Good morning. My name is Antonio Cárdenas , and I will be the conference operator today. At this time, I would like to welcome everyone to Fibra Hotel's twenty twenty-four third quarter earnings conference call. Fibra Hotel issued its quarterly report on Wednesday. If you did not receive a copy via email, you can find it at www.fibrahotel.com or email me at acardenas@fibrahotel.com.
Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance, and financial results.
Unless noted, all figures included herein were prepared in accordance with international financial reporting standards and are stated in nominal Mexican pesos. Joining us from Fibra Hotel are Mr. Simón Galante, CEO; Mr. Eduardo López, General Manager; Mr. Edouard Boudrant, CFO; and Mr. Guillermo Bravo, CIO. With that, I will turn the call over to Simón Galante.
Again. All right. Thank you, Antonio, and good morning, everyone. I am going to begin today's call by providing an overview of the third quarter of twenty twenty-four results, and will then turn the call over to Edouard Boudrant, our CFO, who will discuss our financial results in more detail, and we will then open the call for questions and answers.
The third quarter of twenty twenty-four results reflect a challenging demand environment due to soft economic activity and investment, coupled with margin reductions due to the increase in labor costs. The results of the quarter were below our expectations, and we will continue working to do our part in improving these figures and to execute our long-term business strategy.
The portfolio had a RevPAR growth of 7.3% year over year, with an ADR increase of 12.2% and an occupancy decrease of two hundred and seventy-eight basis points. We were able to increase rates above inflation, but the weaker room demand across regions, and especially in the select service category, created the decrease in overall occupancy.
We will continue to focus on increasing room rates over occupancy growth. In the business hotel segment, limited service and full service hotels performed well with a 12.6 RevPAR growth for limited service hotels and 12.1% RevPAR growth for the full service hotels. Regionally, there is still a normalization in demand in border cities, which are coming off historically high occupancy rates and posted a flat RevPAR growth.
Mexico City outperformed with a RevPAR growth of 14.6% during the quarter. Results were partially impacted by the difficult security and travel situation in Culiacán, as well as several weather and hurricane events. In Cancun, market conditions are still challenging. There were less flight arrivals, with ASUR reporting a 14% decrease in passengers at Cancun Airport, or one million less passengers in the quarter versus last year, on top of the normal impact from a fall seasonality.
Additionally, there were several hurricanes in the Caribbean in the quarter that fortunately did not cause physical damage to the hotel, but impacted quarterly results from cancellation and connectivity issues. The Fiesta Americana Condesa Cancun hotel had a RevPAR decrease in USD of 14%, leaving revenue for the quarter for 48 million MXN due to the decrease in revenues and the increase in labor costs.
Going forward, we expect the market conditions to remain similar in the fourth quarter. At this point, the forward group booking and booking pace for Q1 2025 looks stronger than 2024 and more in line with our expectations. Revenues for the quarter were MXN 1.3 billion, and EBITDA was MXN 303 million. EBITDA margin was 23.3%. We continue to experience margin compression from cost pressures in operating expenses, mainly labor.
To illustrate this point, the minimum wage in Mexico has increased 181% since 2018. In Fibra Hotel, we have taken productivity measures to offset this impact, such as clustering manager positions and reducing certain roles and services in hotels. With these measures, payroll in the same period only increased 50%. However, revenue in the same period only increased 30%.
We are working with our operating partners in operational efficiencies to reverse the margin loss in recent quarters, but we still expect to face headwinds from payroll growth above revenue growth. The changes we are implementing will take time and investment, but we are fully committed and believe we will see results in the medium and long term.
On the organic growth front, we are pleased to announce the signing of the iconic Ritz-Carlton brand for our hotel development in partnership with Fibra Danhos. The LEED-certified hotel with 131 luxury rooms will be located in one of the last premium land parcels in the Cancun Hotel Zone in Punta Nizuc. The hotel is expected to open in late 2027 and will be operated by Marriott International.
