Playa Hotels & Resorts N.V. - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________

FORM 10-Q

_______________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NO. 1-38012

Playa Hotels & Resorts N.V.

(Exact name of registrant as specified in its charter)




The	Netherlands	98-1346104
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

Nieuwezijds Voorburgwal 104

1012 SG

Amsterdam,

the

Netherlands

Not Applicable

(Address of Principal Executive Offices)

(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	Trading Symbol(s)	Name of Each Exchange on Which Registered
Ordinary Shares, €0.10 par value	PLYA	The Nasdaq Stock Market LLC

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 submitted 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 29, 2022, there were 165,778,067 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.

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Playa Hotels & Resorts N.V. TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 202 2 and December 31, 20 21	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 202 2 and 2 021	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021	3
	Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 31, 202 2 and 2 021	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 202 2 and 20 21	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Playa Hotels & Resorts N.V.

Condensed Consolidated Balance Sheets

($ in thousands, except share data)

(unaudited)


	As of March 31,		As of December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	299,802	$	270,088
Restricted cash	24,363		23,489
Trade and other receivables, net	61,660		45,442
Accounts receivable from related parties	12,927		7,981
Inventories	18,801		18,076
Prepayments and other assets	38,912		38,640
Property and equipment, net	1,569,739		1,584,574
Goodwill, net	61,654		61,654
Other intangible assets	7,340		7,632
Total assets	$	2,095,198	$	2,057,576
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade and other payables	$	160,474	$	160,222
Payables to related parties	7,312		5,050
Income tax payable	980		828
Debt	942,553		944,847
Related party debt	195,161		194,472
Derivative financial instruments	8,515		22,543
Other liabilities	30,136		29,882
Deferred tax liabilities	70,470		68,898
Total liabilities	1,415,601		1,426,742
Commitments and contingencies (see Note 7)
Shareholders' equity
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 167,986,071 shares issued and 165,778,067 shares outstanding as of March 31, 2022 and 166,646,284 shares issued and 164,438,280 shares outstanding as of December 31, 2021)	18,670		18,518
Treasury shares (at cost, 2,208,004 shares as of March 31, 2022 and December 31, 2021)	(16,697)		(16,697)
Paid-in capital	1,180,584		1,177,380
Accumulated other comprehensive loss	(16,011)		(18,671)
Accumulated deficit	(486,949)		(529,696)
Total shareholders' equity	679,597		630,834
Total liabilities and shareholders' equity	$	2,095,198	$	2,057,576

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Operations

($ in thousands, except share data)

(unaudited)


	Three Months Ended March 31,
		2022		2021
Revenue
Package		$	184,109	$	63,894
Non-package		32,456		12,995
Management fees		1,057		344
Cost reimbursements		1,952		513
Total revenue		219,574		77,746
Direct and selling, general and administrative expenses
Direct		106,840		60,221
Selling, general and administrative		37,239		24,668
Depreciation and amortization		19,500		20,883
Reimbursed costs		1,952		513
Impairment loss		—		24,011
Loss on sale of assets		—		273
Direct and selling, general and administrative expenses		165,531		130,569
Operating income (loss)		54,043		(52,823)
Interest expense		(9,168)		(18,167)
Other expense		(514)		(706)
Net income (loss) before tax		44,361		(71,696)
Income tax (provision) benefit		(1,614)		1,951
Net income (loss)		$	42,747	$	(69,745)

Earnings (loss) per share
Basic		$	0.26	$	(0.43)
Diluted		$	0.26	$	(0.43)
Weighted average number of shares outstanding during the period - Basic		165,743,382		160,827,261
Weighted average number of shares outstanding during the period - Diluted		166,888,129		160,827,261

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Comprehensive Income (Loss)

($ in thousands)

(unaudited)


	Three Months Ended March 31,
		2022		2021
Net income (loss)		$	42,747	$	(69,745)
Other comprehensive income, net of taxes
Gain on interest rate swaps		2,894		2,894
Pension obligation loss		(234)		(11)
Total other comprehensive income		2,660		2,883
Comprehensive income (loss)		$	45,407	$	(66,862)

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Shareholders' Equity

($ in thousands, except share data)

(unaudited)


	Ordinary Shares			Treasury Shares			Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	134,571,290	$	14,871	2,198,796	$	(16,642)	$	1,030,148	$	(30,949)	$	(436,606)	$	560,822
Cumulative effect of accounting changes, net of tax	—	—		—	—		—		—		(3,408)		(3,408)
Balance at January 1, 2021	134,571,290	$	14,871	2,198,796	$	(16,642)	$	1,030,148	$	(30,949)	$	(440,014)	$	557,414
Net loss	—	—		—	—		—		—		(69,745)		(69,745)
Other comprehensive income	—	—		—	—		—		2,883		—		2,883
Share-based compensation, net of tax withholdings	708,285	87		9,208	(55)		3,092		—		—		3,124
Equity issuance	28,750,000	3,512		—	—		134,204		—		—		137,716
Balance at March 31, 2021	164,029,575	$	18,470	2,208,004	$	(16,697)	$	1,167,444	$	(28,066)	$	(509,759)	$	631,392


	Ordinary Shares			Treasury Shares			Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount		Shares	Amount
Balance at December 31, 2021	164,438,280	$	18,518	2,208,004	$	(16,697)	$	1,177,380	$	(18,671)	$	(529,696)	$	630,834
Net income	—	—		—	—		—		—		42,747		42,747
Other comprehensive income	—	—		—	—		—		2,660		—		2,660
Share-based compensation	1,339,787	152		—	—		3,204		—		—		3,356
Balance at March 31, 2022	165,778,067	$	18,670	2,208,004	$	(16,697)	$	1,180,584	$	(16,011)	$	(486,949)	$	679,597

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	42,747	$	(69,745)
Adjustments to reconcile net income (loss) to net cash from operating activities
Depreciation and amortization	19,500		20,883
Amortization of debt discount and issuance costs	1,019		1,011
Share-based compensation	3,356		3,179
Gain on derivative financial instruments	(11,134)		(2,635)
Impairment loss	—		24,011
Deferred income taxes	1,572		(2,034)
Loss on sale of assets	—		273
Amortization of key money	(238)		(234)
Recovery of doubtful accounts	(483)		(9)
Other	(69)		199
Changes in assets and liabilities:
Trade and other receivables, net	(15,735)		(1,350)
Accounts receivable from related parties	(4,946)		244
Inventories	(725)		(356)
Prepayments and other assets	(223)		4,636
Trade and other payables	281		(2,940)
Payables to related parties	2,262		(1,345)
Income tax payable	152		(190)
Other liabilities	312		(160)
Net cash provided by (used in) operating activities	37,648		(26,562)
INVESTING ACTIVITIES
Capital expenditures	(4,430)		(4,561)

Purchase of intangibles	(30)		(29)
Proceeds from the sale of assets, net	24		34,212
Net cash (used in) provided by investing activities	(4,436)		29,622
FINANCING ACTIVITIES


Proceeds from ordinary shares, net of issuance costs	—		137,716
Repayments of debt	(2,525)		(2,525)

Repayments of borrowings on revolving credit facility	—		(84,667)

Repurchase of ordinary shares for tax withholdings	—		(55)
Principal payments on finance lease obligations	(99)		(23)
Net cash (used in) provided by financing activities	(2,624)		50,446
INCREASE IN CASH AND CASH EQUIVALENTS	30,588		53,506
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF THE PERIOD	$	293,577	$	172,860
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD	$	324,165	$	226,366
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	$	299,802	$	200,427
Restricted cash	24,363		25,939
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH	$	324,165	$	226,366

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Cash Flows (continued)

($ in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	18,221	$	18,798
Cash paid for income taxes, net	$	32	$	197
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Capital expenditures incurred but not yet paid	$	696	$	720
Intangible assets capitalized but not yet paid	$	45	$	59


Par value of vested restricted share awards	$	152	$	87

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

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Playa Hotels & Resorts N.V.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

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 condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.

Basis of preparation, presentation and measurement

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements as of and for the year ended December 31, 2021, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2022 (the “Annual Report”).

In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2022. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.

Note 2. Significant accounting policies

Standards adopted

Standard

Description

Date of Adoption

Effect on the Financial Statements or Other Significant Matters

Accounting Standards Update (“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

The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

January 2022

The adoption of ASU No. 2020-04 and ASU 2021-01 had no impact on our Condensed Consolidated Financial Statements for the three months ended March 31, 2022, as we have not modified our variable rate debt that is priced using a spread over one-month London Interbank Offered Rate (“LIBOR”).

Additionally, 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.

