UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q





ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended September 30, ~~2017~~2018





o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NO. 1-38012

Playa Hotels & Resorts N.V.

(Exact name of registrant as specified in its charter)





The Netherlands		~~Not Applicable~~ 98-1346104
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

Prins Bernhardplein 200
1097 JB Amsterdam, the Netherlands		Not Applicable
(Address of Principal Executive Offices)		(Zip Code)

+31 20 521 49 62

(Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days. YES ý NO o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). YES ý NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer” and~~filer,” “smaller reporting ~~company,”~~company” and ~~"emerging~~“emerging growth ~~company"~~company” in Rule 12b-2 of the Exchange Act. ~~(Check One):~~



Large accelerated filer	o	Accelerated filer	ý
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO ý

As of November ~~7, 2017,~~5, 2018, there were ~~110,305,064~~130,478,993 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.



Playa Hotels & Resorts N.V. TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
		Page
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017	31
	Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017	42
	Condensed Consolidated Statements of Cumulative Redeemable Preferred Shares, Shareholders' Equity and Accumulated Other Comprehensive Loss for the nine months ended September 30, ~~2016~~2018 and 2017	53
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017	64
	Notes to the Condensed Consolidated Financial Statements	86
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2528
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4655
Item 4.	Controls and Procedures	4756
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4857
Item 1A.	Risk Factors	4857
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4857
Item 3.	Defaults Upon Senior Securities	4957
Item 4.	Mine Safety Disclosures	4957
Item 5.	Other Information	4957
Item 6.	Exhibits	5058

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Playa Hotels & Resorts N.V.

Condensed Consolidated Balance Sheets

($ in thousands, except share data)

(unaudited)


	As of September 30,			As of December 31,			As of September 30,			As of December 31,
	2017			2016			2018			2017
ASSETS
Cash and cash equivalents	$	137,827		$	33,512		$	137,692		$	117,229
Restricted cash	4,571			9,651			1,030			—
Trade and other receivables, net	33,747			48,881			36,734			51,527
Accounts receivable from related parties	1,128			2,532			6,321			1,495
Inventories	11,180			10,451			15,148			11,309
Prepayments and other assets	30,193			28,633			38,742			34,066
Property, plant and equipment, net	1,447,657			1,400,317
Property and equipment, net							1,794,494			1,466,326
Investments	1,174			1,389			936			990
Derivative financial instruments							1,817			—
Goodwill	51,731			51,731			74,787			51,731
Other intangible assets	1,727			1,975			5,002			2,087
Deferred tax assets	1,818			1,818			3,207			1,063
Total assets	$	1,722,753		$	1,590,890		$	2,115,910		$	1,737,823
LIABILITIES, CUMULATIVE REDEEMABLE PREFERRED SHARES AND SHAREHOLDERS' EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade and other payables	$	127,788		$	145,042		$	141,330		$	139,528
Accounts payable to related parties	3,363			8,184
Payables to related parties							2,274			2,966
Income tax payable	6,284			5,128			1,175			1,090
Debt	877,699			780,725			991,564			898,215
Debt to related party	—			47,592
Deferred consideration	—			1,836
Other liabilities	20,362			8,997			22,473			19,394
Deferred tax liabilities	76,832			76,832			103,938			77,081
Total liabilities	1,112,328			1,074,336			1,262,754			1,138,274
Commitments and contingencies
Cumulative redeemable preferred shares (par value $0.01; 0 and 28,510,994 shares authorized, issued and outstanding as of September 30, 2017 and December 31, 2016, respectively; aggregate liquidation preference of $0 and $345,951 as of September 30, 2017 and December 31, 2016, respectively)	—			345,951
Shareholders' equity
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 110,305,064 and 50,481,822 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively)	11,803			5,386
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 130,486,360 and 110,305,064 shares issued and 130,478,993 and 110,297,697 shares outstanding as of September 30, 2018 and December 31, 2017, respectively)							14,160			11,803
Treasury shares (at cost, 7,367 shares as of September 30, 2018 and December 31, 2017)							(80		)	(80		)
Paid-in capital	772,231			349,358			991,254			773,194
Accumulated other comprehensive loss	(3,750		)	(3,719		)	(3,852		)	(3,826		)
Accumulated deficit	(169,859		)	(180,422		)	(148,326		)	(181,542		)
Total shareholders' equity	610,425			170,603			853,156			599,549
Total liabilities, cumulative redeemable preferred shares and shareholders' equity	$	1,722,753		$	1,590,890
Total liabilities and shareholders' equity							$	2,115,910		$	1,737,823

The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.

Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

($ in thousands)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2018			2017			2018			2017
Revenue:
Package	$	102,093		$	99,798		$	373,502		$	348,808		$	123,633		$	102,093		$	402,627		$	373,502
Non-package	16,249			14,316			59,505			52,562			18,800			16,249			61,752			59,505
Management fees													152			—			503			—
Cost reimbursements													227			—			349			—
Total revenue	118,342			114,114			433,007			401,370			142,812			118,342			465,231			433,007
Direct and selling, general and administrative expenses:
Direct	75,650			67,995			232,132			214,039			91,573			75,807			250,742			231,567
Selling, general and administrative	23,008			22,034			76,713			66,237			28,489			23,008			87,742			76,713
Pre-opening													87			—			87			—
Depreciation and amortization	13,808			13,022			40,093			38,809			20,138			13,808			51,709			40,093
Insurance proceeds	—			(179		)	—			(309		)
Reimbursed costs													227			—			349			—
Gain on insurance proceeds													(686		)	—			(2,207		)	—
Direct and selling, general and administrative expenses	112,466			102,872			348,938			318,776			139,828			112,623			388,422			348,373
Operating income	5,876			11,242			84,069			82,594			2,984			5,719			76,809			84,634
Interest expense	(13,099		)	(13,418		)	(41,187		)	(40,619		)	(7,637		)	(13,099		)	(35,151		)	(41,187		)
Loss on extinguishment of debt	—			—			(12,526		)	—			—			—			—			(12,526		)
Other income (expense), net	1,782			(225		)	1,191			(2,414		)
Other (expense) income													(390		)	1,939			(1,836		)	626
Net (loss) income before tax	(5,441		)	(2,401		)	31,547			39,561			(5,043		)	(5,441		)	39,822			31,547
Income tax (provision) benefit	(226		)	841			(20,105		)	5,270
Income tax provision													(379		)	(226		)	(6,606		)	(20,105		)
Net (loss) income	(5,667		)	(1,560		)	11,442			44,831			(5,422		)	(5,667		)	33,216			11,442
Other comprehensive income (loss), net of taxes:
Benefit obligation gain (loss)	11			35			(31		)	44			37			11			(26		)	(31		)
Other comprehensive income (loss)	11			35			(31		)	44			37			11			(26		)	(31		)
Total comprehensive (loss) income	$	(5,656	)	$	(1,525	)	$	11,411		$	44,875		$	(5,385	)	$	(5,656	)	$	33,190		$	11,411
Dividends of cumulative redeemable preferred shares	—			(11,469		)	(7,922		)	(33,164		)	—			—			—			(7,922		)
Non-cash dividend to warrant holders	—			—			(879		)	—			—			—			—			(879		)
Net (loss) income available to ordinary shareholders	$	(5,667	)	$	(13,029	)	$	2,641		$	11,667		$	(5,422	)	$	(5,667	)	$	33,216		$	2,641
(Losses) earnings per share - Basic	$	(0.05	)	$	(0.26	)	$	0.03		$	0.12		$	(0.04	)	$	(0.05	)	$	0.28		$	0.03
(Losses) earnings per share - Diluted	$	(0.05	)	$	(0.26	)	$	0.03		$	0.12		$	(0.04	)	$	(0.05	)	$	0.28		$	0.03
Weighted average number of shares outstanding during the period - Basic	110,286,197			50,481,822			92,377,968			50,481,822			130,478,993			110,286,197			119,344,659			92,377,968
Weighted average number of shares outstanding during the period - Diluted	110,286,197			50,481,822			92,453,447			50,481,822			130,478,993			110,286,197			119,647,364			92,453,447

The accompanying Notes form an integral part of the Condensed Consolidated Financial ~~Statements~~Statements.

Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Cumulative Redeemable Preferred Shares, Shareholders'

Equity and Accumulated Other Comprehensive Loss for the nine months ended September 30, ~~2016~~2018 and 2017

($ in thousands, except share data)

(unaudited)

Shareholders' Equity
Cumulative Redeemable Preferred Shares Ordinary Shares Treasury Shares Paid-In Capital
Accumulated Other
Comprehensive Loss
Accumulated Deficit Total
Shares Amount Shares Amount Shares Amount
Balance at December 31, 2015 32,738,094
$ 352,275
60,249,330
$ 656
5,373,884
$ (23,108 ) $ 420,872
$ (4,067 ) $ (200,638 ) $ 193,715
Retroactive application of recapitalization (9,767,508 ) 4,730
(5,373,884 ) 23,108
(27,838 ) —
Adjusted balance at December 31, 2015 32,738,094
$ 352,275
50,481,822
$ 5,386
—
$ —
$ 393,034
$ (4,067 ) $ (200,638 ) $ 193,715
Net income for the period 44,831
44,831
Benefit obligation gain, net of tax 44
44
Dividends of cumulative redeemable preferred shares 33,164
(33,164 ) (33,164 )
Balance at September 30, 2016 32,738,094
$ 385,439
50,481,822
$ 5,386
—
$ —
$ 359,870
$ (4,023 ) $ (155,807 ) $ 205,426



				Shareholders' Equity
	Cumulative Redeemable Preferred Shares			Ordinary Shares			Treasury Shares				Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2017	—	$	—	110,297,697	$	11,803	7,367	$	(80	)	$	773,194		$	(3,826	)	$	(181,542	)	$	599,549
Net income for the period																	33,216			33,216
Benefit obligation loss, net of tax														(26		)				(26		)
Shares issued in business combination (see Note 4)				20,000,000	2,336						213,064									215,400
Share-based compensation				181,296	21						5,051									5,072
Repurchase of Earnout Warrants (see Note 10)											(55		)							(55		)
Balance at September 30, 2018	—	$	—	130,478,993	$	14,160	7,367	$	(80	)	$	991,254		$	(3,852	)	$	(148,326	)	$	853,156


						Shareholders' Equity																										Shareholders' Equity
	Cumulative Redeemable Preferred Shares					Ordinary Shares				Treasury Shares					Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total			Cumulative Redeemable Preferred Shares					Ordinary Shares				Treasury Shares					Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Shares		Amount			Shares		Amount		Shares		Amount															Shares		Amount			Shares		Amount		Shares		Amount												��
Balance at December 31, 2016	28,510,994		$	345,951		60,249,330		$	656	5,373,884		$	(23,108	)	$	377,196		$	(3,719	)	$	(180,422	)	$	170,603		28,510,994		$	345,951		60,249,330		$	656	5,373,884		$	(23,108	)	$	377,196		$	(3,719	)	$	(180,422	)	$	170,603
Retroactive application of recapitalization						(9,767,508	)	4,730		(5,373,884	)	23,108			(27,838		)							—								(9,767,508	)	4,730		(5,373,884	)	23,108			(27,838		)							—
Adjusted balance at December 31, 2016	28,510,994		$	345,951		50,481,822		$	5,386	—		$	—		$	349,358		$	(3,719	)	$	(180,422	)	$	170,603		28,510,994		345,951			50,481,822		5,386		—		—			349,358			(3,719		)	(180,422		)	170,603
Net income for the period																					11,442			11,442																							11,442			11,442
Benefit obligation loss, net of tax																		(31		)				(31		)																		(31		)				(31		)
Recapitalization transaction						52,982,364		5,653							427,878									433,531								52,982,364		5,653							427,878									433,531
Dividends on cumulative redeemable preferred shares			7,922												(7,922		)							(7,922		)			7,922												(7,922		)							(7,922		)
Purchase of cumulative redeemable preferred shares	(28,510,994	)	(239,492		)																			—			(28,510,994	)	(239,492		)																			—
Settlement of accrued dividends of cumulative redeemable preferred shares			(114,381		)																			—					(114,381		)																			—
Issuance of ordinary shares in exchange for warrants						6,689,309		747							132						(879		)	—								6,689,309		747							132						(879		)	—
Share-based compensation						151,569		17							2,785									2,802								151,569		17							2,785									2,802
Balance at September 30, 2017	—		$	—		110,305,064		$	11,803	—		$	—		$	772,231		$	(3,750	)	$	(169,859	)	$	610,425		—		$	—		110,305,064		$	11,803	—		$	—		$	772,231		$	(3,750	)	$	(169,859	)	$	610,425

The accompanying Notes form an integral part of the Condensed Consolidated Financial ~~Statements~~Statements.

Playa Hotels & Resorts N.V.

Condensed Consolidated Statements of Cash Flows

($ in thousands)

(unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2018			2017
CASH FLOW FROM OPERATING ACTIVITIES:
Net income	$	11,442		$	44,831		$	33,216		$	11,442
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40,093			38,809			51,709			40,093
Amortization of debt discount, premium and issuance costs	1,900			2,349			1,175			1,900
Share-based compensation	2,803			—			5,072			2,803
Gain on derivative financial instruments							(1,817		)	—
Gain on property damage insurance proceeds							(203		)	—
Loss on extinguishment of debt	12,526			—			—			12,526
Gain on insurance recoverables	—			(309		)
Other	(306		)	18			985			239
Changes in assets and liabilities:
Trade and other receivables, net	14,238			11,851			14,522			14,238
Accounts receivable from related parties	48			895			(4,826		)	48
Inventories	(784		)	(629		)	(214		)	(784		)
Prepayments and other assets	(26,564		)	(4,230		)	(3,845		)	(26,564		)
Trade and other payables	9,183			(41,969		)	(4,815		)	9,183
Accounts payable to related parties	(1,567		)	2,038			(692		)	(1,567		)
Income tax payable	1,256			(4,431		)	85			1,256
Deferred consideration	654			237			—			654
Other liabilities	299			(560		)	704			299
Net cash provided by operating activities	65,221			48,900			91,056			65,766
INVESTING ACTIVITIES:
Purchase of property, plant and equipment	(69,945		)	(11,814		)
Acquisition of Sagicor business, net of cash acquired							(93,128		)	—
Purchase of property and equipment							(67,252		)	(75,570		)
Contract deposit	(2,700		)	—			—			(2,700		)
Purchase of intangibles	(438		)	(254		)	(1,505		)	(438		)
Proceeds from disposal of property, plant and equipment	53			53
Insurance proceeds	—			479
Property damage insurance proceeds							203			—
Proceeds from disposal of property and equipment							—			53
Net cash used in investing activities	(73,030		)	(11,536		)	(161,682		)	(78,655		)
FINANCING ACTIVITIES:
Proceeds from debt issuance, net of $1.3 million discount	528,675			—
Proceeds from debt issuance							99,499			528,675
Issuance costs of debt	(7,984		)	—			—			(7,984		)
Repayment of deferred consideration	(2,490		)	(1,891		)	—			(2,490		)
Repayment of Term Loan	(364,138		)	(2,813		)	(7,325		)	(364,138		)
Repayment of Senior Notes due 2020	(121,597		)	—			—			(121,597		)
Recapitalization transaction	79,658			—			—			79,658
Repayments of borrowings on revolving credit facility	—			(33,000		)
Net cash provided by (used in) financing activities	112,124			(37,704		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	104,315			(340		)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD	$	33,512		$	35,460
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	137,827		$	35,120
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of interest capitalized	$	47,051		$	46,399
Cash paid for income taxes	$	17,108		$	12,976
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Repurchase of Earnout Warrants							(55		)	—
Net cash provided by financing activities							92,119			112,124
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH							21,493			99,235
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF THE PERIOD							$	117,229		$	43,163
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD							$	138,722		$	142,398


RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents						137,692		137,827
Restricted cash						1,030		4,571
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH						$	138,722	$	142,398
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of interest capitalized						$	40,783	$	47,051
Cash paid for income taxes						$	9,131	$	17,108
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Non-cash issuance of shares in business combination (see Note 4)						$	215,400	$	—
Capital expenditures incurred but not yet paid	$	11,075		$	53	$	439	$	11,075
Intangible assets capitalized but not yet paid						$	674	$	—
Interest capitalized but not yet paid	$	134		$	—	$	43	$	134
Re-class from restricted cash to land	$	(5,625	)	$	—
Non-cash PIK Dividends	$	7,922		$	33,164
Non-cash PIK dividends						$	—	$	7,922
Purchase of cumulative redeemable preferred shares	$	(239,492	)	$	—	$	—	$	(239,492	)
Settlement of accrued dividends of cumulative redeemable preferred shares	$	(114,381	)	$	—	$	—	$	(114,381	)
Par value of vested restricted share awards	$	17		$	—
Par value of ordinary shares issued in exchange for warrants	$	747		$	—	$	—	$	747
Non-cash dividend to warrant holders	$	879		$	—	$	—	$	879
Par value of vested restricted share awards						$	21	$	17

The accompanying Notes form an integral part of the Condensed Consolidated Financial ~~Statements~~Statements.

Playa Hotels & Resorts N.V.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Note 1. Organization, operations and basis of presentation

Background

Playa Hotels & Resorts N.V. (“Playa” or the ~~"Company"~~“Company”) is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations. We own and/or manage a portfolio of 1320 resorts located in Mexico, the Dominican Republic and Jamaica. ~~We currently manage eight of the 13 resorts we own, as well as one resort owned by a third party.~~ Unless otherwise indicated or the context requires otherwise, references in our condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.

Basis of preparation, presentation and measurement

On June 1, 2018, we completed a business combination with the Sagicor Parties (as defined in Note 4), which caused us to evaluate and modify the presentation of our reportable segments. See Note 4 and Note 19 for additional discussion regarding the business combination and our reportable segments, respectively.

Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Company’s Consolidated Financial Statements as of and for the year ended December 31, ~~2016,~~2017, included in our Annual Report on Form ~~8-K~~10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”) on March ~~14, 2017.~~1, 2018 (the "Annual Report").

In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Results for all comparative prior periods have been reclassified to conform to the current period presentation.

The results of operations for the three and nine months ended September 30, ~~2017~~2018 are not necessarily indicative of the results of operations to be expected for the full year ended December 31, ~~2017.~~2018. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.

Note 2. Significant accounting policies

~~Share-based compensation~~

The Company has adopted an equity incentive plan that provides for the grant of share options, share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards. Share-based compensation is measuredDerivative financial instruments

We may use derivative financial instruments, primarily interest rate swap contracts, to hedge our exposure to interest rate risk. Such derivative financial instruments are initially recorded at ~~the~~ fair value ~~of the award~~ on the date ~~of grant~~on which a derivative contract is entered into and ~~recognized as an expense on a straight-line basis over the vesting period. For awards with market conditions, the conditions~~ are ~~incorporated into the~~subsequently remeasured to fair value measurement and the compensation expense is not adjusted if the conditions are not met. For awards with performance conditions, compensation expense is recognized when it becomes probable that the performance criteria specified in the awards will be achieved and, accordingly, the compensation value is adjusted following theat period end. Any gains or losses arising from changes in ~~the estimates of shares likely to vest based on the performance criteria. The determination of~~ fair value on derivative contracts not designated for hedge accounting are recorded in interest expense in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Goodwill

For the ~~market based awards on~~reporting units included within our Jamaica reportable segment that recognized goodwill from the ~~date~~business combination with the Sagicor Parties (as defined in Note 4), we will review goodwill for impairment as of ~~grant~~October 1st each year or more frequently if events or changes in circumstances indicate a potential impairment. There is ~~subjective and involves significant estimates and assumptions including expected volatility of~~no change to our approach over existing goodwill associated with the Company's shares, expected dividend yield, expected term and assumptions of whether these awards will achieve performance thresholds. The effects of forfeitures are recognized in compensation expense when they occur.reporting units within our Yucatán Peninsula reportable segment.

~~Future~~

Standards adopted



Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), as clarified and amended by ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20	This standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance.	January 2018	We applied the modified retrospective transition method to all contracts upon the adoption of ASU 2014-09. We provided the additional required disclosures, but the cumulative adjustment from our comparative periods was zero in our Condensed Consolidated Financial Statements. See Note 3.

ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities as clarified and amended by ASU 2018-03	This standard significantly revises the accounting related to the classification and measurement of investment in equity securities and the presentation of certain fair value changes of financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments.	January 2018	The adoption of ASU 2016-01 reduced our disclosure requirements, but did not impact our Condensed Consolidated Financial Statements. We are no longer required to disclose the method and significant assumptions used to estimate the fair value of our financial instruments measured at amortized cost on the Condensed Consolidated Balance Sheet.

ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)	This standard amends Accounting Standards Codification (“ASC”) 230 to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASC 230 lacks consistent principles for evaluating the classification of cash payments and receipts in the statement of cash flows. This has led to diversity in practice and, in certain circumstances, financial statement restatements. Therefore, the FASB issued ASU 2016-15 with the intent of reducing diversity in practice with respect to eight types of cash flows.	January 2018	The adoption of ASU 2016-15 provided clarification to existing requirements and did not have a material effect on our Condensed Consolidated Financial Statements.

ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory	This standard requires that an entity recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Prior to this ASU, an entity was prohibited from recognizing the income tax consequences of an intra-entity asset transfer until the asset had been sold to an outside party.	January 2018	The adoption of ASU 2016-16 did not have a material effect on our Condensed Consolidated Financial Statements. We have limited intra-entity asset transfers, or intercompany sales, other than inventory that would require income tax recognition.

ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business	This standard provides guidance that will enable more consistency in accounting for transactions when determining if they represent acquisitions or disposals of assets or of a business. Under the ASU, when determining whether an integrated set of assets and activities constitutes a business, entities must go through a “screen.”	January 2018	The adoption of ASU 2017-01 simplified our decision making process of determining whether a purchase constitutes a business combination or an acquisition of assets. We applied this guidance to our acquisition of the Sagicor Assets (as defined in Note 4), which was accounted for as a business combination.

ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Non-financial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Non-financial Assets	The standard clarifies the scope and accounting of a financial asset that meets the definition of an in substance non-financial asset and the definition of an in substance non-financial asset. The ASU also adds guidance for partial sales of non-financial assets.	January 2018	We utilized the modified retrospective transition method upon the adoption of ASU 2017-05 and the cumulative adjustment from our comparative periods was zero in our Condensed Consolidated Financial Statements, as we historically have not sold material non-financial assets in our normal course of business.

~~In May 2014, the Financial Accounting~~ Standards ~~Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2014-09 (“ASU 2014-09”),~~ not yet adopted



Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU No. 2016-02, Leases (Topic 842)	This standard introduces a lessee model that brings most leases on the balance sheet. This will increase a lessee’s reported assets and liabilities—in some cases very significantly. Lessor accounting remains substantially similar to current U.S. GAAP.	January 2019	We are currently evaluating ASU 2016-02 noting that we have not determined the full impact of adoption of ASU 2016-02 on our Condensed Consolidated Financial Statements. However, we expect to adopt this standard prospectively with a cumulative-effect adjustment to opening equity in accordance with the alternative transition method outlined in ASU 2018-11, Leases (Topic 842): Targeted Improvements. The potential impact on our Condensed Consolidated Financial Statements is largely based upon the population of long-term leases in effect at the date of adoption, but we expect the most significant leases to consist of our corporate offices. We expect to record a right of use asset and corresponding lease liability for our operating leases with an original term of greater than one year where we are the lessee. We do not expect material changes to the recognition of operating lease expense in our Condensed Consolidated Financial Statements.

ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement	The standard modifies the disclosure requirements of ASC 820 by eliminating and modifying certain disclosures related to the fair value hierarchy and adding new disclosures related to Level 3 fair value measurements.	January 2020	We do not expect the adoption of ASU 2018-13 to have a material impact our disclosures as we do not have any recurring or nonrecurring Level 3 fair value measurements.

ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans	The standard adds requirements for an entity to disclose (i) the weighted-average interest crediting rates used in cash balance pension plans, (ii) a description of the reasons for significant gains and losses affecting the benefit obligation and (iii) an explanation of any other significant changes in the benefit obligation or plan assets. It also removes certain disclosures for defined benefit plans.	January 2020	We do not expect the adoption of ASU 2018-14 to have a material impact on our disclosures. We do not have a cash balance pension plan and do not expect gains or losses on our pension obligation to be material to the Condensed Consolidated Financial Statements.

ASU No. 2018-15, Intangibles—Goodwill and Other— Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.	January 2020	We do not expect the adoption of ASU 2018-15 to have a material impact on our Condensed Consolidated Financial Statements as implementation costs for our hosting arrangements that are service contracts are immaterial.

Note 3. Revenue

~~Revenue from Contracts with Customers.~~ The standard provides companies with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. ASU 2015-14,On January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, ~~(Topic 606): Deferral of~~as described in Note 2, using the ~~Effective Date~~, defers the effective date of ASU 2014-09 by one year to apply to annual reporting periods beginning after December 15, 2017, but the early adoption of this ASU is permitted. The guidance permits companies to either apply the requirements retrospectivelymodified retrospective approach to all ~~prior periods presented, or apply the requirements~~contracts resulting in ~~the year of adoption, through a~~no cumulative ~~adjustment. Based on our preliminary assessment of our revenue streams under the new standard, we do not expect the~~adjustment to accumulated deficit. The adoption of this standard ~~to have a material~~did not impact onthe timing of our ~~consolidated financial statements and related disclosures. The performance obligations related to our package and non-package~~ revenue ~~streams are generally~~

~~fully satisfied at the point that revenue is recognized due to~~recognition based on the short-term, day-to-day nature of ~~these revenue streams.~~ our operations.

The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in Note 19) ($ in thousands):



	Three Months Ended September 30, 2018
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	52,047	$	14,848	$	22,800	$	33,938	$	—	$	123,633
Non-package revenue	6,681		2,169		4,780		5,170		—		18,800
Management fees	—		—		—		—		152		152
Cost reimbursements	—		—		—		—		227		227
Total revenue	$	58,728	$	17,017	$	27,580	$	39,108	$	379	$	142,812



	Three Months Ended September 30, 2017
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	53,926	$	14,435	$	21,468	$	12,264	$	—	$	102,093
Non-package revenue	7,697		2,457		4,670		1,413		12		16,249
Total revenue	$	61,623	$	16,892	$	26,138	$	13,677	$	12	$	118,342



	Nine Months Ended September 30, 2018
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	182,913	$	57,057	$	83,849	$	78,466	$	342	$	402,627
Non-package revenue	22,775		10,338		15,644		12,994		1		61,752
Management fees	—		—		—		—		503		503
Cost reimbursements	—		—		—		—		349		349
Total revenue	$	205,688	$	67,395	$	99,493	$	91,460	$	1,195	$	465,231



	Nine Months Ended September 30, 2017
	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Other		Total
Package revenue	$	189,531	$	58,365	$	81,813	$	43,793	$	—	$	373,502
Non-package revenue	25,770		11,588		15,121		7,014		12		59,505
Total revenue	$	215,301	$	69,953	$	96,934	$	50,807	$	12	$	433,007

Performance obligations

We ~~currently expect~~recognize revenues when the performance obligations are satisfied by transferring control of the product or service to ~~adopt ASU 2014-09 utilizing the modified retrospective transition method on January 1, 2018, noting that the cumulative adjustment applied~~our customers as described in the table below:



Revenue	Description	Timing of Revenue Recognition
Package	Sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities. All services offered as part of the all-inclusive experience are considered to be one performance obligation.	Revenue is recognized, net of discounts and rebates, based on the agreed upon price after each stay when our performance obligation of all-inclusive services is considered transferred to the customer.
Non-package	All other revenues earned from the operations of our resorts other than package revenue. This includes, but is not limited to, the sale of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages.	Revenue is recognized based on the agreed upon price after the completion of the sale when the product or service is transferred to the customer.
Management fees	Fees earned for managing hotels owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of resort revenue, and an incentive fee, which is computed as a percentage of resort profitability.	Revenue is recognized over the term of the service period as the third-party owners benefit from our management services.
Cost reimbursements	Cash reimbursements for costs related to managing hotels owned by third-parties.	Revenue is recognized when agreed upon reimbursable costs are incurred from managing hotels owned by third-parties.

We do not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less. Due to the nature of ~~adoption~~our business, our revenue is ~~expected~~not significantly impacted by refunds. Cash payments received in advance of guests staying

at our resorts are refunded to ~~be immaterial.~~

~~In March 2017,~~hotel guests if the ~~FASB issued ASU No. 2017-07 ("ASU 2017-07"),~~ ~~Compensation-Retirement Benefits (Topic 715): Improving~~guest cancels within the ~~Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ ~~Net periodic benefit cost is currently reported~~specified time period, before any services are rendered. Refunds related to service are generally recognized as an ~~employee cost within operating income. ASU 2017-07 requires bifurcation~~adjustment to the transaction price at the time the hotel stay occurs or services are rendered.

Contract assets and liabilities

We do not have any material contract assets as of September 30, 2018 and December 31, 2017 other than trade and other receivables, net ~~benefit cost resulting in~~on our Condensed Consolidated Balance Sheet. Our receivables are primarily the ~~service cost component being presented~~result of contracts with ~~other employee compensation costs in operating income. The other components will be reported separately outside~~customers, which are reduced by an allowance for doubtful accounts that reflects our estimate of ~~operations and~~amounts that will not be ~~eligible for capitalization. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods therein.~~ collected.

We ~~do not expect the implementation~~record contract liabilities when cash payments are received or due in advance of ~~ASU 2017-07 to have a material impact~~guests staying at our resorts, which are presented within advance deposits (see Note 18) within trade and other payables on our ~~financial statements. All non-service cost components~~Condensed Consolidated Balance Sheet. Contract liabilities decreased from $40.9 million as of ~~our net periodic benefit cost will be presented retrospectively~~December 31, 2017 to $39.4 million as of September 30, 2018. The decrease for ~~all comparative periods within~~ the ~~consolidated statements~~nine months ended September 30, 2018 was primarily driven by $35.0 million of income as other income (expense), net instead of direct expense with no impact to overall net income. For purposes of evaluating the performance of our operating segments, all components of net periodic benefit cost will bepackage revenue recognized that was included in the ~~operating results~~advanced deposits balance as of December 31, 2017, partially offset by additional cash payments received from guests prior to their stay and $5.8 million in advance deposits acquired in the ~~resorts we own as we~~business combination with the Sagicor Parties (as defined in Note 4).

Contract costs

We consider ~~them~~sales commissions earned to be ~~ongoing~~incremental costs of ~~operations.~~

~~Adopted accounting standards~~

~~In March 2016,~~obtaining a contract with our customers. As a practical expedient, we expense these costs as incurred when the ~~FASB issued ASU No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~, which is intended to simplify various aspects of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The new standard requires excess tax benefits and tax deficienciesperiod to be recorded in the statements of income as a component of the provision for income taxes when stock awards vest or are settled. In addition, it eliminates the requirement to reclassify cash flows related to excess tax benefits from operating activities to financing activities on the consolidated statements of cash flows. The standard also provides an accounting policy election to account for forfeitures as they occur, allows us to withhold more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting, and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flows statement. We adopted this standard in the second quarter of 2017 in connection with our initial grant of restricted share awards. Upon adoption, excess tax benefits or deficiencies from share-based award activity are reflected in the consolidated statements of income as a component of the provision for income taxes. We also elected to account for forfeitures as they occur, ratherbenefited is less than ~~estimate expected forfeitures.~~ one year.

Note 3.4. Business combinations

Business combination with the Sagicor Parties

On February 26, 2018, we entered into a Share Exchange Implementation Agreement with JCSD Trustee Services Limited, X Fund Properties Limited, Sagicor Pooled Investment Funds Limited, and Sagicor Real Estate X Fund Limited (collectively, the “Sagicor Parties”), as amended by that certain First Amendment to Share Exchange Implementation Agreement dated May 31, 2018 (as amended, the “Contribution Agreement”). Pursuant to the Contribution Agreement, the Sagicor Parties agreed to contribute a portfolio of the following assets (the “SagicorAssets”) to a subsidiary of Playa in exchange for consideration consisting of a combination of our ordinary shares and cash:

The Hilton Rose Hall Resort & Spa;

The Jewel Runaway Bay Beach & Golf Resort;

The Jewel Dunn’s River Beach Resort;

The Jewel Paradise Cove Beach Resort & Spa;

The 88 units comprising one of the towers in the multi-tower condominium and spa at the Jewel Grande Montego Bay;

Developable land sites adjacent to the Jewel Grande Montego Bay and the Hilton Rose Hall Resort & Spa;

The management contract for the units owned by the Sagicor Parties at the Jewel Grande Montego Bay; and

All of the Sagicor Parties' rights to “The Jewel” hotel brand.

On June 1, 2018 (the “Acquisition Date”), we consummated our acquisition of the SagicorAssets for total consideration, after preliminary prorations and working capital adjustments, of $308.5 million. The Company accounted for the acquisition as a business combination in accordance with ASC 805, Business Combinations, and allocated the purchase price to the fair values of assets acquired and liabilities assumed. The business combination with the Sagicor Parties allows us to expand our portfolio of resorts in the all-inclusive segment of the lodging industry, capitalize on opportunities for growth and create significant operational synergies.

The following table summarizes the fair value of each class of consideration transferred to the Sagicor Parties on the Acquisition Date ($ in thousands, except share data):



Cash consideration, net of cash acquired of $0.1 million	$	93,128
Ordinary shares (20,000,000 shares at the Acquisition Date closing price of $10.77 per share, €0.10 par value)	215,400
Total purchase consideration	$	308,528

Preliminary fair values of assets acquired and liabilities assumed

The following table presents our preliminary estimates of fair values of the assets that we acquired and the liabilities that we assumed on the Acquisition Date, as previously disclosed in our Quarterly Report on Form 10-Q for the three months ended June 30, 2018, filed with the SEC on August 6, 2018, and as of September 30, 2018. Our preliminary estimates are based on the information that was available as of the Acquisition Date, and we are continuing to evaluate the underlying inputs and assumptions used in our valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which can be up to one year from the Acquisition Date.

The acquisition of the ground lease, which previously gave rise to the favorable intangible ground lease asset, was contingent on certain terms and conditions disclosed in the Contribution Agreement. We chose not to assume the ground lease as these terms and conditions were not met. We also revised our estimate of deferred income taxes based on this election and the receipt of updated tax basis information of the net assets acquired. The impact of these adjustments is as follows ($ in thousands):



	June 1, 2018 (as previously reported)			Adjustments			June 1, 2018 (as adjusted)
Total purchase consideration	$	308,528		$	—		$	308,528
Net assets acquired
Working capital	(1,665		)	—			(1,665		)
Property and equipment	309,452			2,847			312,299
Identifiable intangible assets and liabilities	2,197			(2,646		)	(449		)
Deferred income taxes	(28,753		)	4,040			(24,713		)
Goodwill	27,297			(4,241		)	23,056
Total net assets acquired	$	308,528		$	—		$	308,528

Property and equipment

We acquired property and equipment, which primarily consists of the all-inclusive resorts and adjacent developable land sites that we acquired. We provisionally estimated the value of the acquired property and equipment using a combination of the income and market approaches, which are primarily based on significant Level 2 and Level 3 assumptions (as described in Note 16), such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of the SagicorAssets.

Identified intangible assets and liabilities

The following table presents our preliminary estimates of the fair values of the identified intangible assets and liabilities and their related estimated useful lives that we acquired on the Acquisition Date ($ in thousands):



	Balance Sheet Classification	Estimated Fair Value			Weighted-Average Amortization Period (in years)
Management agreement	Other intangible assets	$	1,900		20
Unfavorable ground lease liability	Other liabilities	(2,349		)	22
Total identifiable intangibles acquired		$	(449	)

We provisionally estimated the value of the management agreement using the multi-period excess earnings valuation method, which is a variation of the income valuation approach. This method estimates an intangible asset’s value based on the present value of the incremental after-tax cash flows attributable to the intangible asset. This valuation approach utilizes Level 3 inputs (as described in Note 16).

Deferred income taxes

Deferred income taxes primarily relate to the fair value of non-current assets and liabilities acquired from the Sagicor Parties, including property and equipment, intangible assets and liabilities and other. We have not finalized our analysis, but we have provisionally estimated deferred income taxes based on the statutory rate in the jurisdiction of the legal entities where the acquired non-current assets and liabilities are recorded. During the third quarter of 2018, we revised our estimate of deferred income taxes based on changes to our preliminary valuations of the related assets and liabilities, which resulted in us recording deferred tax assets of $2.1 million and deferred tax liabilities of $26.8 million as of September 30, 2018.

Goodwill

The excess of the purchase consideration over the aggregate estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies and future growth opportunities of our combined operations and is not deductible for income tax purposes. Goodwill related to the business combination was recognized at the Jamaica reportable segment (refer to discussion of our reportable segments in Note 19).

Pro forma results of operations

The following unaudited pro forma results of operations have been prepared as though the business combination was completed on January 1, 2017. This unaudited pro forma financial information does not necessarily reflect the results of operations of Playa that actually would have resulted had the acquisition of the SagicorAssets occurred at the date indicated, nor does it project the results of operations of Playa for any future date or period ($ in thousands, except per share amounts):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
Pro forma revenue	$	142,812		$	140,741		$	514,995	$	511,507
Pro forma net (loss) income	$	(5,422	)	$	(3,467	)	$	45,640	$	15,607
Pro forma (losses) earnings per share - Basic	$	(0.04	)	$	(0.03	)	$	0.35	$	0.06
Pro forma (losses) earnings per share - Diluted	$	(0.04	)	$	(0.03	)	$	0.35	$	0.06

The unaudited pro forma financial information for the three and nine months ended September 30, 2018 and 2017 includes adjustments for:

Depreciation and amortization expense resulting from the estimated fair values of acquired property and equipment and identifiable definite-lived intangible assets and liabilities, respectively;

Elimination of the Sagicor Assets' management fees and interest expense;

Interest expense resulting from the issuance of an $100.0 million term loan add-on (see Note 14);

Related income tax effects; and

Weighted average number of shares outstanding.

For the nine months ended September 30, 2018, we incurred approximately $2.9 million in transaction costs related to the business combination and approximately $1.3 million in transaction costs related to the issuance of the $100.0 million term loan add-on. These costs are recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income and are reflected in unaudited pro forma net income for the nine months ended September 30, 2017 in the table above.

Sagicor Assets' results of operations

The following table presents the results of the SagicorAssets' operations, which are recorded within our Jamaica reportable segment, included in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the period from the Acquisition Date through September 30, 2018 ($ in thousands):



	June 2, 2018 - September 30, 2018
Revenue	$	31,961
Net income	$	1,714

Recapitalization transaction

At 12:00 a.m. Central European Time on March 12, 2017, we consummated a business combination (the ~~"Business Combination"~~“Pace Business Combination”) pursuant to that certain transaction agreement by and among us, Playa Hotels & Resorts B.V. (our ~~"Predecessor"~~“Predecessor”), Pace Holdings Corp. ~~("Pace"~~(“Pace”) and New Pace Holdings Corp. ("(“New ~~Pace"~~Pace”), the effects of which replicated the economics of a reverse merger between our Predecessor and Pace. In connection with the Pace Business Combination, Pace formed Porto Holdco B.V., a Dutch private limited liability company (besloten vennootschap met beperkte aansprakelijkheid), as a wholly-owned subsidiary to facilitate the reverse merger with our Predecessor. Prior to the consummation of the Pace Business Combination, Porto Holdco B.V.

was converted to a Dutch public limited liability company (naamloze vennootschap) and changed its name to Porto Holdco N.V. Upon the consummation of the Pace Business Combination, the Company's name was changed to Playa Hotels & Resorts N.V.

For accounting and financial reporting purposes, the Pace Business Combination was accounted for as a recapitalization of our Predecessor because Pace was incorporated as a special purpose acquisition company and considered a public shell company. Our Predecessor also maintained effective control of the combined entity because our Predecessor's operations comprise the ongoing operations of the combined entity, our Predecessor's senior management became the senior management of the combined entity and our Predecessor's directors were appointed to, and constitute the majority of, the combined entity's board of directors. Accordingly, no step-up in basis of assets or goodwill were recorded.

The Condensed Consolidated Financial Statements presented herein are those of our Predecessor for all periods prior to the completion of the Pace Business Combination and the recapitalization of the number of ordinary shares attributable to our Predecessor shareholders is reflected retroactively to the earliest period presented. Accordingly, the number of ordinary shares presented as outstanding as of ~~January 1,~~December 31, 2016 totaled 50,481,822 and consisted of the number of ordinary shares issued to Predecessor shareholders. This number of shares was also used to calculate the Company’s earnings per share for all periods prior to the Pace Business Combination.

The consideration received as a result of the Pace Business Combination is summarized as follows ($ in thousands):


Purchase of all of our Predecessor's cumulative redeemable preferred shares ⁽¹⁾	$	353,873	$	353,873
Net cash transferred from Pace	78,859		78,859
Playa Employee Offering⁽²⁾	799		799
Total Consideration Transferred	$	433,531
Total consideration transferred			$	433,531

________

⁽¹⁾Balance consisted of the face value of our Predecessor's cumulative redeemable preferred shares ("(“Preferred ~~Shares"~~Shares”) and their associated PIK dividends as of March 10, 2017, per the terms of the Pace Business Combination.

⁽²⁾In connection with the Pace Business Combination, we entered into subscription agreements (the “Subscription Agreements”) with Playa employees, their family members and persons with business relationships with Playa, pursuant to which those persons agreed to purchase 82,751 ordinary shares for an aggregate purchase price of $0.8 million.

