Playa Hotels & Resorts N : ↓ 2023 Playa Hotels & Resorts N.V. Dutch Statutory Board Report (712 KB)

Playa Hotels & Resorts N.V.

Dutch statutory board report and financial statements

for the fiscal year ended December 31, 2023

Playa Hotels & Resorts N.V.

As of and for the year ended December 31, 2023

	TABLE OF CONTENTS
		Page(s)
1	Introduction
4
1.1	Preparation	4
1.2	Forward-looking statements	4
2	Business	6
2.1	Overview	6
2.2	Material subsequent events	14
3	Risk factors	15
3.1	Summary of key risk factors	15
3.2	Risk factors	16
4	Properties	35
5	Legal proceedings	36
6	Management's discussion and analysis of financial condition and results of operations	36
7	Financial statements	52
7.1	Consolidated financial statements	52
7.2	Company financial statements	100
7.3	Signature page	110
8	Controls and procedures	111
8.1	Controls and procedures	111
8.2	In control statement	111
9	Corporate governance	112
9.1	Dutch corporate governance code	112
9.2	Code of conduct and other corporate governance practices	113
9.3	Risk management and control systems	113
9.4	General meeting	113
9.4.1	Functioning of the general meeting	113
9.4.2	Powers of the general meeting	114
9.4.3	Shareholder rights	114
9.5	Board	114
9.6	Committees	118
9.6.1	General	118
9.6.2	Audit committee	118
9.6.3	Compensation committee	119
9.6.4	Nominating and governance committee	120
9.7	Evaluation	121
9.8	Diversity	121
9.9	Code of business conduct and ethics	122
10	Compensation	124
10.1	Compensation and clawback policies	124

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Playa Hotels & Resorts N.V.

As of and for the year ended December 31, 2023

		TABLE OF CONTENTS
			Page(s)
10.2	Compensation of directors
125
10.3	2017 omnibus incentive plan	125
10.4	Pay ratio	129
11	Related party transactions	129
12	Protective measures	130
13	Other information	131
13.1	Independent auditor's report	131
13.2	Profit appropriation provisions	131
13.3	Branches	131

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1. INTRODUCTION

1.1 Preparation

Unless the context requires otherwise, in this annual report, we use the terms "the Company," "Playa," "our company," "we," "us," "our" and similar references to refer to Playa Hotels & Resorts N.V., a Dutch public limited liability company (naamloze vennootschap), and, where appropriate, its subsidiaries.

This annual report has been prepared by the Company's board of directors (the "Board") pursuant to Section 2:391 of the Dutch Civil Code ("DCC") and also contains (i) the Company's statutory annual accounts within the meaning of Section 2:361(1) DCC and

1. to the extent applicable, the information to be added pursuant to Section 2:392 DCC. This annual report relates to the fiscal year ended December 31, 2023 and, unless explicitly stated otherwise, information presented in this annual report is as of December 31, 2023.

The consolidated financial statements included in Chapter 7.1 of this annual report (the "Consolidated Financial Statements") have been prepared in accordance with the International Financial Reporting Standards ("IFRS") established by the International Accounting Standards Board and endorsed by the European Union. The Company financial statements included in Chapter 7.2 (the "Company Financial Statements") have been prepared in accordance with the accounting principles promulgated by Title 9 of Book 2 DCC ("Dutch GAAP").

1.2 Forward-looking statements

This annual report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect our current views with respect to, among other things, our capital resources, portfolio performance, results of operations, liquidity and financial condition. Likewise, our consolidated financial statements and all of our statements regarding anticipated growth in our operations, anticipated market conditions, demographics and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "approximately," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words or phrases.

The forward-looking statements contained in this annual report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. The following factors, among others, could also cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

• general economic uncertainty and the effect of general economic conditions, including inflation, elevated interest rates and worsening global economic conditions or low levels of economic growth, on consumer discretionary spending and the lodging industry in particular;
• changes in consumer preferences, including the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market, and the popularity of tropical beach-front vacations compared to other vacation options or destinations;
• changes in economic, social or political conditions in the regions we operate, including changes in perception of public- safety, changes in unemployment rates and labor force availability, and changes in the supply of rooms from competing resorts;
• the success and continuation of our relationships with Hyatt Hotels Corporation ("Hyatt"), Hilton Worldwide Holdings, Inc. ("Hilton"), and Wyndham Hotels & Resorts, Inc. ("Wyndham");
• the volatility of currency exchange rates;

