
2002; 2009; 2019
1996; 2006; 2012;
2017
Wyndham Alltra Playa del Carmen
Playa del Carmen, Mexico
Wyndham (adults-only)
Playa
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)
Playa
Playa
2007; 2009; 2015
1969; 1990; 2002;
2009; 2014; 2017
Dominican Republic
Hilton La Romana All-Inclusive Resort
Hilton La Romana All-Inclusive Resort
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)
Playa
1997; 2008; 2019
Hilton (all ages)
Playa
1997; 2008; 2019
Dreams (all ages)
AMResorts
1994; 2008
Dreams (all ages)
AMResorts
Hyatt Ziva (all ages)
Playa
Hyatt Zilara (adults-only)
Playa
2004
2019
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 Paradise Cove Beach Resort & Spa
Jewel Grande Montego Bay Resort & Spa(1)
Runaway Bay, Jamaica
Montego Bay, Jamaica
Jewel (adults-only)
Jewel (all ages)
Total Rooms Owned
Managed Resorts (2)
Sanctuary Cap Cana
Jewel Grande Montego Bay Resort & Spa
The Yucatán Playa Del Carmen All-
Inclusive Resort
Hyatt Ziva Riviera Cancún(3)
Punta Cana, Dominican
Republic
Montego Bay, Jamaica
Playa del Carmen, Mexico
Riviera Maya, Mexico
Sanctuary (adults-only)
Jewel (condo-hotel)
Tapestry Collection by
Hilton (adults-only)
Hyatt Ziva (all ages)
Hyatt Zilara Riviera Maya(4)
Riviera Maya, Mexico
Hyatt Zilara (adults-only)
Total Rooms Operated
Total Rooms Owned and Operated
Playa
Playa
Playa
Playa
Playa
Playa
Playa
Playa
Playa
Playa
2000; 2014; 2017
2000; 2014; 2017
1974; 2008; 2017
2013
2016; 2017
2008; 2015; 2018
2016; 2017
2012
2008, 2021
2003
(1) Represents an 88-unit tower and spa owned by us. 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.
(2) Owned by a third party.
(3) We entered into a management agreement to operate this resort during the first quarter of 2021. The resort opened in the third quarter of 2021.
(4) We entered into a management agreement to operate this resort during the first quarter of 2021. The resort is currently closed for renovations but is expected to open
in the first half of 2022.
34
547
310
458
524
287
591
335
356
418
500
620
375
375
276
344
495
225
88
7,124
324
129
60
438
291
1,242
8,366
Item 3.Legal Proceedings.
The information contained under the heading “Litigation, claims and assessments” in Note 7 – Commitments and contingencies
to our Consolidated Financial Statements in this report is incorporated by reference into this Item 3.
Item 4. Mine Safety Disclosures.
Not Applicable.
PART II
Item 5.Marke t 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, 2022, we had 165,778,067 ordinary shares outstanding that were held by approximately 60 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.
Performance Graph
The graph below compares the cumulative total return for our ordinary shares from March 13, 2017 through December 31, 2021
with the comparable cumulative return of two indices: the Dow Jones United States Travel and Leisure Index (“DOW JONES US
TRAVEL & LEISURE”) and the Russell 2000 Index (“RUSSELL 2000”). The graph assumes $100 was invested on March 13, 2017
in our ordinary shares and the two indices presented.
n
r
u
t
e
R
l
a
t
o
T
200
150
100
50
0
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1
PLYA
DOW JONES US TRAVEL & LEISURE
RUSSELL 2000
35
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Issuer Purchases of Equity Securities
None.
Item 6. Intentionally Omitted
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This section of this Annual Report on Form 10-K generally discusses 2020 and 2021 items and year-to-year comparisons between
2020 and 2021. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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, 2021, Playa owned and/or managed a total portfolio consisting of 22
resorts (8,366 rooms) located in Mexico, Jamaica, and the Dominican Republic:
•
•
•
•
In Mexico, Playa owns and manages Hyatt Zilara Cancún, Hyatt Ziva Cancún, Wyndham Alltra Cancún, Wyndham Alltra
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
Grande Montego Bay Resort & Spa, 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; and
Playa owns two resorts in the Dominican Republic that are managed by a third-party and manages five resorts on behalf of
third-party owners.
Playa’s strategy is to leverage its globally recognized brand partnerships and proprietary in-house direct booking capabilities to
capitalize on the growing popularity of the all-inclusive resort model and reach first-time all-inclusive consumers in a cost effective
manner. We believe that this strategy should position us to generate attractive returns for our shareholders, build lasting relationships
with our guests, and enhance the lives of our associates and the communities in which we operate.
For the year ended December 31, 2021, we generated a net loss of $89.7 million, total revenue of $534.6 million, Net Package
RevPAR of $159.88 and Adjusted EBITDA of $99.2 million. For the year ended December 31, 2020, during which time our
operations were severely impacted by COVID-19, we generated a net loss of $262.4 million, total revenue of $273.2 million, Net
Package RevPAR of $76.61 and Adjusted EBITDA of ($21.2) million.
Impact of COVID-19 Pandemic
The COVID-19 pandemic and the public health measures that have been undertaken in response have had a significant adverse
impact on the global economy, the travel and hospitality industries and our business starting in the first quarter of 2020. The effects of
the COVID-19 pandemic, including related government restrictions, border closings, quarantines, “shelter-in-place” orders and “social
distancing,” as well as overall changes in consumer demand, have significantly disrupted global leisure travel, and have adversely
impacted global commercial activity. We expect that the continuing fallout will create headwinds for global travel even after
government restrictions are lifted.
Due to the spread of the COVID-19 pandemic and the associated restrictions placed on international travel, we temporarily
suspended operations at all of our resorts in late March 2020. We subsequently began reopening our resorts on July 1, 2020, but
occupancy levels at all of our resorts have remained below historical levels due to the continuing effects of the pandemic. All of our
resorts were reopened by December 31, 2020, except for the Capri Resort which was sold in June 2021, and all of our resorts continue
to be open as of December 31, 2021.
36
The suspension of operations at our resorts during part of 2020, and the reduced occupancy at the resorts since they have
reopened, adversely affected our liquidity. As of December 31, 2021, we had $270.1 million of available cash, excluding
$23.5 million of restricted cash. We took the following measures during the fiscal years 2020 and 2021 to mitigate the impact of the
effects of the COVID-19 pandemic on our liquidity position:
•
•
•
•
•
•
•
•
•
•
raised $224.0 million of additional capital during the second quarter of 2020 from affiliates of Davidson Kempner
Capital Management L.P. in the form of $204.0 million of additional debt financing and $20.0 million of equity
financing at $4.10 per share;
sold the Jewel Dunn's River Beach Resort & Spa and the Jewel Runaway Bay Beach Resort & Waterpark in May 2020
for a total cash consideration of $60.0 million;
the temporary suspension of operations of all of our resorts during the second quarter of 2020 significantly reduced the
variable cost components of our resort-level operating expenses, including resort franchise and franchise-related fees,
management fees and expenses related to our resort employees;
deferred substantially all of our non-critical capital expenditures planned for 2020 and 2021;
adopted temporary voluntary senior executive salary reductions while the majority of our resorts were closed, and our
Chief Executive Officer’s voluntary 100% salary reduction remained in place through December 31, 2020;
imposed temporary compensation cuts broadly throughout our corporate workforce and canceled all non-essential
corporate travel and spending;
raised $138.0 million, net of underwriting discounts, of additional capital in January 2021 through an underwritten public
equity offering at $5.00 per share;
paid down the outstanding balance under our Revolving Credit Facility in February 2021 and also amended and extended
our existing facility, further extending the covenant waiver period were we to draw the credit line over 35%;
sold the Dreams Puerto Aventuras in February 2021 for a total cash consideration of $34.5 million; and
sold the Capri Resort in June 2021 for a total cash consideration of $55.0 million.
The extent to which the COVID-19 pandemic will continue to impact us and consumer behavior will depend on future
developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the
pandemic, continuing resurgences of the virus and its variants, including the Delta and Omicron variants, the government actions
taken to contain the pandemic or mitigate its impact, the speed, continuing effectiveness and distribution of vaccines (including
boosters) and treatment therapies, the rate of public adoption of COVID-19 vaccines, and the direct and indirect economic effects of
the pandemic and containment measures, including the magnitude of its impact on unemployment rates, labor-force availability
(including as a result of vaccine mandates), disruption in the supply chain for materials and consumer discretionary spending, among
others. We cannot predict when the effects of the pandemic will subside, and thus we cannot predict whether our resorts will be
permitted to remain open or when our business will return to normalized or even to break-even levels. There also can be no guarantee
that when the effects of the pandemic subside that there will not be continuing resurgences of the virus or that the demand for lodging,
and consumer confidence in travel generally, will recover as quickly as other industries. The longer and more severe the pandemic,
and the actual occurrence or even the possibility of repeat or cyclical outbreaks of the virus beyond the one currently being
experienced, the greater the material adverse effect the pandemic will have on our business, results of operations, cash flows, financial
condition, access to credit markets and ability to service our indebtedness. See Part I, Item 1A. Risk Factors included elsewhere in this
report for additional information.
37
Results of Operations
Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations on a consolidated basis for the years ended December 31, 2021 and
2020 ($ in thousands):
Revenue
Package
Non-package
Management fees
Cost reimbursements
Total revenue
Direct and selling, general and administrative expenses
Direct
Selling, general and administrative
Depreciation and amortization
Reimbursed costs
Impairment loss
Loss on sale of assets
Gain on insurance proceeds
Direct and selling, general and administrative expenses
Operating loss
Interest expense
Other expense
Net loss before tax
Income tax benefit
Net loss
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
$
437,950
$
229,447
$
208,503
88,592
2,291
5,806
534,639
326,979
119,895
81,508
5,806
24,011
676
—
558,875
(24,236)
(71,378)
(1,471)
(97,085)
7,403
40,746
807
2,189
47,846
1,484
3,617
273,189
261,450
209,832
104,188
92,570
2,189
55,619
2,021
(2,993)
463,426
(190,237)
(81,942)
(1,164)
(273,343)
10,973
117,147
15,707
(11,062)
3,617
(31,608)
(1,345)
2,993
95,449
166,001
10,564
(307)
176,258
(3,570)
$
(89,682) $
(262,370) $
172,688
90.9 %
117.4 %
183.9 %
165.2 %
95.7 %
55.8 %
15.1 %
(11.9) %
165.2 %
(56.8) %
(66.6) %
100.0 %
20.6 %
87.3 %
12.9 %
(26.4) %
64.5 %
(32.5) %
65.8 %
The tables below set forth information for our total portfolio and our comparable portfolio 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. For discussion 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.
Our comparable portfolio for the year ended December 31, 2021 excludes the following resorts:
•
•
•
Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, which were sold in May 2020;
Dreams Puerto Aventuras, which was sold in February 2021; and
Capri Resort, which was sold in June 2021.
38
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
2021
2020
Change
% Change
51.6 %
309.94
159.88
$
$
26.9 %
24.7 pts
284.84
76.61
$
$
25.10
83.27
($ in thousands)
425,760
$
221,659
$
204,101
87,746
2,291
515,797
40,473
807
262,939
47,273
1,484
252,858
99,171
$
(21,173)
$
120,344
19.2 %
(8.1)%
27.3 pts
91.8 %
8.8 %
108.7 %
92.1 %
116.8 %
183.9 %
96.2 %
568.4 %
337.0 %
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
52.7 %
310.49
163.53
$
$
26.3 %
26.4 pts
292.84
76.96
$
$
17.65
86.57
($ in thousands)
425,218
$
199,821
$
225,397
87,112
2,291
514,621
100,058
36,226
807
236,854
50,886
1,484
277,767
$
(21,798)
$
121,856
19.4 %
(9.2)%
28.6 pts
100.4 %
6.0 %
112.5 %
112.8 %
140.5 %
183.9 %
117.3 %
559.0 %
310.9 %
$
$
$
$
$
$
$
$
Total Revenue and Total Net Revenue
Our total revenue for the year ended December 31, 2021 increased $261.5 million, or 95.7%, compared to the year ended
December 31, 2020.
Our Total Net Revenue for the year ended December 31, 2021 increased $252.9 million, or 96.2%, compared to the year ended
December 31, 2020. The increase was primarily a result of the resumption of resort operations for the entirety of 2021 as compared to
the year ended December 31, 2020, when we closed all of our resorts for the second quarter of 2020 and experienced severely reduced
occupancy during the third and fourth quarters of 2020 as a result of the COVID-19 pandemic. See “Impact of COVID-19 Pandemic”
above for more information regarding the effects of the COVID-19 pandemic on our results of operations. We believe the increase in
Total Net Revenue for the year ended December 31, 2021 was also due to an increase in Net Package ADR as a result of pent-up
customer demand following COVID-19 related travel restrictions and vaccine availability, and our strategic decision to focus on
pricing discipline to coincide with investments in guest satisfaction at our resorts.
Our Total Net Revenue for the year ended December 31, 2021 includes a $1.3 million favorable value-added tax (“VAT”) impact
following OECD guidelines for Transfer Pricing for Multinational Enterprises as a result of the economic impact of the COVID-19
pandemic. This VAT adjustment resulted in a $0.94 favorable impact in Net Package ADR. Additionally, Net Package ADR of
$309.94 for the year ended December 31, 2021 benefited by an additional $4.95 as a result of a change in billing methodology of an
online travel agency (“OTA”), which required Playa to present this revenue gross of commissions under U.S. GAAP. Excluding the
aforementioned adjustments, Net Package ADR would have been $304.05.
39
The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue, Management Fee
Revenue and Total Net Revenue to total revenue for the years ended December 31, 2021 and 2020 ($ 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
2021
2020
Change
% Change
$
425,218
$
199,821
$
225,397
542
425,760
21,838
221,659
(21,296)
204,101
87,112
634
87,746
2,291
—
2,291
514,621
1,176
515,797
13,036
5,806
36,226
4,247
40,473
807
—
807
236,854
26,085
262,939
8,061
2,189
50,886
(3,613)
47,273
1,484
—
1,484
277,767
(24,909)
252,858
4,975
3,617
$
534,639
$
273,189
$
261,450
112.8 %
(97.5) %
92.1 %
140.5 %
(85.1) %
116.8 %
183.9 %
— %
183.9 %
117.3 %
(95.5) %
96.2 %
61.7 %
165.2 %
95.7 %
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the years ended December 31, 2021
and 2020 ($ in thousands):
Direct expenses
Less: compulsory tips
Net Direct Expenses
Year Ended December 31,
Increase/Decrease
2021
2020
Change
% Change
$
$
326,979
$
209,832
$
117,147
13,036
8,061
4,975
313,943
$
201,771
$
112,172
55.8 %
61.7 %
55.6 %
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, 2021 were $313.9 million, or 60.9% of Total Net
Revenue. Our Net Direct Expenses for the year ended December 31, 2020 were $201.8 million, or 76.7% of Total Net Revenue.
Net Direct Expenses for the year ended December 31, 2021 increased $112.2 million, or 55.6%, compared to the year ended
December 31, 2020. As a percentage of Owned Net Revenue, Net Direct Expenses decreased to 61.3%, compared to 77.1% for the
year ended December 31, 2020. Net Direct Expenses at our comparable properties increased $129.2 million, or 71.2%, compared to
the year ended December 31, 2020. The increase in Net Direct Expenses was primarily a result of the resumption of resort operations
for the entirety of 2021 as compared to the year ended December 31, 2020, when we closed all of our resorts for the second quarter of
2020 and experienced severely reduced occupancy during the third and fourth quarters of 2020 as a result of the COVID-19 pandemic.
The increase was also a result of a higher rate of inflation in 2021 as compared to 2020, particularly in the second half of 2021. See the
“Inflation” section for additional discussion. Direct operating expenses fluctuate based on various factors, including changes in
occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes. Management fees and franchise fees,
which are computed as a percentage of revenue, increase or decrease as a result of changes in revenues.
40
Net Direct Expenses consists of the following ($ in thousands):
Total Portfolio
Year Ended December 31,
Increase/Decrease
2021
2020
Change
% Change
Food and beverages
Guest costs
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
Guest costs
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
$
68,885
$
36,155
$
24,558
117,282
16,629
35,481
2,992
1,492
24,192
4,281
4,672
2,335
6,917
996
3,231
9,555
87,119
11,699
25,094
3,224
1,162
12,874
2,844
3,022
1,090
3,948
623
3,362
32,730
15,003
30,163
4,930
10,387
(232)
330
11,318
1,437
1,650
1,245
2,969
373
(131)
313,943
$
201,771
$
112,172
$
$
68,739
$
32,356
$
24,253
115,245
16,508
35,295
2,854
1,450
24,192
4,249
4,664
2,324
6,899
993
2,988
8,525
78,317
9,742
22,974
2,936
580
12,882
2,525
2,731
995
3,496
588
2,760
36,383
15,728
36,928
6,766
12,321
(82)
870
11,310
1,724
1,933
1,329
3,403
405
228
90.5 %
157.0 %
34.6 %
42.1 %
41.4 %
(7.2) %
28.4 %
87.9 %
50.5 %
54.6 %
114.2 %
75.2 %
59.9 %
(3.9) %
55.6 %
112.4 %
184.5 %
47.2 %
69.5 %
53.6 %
(2.8) %
150.0 %
87.8 %
68.3 %
70.8 %
133.6 %
97.3 %
68.9 %
8.3 %
71.2 %
Year Ended December 31,
Increase/Decrease
2021
2020
Change
% Change
$
310,653
$
181,407
$
129,246
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the year ended December 31, 2021 increased $15.7 million, or 15.1%,
compared to the year ended December 31, 2020. The higher occupancy levels at our resorts in 2021 as compared to 2020 resulted in a
$10.3 million increase in commissions expenses, a $5.6 million increase in credit card commissions, and a $4.1 million increase in
advertising expense. The increase in commissions expenses includes $6.8 million that was a result of a change in billing methodology
of an OTA in 2021, which required Playa to present the commissions on a gross basis under U.S. GAAP. We also experienced a $2.4
million increase in corporate personnel costs due to the reinstatement of full executive and employee salaries and the hiring of
additional resources as we recovered from the effects of COVID-19. Additionally, our January 2021 grants of restricted and
41
performance share awards (see Note 11 to the Consolidated Financial Statements) drove a $3.0 million increase in share-based
compensation expense over the prior year.