Note 4.5. Property ~~plant~~ and equipment

The balance of property ~~plant~~ and equipment, net is as follows ($ in thousands):


	As of September 30,			As of December 31,			As of September 30,			As of December 31,
	2017			2016			2018			2017
Land, buildings and improvements	$	1,478,087		$	1,421,371		$	1,791,723		$	1,493,407
Fixtures and machinery	63,536			60,294			55,946			53,188
Furniture and other fixed assets	162,714			163,753			205,851			173,912
Construction in progress	26,437			3,866			71,707			29,220
Total property, plant and equipment, gross	1,730,774			1,649,284
Total property and equipment, gross							2,125,227			1,749,727
Accumulated depreciation	(283,117		)	(248,967		)	(330,733		)	(283,401		)
Total property, plant and equipment, net	$	1,447,657		$	1,400,317
Total property and equipment, net							$	1,794,494		$	1,466,326

Depreciation expense for property ~~plant~~ and equipment was ~~$39.4~~$50.8 million and ~~$38.1~~$39.4 million for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Depreciation expense for property ~~plant~~ and equipment was ~~$13.6~~$19.8 million and ~~$12.8~~$13.6 million for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

For the ~~three and~~ nine months ended September 30, 2018 and 2017, $3.4 million and $0.7 million of interest expense was capitalized on qualifying ~~assets.~~assets, respectively. For the three ~~and nine~~ months ended September 30, ~~2016, no~~2018 and 2017, $1.3 million and $0.7 million of interest expense was capitalized on qualifying ~~assets.~~assets, respectively. Interest expense was capitalized atusing the ~~weighted average~~weighted-average interest rate of ~~the~~our debt.

Cap Cana ~~Development~~development

On July 12, 2017, we acquired the land for the new Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana in Punta Cana, Dominican Republic for total consideration of $56.2 million. We paid $45.6 million of the consideration in cash upon closing of the ~~acquisition, including by way of the release of our $5.6 million escrow deposit, which was presented as restricted cash on our~~ ~~Condensed Consolidated Balance Sheet~~ ~~as of December 31, 2016.~~acquisition. The remaining $10.6 million balance is due on the earlier of (i) two years from the beginning of construction of the resorts or (ii) the

opening of the resorts and is recorded in other liabilities within the Condensed Consolidated Balance Sheetas of September 30, 2018 and December 31, 2017.

Note 6. Income taxes

We are domiciled in The Netherlands and are taxed in The Netherlands with our other Dutch subsidiaries. Dutch companies are subject to Dutch corporate income tax at a general tax rate of 25%.

For the three months ended September 30, 2018, our income tax provision was $0.4 million, compared to a $0.2 million tax provision for the three months ended September 30, 2017. The increased income tax provision of $0.2 million was driven primarily by the decreased tax benefit associated with future tax liabilities of certain Mexican entities. The increased discrete tax expense associated with foreign exchange rate fluctuations was almost fully offset by the decrease in tax expense from decreased pre-tax book income of our tax paying entities.

For the nine months ended September 30, 2018, our income tax provision was $6.6 million, compared to a $20.1 million tax provision for the nine months ended September 30, 2017. The decreased income tax provision of $13.5 million was driven primarily by the decrease in tax expense from decreased pre-tax book income of our tax paying entities and the increased discrete tax benefit associated with foreign exchange rate fluctuations.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation, commonly referred to as U.S. Tax Reform. As noted in our Annual Report on Form 10-K for the year ended December 31, 2017, the Company completed its deferred tax accounting related to the reduction to the U.S. corporate income tax rate from 35% to 21%. We are not aware of any significant changes to this legislation for the nine months ended September 30, 2018. Since we are a company incorporated in the Netherlands and do not have any controlled foreign corporations under U.S. tax law, we concluded that the new legislation related to global intangible low-taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”) does not apply and therefore no policy decision is required.

~~Note 5. Fair value of financial instruments~~

Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, trade and other payables, accounts payable to related parties, deferred consideration and debt. We believe the carrying value of these assets and liabilities, excluding deferred consideration and debt, approximate their fair values as of September 30, 2017 and December 31, 2016.

~~Fair value measurements~~

The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. U.S. GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of observability of inputs used in measuring fair value as follows:

~~Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.~~

Level 2: Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

~~Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.~~

~~We did not have any movements in and out of Level 3 for our fair valued instruments during any of the above periods.~~

As of September 30, 2017, there were no financial assets or liabilities measured at fair value on a recurring basis as our deferred consideration was settled during the three months ended September 30, 2017 (see Note 7). The following table presents our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of December 31, 2016 ~~($ in thousands)~~:

December 31, 2016 Level 1 Level 2 Level 3
Fair value measurements on a recurring basis:
Deferred Consideration $ 1,836
$ —
$ —
$ 1,836

~~The following table presents a reconciliation from the opening balances to the closing balances for our Level 3 fair valued instruments as of September 30, 2017 and December 31, 2016~~ ~~($ in thousands)~~:

Deferred Consideration
Balance as of December 31, 2015 $ 4,145
Total losses included in earnings (or change in net assets) ⁽¹⁾
160
Settlements (625 )
Balance as of March 31, 2016 3,680
Total losses included in earnings (or change in net assets) ⁽¹⁾
49
Settlements (638 )
Balance as of June 30, 2016 3,091
Total losses included in earnings (or change in net assets) ⁽¹⁾
28
Settlements (628 )
Balance as of September 30, 2016 2,491
Total gains included in earnings (or change in net assets) ⁽¹⁾
(36 )
Settlements (619 )
Balance as of December 31, 2016 1,836
Total gains included in earnings (or change in net assets) ⁽¹⁾
(26 )
Settlements (630 )
Balance as of March 31, 2017 1,180
Total losses included in earnings (or change in net assets) ⁽¹⁾
675
Settlements (735 )
Balance as of June 30, 2017 1,120
Total losses included in earnings (or change in net assets) ⁽¹⁾
5
Settlements (1,125 )
Balance as of September 30, 2017 $ —

~~________~~

⁽¹⁾ ~~All losses and gains (other than changes in net assets) are included in interest expense in the~~ ~~Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income~~.

~~The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of September 30, 2017 and December 31, 2016~~ ~~($ in thousands)~~:

Carrying Value Fair Value
As of September 30, 2017 Level 1 Level 2 Level 3 Total
Financial liabilities not recorded at fair value:
Debt:
Term Loan $ 519,948
$ —
$ —
$ 537,214
$ 537,214
Revolving Credit Facility⁽¹⁾
—
—
—
—
—
Senior Notes due 2020 357,751
—
379,531
—
379,531
Total $ 877,699
$ —
$ 379,531
$ 537,214
$ 916,745

Carrying Value Fair Value
As of December 31, 2016 Level 1 Level 2 Level 3 Total
Financial liabilities not recorded at fair value:
Debt:
Term Loan $ 356,937
$ —
$ —
$ 363,060
$ 363,060
Revolving Credit Facility⁽¹⁾
—
—
—
—
—
Senior Notes due 2020 471,380
—
513,405
—
513,405
Total $ 828,317
$ —
$ 513,405
$ 363,060
$ 876,465

~~________~~

⁽¹⁾We estimate that the carrying value of our revolving credit facility (the "Revolving Credit Facility") is the fair value as of September 30, 2017 and December 31, 2016. The valuation technique and significant unobservable inputs are consistent with our term loan (the "Term Loan"), but the valuation using the discounted cash flow technique approximates the carrying value as the expected term is significantly shorter in duration. We typically use our Revolving Credit Facility solely for short term liquidity.

~~The following table displays valuation techniques and the significant unobservable inputs for our Level 3 assets and liabilities measured at fair value as of September 30, 2017 and December 31, 2016~~ ~~($ in thousands)~~:

Fair Value Measurements as of September 30, 2017
Fair Value Significant Valuation Techniques Significant Unobservable Inputs Input
Term Loan $ 537,214
Discounted Cash Flow Discount Rate 3.00%

Forward Rate 4.33 % - 5.42%
Expected Term 79 months

Fair Value Measurements as of December 31, 2016
Fair Value Significant Valuation Techniques Significant Unobservable Inputs Input
Deferred Consideration $ 1,836
Discounted Cash Flow Discount Rate 4.00%

Forward Rate 4.63 % - 5.00%
Expected Term 7 months
Term Loan $ 363,060
Discounted Cash Flow Discount Rate 3.00%

Forward Rate 4.00 % - 5.33%
Expected Term 32 months

~~Term Loan and deferred consideration~~

The fair value of our Term Loan and deferred consideration are estimated using cash flow projections applying market forward rates and discounted back at the appropriate discount rate. The primary sensitivity in each estimate is based on the selection of an

~~appropriate discount rate. Fluctuations in this assumption will result in a different estimate of fair value as an increase in the discount rate would result in a decrease in the fair value.~~

~~Senior Notes due 2020~~

~~The fair value of the Senior Notes due 2020 is estimated using unadjusted quoted prices in a market that is not active. Current pricing was compiled and applied to the outstanding principal amount.~~

~~Note 6. Income taxes~~

~~We are domiciled in The Netherlands and are taxed in The Netherlands with our other Dutch subsidiaries. Dutch companies are subject to Dutch corporate income tax at a general tax rate of 25%.~~

For the three months ended September 30, 2017, our income tax provision was $0.2 million, compared to a $0.8 million tax benefit for the three months ended September 30, 2016. The increased income tax provision was driven primarily by the increased discrete expense associated with foreign exchange rate fluctuations and the decreased tax benefit associated with the non-recurring valuation allowance release in September 2016. This income tax provision increase was partially offset by the tax benefit on decreased pre-tax book income in our tax paying entities and the increase in the tax benefit associated with future tax liabilities of some Mexican entities.

For the nine months ended September 30, 2017, our income tax provision was $20.1 million, compared to a $5.3 million tax benefit for the nine months ended September 30, 2016. The $25.4 million increase in the income tax provision was driven primarily by the increased discrete expense associated with foreign exchange rate fluctuations, the increase in the tax impact on increased pre-tax book income in our tax paying entities, and the decreased tax benefit associated with the non-recurring valuation allowance release in September 2016.

~~Dominican Republic~~

Taxes in the Dominican Republic are determined based upon Advance Pricing Agreements (“APA”) with the Internal Tax General Directorate of the Dominican Republic (the “Tax Authority”). Historically, based upon our APAs all three of our Dominican entities were subject to the greater of an asset tax or gross receipts tax; thus, such entities have not been subject to income tax accounting under U.S. GAAP. To date, the Tax Authority executed a Memoranda of Understanding (“MOU”) with the Association of Hotels and Tourism of the Dominican Republic, which we are party to, and which provides a framework for the negotiation of the new Company APAs. However, our APAs for 2016 and subsequent years have not been finalized with the Tax Authority as of September 30, 2017. As such, we maintain our position from the December 31, 2016 income tax provision, which contemplates the existing Dominican statutory law without consideration of an MOU and associated APA. Accordingly, the Dominican branch of Playa Cana B.V. is treated as an income taxpayer, and our other two Dominican entities, Inversiones Vilazul, S.A.S and the Dominican branch of Playa Romana Mar B.V., are treated as asset taxpayers.

We expect the Tax Authority and our Dominican entities to sign APAs for tax years 2016 through 2019 in the fourth quarter of 2017. Pursuant to the approved APAs, our three Dominican entities will be subject to the greatest of an asset tax, gross receipts tax or an income tax, and are therefore subject to a hybrid tax regime under ASC 740. Following this guidance, we estimate that a net collective income tax benefit in the range of $1.0 to $2.0 million for our three Dominican entities will be recognized in the fourth quarter of 2017. The estimated net income tax benefit is primarily driven by an income tax benefit of approximately $4.0 million from Playa Cana B.V. due to the reversal of the income tax expense booked in 2016, which will be partially offset by an income tax expense that ranges between $2.0 to $3.0 million from Playa Romana Mar, B.V. Under the hybrid tax regime, we expect Playa Cana B.V. and Playa Romana Mar, B.V. to be subject to non-income taxes in the range of $1.0 to $2.0 million, which will be recorded into pre-tax book income during the fourth quarter of 2017. We expect Inversiones Vilazul, S.A.S will continue to be a non-income tax payer.

Note 7. Related party transactions

The following summarizes transactions and arrangements that we have entered into with related parties. The details of the balances between us and related parties as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows ($ in thousands):

As of September 30, As of December 31,
2017 2016
Accounts receivable $ 1,128
$ 2,532
Accounts payable $ 3,363
$ 8,184
Deferred consideration⁽¹⁾
$ —
$ 1,836
Term Loan⁽²⁾
$ —
$ 47,592
Preferred Shares Non-cash PIK Dividends⁽³⁾
$ —
$ 106,459



	As of September 30,		As of December 31,
	2018		2017
Accounts receivable	$	6,321	$	1,495
Accounts and other payables	$	2,274	$	2,966

~~________~~


⁽¹⁾	Playa H&R Holdings B.V., our wholly owned subsidiary, agreed to make payments of $1.1 million per quarter to the selling shareholder of Real Resorts (the “Real Shareholder”) through the quarter ending September 30, 2017. The Real Shareholder is no longer considered a related party and deferred consideration is not considered a related party balance as of September 30, 2017.


⁽²⁾	The Real Shareholder was one of the lenders under our Term Loan as of December 31, 2016. The Real Shareholder's portion of the original Term Loan was $50.0 million. The balance is net of the discount on the Term Loan and associated deferred financing costs.

⁽³⁾

No ~~Non-cash PIK Dividends~~ ~~had been issued or declared with respect to the~~ ~~Preferred Shares~~. The total accumulated amounts of Non-cash PIK Dividends payable to the Real Shareholder were $0 million and $19.4 million as of September 30, 2017 and December 31, 2016, respectively. The total accumulated amounts of Non-cash PIK Dividends payable to HI Holdings Playa B.V., an affiliate of Hyatt Hotels Corporation ("HI Holdings Playa"), were $0 million and $87.1 million as of September 30, 2017 and December 31, 2016, respectively.

Relationship with Hyatt

As described below, we pay Hyatt franchise fees for our resorts currently operating under the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands. In addition, in connection with the Pace Business Combination, all outstanding Preferred Shares of our Predecessor owned by HI Holdings Playa were purchased at a purchase price of $8.40 per share for $196.0 million in face value and $93.6 million of associated PIK dividends.

Relationship with Real Shareholder

In connection with the Pace Business Combination, all outstanding Preferred Shares of our Predecessor owned by the selling shareholder of Real ~~Shareholder~~Resorts (“Real Shareholder”) were purchased at a purchase price of $8.40 per share for $43.5 million in face value and $20.8 million of associated PIK dividends. ~~The Real Shareholder's portion of the original Term Loan was settled in connection with the refinancing of our Senior Secured Credit Facility on April 27, 2017 (See Note 14).~~

Upon the consummation of the Pace Business Combination, the Real Shareholder was no longer considered a related party because the Preferred Shares were extinguished in connection with the Pace Business Combination.

Transactions with related parties

Transactions between us and related parties during the three and nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 were as follows ($ in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Dividends on the Preferred Shares ⁽¹⁾
$ —
$ 11,469
$ 7,922
$ 33,164
Deferred consideration accretion ⁽²⁾
—
47
36
142
Interest expense on related party debt ⁽²⁾
—
497
372
1,484
Franchise fees ⁽³⁾
2,980
917
10,754
8,848
Lease payments ⁽³⁾
270
323
848
974
Total transactions with related parties $ 3,250
$ 13,253
$ 19,932
$ 44,612



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Hyatt franchise fees ⁽¹⁾	$	3,248	$	2,980	$	12,293	$	10,754
Lease payments ⁽²⁾	258		270		730		848
Dividends on the Preferred Shares ⁽³⁾	—		—		—		7,922
Deferred consideration accretion ⁽⁴⁾	—		—		—		36
Interest expense on related party debt ⁽⁴⁾	—		—		—		372
Total transactions with related parties	$	3,506	$	3,250	$	13,023	$	19,932

________


⁽¹⁾	Included in ~~accretion and dividends of~~ ~~Preferred Shares~~direct expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.


⁽²⁾	Included in ~~interest~~selling, general, and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.


⁽³⁾	Included in ~~direct~~dividends of Preferred Shares in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.


⁽⁴⁾	Included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

~~Franchise fees relate to resorts currently operating under the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands.~~

One of our offices is owned by our Chief Executive Officer, and we sublease the space at that location from a third party. Lease payments related to this space were ~~$0.8~~$0.7 million and $0.8 million for the nine months ended September 30, 2018 and 2017, ~~and 2016,~~

respectively. Lease payments related to this space were ~~$0.3~~$0.2 million and ~~$0.2~~$0.3 million for the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively.

One of our previous offices in Cancún, Mexico iswas owned by an affiliate of the Real Shareholder, and we subleased the space from a third party also affiliated with the Real Shareholder. We terminated this lease agreement effective July 1, 2017. Lease payments related to this space were less than $0.1 million ~~and $0.2 million~~ for the three and nine months ended September 30, ~~2017 and 2016, respectively. Lease payments related to this space were less than $0.1 million for the three months ended September 30, 2016.~~2017.

Note 8. Commitments and contingencies

Litigation, claims and assessments

We are ~~subject, currently and from time to time, to~~involved in various claims and ~~contingencies related to~~ lawsuits ~~taxes~~arising in the normal course of business, including proceedings involving tort and ~~environmental matters, as well as commitments under contractual obligations. Many~~other general liability claims, and workers' compensation and other employee claims. Most occurrences involving liability and claims of ~~these claims~~negligence are covered ~~under current~~by insurance ~~programs, subject to deductibles.~~with solvent insurance carriers. We recognize a liability ~~associated with commitments and contingencies~~ when awe believe the loss is probable and reasonably estimable. ~~Although the ultimate liability for these current matters cannot be determined at this point, based on information~~We currently ~~available, we do not expect~~believe that the ultimate ~~resolution~~outcome of such ~~claims~~lawsuits and ~~litigation~~proceedings will not, individually or in the aggregate, have a material effect on our Condensed Consolidated Financial Statements.

The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits and losses of group companies can be offset against each other. Our Dutch companies file as a fiscal unity, with the exception of Playa Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V. Playa Resorts Holding B.V. is the head of our Dutch fiscal unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.

The Mexican tax authorities issued an assessment to one of our Mexican subsidiaries. In February 2014, we filed an appeal before the tax authorities, which was denied on May 26, 2014. On June 11, 2014, we arranged for the posting of a tax surety bond issued by a surety company, which guaranteed the payment of the claimed taxes and other charges (and suspended collection of such amounts by the tax authorities) while our further appeal to the tax court was resolved. To secure reimbursement of any amounts that may be paid by the surety company to the tax authorities in connection with the surety bond, we provided cash collateral to the surety company valued at approximately $4.6 million as of September 30, 2017. During the third quarter of 2017, we received a favorable resolution from the tax court and the litigation was terminated. As of September 30, 2017, the cash collateral was still held by the surety company, which restricted our use of such cash. The surety company is currently in the process of releasing our cash collateral.

During the third quarter of 2015, we identified and recorded a potential Dutch operating tax contingency resulting from allocations to be made of certain corporate expenses from 2014 and 2015. We have provided all requested documentation to the Dutch tax authorities for their review and ~~are currently waiting for~~expect to receive their final ~~determination.~~determination during the fourth quarter of 2018. We have an estimated amount of $1.6 million as a tax contingency at September 30, ~~2017~~2018 that is recorded in other liabilities within the Condensed Consolidated Balance Sheet.

Electricity supply contract

One of our subsidiaries entered into an electricity supply contract wherein we committed to purchase electricity from a provider over a five-year period ending December 2019. In consideration for our commitment, we received certain rebates. Should this contract be terminated prior to the end of the five-year period, we will be obligated to refund to the supplier the undepreciated portion of (i) the capital investment it made to connect our facilities to the power grid (original amount approximately $1.4 million) and (ii) the unearned rebates we received (total unearned rebates of ~~$0.9~~$0.5 million and ~~$1.2~~$0.8 million as of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively), in each case using a 20% straight-line depreciation per annum.

Leases and other commitments

We lease certain equipment for the operations of our hotels under various lease agreements. The leases extend for varying periods through 2021 and contain fixed components and utility payments. In addition, ~~several~~all of our administrative offices are subject to leases of building facilities from third parties, which extend for varying periods through 2023 and contain fixed and variable components.

Rental expense under non-cancelable operating leases, including contingent leases, consisted of ~~$1.5~~$1.8 million and ~~$1.6~~$1.5 million for the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, respectively. Rental expense under non-cancelable operating leases, including contingent leases, consisted of ~~$0.5~~$0.7 million and $0.5 million for the three months ended September 30, 2018 and 2017, ~~and 2016,~~ respectively.

Note 9. Ordinary shares

As of ~~January 1,~~December 31, 2016, the number of ordinary shares presented as outstanding totaled 50,481,822, consisting of the number of ordinary shares issued to Predecessor shareholders after the retroactive application of the recapitalization. On March 12, 2017, 52,982,364 ordinary shares were issued as part of a recapitalization completed in the Pace Business Combination (see Note 3)4). On June 1, 2018, 20,000,000 ordinary shares were issued as part of the business combination with the Sagicor Parties (see Note 4).

On December 28, 2017, a member of our Board of Directors waived his previously granted share-based compensation for his services as a member of our Board, and transferred 7,367 ordinary shares back to us for no consideration. The shares are recorded as treasury shares on the Condensed Consolidated Balance Sheet as of September 30, 2018.

As of September 30, ~~2017,~~2018, our ordinary share capital consisted of ~~110,305,064~~130,478,993 ordinary shares outstanding, which have a par value of €0.10 per share. In addition, 2,099,127 restricted shares and 10,658 share units were outstanding under the 2017 Plan (as defined in Note 11). The holders of restricted shares are entitled to vote, but not dispose of, such shares until they vest. The holders of share units are neither entitled to vote nor dispose of such shares until they vest.