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• the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future;
• our failure to successfully complete acquisition, expansion, repair and renovation projects in the timeframes and at the costs and returns anticipated;
• changes we may make in timing and scope of our development and renovation projects;
• significant increases in construction and development costs;
• significant increases in utilities, labor or other resort costs;
• our ability to obtain and maintain financing arrangements on attractive terms or at all;
• our ability to obtain and maintain ample liquidity to fund operations and service debt;
• the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates (including expected increases in our corporate tax rate pursuant to the Dutch Minimum Tax Act 2024), accounting guidance and similar matters in regions in which we operate;
• the ability of our guests to reach our resorts given government mandated travel restrictions, such as those related to COVID-19 or other public health crises, or airline service/capacity issues, as well as changes in demand for our resorts resulting from government mandated safety protocols and/or health concerns, including those related to COVID-19 or other public health crises;
• the effectiveness of our internal controls and our corporate policies and procedures;
• changes in personnel and availability of qualified personnel;
• extreme weather events, such as hurricanes, tsunamis, tornados, floods and extreme heat waves, which may increase in frequency and severity as a result of climate change, and other natural or man-made disasters such as droughts, wildfires or oil spills;
• dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;
• cyber incidents and information technology failures;
• the volatility of the market price and liquidity of our ordinary shares and other of our securities; and
• the increasingly competitive environment in which we operate.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this annual report, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements).

Unless the context requires otherwise, in this annual report, we use the terms "the Company," "Playa," "our company," "we," "us," "our" and similar references to refer to Playa Hotels & Resorts N.V., a Dutch public limited liability company (naamloze vennootschap), and, where appropriate, its subsidiaries.

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2. BUSINESS

2.1 Overview

Playa, through its subsidiaries, is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. As of December 31, 2023, we owned and/or managed a total portfolio consisting of 24 resorts (9,027 rooms) located in Mexico, Jamaica and the Dominican Republic. Playa's strategy is to leverage our globally recognized brand partnerships and proprietary in-house direct booking capabilities to capitalize on the growing popularity of the all-inclusive resort model and reach first-timeall-inclusive resort consumers in a cost-effective manner. We believe that this strategy should position us to generate attractive returns for our shareholders, build lasting relationships with our guests, and enhance the lives of our associates and the communities in which we operate.

We believe that the resorts we own and manage are among the finest all-inclusive resorts in the destinations they serve. We believe that our resorts have a competitive advantage due to their location, brand affiliations, extensive amenities, scale and design. Our portfolio is comprised of all-inclusive resorts that share some combination of the following characteristics:

• Prime beachfront locations;
• Globally recognized U.S. hotel brand partners;
• Convenient air access from major and secondary North American markets and international gateway markets;
• Strategic locations in popular vacation destinations with strong local government commitments to tourism;
• High quality standards and physical condition; and
• Capacity for further revenues and earnings growth through incremental renovation or repositioning opportunities.

Our all-inclusive resorts provide guests an attractive vacation experience that offers compelling value and price certainty, while at the same time providing Playa more predictable revenue, expense and occupancy rates than traditional full-service hotel business models. Generally, all-inclusive leisure guests book and pay further in advance, resulting in lower cancellation rates and incremental sales of upgrades, premium services and amenities not included in the all-inclusive package pricing.

We have strategic relationships with Hyatt, Hilton and Wyndham, three of the preeminent globally recognized hotel brands. We believe that partnering with Hyatt, Hilton and Wyndham in the development and management of all-inclusive resorts throughout the Caribbean, Mexico and Latin America provides us with unique advantages, including the following:

• Access to worldwide reservation systems, global marketing scale, and hundreds of millions of hotel loyalty members to drive revenue growth;
• Higher propensity for guests to book direct, which results in significantly improved returns over bookings from wholesale channels such as tour operators, travel agents and online travel agencies;
• Lower customer acquisition costs and higher net Average Daily Rates (ADRs);
• Higher net asset value for branded resorts affiliated with global franchisors;
• Brand partners work with us to maximize returns;
• Immediate customer recognition for new or converted resorts;
• Significant incremental opportunity with exposure to new consumers, who may not be familiar with the all-inclusive model;
• Access to guests from different regions globally, creating a better segmentation mix and reducing concentration risk;
• Stronger marketing and public relations presence through affiliate global hospitality brands;
• Ability to leverage best practices across the platforms;
• Reduced price sensitivity that encourages purchase decisions, resulting in higher revenues;
• Higher occupancy rates and higher levels of group business;

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• Lower failure rates compared to non-branded resorts; and
• Consumer confidence and trust in globally recognized brands.

