Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cibanco S A Institucion De Banca Multiple (DBMXF, Financial) reported a record portfolio growth of 7.3% year over year.
- The company achieved a 12.2% increase in Average Daily Rate (ADR), surpassing inflation.
- Limited service and full service hotels showed strong performance with RevPAR growth of 12.6% and 12.1% respectively.
- Mexico City outperformed with a RevPAR growth of 14.6% during the quarter.
- The company announced a new hotel development project with the iconic Ritz Carlton brand, expected to open in late 2027.
Negative Points
- The third quarter results were below expectations due to challenging demand and increased labor costs.
- Overall occupancy decreased by 278 basis points, reflecting weaker room demand.
- The Fiesta Americana Condesa Cancun Hotel experienced a RevPAR decrease of 14% in dollars.
- Margin compression was noted due to rising operating expenses, particularly labor costs.
- The company faced headwinds from hurricanes and a decrease in flight arrivals impacting results in Cancun.
Q & A Highlights
Q: Can you provide more details on the CapEx for the Punta development for the Ritz Carlton, including the timeline and cost distribution?
A: We don't have a clear answer yet as the project and timelines are still being determined. Most of the payments will be back-ended, with no significant payments expected this year. We will provide more information in the next call.
Q: Given the labor cost issues, what is a sustainable margin moving forward?
A: We face strong pressure from operating costs, particularly labor. We are implementing initiatives to minimize the impact, such as reducing staffing and food offerings. We aim to improve margins over the medium term, but significant short-term increases are unlikely.
Q: How do you see demand for the coming quarters and into 2025, especially given the occupancy decreases?
A: It's difficult to predict due to conflicting market trends. While leisure travel is slowing, economic activity is inconsistent. We expect limited supply to help regain pricing power once demand increases. However, macroeconomic events like the US elections could impact demand.
Q: Will retained cash be enough to fund the Punta development, or will you need to increase debt?
A: We expect to fund the project primarily with existing cash flow. If additional debt is needed, it will be minimal and likely at the end of the project. We do not anticipate a significant increase in debt levels.
Q: How do you plan to manage the residential component of the Punta project?
A: The residential component is managed by another partner, Beyond Ventures. We will benefit from the operational income of the rental pool and other services like spa and restaurants once the residences are operational.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.