Note 10. Warrants

~~Public Warrants:~~

We issued ~~45,000,000~~ warrants to former shareholders of Pace as consideration in the Business Combination (the "Public Warrants"), which entitled such warrant holders to purchase one-third of one ordinary share for an exercise price of one-third of ~~$11.50~~. The Public Warrants became exercisable on April 10, 2017, which was thirty days after the completion of the Business Combination. The Public Warrants were set to expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.

~~Founder Warrants:~~

~~We issued~~ ~~22,000,000~~ warrants to former holders of certain privately placed warrants of Pace and our Predecessor's former ordinary shareholders as consideration in the Business Combination (the "Founder Warrants"), which entitled such warrant holders to purchase one-third of one ordinary share for an exercise price of one-third of ~~$11.50~~. The Founder Warrants became exercisable on April 10, 2017, which was thirty days after the completion of the Business Combination. The Founder Warrants were set to expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms.

~~Earnout Warrants~~:

~~We issued a total of~~ 3,000,000 warrants to our Predecessor's former ordinary shareholders and TPG Pace Sponsor, LLC, a Cayman Islands limited liability company and an affiliate of TPG Global, LLC, as consideration in the Pace Business Combination (the ~~"Earnout Warrants"~~“Earnout Warrants”). The Earnout Warrants entitle such warrant holders to acquire one ordinary share for each Earnout Warrant for an exercise price of ~~€0.10~~€0.10 per ordinary share in the event that the price per share underlying the Earnout Warrants on the NASDAQ is greater than ~~$13.00~~$13.00 for a period of more than 20 days out of 30 consecutive trading days within the five years after the closing date of the Pace Business Combination. The Earnout Warrants expire five years after the completion of the Pace Business Combination or earlier upon redemption or liquidation in accordance with their term.

On August 8, 2018, we repurchased 12,230 of the outstanding Earnout Warrants for less than $0.1 million. The Earnout Warrant repurchase resulted in a reduction to paid in capital and had no impact on our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Incomefor the three and nine months ended September 30, 2018.

As of September 30, ~~2017, none of the Earnout Warrants have been exercised.~~

All warrants issued as part of the Business Combination are classified as paid-in capital and were considered part of a value for value exchange. There was no fair value adjustment to accumulated deficit and no earnings per share impact.

~~Warrant Exchange:~~

On May 22, 2017, we commenced an offer to exchange 0.1 ordinary shares for each outstanding Public Warrant and Founder Warrant, up to a maximum of 67,000,000 warrants (the "Warrant Exchange"). On June 23, 2017, a total of 65,933,459 warrants were tendered in the Warrant Exchange resulting in the issuance of 6,593,321 ordinary shares and the cash settlement of fractional shares. We concluded that the exchange of the Founder Warrants was a value for value exchange, but the fair value of the Public Warrants exchanged was less than the fair value of ordinary shares issued. We recorded a $0.9 million non-cash dividend based on the difference in fair value. After the completion of the Warrant Exchange, 1,066,541 Public Warrants remained outstanding, which were exchanged for 95,988 ordinary shares on July 17, 2017 at an exchange of 0.09 ordinary share per Public Warrant pursuant to a mandatory exchange provision added to the terms of the Public Warrants and Founder Warrants in connection with the Warrant Exchange. There were no cash proceeds to the Company from the exchange transaction.

~~Prior to the Warrant Exchange, no Public Warrants or Founder Warrants were exercised. As of September 30, 2017,~~2018, there were ~~no Public Warrants, no Founder Warrants and 3,000,000~~2,987,770 Earnout Warrants outstanding.

Note 11. Share-based compensation

The Company adopted the 2017 Omnibus Incentive Plan (the ~~"2017 Plan"~~“2017 Plan”) to attract and retain independent directors, executive officers and other key employees and service providers. The 2017 Plan was approved by the Board of Directors and shareholders of the Company on March 10, 2017. The 2017 Plan is administered by the Compensation Committee of our Board of Directors, who may grant awards covering a maximum of 4,000,000 of our ordinary shares under the 2017 Plan. The Compensation Committee may award

share options, share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards. As of September 30, ~~2017,~~2018, there were ~~2,172,547~~1,295,245 shares available for future grants under the 2017 Plan.

Restricted ~~Share Awards~~

share awards

Restricted share awards consist of restricted shares and share units that are granted to eligible employees, executives, and board ~~members. Restricted shares are~~members and consist of ordinary shares ~~that are~~ subject to restrictions and to a risk of forfeiture.

~~On May 16, 2017, the Compensation Committee of the Board approved the issuance of 994,115 restricted~~ Restricted share awards issued to employees and executives of the ~~Company. Each award granted vests~~Company generally vest either pro rata over a three year period or over a five year period with 25% of the underlying award vesting on the third anniversary of the grant date of the award, 25% vesting on the fourth anniversary of the grant

date of the award and 50% vesting on the fifth anniversary of the grant date of the award.

~~On May 26, 2017, the Compensation Committee of the Board approved the issuance of 410,096 restricted~~ Restricted share awards ~~to employees and executives of the Company and 51,569 restricted share awards~~issued to directors of the Company for their services as ~~directors. Each award granted to employees and executives vests pro rata over a three year period. Each award granted to a director was fully vested~~directors generally vest immediately on the grant date of ~~grant.~~the award.

The vesting of restricted share awards is subject to the holder's continued employment through the applicable vesting date. Unvested restricted share awards will be forfeited if the employee's or the executive's employment terminates during the vesting period, provided that unvested restricted share awards will accelerate upon certain terminations of employment as set forth in the applicable award agreements.

The holders of ~~these awards~~restricted shares have the right to vote the restricted shares and receive all dividends declared and paid on such shares, provided that dividends paid on unvested restricted shares will be subject to the same conditions and restrictions applicable to the underlying restricted shares. The holders of share units have no right to vote and may be entitled to receive, upon payment of a cash dividend, a cash payment for each share unit which is equal to the per-share dividend paid on our ordinary shares.

Compensation expense for the restricted share awards is measured based upon the fair market value of our ordinary shares at the date of grant and ~~compensation expense~~ is recognized on a straight-line basis over the vesting period.

A summary of our restricted share awards from January 1, ~~2017~~2018 to September 30, ~~2017~~2018 is as follows:


	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Unvested balance at January 1, 2017	—		$	—
Unvested balance at January 1, 2018					1,265,830		$	10.19
Granted	1,455,780		10.19		535,881		10.76
Vested	(151,569	)	10.19		(181,296	)	10.34
Forfeited	(26,160	)	10.20		(49,581	)	10.27
Unvested balance at September 30, 2017	1,278,051		$	10.19
Unvested balance at September 30, 2018					1,570,834		$	10.37

The total fair value of vested restricted share awards during the nine months ended September 30, 2018 and 2017 was $1.9 million and $1.5 million, respectively. The total fair value of vested restricted share awards during the three ~~and nine~~ months ended September 30, 2017 was $1.0 ~~million and $1.5 million, respectively.~~ million. No restricted share awards vested during the three months ended September 30, 2018.

As of September 30, 2018 and 2017, the unrecognized compensation cost related to restricted share awards was $12.3 million and $11.9 million, respectively, and is expected to be recognized over a ~~weighted average~~weighted-average period of approximately 2.9 years and 4.0 ~~years.~~ years, respectively.

Compensation expense related to the restricted share awards was ~~$1.8~~$3.9 million and $2.7 million for the ~~three and~~ nine months ended September 30, 2018 and 2017, respectively, and $1.1 million and $1.8 million for the three months ended September 30, 2018 and 2017, respectively. Compensation expense is recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Performance ~~Share Awards~~share awards

Performance share awards consist ~~of a grant~~ of ordinary shares that may become earned and vested based on the achievement of performance targets adopted by our Compensation Committee.

~~On May 26, 2017, the Compensation Committee of the Board approved a target award of 265,222 performance-shares to executives of the Company.~~ The actual number of ordinary shares that ultimately vest will range from 0% to 150% of the target award and will be determined ~~in 2020~~at the end of the three year performance period based on two performance criteria as defined in the applicable award agreements for the period of ~~performance from January 1, 2017 through December 31, 2019.~~ performance.

Any ordinary shares that ultimately vest based on the achievement of the applicable performance criteria will be deemed to be vested on the date on which our Compensation Committee certifies the level of achievement of such performance criteria. Except in connection with certain qualifying terminations of employment, as set forth in the applicable award agreements, the awards require continued service through the certification date. The holders of these awards have voting rights equivalent to the ~~right to vote the~~

target level of ordinary shares granted to the holder and any dividends declared on such shares will be accumulated and ~~will be subject~~paid within 30 days after and to the ~~same vesting conditions as~~extent the ~~awards.~~ target ordinary shares vest.

The grant date fair value of the portion of the award based on the compounded annual growth rate of the Company's total shareholder return was estimated using a Monte-Carlo model. The table below summarizes the key inputs used in the Monte-Carlo simulation ($ in thousands):


Performance Award Grant Date	Percentage of Total Award		Grant Date Fair Value by Component		Volatility ⁽¹⁾		Interest Rate ⁽²⁾		Dividend Yield		Percentage of Total Award		Grant Date Fair Value by Component		Volatility ⁽¹⁾		Interest Rate ⁽²⁾		Dividend Yield
May 26, 2017
Total Shareholder Return	50	%	$	770	27.02	%	1.39	%	—	%	50	%	$	770	27.02	%	1.39	%	—	%
Adjusted EBITDA Comparison	50	%	$	1,350	—	%	—	%	—	%	50	%	$	1,350	—	%	—	%	—	%
January 2, 2018
Total Shareholder Return											50	%	$	860	26.13	%	2.00	%	—	%
Adjusted EBITDA Comparison											50	%	$	1,475	—	%	—	%	—	%

________

⁽¹⁾ Expected volatility was determined based on the historical share prices in our industry.

⁽²⁾ The risk-free rate was based on U.S. Treasury zero coupon issues with a remaining term equal to the remaining term of the measurement period.

In the table above, the total shareholder return component is a market condition as defined by ASC 718,Compensation—Stock Compensation, and compensation expense related to this component is recognized on a straight-line basis over the vesting period. The grant date fair value of the portion of the awards based on the compounded annual growth rate of the Company's adjusted earnings before interest, taxes, depreciation and amortization ("(“Adjusted ~~EBITDA"~~EBITDA”) was based on the closing stock price of our ordinary shares on such date. The Adjusted EBITDA component is a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component will be reassessed at each reporting date based on the Company's estimate of the probable level of achievement, and the accrual of compensation expense will be adjusted as appropriate.

As of September 30, 2018 and 2017, the unrecognized compensation cost related to the performance share awards was $2.5 million and $2.0 million, respectively, and is expected to be recognized over a ~~weighted average~~weighted-average period of 2.0 years and 2.3 ~~years.~~years, respectively. Compensation expense related to the performance share awards was approximately $1.2 million and $0.1 million for the nine months ended September 30, 2018 and 2017, respectively, and $0.1 million and $0.1 million for the three ~~and nine~~ months ended September 30, 2018 and 2017, ~~and~~respectively. Compensation expense is recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Note 12. Preferred Shares

Prior to the consummation of the Pace Business Combination, all of our Predecessor's Preferred Shares were purchased at a purchase price of $8.40 per share for an aggregate amount of $353.9 million, which consisted of $239.5 million in face value and $114.4 million of associated PIK dividends. The Preferred Shares issued by our Predecessor were eliminated and extinguished as part of the reverse merger in the Pace Business Combination. The extinguishment is reflected as a non-cash financing activity in the Condensed Consolidated Statements of Cash Flows.

~~The following summarizes the Preferred Shares as of September 30, 2017 and December 31, 2016~~ ~~($ in thousands)~~:

As of September 30, As of December 31,
2017 2016
Face value $ —
$ 239,492
Non-cash PIK Dividends —
106,459
Net value of the Preferred Shares $ —
$ 345,951

Note 13. ~~(Losses) earnings~~Earnings per share

Prior to the consummation of the Pace Business Combination, our Preferred Shares and their related accumulated Non-cash PIK Dividends were participating securities. If a dividend was declared or paid on our Predecessor's ordinary shares, holders of our Predecessor's ordinary shares and Preferred Shares were entitled to proportionate shares of such dividend, with the holders of our Predecessor's Preferred Shares participating on an as-if converted basis.

Under the two-class method, basic (losses) earnings per share (“EPS”) attributable to ordinary shareholders is computed by dividing the net (loss) income attributable to ordinary shareholders by the weighted-average number of ordinary shares outstanding during the period. Net (loss) income attributable to ordinary shareholders is determined by allocating undistributed earnings between ordinary and preferred shareholders. For periods in which there are undistributed losses, there is no allocation of undistributed earnings to preferred shareholders.

Diluted EPS attributable to ordinary shareholders is computed by using the more dilutive result of the two-class method, the if-converted method or the treasury stock method. The if-converted method uses the weighted-average number of ordinary shares outstanding during the period, including potentially dilutive ordinary shares assuming the conversion of the outstanding Preferred Shares of our Predecessor, as of the first day of the reporting period. The dilutive effect of awards under our equity compensation plan is reflected in diluted earnings per share by application of the treasury stock method.

Under the two-class method, the number of shares used in the computation of diluted ~~losses~~earnings per share is the same as that used for the computation of basic ~~losses~~earnings per share for participating securities, as the result would be anti-dilutive. The net ~~loss~~income attributable to ordinary shareholders is not allocated to the Preferred Shares until all other reserves have been exhausted or such loss cannot be covered in any other way.

The calculations of basic and diluted EPS are as follows ($ in thousands, except share data):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018		2017
Numerator:
Net (loss) income	$	(5,422	)	$	(5,667	)	$	33,216	$	11,442
Non-cash dividend to warrant holders	—			—			—		(879		)
Preferred Share dividends	—			—			—		(7,922		)
Allocation of undistributed earnings to preferred shareholders	—			—			—		(277		)
Numerator for basic EPS - (loss) income available to ordinary shareholders	(5,422		)	(5,667		)	33,216		2,364
Add back Preferred Share dividends ⁽¹⁾	—			—			—		—
Add back undistributed earnings to preferred shareholders ⁽¹⁾	—			—			—		—
Numerator for diluted EPS - (loss) income available to ordinary shareholders after assumed conversions	$	(5,422	)	$	(5,667	)	$	33,216	$	2,364
Denominator:
Denominator for basic EPS - weighted-average shares	130,478,993			110,286,197			119,344,659		92,377,968
Effect of dilutive securities:
Unvested restricted share awards	—			—			302,705		75,479
Preferred Shares	—			—			—		—
Denominator for diluted EPS - adjusted weighted-average shares	130,478,993			110,286,197			119,647,364		92,453,447

EPS - Basic	$	(0.04	)	$	(0.05	)	$	0.28	$	0.03
EPS - Diluted	$	(0.04	)	$	(0.05	)	$	0.28	$	0.03

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Numerator:
Net (loss) income $ (5,667 ) $ (1,560 ) $ 11,442
$ 44,831
Non-cash dividend to warrant holders —
—
(879 ) —
Convertible Preferred Share dividends —
(11,469 ) (7,922 ) (33,164 )
Allocation of undistributed earnings to preferred shareholders ⁽¹⁾
—
—
(277 ) (5,555 )
Numerator for basic EPS - (loss) income available to ordinary shareholders (5,667 ) (13,029 ) 2,364
6,112
Add back convertible Preferred Share dividends ⁽²⁾
—
—
—
—
Add back of undistributed earnings to preferred shareholders ⁽²⁾
—
—
—
—
Numerator for diluted EPS - (loss) income available to ordinary shareholders after assumed conversions $ (5,667 ) $ (13,029 ) $ 2,364
$ 6,112
Denominator:

Denominator for basic EPS-weighted shares 110,286,197
50,481,822
92,377,968
50,481,822
Effect of dilutive securities:
Unvested restricted share awards —
—
75,479
—
Convertible Preferred Shares —
—
—
—
Denominator for diluted EPS - adjusted weighted-average shares 110,286,197
50,481,822
92,453,447
50,481,822

EPS - Basic $ (0.05 ) $ (0.26 ) $ 0.03
$ 0.12
EPS - Diluted $ (0.05 ) $ (0.26 ) $ 0.03
$ 0.12

________

⁽¹⁾For the three months ended September 30, 2016, no undistributed earnings were allocated to the preferred shareholders of our Predecessor as we had undistributed losses after deducting preferred shareholder dividends of our Predecessor from net loss.

⁽²⁾⁽¹⁾For the nine months ended September 30, 2017, ~~and 2016, cumulative preferred shareholder~~Preferred Share dividends of our Predecessor of $7.9 million ~~and $33.2 million, respectively,~~ and the preferred shareholders’ allocation of undistributed earnings of our Predecessor of $0.3 million ~~and $5.6 million, respectively,~~ were not added back for purposes of calculating diluted EPS ~~- (loss) income available to ordinary shareholders~~ because the effect of treating our Predecessor's Preferred Shares as if they had been converted to their 10,560,175 ~~and 41,937,483~~ ordinary share equivalents as of January 1, 2017 ~~and 2016, respectively,~~ was anti-dilutive.

For the three months ended September 30, 2018 and 2017, ~~1,278,051~~538,951 and 265,222 of unvested ~~restricted share~~performance-based equity awards, respectively, were not included in the computation of diluted ~~EPS-(loss) income available to ordinary shareholders after assumed conversions~~EPS as ~~their effect would have been anti-dilutive.~~the performance criteria were not met as of the end of the reporting period. For the three ~~and nine~~ months ended September 30, 2018 and 2017, ~~265,222~~1,570,834 and 1,278,051 of unvested ~~performance-based equity~~restricted share awards, respectively, were not included in the computation of diluted ~~EPS-(loss) income available to ordinary shareholders~~EPS as their effect would have been anti-dilutive.

For the nine months ended September 30, 2018 and 2017, 538,951 and 265,222 shares of unvested performance-based equity awards, respectively, were not included in the computation of diluted EPS after assumed conversions as the performance criteria were not met as of the end of the reporting period. For the nine months ended September 30, 2018, 39,345 of unvested restricted share awards were not included in the computation of diluted EPS as their effect would have been anti-dilutive.

For the three and nine months ended September 30, 2018, outstanding Earnout Warrants to acquire a total of 2,987,770 ordinary shares were not included in the computation of diluted EPS after assumed conversions because the warrants were not exercisable as of September 30, 2018. For the three and nine months ended September 30, 2017 outstanding Earnout Warrants to acquire a total of 3,000,000 ordinary shares were not included in the computation of diluted ~~EPS-(loss) income available to ordinary shareholders~~EPS after assumed conversions because the warrants were not exercisable as of September 30, 2017.

Note 14. Debt

Debt consists of the following ($ in thousands):

As of September 30, As of December 31,
2017 2016
Debt Obligations
Term Loan⁽¹⁾
$ 528,675
$ 362,813
Revolving Credit Facility —
—
Senior Notes due 2020 - 8.00% 360,000
475,000
Total Debt Obligations 888,675
837,813
Unamortized (discount) premium
Discount on Term Loan (1,242 ) (811 )
Premium on Senior Notes due 2020 2,546
4,123
Total unamortized (discount) premium 1,304
3,312
Unamortized debt issuance costs:
Term Loan (7,485 ) (5,065 )
Senior Notes due 2020 (4,795 ) (7,743 )
Total unamortized debt issuance costs (12,280 ) (12,808 )
Total Debt $ 877,699
$ 828,317



	As of September 30,			As of December 31,
	2018			2017
Debt obligations
Term Loan⁽¹⁾	$	999,073		$	906,398
Revolving Credit Facility	—			—
Total debt obligations	999,073			906,398
Unamortized discount
Discount on Term Loan	(2,812		)	(2,600		)
Total unamortized discount	(2,812		)	(2,600		)
Unamortized debt issuance costs:
Term Loan	(4,697		)	(5,583		)
Total unamortized debt issuance costs	(4,697		)	(5,583		)
Total debt	$	991,564		$	898,215

~~_____~~________

⁽¹⁾

Borrowings under the Term Loan bear interest at floating rates equal to ~~LIBOR~~one-month London Interbank Offered Rate (“LIBOR”) plus ~~3.0%~~2.75% (where the applicable LIBOR rate has a 1.0% floor). The interest rate ~~used~~ was ~~4.32%~~4.99% and ~~4.00%~~4.62% as of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. Effective March 29, 2018, we entered into two interest rate swaps to fix LIBOR at 2.85% on $800.0 million of our Term Loan (See Note 15).