We consider each of our resorts to be an operating segment, none of which meets the threshold for a reportable segment. For further discussion about our operating segments and financial information about the geographic regions in which we operate, please refer to the section Segment Results in Chapter 6. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 28 to the accompanying Consolidated Financial Statements.

Our Competitive Strengths

We believe the following competitive strengths distinguish us from other owners, operators, developers and acquirers of all- inclusive resorts:

• Premier Collection of All-InclusiveResorts in Highly Desirable Locations. We believe that our portfolio represents a premier collection of all-inclusive resorts. Our award-winning resorts are located in prime beachfront locations in popular vacation destinations, including Cancún, Playa del Carmen, Puerto Vallarta and Los Cabos in Mexico, Cap Cana, Punta Cana and La Romana in the Dominican Republic, and Montego Bay in Jamaica. Guests may conveniently access our resorts from a number of North American and other international gateway markets.
• Diversified Portfolio of All-InclusiveResorts. We currently operate resorts located in four main geographic markets and feature a range of price points, which we believe diversifies our offering, helps foster loyalty among our guests and drives repeat business. Additionally, we operate resorts under nine distinct brands, which include Hyatt, Hilton, Wyndham and Marriott. Having multiple brands to offer owners and developers is essential to our ability to secure management agreements and attractive acquisitions, since having a portfolio of brands mitigates the risks of brand-on-brand supply growth and subsequent cannibalization and expands our addressable market.
• Exclusive Focus on the All-InclusiveModel. We believe the all-inclusive resort model is increasing in popularity as more people come to appreciate the benefits of a high-quality vacation experience that offers value, ease of planning and a high degree of cost certainty. Because our guests have pre-purchased their vacation packages, we also have the opportunity to earn incremental revenue if our guests purchase upgrades, premium services and amenities that are not included in the all- inclusive package.
• Strong Relationships with Top Brands. Our partnerships with Hyatt, Hilton, and Wyndham, three globally recognized hospitality brands, differentiate our resorts from our competitors. The selection of Playa as a strategic partner of Hyatt, Hilton and Wyndham in the development and management of all-inclusive resorts throughout the Caribbean, Mexico and Latin America reflects their confidence and conviction in Playa's best in-class stewardship of all-inclusive resorts. For the year ended December 31, 2023, $857.9 million, or 91.8%, of our Total Net Revenue (as defined in Chapter 6. Management's Discussion and Analysis of Financial Condition and Results of Operations) was generated from resorts under the Hyatt, Hilton, and Wyndham brands.
• • Hyatt Strategic Relationship. Our strategic relationship with Hyatt provides us with a range of benefits, including the right to operate certain of our existing resorts under the Hyatt Ziva and Hyatt Zilara brands (the "Hyatt All- Inclusive Resort Brands") in certain countries. In 2021, we amended our franchise agreements with Hyatt for our Hyatt Ziva and Hyatt Zilara resorts in Mexico and Jamaica to prohibit Hyatt from opening, owning or authorizing other parties (whether under a license or franchise agreement from Hyatt or otherwise) to open or operate Hyatt Ziva and Hyatt Zilara resorts in certain agreed upon geographical areas in proximity to our Hyatt Ziva and Hyatt Zilara resorts for a five-yearperiod.
    The Hyatt Ziva brand is marketed as an all-inclusive resort brand for all-ages and the Hyatt Zilara brand is
    marketed as an all-inclusive resort brand for adults. The Hyatt All-Inclusive Resort Brands benefit from Hyatt's low cost and high margin distribution channels, such as Hyatt guests using the World of Hyatt® guest loyalty program, Hyatt's reservation system, Hyatt's mobile application and website and Hyatt's extensive group sales business. We believe that our strategic relationship with Hyatt and the increasing awareness of our all-inclusive resort brands among potential guests will enable us to increase the number of bookings made through lower cost

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sales channels, such as direct bookings through Hyatt as well as our Company and resort websites.