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Note 3. Revenue

The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in Note 15) ($ in thousands):


	Three Months Ended March 31, 2022
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	60,566	$	25,929	$	59,696	$	37,918	$	—	$	184,109
Non-package revenue	9,812		3,915		10,013		8,208		508		32,456
Management fees	30		—		—		—		1,027		1,057
Cost reimbursements	—		—		—		998		954		1,952
Total revenue	$	70,408	$	29,844	$	69,709	$	47,124	$	2,489	$	219,574


	Three Months Ended March 31, 2021
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	28,870	$	7,552	$	17,463	$	10,009	$	—	$	63,894
Non-package revenue	5,808		1,362		3,432		2,268		125		12,995
Management fees	—		—		—		—		344		344
Cost reimbursements	—		—		—		377		136		513
Total revenue	$	34,678	$	8,914	$	20,895	$	12,654	$	605	$	77,746

Contract assets and liabilities

We do not have any material contract assets as of March 31, 2022 and December 31, 2021 other than trade and other receivables on our Condensed 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 14) within trade and other payables on our Condensed Consolidated Balance Sheet. Our advanced deposits are generally recognized as revenue within one year.

Note 4. Property and equipment

The balance of property and equipment, net is as follows ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Property and equipment, gross
Land, buildings and improvements	$	1,760,827	$	1,759,837
Fixtures and machinery (1)	84,480		84,264
Furniture and other fixed assets	206,766		205,141
Construction in progress	4,646		3,781
Total property and equipment, gross	2,056,719		2,053,023
Accumulated depreciation	(486,980)		(468,449)
Total property and equipment, net	$	1,569,739	$	1,584,574

________

(1) Includes the gross balance of our financing lease right-of-use assets, which was $6.3 million as of March 31, 2022 and December 31, 2021 (see Note 11).

Depreciation expense for property and equipment was $19.1 million and $20.5 million for the three months ended March 31, 2022 and 2021, respectively.

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Sale of Capri Resort

On March 31, 2021, we entered into an agreement to sell our equity interest in the Capri Resort, which was 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 for the three months ended March 31, 2021.

Sale of Dreams Puerto Aventuras

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.

Lessor contracts

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 three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,
Leases	2022		2021
Operating lease income (1)	$	1,226	$	606

________

(1) Our operating lease income, which is recorded within non-package revenue in the Condensed Consolidated Statements of Operations, includes variable lease revenue which is typically calculated as a percentage of our tenant's net sales.

Note 5. Income taxes

We file tax returns for our entities in key jurisdictions including Mexico, Dominican Republic, Jamaica, the United States, and the Netherlands. We are domiciled in the Netherlands and our Dutch subsidiaries are subject to a Dutch general tax rate of 25.8%. Our other operating subsidiaries are subject to tax rates up to 30% in the jurisdictions in which they are domiciled.

We recognized an income tax provision of $1.6 million for the three months ended March 31, 2022, compared to an income tax benefit of $2.0 million for the three months ended March 31, 2021.

All of our outstanding Advanced Pricing Agreements (“APAs”) for our Dominican Republic entities expired as of December 31, 2021. We are currently in the process of renegotiating the terms of our APAs and expect that the terms will be finalized before the end of 2022. This is reflected in our estimated annual effective tax rate calculation.

We had no uncertain tax positions or unrecognized tax benefits as of March 31, 2022. We expect no significant changes in unrecognized tax benefits over the next twelve months.

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

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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. 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 11). 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 three months ended March 31, 2022 and 2021 were as follows ($ in thousands):


		Three Months Ended March 31,
Related Party	Transaction	2022		2021
Revenues
ALG	Package revenue	$	5,874	$	—
Sagicor	Cost reimbursements (1)	$	1,103	$	430
Expenses
Hyatt	Franchise fees (2)	$	7,413	$	3,516
Sagicor	Insurance premiums (2)	$	279	$	155
Chief Executive Officer	Lease expense (3)	$	188	$	228
DKCM	Interest expense (4)	$	5,405	$	5,404
AMResorts	Management fees (2)	$	1,112	$	—
AMResorts	Marketing fees (3)	$	1,083	$	—

________

(1)Equivalent amount included as reimbursed costs in the Condensed Consolidated Statements of Operations.

(2)Included in direct expense in the Condensed 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.

(3)Included in selling, general, and administrative expense in the Condensed Consolidated Statements of Operations.

(4)Includes interest expense and amortization of deferred financing costs and discounts.

Note 7. Commitments and contingencies

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 Condensed 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. Ordinary shares

As of March 31, 2022, our ordinary share capital consisted of 165,778,067 ordinary shares outstanding, which have a par value of €0.10 per share. In addition, 3,926,401 restricted shares and performance share awards and 27,245 restricted share units were

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outstanding under the 2017 Plan (as defined in Note 9). The holders of restricted shares and performance share awards 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 9. 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. As of March 31, 2022, there were 3,498,568 shares available for future grants under the 2017 Plan.

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).

A summary of our restricted share awards from January 1, 2022 to March 31, 2022 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2022	3,006,791	$	6.50
Granted	1,034,850	8.20
Vested	(1,323,366)	6.31
Forfeited	(93,752)	7.73
Unvested balance at March 31, 2022	2,624,523	$	7.22

Performance share awards consist of ordinary shares that may become earned and vested at the end of a three-year performance period based on the achievement of performance targets adopted by our Compensation Committee. Our performance shares have market conditions where 50% of the performance share awards will vest based on the total shareholder return (“TSR”) of our ordinary shares relative to those of our peer group and 50% will vest based on the compound annual growth rate of the price of our ordinary shares. The peer shareholder return component may vest between 0% and 150% of target, 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.

The table below summarizes the key inputs used in the Monte-Carlo simulation to determine the grant date fair value of our performance share awards ($ in thousands):


Performance Award Grant Date	Percentage of Total Award		Grant Date Fair Value by Component		Volatility (1)		Interest Rate (2)		Dividend Yield
January 4, 2022
Peer Shareholder Return	50	%	$	1,689	67.79	%	1.01	%	—	%
Growth Rate	50	%	$	1,346	67.79	%	1.01	%	—	%

________

(1) Expected volatility was determined based on the historical share prices of the Company.

(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.

A summary of our performance share awards from January 1, 2022 to March 31, 2022 is as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2022	1,027,519	$	5.18
Granted	374,998	8.10
Vested	(16,421)	4.34
Forfeited	(56,973)	4.34
Unvested balance at March 31, 2022	1,329,123	$	6.05

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Note 10. Earnings per share

Basic and diluted earnings or loss per share (“EPS”) are as follows ($ in thousands, except share data):


	Three Months Ended March 31,
	2022		2021
Numerator
Net income (loss)	$	42,747	$	(69,745)
Denominator
Denominator for basic EPS - weighted-average number of shares outstanding	165,743,382		160,827,261
Effect of dilutive securities
Unvested performance share awards	401,903		—
Unvested restricted share awards	742,844		—
Denominator for diluted EPS - adjusted weighted-average number of shares outstanding	166,888,129		160,827,261

EPS - Basic	$	0.26	$	(0.43)
EPS - Diluted	$	0.26	$	(0.43)

For the three months ended March 31, 2022 and 2021, unvested performance share awards in the amounts of 187,500 and 1,027,519 shares, respectively, were not included in the computation of diluted EPS as their effect would have been anti-dilutive. The performance targets of our unvested performance share awards were partially achieved as of March 31, 2022 and 2021.

We had no anti-dilutive unvested restricted share awards for the three months ended March 31, 2022. For the three months ended March 31, 2021, unvested restricted share awards of 3,432,944 were not included in the computation of diluted EPS as their effect would have been anti-dilutive.

For the three months ended March 31, 2021, 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 during the reporting period. On March 12, 2022, all of our outstanding warrants expired and had no impact on diluted EPS for the three months ended March 31, 2022.

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Note 11. Debt

Our debt consists of the following ($ in thousands):


			Outstanding Balance as of
	Interest Rate	Maturity Date	March 31, 2022		December 31, 2021
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)	LIBOR + 2.75%	April 27, 2024	939,343		941,868
Term A1 Loan	11.4777%	April 27, 2024	35,000		35,000
Term A2 Loan	11.4777%	April 27, 2024	31,000		31,000
Term A3 Loan (3)	LIBOR + 3.00%	April 27, 2024	27,319		27,319
Total Senior Secured Credit Facilities (at stated value)			1,032,662		1,035,187
Unamortized discount			(1,029)		(1,153)
Unamortized debt issuance costs			(3,761)		(4,207)
Total Senior Secured Credit Facilities, net			$	1,027,872	$	1,029,827

Property Loan
Property Loan (at stated value)	9.25%	July 1, 2025	$	110,000	$	110,000
Unamortized discount			(2,894)		(3,107)
Unamortized debt issuance costs			(3,223)		(3,459)
Total Property Loan, net			$	103,883	$	103,434

Financing lease obligations			$	5,959	$	6,058

Total debt, net			$	1,137,714	$	1,139,319

________

(1)Undrawn balances bear interest between 0.25% to 0.5% depending on certain leverage ratios. We had an available balance of $85.0 million as of March 31, 2022 and December 31, 2021.

