Hospitality company Playa Hotels & Resorts (NASDAQ:PLYA) beat analysts' expectations in Q4 FY2023, with revenue up 15% year on year to $242.5 million. It made a non-GAAP profit of $0.04 per share, down from its profit of $0.13 per share in the same quarter last year.
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Playa Hotels & Resorts (PLYA) Q4 FY2023 Highlights:
- Revenue: $242.5 million vs analyst estimates of $222.9 million (8.8% beat)
- EPS (non-GAAP): $0.04 vs analyst estimates of $0.02 ($0.02 beat)
- Adjusted EBITDA guidance for 2024 of $263 million vs analyst estimates of $262.5 million (in line)
- Gross Margin (GAAP): 47%, up from 45.7% in the same quarter last year
- Market Capitalization: $1.22 billion
Hotels, Resorts and Cruise LinesHotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales GrowthA company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Playa Hotels & Resorts's annualized revenue growth rate of 9.6% over the last five years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new property or emerging trend. That's why we also follow short-term performance. Playa Hotels & Resorts's annualized revenue growth of 35.2% over the last two years is above its five-year trend, suggesting some bright spots.
We can dig even further into the company's revenue dynamics by analyzing its revenue per available room, which clocked in at $301.47 this quarter and is a key metric accounting for average daily rates and occupancy levels. Over the last two years, Playa Hotels & Resorts's revenue per room averaged 51.7% year-on-year growth. Because this number is higher than its revenue growth, we can see its room bookings outperformed its sales from other areas like restaurants, bars, and amenities.
This quarter, Playa Hotels & Resorts reported robust year-on-year revenue growth of 15%, and its $242.5 million of revenue exceeded Wall Street's estimates by 8.8%. Looking ahead, Wall Street expects revenue to decline 1.8% over the next 12 months, a deceleration from this quarter.
Operating MarginOperating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Playa Hotels & Resorts has been a well-managed company over the last eight quarters. It's demonstrated it can be one of the more profitable businesses in the consumer discretionary sector, boasting an average operating margin of 16.6%. This quarter, Playa Hotels & Resorts generated an operating profit margin of 14.3%, up 3.1 percentage points year on year.
Over the next 12 months, Wall Street expects Playa Hotels & Resorts to become less profitable. Analysts are expecting the company’s LTM operating margin of 17.9% to decline to 16.4%.Key Takeaways from Playa Hotels & Resorts's Q4 Results We were impressed by how significantly Playa Hotels & Resorts blew past analysts' EPS expectations this quarter on better profits. We were also excited its operating margin outperformed Wall Street's estimates. Full year 2024 guidance for adjusted EBITDA is in line, showing that the company is staying on track. Zooming out, we think this was a decent quarter. The stock is flat after reporting and currently trades at $8.8 per share.