These increases in selling, general and administrative expenses were partially offset by a $3.8 million decrease in our provision
for doubtful accounts due to the economic recovery from the COVID-19 pandemic and its effect on tour operators and travel agencies.
Additionally, the sales of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark in May
2020, Dreams Puerto Aventuras in February 2021, and Capri Resort in June 2021 resulted in a $2.1 million decrease in insurance
expenses and a $1.2 million decrease in property selling, general and administrative expenses.
Depreciation and Amortization Expense
Our depreciation and amortization expense for the year ended December 31, 2021 decreased $11.1 million, or 11.9%, compared
to the year ended December 31, 2020, primarily as a result of a $7.7 million decrease from our dispositions of the Jewel Dunn’s River
Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark in May 2020, the Dreams Puerto Aventuras in February
2021, and the Capri Resort in June 2021, and a $1.8 million decrease due to accelerated depreciation incurred in 2020 related to the
completion of renovation projects at the Hilton Playa del Carmen All-Inclusive Resort.
Impairment Loss
Our impairment loss for the year ended December 31, 2021 decreased $31.6 million, or 56.8%, compared to the year ended
December 31, 2020. The decrease was driven by $25.3 million of property and equipment impairment recognized upon classification
of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark as held for sale in May 2020 and
an additional $10.6 million of property and equipment impairment recognized upon classification of the Dreams Puerto Aventuras as
held for sale in November 2020. We also recognized $17.7 million of goodwill impairment resulting from the decrease in forecasted
future cash flows during the first quarter of 2020 from the temporary suspension of operations from COVID-19, as we fully impaired
the goodwill of our Jewel Runaway Bay Beach Resort & Waterpark, Jewel Dunn’s River Beach Resort & Spa and Jewel Paradise
Cove Beach Resort & Spa reporting units and recognized $2.1 million of goodwill impairment losses at the Hilton Rose Hall Resort &
Spa reporting unit during the fourth quarter of 2020. These decreases were partially offset by $24.0 million of property and equipment
impairment losses recognized during the year ended December 31, 2021 upon classification of the Capri Resort as held for sale in
March 2021.
Loss on Sale of Assets
Our loss on sale of assets for the year ended December 31, 2021 decreased $1.3 million, or 66.6%, as compared to the year ended
December 31, 2020. The decrease was due to the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach
Resort & Waterpark in May 2020, which resulted in a $1.8 million loss during the year ended December 31, 2020. We recognized a
loss of $0.5 million on the sale of the Capri Resort in June 2021.
Gain on Insurance Proceeds
Our gain on insurance proceeds for the year ended December 31, 2021 decreased $3.0 million, or 100.0%, as compared to the
year ended December 31, 2020 as a result of insurance proceeds received for the temporary suspension of operations at all of our
resorts in late March 2020 due to the COVID-19 pandemic. We had no gain on insurance proceeds during the year ended December
31, 2021.
Interest Expense
Our interest expense for the year ended December 31, 2021 decreased $10.6 million, or 12.9%, as compared to the year ended
December 31, 2020. The decrease in interest expense was driven primarily by $20.2 million related to the change in fair value of 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
income (loss). Due to the significant drop in interest rates during 2020 related to the onset of the COVID-19 pandemic, our cash flow
hedge was deemed ineffective in March 2020, resulting in the recognition of losses on the change in fair value of our interest rate
swaps through interest expense. In addition, interest on our Revolving Credit Facility for the year ended December 31, 2021 decreased
by $2.6 million compared to the same period last year due to the repayment of the entire outstanding balance in February 2021. These
decreases were partially offset by additional interest expense from the Additional Senior Secured Credit Facility and Property Loan of
$4.0 million and $4.9 million, respectively, additional interest expense on our Term Loan of $1.5 million, as well as additional
discount accretion and financing costs of $1.5 million.
42
Cash interest paid was $78.9 million for the year ended December 31, 2021, representing an $8.9 million, or 12.8% increase as
compared to the year ended December 31, 2020. Cash interest paid increased due to the Additional Senior Secured Credit Facility and
Property Loan of $4.3 million and $4.9 million, respectively, as both agreements were executed in June 2020.
Income Tax Benefit
The income tax benefit for the year ended December 31, 2021 was $7.4 million, a decrease of $3.6 million compared to the year
ended December 31, 2020, during which we reported an income tax benefit of $11.0 million. The decrease in tax benefit was driven
primarily by:
•
•
•
$44.1 million reduction in tax benefit due to a reduction in book losses;
$7.9 million reduction in tax benefit due to hybrid tax jurisdictions; and
$7.8 million reduction in tax benefit due to changes in statutory tax rates.
These decreases were partially offset by:
•
•
•
•
$27.4 million increase in tax benefit due to changes in valuation allowances recorded;
$17.3 million increase in tax benefit from rate-favorable jurisdictions;
$6.9 million increase in tax benefit due to decreases in non-deductible expenses; and
$4.9 million increase in tax benefit due to non-recurring goodwill impairments recorded in 2020.
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:
•
•
•
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
• Management Fee Revenue
•
•
•
•
•
•
•
•
•
•
•
Total Net Revenue
Occupancy
Net Package ADR
Net Package RevPAR
Net Direct Expenses
EBITDA
Adjusted EBITDA
Adjusted EBITDA Margin
Owned Resort EBITDA
Owned Resort EBITDA Margin
Comparable Non-U.S. GAAP Measures
43
Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, 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.
“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
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.
“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 resorts 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, 2021,
2020 and 2019, 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
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
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.
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 statistic in the all-inclusive segment of the lodging industry to identify trend information
44
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, Adjusted EBITDA Margin, Owned Resort EBITDA, and Owned Resort EBITDA Margin
We define EBITDA, a non-U.S. GAAP financial measure, as net income or 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 income or expense
Pre-opening expense
Share-based compensation
Other tax expense
Transaction expenses
Severance expense
Gain on property damage insurance proceeds
Loss on extinguishment of debt
Other items which may include, but are not limited to the following: contract termination fees; gains or losses from legal
settlements; repairs from hurricanes and tropical storms; and impairment losses.
We include the non-service cost components of net periodic pension cost recorded within other expense in the Consolidated
Statements of Operations in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.
“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue.
“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.
Usefulness and Limitation of Non-U.S. GAAP Measures
We believe that each of 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
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
believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find
Adjusted EBITDA useful.
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.
45
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 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 resorts for the year ended December 31, 2021 exclude the following resorts: Jewel Dunn's River Beach Resort &
Spa and Jewel Runaway Bay Beach Resort & Waterpark, which were sold in May 2020, Dreams Puerto Aventuras, which was sold in
February 2021, and Capri Resort, which was sold in June 2021.
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, 2021 and 2020
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, 2021 and 2020 ($ in thousands):
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
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
$
188,911
$
109,629
$
76,811
149,774
97,036
512,532
974
2,291
33,065
49,898
69,173
79,282
43,746
99,876
27,863
261,765
250,767
367
807
607
1,484
515,797
$
262,939
$
252,858
$
$
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
59,538
$
17,783
$
23,776
38,141
14,826
136,281
(39,401)
2,291
4,281
(6,694)
(1,284)
14,086
(36,066)
807
41,755
19,495
44,835
16,110
122,195
(3,335)
1,484
$
99,171
$
(21,173) $
120,344
72.3 %
132.3 %
200.2 %
40.3 %
95.8 %
165.4 %
183.9 %
96.2 %
234.8 %
455.4 %
669.8 %
1,254.7 %
867.5 %
(9.2) %
183.9 %
568.4 %
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income or loss,
respectively, each as computed under U.S. GAAP, see Note 18 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, 2021 and 2020 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
2021
2020
Change
% Change
33.2%
22.8 pts
56.0%
335.48
187.92
$
$
283.15
93.94
($ in thousands)
157,633
$
31,278
188,911
93,585
16,044
109,629
$
$
$
52.33
93.98
64,048
15,234
79,282
59,538
$
17,783
$
41,755
31.5%
16.2%
15.3 pts
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
($ in thousands)
60.0%
337.15
202.35
$
$
157,020
$
30,726
187,746
60,914
$
32.4%
34.5%
25.5 pts
302.39
104.22
81,093
13,317
94,410
18,608
$
$
$
34.76
98.13
75,927
17,409
93,336
$
42,306
19.7%
12.7 pts
68.7 %
18.5 %
100.0 %
68.4 %
95.0 %
72.3 %
234.8 %
94.4 %
73.9 %
11.5 %
94.2 %
93.6 %
130.7 %
98.9 %
227.4 %
64.5 %
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the year ended December 31, 2021
increased $93.3 million, or 98.9%, compared to the year ended December 31, 2020. We believe this increase was primarily a result of
pent-up customer demand following COVID-19 related travel restrictions and vaccine availability, and our strategic decision to focus
on pricing discipline to coincide with investments in guest satisfaction at our resorts, but also due to the following:
•
•
•
the resorts being open for the entirety of 2021 as compared to the year ended December 31, 2020, when we closed our
resorts for the second quarter of 2020 and experienced severely reduced occupancy during the third and fourth quarters
of 2020 as a result of the COVID-19 pandemic;
a $10.15 favorable Comparable Net Package ADR impact as a result of a change in billing methodology of an OTA,
which requires Playa to present this revenue gross of commissions under U.S. GAAP; and
a $2.43 favorable Comparable Net Package ADR impact driven by a favorable $1.1 million VAT adjustment to
Comparable Owned Net Revenue following OECD guidelines for Transfer Pricing for Multinational Enterprises as a
result of the economic impact of the COVID-19 pandemic.
Excluding the aforementioned adjustments, Comparable Net Package ADR would have been $324.57 for the year ended
December 31, 2021.
Compared to 2019, Comparable Net Package ADR for the year ended December 31, 2021 increased by $60.61, or 21.9%.
Excluding the aforementioned adjustments, the increase would have been $48.03, or 17.4%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the year ended December 31, 2021
increased $42.3 million, or 227.4%, compared to the year ended December 31, 2020. These increases were a result of the on-going
48
revenue recovery, particularly the strong Comparable Net Package ADR increases compared to the year ended December 31, 2020,
when we closed our resorts for the second quarter of 2020 and experienced severely reduced occupancy during the third and fourth
quarters of 2020 as a result of the COVID-19 pandemic.
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, 2021 and 2020 for the total segment portfolio:
Year Ended December 31,
Increase / Decrease
2021
2020
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
$
$
$
$
($ in thousands)
53.7%
362.28
194.53
$
$
65,751
11,060
76,811
23,776
$
$
25.8%
27.9 pts
315.24
81.38
27,582
5,483
33,065
$
$
$
47.04
113.15
38,169
5,577
43,746
4,281
$
19,495
31.0%
12.9%
18.1 pts
108.1 %
14.9 %
139.0 %
138.4 %
101.7 %
132.3 %
455.4 %
140.3 %
Segment Owned Net Revenue. Our Owned Net Revenue for the year ended December 31, 2021 increased $43.7 million, or
132.3%, compared to the year ended December 31, 2020. We believe the increase was primarily a result of pent-up customer demand
following COVID-19 related travel restrictions and vaccine availability, and our strategic decision to focus on pricing discipline to
coincide with investments in guest satisfaction at our resorts, but also due to the following:
•
•
•
the resorts being open for the entirety of 2021 as compared to the year ended December 31, 2020, when we closed our
resorts for the second quarter of 2020 and experienced severely reduced occupancy during the third and fourth quarters
of 2020 as a result of the COVID-19 pandemic;
an $11.44 favorable Net Package ADR impact as a result of a change in billing methodology of an OTA, which requires
Playa to present this revenue gross of commissions under U.S. GAAP; and
an $0.85 favorable Net Package ADR impact driven by a $0.2 million favorable VAT adjustment to Owned Net Revenue
following OECD guidelines for Transfer Pricing for Multinational Enterprises as a result of the economic impact of the
COVID-19 pandemic.
Excluding the aforementioned adjustments, Net Package ADR would have been $349.99 for the year ended December 31, 2021.
Compared to 2019, Net Package ADR for the year ended December 31, 2021 increased by $77.29, or 27.1%. Excluding the
aforementioned adjustments, the increase would have been $65.00, or 22.8%.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the year ended December 31, 2021 increased $19.5 million, or
455.4%, compared to the year ended December 31, 2020. These increases were a result of the on-going revenue recovery, particularly
the strong Net Package ADR increases compared to the year ended December 31, 2020, when we closed our resorts for the second
quarter of 2020 and experienced severely reduced occupancy during the third and fourth quarters of 2020 as a result of the COVID-19
pandemic.
49
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, 2021 and 2020 for the total 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
$
$
$
$
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
49.0 %
262.86
128.73
$
$
124,231
25,543
149,774
38,141
$
$
18.7 %
30.3 pts
237.34
44.46
42,542
7,356
49,898
$
$
$
25.52
84.27
81,689
18,187
99,876
(6,694)
$
44,835
($ in thousands)
25.5 %
(13.4)%
38.9 pts
162.0 %
10.8 %
189.5 %
192.0 %
247.2 %
200.2 %
669.8 %
290.3 %
Segment Owned Net Revenue. Our Owned Net Revenue for the year ended December 31, 2021 increased $99.9 million, or
200.2%, compared to the year ended December 31, 2020. The increase was a result of the resorts being open for the entirety of 2021 as
compared to the year ended December 31, 2020, when we closed our resorts for the second quarter of 2020 and experienced severely
reduced occupancy during the third and fourth quarters of 2020 as a result of the COVID-19 pandemic.
Compared to 2019, Net Package ADR for the year ended December 31, 2021 increased by $72.22, or 37.9%. This increase was
driven by the opening of the premium-positioned Hyatt Ziva and Hyatt Zilara Cap Cana resorts in the fourth quarter of 2019, the
renovation of the Hilton La Romana All-Inclusive Resort, and our strategic decision to focus on pricing discipline to coincide with
investments in guest satisfaction at our resorts.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the year ended December 31, 2021 increased $44.8 million, or
669.8%, compared to the year ended December 31, 2020. These increases were a result of the on-going revenue recovery, particularly
the strong Net Package ADR increases compared to the year ended December 31, 2020, when we closed our resorts for the second
quarter of 2020 and experienced severely reduced occupancy during the third and fourth quarters of 2020 as a result of the COVID-19
pandemic.
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, 2021 and 2020 for the total segment portfolio and comparable 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
$
$
$
$
50
Year Ended December 31,
Increase / Decrease
2021
2020
Change
% Change
($ in thousands)
47.9 %
312.97
149.93
$
$
78,145
18,891
97,036
14,826
$
$
30.1 %
17.8 pts
320.30
96.36
57,950
11,223
69,173
$
$
$
(7.33)
53.57
20,195
7,668
27,863
(1,284)
$
16,110
15.3 %
(1.9)%
17.2 pts
59.1 %
(2.3)%
55.6 %
34.8 %
68.3 %
40.3 %
1,254.7 %
905.3 %
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
2021
2020
Change
% Change
($ in thousands)
47.9 %
313.25
150.06
$
$
78,216
18,809
97,025
14,337
$
$
28.2 %
19.7 pts
329.62
93.00
48,604
9,703
58,307
$
$
$
(16.37)
57.06
29,612
9,106
38,718
(2,734)
$
17,071
14.8 %
(4.7)%
19.5 pts
69.9 %
(5.0)%
61.4 %
60.9 %
93.8 %
66.4 %
624.4 %
414.9 %
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the year ended December 31, 2021
increased $38.7 million, or 66.4%, compared to the year ended December 31, 2020. These increases were a result of the resorts being
open for the entirety of 2021 as compared to the year ended December 31, 2020, when we closed our resorts for the second quarter of
2020 and experienced severely reduced occupancy during the third and fourth quarters of 2020 as a result of the COVID-19 pandemic.
Compared to 2019, Comparable Net Package ADR for the year ended December 31, 2021 decreased by $3.32, or 1.0%. This
decrease is due to more stringent COVID-19 related travel restrictions in Jamaica compared to the other regions where we operate.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the year ended December 31, 2021
increased $17.1 million, or 624.4%, compared to the year ended December 31, 2020. These increases were a result of the on-going
revenue recovery, particularly the strong Comparable Net Package ADR increases compared to the year ended December 31, 2020,
when we closed our resorts for the second quarter of 2020 and experienced severely reduced occupancy during the third and fourth
quarters of 2020 as a result of the COVID-19 pandemic.
51
Non-U.S. GAAP Financial Measures
Reconciliation of Net Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization
The following is a reconciliation of our U.S. GAAP net income or loss to EBITDA and Adjusted EBITDA for the years ended
December 31, 2021, 2020 and 2019 ($ in thousands):
Year Ended December 31,
2021
2020
2019
Net loss
Interest expense
Income tax benefit
Depreciation and amortization expense
EBITDA
Other expense (a)
Share-based compensation
Pre-opening expense
Transaction expense (b)
Severance expense (c)
Other tax expense (d)
Contract termination fees
Impairment loss
Loss on sale of assets
Repairs from hurricanes and tropical storms (e)
Non-service cost components of net periodic pension (cost) benefit (f)
$
(89,682) $
(262,370) $
71,378
(7,403)
81,508
55,801
1,471
13,163
—
1,321
1,756
617
400
24,011
676
475
(520)
81,942
(10,973)
92,570
(98,831)
1,164
10,158
—
2,497
3,844
613
—
55,619
2,021
1,542
200
Adjusted EBITDA
Other corporate
Management Fee Revenue
Owned Resort EBITDA
Less: Non-comparable Owned Resort EBITDA (g)
Comparable Owned Resort EBITDA
$
$
$
99,171
$
(21,173) $
39,401
(2,291)
136,281
(887)
137,168
$
$
36,066
(807)
14,086
625
13,461
$
$
(4,357)
44,087
(17,220)
101,897
124,407
3,200
8,845
1,452
6,175
515
577
—
6,168
—
—
(645)
150,694
37,049
(1,820)
185,923
18,961
166,962
________
(a) Represents changes in foreign exchange and other miscellaneous expenses or income.