(2)One-month LIBOR is subject to a 1.0% floor. The effective interest rate was 3.75% as of both March 31, 2022 and December 31, 2021. Our two interest rate swaps fix LIBOR at 2.85% on $800.0 million of our Term Loan (see Note 12).

(3)One-month LIBOR is subject to a 1.0% floor. The effective interest rate was 4.00% as of both March 31, 2022 and December 31, 2021.

Financial maintenance covenants

We were in compliance with all applicable covenants as of March 31, 2022. A summary of our applicable covenants and restrictions is as follows:


Debt						Covenant Terms
Senior Secured Credit Facility						We maintained the minimum liquidity balance of $70.0 million through March 31, 2022. Subsequent to March 31, 2022, we will be subject to the following total net leverage ratio requirements if we have more than 35% drawn on the Revolving Credit Facility: ▪6.50x for the period ended March 31, 2022; ▪6.00x for the period ended June 30, 2022; and ▪4.75x for periods thereafter.
Term A1 Loan						Same terms as the Senior Secured Credit Facility
Term A2 Loan						No applicable debt covenants.
Term A3 Loan						No applicable debt covenants.
Property Loan						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.

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Note 12. 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.

Our interest rate swaps are designated as cash flow hedges, but were deemed ineffective due to the decrease in interest rates. All changes in fair value are recognized through interest expense in the Condensed Consolidated Statements of Operations.

The following tables present the effect of our interest rate swaps, net of tax, in the Condensed Consolidated Statements of Comprehensive Income (Loss) and Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 ($ in thousands):


	2022		2021
AOCI from our cash flow hedges as of January 1	$	14,632	$	26,369
Change in fair value	—		—
Reclassification from AOCI to interest expense	(2,894)		(2,894)
OCI related to our cash flow hedges for the three months ended March 31	(2,894)		(2,894)
AOCI from our cash flow hedges as of March 31 (1)	$	11,738	$	23,475

________

(1) As of March 31, 2022, 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.


Derivative Liabilities for Ineffective Hedges	Financial Statement Classification	Three Months Ended March 31,
		2022		2021
Interest rate swaps (1)	Interest expense	$	(5,715)	$	2,811

________

(1) 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 tables present the effect of our interest rate swaps in the Condensed Consolidated Balance Sheet as of March 31, 2022 and December 31, 2021 ($ in thousands):


Derivative Liabilities for Ineffective Hedges	Financial Statement Classification	As of March 31,		As of December 31,
		2022		2021
Interest rate swaps	Derivative financial instruments	$	8,515	$	22,543

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 13) and believe we minimize this credit risk by transacting with major creditworthy financial institutions.

Note 13. 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.

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We believe the carrying value of our financial instruments, excluding our debt, approximate their fair values as of March 31, 2022 and December 31, 2021. We did not have any Level 3 instruments during any of the periods presented in our Condensed Consolidated Financial Statements.

The following tables present our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 ($ in thousands):


	March 31, 2022		Level 1		Level 2		Level 3
Fair value measurements on a recurring basis
Interest rate swap	$	8,515	$	—	$	8,515	$	—


	December 31, 2021		Level 1		Level 2		Level 3
Fair value measurements on a recurring basis
Interest rate swap	$	22,543	$	—	$	22,543	$	—

The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of March 31, 2022 and December 31, 2021 ($ in thousands):


	Carrying Value		Fair Value
	As of March 31, 2022		Level 1		Level 2		Level 3
Financial liabilities not recorded at fair value
Term Loan	$	936,593	$	—	$	—	$	923,069
Term A1 Loan	34,240		—		—		35,524
Term A2 Loan	30,327		—		—		31,465
Term A3 Loan	26,712		—		—		27,008
Property Loan	103,883		—		—		112,226
Total liabilities	$	1,131,755	$	—	$	—	$	1,129,292


	Carrying Value		Fair Value
	As of December 31, 2021		Level 1		Level 2		Level 3
Financial liabilities not recorded at fair value
Term Loan	$	938,788	$	—	$	—	$	924,917
Term A1 Loan	34,151		—		—		35,598
Term A2 Loan	30,248		—		—		31,530
Term A3 Loan	26,640		—		—		27,006
Property Loan	103,434		—		—		111,593
Total liabilities	$	1,133,261	$	—	$	—	$	1,130,644

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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:


						Valuation Technique
Financial instruments recorded at fair value
Interest rate swaps						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.
Financial instruments not recorded at fair value
Term Loans and Property Loan						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.
Revolving Credit Facility						The valuation technique of our Revolving Credit Facility is consistent with our Term Loans. The fair value of the Revolving Credit Facility generally approximates its carrying value as the expected term is significantly shorter in duration.

Note 14. Other balance sheet items

Trade and other receivables, net

The following summarizes the balances of trade and other receivables, net as of March 31, 2022 and December 31, 2021 ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Gross trade and other receivables (1)	$	63,026	$	47,382
Allowance for doubtful accounts	(1,366)		(1,940)
Total trade and other receivables, net	$	61,660	$	45,442

________

(1) The opening balance as of January 1, 2021 was $28.3 million.

We have not experienced any significant write-offs to our accounts receivable during the three months ended March 31, 2022 and 2021.

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Prepayments and other assets

The following summarizes the balances of prepayments and other assets as of March 31, 2022 and December 31, 2021 ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Advances to suppliers	$	7,895	$	8,327
Prepaid income taxes	11,550		11,101
Prepaid other taxes (1)	8,344		7,995
Operating lease right-of-use assets	3,569		3,766
Key money (2)	2,349		2,376
Other assets	5,205		5,075
Total prepayments and other assets	$	38,912	$	38,640

________

(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 three months ended March 31, 2022. The gross carrying values and accumulated impairment losses of goodwill by reportable segment (refer to discussion of our reportable segments in Note 15) as of March 31, 2022 and December 31, 2021 are as follows ($ in thousands):


	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Total
Gross carrying value	$	51,731	$	—	$	—	$	35,879	$	87,610
Accumulated impairment losses	(6,168)		—		—		(19,788)		(25,956)
Net carrying value	$	45,563	$	—	$	—	$	16,091	$	61,654

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Other intangible assets

Other intangible assets as of March 31, 2022 and December 31, 2021 consisted of the following ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Gross carrying value
Casino and other licenses (1)	$	875	$	875
Management contract	1,900		1,900
Enterprise resource planning system (2)	6,452		6,402
Other	4,099		4,073
Total gross carrying value	13,326		13,250

Accumulated amortization
Management contract	(356)		(333)
Enterprise resource planning system (2)	(2,113)		(1,895)
Other	(3,517)		(3,390)
Total accumulated amortization	(5,986)		(5,618)

Net carrying value
Casino and other licenses (1)	875		875
Management contract	1,544		1,567
Enterprise resource planning system (2)	4,339		4,507
Other	582		683
Total net carrying value	$	7,340	$	7,632

________

(1) Our casino and other 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 was placed into service in 2021 and is being amortized over a weighted-average amortization period of 7 years.

Amortization expense for intangible assets was $0.4 million and $0.3 million for the three months ended March 31, 2022 and 2021, respectively.

Trade and other payables

The following summarizes the balances of trade and other payables as of March 31, 2022 and December 31, 2021 ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Trade payables	$	24,294	$	23,843
Advance deposits (1)	61,188		62,644
Withholding and other taxes payable	35,142		32,655
Interest payable	99		99
Payroll and related accruals	20,306		23,998
Accrued expenses and other payables	19,445		16,983
Total trade and other payables	$	160,474	$	160,222

________

(1) The opening balance as of January 1, 2021 was $29.7 million.

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Other liabilities

The following summarizes the balances of other liabilities as of March 31, 2022 and December 31, 2021 ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Pension obligation (1)(2)	$	6,735	$	5,990
Operating lease liabilities	4,096		4,298
Unfavorable ground lease liability	1,939		1,967
Key money (3)	16,466		16,731
Other	900		896
Total other liabilities	$	30,136	$	29,882

________

(1) For the three months ended March 31, 2022 and 2021, the service cost component of net periodic pension cost was $0.2 million and $0.2 million, respectively. The costs are recorded within direct expense in the Condensed Consolidated Statements of Operations.

(2) For the three months ended March 31, 2022 and 2021, the non-service cost components of net periodic pension cost were $0.4 million and $0.1 million, respectively. The costs are recorded within other expense in the Condensed Consolidated Statements of Operations.

(3) Represents the unamortized balance of key money received, which is amortized as a reduction to franchise fees within direct expenses in the Condensed Consolidated Statements of Operations.

Note 15. 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 present four separate reportable segments by geography: (i) Yucatán Peninsula, (ii) Pacific Coast, (iii) Dominican Republic and (iv) Jamaica. For the three months ended March 31, 2022 and 2021, 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 (provision) benefit, and depreciation and amortization expense (“Adjusted EBITDA”), which should not be considered an alternative to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. The performance of our segments is evaluated on Adjusted EBITDA before corporate expenses and management fee income (“Owned Resort EBITDA”).