During the quarter, the Fiesta Americana Hacienda Galindo Hotel received LEED Gold certification in line with our ESG objectives. We also published our biodiversity policy, aligned with the recommendation of the Task Force on Nature-related Financial Disclosures. This policy aims to establish guidelines for the protection, reduction, and mitigation of biodiversity impacts.
We ended the quarter with a net debt position of MXN 3.675 million and LTV of 24.2%. For the third quarter of 2024, Fibra Hotel will make a distribution of MXN 0.1375 per CBFI . I would like to end my remarks by highlighting that we are working under changing market conditions, especially on the cost side, but we have the right team and asset to improve these results.
I would like to thank all of our partners and team members for their work and commitment to Fibra Hotel. I will now pass the call over to Edouard Boudrant, our CFO of Fibra Hotel, to discuss the financial and operating results of the third quarter.
Thank you, Simón, and good morning, everyone. During the third quarter of 2024, the hotel industry in Mexico continued to face challenges, particularly due to rising operating costs, with labor expenses being a significant factor. This pressure impacted both profitability and cash flow generation for the quarter. The occupancy rate for managed hotels for the quarter was 61%, compared to 63.7% for the third quarter of 2023.
Average daily rate was MXN 1,548, increasing 12% compared to the third quarter of 2023. Quarterly RevPAR was MXN 943, representing a 7% increase compared to the third quarter of 2023. The Fiesta Americana Condesa Cancun had an occupancy rate of 69%, compared to 77% one year ago.
The hotel had a net package ADR of MXN 5,556, and net package RevPAR was MXN 3,816, decreasing 8% compared to the third quarter of 2023. In USD, as the rate is sold in USD, ADR decreased by 7% from $299 to $279, and RevPAR decreased 15% from $228 to $195. Total revenues for the quarter was MXN 1,302 million, compared to MXN 1,273 million for the third quarter of 2023, a 2% increase. The total rent collected by the Hotel Fiesta Americana Condesa Cancun represented MXN 48 million, which is 4% of our total revenues, decreasing 26% versus last year.
During the third quarter of 2023, the total rent collected was MXN 65 million and represented 5% of the total revenues. Our lodging contribution for the quarter was MXN 402 million, compared to MXN 429 million for the third quarter of 2023, a 6% decrease. The margin of lodging contribution for the managed hotels was 27%, compared to a 28.5% margin for the third quarter of the year 2023.
Real estate expenses were MXN 25 million, compared to MXN 23 million for the third quarter of last year. Corporate expenses were MXN 74 million, compared to MXN 83 million during the third quarter of last year. EBITDA for the quarter was MXN 303 million, compared to MXN 324 million for the third quarter of last year.
In terms of EBITDA margin, it decreased from 25.5% to 23.3%. Half of the decrease in EBITDA margin is due to the lower than anticipated operations of our managed hotels, decrease in occupancy coupled with cost pressure, and half is due to the weak performance of the Fiesta Americana Condesa Cancun hotel.
We closed the quarter with a net debt of MXN 3.7 billion, decreasing MXN 107 million versus the end of last year. Gross debt amounted to MXN 4.2 billion, and the LTV ratio is very conservative at 24%. In August, we drew down MXN 50 million of an available revolving facility. As of today, our debt structure is extremely healthy. Only 7% is maturing during the next twelve months.
The average cost of debt is 9.5%, and USD-denominated debt represent 18% of Fibra Hotel total debt, or $39 million dollars. During the quarter, the debt position generated a financing cost of MXN 103 million. The net financial income was negative MXN 143 million, considering the 48 million pesos foreign exchange loss, mainly related to the USD-denominated debt.
We closed the quarter with a MXN 544 million cash position, compared with MXN 608 million at the end of last year. During the third quarter, we deployed MXN 120 million of investment, maintenance, CapEx, and repositioning CapEx.