~~Senior Secured~~Second Amendment to Amended & Restated Credit ~~Facility Refinance~~Agreement

On June 7, 2018, we entered into the Second Amendment to Amended & Restated Credit Agreement (the “Amendment”), which amended the Amended & Restated Credit Agreement dated as of April 27, 2017 we(the “Existing Credit Agreement”). The Amendment amended ~~and restated our existing Senior Secured~~the Existing Credit ~~Facility, consisting of a new $530.0 million~~Agreement to, among other things (i) effect an incremental term loan ~~("Term Loan") priced at 99.75% of the principal amount which matures on April 27, 2024 and a revolving credit~~ facility ~~with a maximum aggregate borrowing capacity~~ of $100.0 million ~~which matures on April 27, 2022. The maturity date~~(the “Incremental Term Loan” and, together with ~~respect~~the existing terms loans that were in effect prior to the ~~Revolving~~Amendment, the “Term Loan”) pursuant to our option to request incremental loans under the Existing Credit ~~Facility~~Agreement and (ii) decrease the Term Loan are subject to an earlier maturity date (the "Springing Maturity Date") if on the date that is 91 days prior to August 15, 2020 (the final maturity date of our Senior Notes due 2020), either the outstanding principal amount of the Senior Notes due 2020 is greater than or equal to $25.0 million or, if less than $25.0 million, we are unable to demonstrate that we have sufficient liquidity to repay such outstanding principal amount without causing our liquidity to be less than $50.0 million. The proceeds received from the Term Loan were used to repay our existing term loan and $115.0 million of our Senior Notes due 2020 and for other general corporate purposes. The repayment of our existing term loan and partial repayment of our Senior Notes due 2020 was accounted for as an extinguishment of debt and resulted in a lo~~ss on extinguishment of debt of $12.5 million.~~

~~Revolving Credit Facility~~

~~Our Revolving Credit Facility, which permits us to borrow up to a maximum aggregate principal amount of $100.0 million, matures on April 27, 2022 (subject to the Springing Maturity Date) and bears~~ interest ~~at variable interest rates that are either based on London Interbank Offered Rates ("LIBOR") or based on an alternate base~~ rate ~~derived from the greatest of the federal funds rate plus a spread, prime rate, one-month euro-currency rate plus a spread and, solely with respect~~applicable to the Term Loan ~~the initial term loan~~by 0.50% to, at our option, either a base rate ~~("ABR Rate"). We are required to pay~~plus a ~~commitment fee ranging from 0.25% to 0.5% per annum (depending on the level~~margin of ~~our consolidated secured leverage ratio in effect from time to time) on the average daily undrawn balance.~~

~~Term Loan~~

We borrowed $530.0 million under our Term Loan on April 27, 2017. We received net proceeds of approximately $32.5 million from our Term Loan after prepaying our existing senior secured credit facility and a portion of our Senior Notes due 2020, deducting a debt issuance discount of $1.3 million and unamortized debt issuance costs of $8.0 million. The unamortized debt issuance costs are accreted on an effective interest basis over the term of our Term Loan.

~~The Term Loan bears interest at a rate per annum equal to~~1.75% or LIBOR plus ~~3.0% (where~~a margin of 2.75%. The other terms to the ~~applicable LIBOR rate has a 1.0% floor), and interest continues to be payable~~Existing Credit Agreement, including those disclosed in ~~cash in arrears~~our Annual Report on Form 10-K filed with the ~~last day of~~SEC on March 1, 2018, were not effected by the ~~applicable interest period (unless we elect to use the ABR rate).~~Amendment.

Financial maintenance covenants

Our Term Loan requires quarterly payments of principal equal to 0.25% of the $530.0 million original principal amount on the last business day of each March, June, September and December. The remaining unpaid amount of our Term Loan is due and payable at maturity on April 27, 2024 (subject to the Springing Maturity Date).

~~Financial Maintenance Covenants~~

~~Our refinanced Senior Secured~~Existing Credit ~~Facility also~~Agreement requires us to meet a springing leverage ratio financial maintenance covenant, but only if the aggregate amount outstanding on our Revolving Credit Facility exceeds 35% of the aggregate revolving credit commitments as defined in our ~~Senior Secured~~Existing Credit ~~Facility.~~Agreement. We were in compliance with all applicable covenants as of September 30, ~~2017.~~2018.

Note 15. ~~Employee benefit plan~~Derivative financial instruments

~~In accordance with labor law regulations in Mexico, certain employees are legally entitled~~Interest rate swaps

Effective March 29, 2018, we entered into two interest rate swaps to ~~receive severance that~~mitigate the interest rate risk inherent to our floating rate debt, including the Revolving Credit Facility and Term Loan. The interest rate swaps have fixed notional values of $200.0 million and $600.0 million. The fixed rate paid by us is ~~commensurate with~~2.85% and the ~~tenure they had with us at~~variable rate received resets monthly to the ~~time of termination without cause,~~one-month LIBOR rate, which results in ~~an unfunded benefit obligation. There were no plan assets~~us fixing LIBOR at 2.85% on $800.0 million of our Term Loan. The interest rate swaps are not for trading purposes and we have not designated the interest rate swaps for hedge accounting treatment. As a result, changes in fair value of the interest rate swaps are recognized in earnings immediately as interest expense in the Condensed Consolidated Statements of ~~September 30, 2017 or December~~Operations and Comprehensive (Loss) Income. The interest rate swaps mature on March 31, ~~2016 as contributions are made only to the extent benefits are paid.~~2023.

The following table presents the ~~components~~location and effects of ~~net periodic benefit cost~~the derivative instruments in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three and nine months ended September 30, 2018 and 2017 ($ in thousands):



		Three Months Ended September 30,					Nine Months Ended September 30,
Derivatives not Designated as Hedging Instruments	Financial Statement Classification	2018			2017		2018		2017
Interest rate swaps	Interest expense⁽¹⁾	$	(3,985	)	$	—	$	1,642	$	—

________

⁽¹⁾Negative amounts in the table above represent reductions to interest expense resulting from the change in fair value of the interest rate swaps.

The following table presents the location and fair value of the derivative instruments in the Condensed Consolidated Balance Sheet as of September 30, 2018and December 31, 2017 ($ in thousands):



		As of September 30,		As of December 31,
Derivatives not Designated as Hedging Instruments	Balance Sheet Classification	2018		2017
Derivative assets:
Interest rate swaps	Derivative financial instruments	$	1,817	$	—

Derivative financial instruments expose the Company to credit risk in the event of non-performance by the counterparty under the terms of the interest rate swaps. The Company incorporates these counterparty credit risks in its fair value measurements (see Note 16). The Company believes it minimizes this credit risk by transacting with major creditworthy financial institutions.

Note 16. Fair value of financial instruments

Our financial instruments consist of cash and cash equivalents, trade and other receivables, accounts receivable from related parties, trade and other payables, accounts payable to related parties, derivatives and debt. We believe the carrying value of these assets and liabilities, excluding the Term Loan, approximate their fair values as of September 30, 2018 and December 31, 2017.

Fair value measurements

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.

We did not have any movements in and out of Level 3 for our fair valued instruments during any of the above periods.

The following table presents our fair value hierarchy for our financial assets measured at fair value on a recurring basis as of September 30, 2018 ($ in thousands):



	September 30, 2018		Level 1		Level 2		Level 3
Fair value measurements on a recurring basis:
Interest rate swap	$	1,817	$	—	$	1,817	$	—

As of December 31, 2017, there were no financial assets or liabilities measured at fair value on a recurring basis as our deferred consideration was settled during the third quarter of 2017.

The following table presents the changes in our Level 3 fair valued instruments for the three and nine months ended September 30, 2017 ~~and 2016 (~~($ in ~~thousands~~thousands)):



	Deferred Consideration
Balance as of December 31, 2016	$	1,836
Total gains included in earnings (or change in net assets) ⁽¹⁾	(26		)
Settlements	(630		)
Balance as of March 31, 2017	$	1,180
Total losses included in earnings (or change in net assets) ⁽¹⁾	675
Settlements	(735		)
Balance as of June 30, 2017	$	1,120
Total losses included in earnings (or change in net assets) ⁽¹⁾	5
Settlements	(1,125		)
Balance as of September 30, 2017	$	—

________

⁽¹⁾All losses and gains (other than changes in net assets) were included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of September 30, 2018 and December 31, 2017 ($ in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Service cost $ 183
$ 174
$ 542
$ 507
Interest cost 87
64
234
185
Effect of foreign exchange rates (78 ) (125 ) 514
(495 )
Amortization of prior service cost —
—
—
2
Amortization of gain (7 ) (2 ) (22 ) (8 )
Compensation-non-retirement post employment benefits (41 ) 24
(36 ) 54
Settlement gain (84 ) —
(91 ) —
Curtailment gain (34 ) —
(34 ) (5 )
Net periodic benefit cost $ 26
$ 135
$ 1,107
$ 240



	Carrying Value		Fair Value
	As of September 30, 2018		Level 1		Level 2		Level 3
Financial liabilities not recorded at fair value:
Debt:
Term Loan	$	991,564	$	—	$	—	$	990,835
Revolving Credit Facility	—		—		—		—
Total	$	991,564	$	—	$	—	$	990,835



	Carrying Value		Fair Value
	As of December 31, 2017		Level 1		Level 2		Level 3
Financial liabilities not recorded at fair value:
Debt:
Term Loan	$	898,215	$	—	$	—	$	916,369
Revolving Credit Facility	—		—		—		—
Total	$	898,215	$	—	$	—	$	916,369

The following table summarizes the valuation techniques used to estimate the fair value of our financial instruments measured at fair value on a recurring basis and our financial instruments not measured at fair value:



		Valuation Technique
Financial instruments recorded at fair value:
Interest rate swaps		The fair value of the interest rate swaps is estimated based on the expected future cash flows by incorporating the notional amount of the swaps, the contractual period to maturity, and observable market-based inputs, including interest rate curves. The fair value also incorporates credit valuation adjustments to appropriately reflect nonperformance risk.
Financial instruments not recorded at fair value:
Term Loan		The fair value of our Term Loan is estimated using cash flow projections over the remaining contractual period by applying market forward rates and discounting back at the appropriate discount rate.
Revolving Credit Facility		The valuation technique of our Revolving Credit Facility is consistent with our Term Loan. The fair value of the Revolving Credit Facility generally approximates its carrying value as the expected term is significantly shorter in duration.

Note ~~16.~~17. Employee benefit plan

In accordance with labor law regulations in Mexico, certain employees are legally entitled to receive severance that is commensurate with the tenure they had with us at the time of termination without cause, which results in an unfunded benefit obligation. There were no plan assets as of September 30, 2018 or December 31, 2017 as contributions are made only to the extent benefits are paid.

The following table presents the components of net periodic pension cost for the three and nine months ended September 30, 2018 and 2017 ($ in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Service cost	$	176		$	183		$	526		$	542
Interest cost	94			87			270			234
Amortization of prior service cost	77			—			25			—
Effect of foreign exchange rates	201			(78		)	226			514
Amortization of gain	(4		)	(7		)	(14		)	(22		)
Compensation-non-retirement post employment benefits	(16		)	(41		)	2			(36		)
Settlement gain	—			(84		)	—			(91		)
Curtailment gain	(17		)	(34		)	(17		)	(34		)
Net periodic pension cost	$	511		$	26		$	1,018		$	1,107

The service cost component of net periodic pension cost is recorded within direct expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The non-service cost components of net periodic pension cost are recorded within other (expense) income for all periods presented.

Note 18. Other balance sheet items

Trade and other receivables, net

The following summarizes the balances of trade and other receivables, net as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 ($ in thousands):


	As of September 30,			As of December 31,			As of September 30,			As of December 31,
	2017			2016			2018			2017
Gross trade and other receivables	$	34,625		$	49,942		$	37,426		$	52,312
Allowance for doubtful accounts	(878		)	(1,061		)	(692		)	(785		)
Total trade and other receivables, net	$	33,747		$	48,881		$	36,734		$	51,527

~~Our allowance for doubtful accounts as of September 30, 2017 and December 31, 2016 was approximately $0.9 million and $1.1 million, respectively.~~ We have not experienced any significant write-offs to our accounts receivable.

Prepayments and other assets

The following summarizes the balances of prepayments and other assets as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 ($ in thousands):


	As of September 30,		As of December 31,		As of September 30,		As of December 31,
	2017		2016		2018		2017
Advances to suppliers	$	11,872	$	5,769	$	12,590	$	6,509
Prepaid income taxes	1,508		2,759		10,042		10,935
Prepaid other taxes⁽¹⁾	10,627		15,343		11,552		10,737
Contract deposit ⁽²⁾	2,700		—		2,700		2,700
Other assets	3,486		4,762		1,858		3,185
Total prepayments and other assets	$	30,193	$	28,633	$	38,742	$	34,066

~~_____~~________


⁽¹⁾	Includes recoverable value-added tax and general consumption tax accumulated by our Mexico and Jamaica entities, respectively.

⁽²⁾Represents a cash deposit related to the Sanctuary Cap Cana management contract. We are in the process of negotiating final terms for the purchase of a 30% interest in the resort in the second half of 2018, and the deposit will be used towards this purchase if we are able to agree on terms. If the purchase is not completed, this amount, together with an additional $0.8 million due, will be treated as key money.

Goodwill

The gross carrying values and accumulated impairment losses of goodwill by reportable segment (refer to discussion of our reportable segments in Note 19) as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 are as follows ($ in thousands):

As of September 30, As of December 31,
2017 2016
Gross carrying value $ 51,731
$ 51,731
Accumulated impairment loss —
—
Carrying Value $ 51,731
$ 51,731



	Yucatán Peninsula		Pacific Coast		Dominican Republic		Jamaica		Total
Gross carrying value as of December 31, 2017	$	51,731	$	—	$	—	$	—	$	51,731
Accumulated impairment losses	—		—		—		—		—
Net carrying value as of December 31, 2017	51,731		—		—		—		51,731

Additions (see Note 4)	—		—		—		23,056		23,056

Gross carrying value as of September 30, 2018	51,731		—		—		23,056		74,787
Accumulated impairment losses	—		—		—		—		—
Net carrying value as of September 30, 2018	$	51,731	$	—	$	—	$	23,056	$	74,787

Other intangible assets

~~The summary of other~~Other intangible assets as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 consisted of the following ($ in thousands):

As of September 30, As of December 31, Weighted average
2017 2016 useful life
Strategic Alliance $ 3,717
$ 3,748

Licenses 991
987

Other 2,632
2,196

Acquisition Cost 7,340
6,931

Strategic Alliance (3,693 ) (3,472 )
Other (1,920 ) (1,484 )
Accumulated Amortization (5,613 ) (4,956 )

Strategic Alliance 24
276
3 years
Licenses 991
987

Other 712
712
3 years
Carrying Value $ 1,727
$ 1,975



	As of September 30,			As of December 31,
	2018			2017
Gross carrying value:
Strategic alliance	$	—		$	3,616
Enterprise resource planning system⁽¹⁾	1,405			—
Management contract ⁽²⁾	1,900			—
Licenses ⁽³⁾	858			981
Other	2,568			3,298
Gross carrying value	6,731			7,895

Accumulated amortization:
Strategic alliance	—			(3,616		)
Enterprise resource planning system⁽¹⁾	(27		)	—
Management contract ⁽²⁾	(24		)	—
Other	(1,678		)	(2,192		)
Accumulated amortization	(1,729		)	(5,808		)

Net carrying value:
Strategic alliance	—			—
Enterprise resource planning system⁽¹⁾	1,378			—
Management contract ⁽²⁾	1,876			—
Licenses ⁽³⁾	858			981
Other	890			1,106
Net carrying value	$	5,002		$	2,087

~~Amortization expense for intangibles was $0.7~~________

⁽¹⁾Represents software development costs incurred to develop and implement SAP as our integrated enterprise resource planning (“ERP”) system. $1.1 million of these costs were placed into service in July 2018 and ~~$0.7 million for~~are being amortized over a weighted-average amortization period of 7 years.

⁽²⁾Represents the ~~nine months ended September 30, 2017 and 2016, respectively. Amortization expense for intangibles was $0.2 million and $0.2 million for~~fair value of a management contract acquired in the ~~three months ended September 30, 2017 and 2016, respectively.~~ business combination with the Sagicor Parties (see Note 4).

⁽³⁾Our licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization. As of September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, such indefinite lived assets totaled $0.9 million and $1.0 ~~million.~~million, respectively.

Amortization expense for intangible assets was $0.9 million and $0.7 million for the nine months ended September 30, 2018 and 2017, respectively. Amortization expense for intangible assets was $0.3 million and $0.2 million for the three months ended September 30, 2018 and 2017, respectively.

Trade and other payables

The following summarizes the balances of trade and other payables as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 ($ in thousands):


	As of September 30,		As of December 31,		As of September 30,		As of December 31,
	2017		2016		2018		2017
Trade payables	$	14,377	$	21,229	$	21,436	$	18,160
Advance deposits	40,269		41,621		39,447		43,884
Withholding and other taxes payable	32,547		27,432		44,781		34,904
Accrued professional services	7,300		19,566
Interest payable	7,559		16,151		420		5,586
Payroll and related accruals	13,908		12,963		15,525		13,848
Other payables	11,828		6,080
Accrued expenses and other payables					19,721		23,146
Total trade and other payables	$	127,788	$	145,042	$	141,330	$	139,528

Other liabilities

The following summarizes the balances of other liabilities as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 ($ in thousands):


	As of September 30,		As of December 31,		As of September 30,		As of December 31,
	2017		2016		2018		2017
Tax contingencies	$	3,025	$	2,969	$	2,347	$	2,310
Pension obligations	4,552		3,556		5,368		4,456
Casino loan and license	994		1,027
Cap Cana land purchase obligation	10,625		—		10,625		10,625
Unfavorable ground lease liability⁽¹⁾					2,322		—
Other	1,166		1,445		1,811		2,003
Total other liabilities	$	20,362	$	8,997	$	22,473	$	19,394

________


⁽¹⁾	Represents an unfavorable ground lease intangible acquired in the business combination with the Sagicor Parties (see Note 4). Amortization is recorded in non-package revenue in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

~~Note 17. Segment information~~

We consider each one of our hotels to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual hotels. Our operating segments meet the aggregation criteria and thus, we report three separate segments by geography: (i) Yucatán Peninsula, (ii) Pacific Coast and (iii) Caribbean Basin.

Our operating segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, all of whom represent our chief operating decision maker (“CODM”). Financial information for each reportable segment is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources. We did not provide a reconciliation of reportable segments' assets to our consolidated assets as this information is not reviewed by the CODM to assess performance and make decisions regarding the allocation of resources.

The performance of our operating segments is evaluated primarily on adjusted earnings before interest expense, income tax (provision) benefit, and depreciation and amortization expense (“Adjusted EBITDA”), which should not be considered an alternative to net (loss) income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. We define Adjusted EBITDA as net (loss) income, determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax (provision) benefit, and depreciation and amortization expense, further adjusted to exclude the following items: (a) other income (expense), net; (b) transaction expenses; (c) severance expense; (d) other tax expense; (e) share-based compensation; (f) loss on extinguishment of debt; (g) Jamaica delayed opening, (h) insurance proceeds and (i) repairs from hurricanes and tropical storms.

There are limitations to using financial measures such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary

~~cash available for investment in our business and investors should carefully consider our U.S. GAAP results presented in our Condensed Consolidated Financial Statements.~~

~~The following tables present segment net revenue, a reconciliation to gross revenue and segment Adjusted EBITDA and a reconciliation to net (loss) income ($ in thousands~~):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Revenue:
Yucatàn Peninsula $ 59,630
$ 56,883
$ 209,305
$ 189,640
Pacific Coast 15,872
15,121
67,377
58,178
Caribbean Basin 39,283
39,165
146,026
144,445
Segment net revenue ⁽¹⁾
114,785
111,169
422,708
392,263
Other 10
2
12
6
Tips 3,547
2,943
10,287
9,101
Total gross revenue $ 118,342
$ 114,114
$ 433,007
$ 401,370

~~________~~

⁽¹⁾ ~~Net revenue represents total gross revenue less compulsory tips paid to employees and other miscellaneous revenue not derived from segment operations.~~

Three Months Ended September 30, Nine Months Ended September 30,

2017 2016 2017 2016
Adjusted EBITDA:
Yucatàn Peninsula $ 20,824
$ 23,274
$ 93,070
$ 84,073
Pacific Coast 3,758
3,851
27,242
20,639
Caribbean Basin 7,281
6,760
42,853
43,763
Segment Adjusted EBITDA 31,863
33,885
163,165
148,475
Other corporate - unallocated (7,544 ) (8,288 ) (23,354 ) (22,536 )
Total consolidated Adjusted EBITDA 24,319
25,597
139,811
125,939
Less:
Other (income) expense, net (1,782 ) 225
(1,191 ) 2,414
Share-based compensation 1,843
—
2,803
—
Loss on extinguishment of debt —
—
12,526
—
Transaction expenses 1,893
1,203
11,193
3,874
Severance expense —
—
442
—
Other tax expense 175
309
598
971
Jamaica delayed opening expenses (41 ) —
(152 ) —
Property damage insurance proceeds —
(179 ) —
(309 )
Repairs from hurricanes and tropical storms ⁽¹⁾
765
—
765
—
Add:
Interest expense (13,099 ) (13,418 ) (41,187 ) (40,619 )
Depreciation and amortization (13,808 ) (13,022 ) (40,093 ) (38,809 )
Net (loss) income before tax (5,441 ) (2,401 ) 31,547
39,561
Income tax (provision) benefit (226 ) 841
(20,105 ) 5,270
Net (loss) income $ (5,667 ) $ (1,560 ) $ 11,442
$ 44,831

~~________~~

⁽¹⁾Represents repairs and maintenance expenses incurred in connection with damage from Tropical Storm Lidia and Hurricane Maria at Hyatt Ziva Los Cabos and Dreams Punta Cana, respectively, which were included in direct expense in the ~~Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income~~.