We define Adjusted EBITDA as net income (loss), determined in accordance with U.S. GAAP, for the periods presented, before interest expense, income tax (provision) 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) share-based compensation; (e) other tax expense; (f) transaction expenses; and (g) severance expenses.

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 Condensed Consolidated Financial Statements.

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The following table presents segment owned net revenue and a reconciliation to total revenue for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,
	2022		2021
Owned net revenue
Yucatán Peninsula	$	68,629	$	33,603
Pacific Coast	29,104		8,621
Dominican Republic	69,664		20,881
Jamaica	44,264		11,722
Segment owned net revenue (1)	211,661		74,827
Other	507		125
Management fees	1,057		344
Cost reimbursements	1,952		513
Compulsory tips	4,397		1,937
Total revenue	$	219,574	$	77,746

________

(1) Segment owned net revenue represents total revenue less compulsory tips paid to employees, cost reimbursements, management fees and other miscellaneous revenue not derived from segment operations.

The following table presents segment Owned Resort EBITDA, Adjusted EBITDA and a reconciliation to net income (loss) for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,
	2022		2021
Owned Resort EBITDA
Yucatán Peninsula	$	29,458	$	7,174
Pacific Coast	12,544		485
Dominican Republic	28,377		1,666
Jamaica	17,158		(2,780)
Segment Owned Resort EBITDA	87,537		6,545
Other corporate	(11,651)		(9,394)
Management fees	1,057		344
Adjusted EBITDA	76,943		(2,505)
Interest expense	(9,168)		(18,167)
Depreciation and amortization	(19,500)		(20,883)
Impairment loss	—		(24,011)
Loss on sale of assets	—		(273)
Other expense	(514)		(706)
Share-based compensation	(3,356)		(3,179)
Other tax expense	(240)		(163)
Transaction expenses	(191)		(579)
Severance expense	—		(1,287)
Non-service cost components of net periodic pension cost (1)	387		57
Net income (loss) before tax	44,361		(71,696)
Income tax (provision) benefit	(1,614)		1,951
Net income (loss)	$	42,747	$	(69,745)

________

(1) Represents the non-service cost components of net periodic pension cost or benefit recorded within other expense in the Condensed Consolidated Statements of Operations. We include these costs in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.

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The following table presents segment property and equipment, gross and a reconciliation to total property and equipment, net as of March 31, 2022 and December 31, 2021 ($ in thousands):


	As of March 31,		As of December 31,
	2022		2021
Segment property and equipment, gross
Yucatán Peninsula	$	668,667	$	667,618
Pacific Coast	289,243		288,309
Dominican Republic	684,948		684,187
Jamaica	409,009		408,107
Total segment property and equipment, gross	2,051,867		2,048,221
Corporate property and equipment, gross	4,852		4,802
Accumulated depreciation	(486,980)		(468,449)
Total property and equipment, net	$	1,569,739	$	1,584,574

The following table presents segment capital expenditures and a reconciliation to total capital expenditures for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,
	2022		2021
Segment capital expenditures
Yucatán Peninsula	$	1,265	$	681
Pacific Coast	1,152		141
Dominican Republic	946		645
Jamaica	985		1,027
Total segment capital expenditures (1)	4,348		2,494
Corporate	52		57
Total capital expenditures (1)	$	4,400	$	2,551

________

(1) Represents gross additions to property and equipment.

Note 16. Subsequent events

On April 29, 2022, our restricted cash balance related to our Property Loan of approximately $20.6 million was released into unrestricted cash as the Hyatt Ziva and Hyatt Zilara Cap Cana and Hilton Rose Hall Resort & Spa properties achieved the required debt service coverage ratio for two consecutive quarters.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Playa Hotels & Resorts N.V.'s (“Playa”) financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Playa and its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward looking statements. Forward-looking statements are subject to various factors that could cause actual outcomes or results to differ materially from those indicated in these statements, including the risks described under the sections entitled “Risk Factors” of our Annual Report on Form 10-K, filed with the SEC on February 24, 2022 and as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. 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, which include 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 experienced severely reduced occupancy levels at our resorts compared to historic 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, the government actions taken to contain the pandemic or mitigate its impact, continuing effectiveness and uptake of vaccines (including boosters) and treatment therapies, 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:

•general economic uncertainty and the effect of general economic conditions, including inflation, 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;

•uncertainty regarding the ongoing conflict between Russia and Ukraine and the related impacts on inflation, supply chains and macroeconomic conditions;

•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;

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•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;

•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 quarterly 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).

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 March 31, 2022, 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, we own and manage 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, we own and manage 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, we own and manage the Hilton La Romana All-Inclusive Resort, the Hilton La Romana All-Inclusive Adult Resort, Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana; and

•We own two resorts in the Dominican Republic that are managed by a third-party and manage 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 three months ended March 31, 2022, we generated net income of $42.7 million, total revenue of $219.6 million, Net Package RevPAR of $280.78 and Adjusted EBITDA of $76.9 million. For the three months ended March 31, 2021, during which time our operations were severely impacted by the effects of COVID-19, we generated a net loss of $69.7 million, total revenue of $77.7 million, Net Package RevPAR of $91.40 and Adjusted EBITDA of ($2.5) million.

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Our Portfolio of Resorts

As of March 31, 2022, 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.

Name of Resort

Location

Brand and Type

Operator

Year Built; Significant Renovations

Rooms

Owned Resorts

Yucatán Peninsula

Hyatt Ziva Cancún

Cancún, Mexico

Hyatt Ziva (all ages)

Playa

1975; 1980; 1986; 2002; 2015

547

Hyatt Zilara Cancún

Cancún, Mexico

Hyatt Zilara (adults-only)

Playa

2006; 2009; 2013; 2017

310

Wyndham Alltra Cancún

Cancún, Mexico

Wyndham (all ages)

Playa

1985; 2009; 2017

458

Hilton Playa del Carmen All-Inclusive Resort

Playa del Carmen, Mexico

Hilton (adults-only)

Playa

2002; 2009; 2019

524

Wyndham Alltra Playa del Carmen

Playa del Carmen, Mexico

Wyndham (adults-only)

Playa

1996; 2006; 2012; 2017

287

Pacific Coast

Hyatt Ziva Los Cabos

Cabo San Lucas, Mexico

Hyatt Ziva (all ages)

Playa

2007; 2009; 2015

591

Hyatt Ziva Puerto Vallarta

Puerto Vallarta, Mexico

Hyatt Ziva (all ages)

Playa

1969; 1990; 2002; 2009; 2014; 2017

335

Dominican Republic

Hilton La Romana All-Inclusive Resort

La Romana, Dominican Republic

Hilton (adults-only)

Playa

1997; 2008; 2019

356

Hilton La Romana All-Inclusive Resort

La Romana, Dominican Republic

Hilton (all ages)

Playa

1997; 2008; 2019

418

Dreams Palm Beach

Punta Cana, Dominican Republic

Dreams (all ages)

AMResorts

1994; 2008

500

Dreams Punta Cana

Punta Cana, Dominican Republic

Dreams (all ages)

AMResorts

2004

620

Hyatt Ziva Cap Cana

Cap Cana, Dominican Republic

Hyatt Ziva (all ages)

Playa

2019

375

Hyatt Zilara Cap Cana

Cap Cana, Dominican Republic

Hyatt Zilara (adults-only)

Playa

2019

375

Jamaica

Hyatt Ziva Rose Hall

Montego Bay, Jamaica

Hyatt Ziva (all ages)

Playa

2000; 2014; 2017

276

Hyatt Zilara Rose Hall

Montego Bay, Jamaica

Hyatt Zilara (adults-only)

Playa

2000; 2014; 2017

344

Hilton Rose Hall Resort & Spa

Montego Bay, Jamaica

Hilton (all ages)

Playa

1974; 2008; 2017

495

Jewel Paradise Cove Beach Resort & Spa

Runaway Bay, Jamaica

Jewel (adults-only)

Playa

2013

225

Jewel Grande Montego Bay Resort & Spa (1)

Montego Bay, Jamaica

Jewel (all ages)

Playa

2016; 2017

Total Rooms Owned

7,124

Managed Resorts (2)

Sanctuary Cap Cana

Punta Cana, Dominican Republic

Sanctuary (adults-only)

Playa

2008; 2015; 2018

324

Jewel Grande Montego Bay Resort & Spa

Montego Bay, Jamaica

Jewel (condo-hotel)

Playa

2016; 2017

129

The Yucatán Playa del Carmen All-Inclusive Resort

Playa del Carmen, Mexico

Tapestry Collection by Hilton (adults-only)

Playa

2012

Hyatt Ziva Riviera Cancún (3)

Riviera Maya, Mexico

Hyatt Ziva (all ages)

Playa

2008, 2021

438

Hyatt Zilara Riviera Maya (4)

Riviera Maya, Mexico

Hyatt Zilara (adults-only)

Playa

2003

291

Total Rooms Operated

1,242

Total Rooms Owned and Operated

8,366

________

(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 second half of 2022.