MXN 82 million for maintenance CapEx, MXN 23 million in the remodeling the hotels Fiesta Inn Monterrey La Fe and Fiesta Inn Monterrey Valle, MXN 7 million on improvement in the Fiesta Americana Condesa Cancun, and MXN 9 million in other hotels of the portfolio. For the quarter, our FFO and our AFFO were positive, MXN 240 million and MXN 143 million.
Please note that in accordance with the distribution policy decided by technical committee in April of this year, we'll pay for the third quarter of 2024, a distribution of MXN 0.1375 per certificate. Total distribution per CBFI for the year will be MXN 0.55 per certificate, increasing 10% versus last year. At this point, I would like to open the floor for the Q&A question. Tonio, we are ready to take any question.
Thank you, Edouard. To ask a question, please raise your hand or send a message, and we will open your microphones. The first question comes from Felipe Barragán from BTG.
Hey, guys. Good morning. Thanks for the call and for taking my questions. One is a little bit on the color that you can give us on the CapEx for the Punta Nizuc development for the Ritz-Carlton. Can you just share a little bit more on the numbers? How much it's gonna be for you, how much it's for them, and sort of the timeline of that, if it's more front-ended or more towards the end.
And my second question is, we understand that the labor cost has been definitely an issue. So what would be sort of a sustainable margin moving forward, if you can give us a little bit of guidance of a range? I know, like, below thirty-six, above thirty-six would be helpful. Thank you.
Hi, Felipe. If you want, let me start with the first one, and we don't have a clear answer right now, because the project and the timelines are still being determined. What we know right now is we have the payment of the land, which is going to be fixed, but the reality is most of it is going to be more back-ended.
We don't expect a significant payment this year. We should start construction of all the structure, which we can be able to provide more information in the next call for next year. So for this year, we don't expect material investments, and we will provide enough color once we have the project more fully on their way. But you shouldn't expect as much this year, and then we can provide information for next year. And on the second part of the expenses, I think it's also moving, but I will let Edouard complement that.
Yes. Basically, regarding the margins, we have strong pressure in operating cost. And just to illustrate the theme, a little bit less than 50% of our staff is linked with the minimum wage in Mexico. And, as you know, it increased by 181% during the past few years. And, for example, for next year, we plan to increase that around 12%, as mentioned by the government. It's a very strong pressure that we have. We are doing a lot of initiatives in order to minimize the negative impact of that.
For example, to see in some hotels, if we can reduce some staffing guide, if we can reduce the food and beverage offering in order to lower the staff at the hotels. What we plan, it's on a medium-term basis, to improve a couple of percentage points, the margin at the hotels. It's a hard work that we have to do with the operator. We are fully committed to do that. We will not see a strong increase in the margin on a short-term basis, but we're fully committed to come back to a more higher margin at the hotels level in the couple of years.
And also, a strong driver of the margin, of the EBITDA margin of Fibra Hotel is the performance of Condesa Cancun. As you know, we received a rent from Condesa Cancun. The EBITDA margin of this rent is around 80% of EBITDA. So basically, we are looking to improve also the operating performance of Condesa. We see the first insight that we see that the winter of 2025 is getting more interesting than last year, and we hope that we will have a better year for Condesa Cancun next year than this year that has been very disappointing.
Got it. That, that's very clear. Thank you. Well, yeah, it's been quite difficult with a couple of hurricanes hitting Cancun. So yeah, hopefully next year. Thank you.
Thank you, Felipe.
The second question comes from Natalia Leo, from J.P. Morgan.
Hi, thank you. Good morning, everyone. So my question is, I'd like to get a sense on how you see demand for the coming quarters, and maybe if you have a little bit of color for twenty twenty-five. Not only Cancun, but I understand that should go follow the trends of the third quarter in the next quarter, but your overall portfolio, as we've seen occupancy decreasing on a year-over-year basis in these first three quarters. Thank you.
