Playa sells Jewel hotels at a loss
Playa Hotels & Resorts, operator of all-inclusive resort hotels in the region, booked the equivalent of a near $4-billion loss on the sale of two properties in Jamaica.
The outlook remains sombre for the hotel management company, which is wary of potential upsurges in the spread of the coronavirus a month into the reopening of properties in its portfolio.
“We cannot predict when our business will return to normalised levels because we cannot predict when all effects of the pandemic will subside. The longer and more severe the pandemic, the greater the material adverse effect the pandemic will have on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our debt,” said Playa Chairman and CEO Bruce Wardinski in the company’s second-quarter financial report.
Playa recorded a US$87.5-million net loss for the June quarter after earning less than one million dollars in revenue. Comparatively, it made a profit of US$1 million on revenue of US$164 million a year earlier.
Pay down debt
The company sold Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark in May. The properties were sold for US$60 million ($9 billion), below their fair value of US$85 million ($12.6 billion). Playa stated that it needed the funds for cash flow but also to pay down on a portion of its debt.
Playa said its impairment loss for the April-June quarter increased 100 per cent year-on-year to US$25.3 million, which translates to $3.8 billion in Jamaican currency.
“The increase was due to property and equipment impairment upon classification of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark as held for sale,” the hotel company said in its financials released this week.
The sale of two Jewel properties injected about US$58 million after closing costs and reduced the hotel rooms that Playa operates in Jamaica by 42 per cent.
The entity that acquired the properties remains unidentified.
The sale of the two Jewel hotels, which were among five properties acquired in 2018 from Sagicor Group Jamaica and its affiliates, accounted for 515 of the 1,946 rooms operated by the Mexican company in Jamaica prior to the sale.
Now, its Jamaican portfolio holds five properties in total, with 1,441 rooms under management: Jewel Paradise Cove Beach Resort & Spa, 225 rooms; Jewel Grande Montego Bay Resort & Spa, 217 rooms of which 88 rooms are owned and 129 are managed; Hilton Rose Hall Resort & Spa, 495 rooms; family resort Hyatt Ziva Rose Hall, 276 rooms; and couples-only resort Hyatt Zilara Rose Hall, 344 rooms.
Across its regional network, Playa Hotels & Resorts owns or manages 8,172 rooms across more than 20 resorts in popular vacation destinations in Mexico, Jamaica and the Dominican Republic.
The company held US$2.6 billion in total assets in June, comprised mostly of hotel properties. Amid a shutdown of the tourism market worldwide, Playa Hotels’ net value declined to US$710.5 million from US$809.7 million in December 2019, which was attributed to the impact of the COVID-19 pandemic.
In the March quarter, prior to the sale of the Jewel properties, Playa reported an initial impairment due to the shutdown of its properties and also the material decrease in the “forecasted future cash flows” of its reporting units.
“We performed an interim quantitative impairment analysis as of March 31, 2020, and recognised US$16.2 million of goodwill impairment losses at the following reporting units within impairment loss in the condensed consolidated statement of operations for the three months ended March 31, 2020, as we determined that their carrying values exceeded their fair value,” the company said.