(b) Represents expenses incurred in connection with corporate initiatives, such as: system implementations; debt refinancing costs; other capital raising efforts;
and strategic initiatives, such as the launch of a new resort or possible expansion into new markets.
(c) Represents expenses incurred for employee terminations.
(d) 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 similar to the income tax provision we eliminate from our calculation of EBITDA.
(e) Represents expenses incurred that are not covered by insurance claims nor offset by insurance proceeds.
(f) Represents the non-service cost components of net periodic pension (cost) benefit recorded within other expense in the Consolidated Statement of
Operations. We include these benefits or costs for calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.
(g) Our comparable resorts for the year ended December 31, 2021 exclude the following resorts: Jewel Dunn's River Beach Resort & Spa and Jewel Runaway
Bay Beach Resort & Waterpark, which were sold in May 2020, Dreams Puerto Aventuras, which was sold in February 2021, and Capri Resort, which was
sold in June 2021.
52
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico, Jamaica and the Dominican Republic have
historically resulted 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.
However, the COVID-19 pandemic altered this seasonal trend in both 2020 and 2021 and Net Package ADR was progressively
stronger during the second, third and fourth quarters of 2021 than it was in the first quarter of 2021. See “Impact of COVID-19
Pandemic” for more information regarding the effects of the COVID-19 pandemic on our results of operations.
Inflation
We experienced a higher rate of inflation in our direct resort expenses in 2021 as compared to 2020, particularly in the second half
of 2021, which was approximately 200 basis points higher than the first half of 2021. Inflation effects were experienced mostly
through higher labor costs, food and beverage prices, and utility costs. We expect this trend will likely continue at least through the
first half of 2022, but it could continue for longer. While we, like most operators of lodging properties, have the ability to adjust room
rates to reflect the effects of inflation, competitive pricing pressures and the continuing effects of the COVID-19 pandemic may limit
our ability to raise room rates to fully offset inflationary cost increases. See “Impact of COVID-19 Pandemic” above for more
information regarding the effects of the COVID-19 pandemic on our results of operations.
Liquidity and Capital Resources
The suspension of operations at our resorts during part of 2020, and the reduced occupancy at the resorts since they have
reopened, has adversely affected our liquidity. Our net cash provided by operating activities for the year ended December 31, 2021
was $29.6 million, representing a significant increase over 2020, but we expect that our cash flows from operations will be adversely
affected for the duration of the COVID-19 pandemic and for a transitional period thereafter. See “Impact of COVID-19 Pandemic”
above for information regarding the significant measures we took to preserve our available cash and improve our liquidity position
during 2020 and 2021. Based on these actions, we believe that our sources of cash, which consist of available cash and cash from
operations, together with the available borrowing capacity under our Revolving Credit Facility and our access to the capital markets,
will be adequate to meet our cash requirements, including our contractual obligations, over the next twelve months and beyond.
Sources of Cash
As of December 31, 2021, we had $270.1 million of available cash, excluding restricted cash, up from $146.9 million as of
December 31, 2020. The increase in available cash was primarily due to improved performance across our portfolio due to the ongoing
recovery from the COVID-19 pandemic and our resorts being open for the entirety of 2021 as compared to 2020, during which time
we closed all of our resorts for the second quarter and experienced severely reduced occupancy during the third and fourth quarters.
We also benefited from pent-up customer demand following the easing of COVID-19 related travel restrictions and increased public
adoption of vaccines, as well as our strategic decision to focus on pricing discipline to coincide with investments in guest satisfaction
at our resorts. This combination of factors allowed us to generate positive resort-level cash flow starting in the second quarter of 2021.
Additionally, we received cash proceeds from our public equity offering of ordinary shares of $137.7 million in January 2021, our
sale of the Dreams Puerto Aventuras for $34.5 million in February 2021, and sale of the Capri Resort for $55.0 million in June 2021,
all of which further improved our liquidity position. These increases were partially offset by the repayment of our outstanding
Revolving Credit Facility balance of $84.7 million and the Term Loan and Term A3 Loan principal repayments of $25.1 million
resulting from the sale of Capri Resort. As of January 31, 2022, we had approximately $275.6 million of available cash, excluding
$22.4 million of restricted cash, and also had $85.0 million available on our Revolving Credit Facility, of which $68.0 million does
not mature until January 2024.
We expect to meet our long-term liquidity requirements generally through the sources of cash available for short-term needs, net
cash provided by operations, as well as equity or debt issuances or proceeds from the potential disposal of assets.
Cash Requirements
Our expected material cash requirements for the twelve months ended December 31, 2022 and thereafter consist of (i)
contractually obligated expenditures, including payments of principal and interest; (ii) other essential expenditures, including
operating expenses and maintenance of our resorts; and (iii) opportunistic expenditures, including possible property developments,
expansions, renovations, repositioning and rebranding projects, potential acquisitions, the repayment of indebtedness and discretionary
repurchases of our securities.
53
As of December 31, 2021, we had $127.8 million of scheduled contractual obligations in 2022, which primarily relate to servicing
our outstanding debt and mandatory Term Loan repayments resulting from the sales of our resorts in 2020 and 2021. Refer to the table
below for a summary of our contractual commitments.
1 Year
Due in 1 to
3 years
Due in 3 to
5 years
Due in
Over 5 years
Total
Revolving Credit Facility interest payments (1)
$
366
$
374
$
— $
— $
Term Loan principal payments
Term Loan interest payments (2)
Property Loan principal payments
Property Loan interest payments
Repayments of Senior Secured Credit Facilities (3)
Operating and finance lease obligations
Pension obligation
10,100
61,512
—
9,440
44,015
1,825
574
973,812
67,204
—
20,661
7,260
2,935
1,253
—
—
110,000
5,992
—
2,886
1,484
—
—
—
—
—
6,023
3,742
740
983,912
128,716
110,000
36,093
51,275
13,669
7,053
Total contractual obligations
$
127,832
$
1,073,499
$
120,362
$
9,765
$
1,331,458
________
(1) The commitment fee, which may range from 0.25% to 0.5% depending on certain leverage ratios, was 0.5% on the $85.0 million undrawn balance of our
Revolving Credit Facility as of December 31, 2021.
(2) The interest commitment on our Term Loan is calculated based on LIBOR plus 275 basis points with a 1.0% LIBOR floor and the estimated net
settlement of the related interest rate swaps. Projected interest rates range between 3.75% and 5.60%. Interest payments were calculated using the
forecasted one-month forward-looking LIBOR curve.
(3) Under the terms of the Existing Credit Agreement and Second Amendment, we are required to use the net proceeds from the sale of assets, subject to
certain exceptions, to repay the proportionate balance on our Senior Secured Credit Facility and Term A3 Loan. See Note 4, “Property and equipment,” to
our Consolidated Financial Statements for more information.
In addition, as of December 31, 2021 we have budgeted between $30.0 million and $35.0 million of capital expenditures for
2022, a vast majority of which is related to maintenance of our resorts.
We are continuing to monitor our liquidity and we may pursue additional sources of liquidity as 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. If operating conditions do not improve, whether as a
result of the current pandemic or a resurgence thereof or for other reasons, we may not be able to maintain our current liquidity
position or access additional sources of liquidity at acceptable terms or at all.
Financing Strategy
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.
54
Recent Transactions Affecting Our Liquidity and Capital Resources
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 (used in) operating activities
Net cash provided by investing activities
Net cash provided by financing activities
Increase in cash, cash equivalents, and restricted cash
Cash Flows from Operating Activities
Year Ended December 31,
2021
2020
$
$
29,644
$
73,400
17,673
120,717
$
(99,938)
29,412
222,455
151,929
Our net cash from operating activities is generated primarily from operating income from our resorts. Our net cash provided by
operating activities for the year ended December 31, 2021 was $29.6 million, compared to $99.9 million of net cash used in operating
activities for the year ended December 31, 2020. The increase was primarily due to improved performance across our portfolio due to
the ongoing recovery from the COVID-19 pandemic and our resorts being open for the entirety of 2021 as compared to 2020, during
which time we closed all of our resorts for the second quarter and experienced severely reduced occupancy during the third and fourth
quarters.
Cash Flows from Investing Activities
For the years ended December 31, 2021 and 2020, our net cash provided by investing activities was $73.4 million and $29.4
million, respectively.
Activity for the year ended December 31, 2021:
•
•
•
•
Net proceeds from the sale of assets, including the Capri Resort and Dreams Puerto Aventuras, of $89.2 million;
Purchases of property and equipment, which primarily consisted of maintenance expenditures, of $17.3 million;
Purchases of intangible assets, which primarily related to our integrated enterprise resource planning system, of $0.3 million;
and
Receipt of key money of $1.9 million in accordance with the terms of our franchise agreements.
Activity for the year ended December 31, 2020:
•
•
•
•
Net proceeds from the sale of assets, including the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach
Resort & Waterpark, of $58.3 million;
Purchases of property and equipment of $36.4 million
◦
Included $18.7 million in payments for prior year non-cash purchases of property and equipment related to our
Hilton renovation projects and construction of the Hyatt Ziva and Hyatt Zilara Cap Cana;
Purchases of intangible assets of $1.0 million; and
Receipt of key money of $8.5 million in accordance with the terms of our franchise agreements.
Capital Expenditures
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise
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 (i.e., maintenance capital
expenditures), differ from ongoing repair and maintenance expense items, which do not in our judgment extend the service life or
55
increase the capacity of assets and are charged to expense 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
space, gyms, spas and/or restaurants, in order to better compete with other resorts in our markets. Due to the impacts of the COVID-19
pandemic on our liquidity, we deferred substantially all potential development, expansion, renovation, repositioning and rebranding
projects in 2020 and 2021.
Cash Flows from Financing Activities
Our net cash provided by financing activities was $17.7 million for the year ended December 31, 2021, compared to $222.5
million for the year ended December 31, 2020.
Activity for the year ended December 31, 2021:
•
•
•
Net proceeds from our January 2021 equity issuance of $137.7 million;
Principal payments on our Term Loan, including the repayments as a result of the sale of Capri Resort, of $34.5 million; and
Repayments on our Revolving Credit Facility of $84.7 million.
Activity for the year ended December 31, 2020:
•
•
•
•
•
•
•
Net proceeds from our June 2020 debt issuance of $199.6 million;
Proceeds from borrowings on our Revolving Credit Facility of $40.0 million;
Net proceeds from our June 2020 equity issuance of $19.6 million;
Quarterly principal payments on our Term Loan of $10.1 million;
Issuance costs of debt of $8.7 million;
Repayments on our Revolving Credit Facility of $15.3 million; and
Purchases of ordinary shares of $2.5 million.
Share Repurchases and Dividends
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. 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. We have purchased a total of 2,178,837
shares and there was approximately $83.5 million remaining under our share repurchase authorization as of December 31, 2021. As
part of our cash preservation efforts given our liquidity position as a result of the COVID-19 pandemic, we suspended repurchases of
our ordinary shares under our share repurchase program during 2020 and 2021. However, given the rapidly changing environment, we
may consider repurchases of our ordinary shares in the future in order to enhance shareholder returns and optimize our balance sheet.
We also 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, 2021.
Senior Secured Credit Facility, Additional Credit Facility and Property Loan
As of December 31, 2021, our total debt obligations were $1,151.2 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”), our additional senior secured credit facility (the “Additional Credit Facility”), our
property loan agreement (the “Property Loan”) and finance lease obligations, excluding $4.3 million of issuance discounts and $7.7
million of unamortized debt issuance costs.
For discussion of our debt obligations, refer to Note 13 to the Consolidated Financial Statements.
56
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 15, “Fair value of financial instruments,” to our
Consolidated Financial Statements for more information.
Related Party Transactions
See Note 6, “Related party transactions,” to our Consolidated Financial Statements for information on these transactions.
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 involve a significant level of
estimation uncertainty and have had or area reasonable likely to have a material impact on our financial condition or results of
operations. We believe our estimates, assumptions and judgments with respect to such policies are reasonable based upon information
presently available. However, 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.
Property and equipment, net - Estimating useful lives of property and equipment
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; however, there were no significant changes to our
estimates of useful lives during the year ended December 31, 2021.
Property and equipment, net - Estimates related to the impairment of property and equipment
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. If we determine that an indicator is present, we compare the carrying amount of the asset group to the estimated
undiscounted future cash flows and measure the amount of the impairment loss by comparing the carrying amount of the asset to its
estimated fair value.
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.
As of December 31, 2021, incorporating a 5.0% decline in our underlying undiscounted future cash flow projections would not
result in the estimated cash flows falling below the carrying value for any of our asset groups. However, the future impacts of the
COVID-19 pandemic are highly uncertain and difficult to predict, and may change the estimates and assumptions used in our
qualitative or quantitative property and equipment impairment testing, which could result in future impairment losses that could be
material to our results of operations.
Income taxes - Estimates related to tax liabilities and realization of deferred tax assets
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
57
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.
We recognize income 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 - Estimates related to the impairment of 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 growth rates and discount rates
based on the weighted-average cost of capital. Our estimates of 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 transaction approach, we rely on assumptions and estimates including
comparable asset sales.
Our most recent annual goodwill impairment test was performed on July 1, 2021 and October 1, 2021 for our Yucatán Peninsula
and Jamaica reporting units, respectively. As of each testing date, incorporating a 5.0% decline in our underlying cash flow projections
or a 1.0% increase in the discount rate or the terminal capitalization rate would not result in material impairment of goodwill at any
reporting unit. However, the future impacts of the COVID-19 pandemic are highly uncertain and difficult to predict, and may change
the estimates and assumptions used in our qualitative or quantitative goodwill impairment testing, which could result in future
impairment losses that could be material to our results of operations.
Derivative financial instruments - Estimating future one-month LIBOR
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
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.
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. Changes to these significant inputs or estimates could materially
affect our recorded interest expense and our results of operations.
As of December 31, 2021, incorporating a 50 basis point decrease in the forecasted one-month LIBOR rates through the maturity
date of our derivative financial instruments would result in a $5.1 million impact to our results of operations by increasing interest
expense.
Recent Accounting Pronouncements
See the recent accounting pronouncements in the “Accounting standards” section of Note 2 to our Consolidated Financial
Statements.
58
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 14 to our Consolidated Financial Statements) to manage exposure to this risk. As of
December 31, 2021, approximately 15% of our outstanding indebtedness bore interest at floating rates and approximately 85% 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 $0.2 million annually, assuming the balance
outstanding under our Revolving Credit Facility remained at $0.0 million.
If market rates of interest on our floating rate debt were to decrease by 1.0%, there would be no impact on our floating rate
debt or our future earnings and cash flows, assuming the balance outstanding under our Revolving Credit Facility remained at
$0.0 million and the current LIBOR rate on our floating rate debt could not fall below the existing 1.0% LIBOR floor.
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, 2021 approximately 3.1% 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 77.3% of our resort-level operating expenses for the year ended December 31, 2021 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 5.0% adverse change in foreign exchange rates on Mexican Peso-denominated expenses at
December 31, 2021 would have impacted our Owned Resort EBITDA by approximately $7.2 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, 2021 would have impacted our Owned Resort EBITDA by approximately $4.6 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, 2021 would have impacted our Owned Resort EBITDA by approximately $3.5 million on a year-to-date basis.
At this time, we do not have any outstanding derivatives or other financial instruments designed to hedge our foreign currency
exchange risk.
59
Item 8.Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Notes to the Consolidated Financial Statements
Financial Statement Schedule
Schedule I - Condensed Financial Information of Registrant
Page
61
64
65
66
67
68
70
103
60
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, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash
flows, for each of the three years in the period ended December 31, 2021, and the related notes and the 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, 2021 and 2020, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the
United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 24, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.
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 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.
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.
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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Goodwill — Impairment - Refer to Notes 2 and 17
Critical Audit Matter Description
The Company reviews goodwill for impairment annually and whenever events or changes in circumstances indicate that an
impairment may have occurred. The Company’s evaluation of goodwill for impairment involves either a quantitative comparison of
the fair value of each reporting unit to its carrying value or a qualitative assessment. The fair value of one reporting unit did not exceed
its carrying value by a substantial amount. The Company determined the fair value of this reporting unit (the “Reporting Unit”)
primarily using the discounted cash flow method. The determination of fair value using the discounted cash flow approach requires
management to make significant estimates and assumptions related to projections of revenues and expenses based on estimated growth
rates and discount rates based on the weighted-average cost of capital. The weighted-average cost of capital is estimated based on each
reporting unit's cost of debt and equity and a selected capital structure.
The Company’s goodwill balance was $61.7 million as of December 31, 2021.
61
We identified goodwill impairment for the Reporting Unit as a critical audit matter because of the significant estimates and
assumptions management makes to estimate the fair value of the Reporting Unit. This required a high degree of auditor judgment and
an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the
reasonableness of management’s estimates and assumptions related to projections of future revenues and expenses and selection of the
discount rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of future revenues and expenses and the selection of the discount rates based on the
weighted average cost of capital used by management to estimate the fair value of the Reporting Unit included the following, among
others:
• We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the
determination of the fair value of the Reporting Unit.
• We evaluated management’s projected revenues and expenses by comparing these projections to (1) historical results and (2)
macroeconomic and industry forecasts.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation models, methodology, and
significant assumptions used by the Company, specifically the discount rate based on the weighted-average cost of capital
including:
◦
◦
Testing the mathematical accuracy of the discount rate selected by the Company.
Developing a range of independent estimates and comparing to the discount rate selected by management.
Given the inherent uncertainty related to the timing of economic recovery and the resulting adverse impacts associated with
the COVID-19 outbreak on the Reporting Unit, we evaluated the reasonableness of management’s assumptions related to the
severity of business disruption associated with the COVID-19 outbreak on the Reporting Unit and timing of economic
recovery by:
◦
◦
Comparing management’s analysis of the expected business disruption from the COVID-19 outbreak on the
Reporting Unit to the business impacts observed since the outbreak during the Company’s fiscal year 2021.
Comparing management’s analysis of the timing of economic recovery to external economic recovery and industry
forecasts.
Compared the carrying value for the Reporting Unit to amounts recorded by the Company.
Recalculated the excess or deficit of fair value over the carrying value for the Reporting Unit.
•
•
•
/s/ Deloitte & Touche LLP
McLean, VA
February 24, 2022
We have served as the Company’s auditor since 2014.
