Grupo Hotelero Santa Fe, S.A.B. de C.V. (HOTEL) Earnings Call Transcript & Summary

Welcome to today's Grupo Hotelero Santa Fe Fourth Quarter 2024 Investor Relations Call. Please note, this call is recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Max Zimmermann.

Good afternoon, and thank you for joining us today. My name is Max Zimmermann, Investor Relations Director of Hotel, and I would like to welcome you to the company's earnings webcast for the fourth quarter of 2024. On the line, we have Francisco Medina, our CEO. The presentation slides we will follow during the call are available on our webcast, which you can find in the Investor Relations section of our website. Before we begin, I would like to remind you that this call is being recorded, and that information discussed today may include forward-looking statements regarding the company's financial and operating performance. Our projections are subject to risks and uncertainties, and actual results may differ materially based on a number of factors. Please refer to the detailed notes in the company's press release regarding forward-looking statements. At the end of the presentation, we will open the call to any questions you may have. Now I will pass the call to Francisco Medina, our CEO. Go ahead, Paco.

Thank you, Max. Good morning, everyone. It's a pleasure to be here sharing with you our results. 2024 was a year that improved as the year went by, closing the year with a record fourth quarter in terms of both sales and EBITDA. We posted a slight topline growth and a slight contraction in profitability driven by the headwinds, such as lower tourism in Mexico, a stronger Mexican peso exchange rate, the remodeling of the Krystal Beach, due to the impact of the hurricane Acapulco and the path of maturity of new hotels in our portfolio. Revenue to around MXN 2,985 million for 2024, up 1% compared to 2023, and EBITDA was MXN 810 million for the year, down 4% compared to 2023, basically for the situation of having Krystal Beach Acapulco. Now I will pass the call back to Max, who will get into our quarterly operational results. Please go ahead, Max.

Thank you, Paco. Please go to Slide 2. Room revenue increased 20% to MXN 425 million in the fourth quarter of 2024 compared to the fourth quarter of 2013, driven by a higher revenue. Food and beverage revenue increased 24% to MXN 359 million in the fourth quarter of 2024 compared to the fourth quarter of last year. And other income, which includes, among other items, event room rentals, parking, laundry, telephone and leasing of commercial spaces, increased 30% to MXN 50 million in the quarter compared to the same quarter of last year. Vacation Club income increased 90% to MXN 19 million and third-party hotel management fees were up 4% to MXN 25 million in the quarter compared to the same quarter of last year. Now please move to Slide 3. Moving on to our operational metrics. On a consolidated level, this quarter, we posted a 1.8 percentage point increase in occupancy to 68%, combined with an ADR increase of 13% to 1,992 basis. RevPAR in the quarter was 1,303 basis, was 16% higher than the fourth quarter of 2023. Now please move to Slide 4. EBITDA in the quarter increased 48% to a record MXN 266 million compared to MXN 180 million in the fourth quarter of last year, reflecting higher revenues combined with operational leverage. Moving on in the quarter, we posted an operating income of MXN 198 million compared to an operating loss of MXN 16 million in the fourth quarter of 2023, reflecting higher revenues combined with operational leverage. In terms of net income, we went from a MXN 5 million gain in the fourth quarter of last year to a MXN 17 million gain in the fourth quarter of this year. This result was driven by higher operating income, lower income taxes both of these, which partially compensated a net financing costs in the quarter. Now please move to Slide 5. Net debt was MXN 2,550 million at the end of the fourth quarter of this year, which represented a total debt-to-EBITDA last 12 months ratio of 3.1x, a significant improvement from last quarter, where we were standing at 3.6x. Total debt is now at 100% dollar denominated, which is great news for the company and has an average cost of 7.8%, nearly half of what it was in pesos. Additionally, I would like to mention that over 88% of debt maturities are long term. Our short U.S. dollar position by the end of the quarter was $134 million, equal to MXN 2,743 million. Now please move to Slide 6, and I will pass the call back to Paco, who will finish up the call.

Thank you, again, Max. Lastly, I would like to highlight and express my gratitude for the more than -- 4,300 associates we have supported the company unconditionally as always. We are especially thankful for the trust and support of our shareholders. And again, to all of our tremendously professional and cooperative teams. With that, I would like to open the call for questions and answers.

Operator?

[Operator Instructions] Our first question comes from Carlos Alcaraz from Apalache Research.

Congratulations on the results. First, I would like to ask you about your debt structure. Considering that 100% of debt is in dollars, do you plan to issue that in Mexican pesos. And could you give us more color on the status of the Acapulco Hotel?