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Results of Operations

Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations on a consolidated basis for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,				Increase / Decrease
	2022		2021		Change		% Change
Revenue
Package	$	184,109	$	63,894	$	120,215	188.1	%
Non-package	32,456		12,995		19,461		149.8	%
Management fees	1,057		344		713		207.3	%
Cost reimbursements	1,952		513		1,439		280.5	%
Total revenue	219,574		77,746		141,828		182.4	%
Direct and selling, general and administrative expenses
Direct	106,840		60,221		46,619		77.4	%
Selling, general and administrative	37,239		24,668		12,571		51.0	%
Depreciation and amortization	19,500		20,883		(1,383)		(6.6)	%
Reimbursed costs	1,952		513		1,439		280.5	%
Impairment loss	—		24,011		(24,011)		(100.0)	%
Loss on sale of assets	—		273		(273)		(100.0)	%
Direct and selling, general and administrative expenses	165,531		130,569		34,962		26.8	%
Operating income (loss)	54,043		(52,823)		106,866		202.3	%
Interest expense	(9,168)		(18,167)		8,999		49.5	%
Other expense	(514)		(706)		192		27.2	%
Net income (loss) before tax	44,361		(71,696)		116,057		161.9	%
Income tax (provision) benefit	(1,614)		1,951		(3,565)		(182.7)	%
Net income (loss)	$	42,747	$	(69,745)	$	112,492	161.3	%

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 three months ended March 31, 2022 excludes the Dreams Puerto Aventuras, which was sold in February 2021 and Capri Resort, which was sold in June 2021.

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Total Portfolio


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	72.4		%	31.6		%	40.8		pts	129.1	%
Net Package ADR	$	388.07		$	288.88		$	99.19		34.3	%
Net Package RevPAR	$	280.78		$	91.40		$	189.38		207.2	%
	($ in thousands)
Net Package Revenue	$	180,026		$	62,083		$	117,943		190.0	%
Net Non-package Revenue	32,142			12,869			19,273			149.8	%
Management Fee Revenue	1,057			344			713			207.3	%
Total Net Revenue	213,225			75,296			137,929			183.2	%
Adjusted EBITDA	$	76,943		$	(2,505)		$	79,448		3,171.6	%
Adjusted EBITDA Margin	36.1		%	(3.3)		%	39.4		pts	1,193.9	%

Comparable Portfolio


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	72.4		%	32.9		%	39.5		pts	120.1	%
Net Package ADR	$	388.07		$	291.50		$	96.57		33.1	%
Net Package RevPAR	$	280.78		$	95.82		$	184.96		193.0	%
	($ in thousands)
Net Package Revenue	$	180,026		$	61,438		$	118,588		193.0	%
Net Non-package Revenue	32,143			12,405			19,738			159.1	%
Management Fee Revenue	1,057			344			713			207.3	%
Total Net Revenue	213,226			74,187			139,039			187.4	%
Adjusted EBITDA	$	76,917		$	(1,996)		$	78,913		3,953.6	%
Adjusted EBITDA Margin	36.1		%	(2.7)		%	38.8		pts	1,437.0	%

Total Revenue and Total Net Revenue

Our Total Revenue for the three months ended March 31, 2022 increased $141.8 million, or 182.4%, compared to the three months ended March 31, 2021.

Our Total Net Revenue for the three months ended March 31, 2022 increased $137.9 million, or 183.2%, compared to the three months ended March 31, 2021. The increase was due to the following:

•an increase in demand as a result of increased vaccination levels, easing of government travel restrictions, and pent-up demand for leisure travel compared to the three months ended March 31, 2021, when we experienced severely reduced occupancy as a result of the COVID-19 pandemic;

•an increase in Net Package ADR as a result of pent-up demand and pricing discipline to coincide with investments in guest satisfaction at our resorts;

•continued sequential improvement in Net Non-package Revenue with our highest spend per guest on record in the first quarter of 2022; and

•a $7.14 favorable Net Package ADR impact due to the change in billing methodology of an online travel agency (“OTA”), which requires Playa to present this revenue gross of commissions under U.S. GAAP. Excluding this adjustment, Net Package ADR would have been $380.93.

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The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,				Increase/Decrease
	2022		2021		Change		% Change
Net Package Revenue
Comparable Net Package Revenue	$	180,026	$	61,438	$	118,588	193.0	%
Non-comparable Net Package Revenue	—		645		(645)		(100.0)	%
Net Package Revenue	180,026		62,083		117,943		190.0	%

Net Non-package Revenue
Comparable Net Non-package Revenue	32,143		12,405		19,738		159.1	%
Non-comparable Net Non-package Revenue	(1)		464		(465)		(100.2)	%
Net Non-package Revenue	32,142		12,869		19,273		149.8	%

Management Fee Revenue
Comparable Management Fee Revenue	1,057		344		713		207.3	%
Non-comparable Management Fee Revenue	—		—		—		—	%
Management Fee Revenue	1,057		344		713		207.3	%

Total Net Revenue
Comparable Total Net Revenue	213,226		74,187		139,039		187.4	%
Non-comparable Total Net Revenue	(1)		1,109		(1,110)		(100.1)	%
Total Net Revenue	213,225		75,296		137,929		183.2	%
Compulsory tips	4,397		1,937		2,460		127.0	%
Cost Reimbursements	1,952		513		1,439		280.5	%
Total revenue	$	219,574	$	77,746	$	141,828	182.4	%

Direct Expenses

The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,				Increase/Decrease
	2022		2021		Change		% Change
Direct expenses	$	106,840	$	60,221	$	46,619	77.4	%
Less: compulsory tips	4,397		1,937		2,460		127.0	%
Net Direct Expenses	$	102,443	$	58,284	$	44,159	75.8	%

Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our Net Direct Expenses were $102.4 million, or 48.0% of Total Net Revenue, for the three months ended March 31, 2022 and $58.3 million, or 77.4% of Total Net Revenue, for the three months ended March 31, 2021. 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.

Net Direct Expenses for the three months ended March 31, 2022 increased $44.2 million, or 75.8%, compared to the three months ended March 31, 2021. As a percentage of Owned Net Revenue, Net Direct Expenses decreased to 48.4%, compared to 77.9% for the three months ended March 31, 2021. Net Direct Expenses at our comparable properties increased $46.7 million, or 83.6%, compared to the three months ended March 31, 2021. Net Direct Expenses increased due to the corresponding recovery in our operations, compared to the three months ended March 31, 2021 when we experienced severely reduced occupancy as a result of the COVID-19 pandemic, and also due to a higher rate of inflation in the first quarter of 2022 as compared to 2021. See the “Inflation” section for

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additional discussion. Our food and beverage expenses increased during the first quarter of 2022 on a per guest basis as part of our initiative to deliver an exceptional customer experience across our portfolio.

Net Direct Expenses consists of the following ($ in thousands):

Total Portfolio


	Three Months Ended March 31,				Increase/Decrease
	2022		2021		Change		% Change

Food and beverages	$	24,240	$	10,295	$	13,945	135.5	%
Guest costs	7,601		3,807		3,794		99.7	%
Salaries and wages	35,878		25,037		10,841		43.3	%
Repairs and maintenance	4,588		2,940		1,648		56.1	%
Utilities and sewerage	10,317		7,364		2,953		40.1	%
Licenses and property taxes	795		805		(10)		(1.2)	%
Incentive and management fees	1,112		146		966		661.6	%
Franchise / license fees	10,139		4,249		5,890		138.6	%
Transportation and travel expenses	1,302		923		379		41.1	%
Laundry and cleaning expenses	1,406		879		527		60.0	%
Property and equipment rental expense	1,306		175		1,131		646.3	%
Entertainment expenses and decoration	2,376		903		1,473		163.1	%
Office supplies	299		168		131		78.0	%
Other operational expenses	1,084		593		491		82.8	%
Total Net Direct Expenses	$	102,443	$	58,284	$	44,159	75.8	%

Comparable Portfolio


	Three Months Ended March 31,				Increase/Decrease
	2022		2021		Change		% Change

Food and beverages	$	24,236	$	10,161	$	14,075	138.5	%
Guest costs	7,601		3,507		4,094		116.7	%
Salaries and wages	35,912		23,389		12,523		53.5	%
Repairs and maintenance	4,588		2,863		1,725		60.3	%
Utilities and sewerage	10,317		7,241		3,076		42.5	%
Licenses and property taxes	795		745		50		6.7	%
Incentive and management fees	1,112		104		1,008		969.2	%
Franchise / license fees	10,139		4,249		5,890		138.6	%
Transportation and travel expenses	1,302		897		405		45.2	%
Laundry and cleaning expenses	1,406		871		535		61.4	%
Property and equipment rental expense	1,306		165		1,141		691.5	%
Entertainment expenses and decoration	2,376		884		1,492		168.8	%
Office supplies	299		166		133		80.1	%
Other operational expenses	1,083		558		525		94.1	%
Total Net Direct Expenses	$	102,472	$	55,800	$	46,672	83.6	%

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Selling, General and Administrative Expenses

Our selling, general and administrative expenses for the three months ended March 31, 2022 increased $12.6 million, or 51.0%, compared to the three months ended March 31, 2021. The higher levels of occupancy from the ongoing recovery at our resorts during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 resulted in a $5.8 million increase in commissions expenses, a $2.4 million increase in corporate personnel costs, a $2.2 million increase in advertising expenses, a $2.0 million increase in credit card commissions, and a $0.5 million increase in professional fees. The increase in commissions expenses includes an additional $3.3 million that was a result of a change in billing methodology of an OTA, which requires Playa to present the commissions on a gross basis under U.S. GAAP. The increases in selling, general and administrative expenses were partially offset by a $0.5 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.