62
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 Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Playa Hotels & Resorts N.V. and subsidiaries (the “Company”) as of
December 31, 2021, based on criteria established in Internal Control —Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control —
Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated
February 24, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the 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.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
McLean, VA
February 24, 2022
63
(a) Consolidated Financial Statements
Playa Hotels & Resorts N.V.
Consolidated Balance Sheets
($ in thousands, except share data)
ASSETS
Cash and cash equivalents
Restricted cash
Trade and other receivables, net
Accounts receivable from related parties
Inventories
Prepayments and other assets
Property and equipment, net
Assets held for sale
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
Related party debt
Derivative financial instruments
Other liabilities
Deferred tax liabilities
Total liabilities
Commitments and contingencies (see Note 7)
Shareholders' equity
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 166,646,284 shares
issued and 164,438,280 shares outstanding as of December 31, 2021, and 136,770,086
shares issued and 134,571,290 shares outstanding as of December 31, 2020)
Treasury shares (at cost, 2,208,004 shares as of December 31, 2021 and 2,198,796
shares as of December 31, 2020)
Paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders' equity
As of December 31,
2021
2020
$
270,088
$
146,919
23,489
45,442
7,981
18,076
38,640
25,941
25,433
3,726
13,813
47,638
1,584,574
1,727,383
$
$
$
$
—
61,654
7,632
—
2,057,576
160,222
5,050
828
944,847
194,472
22,543
29,882
68,898
34,472
61,654
8,556
2,130
2,097,665
123,410
8,073
348
1,251,267
—
46,340
29,768
77,637
1,426,742
1,536,843
18,518
14,871
(16,697)
1,177,380
(18,671)
(529,696)
630,834
(16,642)
1,030,148
(30,949)
(436,606)
560,822
Total liabilities and shareholders' equity
$
2,057,576
$
2,097,665
The accompanying Notes form an integral part of the Consolidated Financial Statements.
64
Playa Hotels & Resorts N.V.
Consolidated Statements of Operations
($ in thousands, except share data)
Year Ended December 31,
2020
2019
2021
$
437,950
$
229,447
$
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
Loss on sale of assets
Gain on insurance proceeds
Direct and selling, general and administrative expenses
Operating (loss) income
Interest expense
Other expense
Net loss before tax
Income tax benefit
Net loss
Loss per share
Basic
Diluted
88,592
2,291
5,806
534,639
326,979
119,895
—
81,508
5,806
24,011
676
—
558,875
(24,236)
(71,378)
(1,471)
(97,085)
7,403
40,746
807
2,189
273,189
209,832
104,188
—
92,570
2,189
55,619
2,021
(2,993)
463,426
(190,237)
(81,942)
(1,164)
(273,343)
10,973
(89,682) $
(262,370) $
538,088
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)
(0.55) $
(0.55) $
(1.98) $
(1.98) $
(0.03)
(0.03)
$
$
$
Weighted average number of shares outstanding during the period - Basic
163,370,410
132,210,205
130,023,463
Weighted average number of shares outstanding during the period - Diluted
163,370,410
132,210,205
130,023,463
The accompanying Notes form an integral part of the Consolidated Financial Statements.
65
Playa Hotels & Resorts N.V.
Consolidated Statements of Comprehensive Loss
($ in thousands)
Net loss
Other comprehensive income (loss)
Gain (loss) on interest rate swaps
Release of foreign currency translation reserve related to sale of Capri
Resort (see Note 4)
Pension obligation gain (loss)
Total other comprehensive income (loss)
Comprehensive loss
Year Ended December 31,
2021
2020
2019
$
(89,682) $
(262,370) $
(4,357)
11,737
140
401
12,278
(6,205)
—
(102)
(6,307)
$
(77,404) $
(268,677) $
(20,164)
—
(820)
(20,984)
(25,341)
The accompanying Notes form an integral part of the Consolidated Financial Statements.
66
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Playa Hotels & Resorts N.V.
Consolidated Statements of Cash Flows
($ in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Year Ended December 31,
2021
2020
2019
$
(89,682) $
(262,370) $
(4,357)
Depreciation and amortization
Amortization of debt discount and issuance costs
Share-based compensation
(Gain) loss on derivative financial instruments
Impairment loss
Deferred income taxes
Loss on sale of assets
Amortization of key money
(Recovery of) provision for doubtful accounts
Other
Changes in assets and liabilities:
Trade and other receivables, net
Accounts receivable from related parties
Inventories
Prepayments and other assets
Trade and other payables
Payables to related parties
Income tax payable
Other liabilities
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES
Capital expenditures
Purchase of intangibles
Receipt of key money
Proceeds from the sale of assets, net
Property damage insurance proceeds
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES
Proceeds from debt issuance, net of discount
Issuance costs of debt
Proceeds from ordinary shares, net of issuance costs
Repayment of debt
Repayment of debt from related parties
Proceeds from borrowings on revolving credit facility
Repayments of borrowings on revolving credit facility
Repurchase of ordinary shares
Repurchase of ordinary shares for tax withholdings
Principal payments on finance lease obligations
Net cash provided by financing activities
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF THE
PERIOD
$
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD $
68
81,508
4,116
13,163
(12,060)
24,011
(10,017)
676
(622)
(672)
701
(23,223)
(378)
(4,353)
8,798
43,130
(5,377)
480
(555)
29,644
(17,334)
(308)
1,863
89,179
—
73,400
—
—
137,716
(34,479)
(681)
—
(84,667)
—
(55)
(161)
17,673
120,717
92,570
2,825
10,158
8,204
55,619
(11,472)
2,021
(907)
3,115
(845)
42,702
1,675
1,132
(657)
(39,866)
453
(2,904)
(1,391)
(99,938)
(36,360)
(1,001)
8,500
58,273
—
29,412
199,600
(8,677)
19,558
(10,100)
—
40,000
(15,333)
(2,500)
(54)
(39)
222,455
151,929
101,897
1,371
8,845
(708)
6,168
(22,947)
—
(263)
1,402
1,070
(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)
—
—
—
(10,100)
—
60,000
—
(13,694)
—
—
36,206
(95,422)
172,860
293,577
$
$
20,931
172,860
$
$
116,353
20,931
Playa Hotels & Resorts N.V.
Consolidated Statements of Cash Flows (Continued)
($ in thousands)
Year Ended December 31,
2020
2019
2021
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents
Restricted cash
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH
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 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
Right-of-use assets obtained in exchange for new finance lease liabilities
Termination of right-of-use asset and operating lease liability
$
$
$
$
$
$
$
$
$
$
$
270,088
23,489
293,577
78,945
2,127
929
155
$
$
$
$
$
$
— $
135
262
3,925
$
$
$
— $
146,919
25,941
172,860
70,017
4,414
1,441
114
$
$
$
$
$
$
— $
103
$
— $
2,333
646
$
$
20,931
—
20,931
43,089
8,159
20,958
251
41
54
1,393
—
—
The accompanying Notes form an integral part of the Consolidated Financial Statements.
69
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 22 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.
COVID-19 impact
Due to the spread of the coronavirus (“COVID-19”) global pandemic and the associated restrictions placed on international travel,
we temporarily suspended operations at all of our resorts in late March 2020. We subsequently began reopening our resorts on July 1,
2020, but occupancy levels at all of our resorts have remained below historical levels due to the continuing effects of the pandemic.
All of our resorts were reopened by December 31, 2020, except for the Capri Resort which was sold in June 2021, and all of our
resorts continue to be open as of December 31, 2021. We have also implemented additional safety measures at our resorts to mitigate
the potential health risks of COVID-19. We cannot predict when our business will return to normalized levels because we cannot
predict when all effects of the pandemic will subside. The longer and more severe the pandemic, the greater the material adverse effect
the pandemic will have on our business, results of operations, cash flows, financial condition, access to credit markets and ability to
service our debt.
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”).
In connection with our efforts to remediate the Tax Weakness (as defined in Item 9A. Controls and Procedures) in our internal
control over financial reporting, we identified an error in our previously disclosed deferred tax liabilities for one of our Dominican
Republic entities during the quarter ended September 30, 2021. Our Dominican Republic entities are subject to a hybrid tax regime
where deferred tax liabilities are recognized using a hybrid tax rate. We determined that the basis difference related to the underlying
purchase price value of land was not included in our initial hybrid tax calculation, which resulted in a $7.3 million understatement of
our deferred tax liabilities and accumulated deficit for all prior periods presented.
We assessed the materiality of the error on our financial statements for prior periods in accordance with SEC Staff Accounting
Bulletin (“SAB”) No. 99, Materiality, codified in Accounting Standards Codification (“ASC”) 250, Presentation of Financial
Statements, and concluded that it was not material to any prior annual or interim periods. However, the aggregate amount of the prior
period corrections of the immaterial error through September 30, 2021 of $7.3 million would have been material, if corrected, to the
results of operations in the quarter and nine-month period ended September 30, 2021. Consequently, in accordance with ASC 250
(specifically SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
Financial Statements), we have corrected the error for all prior periods presented by revising the Consolidated Financial Statements
and other financial information included herein. The adjustment had no impact on our Consolidated Statements of Operations or
Consolidated Statements of Cash Flows for all prior periods presented.
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.
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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 make
significant estimates include the 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.
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.
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 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.
Foreign exchange gains and losses are presented in the Consolidated Statements of Operations within other expense. We
recognized foreign currency losses of $1.0 million, $2.0 million and $2.1 million for the years ended December 31, 2021, 2020 and
2019, respectively.
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.
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. We recognized impairment losses on property and equipment of $24.0 million and $35.9 million for the years
ended December 31, 2021 and 2020, respectively. No impairment was recognized for the year ended December 31, 2019.
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
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liabilities, as well as for tax loss carryforwards. For purposes of these Consolidated Financial Statements, our income tax benefit 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 is
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.
Commitments and contingencies
We are subject to various legal proceedings, regulatory proceedings and claims, the outcomes of which are subject to uncertainty.
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. We provide disclosure on
contingencies when there is a reasonable possibility that a loss has been incurred (see Note 7).
Ordinary shares and paid-in capital
Ordinary shares are classified as equity when there is no obligation to transfer cash or other assets 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 13) 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.
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.
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 for our Yucatán Peninsula and Jamaica reportable segments (the only
segments to which goodwill is currently allocated) is reviewed for impairment annually on July 1st and October 1st, respectively, or
more frequently if events or changes in circumstances indicate a potential impairment. No goodwill impairment was recognized for the
year ended December 31, 2021. We recognized $19.8 million and $6.2 million of goodwill impairment for the years ended
December 31, 2020 and 2019, respectively.
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When evaluating goodwill for potential impairment, we are permitted to first assess qualitative factors to determine whether it is
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
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.
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, 2021, 2020 and 2019.
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 or loss. Cost reimbursements are recognized when agreed upon reimbursable costs are incurred from
managing resorts 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 withholdings for government mandated compulsory tips of
$4.5 million, $2.0 million and $3.8 million for the years ended December 31, 2021, 2020 and 2019, 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.
Restricted cash
Restricted cash consists of cash balances restricted in use by contractual obligations with third-parties.
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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 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, 2021,
2020 and 2019, we recorded advertising costs of $15.4 million, $11.3 million and $26.6 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 market 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: Share-based compensation is measured at the fair value of the award on the
date of grant. The 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. 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 income (loss) in our Consolidated Statements of
Comprehensive Loss 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 interest expense.
Leases
We determine if an arrangement is a lease or contains a lease at the inception of the contract. Our leases generally contain fixed
and variable components. The variable components of our leases are primarily based on operating performance of the leased property.
Our lease agreements may also include non-lease components, such as common area maintenance. For our fixtures and machinery
asset class, we combine the lease and non-lease components. For all other classes of underlying assets, we do not combine lease and
non-lease components.
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Lease liabilities, which represent our obligation to make lease payments arising from the lease, and corresponding right-of-use
assets, which represent our right to use an underlying asset for the lease term, are recognized at the commencement date of the lease
based on the present value of future payments over the lease term. We calculate the present value of future payments using the
discount rate implicit in the lease, if available, or our incremental borrowing rate.
For operating leases, lease expense relating to fixed payments is recognized on a straight-line basis over the lease term and lease
expense relating to variable payments is expensed as incurred. Operating lease expense is reported in direct expense and selling,
general and administrative expense in the Consolidated Statements of Operations depending on the nature of the lease. For finance
leases, the amortization of the asset is recognized over the shorter of the lease term or useful life of the underlying asset. However, if
the lessor transfers ownership of the finance lease right of use asset to us at the end of the lease term, the finance lease right of use
asset is amortized over the useful life of the leased asset. Amortization expense is recorded within depreciation and amortization in the
Consolidated Statements of Operations. Interest expense is incurred based on the carrying value of the lease liability and is recorded
within interest expense in the Consolidated Statements of Operations.
Assets and liabilities held for sale
We classify resorts as held for sale when the sale is probable, will be completed within one year and actions to complete the sale
are unlikely to change or it is unlikely that the sale will not occur. This is consistent with our experience with real estate transactions
under which the timing and final terms of a sale are frequently not known until purchase agreements are executed, the buyer has a
significant deposit at risk and no financing contingencies exist that could prevent the transaction from being completed in a timely
manner. We typically classify resorts as held for sale when all the following conditions are met:
•
•
•
our Board of Directors has approved the sale (to the extent that the dollar amount of the sale requires Board approval);
a binding agreement to sell the resort has been signed under which the buyer has committed a significant amount of
nonrefundable cash; and
no significant financing contingencies exist that could prevent the transaction from being completed in a timely manner.
If these criteria are met, we will cease recording depreciation expense, record an impairment loss to the extent the carrying
amount of the resort exceeds the fair value and classify the assets and related liabilities as held for sale on the Consolidated Balance
Sheet. Assets and related liabilities classified as held for sale are measured at the lower of their carrying value or fair value less costs
to sell. Gains on sales are recognized at the time of sale.
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. 2019-12,
Income Taxes (Topic
740): Simplifying the
Accounting for Income
Taxes
Description
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.
Date of Adoption
January 2021
Effect on the Financial Statements or Other
Significant Matters
The adoption of ASU No. 2019-12 resulted in
changes to our deferred tax liabilities and
deferred income tax expense for our resorts
located in the Dominican Republic, which are
subject to hybrid tax regimes. We adopted ASU
No. 2019-12 on a modified retrospective basis
through a $3.4 million cumulative-effect
adjustment to opening retained earnings in our
Consolidated Financial Statements for the year
ended December 31, 2021.
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Standards not yet adopted
Description
The amendments in this update provide optional
expedients and exceptions for applying generally
accepted accounting principles (GAAP) to
contracts, hedging relationships, and other
transactions affected by reference rate reform if
certain criteria are met.
Date of Adoption
January 2023
Effect on the Financial Statements or Other
Significant Matters
We are in the process of evaluating the impact
of ASU No. 2020-04 and ASU 2021-01 on the
Consolidated Financial Statements with respect
to our variable rate debt that is priced using a
spread over one-month LIBOR.
Our interest rate swaps mature on March 31,
2023, prior to the anticipated discontinuation of
the one-month LIBOR rate on June 30, 2023.
We do not expect to modify our interest rate
swap contracts prior to their maturity date.
Standard
ASU No. 2020-04
Reference Rate Reform
(Topic 848):
Facilitation of the
Effects of Reference
Rate Reform on
Financial Reporting.
ASU No. 2021-01,
Reference Rate Reform
(Topic 848): Scope.
Note 3. Revenue
The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in
Note 18) ($ 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
Cost reimbursements
Total revenue
Performance obligations
Year Ended December 31, 2021
Yucatán
Peninsula
Pacific
Coast
Dominican
Republic
Jamaica
Other
Total
$
162,647
$
68,040
$
124,348
$
82,915
$
— $
437,950
32,040
11,144
25,543
84
—
—
—
—
—
18,891
—
2,853
974
2,207
2,953
88,592
2,291
5,806
$
194,771
$
79,184
$
149,891
$
104,659
$
6,134
$
534,639
Year Ended December 31, 2020
Yucatán
Peninsula
Pacific
Coast
Dominican
Republic
Jamaica
Other
Total
$
96,942
$
28,535
$
42,584
$
61,386
$
— $
229,447
16,263
5,532
7,356
—
—
—
—
—
—
11,223
—
1,661
372
807
528
40,746
807
2,189
$
113,205
$
34,067
$
49,940
$
74,270
$
1,707
$
273,189
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
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 resort 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 resort stay occurs or services are rendered.
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Contract assets and liabilities
We do not have any material contract assets as of December 31, 2021 and 2020 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 17) 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. We also consider key money
payments to be incremental costs of obtaining management contracts. These costs are capitalized within prepayments and other assets
and amortized on a straight-line basis over the term of the management agreement (see Note 17).
Note 4. Property and equipment
The balance of property and equipment, net is as follows ($ in thousands):
Property and equipment, gross
Land, buildings and improvements
Fixtures and machinery(1)
Furniture and other fixed assets
Construction in progress
Total property and equipment, gross
Accumulated depreciation
Total property and equipment, net
As of December 31,
2021
2020
$
$
1,759,837
$
1,863,406
84,264
205,141
3,781
2,053,023
(468,449)
1,584,574
$
83,802
225,869
4,552
2,177,629
(450,246)
1,727,383
________
(1) Includes the gross balance of our finance lease right-of-use assets of $6.3 million (see Note 8). Amortization expense for our finance lease was $0.3
million and $0.1 million for the years ended December 31, 2021 and 2020, respectively. We had no finance leases during the year ended December 31,
2019.
Depreciation expense for property and equipment was $80.1 million, $90.9 million and $100.8 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
For the years ended December 31, 2021 and 2020, we did not capitalize any interest expense. For the year ended December 31,
2019, we capitalized $13.1 million of interest expense on qualifying assets using the weighted-average interest rate of our debt.
Sale of assets
Capri Resort
On March 31, 2021, we entered into an agreement to sell our equity interest in the Capri Resort, which is reported within our
Yucatán Peninsula reportable segment, for $55.0 million in cash consideration. Upon entering into the agreement, we classified the
resort and related deferred tax liabilities as held for sale and recorded an impairment loss of $24.0 million based on the sale price. The
sale price is considered an observable input other than quoted prices (Level 2) in the U.S. GAAP fair value hierarchy (see Note 15).