Note ~~18. Subsequent events~~19. Segment information

In preparing the interim Condensed Consolidated Financial Statements as of September 30, 2017, we have evaluated subsequent events occurring after September 30, 2017. Based on this evaluation, there were no subsequent events from September 30, 2017 through the date the Condensed Consolidated Financial Statements were issued.

~~Item 2.~~ ~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~

The following discussion and analysis of Playa Hotels & Resorts N.V.'s ("Playa") financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our "Condensed Consolidated Financial Statements") and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, "we," "us," "our" and the "Company" refer to Playa and its subsidiaries.

~~Cautionary Note Regarding Forward-Looking Statements~~

Some of the statements contained in this quarterly report constitute forward-looking statements within the meaning of the federal securities laws. 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 and results of operations. Likewise, our Condensed Consolidated Financial Statements and allAs a result of our ~~statements regarding anticipated growth in our operations, anticipated market conditions, demographics~~business combination with the Sagicor Parties, we evaluated and ~~results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by~~modified 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 quarterly 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 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 on the lodging industry in particular;~~

~~the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;~~

~~the success and continuation~~presentation of our ~~relationship with Hyatt;~~

reportable segments to reflect the ~~volatility of currency exchange rates;~~

~~the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future, including the rebranding of two~~management of our resorts ~~under~~after the ~~new all-inclusive “Panama Jack” brand;~~

~~our failure to successfully complete expansion, repair and renovation projects in the timeframes and at the costs anticipated;~~

~~significant increases in construction and development costs;~~

~~our ability to obtain and maintain financing arrangements on attractive terms;~~

~~the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which we operate;~~

~~the effectiveness of our internal controls and our corporate policies and procedures and the success and timing~~incorporation of the ~~remediation efforts for the material weaknesses that we identified in~~Sagicor Assets. We divided our ~~internal control over financial reporting;~~

~~changes in personnel and availability of qualified personnel;~~

~~environmental uncertainties and risks related to adverse weather conditions and natural disasters;~~

~~dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;~~

~~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 quarterly 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).

~~Explanatory Note~~

At 12:00 a.m. Central European Time on March 12, 2017 (the "Closing Time"), we consummated a business combination (the "Business Combination") pursuant to that certain transaction agreement by and among us, Playa Hotels & Resorts B.V. (our "Predecessor") and Pace Holdings Corp. ("Pace"), an entity that was formed as a special purpose acquisition company, for the purpose of effecting a merger or other similar business combination with one or more target businesses, and New Pace Holdings Corp. In connection with the Business Combination, which is described in detail in our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on March 14, 2017, we changed our name from Porto Holdco N.V. to Playa Hotels & Resorts N.V. In addition, in connection with the Business Combination, (i) prior to the consummation of the Business Combination, all of our Predecessor's cumulative redeemable preferred shares were purchased and were subsequently extinguished upon the reverse merger of our Predecessor with andCaribbean Basin segment into us, (ii) Pace's former shareholders and our Predecessor's former shareholders received a combination of our ordinary shares and warrants as consideration in the Business Combination. Our Predecessor was the accounting acquirer in the Business Combination, and the business, properties, and management team of our Predecessor prior to the Business Combination are the business, properties, and management team of the Company following the Business Combination.

Our financial statements, other financial information and operating statistics presented in this Form 10-Q reflect the results of our Predecessor for all periods prior to the Closing Time. Our financial statements and other financial information also include the consolidation of Pace from the Closing Time of the Business Combination to September 30, 2017.

~~Overview~~

We are 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 September 30, 2017, we owned a portfolio consisting of 13 resorts (6,130 rooms) located in Mexico, theseparate Dominican Republic and ~~Jamaica. In addition, we signed an agreement pursuant~~Jamaica segments, which caused us to ~~which, beginning on October 1, 2017, we began managing a resort owned by a third party, located in~~change from three to four reportable segments. The results for all comparative prior periods have been reclassified to conform to the ~~Dominican Republic.~~ current period presentation.

We ~~believe that the resorts we own, as well as the resorts we manage, are among the finest all-inclusive resorts in the markets they serve. All~~consider each one of our resorts ~~offer guests luxury accommodations, noteworthy architecture, extensive on-site activities~~to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and ~~multiple food~~assess operating performance based on individual resorts. Our operating segments meet the aggregation criteria and ~~beverage options. Our guests also have the opportunity to purchase upgrades from us such as premium rooms, dining experiences, wines and spirits and spa packages.~~

~~For the three months ended September 30, 2017,~~thus, we generated a net loss of $5.7 million, total revenue of $118.3 million, Net Package RevPAR of approximately $174.97 and Adjusted EBITDA of $24.3 million. For the three months ended September 30, 2016, we generated a net loss of $1.6 million, total revenue of $114.1 million, Net Package RevPAR of approximately $171.52 and Adjusted EBITDA of $25.6 million.

For the nine months ended September 30, 2017, we generated net income of $11.4 million, total revenue of $433.0 million, Net Package RevPAR of approximately $217.24 and Adjusted EBITDA of $139.8 million. For the nine months ended September 30, 2016, we generated net income of $44.8 million, total revenue of $401.4 million, Net Package RevPAR of approximately $202.13 and Adjusted EBITDA of $125.9 million.

~~Our Portfolio of Owned Resorts~~

The following table presents an overview of the resorts we own. We manage eight of the resorts we own and a third party, AMResorts, manages five of the resorts we own. None of the resorts we own contributed more than 12.5% of our total net revenue or 17.9% of our consolidated Adjusted EBITDA for the nine months ended September 30, 2017. The table below is organizedpresent four separate reportable segments by ~~our three geographic business segments: the~~geography: (i) Yucatán Peninsula, ~~the~~(ii) Pacific Coast, ~~and the Caribbean Basin.~~



~~Name of Resort~~	~~Location~~	~~Brand and Type~~	~~Operator~~	~~Rooms~~
~~Yucatán Peninsula~~
~~Hyatt Ziva Cancún~~	~~Cancún, Mexico~~	~~Hyatt Ziva (all ages)~~	~~Playa~~	~~547~~
~~Hyatt Zilara Cancún~~	~~Cancún, Mexico~~	~~Hyatt Zilara (adults-only)~~	~~Playa~~	~~307~~
~~Gran Caribe Real~~	~~Cancún, Mexico~~	~~Gran (all ages)~~⁽¹⁾	~~Playa~~	~~458~~
~~THE Royal Playa del Carmen~~	~~Playa del Carmen, Mexico~~	~~THE Royal (adults-only)~~	~~Playa~~	~~513~~
~~Gran Porto Real~~	~~Playa del Carmen, Mexico~~	~~Gran (all ages)~~⁽¹⁾	~~Playa~~	~~287~~
~~Secrets Capri~~	~~Riviera Maya, Mexico~~	~~Secrets (adults-only)~~	~~AMResorts~~	~~291~~
~~Dreams Puerto Aventuras~~	~~Riviera Maya, Mexico~~	~~Dreams (all ages)~~	~~AMResorts~~	~~305~~
~~Pacific Coast~~
~~Hyatt Ziva Los Cabos~~	~~Cabo San Lucas, Mexico~~	~~Hyatt Ziva (all ages)~~	~~Playa~~	~~591~~
~~Hyatt Ziva Puerto Vallarta~~	~~Puerto Vallarta, Mexico~~	~~Hyatt Ziva (all ages)~~	~~Playa~~	~~335~~
~~Caribbean Basin~~
~~Dreams La Romana~~	~~La Romana, Dominican Republic~~	~~Dreams (all ages)~~	~~AMResorts~~	~~756~~
~~Dreams Palm Beach~~	~~Punta Cana, Dominican Republic~~	~~Dreams (all ages)~~	~~AMResorts~~	~~500~~
~~Dreams Punta Cana~~	~~Punta Cana, Dominican Republic~~	~~Dreams (all ages)~~	~~AMResorts~~	~~620~~
~~Hyatt Ziva and Hyatt Zilara Rose Hall~~⁽²⁾	~~Montego Bay, Jamaica~~	~~Hyatt Ziva (all ages) and Hyatt Zilara (adults-only)~~	~~Playa~~	~~620~~
~~Total Rooms~~				~~6,130~~

⁽¹⁾ ~~Pursuant to an agreement with Panama Jack, we have agreed to rebrand these resorts under the Panama Jack brand. We expect the rebranding to be completed in 2017.~~

⁽²⁾ Our Jamaica property is treated as a single resort operating under both of the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands (the "Hyatt All-Inclusive Resort Brands"), rather than as two separate resorts.

~~Results of Operations~~

~~Three Months Ended September 30, 2017 and 2016~~

~~The following table summarizes our results of operations on a consolidated basis for the three months ended September 30, 2017 and 2016:~~

Three Months Ended September 30, Increase / Decrease
2017 2016 Change % Change
Revenue: ($ in thousands)
Package $ 102,093
$ 99,798
$ 2,295
2.3 %
Non-package 16,249
14,316
1,933
13.5 %
Total revenue 118,342
114,114
4,228
3.7 %
Direct and selling, general and administrative expenses:
Direct 75,650
67,995
7,655
11.3 %
Selling, general and administrative 23,008
22,034
974
4.4 %
Depreciation and amortization 13,808
13,022
786
6.0 %
Insurance proceeds —
(179 ) 179
(100.0 )%
Direct and selling, general and administrative expenses 112,466
102,872
9,594
9.3 %
Operating income 5,876
11,242
(5,366 ) (47.7 )%
Interest expense (13,099 ) (13,418 ) 319
(2.4 )%
Other income (expense), net 1,782
(225 ) 2,007
(892.0 )%
Net loss before tax (5,441 ) (2,401 ) (3,040 ) 126.6 %
Income tax (provision) benefit (226 ) 841
(1,067 ) (126.9 )%
Net loss $ (5,667 ) $ (1,560 ) $ (4,107 ) 263.3 %

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue (as defined below), total net revenue and Adjusted EBITDA for the three months ended September 30, 2017 and 2016. For a description of these operating metrics and non-U.S. GAAP measures and a reconciliation of Net Package Revenue, Net Non-package Revenue and total net revenue to total revenue as computed under U.S. GAAP, see “Key Indicators of Financial and Operating Performance,” below. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

~~Total Portfolio~~

Three Months Ended September 30, Increase / Decrease
2017 2016 Change % Change
Occupancy 78.5 % 81.6 % (3.1 )pts (3.8 )%
Net Package ADR $ 222.80
$ 210.26
$ 12.54
6.0 %
Net Package RevPAR 174.97
171.52
3.45
2.0 %
($ in thousands)
Net Package Revenue $ 98,674
$ 96,919
$ 1,755
1.8 %
Net Non-package Revenue 16,121
14,252
1,869
13.1 %
Net Revenue 114,795
111,171
3,624
3.3 %
Adjusted EBITDA $ 24,319
$ 25,597
$ (1,278 ) (5.0 )%

~~Total Revenue and Total Net Revenue~~

Our total revenue for the three months ended September 30, 2017 increased $4.2 million, or 3.7%, compared to the three months ended September 30, 2016. Our total net revenue (which represents total revenue less compulsory tips paid to employees) for the three months ended September 30, 2017 increased $3.6 million, or 3.3%, compared to the three months ended September 30, 2016. This increase was driven by an increase in Net Package Revenue of $1.8 million, or 1.8%, and an increase in Net Non-package Revenue of $1.9 million, or 13.1%. The increase in Net Package Revenue was the result of an increase in Net Package ADR of $12.54, or 6.0% partially offset by a decrease in average occupancy from 81.6% to 78.5%, the equivalent of an increase of $3.45, or 2.0%, in Net Package RevPAR.

~~Direct Expenses~~

~~The following table shows a reconciliation of our direct expenses to net direct expenses for the three months ended September 30, 2017 and 2016~~ ~~($ in thousands):~~

Three Months Ended September 30, Increase/Decrease
2017 2016 Change % Change
Direct expenses $ 75,650
$ 67,995
$ 7,655
11.3 %
Less: tips 3,547
2,943
604
20.5 %
Net direct expenses $ 72,103
$ 65,052
$ 7,051
10.8 %

Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our net direct expenses (which represents total direct expenses less compulsory tips paid to employees) for the three months ended September 30, 2017 were $72.1 million, or 62.8%, of total net revenue and $65.1 million, or 58.5%, of total net revenue for the three months ended September 30, 2016. Net direct expenses for the three months ended September 30, 2017 include $18.0 million of food and beverage expenses, $26.0 million of resort salary and wages, $7.5 million of utility expenses, $4.3 million of repairs and maintenance expenses, $0.6 million of licenses and property taxes, $2.0 million of incentive and management fees, $3.0 million of Hyatt fees, $0.9 million of guest costs, and $9.8 million of other operational expenses. Other operational expenses primarily include $1.0 million of office supplies, $1.1 million of guest supplies, $0.6 million of laundry and cleaning expenses, $1.1 million of transportation and travel expenses, $0.9 million of entertainment expenses, $0.9 million of other supplies and expense amortization, $0.7 million of property and equipment rental expenses, $0.3 million of computer and telephone expense, and $3.2 million of other expenses.

Net direct expenses for the three months ended September 30, 2016 include $19.2 million of food and beverage expenses, $25.6 million of resort salaries and wages, $6.8 million of utility expenses, $3.6 million of repairs and maintenance expenses, $0.5 million of licenses and property taxes, $2.2 million of incentive and management fees, $2.3 million of Hyatt fees, $1.4 million of guest costs, and $3.4 million of other operational expenses. Other operational expenses primarily include $2.1 million of transportation and travel expenses and $1.3 million of office supplies.

Net direct expenses for the three months ended September 30, 2017 increased $7.1 million, or 10.8%, compared to the three months ended September 30, 2016. The increases in net direct expenses were primarily attributable to an increase in other expenses of $6.4 million, an increase in utility expenses of $0.7 million, an increase in salary and wages expenses of $0.4 million, an increase in repairs and maintenance of $0.7 million and an increase in Hyatt fees of $0.7 million. These expenses were partially offset by a decrease in food and beverage expenses of $1.2 million and a decrease in guest cost expenses of $0.5 million.

~~Selling, General and Administrative Expenses~~

Our selling, general and administrative expenses for the three months ended September 30, 2017 increased $1.0 million, or 4.4%, compared to the three months ended September 30, 2016. This increase was primarily driven by an increase in transaction expenses of $0.9 million and an increase in corporate personnel costs of $1.2 million. These expenses were partially offset by a decrease in advertising and commissions expenses of $1.1 million and a decrease in professional fees of $0.1 million.

~~Depreciation and Amortization Expense~~

~~Our depreciation and amortization expense for the three months ended September 30, 2017 increased $0.8 million, or 6.0%, compared to the three months ended September 30, 2016.~~

~~Insurance Proceeds~~

We received property damage proceeds of $0.8 million during the three months ended September 30, 2017 related to a flood claim at the Dreams Punta Cana resort, which were completely offset by expenses incurred to repair the damage during the same period. During the three months ended September 30, 2016, we recorded a gain of $0.2 million from net property damage insurance proceeds related to a small claim at the Dreams Palm Beach resort.

~~Interest Expense~~

Our interest expense for the three months ended September 30, 2017 decreased $0.3 million, or 2.4%, as compared to the three months ended September 30, 2016. This decrease was primarily attributable to the partial principal repayment of $115.0 million on our Senior Notes due 2020 in April of 2017.

~~Income Tax Provision~~

The income tax provision for the three months ended September 30, 2017 was $0.2 million, an increase of $1.1 million compared to the three months ended September 30, 2016, during which quarter we reported an income tax benefit of $0.8 million. The increased income tax expense was driven primarily by a $1.1 million increase in the discrete expense associated with foreign exchange rate fluctuations and a $3.6 million tax benefit decrease associated with the non-recurring valuation allowance release in September 2016. This was partially offset by a $2.4 million increase in the tax impact on increased pre-tax book income in our tax paying entities and a $1.2 million increase in the tax benefit associated with future tax liabilities of some of our Mexican entities.

~~Adjusted EBITDA~~

Our Adjusted EBITDA for the three months ended September 30, 2017 decreased $1.3 million, or 5.0%, compared to the three months ended September 30, 2016. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

~~Nine Months Ended September 30, 2017 and 2016~~

~~The following table summarizes our results of operations on a consolidated basis for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended September 30, Increase / Decrease
2017 2016 Change % Change
Revenue: ($ in thousands)
Package $ 373,502
$ 348,808
$ 24,694
7.1 %
Non-package 59,505
52,562
6,943
13.2 %
Total revenue 433,007
401,370
31,637
7.9 %
Direct and selling, general and administrative expenses:
Direct 232,132
214,039
18,093
8.5 %
Selling, general and administrative 76,713
66,237
10,476
15.8 %
Depreciation and amortization 40,093
38,809
1,284
3.3 %
Insurance proceeds —
(309 ) 309
(100.0 )%
Direct and selling, general and administrative expenses 348,938
318,776
30,162
9.5 %
Operating income 84,069
82,594
1,475
1.8 %
Interest expense (41,187 ) (40,619 ) (568 ) 1.4 %
Loss on extinguishment of debt (12,526 ) —
(12,526 ) 100.0 %
Other income (expense), net 1,191
(2,414 ) 3,605
(149.3 )%
Net income before tax 31,547
39,561
(8,014 ) (20.3 )%
Income tax (provision) benefit (20,105 ) 5,270
(25,375 ) (481.5 )%
Net income $ 11,442
$ 44,831
$ (33,389 ) (74.5 )%

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue (as defined below), total net revenue and Adjusted EBITDA for the nine months ended September 30, 2017 and 2016. For a description of these operating metrics and non-U.S. GAAP measures and a reconciliation of Net Package Revenue, Net Non-package Revenue and total net revenue to total revenue as computed under U.S. GAAP, see “Key Indicators of Financial and Operating Performance,” below. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

~~Total Portfolio~~

Nine Months Ended September 30, Increase / Decrease
2017 2016 Change % Change
Occupancy 82.6 % 80.8 % 1.8 pts 2.2 %
Net Package ADR $ 263.00
$ 250.12
$ 12.88
5.1 %
Net Package RevPAR 217.24
202.13
15.11
7.5 %
($ in thousands)
Net Package Revenue $ 363,766
$ 340,171
$ 23,595
6.9 %
Net Non-package Revenue 58,954
52,098
6,856
13.2 %
Total net revenue 422,720
392,269
30,451
7.8 %
Adjusted EBITDA $ 139,811
$ 125,939
$ 13,872
11.0 %

~~Total Revenue and Total Net Revenue~~

Our total revenue for the nine months ended September 30, 2017 increased $31.6 million, or 7.9%, compared to the nine months ended September 30, 2016. Our total net revenue (which represents total revenue less compulsory tips paid to employees) for the nine months ended September 30, 2017 increased $30.5 million, or 7.8%, compared to the nine months ended September 30, 2016. This increase was driven by an increase in Net Package Revenue of $23.6 million, or 6.9%, and an increase in Net Non-package Revenue of $6.9 million, or 13.2%. The increase in Net Package Revenue was the result of an increase in Net Package ADR of $12.88, or 5.1% and an increase in average occupancy from 80.8% to 82.6%, the equivalent of an increase of $15.11, or 7.5%, in Net Package RevPAR.

~~Direct Expenses~~

~~The following table shows a reconciliation of our direct expenses to net direct expenses for the nine months ended September 30, 2017 and 2016~~ ~~($ in thousands):~~

Nine Months Ended September 30, Increase/Decrease
2017 2016 Change % Change
Direct expenses $ 232,132
$ 214,039
$ 18,093
8.5 %
Less: tips 10,287
9,101
1,186
13.0 %
Net direct expenses $ 221,845
$ 204,938
$ 16,907
8.2 %

Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our net direct expenses (which represents total direct expenses less compulsory tips paid to employees) for the nine months ended September 30, 2017 were $221.8 million, or 52.5%, of total net revenue and $204.9 million, or 52.2%, of total net revenue for the nine months ended September 30, 2016. Net direct expenses for the nine months ended September 30, 2017 include $55.4 million of food and beverage expenses, $77.8 million of resort salary and wages, $22.1 million of utility expenses, $11.3 million of repairs and maintenance expenses, $1.8 million of licenses and property taxes, $9.0 million of incentive and management fees, $10.8 million of Hyatt fees, $2.9 million of guest costs, and $30.7 million of other operational expenses. Other operational expenses primarily include $3.1 million of office supplies, $3.3 million of guest supplies, $1.9 million of laundry and cleaning expenses, $3.2 million of transportation and travel expenses, $2.7 million of entertainment expenses, $2.9 million other supplies and expense amortization, $3.2 million of property and equipment rental expenses, $0.9 million of computer and telephone expense, and $9.5 million of other expenses.

Net direct expenses for the nine months ended September 30, 2016 include $56.7 million of food and beverage expenses, $69.4 million of resort salaries and wages, $18.7 million of utility expenses, $10.8 million of repairs and maintenance expenses, $2.0 million of licenses and property taxes, $9.0 million of incentive and management fees, $10.2 million of Hyatt fees, $1.7 million of guest costs,

and $26.4 million of other operational expenses. Other operational expenses primarily include $3.7 million of office supplies, $3.5 million of guest supplies, $2.3 million of laundry and cleaning expenses, $3.3 million of transportation and travel expenses, $2.3 million of entertainment expenses, $3.0 million of other supplies and expense amortization, $3.0 million of property and equipment rental expenses, $1.2 million of computer and telephone expense, and $4.1 million of other expenses.