Depreciation and Amortization Expense

Our depreciation and amortization expense for the three months ended March 31, 2022 decreased $1.4 million, or 6.6%, compared to the three months ended March 31, 2021, which was primarily due to a $0.9 million decrease from the sale of the Capri Resort in June 2021.

Impairment Loss

Our impairment loss for the three months ended March 31, 2022 was $0 million, a decrease of $24.0 million, or 100.0%, compared to the three months ended March 31, 2021. The decrease was driven by the $24.0 million of property and equipment impairment recognized upon classification of the Capri Resort as held for sale in March 2021, as the carrying value exceeded the sale price of the assets under the sales agreement.

Interest Expense

Our interest expense for the three months ended March 31, 2022 decreased $9.0 million, or 49.5%, compared to the three months ended March 31, 2021. The decrease in interest expense was driven primarily by an $8.5 million benefit over the period related to the change in fair value of our interest rate swaps. During the three months ended March 31, 2022, we recognized a benefit of $5.7 million due to the increase in interest rates closer to our fixed rate of 2.85%, compared to a loss of $2.8 million during the three months ended March 31, 2021.

Cash interest paid was $18.2 million for the three months ended March 31, 2022, representing a $0.6 million, or 3.1% decrease as compared to the three months ended March 31, 2021. Cash interest paid on our Revolving Credit Facility decreased $0.4 million from the repayment of our entire outstanding balance in February 2021.

Income Tax Provision

For the three months ended March 31, 2022, our income tax provision was $1.6 million, compared to a $2.0 million income tax benefit for the three months ended March 31, 2021. The increase in our income tax provision of $3.6 million was primarily driven by:

•$4.5 million increased tax provision due to higher pre-tax book income from our taxpaying entities;

•$1.3 million decreased tax benefit related to the sale of the Dreams Puerto Aventuras in 2021; and

•$1.2 million increased tax provision associated with foreign exchange rate fluctuations, primarily for our Mexican entities.

These increases were partially offset by:

•$2.9 million decreased tax provision related to valuation allowances recognized for our Jamaica and Mexico entities; and

•$0.6 million increased tax benefit related to prior year adjustments.

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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

Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total Net Revenue and Net Direct Expenses

“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations, food and beverage services 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.

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“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 revenue, and an incentive fee, which is computed as a percentage of profitability. Management Fee Revenue had a minor contribution to our operating results for the three months ended March 31, 2022 and 2021, 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 (loss) or net income (loss).

“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 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 measure in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.

EBITDA, Adjusted EBITDA, 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

•Transaction expenses

•Severance expense

•Other tax expense

•Gain on property damage insurance proceeds

•Share-based compensation

•Loss on extinguishment of debt

•Other items, which may include but are not limited to the following: contract termination fees; gains or losses from legal settlements; repairs from hurricanes and tropical storms and impairment losses.

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We include the non-service cost components of net periodic pension cost or benefit recorded within other income or expense in the Condensed 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 useful to investors as they 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 income or 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 a portion of the annual variable compensation for certain members of our management based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.

Our non-U.S. GAAP financial measures are not substitutes for revenue, net income or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, our non-U.S. GAAP financial measures should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented.

For a reconciliation of EBITDA, Adjusted EBITDA and Owned Resort EBITDA to net income as computed under U.S. GAAP, see “Non-U.S. GAAP Financial Measures.”

Comparable Non-U.S. GAAP Measures

We believe that presenting Adjusted EBITDA, Total Net Revenue, Net Package Revenue, Net Non-package Revenue and Net Direct Expenses on a comparable basis is useful to investors because these measures include only the results of resorts owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate comparable Adjusted EBITDA, comparable Total Net Revenue, comparable Net Package Revenue and comparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were not owned or in operation during some or all of the relevant reporting period.

Our comparable resorts for the three months ended March 31, 2022 excludes the following resorts: Dreams Puerto Aventuras, which was sold in February 2021 and Capri Resort, which was sold in June 2021.

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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.”

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Segment Results

Three Months Ended March 31, 2022 and 2021

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 three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,				Increase / Decrease
	2022		2021		Change		% Change
Owned Net Revenue
Yucatán Peninsula	$	68,629	$	33,603	$	35,026	104.2	%
Pacific Coast	29,104		8,621		20,483		237.6	%
Dominican Republic	69,664		20,881		48,783		233.6	%
Jamaica	44,264		11,722		32,542		277.6	%
Segment Owned Net Revenue	211,661		74,827		136,834		182.9	%
Other	507		125		382		305.6	%
Management fees	1,057		344		713		207.3	%
Total Net Revenue	$	213,225	$	75,296	$	137,929	183.2	%


	Three Months Ended March 31,				Increase / Decrease
	2022		2021		Change		% Change
Owned Resort EBITDA
Yucatán Peninsula	$	29,458	$	7,174	$	22,284	310.6	%
Pacific Coast	12,544		485		12,059		2,486.4	%
Dominican Republic	28,377		1,666		26,711		1,603.3	%
Jamaica	17,158		(2,780)		19,938		717.2	%
Segment Owned Resort EBITDA	87,537		6,545		80,992		1,237.5	%
Other corporate	(11,651)		(9,394)		(2,257)		(24.0)	%
Management fees	1,057		344		713		207.3	%
Total Adjusted EBITDA	$	76,943	$	(2,505)	$	79,448	3,171.6	%

For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 15 to our Condensed Consolidated Financial Statements.

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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 three months ended March 31, 2022 and 2021 for the total segment portfolio and comparable segment portfolio:

Total Portfolio


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	71.9		%	41.8		%	30.1		pts	72.0	%
Net Package ADR	$	429.45		$	290.91		$	138.54		47.6	%
Net Package RevPAR	$	308.75		$	121.66		$	187.09		153.8	%
	($ in thousands)
Net Package Revenue	$	59,077		$	27,911		$	31,166		111.7	%
Net Non-package Revenue	9,552			5,692			3,860			67.8	%
Owned Net Revenue	68,629			33,603			35,026			104.2	%
Owned Resort EBITDA	$	29,458		$	7,174		$	22,284		310.6	%
Owned Resort EBITDA Margin	42.9		%	21.3		%	21.6		pts	101.4	%

Comparable Portfolio


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	71.9		%	48.0		%	23.9		pts	49.8	%
Net Package ADR	$	429.46		$	297.02		$	132.44		44.6	%
Net Package RevPAR	$	308.75		$	142.50		$	166.25		116.7	%
	($ in thousands)
Net Package Revenue	$	59,077		$	27,266		$	31,811		116.7	%
Net Non-package Revenue	9,553			5,228			4,325			82.7	%
Owned Net Revenue	68,630			32,494			36,136			111.2	%
Owned Resort EBITDA	$	29,432		$	7,683		$	21,749		283.1	%
Owned Resort EBITDA Margin	42.9		%	23.6		%	19.3		pts	81.8	%

Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended March 31, 2022 increased $36.1 million, or 111.2%, compared to the three months ended March 31, 2021. The increase was due to the following:

•an increase in Occupancy of 23.9 percentage points compared to the three months ended March 31, 2021, driven by the factors listed above as well as an increase in guests sourced from Canada and Asia;

•an increase in Net Package ADR as a result of pent-up demand and pricing discipline to coincide with investments in guest satisfaction at our resorts;

•continued sequential improvement in Net Non-package Revenue with our highest spend per guest on record in the first quarter of 2022; and

•an $18.01 favorable Net Package ADR impact due to the change in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP.

Compared to 2019, Comparable Net Package ADR for the three months ended March 31, 2022 increased by $108.37, or 33.8%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $90.36, or 28.1%.

Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended March 31, 2022 increased $21.7 million, or 283.1%, compared to the three months ended March 31, 2021. The increase was a result of the on-

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going revenue recovery, particularly the strong Comparable Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses compared to the three months ended March 31, 2021, when we experienced severely reduced occupancy as a result of the COVID-19 pandemic.