The impairment is recorded within impairment loss in the Consolidated Statements of Operations.
On June 24, 2021, we completed the sale, received total cash consideration of $55.2 million, after customary closing costs, and
recognized a loss of $0.5 million within loss on sale of assets in the Consolidated Statements of Operations. In accordance with our
Existing Credit Agreement (as defined in Note 13), we utilized 50% of the Capri Resort's net proceeds of $24.4 million, after
deducting incremental expenses, to repay a portion of our Term Loan on June 29, 2021. The remaining net proceeds, after deducting
capital expenditures incurred across our portfolio for up to 18 months following the sale, will be used to repay our Term Loan and
Term A3 Loan in December 2022.
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Dreams Puerto Aventuras
On November 3, 2020, we entered into an agreement to sell the Dreams Puerto Aventuras, which is reported within our Yucatán
Peninsula reportable segment, for $34.5 million in cash consideration. Upon classification as held for sale, we recorded an impairment
loss of $10.6 million based on the sale price, which is considered an observable input other than quoted prices (Level 2) in the U.S.
GAAP fair value hierarchy (see Note 15). The impairment is recorded within impairment loss in the Consolidated Statements of
Operations. The assets are recorded at their fair value less costs to sell within assets held for sale in the Consolidated Balance Sheet as
of December 31, 2020.
On February 5, 2021, we completed the sale of the Dreams Puerto Aventuras. Upon closing, we received total cash consideration
of $34.3 million, after customary closing costs, and recognized a gain of less than $0.1 million within loss on sale of assets in the
Consolidated Statements of Operations. A portion of the net proceeds from the sale, after deducting incremental expenses and capital
expenditures incurred across our portfolio for up to 24 months following the sale, will be used to repay our Term Loan and Term A3
Loan in February 2023.
Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark
On May 22, 2020, we completed the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort
& Waterpark, which were reported within our Jamaica reportable segment, for $60.0 million in cash consideration. Upon
classification as held for sale, we recorded an impairment loss of $25.3 million based on the sale price of the properties, which is
considered an observable input other than quoted prices (Level 2) in the U.S. GAAP fair value hierarchy (see Note 15). The
impairment is recorded within impairment loss in the Consolidated Statements of Operations. Upon closing, we received total cash
consideration of $58.7 million, after customary closing costs, and recognized a loss of $1.8 million within loss on sale of assets in the
Consolidated Statements of Operations. A portion of the net proceeds from the sale, after deducting incremental expenses and capital
expenditures incurred across our portfolio for up to 24 months following the sale, will be used to repay our Term Loan in May 2022.
Note 5. Income taxes
Net loss before tax is summarized below ($ in thousands):
Domestic
Foreign
Net loss before tax
Year Ended December 31,
2020
2019
2021
$
$
$
1,517
(98,602)
(97,085) $
$
1,053
(274,396)
(273,343) $
(7,030)
(14,547)
(21,577)
The components of our income tax benefit for the years ended December 31, 2021, 2020 and 2019 were as follows ($ in
thousands):
Current
Domestic
Foreign
Total current income tax provision
Deferred
Domestic
Foreign
Total deferred income tax benefit
Income tax benefit
Year Ended December 31,
2021
2020
2019(1)
$
$
— $
431
$
(2,706)
(2,706)
—
10,109
10,109
7,403
$
(892)
(461)
(7,684)
19,118
11,434
10,973
$
(8)
(5,592)
(5,600)
7,684
15,136
22,820
17,220
________
(1) During 2020, we recognized $0.8 million in additional net income tax expense related to prior periods, which was not significant to our previously
reported Consolidated Financial Statements.
78
Reconciliation of the Netherlands statutory income tax rate to actual income tax rate
A reconciliation of the Netherlands statutory income tax rate to our effective income tax rate from continuing operations is as
follows ($ in thousands):
Nondeductible interest and expenses
(12,969)
(13.4) %
(19,893)
Income tax benefit at statutory rate
Differences between statutory rate and foreign
rate
Inflation adjustments
Goodwill impairment
Foreign exchange rate differences
Dominican Republic tax classification
Dutch and U.S. tax rate change
Basis difference in fixed assets
Change in valuation allowance
Other
Income tax benefit
Year Ended December 31,
2021
2020
2019
$
24,272
25.0 % $
68,336
25.0 % $
5,394
25.0 %
16,741
7,312
17.2 %
7.5 %
(598)
4,366
—
(7,950)
—
2,753
—
— %
(8.2) %
— %
2.8 %
— %
(4,900)
(4,194)
7,949
10,545
(3,026)
(0.2) %
1.6 %
(7.3) %
(1.8) %
(1.5) %
2.9 %
3.9 %
(1.1) %
(20,820)
(21.4) %
(48,213)
(17.6) %
(1,936)
7,403
$
(2.0) %
7.5 % $
601
10,973
0.1 %
4.0 % $
18,836
4,276
(12,043)
(1,542)
(6,038)
(6,109)
3,952
—
10,554
(60)
17,220
87.3 %
19.8 %
(55.8) %
(7.1) %
(28.0) %
(28.3) %
18.3 %
— %
48.9 %
(0.3) %
79.8 %
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, 2021, we recognized an income tax benefit of $7.4 million, resulting in an effective tax rate for
the year of 7.5%. The 2021 income tax benefit was driven primarily by a $24.3 million benefit on the tax impact of book losses, a
$7.3 million tax benefit associated with inflation adjustments, a $16.7 million tax benefit from our rate-favorable jurisdictions, and a
$2.8 million tax benefit on measurement of deferred tax assets and liabilities pursuant to statutory tax rate changes. The 2021 income
tax benefit was partially offset by $13.0 million of tax expense on non-deductible stock compensation and other expenses, an
$8.0 million tax expense due to changes in foreign exchange rates, a $20.8 million increase in our valuation allowance1, and a
$1.9 million tax expense on other miscellaneous items.
For the year ended December 31, 2020, we recognized an income tax benefit of $11.0 million, resulting in an effective tax rate for
the year of 4.0%. The 2020 income tax benefit was driven primarily by a $68.3 million benefit on the tax impact of book losses, a
$4.4 million tax benefit associated with inflation adjustments, a $10.5 million tax benefit on measurement of the Dutch deferred tax
assets and liabilities pursuant to the Dutch tax rate change, and a $7.9 million tax benefit associated with our Dominican Republic
entities. The 2020 income tax benefit was partially offset by $24.8 million of tax expense on non-deductible interest, goodwill and
other expenses, a $4.2 million tax expense due to changes in foreign exchange rates, a $3.0 million tax expense associated with a
newly established basis difference in fixed assets and a $48.2 million increase in our valuation allowance.
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 a $5.4 million benefit on the tax impact of book losses, an
$18.8 million tax benefit from our rate-favorable 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.
We have a taxable presence in a variety of jurisdictions worldwide, most significantly in Mexico, the Netherlands, the U.S., the
Dominican Republic and Jamaica. We have been granted certain “tax holidays,” providing us with temporary income tax exemptions.
Specifically, two of our entities in the Dominican Republic are under a tax holiday. Playa Romana Mar B.V. and Playa Dominican
Resorts B.V. are tax exempted for 15 years starting in 2019.
1 During 2021 we recorded a prior period adjustment that resulted in a $12.7 million increase to deferred tax assets and a $12.7 million increase to the valuation
allowance at our Dutch legal entities. The adjustment had a $0 net impact to our 2021 income tax expense and has been excluded from the 2021 rate reconciliation.
79
Effects of Tax Legislative Changes
In April 2021, the Mexico Congress approved amendments to the Mexico Labor Law. The tax provisions of the amendments were
effective August 1, 2021. The measures we adopted in response to the amendments to the Mexico Labor Law did not have any net
income tax impact.
On December 21, 2021, the Dutch Senate approved the 2022 tax package. Effective January 1, 2022, the corporate income tax
rate for 2022 and future tax years increased to 25.8% for amounts in excess of €0.4 million. The adjusted rate increased the carrying
value of our deferred tax assets that are offset by a full valuation allowance. Our Netherlands deferred tax assets increased $2.7 million
and valuation allowance increased $2.7 million and resulted in no net financial statement impact.
On December 15, 2020, the Dutch Senate approved the 2021 tax package. Effective January 1, 2021 the corporate income tax rate
for 2021 increased to 25% for amounts in excess of €0.2 million. The adjusted rate increased the carrying value of our deferred tax
assets that are offset by a full valuation allowance. Our Netherlands deferred tax assets increased $10.5 million and valuation
allowance increased $10.5 million and resulted in no net financial statement impact.
Dominican Republic
Taxes in the Dominican Republic are determined based upon Advanced Pricing Agreements (“APA”) approved by the Ministry of
Finance of the Dominican Republic. APAs were signed in December 2017 and extended through December 31, 2021. Pursuant to the
signed APAs, our Dominican Republic entities are subject to the greater of an income tax or an asset tax.
During 2021, our Dominican Republic entities were not subject to income tax. We applied ASC 740-10-15-4(a) to compute the
2021 tax benefit. For the year ended December 31, 2021, we recorded a deferred tax benefit of $1.9 million.
During 2020, our Dominican Republic entities were not subject to income tax. We project that they will be subject to income
taxes in some of the foreseeable years. Under these circumstances, we applied ASC 740-10-55-144 to compute a hybrid tax rate for
our deferred taxes. For the year ended December 31, 2020, we recorded a deferred tax benefit of $7.9 million.
During 2019, our Dominican Republic entities were not subject to income tax. We projected that they would be subject to income
taxes in some of the foreseeable years. Under these circumstances, we applied ASC 740-10-55-144 to compute a hybrid tax rate for
our deferred taxes. For the year ended December 31, 2019, we recorded deferred tax expense of $5.7 million.
Deferred income taxes
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities
and their tax bases, as well as net operating losses and tax credit carry-forwards. We measure those balances using the enacted tax
rates we expect will be in effect when we pay or recover taxes. Deferred income tax assets represent amounts available to reduce
income taxes we will pay on taxable income in future years. We evaluate our ability to realize these future tax deductions and credits
by assessing whether we expect to have sufficient future taxable income from all sources, including reversal of taxable temporary
differences, forecasted operating earnings and available tax planning strategies to utilize these future deductions and credits. We
establish a valuation allowance when we no longer consider it more likely than not that a deferred tax asset will be realized.
80
The tax effect of each type of temporary difference and carry-forward that gives rise to a significant portion of our deferred tax
assets and liabilities as of December 31, 2021 and 2020 were as follows ($ in thousands):
Deferred tax assets
Advance customer deposits
Trade payables and other accruals
Labor liability accrual
Property and equipment
Lease obligation
Interest expense
Net operating losses
Total deferred tax asset
Valuation allowance
Net deferred tax asset
Deferred tax liabilities
Accounts receivable and prepayments to vendors
Property and equipment
Other liabilities
Total deferred tax liability
Net deferred tax liability
As of December 31,
2021
2020
$
2,242
$
9,441
895
—
584
31,895
143,098
188,155
(160,104)
28,051
164
93,503
3,282
96,949
$
(68,898) $
1,721
9,921
1,000
2,441
857
—
145,576
161,516
(123,967)
37,549
60
110,095
2,901
113,056
(75,507)
As of December 31, 2021, we had approximately $519.0 million of foreign net operating loss carryforwards and $23.9 million of
U.S. federal and state net operating loss carryforwards. The ability to utilize the tax net operating losses in any single year ultimately
depends upon our ability to generate sufficient taxable income. The foreign net operating loss carryforwards begin to expire in 2022,
and the U.S. federal net operating loss carryforwards begin to expire in 2034. An annual limitation may apply to the use of the U.S.
operating loss carryforwards under the provisions of the Internal Revenue Code and similar state tax provisions that are applicable if
the Company experiences an “ownership change”. We performed an analysis of the potential limitations on the utilization of net
operating losses and determined that they are subject to limitations that would preclude the use of a portion of the net operating losses.
We have made no provision for foreign or domestic income taxes on the cumulative unremitted earnings of our subsidiaries. We
intend to indefinitely reinvest all foreign earnings and have no intention to repatriate foreign earnings for the foreseeable future.
The change in the valuation allowance established against our deferred tax assets for the years ended December 31, 2021, 2020
and 2019 is summarized in the following table ($ in thousands):
December 31, 2021
December 31, 2020
December 31, 2019
Balance at
January 1
$
$
$
(123,967) $
(79,788) $
(94,575) $
Additions
Deductions
Balance at
December 31
(41,450) $
(45,833) $
(7,008) $
5,313
1,654
21,795
$
$
$
(160,104)
(123,967)
(79,788)
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, 2021, our valuation allowance relates primarily to net operating loss carryforwards, which we do not expect to utilize,
most notably in the U.S., Netherlands, and certain legal entities in Mexico and Jamaica.
We are subject to income taxes in a variety of global jurisdictions and are not currently under income tax examination in any of
our significant jurisdictions. We remain subject to U.S. federal and state examinations of our income tax returns for tax years 2018 to
the present. We are also subject to income tax examinations in various foreign jurisdictions for tax years 2011 to the present. We
consider the potential outcome of current and future examinations in our assessment of our uncertain tax positions. We had no
uncertain tax positions as of December 31, 2021, 2020 and 2019.
81
Note 6. Related party transactions
Relationship with Hyatt and AMResorts
Hyatt Hotels Corporation (“Hyatt”) is considered a related party due to its ownership of our ordinary shares by its affiliated
entities. Hyatt also had representation on our Board of Directors until August 18, 2021. 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.
In November 2021, Hyatt completed its acquisition of Apple Leisure Group (“ALG”), which owns the brand management
platform AMResorts in addition to various tour operators and travel agencies. We pay AMResorts and its affiliates, as operators of two
of our resorts, management and marketing fees, and sell all-inclusive packages through ALG’s tour operators and travel agencies.
Relationship with Sagicor
Sagicor Financial Corporation Limited and its affiliated entities (collectively “Sagicor”) is considered a related party due to its
ownership of our ordinary shares and representation on our Board of Directors. We pay Sagicor for employee insurance coverage at
one of our Jamaica properties. Sagicor is also a part owner of the Jewel Grande Montego Bay Resort & Spa and compensates us as
manager of the property.
Relationship with Davidson Kempner Capital Management L.P.
Davidson Kempner Capital Management L.P. (“DKCM”) is the investment manager of multiple affiliated funds and is considered
a related party due to the DKCM funds' ownership of our ordinary shares acquired in the public offering of our ordinary shares in
January 2021 (see Note 9). The affiliated funds managed by DKCM are also the lenders to our Property Loan and Additional Credit
Facility, which consists of our Term A1, Term A2 and Term A3 loans (see Note 13). We pay DKCM periodic interest payments
related to the outstanding debt.
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, 2021, 2020 and 2019 were as follows ($ in
thousands):
Related Party
Transaction (1)
Revenues
ALG
Sagicor
Expenses
Hyatt
Sagicor
Chief Executive Officer
DKCM
AMResorts
AMResorts
Package revenue
Cost reimbursements (2)
Franchise fees (3)
Insurance premiums (3)
Lease expense (4)
Interest expense (5)
Management fees (3)
Marketing fees (4)
Year Ended December 31,
2020
2019
2021
$
$
$
$
$
$
$
$
2,750
3,253
18,603
783
802
21,921
607
615
$
$
$
$
$
$
$
$
— $
1,870
9,937
927
770
$
$
$
$
— $
— $
— $
—
5,142
17,423
1,659
745
—
—
—
________
(1) Amounts presented in the table above represent activity since the date the entity became a related party.
(2) Equivalent amount included as reimbursed costs in the Consolidated Statements of Operations.
(3) 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.
(4) Included in selling, general, and administrative expense in the Consolidated Statements of Operations.
(5) Includes interest expense and amortization of deferred financing costs and discounts.
82
Note 7. 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.
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. With the exception of Playa Dominican Resort B.V., Playa Romana
B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V., our Dutch companies file as a fiscal unity. 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.
Note 8. Leases
We enter into operating leases primarily for administrative offices. 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 2028 and 2030, respectively. The extension options are reasonably certain to be exercised and
included in the amounts recorded.
We also have two finance lease arrangements with third-parties for the construction, management and maintenance of thermal
energy plants in the Dominican Republic. Refer to further discussion in Note 13.
Our future minimum lease payments as of December 31, 2021 were as follows ($ in thousands):
Minimum future lease payments
2022
2023
2024
2025
2026
Thereafter
Total minimum future lease payments
Less: imputed interest
Total lease liability(1)
Operating Leases
Finance Leases
$
$
982 $
687
547
572
591
1,565
4,944
(646)
4,298 $
843
848
853
859
864
4,458
8,725
(2,667)
6,058
________
(1) Operating and finance leases are included in other liabilities and debt, respectively, in our Consolidated Balance Sheet.
The following table presents the components of lease expense and supplemental cash flow information ($ in thousands):
Lease expense(1)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases
Operating cash outflows for finance leases
Financing cash outflows for finance leases
________
(1) Includes variable and short term lease expenses.
Year Ended December 31,
2020
2019
2021
2,292 $
2,497 $
2,563
731 $
278 $
161 $
721 $
112 $
39 $
643
—
—
$
$
$
$
83
The following table presents other relevant information related to our leases as of December 31, 2021:
Weighted-average remaining lease term
Weighted-average discount rate (1)
Operating Leases
Finance Leases
6.70 years
4.12 %
11.30 years
7.71 %
________
(1) The discount rates applied to each operating lease reflects our estimated incremental borrowing rate which was determined based on lending rates specific
to the type of leased real estate. The discount rates applied to our finance leases were implicit in the lease.
We rent certain real estate to third parties for office and retail space within our resorts. 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
years ended December 31, 2021, 2020 and 2019 ($ in thousands):
Leases
Operating lease income (1)
Financial Statement Classification
Year Ended December 31,
2020
2019
2021
Non-package revenue
$
3,086 $
1,753 $
5,105
________
(1) Includes variable lease revenue, which is typically calculated as a percentage of our tenant's net sales.
Note 9. Ordinary shares
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,
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, 2021, we did not repurchase any shares under the repurchase program. During the years ended December 31, 2020 and
2019, we repurchased 340,109 and 1,791,487 ordinary shares, respectively.
