Hospitality company Playa Hotels & Resorts (NASDAQ:PLYA) reported Q4 CY2024 results topping the market’s revenue expectations, but sales fell by 9.7% year on year to $218.9 million. Its non-GAAP profit of $0.08 per share was significantly above analysts’ consensus estimates.
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Playa Hotels & Resorts (PLYA) Q4 CY2024 Highlights:
- Revenue: $218.9 million vs analyst estimates of $216.2 million (9.7% year-on-year decline, 1.3% beat)
- Adjusted EPS: $0.08 vs analyst estimates of $0.04 (significant beat)
- Adjusted EBITDA: $55.76 million vs analyst estimates of $51.3 million (25.5% margin, 8.7% beat)
- Operating Margin: 14.5%, in line with the same quarter last year
- RevPAR: $325.50 at quarter end, up 8% year on year
- Market Capitalization: $1.62 billion
Company Overview
Sporting a roster of beachfront properties, Playa Hotels & Resorts (NASDAQ:PLYA) is an owner, operator, and developer of all-inclusive resorts in prime vacation destinations.
Travel and Vacation Providers
Airlines, hotels, 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 airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Playa Hotels & Resorts’s sales grew at a sluggish 8.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the consumer discretionary sector and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Playa Hotels & Resorts’s recent history shows its demand slowed as its annualized revenue growth of 4.7% over the last two years is below its five-year trend. 
Playa Hotels & Resorts also reports revenue per available room, which clocked in at $325.50 this quarter and is a key metric accounting for daily rates and occupancy levels. Over the last two years, Playa Hotels & Resorts’s revenue per room averaged 10.2% year-on-year growth. Because this number is better 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’s revenue fell by 9.7% year on year to $218.9 million but beat Wall Street’s estimates by 1.3%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Playa Hotels & Resorts has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.8%, subpar for a consumer discretionary business. The divergence from its good operating margin stems from its capital-intensive business model, which requires Playa Hotels & Resorts to make large cash investments in working capital and capital expenditures.
Key Takeaways from Playa Hotels & Resorts’s Q4 Results
We were impressed by how significantly Playa Hotels & Resorts blew past analysts’ EPS and EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a solid quarter. The stock remained flat at $13.31 immediately after reporting.
Is Playa Hotels & Resorts an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