Hi, Natalia. How are you? Let me provide some color. The problem is things are really difficult to have a clear view right now. There's a lot of conflicting trends going on in the markets. The markets that had outperformed are normalizing and going back to normal. Leisure travel, which had done well for a very long while, is now starting to slow down at the margin a little bit. We are seeing some less flights in general, and economic activity is very rare. Some weeks you have very good activity, some weeks you have bad activity.
There's a lot of headline issues, including the U.S. elections, which have, in many cases, probably put some investments in standby until people have more color. So at this point, it's really difficult to get a very clear picture for next quarter in terms of how demand is going to react. What we can tell you is, we look at these numbers week to week and day to day, and the numbers have slowed down, but they have slowed down marginally.
And except in some cases, like we mentioned, the Culiacán, which slowed down significantly because of the issues there. And in some of the other places, we're still looking at healthy numbers in terms of general occupancy above 60%. In rates, we have been able to fortunately continue to increase prices.
So it's very difficult for us to provide a clear guide in terms of what we are seeing, but we do expect things to improve. What we know is there is very limited supply, except for in Cancun and in some leisure destinations, there's very little supply in the market. So all of the demand, we're needing increases, we should be able to gain back the pricing power that we had, and we should be able to improve. So in the short term, for this year, I think, again, it's going to be very difficult to have a clear picture. I think some of it will depend on what happens with U.S. elections and some other macroeconomic events.
For next year, we still expect at least the top line to continue to be favorable, because once this demand hits, we should be able to continue on the positive trend we had. I don't know if that answers your question, but it's we don't have enough information to give you a very clear outlook right now.
No, that's perfect. I understand. Thank you so much.
Thank you, Natalia.
The next question comes from Francisco Chavez, BBVA.
Hi. I have two questions regarding the Punta Nizuc project. I understand that you will provide more information later, but, Will your retained cash be enough to fund the committed CapEx for the development, or will you have to increase debt? And the second question is: How do you and Fibra Danhos plan to manage the residential component? Thank you.
Hi, Paco. Thank you for your questions. The residential component is part of another partner, which is called Beyond Ventures. What we will, as managers of the hotels, we will have some benefit in the recurring operations of the project. So once the residences are operational and so they can participate in the rental pool, and we will get some benefits in the operating income from that rental pool and from participating in spa, and restaurants, and all of the expenses that the residents have.
So it's a different business model that they have, but we will benefit in terms of that, and we will also benefit in terms of the allocation that was paid for some of the construction and the land, which is their part of the project. So we shouldn't really take that as much into account in the short term. And the first part of your question. Sorry, tell me, the first part of your question?
Yeah, it's regarding the funding of the committed topics.
Yes.
Okay.
So our perspective, things are fungible in terms of how we're going to allocate the cash, but our expectation is that if we need to take on some leverage, it will be at the end of the project to finish the project. It won't be significant, and that will depend on how we advance in other things that we have or that we could be working on in terms of some asset sales or the how much AFFO we are able to get in the next couple of years. But our expectation is that if we need to increase debt to finish this project, it will not be significantly higher than where we are right now.
It should be maybe a couple of percentage points, and that should go down once the hotel is up and operating. But we don't expect to fully fund it with new debt. We expect to fund it more with existing cash flow that we're getting at the company level.
Okay. Very clear. And just to follow up on this, can we assume that you will not be developing any other project or opportunity, or will you still be seeking for some additional projects?
We're always looking in the market. We have mentioned that we have another project, which is, again, more of a long-term project that probably won't require a lot of investment right now, and it's something that we could talk about, maybe next year or in a couple of years. So in the short term, we don't expect anything to be there.
We do expect, basically this project and our other priorities we have at the Fibra level. We're working on some rebrandings and remodelings and things like that. So we don't expect anything significant in the short term, but we're always in the market looking for opportunities, if they make sense for the company.
Great. Thank you.
Thank you, Paco.
The next question comes from Michel Galvez, from Principal.