On June 12, 2020, we issued 4,878,049 ordinary shares with a par value of €0.10 per share, in a private placement exempt from
registration under the Securities Act in connection with our capital raising efforts. We received $19.6 million in cash consideration,
after customary closing costs.
On January 11, 2021, we issued 28,750,000 ordinary shares with a par value of €0.10 per share in connection with a public equity
offering. We received $137.7 million in cash consideration, net of underwriting discounts and customary closing costs.
As of December 31, 2021, our ordinary share capital consisted of 164,438,280 ordinary shares outstanding, which have a par
value of €0.10 per share. In addition, 4,007,985 restricted shares and 26,325 restricted share units were outstanding under the 2017
Plan (as defined in Note 11). The holders of restricted shares are entitled to vote, but not dispose of, such shares until they vest. The
holders of restricted share units are neither entitled to vote nor dispose of such shares until they vest.
Note 10. 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 five
years after March 12, 2017. The Earnout Warrants expire on March 12, 2022 or earlier upon redemption or liquidation in accordance
with their term.
As of December 31, 2021, there were 2,987,770 Earnout Warrants outstanding, none of which were exercisable as of such date.
Note 11. 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 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, 2021, there were 4,851,439
84
shares available for future grants under the 2017 Plan. Compensation expense related to the 2017 Plan 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 the 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 vest one year from 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, executive’s, or director’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 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, 2021 to December 31, 2021 is as follows:
Unvested balance at January 1, 2021
Granted
Vested
Forfeited
Unvested balance at December 31, 2021
Number of Shares
Weighted-Average
Grant Date Fair
Value
2,225,139
$
1,925,298
(1,126,198)
(17,448)
3,006,791
$
8.53
5.45
8.68
7.68
6.50
The following table provides additional information on our restricted share awards for the years ended December 31, 2021, 2020
and 2019 ($ in thousands, except per share data):
Weighted-average grant date fair value
Fair value of vested restricted share awards
Share-based compensation expense
Year Ended December 31,
2021
2020
2019
$
$
$
5.45
7,455
10,645
$
$
$
7.92
4,837
9,123
$
$
$
7.25
3,600
8,065
As of December 31, 2021, the unrecognized compensation cost related to restricted share awards was $9.3 million and is expected
to be recognized over a weighted-average period of 1.7 years.
Performance share awards
Performance share awards consist of ordinary shares that may become earned and vested based on the achievement of
performance targets adopted by our Compensation Committee. The actual number of ordinary shares that ultimately vest will range
85
from 0% to 150% of the target award and will be determined at the end of the three-year performance period based on two
performance criteria as defined in the applicable award agreements for the period of performance.
Any ordinary shares that ultimately vest based on the achievement of the applicable performance criteria will be deemed to be
vested on the date on which our Compensation Committee certifies the level of achievement of such performance criteria. Except in
connection with certain qualifying terminations of employment as set forth in the applicable award agreements, the awards require
continued service through the certification date. The holders of these awards have voting rights equivalent to the target level of
ordinary shares granted to the holder and any dividends declared on such shares will be accumulated and paid within 30 days after and
to the extent the target ordinary shares vest.
The grant date fair value of our awards with market conditions was estimated using a Monte-Carlo model. The table below
summarizes the key inputs used in the Monte-Carlo simulation ($ in thousands):
Performance Award Grant Date
Percentage of
Total Award
Grant Date
Fair Value by
Component
Volatility (1)
Interest
Rate (2)
Dividend
Yield
January 2, 2019
Total Shareholder Return
Adjusted EBITDA Comparison
September 19, 2019
Total Shareholder Return
Adjusted EBITDA Comparison
January 2, 2020
Total Shareholder Return
Adjusted EBITDA Comparison
January 4, 2021
Peer Shareholder Return
Growth Rate
50 % $
50 % $
50 % $
50 % $
50 % $
50 % $
50 % $
50 % $
537
900
287
448
1,334
2,187
3,088
2,230
27.78 %
— %
25.86 %
— %
24.87 %
— %
57.69 %
57.69 %
2.46 %
— %
1.72 %
— %
1.58 %
— %
0.16 %
0.16 %
— %
— %
— %
— %
— %
— %
— %
— %
________
(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.
In the table above, the total shareholder return (“TSR”), peer shareholder return, and growth rate components are market
conditions as defined by ASC 718, Compensation—Stock Compensation, and compensation expense related to these components is
recognized on a straight-line basis over the vesting period. The peer shareholder return component may vest between 0% and 150% of
target based on the TSR of our ordinary shares relative to those of our peer group, with the award capped at 100% of target should
Playa’s TSR be negative. The growth rate component may vest up to 100% of target based on the compound annual growth rate of the
price of our ordinary shares.
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 18) was based on the closing stock price of our ordinary shares on such date. The Adjusted EBITDA component was a
performance condition as defined by ASC 718, and, therefore, compensation expense related to this component was reassessed at each
reporting date based on our estimate of the probable level of achievement, and the accrual of compensation expense was adjusted as
appropriate.
Due to the adverse effects of COVID-19, all outstanding performance share awards granted in 2018, 2019 and 2020 were
voluntarily waived and forfeited during the fourth quarter of 2020 and accounted for as cancellations under ASC 718. These
performance share awards were returned to the pool of shares available for future grants under the 2017 Plan.
86
A summary of our performance share awards from January 1, 2021 to December 31, 2021 is as follows:
Unvested balance at January 1, 2021
Granted
Unvested balance at December 31, 2021
Number of Shares
Weighted-Average
Grant Date Fair
Value
— $
1,027,519
1,027,519
$
—
5.18
5.18
The following table provides additional information on our performance share awards for the years ended December 31, 2021,
2020 and 2019 ($ in thousands, except per share data):
Weighted-average grant date fair value
Share-based compensation expense
Year Ended December 31,
2021
2020
2019
$
$
5.18
2,518
$
$
6.38
1,035
$
$
5.83
780
As of December 31, 2021, the unrecognized compensation cost related to performance share awards was $4.0 million and is
expected to be recognized over a weighted-average period of 1.9 years.
Note 12. Earnings per share
Basic and diluted earnings or loss per share (“EPS”) were as follows ($ in thousands, except share data):
Numerator
Net loss
Denominator
Year Ended December 31,
2021
2020
2019
$
(89,682) $
(262,370) $
(4,357)
Denominator for basic EPS - weighted-average number of shares outstanding
163,370,410
132,210,205
130,023,463
Effect of dilutive securities
Unvested performance share awards
Unvested restricted share awards
Denominator for diluted EPS - adjusted weighted-average number of shares
outstanding
EPS - Basic
EPS - Diluted
—
—
—
—
163,370,410
—
132,210,205
—
130,023,463
$
$
(0.55) $
(0.55) $
(1.98) $
(1.98) $
(0.03)
(0.03)
For the years ended December 31, 2021, 2020, and 2019, unvested restricted share awards of 3,006,791, 2,225,139 and 2,157,336,
respectively, were not included in the computation of diluted EPS as their effect would have been anti-dilutive.
For the years ended December 31, 2021 and 2019, unvested performance share awards of 1,027,519 and 913,407, respectively,
were not included in the computation of diluted EPS after assumed conversions as their effect would have been anti-dilutive. The
performance targets of our unvested performance share awards were partially achieved as of December 31, 2021, but were not
achieved as of December 31, 2019. As of December 31, 2020, there were no unvested performance share awards.
For the years ended December 31, 2021, 2020 and 2019, outstanding Earnout Warrants to acquire a total of 2,987,770 ordinary
shares were not included in the computation of diluted EPS after assumed conversions because the warrants were not exercisable as of
the end of the respective reporting period.
87
Note 13. Debt
Our debt consists of the following ($ in thousands):
Interest Rate
Maturity Date
Outstanding Balance as of
December 31, 2021 December 31, 2020
Senior Secured Credit Facilities
Revolving Credit Facility (1)
LIBOR + 3.00%
LIBOR + 4.00%
April 27, 2022 ($17.0 million)
January 27, 2024 ($68.0
million)
$
Term Loan (2)
Term A1 Loan
LIBOR + 2.75%
11.4777%
Term A2 Loan
Term A3 Loan (3)
Total Senior Secured Credit Facilities (at stated value)
LIBOR + 3.00%
11.4777%
April 27, 2024
April 27, 2024
April 27, 2024
April 27, 2024
Unamortized discount
Unamortized debt issuance costs
Total Senior Secured Credit Facilities, net
Property Loan
Property Loan (at stated value)
9.25%
July 1, 2025
Unamortized discount
Unamortized debt issuance costs
Total Property Loan, net
Finance lease obligations (4)
Total debt, net
$
$
$
$
$
— $
84,667
941,868
35,000
31,000
27,319
976,348
35,000
31,000
28,000
1,035,187
1,155,015
(1,153)
(4,207)
(1,658)
(6,015)
1,029,827 $
1,147,342
110,000 $
(3,107)
(3,459)
103,434 $
110,000
(3,960)
(4,409)
101,631
6,058 $
2,294
1,139,319 $
1,251,267
_______
(1) Undrawn balances bear interest between 0.25% to 0.5% depending on certain leverage ratios. We had $85.0 million and $0.3 million available as of
December 31, 2021 and 2020, respectively. The weighted-average interest rate on the outstanding balance was 3.15% as of December 31, 2020, based on
the one-month London Interbank Offered Rate (“LIBOR”).
(2) One-month LIBOR is subject to a 1.0% floor. The effective interest rate was 3.75% as of both December 31, 2021 and 2020. Our two interest rate swaps
fix LIBOR at 2.85% on $800.0 million of our Term Loan (see Note 14).
(3) One-month LIBOR is subject to a 1.0% floor. The effective interest rate was 4.00% as of December 31, 2021 and 2020.
(4) Interest expense for our finance leases was $0.3 million and $0.1 million for the years ended December 31, 2021 and 2020, respectively. We had no
finance leases during the year ended December 31, 2019.
Aggregate debt maturities for future annual periods are as follows ($ in thousands):
2022
2023
2024
2025
2026
Thereafter
Total debt maturities
As of December 31, 2021
Senior Secured
Credit Facilities
Property Loan
$
$
10,100 $
10,100
1,014,987
—
—
—
—
—
—
110,000
—
—
1,035,187 $
110,000
88
Senior Secured Credit Facility
Playa Resorts Holding B.V., a subsidiary of ours, holds a senior secured credit facility (“Senior Secured Credit Facility”), which
consists of a term loan facility which is scheduled to mature on April 27, 2024 (“Term Loan”) and a revolving credit facility which
was originally scheduled to mature on April 27, 2022 (“Revolving Credit Facility”) (see discussion of amendments below). The Term
Loan bears interest at a rate per annum equal to LIBOR plus 2.75% (where the applicable LIBOR rate has a 1.0% floor). The
Revolving Credit Facility bears interest at LIBOR plus 3.00%. We are required to pay a commitment fee ranging from 0.25% to 0.5%
per annum on the average daily undrawn balance of the Revolving Credit Facility.
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 our
ordinary shares.
The obligations are further collateralized by, among other things, a lien on (i) all resorts located in Mexico, (ii) certain personal
property associated with such resort properties and (iii) pledges of equity interests in certain of our subsidiaries that directly or
indirectly own equity interests in any resort property or certain management companies.
Fourth Amendment to Amended and Restated Credit Agreement
On June 12, 2020, we entered into the Fourth Amendment to the Amended & Restated Credit Agreement (the “Fourth
Amendment”). The terms of the Senior Secured Credit Facility remain in effect except for the following terms modified by the Fourth
Amendment:
i.
replace the total net leverage ratio requirement of the financial covenant with a minimum liquidity test until September 30,
2021 (the “Fourth Amendment Relief Period”);
ii. modify the financial covenant for certain test dates after the Fourth Amendment Relief Period; and
iii. add certain restrictions on, among other things, the incurrence of additional debt and making of investments, dispositions and
restricted payments during the Fourth Amendment Relief Period.
Fifth Amendment to Amended and Restated Credit Agreement
On February 5, 2021, we entered into the Fifth Amendment to the Amended & Restated Credit Agreement (the “Fifth
Amendment”, and collectively with the unamended terms of the Senior Secured Credit Facility, the “Existing Credit Agreement”). The
terms of the Senior Secured Credit Facility remain in effect except for the following terms modified by the Fifth Amendment:
i.
extend the maturity date for $68.0 million of our $85.0 million Revolving Credit Facility through January 2024. The
remaining $17.0 million matures in April 2022;
ii.
repaid the $84.7 million outstanding balance on our Revolving Credit Facility as a condition to maturity extension;
iii.
increase the interest rate on the extended portion of our Revolving Credit Facility to LIBOR plus an applicable margin of
4.00%;
iv. extend the replacement of the total net leverage ratio requirement of the financial covenant with a minimum liquidity balance
through March 31, 2022 (the “Relief Period”);
v.
further modify the financial covenant for certain test dates after the Relief Period; and
vi. add certain restrictions on, among other things, the incurrence of additional debt and making of investments, dispositions and
restricted payments during the Relief Period and thereafter.
Additional Credit Facility
On June 12, 2020, we entered into an additional senior secured credit facility with an average interest rate of 9.25% that matures
on April 27, 2024 and ranks pari passu with the Existing Credit Agreement (the “Additional Credit Facility”). The Additional Credit
Facility consists of the following term loans:
i.
$35.0 million term loan at fixed rate of 11.4777% (the “Term A1 Loan”);
ii. $31.0 million term loan at fixed rate of 11.4777% (the “Term A2 Loan”); and
iii. $28.0 million term loan at our option of either a base rate plus a margin of 2.00% or LIBOR plus 3.00% (the “Term A3
Loan”). Term A3 Loan is a Eurocurrency loan subject to a 1.00% LIBOR floor consistent with the Existing Credit
Agreement.
89
We used the proceeds from the Additional Credit Facility for general corporate purposes. The obligations under the Additional
Credit Facility are collateralized in a manner that is substantially identical to the Existing Credit Agreement.
Prior to the maturity date, the Additional Credit Facility does not require principal payments, but does include mandatory
prepayment requirements for the Term A3 Loan that are consistent with the Existing Credit Agreement. Mandatory prepayments are
required for certain asset sales, casualty events and condemnation events that are not reinvested in our business where our total net
leverage ratio is above 4.00x. We may not voluntarily prepay any portion of the Additional Credit Facility prior to June 2023 without
paying a make-whole premium equal to 100% of the interest that would have otherwise accrued from the date of such payment
through June 2022 plus 50% of the interest that otherwise would have accrued from June 2022 to June 2023. Subsequent to June 2023,
we may prepay any portion of the Additional Credit Facility without penalty.
In connection with the Additional Credit Facility, we terminated the then-remaining $15.0 million of unused capacity of our
Revolving Credit Facility under the Senior Secured Credit Facility. The Additional Credit Facility contains covenants, including a
springing financial maintenance covenant, identical to those contained in the Senior Secured Credit Facility.
Second Amendment to Additional Credit Facility
On February 5, 2021, we entered into the Second Amendment to the Additional Credit Facility (the “Second Amendment”). The
terms of the Additional Credit Facility remain in effect except for the following terms modified by the Second Amendment:
i.
ii.
extend the Relief Period through March 31, 2022;
further modify the financial covenant for certain test dates after the Relief Period; and
iii. add certain restrictions on, among other things, the incurrence of additional debt and making of investments, dispositions and
restricted payments during the Relief Period and thereafter.
Property Loan
On June 12, 2020, we entered into a property loan agreement in the amount of $110.0 million that has a fixed interest rate of
9.25% and matures on July 1, 2025 (the “Property Loan”). Prior to maturity, the Property Loan does not require principal payments.
The Property Loan is collateralized by the mortgages of our Hyatt Ziva and Hyatt Zilara Cap Cana properties located in the Dominican
Republic and the Hilton Rose Hall Resort & Spa located in Jamaica (collectively the “Properties”). We intend to use the proceeds of
the Property Loan to finance the operation and management of the Properties and for general corporate purposes. We may not
voluntarily prepay any portion of the Property Loan prior to July 1, 2023 without paying a make-whole premium equal to 100% of the
amount of interest that would have otherwise accrued from the date of such payment through July 1, 2022 plus 50% of the interest that
otherwise would have accrued from the prepayment date to July 1, 2023. Subsequent to July 2023, we may prepay any portion of the
Property Loan without penalty.
During the term of the Property Loan, we are required to deposit certain cash reserves including reserves for operating expenses,
debt service and certain property improvement plan required work. We will continue to fund the reserves until the Properties achieve a
debt service coverage ratio of 1.50x for two consecutive calendar quarters. These reserves are presented as restricted cash on our
Consolidated Balance Sheet and had a balance of $23.5 million as of December 31, 2021.
Finance lease obligation
On July 1, 2020, we entered into a twelve-year finance lease arrangement with a third-party for the construction, management and
maintenance of a thermal energy plant located at the Hyatt Ziva and Hyatt Zilara Cap Cana. We recognized a $2.3 million right-of-use
asset and lease liability within property and equipment, net and debt, respectively, on the Consolidated Balance Sheet.
On October 1, 2021, we entered into a ten-year finance lease arrangement with a third-party for the construction, management and
maintenance of a thermal energy plant located at the Hilton La Romana. We recognized a $3.9 million right-of-use asset and lease
liability within property and equipment, net and debt, respectively, on the Consolidated Balance Sheet.
90
Financial maintenance covenants
We were in compliance with all applicable covenants as of December 31, 2021. A summary of our applicable covenants and
restrictions is as follows:
Existing Credit Agreement
Debt
Term A1 Loan
Term A2 Loan
Term A3 Loan
Property Loan
We are required to maintain a minimum liquidity balance of $70.0 million
through the Relief Period.
Covenant Terms
If we have more than 35% drawn on the Revolving Credit Facility for periods
subsequent to December 31, 2021, we will be subject to the following total net
leverage ratio requirements:
▪
▪
▪
6.50x for the period ended March 31, 2022;
6.00x for the period ended June 30, 2022; and
4.75x for periods thereafter.
Same terms as the Existing Credit Agreement.
No applicable debt covenants.
No applicable debt covenants.
