FibraHotel (FIHO12.MX) Earnings Call Transcript & Summary

Good morning. My name is Antonio Cardenas, and I will be the conference operator today. At this time, I would like to welcome everyone to FibraHotel's 2025 First Quarter Earnings Conference Call. FibraHotel issued its quarterly report on Tuesday. If you did not receive a copy via e-mail you can find it at www.fibrahotel.com or e-mail me at [email protected]. Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance and financial results. Unless noted, all figures included herein were prepared in accordance with International Financial Reporting Standards and are stated in nominal Mexican pesos. Joining us from FibraHotel are Mr. Simón Galante, CEO; Mr. Eduardo López, General Manager; Mr. Edouard Boudrant, CFO; and Mr. Guillermo Bravo, CIO. With that, I will turn the call over to Simón Galante.

Thank you, Antonio, and good morning, everyone. I am going to begin today's call by providing an overview of the first quarter of 2025 results and will then turn the call over to Edouard Boudrant, our CFO, who will discuss our financial results in more detail. And we then will open the call for questions and answers. During the first quarter of 2025, FibraHotel posted a solid set of results considering the current macroeconomic environment. The portfolio had a RevPAR growth of 7.3% year-over-year with an ADR increase of 9.2% and an occupancy decrease of 105 basis points. These numbers reflect a combination of lower demand in certain regions such as the oil region, combined with the positive results in the large cities, including Mexico City, Monterrey and Guadalajara. For example, Mexico City RevPAR increased 15.5% year-on-year, supported by many citywide concerts and sporting events. We also saw good numbers in Guadalajara and Monterrey, which combined had a year-on-year revenue growth of 18%. On the other hand, some cities had a [indiscernible] performance, including hotels in the oil regions such as Ciudad del Carmen and Villahermosa, which have mainly been impacted by the situation at Pemex. In the first quarter, we did not see a relevant impact from the different tariff announcement in the manufacturing destination. We are present, but we remain cautious about changes to demand in those cities. The winter season at the Fiesta Americana Condesa Cancun Hotel and a lease revenue of MXN 110 million. This was the result of overall weakened demand in Cancun, which led to a decrease in ADR in dollars of 7% and was often by the depreciation of the currency. Even though the hotel continues to gain market share, we remain cautious as we expect the destination demand weakness to continue during the middle of the year. The hotel ADR would be hard to maintain if there is a drop in demand from U.S. tourists. Revenues from the quarter were MXN 1,352 million and EBITDA was MXN 351 million. EBITDA margin was 26%. We continue working on efficiency projects to increase the profitability at each hotel. As an example, we finished the conversion of 10 Fiesta Inn hotels into the Fiesta Inn express model. Under the express model, breakfast is included, and there is a selective food and beverage alternative, including grab-and-go for lunch and dinner and the ability for catering and events. In this new model, we were able to reduce payroll and have better operation at these hotels. A couple of additional changes in investment in the portfolio, I would like to highlight include, in April, we changed the operating model at the Tapestry Playa del Carmen Hotel from a noninclusive to a European plant with a new operator to increase the profitability of the hotel. The Fiesta Inn Monterrey Valle Hotel and the Fiesta Monterrey La Fe Hotel are in process of being fully remodeled and should be fully operational by the third quarter of 2025. A core strategic objective of FibraHotel continues to be the strong balance sheet with an LTV of 24.6% and a net debt to loan-to-value EBITDA ratio of 2.7x. Regarding our ESG objectives, during the quarter, we published the net zero policy based on the science-based targets initiative. We also received a rating of B for the carbon disclosure project. Finally, Valora validated that FibraHotel achieved a 7.5% annual reduction during 2024 in energy consumption intensity for the One hotel portfolio, which is above 1.5% reduction target in the credit agreement with Scotiabank. For the first quarter of 2024, FibraHotel will make a distribution of MXN 0.15 per CBFI. And for the full year 2025, we expect to make 3 additional quarterly distributions of MXN 0.15 per CBFI for a total of MXN 0.60 per CBFI for the year. The distribution represents a healthy 9% growth to 2024. Despite rising uncertainty in market conditions, we remain confident that the operational and financial strength of FibraHotel, along with the diversification of our portfolio will allow us to continue generating long-term value. I would also like to thank all our partners and team for their work and commitment to FibraHotel. With that, I will now pass the call over to Edouard Boudrant, the CFO of FibraHotel, to discuss the financial and operating results of the first quarter.