• • Hilton Strategic Alliance. Our strategic alliance with Hilton allows us to expand into markets in the Caribbean, Mexico, and South and Central America while benefiting from Hilton's global portfolio of brands and the Hilton Honors guest loyalty program (which had approximately 180 million members as of December 31, 2023). We have successfully converted two of our resorts into three Hilton all-inclusive resorts, and under our agreement with Hilton we have the potential to convert, develop or manage up to an additional eight resorts in certain locations in the Caribbean, Mexico, and South and Central America by 2025.
  • Wyndham Strategic Alliance. Our strategic alliance with Wyndham allows us to benefit from Wyndham's global portfolio of brands and guest loyalty program (which had approximately 106 million members as of December 31, 2023), and provides us with an exclusive right to own or operate Wyndham Alltra all-inclusive resorts through December 2026 in Mexico, Jamaica, the Dominican Republic and certain other Caribbean and Latin American destinations (collectively, the "Exclusive Territories"), subject to certain termination rights by Wyndham that are triggered on December 1, 2024. We have the right to extend our exclusivity right subject to achieving certain development milestones. Our strategic alliance also grants us a right of first offer to manage Wyndham Alltra all- inclusive resorts located outside of the Exclusive Territories during the initial exclusivity period and any extension. We have successfully converted two of our resorts in Mexico into Wyndham Alltra all-inclusive resorts and recently entered into management contracts to manage two Wyndham Alltra all-inclusive resorts.
• Proprietary Direct Booking Capabilities. To further support the direct booking benefits of partnering with globally recognized brands, we have invested in our own in-house direct booking platform to optimize our customer acquisition costs and build guest loyalty. For the year ended December 31, 2023, $147.6 million, or 16.0% of our Owned Net Revenue (as defined in Chapter 6. Management's Discussion and Analysis of Financial Condition and Results of Operations) was generated through playaresorts.com, compared to $16.9 million for the year ended December 31, 2018. We continue to invest in this effort to improve our selling capabilities and adapt to consumer demand.
• Integrated and Scalable Operating Platform. We believe we have developed a scalable resort management platform designed to improve operating efficiency at the 24 resorts we currently manage. Our platform enables us to integrate additional resorts we may acquire and manage resorts owned by third-parties.For example, between December 2022 and January 2023, we successfully internalized the management of two of our resorts that were previously managed by a third- party. Our platform also enables managers of each of our key functions, including sales, marketing and resort management, to observe, analyze, share and respond to trends throughout our portfolio. As a result, we are able to implement management initiatives on a real-time, portfolio-widebasis.
• Advantageous Exposure to Leisure Travel. Our beachfront resort portfolio skews our customer mix to be composed of approximately 90% leisure travelers. We believe that this concentration has historically positioned us to recover faster from periods of global reductions in travel, such as those relating to the COVID-19 pandemic and economic recessions, than many of our lodging peers, as the leisure segment of the travel market has generally rebounded faster than the business- oriented segment.
• Experienced Leadership with a Proven Track Record. Our senior management team has significant experience in the lodging industry, including operating all-inclusive resorts.
• • Bruce Wardinski, our Chief Executive Officer has over 30 years of experience in the hospitality industry, founded our predecessor company and previously was the Chief Executive Officer of two lodging companies: Barceló Crestline Corporation, an independent hotel owner, lessee and manager; and Crestline Capital Corporation, a New York Stock Exchange ("NYSE") listed hotel owner, lessee and manager. Mr. Wardinski was also the non- executive chairman of the board of directors of Highland Hospitality Corporation, a NYSE-listed owner of upscale full-service, premium limited-service and extended-stay properties. Mr. Wardinski held other leadership roles within the industry including Senior Vice President and Treasurer of Host Marriott Corporation (now Host Hotels and Resorts) (NYSE: HST)) and various roles with Marriott International, Inc. As of January 31, 2024, 3.5% of our outstanding ordinary shares were beneficially owned by Mr. Wardinski.
  • Ryan Hymel, our Chief Financial Officer, has over 20 years of experience working within the hospitality sector

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and is a founding member of our management team, beginning with Playa at its inception in 2006. He previously served as Senior Vice President and Treasurer of Playa and has worked at Barceló Crestline Corporation and Crestline Capital Corporation.

• Greg Maliassas, our Chief Operating Officer, has over 20 years of experience in the hospitality and lodging industry. Mr. Maliassas previously served as Senior Vice President Operations for the luxury brands of Accor Hotels in Central & Eastern Europe, Benelux and Switzerland, overseeing a portfolio of over 45 hotels.
• Fernando Mulet, our Chief Investment Officer, has over 20 years of experience in the hospitality industry, and is a founding member of our management team, beginning with Playa at its inception in 2006. Mr. Mulet previously served as the Director of International Investments & Asset Management with Highland Hospitality Corporation and prior to that worked for Barceló Hotels & Resorts.
• Tracy Colden, our Executive Vice President and General Counsel, has over 30 years of experience in the hospitality and lodging industry. She previously served as Executive Vice President and General Counsel for Highland Hospitality Corporation, and as Executive Vice President and General Counsel of Crestline Capital Corporation. Ms. Colden was also an Assistant General Counsel at Host Marriott Corporation.