Net direct expenses for the nine months ended September 30, 2017 increased $16.9 million, or 8.2%, compared to the nine months ended September 30, 2016. The increases in net direct expenses were primarily attributable to an increase in utility expenses of $3.4 million, an increase in guest costs of $1.2 million, an increase in repairs and maintenance of $0.5 million, an increase in Hyatt fees of $0.6 million, an increase in salary and wages expenses of $8.4 million and an increase in other expenses of $4.3 million. These expenses were partially offset by a decrease in food and beverages expenses of $1.3 million and a decrease in licenses and property taxes of $0.2 million.

~~Selling, General and Administrative Expenses~~

Our selling, general and administrative expenses for the nine months ended September 30, 2017 increased $10.5 million, or 15.8%, compared to the nine months ended September 30, 2016. This increase was primarily driven by an increase in transaction expenses of $7.3 million, an increase in advertising and commissions expenses of $0.8 million, an increase in professional fees of $0.7 million, an increase in corporate personnel costs of $2.5 million, and an increase in corporate selling, general and administrative expenses of $0.1 million. These expenses were partially offset by a decrease in insurance expenses of $0.9 million.

~~Depreciation and Amortization~~ ~~Expense~~

Our depreciation and amortization expense for the nine months ended September 30, 2017 increased $1.3 million, or 3.3%, compared to the nine months ended September 30, 2016. This increase is due to asset additions in the prior year that have a full year of depreciation in the current year, as well as additions in the current year which have increased depreciation expense.

~~Insurance Proceeds~~

We received property damage proceeds of $1.3 million during the nine months ended September 30, 2017 related to a flood claim at the Dreams Punta Cana resort, which were completely offset by expenses incurred to repair the damage during the same period. During the nine months ended September 30, 2016, we recorded a gain of $0.3 million from net property damage insurance proceeds related to a small claim at the Dreams Palm Beach resort.

~~Interest Expense~~

Our interest expense for the nine months ended September 30, 2017 increased $0.6 million, or 1.4%, as compared to the nine months ended September 30, 2016. This increase was primarily attributable to the accretion of deferred consideration.

~~Loss on Extinguishment of Debt~~

~~The repayment of our existing term loan and partial repayment of our Senior Notes due 2020 was accounted for as an extinguishment of debt and resulted in a loss on extinguishment of debt for the~~ ~~nine months ended September 30, 2017~~ ~~of $12.5 million~~.

~~Income Tax Provision~~

The income tax provision for the nine months ended September 30, 2017 was $20.1 million, an increase of $25.4 million compared to the nine months ended September 30, 2016, during which period we reported an income tax benefit of $5.3 million. The increased income tax expense was driven primarily by a $20.7 million increase in the discrete expense associated with foreign exchange rate fluctuations, a $1.3 million increase in the tax impact on increased pre-tax book income in our tax paying entities, and a $3.6 million tax benefit decrease associated with the non-recurring valuation allowance release in September 2016. This was partially offset by a $0.5 million decrease in the tax benefit associated with future tax liabilities of some Mexican entities.

~~Adjusted EBITDA~~

Our Adjusted EBITDA for the nine months ended September 30, 2017 increased $13.9 million, or 11.0%, compared to the nine months ended September 30, 2016. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

~~Key Indicators of Financial and Operating Performance~~

We use a variety of financial and other information to monitor the financial and operating performance of our business. Some of this is financial information prepared in accordance with U.S. GAAP, while other information, though financial in nature, is not prepared in accordance with U.S. GAAP. For reconciliations of non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measure, see “Non-U.S. GAAP Financial Measures.” Our management also uses other information that is not financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate the financial and operating performance of our portfolio. Our management uses this information to measure the performance of our segments and consolidated portfolio. We use this information for planning and monitoring our business, as well as in determining management and employee compensation. These key indicators include:

~~Net revenue~~

~~Net Package Revenue~~

~~Net Non-package Revenue~~

~~Occupancy~~

~~Net Package ADR~~

~~Net Package RevPAR~~

~~Adjusted EBITDA~~

~~Comparable Adjusted EBITDA~~

~~Net Revenue, Net Package Revenue and Net Non-package Revenue~~

We derive net revenue from the sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities, net of compulsory tips paid to employees in Mexico and Jamaica. Government mandated compulsory tips in the(iii) Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net revenue is recognized when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized. Food and beverage revenue not included in a guest’s all-inclusive package is recognized when the goods are consumed. Net revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition.

In analyzing our results, our management differentiates between Net Package Revenue and Net Non-package Revenue (as such terms are defined below). Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day. “Net Package Revenue” consists of net revenues derived from all-inclusive packages purchased by our guests. “Net Non-package Revenue” primarily includes net revenue associated with guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages, which are not included in the all-inclusive package.

~~The following table shows a reconciliation of Net Package Revenue, Net Non-package Revenue and Net Revenue to Total Revenue for~~(iv) Jamaica. For the three and nine months ended September 30, 2018 and 2017, we have excluded the immaterial amounts of management fees, cost reimbursements and ~~2016:~~other from our segment reporting.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
($ in thousands) ($ in thousands)
Total Net Package Revenue $ 98,674
$ 96,919
$ 363,766
$ 340,171
Total Net Non-package Revenue 16,121
14,252
58,954
52,098
Total net revenue 114,795
111,171
422,720
392,269
Plus: compulsory tips 3,547
2,943
10,287
9,101
Total revenue $ 118,342
$ 114,114
$ 433,007
$ 401,370

~~Occupancy~~

~~“Occupancy” represents~~Our operating segments are components of the ~~total number~~business which are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, all of ~~rooms sold~~whom represent our chief operating decision maker (“CODM”). Financial information for ~~a period divided~~each reportable segment is reviewed by the ~~total number~~CODM to assess performance and make decisions regarding the allocation of ~~rooms available during such period. Occupancy~~resources. We did not provide a reconciliation of reportable segments' assets to our consolidated assets as this information is a useful measure of the utilization of a resort’s total available capacity and can be used to gauge demand at a specific resort or group of properties for a period. Occupancy levels also enable us to optimize Net Package ADR by increasing or decreasing the stated rate for our all-inclusive packages as demand for a resort increases or decreases.

~~Net Package ADR~~

~~“Net Package ADR” represents total Net Package Revenue for a period divided~~not regularly reviewed by the ~~total number~~CODM to assess performance and make decisions regarding the allocation of ~~rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base~~resources.

The performance of our ~~portfolio or comparable portfolio, as applicable. Net Package ADR~~operating segments is ~~a commonly used performance measure in the all-inclusive segment of the lodging industry,~~evaluated primarily on adjusted earnings before interest expense, income tax provision, and ~~is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.~~

~~Net Package RevPAR~~

~~“Net Package RevPAR” is the product of Net Package ADR~~depreciation and ~~the average daily occupancy percentage. Net Package RevPAR does~~amortization expense (“Adjusted EBITDA”), which should not ~~reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is~~be considered ~~the key performance measure in the all-inclusive segment of the lodging industry to identify trend information with respect~~an alternative to net ~~room revenue produced by our portfolio~~(loss) income or ~~comparable portfolio, as applicable, and to evaluate operating~~other measures of financial performance ~~on a consolidated basis~~ or ~~a regional basis, as applicable.~~

~~Adjusted EBITDA~~

liquidity derived in accordance with U.S. GAAP. We define Adjusted EBITDA ~~a non-U.S. GAAP financial measure,~~ as net (loss) income, ~~(loss),~~ determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax provision, and

depreciation and amortization ~~expense. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA~~expense, further adjusted to exclude the following items:

~~Other expense (income), net~~

~~Impairment~~ (a) other (expense) income, net; (b) share-based compensation; (c) loss

~~Management termination fees~~

~~Pre-opening expenses~~

~~Transaction expenses~~

~~Severance expenses~~

~~Other tax expense~~

~~Property damage insurance proceeds~~

~~Share-based compensation expense~~

~~Loss (gain)~~ on extinguishment of ~~debt~~

~~Other items which may include, but are not limited to the following: management contract termination fees; gains or losses from legal settlements;~~debt; (d) transaction expenses; (e) severance expense; (f) other tax expense; (g) Jamaica delayed opening accrual reversal; (h) pre-opening expenses; (i) property damage insurance proceeds; and (j) repairs from hurricanes and tropical ~~storms; and Jamaica delayed opening accrual~~

storms.

We believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other expense, net), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time.

The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our "Board") and management. In addition, the compensation committee of our Board determines the annual variable compensation for certain members of our management based, in part, on consolidated Adjusted EBITDA. We

believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.

~~Adjusted EBITDA is not a substitute for net income or any other measure determined in accordance with U.S. GAAP.~~ There are limitations to ~~the utility of non-U.S. GAAP~~using financial measures such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named ~~non-U.S. GAAP~~ financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business and investors should carefully consider our U.S. GAAP results ~~presented.~~

~~For a reconciliation of EBITDA and Adjusted EBITDA to net income as computed under U.S. GAAP, see “Non-U.S. GAAP~~presented in our Condensed Consolidated Financial ~~Measures.”~~

~~Segment Results~~Statements.

~~Three Months Ended September 30, 2017 and 2016~~

~~We evaluate our business segment operating performance using~~The following tables present segment net revenue, ~~and segment Adjusted EBITDA. The following tables summarize segment net~~a reconciliation to gross revenue and segment Adjusted EBITDA ~~for the three months ended September 30, 2017~~ and ~~2016:~~

Three Months Ended September 30,
2017 2016
Change

% Change
Net revenue: ($ in thousands)
Yucatán Peninsula $ 59,630
$ 56,883
$ 2,747
4.8 %
Pacific Coast 15,872
15,121
751
5.0 %
Caribbean Basin 39,283
39,165
118
0.3 %
Segment net revenue 114,785
111,169
3,616
3.3 %
Other 10
2
8
400.0 %
Total net revenue
$ 114,795
$ 111,171
$ 3,624
3.3 %

Three Months Ended September 30,
2017 2016
Change
% Change
Adjusted EBITDA: ($ in thousands)
Yucatán Peninsula $ 20,824
$ 23,274
$ (2,450 ) (10.5 )%
Pacific Coast 3,758
3,851
(93 ) (2.4 )%
Caribbean Basin 7,281
6,760
521
7.7 %
Segment Adjusted EBITDA 31,863
33,885
(2,022 ) (6.0 )%
Other corporate—unallocated (7,544)
(8,288)
744
(9.0 )%
Total Adjusted EBITDA
$ 24,319
$ 25,597
$ (1,278 ) (5.0 )%

~~For~~ a reconciliation ~~of segment~~to net ~~revenue and segment Adjusted EBITDA to gross revenue and net loss, respectively, each as computed under U.S. GAAP, see~~ ~~Note 17~~ ~~to our Condensed Consolidated Financial Statements.~~

~~Yucatán Peninsula~~

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, total net revenue and Adjusted EBITDA for our Yucatán Peninsula segment for the three months ended September 30, 2017 and 2016 for the total segment portfolio.

Three Months Ended September 30,
2017 2016
Change
% Change
Occupancy 86.2 % 88.1 % (1.9 )pts (2.2 )%
Net Package ADR $ 242.21
$ 232.77
$ 9.44
4.1 %
Net Package RevPAR 208.80
204.97
3.83
1.9 %
($ in thousands)
Net Package Revenue $ 52,019
$ 51,292
$ 727
1.4 %
Net Non-package Revenue 7,611
5,591
2,020
36.1 %
Total net revenue 59,630
56,883
2,747
4.8 %
Adjusted EBITDA $ 20,824
$ 23,274
$ (2,450 ) (10.5 )%

~~Segment Total Net Revenue~~. Our net revenue for the three months ended September 30, 2017 increased $2.7 million, or 4.8%, compared to the three months ended September 30, 2016. This increase was primarily due to strong performance of Hyatt Ziva Cancun, which accounted for a $2.4 million increase in net revenue compared to the three months ended September 30, 2016 due to its increase in both Net Package ADR and Occupancy compared to prior year.

~~Segment Adjusted EBITD~~A. Our Adjusted EBITDA for the three months ended September 30, 2017 decreased $2.5 million, or 10.5%, compared to the three months ended September 30, 2016. This decrease was primarily the result of the performance of Gran Caribe and Gran Porto, which together accounted for a decrease of $3.1 million in Adjusted EBITDA compared to the three months ended September 30, 2016. These resorts had a decrease in occupancy and package revenue, as well as an increase in operational expenses to advance the renovations and conversion of these resorts to the Panama Jack brand. The renovations are scheduled to be completed by early December of 2017.

~~Pacific Coast~~

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-Package Revenue, total net revenue and Adjusted EBITDA for our Pacific Coast segment for the three months ended September 30, 2017 and 2016 for the total segment portfolio.

Three Months Ended September 30,
2017 2016 Change % Change
Occupancy 68.0 % 72.3 % (4.3 )pts (5.9 )%
Net Package ADR $ 231.95
$ 209.28
$ 22.67
10.8 %
Net Package RevPAR 157.71
151.33
6.38
4.2 %
($ in thousands)
Net Package Revenue $ 13,435
$ 12,892
$ 543
4.2 %
Net Non-package Revenue 2,437
2,229
208
9.3 %
Total net revenue 15,872
15,121
751
5.0 %
Adjusted EBITDA $ 3,758
$ 3,851
$ (93 ) (2.4 )%

~~Segment Total Net Revenue~~. Our total net revenue for the three months ended September 30, 2017 increased $0.8 million, or 5.0%, compared to the three months ended September 30, 2016. This increase was due to increased net revenue by both hotels in this segment.

~~Segment Adjusted EBITDA~~.Our Adjusted EBITDA for the three months ended September 30, 2017 decreased $0.1 million, or 2.4%, compared to the three months ended September 30, 2016. This decrease was due to decreased Adjusted EBITDA by Hyatt Ziva Puerto Vallarta, which was a result of higher food and beverage and utility costs for the three months ended September 30, 2017 compared to the three months ended September 30, 2016.

~~Caribbean Basin~~

The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, total net revenue and Adjusted EBITDA for our Caribbean Basin segment for the three months ended September 30, 2017 and 2016 for the total segment portfolio.

Three Months Ended September 30,
2017 2016 Change % Change
Occupancy 74.1 % 78.0 % (3.9 )pts (5.0 )%
Net Package ADR $ 195.19
$ 182.88
$ 12.31
6.7 %
Net Package RevPAR 144.67
142.55
2.12
1.5 %
($ in thousands)
Net Package Revenue $ 33,220
$ 32,735
$ 485
1.5 %
Net Non-package Revenue 6,063
6,430
(367 ) (5.7 )%
Total net revenue 39,283
39,165
118
0.3 %
Adjusted EBITDA $ 7,281
$ 6,760
$ 521
7.7 %

~~Segment Total Net Revenue~~. Our total net revenue for the three months ended September 30, 2017 increased $0.1 million, or 0.3%, compared to the three months ended September 30, 2016. This increase was due to the performance of Hyatt Ziva and Hyatt Zilara Rose Hall, which accounted for a $1.8 million increase in total net revenue compared to the three months ended September 30, 2016. This was offset by a decrease of $1.7 million for the three months ended September 30, 2017 for the remaining resorts in the Dominican Republic compared to the three months ended September 30, 2016.

~~Segment Adjusted EBITDA~~. Our Adjusted EBITDA for the three months ended September 30, 2017 increased $0.5 million, or 7.7%, compared to the three months ended September 30, 2016. This increase was primarily due to the performance of Hyatt Ziva and Hyatt Zilara Rose Hall, which accounted for a $1.8 million increase in Adjusted EBITDA compared to the three months ended September 30, 2016. This was partially offset by a decrease of $1.3 million for the three months ended September 30, 2017 for the remaining resorts in the Dominican Republic compared to the three months ended September 30, 2016. During the three months ended September 30, 2017, the Dominican Republic was directly and indirectly affected by hurricanes, which resulted in airport closures, evacuations and general travel disruptions.

~~Nine Months Ended September 30, 2017 and 2016~~

We evaluate our business segment operating performance using segment net revenue and segment Adjusted EBITDA. The following tables summarize segment net revenue and segment Adjusted EBITDA for the nine months ended September 30, 2017 and 2016:

Nine Months Ended September 30,
2017 2016
Change

% Change
Net revenue: ($ in thousands)
Yucatán Peninsula $ 209,305
$ 189,640
$ 19,665
10.4 %
Pacific Coast 67,377
58,178
9,199
15.8 %
Caribbean Basin 146,026
144,445
1,581
1.1 %
Segment net revenue 422,708
392,263
30,445
7.8 %
Other 12
6
6
100.0 %
Total net revenue
$ 422,720
$ 392,269
$ 30,451
7.8 %

Nine Months Ended September 30,
2017 2016
Change
% Change
Adjusted EBITDA: ($ in thousands)
Yucatán Peninsula $ 93,070
$ 84,073
$ 8,997
10.7 %
Pacific Coast 27,242
20,639
6,603
32.0 %
Caribbean Basin 42,853
43,763
(910 ) (2.1 )%
Segment Adjusted EBITDA 163,165
148,475
14,690
9.9 %
Other corporate—unallocated (23,354)
(22,536)
(818 ) 3.6 %
Total Adjusted EBITDA $ 139,811
$ 125,939
$ 13,872
11.0 %

~~For a reconciliation of segment net revenue and segment Adjusted EBITDA to gross revenue and net~~(loss) income ~~respectively, each as computed under U.S. GAAP, see~~ ~~Note 17~~ ~~to our Condensed Consolidated Financial Statements.~~

~~Yucatán Peninsula~~

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, total net revenue and Adjusted EBITDA for our Yucatán Peninsula segment for the nine months ended September 30, 2017 and 2016 for the total segment portfolio.

Nine Months Ended September 30,
2017 2016
Change
% Change
Occupancy 88.5 % 85.3 % 3.2 pts 3.8 %
Net Package ADR $ 280.56
$ 263.60
$ 16.96
6.4 %
Net Package RevPAR 248.30
224.98
23.32
10.4 %
($ in thousands)
Net Package Revenue $ 183,804
$ 167,672
$ 16,132
9.6 %
Net Non-package Revenue 25,501
21,968
3,533
16.1 %
Total net revenue 209,305
189,640
19,665
10.4 %
Adjusted EBITDA $ 93,070
$ 84,073
$ 8,997
10.7 %

~~Segment Total Net Revenue~~. Our net revenue for the nine months ended September 30, 2017 increased $19.7 million, or 10.4%, compared to the nine months ended September 30, 2016. This increase was due in large part to the strong performance by all of our resorts, with Hyatt Ziva Cancun being the most notable contributor. Hyatt Ziva Cancun accounted for a $15.9 million increase in net revenue compared to the nine months ended September 30, 2016 due to its increase in both Net Package ADR and Occupancy compared to prior year.

~~Segment Adjusted EBITD~~A. Our Adjusted EBITDA for the nine months ended September 30, 2017 increased $9.0 million, or 10.7%, compared to the nine months ended September 30, 2016. This increase was primarily attributable to the performance of Hyatt Ziva Cancun, which accounted for a $13.8 million increase in Resort EBITDA compared to the nine months ended September 30, 2016. This was offset by the performance of Gran Caribe and Gran Porto, which together accounted for a $4.2 million decrease in Adjusted EBITDA compared to the nine months ended September 30, 2016. The current year results of these two resorts have been impacted by renovation disruption, as we are converting and re-branding them to the Panama Jack brand. The renovations are scheduled to be completed by early December of 2017.

~~Pacific Coast~~

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-Package Revenue, total net revenue and Adjusted EBITDA for our Pacific Coast segment for the nine months ended September 30, 2017 and 2016 for the total segment portfolio.

Nine Months Ended September 30,
2017 2016 Change % Change
Occupancy 73.0 % 69.8 % 3.2 pts 4.6 %
Net Package ADR $ 303.31
$ 277.84
$ 25.47
9.2 %
Net Package RevPAR 221.36
193.80
27.56
14.2 %
($ in thousands)
Net Package Revenue $ 55,959
$ 49,171
$ 6,788
13.8 %
Net Non-package Revenue 11,418
9,007
2,411
26.8 %
Total net revenue 67,377
58,178
9,199
15.8 %
Adjusted EBITDA $ 27,242
$ 20,639
$ 6,603
32.0 %

~~Segment Total Net Revenue~~. Our total net revenue for the nine months ended September 30, 2017 increased $9.2 million, or 15.8%, compared to the nine months ended September 30, 2016. This increase was due to increased net revenue by both hotels in this segment.

~~Segment Adjusted EBITDA~~.Our Adjusted EBITDA for the nine months ended September 30, 2017 increased $6.6 million, or 32.0%, compared to the nine months ended September 30, 2016. This increase was due to increased Adjusted EBITDA by both hotels in this segment.

~~Caribbean Basin~~

The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, total net revenue and Adjusted EBITDA for our Caribbean Basin segment for the nine months ended September 30, 2017 and 2016 for the total segment portfolio.