Compared to 2019, Comparable Owned Resort EBITDA for the three months ended March 31, 2022 increased by $1.9 million, or 6.9%.

Pacific Coast

The following table sets 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 three months ended March 31, 2022 and 2021 for the total segment portfolio:


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	66.6		%	28.0		%	38.6		pts	137.9	%
Net Package ADR	$	454.61		$	311.06		$	143.55		46.1	%
Net Package RevPAR	$	302.89		$	87.20		$	215.69		247.4	%
	($ in thousands)
Net Package Revenue	$	25,242		$	7,268		$	17,974		247.3	%
Net Non-package Revenue	3,862			1,353			2,509			185.4	%
Owned Net Revenue	29,104			8,621			20,483			237.6	%
Owned Resort EBITDA	$	12,544		$	485		$	12,059		2,486.4	%
Owned Resort EBITDA Margin	43.1		%	5.6		%	37.5		pts	669.6	%

Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended March 31, 2022 increased $20.5 million, or 237.6%, compared to the three months ended March 31, 2021. The increase was due to the following:

•an increase in Occupancy of 38.6 percentage points compared to the three months ended March 31, 2021, driven by the factors listed above as well as an increase in group room nights, which were only modestly below our first quarter 2019 group room night mix;

•an increase in Net Package ADR as a result of pent-up demand and pricing discipline to coincide with investments in guest satisfaction at our resorts;

•continued sequential improvement in Net Non-package Revenue with our highest spend per guest on record in the first quarter of 2022; and

•a $15.03 favorable Net Package ADR impact due to the change in billing methodology of an OTA, which requires Playa to present this revenue gross of commissions under U.S. GAAP.

Compared to 2019, Net Package ADR for the three months ended March 31, 2022 increased by $106.76, or 30.7%. Excluding the aforementioned adjustment for the OTA billing methodology, the increase would have been $91.73, or 26.4%.

Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended March 31, 2022 increased $12.1 million, or 2,486.4%, compared to the three months ended March 31, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses compared to the three months ended March 31, 2021 when we experienced severely reduced occupancy as a result of the COVID-19 pandemic.

Compared to 2019, Owned Resort EBITDA for the three months ended March 31, 2022 increased by $0.2 million, or 1.3%.

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Dominican Republic

The following table sets 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 three months ended March 31, 2022 and 2021 for the total segment portfolio:

Total Portfolio


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	77.3		%	26.0		%	51.3		pts	197.3	%
Net Package ADR	$	324.26		$	282.27		$	41.99		14.9	%
Net Package RevPAR	$	250.68		$	73.33		$	177.35		241.9	%
	($ in thousands)
Net Package Revenue	$	59,651		$	17,449		$	42,202		241.9	%
Net Non-package Revenue	10,013			3,432			6,581			191.8	%
Owned Net Revenue	69,664			20,881			48,783			233.6	%
Owned Resort EBITDA	$	28,377		$	1,666		$	26,711		1,603.3	%
Owned Resort EBITDA Margin	40.7		%	8.0		%	32.7		pts	408.8	%

Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended March 31, 2022 increased $48.8 million, or 233.6%, compared to the three months ended March 31, 2021. The increase was due to the following:

•an increase in Occupancy of 51.3 percentage points compared to the three months ended March 31, 2021, driven by the factors listed above as well as an increase in guests sourced from Canada and Europe;

•an increase in Net Package ADR as a result of pent-up demand and pricing discipline to coincide with investments in guest satisfaction at our resorts, partially offset by our externally managed properties, whose rates remain significantly depressed versus our Playa-managed properties; and

•continued sequential improvement in Net Non-package Revenue.

Compared to 2019, Net Package ADR for the three months ended March 31, 2022 increased by $90.60, or 38.8%. 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 and the renovation of the Hilton La Romana All-Inclusive Resort in 2019.

Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended March 31, 2022 increased $26.7 million, or 1,603.3%, compared to the three months ended March 31, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses compared to the three months ended March 31, 2021, when we experienced severely reduced occupancy as a result of the COVID-19 pandemic.

Compared to 2019, Owned Resort EBITDA for the three months ended March 31, 2022 increased by $14.9 million, or 110.8%. Our Playa-managed properties increased $20.0 million, or 617.1%, driven by the opening of the premium-positioned Hyatt Ziva and Hyatt Zilara Cap Cana resorts in the fourth quarter of 2019 and the renovation of the Hilton La Romana All-Inclusive Resort in 2019.

The segment's performance was weighed down by our two externally managed properties, which have lagged behind our globally branded resorts in the segment with respect to rate gains and, as a result, are yielding significantly lower margins. Owned Resort EBITDA of our externally managed properties decreased $5.1 million, or 49.6%, compared to the three months ended March 31, 2019.

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Jamaica

The following table sets 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 three months ended March 31, 2022 and 2021 for the total segment portfolio:

Total Portfolio


	Three Months Ended March 31,						Increase / Decrease
	2022			2021			Change			% Change
Occupancy	67.6		%	26.3		%	41.3		pts	157.0	%
Net Package ADR	$	415.11		$	279.87		$	135.24		48.3	%
Net Package RevPAR	$	280.54		$	73.57		$	206.97		281.3	%
	($ in thousands)
Net Package Revenue	$	36,056		$	9,455		$	26,601		281.3	%
Net Non-package Revenue	8,208			2,267			5,941			262.1	%
Owned Net Revenue	44,264			11,722			32,542			277.6	%
Owned Resort EBITDA	$	17,158		$	(2,780)		$	19,938		717.2	%
Owned Resort EBITDA Margin	38.8		%	(23.7)		%	62.5		pts	63.7	%

Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended March 31, 2022 increased $32.5 million, or 277.6%, compared to the three months ended March 31, 2021. The increase was due to the following:

•an increase in demand as a result of increased vaccination levels, easing of government travel restrictions, and pent-up demand for leisure travel compared to the three months ended March 31, 2021 when we experienced severely reduced occupancy as a result of the COVID-19 pandemic;

•an increase in Occupancy of 41.3 percentage points compared to the three months ended March 31, 2021, driven by the factors listed above as well as an increase in guests sourced from Canada and Europe;

•an increase in Net Package ADR as a result of pent-up demand and pricing discipline to coincide with investments in guest satisfaction at our resorts; and

•continued sequential improvement in Net Non-package Revenue with our highest spend per guest on record in the first quarter of 2022.

Compared to 2019, Net Package ADR for the three months ended March 31, 2022 increased by $64.64, or 18.4%. The recovery in Jamaica continues to improve but remains depressed due to more stringent COVID-19 related travel restrictions compared to the other regions where we operate.

Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the three months ended March 31, 2022 increased $19.9 million, or 717.2%, compared to the three months ended March 31, 2021. The increase was a result of the on-going revenue recovery, particularly the strong Net Package ADR increases and cost control practices which partially offset occupancy-related increases in resort operating expenses compared to the three months ended March 31, 2021, when we experienced severely reduced occupancy as a result of the COVID-19 pandemic.

Compared to 2019, Owned Resort EBITDA for the three months ended March 31, 2022 decreased by $7.2 million, or 29.5%. The recovery in Jamaica continued to improve, but remained depressed as this segment suffered the greatest impact from the Omicron variant with disrupted bookings in January as a result of more stringent COVID-19 related travel restrictions. This segment finished the quarter relatively flat compared to the end of 2021.

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Non-U.S. GAAP Financial Measures

Reconciliation of Net Income (Loss) to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

The following is a reconciliation of our U.S. GAAP net income (loss) to EBITDA, Adjusted EBITDA, Owned Resort EBITDA and Comparable Owned Resort EBITDA for the three months ended March 31, 2022 and 2021 ($ in thousands):


	Three Months Ended March 31,
	2022		2021
Net income (loss)	$	42,747	$	(69,745)
Interest expense	9,168		18,167
Income tax provision (benefit)	1,614		(1,951)
Depreciation and amortization	19,500		20,883
EBITDA	73,029		(32,646)
Other expense (a)	514		706
Share-based compensation	3,356		3,179

Transaction expense (b)	191		579
Severance expense (c)	—		1,287
Other tax expense (d)	240		163

Impairment loss (e)	—		24,011
Loss on sale of assets	—		273
Non-service cost components of net periodic pension cost (f)	(387)		(57)
Adjusted EBITDA	76,943		(2,505)
Other corporate	11,651		9,394
Management fee income	(1,057)		(344)
Owned Resort EBITDA	87,537		6,545
Less: Non-comparable Owned Resort EBITDA	26		(509)
Comparable Owned Resort EBITDA (g)	$	87,511	$	7,054

________

(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.

(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 substantially similar to the income tax provision or benefit we eliminate from EBITDA.

(e) Represents the property and equipment impairment loss on the Capri Resort recognized upon classification of the resort as held for sale in connection with the agreement for the sale of the property executed on March 31, 2021.