Thank you, Simón, and good morning, everyone. We closed the first quarter with 85 hotels opened. The occupancy rate of managed hotels for the quarter was 58% compared to 59% for the first quarter of 2024. Average daily rate was MXN 1,651, increasing 9% compared to the first quarter of 2024. Quarterly RevPAR was MXN 958, representing a 7% increase compared to the first quarter of 2024. The Fiesta Americana Condesa Cancun had an occupancy rate of 84% compared to 87% 1 year ago. The hotel had a net package ADR of MXN 7,097 and net package RevPAR was MXN 5,992 increasing 9% compared to the first quarter of 2024. In USD as the rate is sold in USD, ADR decreased by 7% from $367 to $341 and RevPAR decreased 10% from $318 to $288 compared to the first quarter of 2024. Total revenues for the quarter were MXN 1,352 million compared to MXN 1,286 million for the first quarter of 2024, a 5% increase. The total rent collected by the Hotel Fiesta Americana Condesa Cancun represented MXN 110 million, which is 8% of our total revenues, increasing 5% versus last year. During the first quarter of 2024, the total rent collected was MXN 105 million and represented 8% of the total revenue. Lodging contribution for the quarter was MXN 464 million compared to MXN 443 million for the first quarter of the year 2024, a 5% increase. The margin of lodging contribution for the managed hotels was 27% compared to a 27.7% margin for the first quarter of the year 2024. Real estate expenses were MXN 26 million compared to MXN 21 million for the first quarter of 2024. Corporate expenses were MXN 88 million compared to MXN 83 million during the first quarter of 2024. EBITDA for the quarter was MXN 351 million compared to MXN 339 million for the first quarter of 2024. In terms of EBITDA margin, it slightly decreased from 26.4% to 26%. We closed the quarter with a net debt of MXN 3.7 billion, increasing MXN 89 million versus the end of last year. Gross debt amounted to MXN 4.3 billion, and the LTV ratio is still very conservative at 24.6%. In January, we drew down MXN 219 million of a long-term available line of credit. As of today, our debt structure is extremely healthy. Only 6% is maturing during the next 12 months. The average cost of debt is 9.2%. USD-denominated debt represents 17% of FibraHotel's total debt, 18% at the end of last year and represents $37 million. During the quarter, the debt position generated a financing cost of MXN 99 million. The net financial income was negative MXN 89 million, considering a MXN 3 million foreign exchange profit, noncash item, mainly related to the USD-denominated debt. We closed the quarter with a MXN 595 million cash position compared with MXN 630 million at the end of last year. During the fourth quarter -- during the first quarter, sorry, we deployed MXN 148 million of investment, maintenance CapEx and repositioning CapEx. MXN 75 million in The Ritz-Carlton Cancun Hotel, MXN 26 million for maintenance CapEx, MXN 23 million in a building in Perinorte, MXN 19 million in the remodeling of the Fiesta in Monterrey Valle and Fiesta Monterrey La Fe and MXN 13 million in other hotels of the portfolio. For the quarter, FFO and AFFO were positive MXN 269 million and MXN 186 million. Please note that in accordance with the distribution policy decided by our technical committee, we will pay for the first quarter of 2025 and for each quarter of the year, a distribution of MXN 0.50 per certificate. Total distribution per certificate for the year will be MXN 0.60 per certificate, increasing 9% versus last year. At this point, I would like to open the floor for the Q&A session. Antonio, we are ready to take any questions.

[Operator Instructions] The first question comes from [indiscernible].

I have a couple of them. The first one is related to the Ritz-Carlton Cancun. Could you remind us the total cost of the project? And the second question regarding on Cancun, specifically is this capital allocation that you made in the first quarter, it's going to be the same for the rest of 2025? And last but not least, in which level of LTV do you feel comfortable? Right now, it's 24.6%, which is fantastic, by the way. But you have, I mean, historically an improved. So in which level are you comfortable regarding the LTV?

Thank you for your question. Let me start with the first part, and I'll let Edouard comment on the LTV. Regarding the Cancun project, we do not expect similar numbers than in the first quarter. The expenses or the investment in the hotel will be shifting over time. For the remainder of the year, we have started already demolitions and the structuring of the building, and so we will have some investment for the rest of the year in order to put in the structure of the property. Most of the heavy investment will come over the next couple of years as we are more advanced on that project. And in terms of the full investment, there are several moving pieces, especially in regards to the residential component on how much investment we will need. But our estimate right now is that we -- FibraHotel's portion of the investment should be around $100 million. So that can move around, but that can give you some color. And more of that should be slated for the next few years more than this year.

And regarding the LTV, so basically, we have a 24% LTV. We feel very comfortable with this kind of LTV. If you remember, at the beginning of 2021 after the bad result of the pandemic, the highest level that we had, it was 30%. Also at that time, under the specific condition, we were also very comfortable with our indebtedness. And so basically, what we want to do is to reduce the debt in accordance with the amortization schedule that we have. If you see the amortization schedule, it's very, very conservative also with less than MXN 400 million this year, MXN 400 million next year. We will start to analyze the refinancing of the bond in 2 years. But also, if you remember in 2019, when we issued a bond, it was a bond with not a bullet payment, but [ 3 ] equal payment. And in the future, we think that the LTV will slightly increase with the Nizuc project. I don't think it will be higher than 30% if we have no further project. And after that, it will decrease quite quickly. So basically, as of today, 25% is very comfortable with the project of Nizuc, which is a very promising project for FibraHotel, 27%, 28%. Also, we will be very confident in that. We always have been very conservative in terms of indebtedness and the policy of FibraHotel didn't change. We will be very conservative. And one of the priority of FibraHotel is to reduce the debt according to the cash flow that we generate.

Okay. And lastly, if I may, a follow-up regarding the Ritz-Carlton. When -- what will be the time line to be completed the hotel?

We're still determining the final time line of the property, but we expect late 2017 (sic) [ 2027 ] or during 2018 (sic) [ 2028 ]. So realistically, for the numbers, the hotel shouldn't contribute a lot through 2018 -- 2028.

[Operator Instructions] There are no further questions. Thank you for participating in FibraHotel's 2025 First Quarter Results Conference Call. If you have any further questions please do not hesitate to visit www.fibrahotel.com or contact us. This concludes today's call. Thank you, and have a good day.

Thank you, everyone. Sorry for the technical difficulties. Have a good day.