Sure. Sure, Carlos. Thank you for your questions, and welcome to our call. In terms of debt in pesos, the truth is that we feel much more comfortable having our debt in dollars because it also has a lower cost, and it's important to remember that we have a natural hedge in dollars. As you can see in our in our quarterly report, you will see that for the year 2024, we had 35% of our revenues in dollars. Since all of our expenses or the vast majority of our expenses are in pesos. At the end, our operational cash flow is basically almost 90% in dollars, 87%, 88% to be exact. So with that, we have never been -- we have never had the need to buy dollars with pesos in order to pay debt. And because of that, we also have the benefit of being able to have our loans in dollars. We just recently switched over the debt from our Hyatt 724 property from pesos to dollars, which made a lot of sense because of the lower cost that this implies. And on the second question on Acapulco, I'm going to pass that question over to Paco.

Thank you, Carlos, for your questions. In -- let me start saying that Acapulco has been a very successful surprise since the status of -- the rest of the hotel, it's minus 30% in the destination, we have been very happy for the position of the hotel. We have achieved 95% remodel of the property and the 25 of this month, we will finish the last floor, which is a night floor, finishing the total of the rooms and in one pending ballroom that it will be Papagaio it will be also finished at the same time in the 25th of February. So we will continue having success in that hotel receiving a lot of Mexican market.

Or next question comes from Martín Lara.

Congratulations for these strong results. I have the following questions. The first one is, could you please explain the 3% reduction in sales and administrative expenses in the quarter. And the second question is that the ADR increased 10.3% in owned hotels, about 16.5% in managed hotels, could you please explain that difference? And what can we expect going forward?

Well, thank you, first of all, Martin, for your questions. I will say with the extraordinary performance that we had in the last quarter and the big increase in revenue. As you can imagine, we -- all the expenses that are stabilized, not variable, but the normalized fixed prices. They normally maintain there, but we have the very high increase in revenue, and that represents a reduction of 3% or 5% regarding the expenses of administration and sales compared to the revenue. That is basically the main reason. The extraordinary revenue we have during this quarter. And the second question question?

The difference between the ADR in owned hotels and managed hotels.

Well, basically, there are two situations that have been changing the variable of the company, which is one secrets to loan that we opened last year and this year, it's going -- boosting and having an extraordinary results as well. And that is one of the main reasons. And the other one is the Chartwell Hotels, we call Chartwell, which is Krystal Cancun Puerto Vallarta that have had an extraordinary closing of the year compared to 2023,

Yes, with big ADR increases in those hotels. Those hotels were still lagging some increases, which we were able to put through in 2024. And also complementing the reduction, Martin, of the expenses. Please remember that this year, we had a tough start to the year. So during the first, second and third quarters, we also reduced expenses as much as possible because we were having results that were below our expectations and even below last year. Now the fourth quarter came to change that, but we still have our our lean structure in place. And this, of course, also represented a slight diminishing of expenses in the quarter.

And I have a last question. What will be the CapEx in 2025?

So we have considered that as we do every year, the 4% of the total revenue. And basically, the total revenue has a big increase compared to 2023, which will represent an improvement as well of the 4% of the CapEx for the properties.

That's correct. As Paco mentioned, we are expecting a good year. However, as you know, we do not give guidance.

[Operator Instructions] Our next question comes from Felipe Barragan from BTG.

My question is on the revenue growth. There was a big revenue growth of 22% year-over-year. Just wanted to understand what drove the revenue growth. It was more like -- the revenues are in dollars. So that accounts for a bit of it. You had some rooms, and I can put coming back into the equation as well. ADR growth grew single digits. So I just wanted to hear your thoughts on what exactly is driving the growth and if this is sustainable moving forward.

Well, I will say the main driver was the increase on the ADR, which, as Max was explaining a little bit ago, we have a very complicated first semester. Then the second semester, I will say, basically, after the elections, it was a coincidence that after the elections in Mexico and the U.S.A., the production of the main tour operators started to grow up as well as the ADR, available daily rate. So the prices went up, the demand went up, and we took advantage of that, having a very good yield management controlling the expenses. We have an extraordinary resource mainly at the resorts, hotels and Cancun [indiscernible] in Los Cabos, et cetera. And the first semester, it was a very good semester for the urban hotels. So basically, that combination helps us out to have a very good year. If we consider that we recuperated after August the Hotel Acapulco. And also Felipe to complement that, as you well mentioned, we grew revenues around 22%. If we look at our RevPAR, it grew around 16%, and out of that 16% ADR represented 13%. So it was basically ADR representing more than half of the 22% growth just to make a small proxy, a little bit of occupancy. And as you well mentioned, also having more rooms from Acapulco as the year went by, also helped for the plug to that 22%.

That's very clear. Well, congrats on the results. And I guess it's the benefit of having a well-diversified portfolio.

Thank you.

With further questions in the queue, I would like to turn the call to the management.

Thank you, Antonio. We would like to thank you for the trust that you have placed in us and reference our commitment to maximize your investment. We also would like to thank all of the associates for the [indiscernible] platform, have a great day, everyone. Have a great weekend.

Thank you, guys. Bye.

Thank you. You may disconnect.