No applicable debt covenants other than the requirement to maintain a cash
reserve until the Properties achieve a debt service coverage ratio of 1.50x for
two consecutive quarters.
Note 14. Derivative financial instruments
Our two interest rate swaps 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 $800.0 million of our Term Loan. The interest rate swaps mature on March 31, 2023.
As of March 20, 2019, we elected to adopt hedge accounting and designate our interest rate swaps as cash flow hedges. Following
adoption, the change in the fair value of our interest rate swaps that qualifies as effective cash flow hedges was recorded through other
comprehensive loss (“OCI”) in the Consolidated Statements of Comprehensive Loss. Since February 29, 2020, our interest rate swaps
have been deemed ineffective due to the decrease in interest rates and all subsequent changes in fair value were recognized through
interest expense in the Consolidated Statements of Operations.
The following table presents the effect of our interest rate swaps, net of tax, in the Consolidated Statements of Comprehensive
Loss and Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019 ($ in thousands):
Derivative Liabilities Designated as Hedging Instruments
2021
2020
2019
AOCI from our cash flow hedges as of January 1
$
26,369
$
20,164
$
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
Reclassification from AOCI to interest expense
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
—
(2,894)
(2,894)
—
(2,926)
(2,926)
—
(2,958)
(2,958)
—
16,956
(1,908)
15,048
—
(2,926)
(2,926)
—
(2,958)
(2,958)
—
Reclassification from AOCI to interest expense
AOCI from our cash flow hedges as of December 31(1)
(2,959)
14,632
$
(2,959)
26,369
$
$
—
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, 2021, the total amount expected to be reclassified from AOCI to interest expense during the next twelve months is $11.7 million,
which represents prior losses recognized in AOCI when our interest rate swaps were deemed effective hedges.
91
Derivative Liabilities for Ineffective Hedges(1)
Interest rate swaps(2)
Financial Statement
Classification
Year Ended December 31,
2020
2019
2021
Interest expense
$
10,223
$
26,299
$
2,715
________
(1) Beginning on February 29, 2020, our interest rate swaps were deemed ineffective.
(2) Includes the change in fair value of our interest rate swaps and the cash interest paid for the monthly settlements of the derivative.
The following table presents the effect of our interest rate swaps in the Consolidated Balance Sheet as of December 31, 2021 and
December 31, 2020 ($ in thousands):
Derivative Liabilities for Ineffective Hedges
Financial Statement
Classification
As of December 31,
2021
2020
Interest rate swaps
Derivative financial instruments
$
22,543
$
46,340
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 15) and believe we
minimize this credit risk by transacting with major creditworthy financial institutions.
Note 15. 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
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.
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,
2021 and 2020. Our only Level 3 financial instrument in our Consolidated Financial Statements is our pension obligation (refer to
Note 16 for further discussion).
The following tables present our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of
December 31, 2021 and 2020 ($ in thousands):
Fair value measurements on a recurring basis
Interest rate swap
Fair value measurements on a recurring basis
Interest rate swap
$
$
December 31, 2021
Level 1
Level 2
Level 3
22,543
$
— $
22,543
$
—
December 31, 2020
Level 1
Level 2
Level 3
46,340
$
— $
46,340
$
—
The following table presents our fair value hierarchy for our financial assets measured at fair value on a nonrecurring basis as of
December 31, 2020 ($ in thousands):
November 3, 2020
Level 1
Level 2
Level 3
Fair value measurements on a nonrecurring basis
Impaired long-lived assets (1)
$
34,475
$
— $
34,475
$
—
________
(1) On November 3, 2020, we recorded an impairment loss of $10.6 million based on the sale price of the Dreams Puerto Aventuras, which we consider an
observable input other than quoted prices. Refer to further discussion in Note 4.
92
The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of December 31,
2021 and 2020 ($ in thousands):
Financial liabilities not recorded at fair value
Term Loan
Term A1 Loan
Term A2 Loan
Term A3 Loan
Property Loan
Total liabilities
Financial liabilities not recorded at fair value
Term Loan
Revolving Credit Facility
Term A1 Loan
Term A2 Loan
Term A3 Loan
Property Loan
Total liabilities
Carrying Value
As of December 31, 2021
Level 1
Fair Value
Level 2
Level 3
$
$
938,788
$
— $
— $
924,917
34,151
30,248
26,640
103,434
—
—
—
—
—
—
—
—
35,598
31,530
27,006
111,593
1,133,261
$
— $
— $
1,130,644
Carrying Value
As of December 31, 2020
Level 1
Fair Value
Level 2
Level 3
$
$
971,920
$
— $
— $
936,799
84,667
33,792
29,930
27,033
101,631
—
—
—
—
—
—
—
—
—
—
84,769
35,182
31,161
28,028
109,871
1,248,973
$
— $
— $
1,225,810
The following table summarizes the valuation techniques used to estimate the fair value of our financial instruments measured at
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 Loans and Property Loan
Revolving Credit Facility
Note 16. Employee benefit plan
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 interest rate swaps is largely dependent on forecasted
LIBOR as of the measurement date. If, in subsequent periods, forecasted
LIBOR exceeds 2.85%, we will recognize a gain and future cash inflows.
Conversely, if forecasted LIBOR falls below 2.85% in subsequent periods,
we will recognize a loss and future cash outflows.
The fair value of our Term Loans and Property Loan are 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.
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, 2021 and 2020 was determined based on the application of certain assumptions including a discount rate, mortality
(using the EMSSAH-09 and EMSSAM-09 mortality tables), salary increase and estimated personnel turnover and disability.
93
The following table sets forth our pension obligation, funded status and accumulated pension obligation as of December 31, 2021
and 2020 ($ in thousands):
Change in pension obligation
Balance at beginning of period
Service cost
Interest cost
Actuarial (gain) loss
Effect of foreign exchange rates
Curtailment
Benefits paid
Divestitures
Balance at end of period
Underfunded status
Accumulated pension obligation
As of December 31,
2021
2020
6,231
$
832
423
(266)
(194)
29
(1,065)
—
5,990
$
(5,990)
(4,265) $
6,764
822
428
332
(560)
(264)
(1,264)
(27)
6,231
(6,231)
(4,382)
$
$
$
There were no plan assets as of December 31, 2021 or 2020 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. Actuarial gains and losses are
recognized in the Consolidated Statements of Operations.
The following table presents the components of net periodic pension cost for the years ended December 31, 2021, 2020 and 2019
($ in thousands):
Service cost
Interest cost
Effect of foreign exchange rates
Amortization of prior service cost
Amortization of loss (gain)
Compensation-non-retirement post-employment benefits
Settlement and curtailment gain
Total net periodic pension cost
Year Ended December 31,
2021
2020
2019
$
$
$
832
423
(194)
1
2
694
(406)
1,352
$
$
822
428
(560)
1
6
214
(289)
622
$
795
492
384
1
(20)
(1)
(211)
1,440
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.
The weighted-average assumptions used to determine the pension obligation as of December 31, 2021 and 2020 and the net
periodic pension cost for the years ended December 31, 2021, 2020 and 2019 were as follows:
Discount rate
Rate of compensation increase
As of December 31,
2021
2020
2019
8.00 %
4.79 %
7.10 %
4.79 %
7.50 %
4.79 %
The discount rate reflects the current rate at which our pension obligations could be effectively settled on the measurement date.
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.
94
The following table represents our expected plan payments for the next five years and thereafter ($ in thousands):
2022
2023
2024
2025
2026
Thereafter
Total expected plan payments
Note 17. Other balance sheet items
Trade and other receivables, net
As of December 31,
2021
$
$
574
596
657
726
758
3,742
7,053
The following summarizes the balances of trade and other receivables, net as of December 31, 2021 and 2020 ($ in thousands):
Gross trade and other receivables (1)
Allowance for doubtful accounts
Total trade and other receivables, net
________
(1) The opening balance as of January 1, 2020 was $73.0 million.
As of December 31,
2021
2020
$
$
47,382
(1,940)
45,442
$
$
28,346
(2,913)
25,433
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 resort periodically reviews the age of the clients’ balances
and the balances which may be of doubtful recoverability.
We do not require collateral or other security in support of accounts receivable. Allowances are provided for individual accounts
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.
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.
During the year ended December 31, 2021, we reversed $0.8 million of our allowance for doubtful accounts and bad debt expense
as a result of cash collections following the economic recovery from the COVID-19 pandemic and its effect on tour operators and
travel agencies. During the year ended December 31, 2020, we recognized bad debt expense of $3.1 million primarily as result of the
negative effects of COVID-19 and $0.8 million during the year ended December 31, 2019 as a result of the bankruptcy of Thomas
Cook, one of our travel partners.
95
The change in the allowance for doubtful accounts for the years ended December 31, 2021, 2020 and 2019 is summarized in the
following table ($ in thousands):
December 31, 2021
December 31, 2020
December 31, 2019
Balance at
January 1
Additions
$
$
$
(2,913) $
(1,765) $
(593) $
(107) $
(3,115) $
(1,402) $
Deductions(1)
1,080
1,967
230
$
$
$
Balance at
December 31
(1,940)
(2,913)
(1,765)
________
(1) Includes reversals of our bad debt expense and write offs of our allowance for doubtful accounts.
Prepayments and other assets
The following summarizes the balances of prepayments and other assets as of December 31, 2021 and 2020 ($ in thousands):
Advances to suppliers
Prepaid income taxes
Prepaid other taxes (1)
Operating lease right-of-use assets
Key money (2)
Other assets
Total prepayments and other assets
As of December 31,
2021
2020
$
$
8,327
$
11,101
7,995
3,766
2,376
5,075
38,640
$
8,748
12,731
14,033
4,263
2,700
5,163
47,638
________
(1) Includes recoverable value-added tax, general consumption tax, and other sales tax accumulated by our Mexico, Jamaica, Dutch and Dominican Republic
entities.
(2) Represents a cash deposit related to the Sanctuary Cap Cana management contract. In April 2021, we entered into an agreement to classify this deposit as
key money.
Goodwill
We recognized no goodwill impairment losses on our reporting units nor any additions to goodwill during the year ended
December 31, 2021. The gross carrying values and accumulated impairment losses of goodwill by reportable segment (refer to
discussion of our reportable segments in Note 18) as of December 31, 2021 and 2020 were as follows ($ in thousands):
Gross carrying value
Accumulated impairment losses
Net carrying value
Yucatán
Peninsula
Pacific Coast
Dominican
Republic
Jamaica
Total
$
$
51,731
(6,168)
45,563
$
$
— $
—
— $
— $
—
— $
35,879
(19,788)
16,091
$
$
87,610
(25,956)
61,654
As a result of the negative impacts of COVID-19 and the temporary suspension of operations at our resorts (see Note 1), we
performed an interim quantitative impairment analysis as of March 31, 2020 for all of our reporting units. The forecasted future cash
flows of our reporting units materially decreased during the first quarter of 2020 and as a result, we recognized impairment losses at
our Jewel Runaway Bay Beach Resort & Waterpark, Jewel Dunn’s River Beach Resort & Spa and Jewel Paradise Cove Beach Resort
& Spa reporting units.
The fair values of our Hilton Playa del Carmen All-Inclusive Resort and Hyatt Zilara Cancún reporting units in Mexico
substantially exceeded their carrying values as of March 31, 2020 and as of July 1, 2020, our annual testing date. We did not identify
any additional triggering events subsequent to the annual testing date for these reporting units. The fair value of our Wyndham Alltra
Cancún (formerly known as the Panama Jack Resorts Cancún) reporting unit did not exceed its carrying value by a substantial amount
as of March 31, 2020 or July 1, 2020. We therefore performed an interim quantitative impairment analysis for the Wyndham Alltra
Cancún reporting unit as of September 30, 2020 and concluded that the goodwill was not impaired. Due to the stronger recovery in the
Mexico market, the fair value of this reporting unit exceeded its carrying value by a substantial amount as of September 30, 2020. We
did not identify any additional triggering events subsequent to the September 30, 2020 interim testing date for this reporting unit.
96
The fair value of the Hilton Rose Hall Resort & Spa reporting unit in Jamaica substantially exceeded its carrying value as of
March 31, 2020. However, as a result of the COVID-19 testing requirements enacted by the Jamaican government, the fair value of
the reporting unit did not exceed its carrying value by a substantial margin as of October 1, 2020, our annual testing date. As a result
of the continued COVID-19 testing requirements, combined with the re-entry requirements imposed by the U.S. Centers for Disease
Control and Prevention, we also performed an interim quantitative impairment analysis over the reporting unit as of December 31,
2020 and concluded that the goodwill was partially impaired.
During the fourth quarter of 2019, we performed an interim quantitative impairment analysis over our Wyndham Alltra Playa del
Carmen (formerly known as the Panama Jack Resorts Playa del Carmen) reporting unit due to the unfavorable market conditions in the
Yucatán Peninsula region. The financial performance of this reporting unit did not recover during the fourth quarter of 2019 consistent
with our other reporting units in the region. The decline in current and forecasted cash flows was considered a triggering event for
quantitative impairment testing, and we determined that the carrying value of the reporting unit exceeded its fair value and we
recognized an impairment loss.
A summary of our goodwill impairment losses, by reporting unit, recognized within impairment loss in the Consolidated
Statements of Operations for the years ended December 31, 2020 and 2019 is as follows ($ in thousands):
Reporting Unit
Reportable Segment
Jewel Runaway Bay Beach Resort & Waterpark
Jewel Dunn’s River Beach Resort & Spa
Jewel Paradise Cove Beach Resort & Spa
Hilton Rose Hall Resort & Spa
Jamaica
Jamaica
Jamaica
Jamaica
Wyndham Alltra Playa del Carmen
Yucatán Peninsula
Year ended December 31,
2020
2019
7,604 $
5,612 $
4,489 $
2,083 $
— $
—
—
—
—
6,168
$
$
$
$
$
97
Other intangible assets
Other intangible assets as of December 31, 2021 and 2020 consisted of the following ($ in thousands):
Gross carrying value
Casino and other licenses (1)
Management contract
Enterprise resource planning system (2)
Other
Total gross carrying value
Accumulated amortization
Management contract
Enterprise resource planning system (2)
Other
Total accumulated amortization
Net carrying value
Casino and other licenses (1)
Management contract
Enterprise resource planning system (2)
Other
Total net carrying value
As of December 31,
2021
2020
$
875
$
1,900
6,402
4,073
13,250
(333)
(1,895)
(3,390)
(5,618)
875
1,567
4,507
683
$
7,632
$
875
1,900
6,047
4,238
13,060
(238)
(1,125)
(3,141)
(4,504)
875
1,662
4,922
1,097
8,556
________
(1) Our casino licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization.
(2) Represents software development costs incurred to develop and implement SAP as our integrated enterprise resource planning system, of which $0.9
million and $1.4 million was placed into service in 2021 and 2020, respectively, and is being amortized over a weighted-average amortization period of 7
years.
Amortization expense for intangible assets was $1.4 million, $1.7 million and $1.1 million for the years ended December 31,
2021, 2020 and 2019, respectively. Amortization expense for our intangible assets with finite lives is expected to be as follows ($ in
thousands):
2022
2023
2024
2025
2026
Thereafter
Total future amortization expense
As of December 31,
2021
$
$
1,442
1,181
1,051
949
637
1,497
6,757
98
Trade and other payables
The following summarizes the balances of trade and other payables as of December 31, 2021 and 2020 ($ 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, 2020 was $53.8 million.
Other liabilities
As of December 31,
2021
2020
23,843
$
62,644
32,655
99
23,998
16,983
23,348
29,707
37,450
618
15,668
16,619
160,222
$
123,410
$
$
The following summarizes the balances of other liabilities as of December 31, 2021 and 2020 ($ in thousands):
Pension obligation
Operating lease liabilities
Unfavorable ground lease liability (1)
Key money (2)
Other
Total other liabilities
As of December 31,
2021
2020
$
$
5,990
$
4,298
1,967
16,731
896
29,882
$
6,231
4,762
2,090
15,790
895
29,768
________
(1) Represents the unamortized balance of the unfavorable ground lease intangible acquired in our 2018 business combination.
(2) 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 $1.9 million and $8.5 million in 2021 and 2020, respectively.
Note 18. Business segments
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
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, 2021, 2020 and 2019, 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 whom
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, and
depreciation and amortization expense (“Adjusted EBITDA”), which should not be considered an alternative to net 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, determined in accordance with U.S. GAAP, for the period presented, before interest
expense, income tax benefit, and depreciation and amortization expense, further adjusted to exclude the following items:
(a) impairment loss; (b) loss on sale of assets; (c) other expense; (d) repairs from hurricanes and tropical storms; (e) contract
termination costs; (f) pre-opening expense; (g) share-based compensation; (h) other tax expense; (i) transaction expense; and (j)
severance expense.
99
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, 2021, 2020 and 2019 ($ in thousands):
Owned net revenue (1)
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Segment owned net revenue
Other
Management fees
Cost reimbursements
Compulsory tips
Total revenue
Year Ended December 31,
2021
2020
2019
$
188,911 $
109,629 $
235,788
76,811
149,774
97,036
512,532
974
2,291
5,806
13,036
33,065
49,898
69,173
261,765
367
807
2,189
8,061
$
534,639 $
273,189 $
85,219
90,783
193,558
605,348
23
1,820
6,412
22,874
636,477
________
(1) We recognized $3.0 million in business interruption insurance recoveries for the year ended December 31, 2020 related to the suspension of operations
from the COVID-19 pandemic.