(f) Represents the non-service cost components of net periodic pension cost recorded within other expense in the Condensed Consolidated Statement of Operations. We include these costs or benefits in Adjusted EBITDA as they are considered part of our ongoing resort operations.

(g) Comparable resorts for the three months ended March 31, 2022 exclude the Dreams Puerto Aventuras, which was sold in February 2021, and Capri Resort, which was sold in June 2021.

Seasonality

The seasonality of the lodging industry and the location of our resorts in Mexico, Jamaica and Dominican Republic have historically resulted in the greatest demand for our resorts occurring 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 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. We generally expect to see a return to pre-COVID-19 seasonality in 2022.

Inflation

During the first quarter of 2022 we experienced above-average inflationary pressure on our direct resort expenses, which was approximately 200 basis points higher than our typical expense inflation range experienced in the pre-pandemic environment. 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 second quarter of 2022, but it could continue for longer. While we, like most operators of lodging

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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.

Liquidity and Capital Resources

Our net cash provided by operating activities for the three months ended March 31, 2022 was $37.6 million, representing a significant increase over the three months ended March 31, 2021 as our business continues to recover from the impacts of the COVID-19 pandemic. 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 March 31, 2022, we had $299.8 million of available cash, excluding restricted cash, up from $270.1 million as of December 31, 2021. The increase in available cash was primarily due to improved cash flow from operations across our portfolio due to the ongoing recovery from the COVID-19 pandemic. We also benefited from increased vaccination levels, easing of government travel restrictions, and pent-up customer demand for leisure travel, as well as our strategic decision to focus on pricing discipline to coincide with investments in guest satisfaction at our resorts.

Our primary short-term cash needs are paying operating expenses, maintaining our resorts, and servicing our outstanding indebtedness. We expect to meet our short-term liquidity requirements generally through our existing cash balances, net cash provided by operations, equity issuances or short-term borrowings under our Revolving Credit Facility.

Further, our restricted cash balance related to our Property Loan of $20.6 million was released into unrestricted cash on April 29, 2022 due to the strong operating performance of the Hyatt Ziva and Hyatt Zilara Cap Cana and Hilton Rose Hall Resort & Spa properties. As of April 30, 2022, we had approximately $334.5 million of available cash and also had $68.0 million available on our Revolving Credit Facility, which 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 remainder of 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.

As of March 31, 2022, there have been no significant changes to our “Contractual Obligations” table in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report, other than the change in mandatory Term Loan repayments as a result of the sales of our resorts in 2021 and 2020. As of March 31, 2022, we expect to repay approximately $37.9 million of our outstanding Term Loan in 2022 and approximately $9.0 million in February 2023. In addition to the mandatory Term Loan repayments resulting from the sale of our resorts, we also had $62.6 million of scheduled contractual obligations remaining in 2022.

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 continue to improve, whether as a result of the current pandemic or a resurgence thereof or for other reasons, such as the Ukraine and Russia crisis, 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.

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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.

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 Condensed Consolidated Statements of Cash Flows and accompanying notes thereto ($ in thousands):


	Three Months Ended March 31,
	2022		2021
Net cash provided by (used in) operating activities	$	37,648	$	(26,562)
Net cash (used in) provided by investing activities	$	(4,436)	$	29,622
Net cash (used in) provided by financing activities	$	(2,624)	$	50,446
Increase in cash, cash equivalents, and restricted cash	$	30,588	$	53,506

Cash Flows from Operating Activities

Our net cash from operating activities is generated primarily from operating income of our resorts. For the three months ended March 31, 2022, our net cash provided by operating activities was $37.6 million. For the three months ended March 31, 2021, our net cash used in operating activities was $26.6 million.

Cash Flows from Investing Activities

For the three months ended March 31, 2022, our net cash used in investing activities was $4.4 million. For the three months ended March 31, 2021, our net cash provided by investing activities was $29.6 million.

Activity for the three months ended March 31, 2022:

•Purchases of property and equipment of $4.4 million.

Activity for the three months ended March 31, 2021:

•Net proceeds from the sale of assets, consisting of the Dreams Puerto Aventuras resort, of $34.2 million; and

•Purchases of property and equipment of $4.6 million.

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 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.

Cash Flows from Financing Activities

Our net cash used in financing activities was $2.6 million for the three months ended March 31, 2022 compared to $50.4 million of cash provided by financing activities for the three months ended March 31, 2021.

Activity for the three months ended March 31, 2022:

•Principal payments on our Term Loan of $2.5 million.

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Activity for the three months ended March 31, 2021:

•Net proceeds from our January 2021 equity issuance of $137.7 million;

•Principal payments on our Term Loan of $2.5 million; and

•Repayments on our Revolving Credit Facility of $84.7 million.

Critical Accounting Policies and Estimates

Our Condensed 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 higher degree of judgement and estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We believe our estimates, assumptions and judgments with respect to our 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.

We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022. There have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them except for those disclosed in Note 2 to our Condensed Consolidated Financial Statements.

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 (excluding the financing lease obligation). See Note 13, “Fair value of financial instruments,” to our Condensed Consolidated Financial Statements for more information.

Related Party Transactions

See Note 6, “Related party transactions,” to our Condensed Consolidated Financial Statements for information on these transactions.

Recent Accounting Pronouncements

See the recent accounting pronouncements in Note 2 to our Condensed Consolidated Financial Statements.

Item 3. 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 12 of our Condensed Consolidated Financial Statements) to manage exposure to this risk. As of March 31, 2022, 15% of our outstanding indebtedness bore interest at floating rates and 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 $0.8 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $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 million and the current LIBOR rate on our floating rate debt could not fall below the existing 1.0% LIBOR floor.

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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 three months ended March 31, 2022 approximately 2.2% of our revenues were denominated in currencies other than the U.S. dollar. As a result, our revenues reported on our Condensed Consolidated Statements of Operations are affected by movements in exchange rates.

Approximately 74.5% of our resort-level operating expenses for the three months ended March 31, 2022 were denominated in the local currencies in the countries in which we operate. As a result, our operating expenses reported on our Condensed Consolidated Statements of Operations are affected by movements in exchange rates. The foreign currencies in which our expenses are primarily denominated are the Mexican Peso, Dominican Peso and the Jamaican Dollar.

•The effect of an immediate 5% adverse change in foreign exchange rates on Mexican Peso-denominated expenses at March 31, 2022 would have impacted our Owned Resort EBITDA by approximately $2.1 million on a year-to-date basis.

•The effect of an immediate 5% adverse change in foreign exchange rates on Dominican Peso-denominated expenses at March 31, 2022 would have impacted our Owned Resort EBITDA by approximately $1.7 million on a year-to-date basis.

•The effect of an immediate 5% adverse change in foreign exchange rates on Jamaican Dollar-denominated expenses at March 31, 2022 would have impacted our Owned Resort EBITDA by approximately $1.1 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.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.

We maintain a set of disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Quarterly Report on Form 10-Q, were effective.

Changes in Internal Control Over Financial Reporting.

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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on our financial condition, cash flows or results of operations. The outcome of claims, lawsuits and legal proceedings brought against us, however, is subject to significant uncertainties. Refer to Note 7 to our financial statements included in “Item 1. Financial Statements” of this Form 10-Q for a more detailed description of such proceedings and contingencies.

Item 1A. Risk Factors.

We are supplementing the risk factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 with the additional risk factor set forth below, which supplements, and to the extent inconsistent, supersedes such risk factors.

The ongoing conflict between Russia and Ukraine may negatively impact macro-economic conditions which could affect consumer spending adversely and as a result, our business, results of operations, cash flows or financial condition.

The current conflict between Russia and Ukraine has not had a direct or material impact on the Company. However, a prolonged conflict, the potential expansion of the conflict into other European countries, or the involvement of the United States or other countries where we source our guests could have an impact on macro-economic conditions which could adversely affect consumer spending and consequently, our operations. Further, the rising price of utilities, including increases in fuel prices, would raise the overall vacation cost to our guests and may adversely affect demand for our vacation packages.

Additional risks to our business relating to the Russia and Ukraine conflict include potential interruptions in global supply chains and the availability of items essential to our resort operations, the heightened possibility of cyberattacks, and the potential for travel restrictions affecting our guests' ability to access our resort destinations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

The following exhibits are filed as part of this Form 10-Q:


Exhibit Number						Exhibit Description
31.1						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

31.2						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

32.1						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

32.2						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

101						The following materials from Playa Hotels & Resorts N.V.’s Quarterly Report on Form 10-Q for the period ended March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) the Notes to the Condensed Consolidated Financial Statements

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements 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:

May 5, 2022

By:

/s/ Bruce D. Wardinski

Bruce D. Wardinski

Chairman and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal financial officer of the registrant.

Playa Hotels & Resorts N.V.

Date:

May 5, 2022

By:

/s/ Ryan Hymel

Ryan Hymel

Chief Financial Officer

(Principal Financial Officer)