Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cibanco S A Institucion De Banca Multiple (DBMXF, Financial) reported a RevPAR growth of 6% year over year, with an ADR increase of 7.4%, indicating strong pricing power.
- The business hotel segment, particularly limited service hotels, showed robust performance with a RevPAR growth of 12.3%.
- Mexico City outperformed other markets with a notable RevPAR growth of 12.9%, showcasing strong demand in the region.
- The company successfully closed the sale of the Gamma Hotel Guadalajara for MXN135 million, above its book value, indicating effective asset management.
- Cibanco S A Institucion De Banca Multiple (DBMXF) maintains a strong balance sheet with a conservative LTV of 24.6% and a net debt position of MXN3.666 billion.
Negative Points
- The company faced challenging market conditions due to soft economic activity and investments, leading to slower hotel demand.
- Operating cost pressures, primarily in labor, have impacted margins and profitability, with EBITDA margin decreasing from 28.2% to 24.3%.
- Occupancy rates decreased slightly, with managed hotels showing a decline from 63% to 62% year over year.
- The Fiesta Americana Condesa Cancun experienced a significant RevPAR decrease of 13.2% in dollars, mainly due to lower occupancy.
- Cost pressures are expected to persist, particularly in labor and real estate expenses, which could continue to impact margins in the coming quarters.
Q & A Highlights
Q: Can you provide more details about the cost pressures, particularly in labor, and the timeline for the joint venture with Danhos?
A: Labor costs have increased significantly due to a rise in minimum wages and high staff turnover, especially in regions like Riviera Maya and Monterrey. This has led to increased recruitment and training costs. Regarding the joint venture with Danhos, we are progressing well in the preconstruction phase and have identified a brand. We expect to announce more details, including the brand, in the fourth quarter.
Q: Should we expect the occupancy losses to continue, and are you still targeting ADR increases above inflation?
A: We anticipate an improvement in occupancy rates in the third and fourth quarters, although they may be slightly lower than last year. Our strategy focuses on maximizing ADR to increase RevPAR, and we aim to continue increasing rates above inflation.
Q: When can we expect the first benefits from the margin recovery initiatives, and do you see favorable conditions to continue increasing ADR above inflation?
A: The margin recovery initiatives are strategic and medium to long-term, so benefits are expected more towards next year. We are focused on finding a margin inflection point. The ADR growth has been positive, and we aim to continue increasing it above inflation.
Q: Are there any plans for potential acquisitions, particularly regarding properties being divested by other brands?
A: Currently, our strategic focus is on high-return projects with Danhos and reducing our debt. We are not prioritizing inorganic growth through acquisitions unless an exceptionally attractive opportunity arises.
Q: Will the cost pressures and SG&A remain high, and should we expect a lower increase next quarter without the profit sharing expense?
A: The profit sharing was a one-off expense this quarter, so we expect a lower increase next quarter. However, we anticipate continued pressure on real estate expenses and insurance costs due to frequent natural disasters and potential tax increases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