Our Business and Growth Strategies

Our goal is to be the leading owner, operator and developer of all-inclusive beachfront resorts in the markets we serve and to generate attractive risk-adjusted returns above our cost of capital while creating value for our shareholders by implementing the following business and growth strategies:

• Selectively Pursue Strategic Growth Opportunities. The all-inclusive segment of the lodging industry is highly fragmented. We believe that we are well positioned to grow our portfolio through acquisitions and partnerships in the all- inclusive segment of the lodging industry. We believe that our extensive experience in all-inclusive resort operations, brand relationships, acquisition, expansion, renovation, repositioning and rebranding, as well as our direct booking strategy, established and scalable management platform, and ability to offer Nasdaq-listed ordinary shares to potential resort sellers will make us a preferred asset acquirer or partner.
• Secure New Management Agreements. We intend to pursue opportunities to capitalize on our scalable and integrated resort management platform and our expertise and experience with managing all-inclusive resorts, by seeking to manage premier all-inclusive resorts owned by third parties for management fees. During 2023, we entered into a new management agreement to manage all operations, sales and marketing of a resort operating under the Wyndham brand in the Dominican Republic. We may also look to make minority or majority investments in high return projects to obtain management agreements.
• Utilization of New Technologies and Leverage of Big Data. We utilize numerous technologies aimed at improving guest satisfaction and shareholder returns. Our website uses search engine and metasearch optimization tools aimed at driving direct bookings (i.e., bookings through our website or our brand partner websites), which is our lowest cost customer acquisition channel. As a result, we continue to benefit from a significant level of direct business at our Playa-managedresorts. In 2023, direct stays were approximately 37% of total Playa-managed room nights, and direct bookings, including future stays, were approximately 40% of total Playa-managed room nights.
  We also utilize an end-to-end technology at select resorts which uses sophisticated algorithms to identify in real-time what upgrades, packages and pricing to offer guests. This enables us to provide guests with several options to enhance their experience, while increasing revenue post-booking. Other technological innovations include our travel agent portal, which facilitates travel agent bookings without the additional commission layer of a tour and travel operator, as well as the continued launch of our new yield management system, which should maximize guest revenues by optimizing both package rates and channel mix.
  Additionally, by virtue of our partnerships with Hyatt, Hilton, and Wyndham, we have greatly increased our ability to reach millions of guests, further enabling us to drive lower customer acquisition costs, bookings and revenues.

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• Disposition of non-coreassets. We continuously monitor, review and optimize our portfolio to align with our strategic vision and maximize our return on invested capital. As part of this ongoing process, we may sell assets that no longer fit our criteria for capital investment and use the proceeds from these sales to pay down existing debt, reinvest in projects in our current portfolio, and/or pursue new growth opportunities. For example, in December 2023, we completed the sale of Jewel Punta Cana. We used proceeds from the sale for general corporate purposes.

Distribution Channels and Sales and Reservations

Our experienced sales and marketing team uses a strategic sales and marketing program across a variety of distribution channels through which our all-inclusive offerings are sold. Key components of this sales and marketing program include:

• Developing programs aimed at reaching consumers through:
• • Our company and resort websites;
  • The Hyatt website and toll-free reservation system;
  • The World of Hyatt® guest loyalty program;
  • The Hilton website and toll-free reservation system;
  • The Hilton Honors guest loyalty program;
  • The Wyndham website and toll-free reservation system;
  • The Wyndham Rewards guest loyalty program; and
  • Our toll-free reservation system that provides a comprehensive view of inventory in real time, based on demand;
• Targeting the primary tour operators and the wholesale market for transient business with a scalable program that supports shoulder and lower rate seasons while seeking to maximize revenue during high season, which also includes:
• • Engaging in cooperative marketing programs with leading travel industry participants;
  • Participating in travel agent and tour operator promotional campaigns; and
  • Utilizing online travel leaders, such as Expedia and Booking.com, to supplement sales during shoulder and lower rate seasons;
• Targeting group and incentive markets to seek and grow a strong base of corporate and event business;
• Developing customer loyalty and increasing repeat business through The Playa Collection, a third-party owned and operated long-term membership program that provides exclusive on-property benefits and amenities and significant preferred discounts to its members;
• Highlighting destination wedding and honeymoon programs;
• Participating in key industry trade shows targeted to the travel agent and wholesale market;
• Engaging in online and social media, including:
• • Search engine optimization;
  • Targeted online and bounce-back advertising;

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