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Playa Hotels & Resorts' Direct Bookings Get Major Boost from Hilton's Loyalty Program, Revamped Website

During Playa Hotels & Resorts fourth quarter 2018 earnings conference call on March 1, Chairman and CEO Bruce Wardinski discussed how the company was maximizing revenue and lowering customer acquisition costs.

In particular, Wardinski called out the company's partnership with Hilton and its loyalty program as a large contributing factor to its recent success. Since partnering, Hilton's 85 million loyalty members can earn and redeem points at Playa Hotels & Resorts. He gave the example of the company's Hilton Playa del Carmen and Hilton La Romana which recently went from direct bookings in mid-to-high single-digit range to 30% in less than three months.

"On any given night, roughly 60% of Hilton's occupancy across its system is driven by Hilton honors members and we are confident we can continue to narrow the gap between where we are currently booking and their system average," Wardinski said. "If just 0.1% of Hilton honors members were to stay with us, every one of our Hiltons would run at 100% occupancy 365 days a year."

Playa's CEO noted that companywide, its booked direct percentage reached 22% for guests who stayed during the fourth quarter of 2018. This is up nearly 300 basis points sequentially from third quarter 2018.

"For those bookings collected during the fourth quarter for all future periods, the metrics are even more encouraging as approximately 30% of our fourth quarter bookings were direct, up from 20% a year ago," he added. "For the full year 2018, 21.6% of rooms were booked direct, up from 18.2% in 2017, up 340 basis points year-over-year."

Playa Resorts & Hotels launched a new website in July 2018. Described by Wardinski as the company "lowest cost distribution channel," it is continuing to gain momemtum in bookings through this website. During the fourth quarter of 2018, 7.4% of the rooms booked came from, nearly 7.5 times the year-ago period and a sizable improvement over the third quarter of 2018.

"These bookings represented 10.5% of revenues, demonstrating the growth in net revenues as book direct is our lowest cost of acquisition channel and further demonstrates the potential for higher net rates especially versus the high-cost legacy distribution models," Wardinski explained.

This newly revamped website with uses new search engine optimization technology is expected to provide meaningful gains in website capture throughout 2019. Wardinski says the company is confident it is on target to hit its goal of 50% consumer-direct business during the next five years.

Additionally, during the first quarter of 2019, Play Resorts & Hotels said it will launch the next evolution of the Playa Resorts website, which contains a travel agent portal on which travel agents canmake commissioned reservations directly on without having to go through a tour and travel operator.

"This effectively removes an additional layer cost that previously existed serving Playa roughly 7% to 9% in commission per booking, while at the same time maintaining the economics for the travel agent on a basic booking and improving them in the case of upsells or pre-booked ancillary revenues," Wardinski said.

The company also discussed how it terminated its distribution agreement with Mark Travel, its highest cost distribution channel, in the fall of 2018.

"As a result of our branding, technological and system improvements we have already backfilled over 50% of our high-cost Mark Travel business for full year 2019," Wardinski stated. "And we are on pace to replace 100% of the business by year-end at an average customer acquisition cost per guest of 12% to 16%, which is eight to 14 percentage points lower than what we're paying Mark Travel.

"There is no stronger proof point that our strategy and positioning are resonating with guest and we are on track to creating long-term sustainable value for our shareholders through our unique and efficient distribution model," he continued. "The success of our website and booking engine has increased the size of our customer database dramatically and we are taking steps to better leverage that data."

To that end, the company recently began a soft rollout of an end-to-end upsell and rebook technology at selected resorts. This technology uses sophisticated algorithms to identify new revenue opportunities in real-time via the sale of ancillary items and additional room packages. This can include a suite upgrade, a late checkout, airport transportation or even booking the guest's next trip.

"Our goal is to delight our guest, increase loyalty and optimize profits by making the right offer, to the right guest, at the right time," Wardinski said. "Like all optimization engines, the technology gets smarter with each transaction and learns from every guest interaction, which means that we don't expect it to be an immediate contributor to our financial results, but over time do expect it to drive highly profitable upsell and ancillary revenues all while improving guest satisfaction and loyalty."

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