100
The following table presents segment Owned Resort EBITDA, Adjusted EBITDA and a reconciliation to net loss for the years
ended December 31, 2021, 2020 and 2019 ($ in thousands):
Owned Resort EBITDA
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Segment Owned Resort EBITDA
Other corporate
Management fees
Adjusted EBITDA
Interest expense
Depreciation and amortization
Impairment loss
Loss on sale of assets
Other expense
Repairs from hurricanes and tropical storms
Contract termination fees
Pre-opening expense
Share-based compensation
Other tax expense
Transaction expense
Severance expense
Non-service cost components of net periodic pension cost (benefit) (1)
Net loss before tax
Income tax benefit
Net loss
Year Ended December 31,
2020
2019
2021
$
59,538
$
17,783
$
23,776
38,141
14,826
136,281
(39,401)
2,291
99,171
(71,378)
(81,508)
(24,011)
(676)
(1,471)
(475)
(400)
—
4,281
(6,694)
(1,284)
14,086
(36,066)
807
(21,173)
(81,942)
(92,570)
(55,619)
(2,021)
(1,164)
(1,542)
—
—
(13,163)
(10,158)
(617)
(1,321)
(1,756)
520
(97,085)
7,403
(613)
(2,497)
(3,844)
(200)
(273,343)
10,973
$
(89,682) $
(262,370) $
82,534
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)
645
(21,577)
17,220
(4,357)
________
(1) Represents the non-service cost components of net periodic pension cost or benefit recorded within other expense in the Consolidated Statements of
Operations. We include these costs in 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, 2021 and 2020 ($ in thousands):
Segment property and equipment, gross
Yucatán Peninsula (1)
Pacific Coast
Dominican Republic
Jamaica
Total segment property and equipment, gross
Corporate property and equipment, gross
Accumulated depreciation
Total property and equipment, net
As of December 31,
2021
2020
$
667,618
$
288,309
684,187
408,107
2,048,221
4,802
(468,449)
$
1,584,574
$
799,849
288,328
678,900
406,047
2,173,124
4,505
(450,246)
1,727,383
________
(1) Property and equipment of the Dreams Puerto Aventuras resort is included within assets held for sale in the Consolidated Balance Sheet as of December
31, 2020.
101
The following table presents segment capital expenditures and a reconciliation to total capital expenditures for the years ended
December 31, 2021, 2020 and 2019 ($ in thousands):
Segment capital expenditures
Yucatán Peninsula
Pacific Coast
Dominican Republic
Jamaica
Total segment capital expenditures (1)
Corporate
Total capital expenditures (1)
Year Ended December 31,
2021
2020
2019
$
4,957
$
4,487
$
1,138
3,417
4,210
13,722
353
1,345
9,966
3,112
18,910
160
$
14,075
$
19,070
$
28,495
3,144
178,599
5,178
215,416
14,512
229,928
________
(1) Represents gross additions to property and equipment excluding our finance leases.
Note 19. Subsequent events
For our Consolidated Financial Statements as of December 31, 2021, we evaluated subsequent events through February 24, 2022,
which is the date the Consolidated Financial Statements were issued.
102
(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
Advances from subsidiaries
Total liabilities
Total shareholders’ equity
Total liabilities and shareholders' equity
As of December 31,
2021
2020
$
$
$
$
8,903
$
79
100
773,471
782,553
410
151,309
151,719
630,834
$
$
782,553
$
10,534
506
140
701,136
712,316
185
151,309
151,494
560,822
712,316
The accompanying notes are an integral part of these Condensed Financial Statements.
103
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Playa Hotels & Resorts N.V.
(Parent Company)
Statement of Operations
($ in thousands)
Year Ended December 31,
2021
2020
2019
Revenue
Selling, general and administrative expenses
Operating loss
Other expense
Interest income
Net loss before equity in net (loss) income of subsidiaries
Equity in net (loss) income of subsidiaries
$
— $
— $
(14,143)
(14,143)
(4)
—
(14,147)
(75,535)
(11,099)
(11,099)
(5)
—
(11,104)
(251,266)
Net loss
$
(89,682) $
(262,370) $
The accompanying notes are an integral part of these Condensed Financial Statements.
—
(11,429)
(11,429)
(17)
29
(11,417)
7,060
(4,357)
104
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Playa Hotels & Resorts N.V.
(Parent Company)
Statement of Cash Flows
($ in thousands)
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities
$
(347) $
2,398
$
4,456
For the Year Ended December 31,
2021
2020
2019
INVESTING ACTIVITIES
Investment in subsidiaries
Net cash used in investing activities
FINANCING ACTIVITIES
Advances from subsidiaries
Repurchase of ordinary shares
Proceeds from ordinary shares
Net cash provided by (used in) 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
$
$
(139,000)
(139,000)
(161,000)
(161,000)
—
—
137,716
137,716
(1,631)
10,534
8,903
$
$
151,309
(2,500)
20,000
168,809
10,207
327
10,534
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Non-cash repurchases of ordinary shares for tax withholdings
Non-cash equity issuance costs
Par value of vested restricted share awards
$
$
$
55
$
— $
$
135
54
442
103
The accompanying notes are an integral part of these Condensed Financial Statements.
—
—
—
(13,694)
—
(13,694)
(9,238)
9,565
327
—
—
54
$
$
$
$
$
105
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 a business combination pursuant to a transaction agreement by and among us, Playa Hotels & Resorts
B.V., Pace Holdings Corp., 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. 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
advances pursuant to the Senior Secured Credit Facility (as defined in Note 13 of the Company’s Consolidated Financial Statements
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.
We corrected an error in our previously disclosed deferred tax liabilities for one of our Dominican Republic entities for all prior
periods presented by revising the Condensed Financial Statements and other financial information included herein. The adjustment
had no impact on our Condensed Statement of Operations or Condensed Statements of Cash Flows for all prior periods presented.
Refer to Note 1 to the Consolidated Financial Statements for further discussion.
2. Commitments and contingencies
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 with
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. With the exception of Playa Dominican Resort B.V., Playa Romana
B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V., our Dutch companies file as a fiscal unity. 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.
3. Dividends from subsidiaries
We received $0 million, $3.5 million and $8.3 million in cash dividends for the years ended December 31, 2021, 2020 and 2019,
respectively, which are included within operating activities in the Condensed Statement of Cash Flows for all periods presented.
4. Advances from subsidiaries
We received non-interest bearing cash advances of $93.1 million and $58.2 million from our Netherlands and Jamaican
subsidiaries, respectively, during the year end December 31, 2020. These are included within financing activities in the Condensed
Statement of Cash Flows.
106
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
Chief Executive Officer (“CEO”) in the role of Principal Executive Officer and our Chief Financial Officer (“CFO”) in the role of
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 CEO and CFO, of the effectiveness
of our disclosure controls and procedures. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and
procedures were effective as of December 31, 2021.
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. Our internal control system is designed to provide reasonable
assurance to our management and the board of directors regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management conducted, under the supervision of our CEO and CFO, 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, 2021.
Deloitte & Touche LLP, an independent registered public accounting firm, has audited the 2021 Consolidated Financial
Statements included in this Annual Report on Form 10-K and, as part of its audit, has issued an attestation report, included herein, on
the effectiveness of our internal control over financial reporting.
Remediation of Prior Year Material Weakness
We disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 the following material weakness in our
internal control over financial reporting that existed as of December 31, 2020 and 2019:
•
The control activities related to our income tax provision did not operate with a level of precision that would identify a
material misstatement (the “Tax Weakness”).
During 2021, we initiated and implemented measures designed to improve our internal control processes and procedures related to
income tax accounting. Specifically, we hired additional resources, engaged third-party service providers, and developed and
implemented enhanced policies, procedures and controls relating to income tax account reconciliations and analysis, including
enhancements to our documentation to reflect the control attributes that are performed and enhanced the precision of our controls. We
also successfully completed testing our income tax provision controls for effectiveness. Based on our implementation and testing, we
concluded that the Tax Weakness has been remediated as of December 31, 2021.
Changes in Internal Control Over Financial Reporting
Except for the remediation of the Tax 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.
107
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
108
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 2021 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to the Company's Proxy Statement for the 2021 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Except as provided below, the information required by this item is incorporated by reference to the Company's Proxy Statement
for the 2021 Annual General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31,
2021.
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, 2021. See Note 11 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
—
—
—
—
——
—
4,851,439
4,851,439
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 2021 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
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 2021 Annual
General Meeting of Shareholders to be filed with the SEC within 120 days of the fiscal year ended December 31, 2021.
109
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, 2021 and 2020.
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019.
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021, 2020 and 2019.
Consolidated Statements of Shareholders' Equity for the years ended December 31, 2021, 2020 and 2019.
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019.
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
4.1
10.1
10.2
10.3
10.4
10.5
10.6*
10.7*
10.8*
Exhibit Description
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 Company on August 6, 2020)
Board Rules for Playa Hotels & Resorts N.V. (incorporated by reference to Exhibit 3.1 to the to the Current Report on
Form 8-K filed by the Company on February 22, 2021)
Description of Securities of Playa Hotels & Resorts N.V. (incorporated by reference to Exhibit 4.1 to the Annual Report
on Form 10-K filed by the Company on February 27, 2020)
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)
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)
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)
Second Amendment to 2017 Second Amendment to 2017 Omnibus Incentive Plan (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K filed by the Registrant on May 21, 2019)
110
Exhibit
Number
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*
10.24*
10.25*
10.26*
Exhibit Description
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).
Omnibus Third Amendment to Franchise Agreement Amendment by and among Franchisees named therein and Hyatt
Franchising Latin America, L.L.C.**
Shareholder Agreement, dated as of May 31, 2018, by and among 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 20, 2021, by Playa Resorts Management, LLC, and Bruce D.
Wardinski**
Executive Employment Agreement, dated as of December 20, 2021, by Playa Resorts Management, LLC, and Ryan
Hymel**
Executive Employment Agreement, dated as of December 20, 2021, by Playa Resorts Management, LLC, and Tracy-
Marie J. Colden**
Executive Employment Agreement, dated as of December 20, 2021, by Playa Resorts Management, LLC, and Grigorios
Maliassas**
Executive Employment Agreement, dated as of December 20, 2021, by Playa Resorts Management, LLC, and Fernando
Mulet**
10.27*
Separation Agreement by and between Playa Management USA, LLC, and Kevin Froemming**
10.28
Fourth Amendment to Amended & Restated Credit Agreement, dated as of June 12, 2020, 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 Company on June 12, 2020)
111
Exhibit
Number
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
21.1
23.1
31.1
31.2
32.1
32.2
101
104
*
**
Credit Agreement, dated as of June 12, 2020, among Playa Hotels & Resorts N.V., Playa Resorts Holding B.V., as
Borrower, the Guarantors party thereto, Cortland Capital Market Services LLC, as Administrative Agent, Acquiom
Agency Services LLC, as Mexican Collateral Agent and the lenders party thereto from time to time (incorporated by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q filed by the Company on August 6, 2020)
Exhibit Description
Loan Agreement, dated as of June 12, 2020, among Hilmobay Resort III, LLC and Playa Dominican Resort III, LLC,
collectively, as Borrower, Hilmobay Resort Limited and Playa Dominican Resort B.V., collectively, as Security
Guarantor, PHR Lender LLC, as Agent for the lenders and the several lenders party thereto from time to time
(incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Registrant on June 12, 2020)
Fifth Amendment to Amended & Restated Credit Agreement, dated as of February 5, 2021, 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 Company on February 5, 2021)
Second Amendment to Credit Agreement, dated as of February 5, 2021, among Playa Hotels & Resorts N.V., Playa
Resorts Holding B.V., as borrower, Cortland Capital Market Services LLC, as Administrative Agent, and the other
lenders party thereto from time to time (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K
filed by the Company on February 5, 2021)
Hotel Management Agreement, effective as of October 31, 2007, entered into by and between Playa Cana B.V., and
Operator **
First Amendment to Hotel Management Agreement, entered into on May 10, 2010, by and between Playa Cana B.V.,
and Operator **
Second Amendment to Hotel Management Agreement, entered into on August 12, 2013, by and between Playa Cana
B.V., and Operator **
Third Amendment to Hotel Management Agreement, entered into on October 9, 2020, by and between Playa Cana B.V.,
and Operator **
Hotel Management Agreement, effective as of December 20, 2007, entered into by and among Perfect Tours, N.V., the
Operator, and Inversiones Vilazul, S.A. **
First Amendment to Hotel Management Agreement, entered into on August 12, 2013, by and among Inversiones
Vilazul, S.A.S., Perfect Tours N.V., and Operator **
Fourth Amendment to Hotel Management Agreement, entered into on February 23, 2022, by and between Playa Cana
B.V., and Operator **
Second Amendment to Hotel Management Agreement, entered into on February 23, 2022, by and among Inversiones
Vilazul, S.A.S. and Operator **
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, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) Income, (iv)
Consolidated Statements of 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, 2021, 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
112
Item 16. Form 10-K Summary.
Not applicable.
113
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 24, 2022
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
/s/ Bruce D. Wardinski
Bruce D. Wardinski
/s/ Ryan Hymel
Ryan Hymel
/s/ Brandon B. Buhler
Brandon B. Buhler
/s/ Richard B. Fried
Richard B. Fried
/s/ Hal Stanley Jones
Hal Stanley Jones
/s/ Elizabeth Lieberman
Elizabeth Lieberman
/s/ Karl Peterson
Karl Peterson
/s/ Leticia Navarro
Leticia Navarro
/s/ Mahmood Khimji
Mahmood Khimji
/s/ Maria Miller
Maria Miller
Title
Date
Chairman and Chief Executive Officer (Principal
Executive Officer)
2/24/2022
Chief Financial Officer (Principal Financial Officer)
2/24/2022
Chief Accounting Officer (Principal Accounting Officer) 2/24/2022
2/24/2022
2/24/2022
2/24/2022
2/24/2022
2/24/2022
2/24/2022
2/24/2022
Director
Director
Director
Director
Director
Director
Director
114
VALUED SHAREHOLDERS:
The second year of the pandemic can best be described as
a tale of two halves for Playa. The first half of the year was
fraught with uncertainty regarding the sustainability of
demand and the uncertainty of continued, and new, travel
restrictions. To enhance our liquidity position and protect
the financial stability of the Company, we took several
measures to drastically reduce our operational expenses and
raised capital through the capital markets and the sale of
non-core assets. The uncertainty of the first half of 2021
quickly transitioned to an environment defined by surging
pent-up demand and record Average Daily Rates (ADR)
and resort margins. Our focus throughout 2021 continued
to be on our guests and delivering the safest guest experience
possible at our resorts, while executing on our strategic
objectives to drive growth in 2022 and beyond.
2021 Financial performance highlights
Despite the on-going disruption from the COVID-19
pandemic, the fundamentals of our business improved
through the year as vaccination rates increased and flight
capacity into our markets climbed. Following a temporary
set-back at the start of the year from the implementation
of the CDC’s testing requirements for all international
travelers to enter the United States, we saw a staggering
increase in demand, leading to our on-the-books revenue
pacing position for the second half of 2021, and beyond, far
exceeding levels seen in any prior year. Given the continued
pace of bookings from historic pent-up demand and recent
capital investments in our resorts, we made a strategic
decision to focus on maximizing ADR and establishing
our competitive positioning at the high end of the market
which was the key driver of our profit performance during
the second half of the year. This was particularly evident in
our ADR gains, which led to exceptional Owned Resort
EBITDA Margin performance despite occupancy rates
remaining well below pre-pandemic levels.
Putting this all together, Playa went from generating a $2.5
million adjusted EBITDA loss during the first quarter
on occupancy of just 31.6%, to a strong fourth quarter
finish with positive adjusted EBITDA of $47 million and
occupancy of 66.3%.
At the segment level, Mexico led the way throughout the year
as its consistent travel policies led to a quicker recovery in
consumer demand and flight capacity. As the year progressed,
the Dominican Republic also experienced a sharp recovery
in occupancy and international visitor arrivals, particularly
as travel restrictions for several European countries began
easing in the second half of the year. While Jamaica was
a strong segment for us pre-pandemic, it has lagged our
other segments during the recovery due to more stringent
travel restrictions. We are confident however that there are
no major structural challenges for any of our segments to
achieving a healthy recovery, but are braced for the recovery
to remain uneven.
Significantly improved liquidity profile
We entered 2021 generating negative free cash flow on a
monthly basis with limited visibility to sustained cash
generation. With that in mind, in early January we raised
approximately $138 million of capital through an equity
offering and paid off the outstanding balance on our
Revolving Credit Facility, while obtaining a favorable
amendment with respect to our financial covenants. We also
sold two resorts in Mexico during the first half of the year
for a total gross consideration of nearly $90 million to help
enhance our liquidity position and make further progress on
increasing our percentage of branded hotels.
Our business fundamentals sustainably turned the corner
during the third quarter of the year as occupancy rates
improved and ADR gains drove substantial margin
increases. We exited 2021 with approximately $270 million
of cash and a fully undrawn balance on our Revolving
Credit Facility.
Continued progress on strategic imperatives
Although the pandemic continued to present challenges
during 2021, we did not lose sight of our strategic goals and
continued to make significant progress on them during 2021.
Our focus on brand partnerships with globally recognized
brands with robust loyalty databases, combined with
investments in our own direct-booking capabilities in recent
years, continued to be a significant competitive advantage
as third-party channels lagged during the recovery of 2021.
We expected our mix of direct sourced business to decline
in 2021 as compared to 2020 as the severely depressed
third-party channels improved and MICE groups began
to return but our direct mix exceeded our expectations,
EXECUTIVE MANAGEMENT TEAM
BOARD OF DIRECTORS
HYATT ZILARA CANCUN
Bruce D. Wardinski
Chairman and
Chief Executive Officer
Greg Maliassas
Executive Vice President
and Chief Operating Officer
Ryan Hymel
Executive Vice President
and Chief Financial Officer
Tracy M. J. Colden
Executive Vice President
and General Counsel
Fernando Mulet
Executive Vice President
and Chief Investment Officer
Pedram Saif
Senior Vice President
Investor Relations & Strategy
Bruce D. Wardinski
Hal Stanley Jones
Leticia Navarro
Richard B. Fried
Elizabeth Lieberman
Mahmood Khimji
Karl Peterson
Maria Miller
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
3950 University Drive, Suite 301
Fairfax, VA 22030
571.529.6017
Pedram.Saif@Playaresorts.com
Annual Meeting of Stockholders:
May 12, 2022
Transfer Agent:
Deloitte Accountants B.V.
Gustav Mahlerlaan 2970
1081 LA Amsterdam, the Netherlands
+31.88.288.2888
Computershare
462 South 4th Street, Suite 1600
Louisville, KY 40202
877.373.6374
®
A N N U A L R E P O R T
2021
®
Nieuwezijds Voorburgwal 104 | 1012 SG Amsterdam, the Netherlands | +31.68.255.8430
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
Hyatt Ziva Rose Hall