Hey, thank you so much. It's only a quick follow-up over your equilibrium point in terms of occupancy rate, which would be it?
Hi, Michel. Thank you very much for your question. If you remember, during the pandemic, we've made a big adjustment in terms of the staff structure of Fibra Hotel. And by that time, we had more than 5,000 employees at the hotels, and we reduced, as of today, the number of employees, but about roughly 20%-25% less, doing some clusterization, eliminating some mid-management tasks. Basically, we succeeded in reducing the break-even point at hotels level from 25% to 23% of occupancy at hotel levels, and in terms of AFFO, from 38% to 35%.
As of today, with the strong increase in the operating cost of the hotel, I think that. The break-even point increased a little bit in term of. At the hotels levels, we are talking about 25% occupancy rate, and in terms of AFFO, we are talking about 37%-38%. So it's quite low. It's significantly lower than that we have prior to the pandemic, but it increased a little bit since the government decided to increase a lot the wages, and just to give you an information, a data, prior to the pandemic, staffing cost was 25% of the total revenue of the hotels.
As of today, in a year where this cost increased a lot, and also it has been quite disappointing in terms of occupancy rate. We're roughly between 27% and 28% of total revenue. So it increased. Yes, it increased a little bit, the breakeven point, but we are fully committed with the different operator we work with in order to be much more efficient and to lower the negative impact of this trend.
Thank you so much.
The next question comes from Bernardo Mántica from Santander Asset Management.
Hi, Simon, Eduardo. Thank you for taking my question. My question is maybe a very specific one. Among the many trends impacting your outlook, you mentioned U.S. elections. When Trump won the presidential elections in twenty sixteen, there was a bit of a deceleration in traffic across some tourism destinations. Do you see that as a risk in the short term, potential risk or not really for your markets? Thank you.
Hi, Bernardo. Let me take that one. This is Guillermo. I think there's. Let me separate that question into two parts, into leisure and into business. Our main worry really with the elections is more on the business side than in. It is that we. From what we are seeing from market info, is that there has been a sort of a pause in terms of what new investments are coming in, especially in manufacturing and you see some of these in the industrial warehouses in the north of the country and in the Bajío region. And so what we see is people are sort of in a wait-and-see mode until they see what happens.
And I don't think even whatever the outcome of the elections is, people will at least have more clarity, and then they will be able to plan, and then they will be able to invest. So it's not all negative or it's not one candidate or the other. It's really that people are not ready to commit until they have more color, because the possible outcomes are so different. So in the business side is where we have really seen more of an impact. We have seen an important slowdown in Tijuana, in Mexicali, in Juárez, and so we expect that to normalize a little bit.
I'm not sure how quickly that will be, but next year that should normalize, and we should have more color in terms of what investments are coming in from that front. In terms of the resort side, I think there's different, very different risks. I think that the election is a little bit less relevant, but if they continue to hit Mexico, it is a headline risk.
So if things become heated and people talk badly about the immigration or Mexico, then people, in many cases, are less willing to travel. But I think the value opportunity that Mexico provides as a tourism destination is over and above what anything else that can happen in the market.
So I don't see that slowing down, but we do see a more of an economic risk on that front. In the end, travel is a little bit of a consumer product, and if the U.S. consumer slows down or suffers, then we might see a little bit more of a slowdown in terms of tourism and leisure into the country, but that would be everywhere, not specific either to us or to Mexico. So we're not as worried in leisure in terms of the presidential outcome, but there it does have some other items that we are looking at.
Guillermo, that is super clear. Thank you for the answer.
Thank you.
Felipe Barragan from BTG, do you have another question?
No, I think it, I raised it by accident. Thank you.
There are no further questions. Thank you for participating in Fibra Hotel's 2024 third quarter results conference call. If you have any further questions, please do not hesitate to visit www.fibrahotel.com or contact us. This concludes today's call. Thank you and have a good day.