Nine Months Ended September 30,
2017 2016 Change % Change
Occupancy 79.8 % 80.0 % (0.2 )pts (0.3 )%
Net Package ADR $ 228.16
$ 225.48
$ 2.68
1.2 %
Net Package RevPAR 181.98
180.33
1.65
0.9 %
($ in thousands)
Net Package Revenue $ 124,003
$ 123,328
$ 675
0.5 %
Net Non-package Revenue 22,023
21,117
906
4.3 %
Total net revenue 146,026
144,445
1,581
1.1 %
Adjusted EBITDA $ 42,853
$ 43,763
$ (910 ) (2.1 )%

~~Segment Total Net Revenue~~. Our total net revenue for the nine months ended September 30, 2017 increased $1.6 million, or 1.1%, compared to the nine months ended September 30, 2016. This increase was due to the strong performance by Dreams La Romana and Hyatt Ziva and Zilara Rose Hall, which accounted for an increase in total net revenue of $3.4 million compared to the nine months ended September 30, 2016. This was offset by the performance of Dreams Palm Beach and Dreams Punta Cana, which accounted for a decrease of $1.8 million in total net revenue compared to the nine months ended September 30, 2016. During the three months ended September 30, 2017, the Dominican Republic was directly and indirectly affected by hurricanes, which resulted in airport closures, evacuations and general travel disruptions.

~~Segment Adjusted EBITDA~~. Our Adjusted EBITDA for the nine months ended September 30, 2017 decreased $0.9 million, or 2.1%, compared to the nine months ended September 30, 2016. This decrease is due to various factors during the year including disruptions from the extensive renovations at our Hyatt Ziva and Zilara Rose Hall resort which began in April of 2017. Additionally, the resorts in this segment have been directly and indirectly affected by hurricanes, which resulted in airport closures, evacuations and general travel disruptions, most notably during the three months ended September 30, 2017.

~~Non-U.S. GAAP Financial Measures~~

~~Reconciliation of Net Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)~~

~~The following is a reconciliation of our U.S. GAAP net income to EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2017 and 2016~~ ($ in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Net (loss) income $ (5,667 ) $ (1,560 ) $ 11,442
$ 44,831
Interest expense 13,099
13,418
41,187
40,619
Income tax provision (benefit) 226
(841 ) 20,105
(5,270 )
Depreciation and amortization 13,808
13,022
40,093
38,809
EBITDA 21,466
24,039
112,827
118,989
Other (income) expense, net ^(a)
(1,782 ) 225
(1,191 ) 2,414
Share-based compensation expense 1,843
—
2,803
—
Loss on extinguishment of debt —
—
12,526
—
Transaction expense ^(b)
1,893
1,203
11,193
3,874
Severance expense —
—
442
—
Other tax expense ^(c)
175
309
598
971
Jamaica delayed opening accrual ^(d)
(41 ) —
(152 ) —
Property damage insurance proceeds ^(e)
—
(179 ) —
(309 )
Repairs from hurricanes and tropical storms ^(f)
765
—
765
—
Adjusted EBITDA $ 24,319
$ 25,597
$ 139,811
$ 125,939



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Revenue:
Yucatàn Peninsula	$	57,087	$	59,630	$	200,025	$	209,305
Pacific Coast	16,211		15,872		65,081		67,377
Dominican Republic	27,580		26,139		99,493		96,935
Jamaica	36,651		13,144		87,141		49,091
Segment net revenue ⁽¹⁾	137,529		114,785		451,740		422,708
Other	—		10		343		12
Management fees	152		—		503		—
Cost reimbursements	227		—		349		—
Compulsory tips	4,904		3,547		12,296		10,287
Total gross revenue	$	142,812	$	118,342	$	465,231	$	433,007

________


^(a)	~~Represents changes in foreign exchange and other miscellaneous expenses or income.~~


^(b)	Represents expenses incurred in connection with corporate initiatives, such as: the redesign and build-out of our internal controls; other capital raising efforts including the business combination with Pace; and strategic initiatives, such as possible expansion into new markets. We eliminate these expenses from Adjusted EBITDA because they are not attributable to our core operating performance.


^(c)	Relates primarily to a Dominican Republic asset tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax expense we eliminate from our calculation of EBITDA.


^(d)	Represents a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of Hyatt Ziva and Hyatt Zilara Rose Hall. The partial reversal of this accrual occurred throughout 2017.


^(e)	~~Represents a portion of the insurance proceeds related to property insurance and not business interruption proceeds.~~


^(f)	Represents repair and maintenance expenses at Hyatt Ziva Los Cabos due to Tropical Storm Lidia and Dreams Punta Cana due to Hurricane Maria for $0.4 million and $0.3 million respectively. These are expenses incurred that are not covered by insurance claims or offset by insurance proceeds.

~~Seasonality~~

The seasonality of the lodging industry and the location of our resorts in Mexico and the Caribbean generally result in the greatest demand for our resorts between mid-December and April of each year, yielding higher occupancy levels and package rates during this period. This seasonality in demand has resulted in predictable fluctuations in⁽¹⁾ Segment net revenue ~~results of operations, and liquidity, which are consistently higher during the first quarter of each year than in successive quarters.~~

~~Inflation~~

~~Operators of lodging properties, in general, possess the ability~~represents total gross revenue less compulsory tips paid to ~~adjust room rates to reflect the effects of inflation. However, competitive pressures may limit our ability to raise room rates to fully offset inflationary~~employees, cost ~~increases.~~

~~Liquidity and Capital Resources~~

Our primary short-term cash needs are paying operating expenses, maintaining our resorts, servicing of our outstanding indebtedness and funding any ongoing expansion, renovation, repositioning and rebranding projects. As of September 30, 2017, we had $7.6 million of scheduled contractual obligations due within one year.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our revolving credit facility, originally entered into on August 9, 2013 amended and restated pursuant to that certain Restatement Agreement, dated as of April 27, 2017, with the lenders and agents party thereto and the guarantors named therein, permitting borrowings of up to $100.0 million and which matures on April 27, 2022 (the "Revolving Credit Facility"). We had cash and cash equivalents of $137.8 million as of September 30, 2017, compared to $35.1 million as of September 30, 2016 (excluding $4.6 million and $6.4 million of restricted cash, respectively). We plan to fund our Hyatt Ziva and Zilara Cap Cana development project over the next 18 to 24 months with the cash we have on hand, as well as our cash generated from operations. As of September 30, 2017, there was $0.0 million outstanding under our Revolving Credit Facility. When assessing liquidity, we also consider the availability of cash resources held within local business units to meet our strategic needs.

Long-term liquidity needs may include existing and future property expansions, renovations, repositioning and rebranding projects, potential acquisitions and the repayment of indebtedness. As of September 30, 2017, our total debt obligations were $888.7 million (which represents the principal amounts outstanding under our Revolving Credit Facility, $530.0 million term loan facility, originally entered into on August 9, 2013, as amended and restated pursuant to that certain Restatement Agreement, dated as of April 27, 2017, with the lenders and agents party thereto and the guarantors named therein, which matures on April 27, 2024 (the "Term Loan," and together with the Revolving Credit Facility, the "Senior Secured Credit Facility") and Senior Notes due 2020 and excludes a $1.2 million issuance discount on our Term Loan, a $2.5 million issuance premium on our Senior Notes due 2020 and $12.3 million of unamortized debt issuance costs). On April 27, 2017, we redeemed $115.0 million in aggregate principal amount of our Senior Notes due 2020 with a portion of proceeds from the Senior Secured Credit Facility (for additional detail, see "—Senior Secured Credit Facility"). In addition to the sources available for short-term needs, we may use equity or debt issuances or proceeds from the potential disposal of assets to meet these long-term needs.

In an effort to maintain sufficient liquidity, our cash flow projections and available funds are discussed with our Board and we consider various ways of developing our capital structure and seeking additional sources of liquidity if needed. The availability of additional liquidity options will depend on the economic and financial environment, our credit, our historical and projected financial and operating performance and continued compliance with financial covenants. As a result of possible future economic, financial and operating declines, possible declines in our creditworthiness and potential non-compliance with financial covenants, we may have less liquidity than anticipated, fewer sources of liquidity than anticipated, less attractive financing terms and less flexibility in determining when and how to use the liquidity that is available.

~~Financing Strategy~~

In addition to our Revolving Credit Facility, we intend to use other financing sources that may be available to us from time to time, including financing from banks, institutional investors or other lenders, such as bridge loans, letters of credit, joint venturesreimbursements and other arrangements. Future financings may be unsecured or may be secured by mortgages or other interests in our assets. In addition, we may issue publicly or privately placed debt or equity securities. When possible and desirable, we will seek to replace short-term financing with long-term financing. We may use the proceedsmiscellaneous revenue not derived from ~~any financings to refinance existing indebtedness, to finance resort projects or acquisitions or for general working capital or other purposes.~~

Our indebtedness may be recourse, non-recourse or cross-collateralized and may be fixed rate or variable rate. If the indebtedness is non-recourse, the obligation to repay such indebtedness will generally be limited to the particular resort or resorts pledged to secure such indebtedness. In addition, we may invest in resorts subject to existing loans secured by mortgages or similar liens on the resorts, or may refinance resorts acquired on a leveraged basis.segment operations.

~~Cash Flows~~

The following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our ~~Condensed Consolidated Statements of Cash Flows~~ ~~and accompanying notes thereto included in the Condensed Consolidated Financial Statements.~~

Nine Months Ended September 30,
2017 2016
($ in thousands)
Net cash provided by operating activities $ 65,221
$ 48,900
Net cash used in investing activities (73,030)
(11,536)
Net cash provided by (used in) financing activities 112,124
(37,704)

~~Net Cash Provided by Operating Activities~~

Our net cash from operating activities is generated primarily from operating income from our resorts. For the nine months ended September 30, 2017 and 2016, our net cash provided by operating activities totaled $65.2 million and $48.9 million, respectively. Net income of $11.4 million for the nine months ended September 30, 2017 included significant non-cash expenses, including $40.1 million of depreciation and amortization, representing an increase of $1.3 million compared to the nine months ended September 30, 2016 and $12.5 million loss on extinguishment of debt.

~~Activity for the nine months ended September 30, 2017:~~

~~Net increase in interest expense of $0.6 million, primarily due to an increase in the accretion of deferred consideration.~~

~~Transaction expenses of $11.2 million~~

~~Activity for the nine months ended September 30, 2016:~~

~~Transaction expenses of $3.9 million~~

~~Net Cash Used in Investing Activities~~

~~For the nine months ended September 30, 2017 and 2016, our net cash used in investing activities was $73.0 million and $11.5 million, respectively.~~

~~Activity for the nine months ended September 30, 2017:~~

Purchases of property, plant and equipment of $69.9 million which includes $40.0 million in cash used for the acquisition of land in Cap Cana, Dominican Republic and $29.9 million in capital expenditures.

~~Purchase of intangibles of $0.4 million~~

~~Contract deposit of $2.7 million~~

~~Activity for the nine months ended September 30, 2016:~~

~~Purchases of property, plant and equipment of $11.8 million~~

~~Purchase of intangibles of $0.3 million~~

~~Receipt of insurance proceeds of~~ ~~$0.5 million~~

~~Capital Expenditures~~

We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise agreements and management agreements. Routine capital expenditures are administered by us and a third party property management company. However, we have approval rights over capital expenditures as part of the annual budget process for each of our properties. From time to time, certain of our resorts may be undergoing renovations as a result of our decision to upgrade portions of the resorts, such as guestrooms, public space, meeting space, gyms, spas and/or restaurants, in order to better compete with other hotels in our markets.

~~The following table summarizes our capital expenditures for the nine months ended September 30, 2017 and 2016:~~

Nine Months Ended September 30,
2017 2016
($ in thousands)
Development Capital Expenditures
Hyatt Zilara Cancun $ 1,551
$ —
Gran Caribe Real 4,224
—
Gran Porto Real 447
—
Hyatt Ziva Puerto Vallarta 1,551
—
Hyatt Ziva and Zilara Cap Cana 4,725
—
Hyatt Ziva and Zilara Rose Hall 8,613
—
Total Development Capital Expenditures 21,111
—
Maintenance Capital Expenditures⁽¹⁾
8,834
11,814
Total Capital Expenditures ⁽²⁾
$ 29,945
$ 11,814

~~_____~~

⁽¹⁾

Our maintenance capital expenditures are cash expenditures made to extend the service life or increase capacity of our assets (including expenditures for the replacement, improvement or expansion of existing capital assets). These maintenance capital expenditures differ from ongoing repair and maintenance expense items which do not in our judgment extend the service life or increase the capacity of assets and are charged to expense as incurred. Typically, maintenance capital expenditures equate to roughly 3% to 4% of total net revenue.


⁽²⁾	Total capital expenditures plus $40.0 million of cash used to purchase the land in Cap Cana totals $69.9 million as disclosed above in the net cash used in investing activities for the nine months ended September 30, 2017.

~~Net Cash Provided by (Used in) Financing Activities~~

Our net cash provided by financing activities was $112.1 million for the nine months ended September 30, 2017, compared to $37.7 million used in financing activities for the nine months ended September 30, 2016.

~~Activity for the nine months ended September 30, 2017:~~

~~Principal payments on our existing term loan of $364.1 million and our Senior Notes due 2020 of $121.6 million.~~

~~Proceeds from our new Term Loan of~~ ~~$528.7 million, net of a~~ ~~$1.3 million~~ ~~discount.~~

~~Payments of our deferred consideration to the selling shareholder of Real Resorts (the "Real Shareholder") of $2.5 million~~

~~Recapitalization as part of the business combination of~~ ~~$79.7 million~~

~~Activity for the nine months ended September 30, 2016:~~

~~Repayments of borrowings on our Revolving Credit Facility of $33.0 million~~

~~Principal payments on our Term Loan of $2.8 million~~

~~Payments of our deferred consideration to the Real Shareholder of $1.9 million~~

~~Dividends~~

We may only pay dividends to our shareholders if our shareholders’ equity exceeds the sum of the paid-up and called-up share capital plus the reserves as required to be maintained by Dutch law or by our articles of association.

Any amount remaining out of the profit is carried to reserve as our Board determines. After reservation by our Board of any profit, the profits which are not required to be maintained by Dutch law or by our articles of association may be declared by the shareholders, but only at the proposal of our Board. Our Board is permitted, subject to certain requirements, to declare interim dividends without the approval of the shareholders at a General Meeting. However, payments of dividends are restricted by the indenture governing our Senior Notes due 2020 and our Senior Secured Credit Facility. See “—Senior Secured Credit Facility.” No cash dividends were paid during the nine months ended September 30, 2017. We do not plan on paying cash dividends on our ordinary shares in the foreseeable future.

Our Predecessor could not pay any dividends on its ordinary shares until any accumulated and unpaid dividends on its Preferred Shares had been paid in full, to the extent any of our Predecessor's Preferred Shares were outstanding. Our Predecessor's Preferred Shares accumulated dividends at a rate of 12% per annum (payable in Preferred Shares), compounded quarterly, on each January 15, April 15, July 15, and October 15. On March 11, 2017, all outstanding Preferred Shares of our Predecessor were repurchased and all such Preferred Shares have been canceled and no Preferred Shares remain outstanding.

~~Senior Secured Credit Facility~~

On August 9, 2013, we entered into our senior secured credit facility, which consisted of a term loan of $375.0 million, which was scheduled to mature on August 9, 2019, and our revolving credit facility of $50.0 million, which was scheduled to mature on August 9, 2018. On April 27, 2017, we amended and restated our existing Senior Secured Credit Facility, consisting of a new $530.0 million term loan priced at 99.75% of the principal amount which matures on April 27, 2024 and a revolving credit facility with a maximum aggregate borrowing capacity of $100.0 million which matures on April 27, 2022. The maturity date with respect to the Revolving Credit Facility and the Term Loan are subject to an earlier maturity date (the "Springing Maturity Date") if on the date that is 91 days prior to August 15, 2020 (the final maturity date of our Senior Notes due 2020), either the outstanding principal amount of the Senior Notes due 2020 is greater than or equal to $25.0 million or, if less than $25.0 million, we are unable to demonstrate that we have sufficient liquidity to repay such outstanding principal amount without causing our liquidity to be less than $50.0 million. The borrower under our Senior Secured Credit Facility is our wholly owned subsidiary Playa Resorts Holding B.V.

The proceeds received from the Term Loan were used to repay our existing term loan and $115.0 million of our Senior Notes due 2020 and for other general corporate purposes. The repayment of our existing term loan and partial repayment of our Senior Notes due 2020 was accounted for as an extinguishment of debt and resulted in a loss of $12.5 million. This refinancing lowers our annual weighted average cost of debt and saves the Company an estimated $2.0 million in annualized interest expense.

~~Revolving Credit Facility~~

Our Revolving Credit Facility, which permits us to borrow up to a maximum aggregate principal amount of $100.0 million, matures on April 27, 2022 (subject to the Springing Maturity Date) and bears interest at variable interest rates that are either based on London Interbank Offered Rates ("LIBOR") or based on an alternate base rate derived from the greatest of the federal funds rate plus a spread, prime rate, one-month euro-currency rate plus a spread and, solely with respect to the Term Loan, the initial term loan rate ("ABR Rate"). We are required to pay a commitment fee ranging from 0.25% to 0.5% per annum (depending on the level of our consolidated secured leverage ratio in effect from time to time) on the average daily undrawn balance.

~~Term Loan~~

The Term Loan bears interest at a rate per annum equal to LIBOR plus 3.0% (where the applicable LIBOR rate has a 1.0% floor), and interest continues to be payable in cash in arrears on the last day of the applicable interest period (unless we elect to use the ABR rate).

~~Senior Notes due 2020~~

On August 9, 2013, our wholly-owned subsidiary Playa Resorts Holding B.V. issued $300.0 million of our Senior Notes due 2020. Interest on our Senior Notes due 2020 is payable semi-annually in arrears on February 15 and August 15 of each year. We received net proceeds of approximately $290.1 million after deducting unamortized debt issuance costs of $9.9 million. The net proceeds were used in connection with the formation transactions of our Predecessor, to fund general working capital requirements and for general corporate purposes.

On February 14, 2014, we issued an additional $75.0 million of our Senior Notes due 2020. The additional Senior Notes due 2020 were priced at 105.5% of their principal amount, and we received net proceeds of approximately $79.1 million before deducting unamortized debt issuance costs of $2.3 million.

On May 11, 2015, we issued an additional $50.0 million of our Senior Notes due 2020. The additional Senior Notes due 2020 were priced at 103% of their principal amount and we received net proceeds of approximately $51.5 million before deducting unamortized debt issuance costs of $0.6 million. The net proceeds of the February 14, 2014 and May 11, 2015 issuances were primarily used in connection with the expansion, renovation, repositioning and rebranding of our Hyatt Ziva Cancun resort, and the remaining net proceeds were used for general corporate purposes, including fees and expenses.

On October 4, 2016, we issued an additional $50.0 million of the Senior Notes due 2020. The additional Senior Notes due 2020 were priced at 101% of their principal amount and we received net proceeds of approximately $50.5 million before deducting unamortized debt issuance costs of less than $0.1 million. The net proceeds of the October 4, 2016 issuance were used to purchase 4,227,100 of our Predecessor's outstanding Preferred Shares at a purchase price of $8.40 per share for $35.5 million in face value and we paid $14.5 million of associated PIK dividends. Our Predecessor's Preferred Shares were extinguished as part of the reverse merger in the Business Combination.

On April 27, 2017, we redeemed $115.0 million in aggregate principal amount of our Senior Notes due 2020 with a portion of the proceeds from the Senior Secured Credit Facility. Our Senior Notes due 2020 were redeemed at 106% of the principal amount. Following the redemption, $360.0 million in aggregate principal amount of our Senior Notes due 2020 remained outstanding.

Our Senior Notes due 2020 mature on August 15, 2020 and bear interest at 8.00% per year, payable semi-annually in arrears on February 15 and August 15 of each year. As of September 30, 2017, the aggregate outstanding principal amount of our Senior Notes due 2020 was $360.0 million.

~~At any time, we may redeem some or all of our Senior Notes due 2020 at the applicable redemption rate set forth below plus accrued and unpaid interest (if any):~~

Year of Redemption Redemption
Rate %
2017 104%
2018 102%
2019 and thereafter 100%

Our Senior Notes due 2020 are senior unsecured obligations of our wholly-owned subsidiary Playa Resorts Holding B.V. and rank equally with all other senior unsecured indebtedness of Playa Resorts Holding B.V. Our Senior Notes due 2020 are subordinated to any existing and future secured debt of Playa Resorts Holding B.V. to the extent of the value of the assets securing such debt, including our Senior Secured Credit Facility. We were in compliance with all applicable covenants under the indenture governing our Senior Notes due 2020 as of September 30, 2017.

~~Business Combination~~

At the Closing Time, we consummated the Business Combination resulting in Playa Hotels & Resorts N.V. having 103,464,186 shares outstanding with a par value of €0.10 per share. As a result, we received an additional $79.7 million in cash and all outstanding preferred shares of our Predecessor were purchased as well as all associated paid-in-kind dividends ($353.9 million in total), which were subsequently extinguished as part of the reverse merger in the Business Combination. The additional capital will be used for general corporate purposes.

~~Contractual Obligations~~

~~The following table sets forth our obligations and commitments to make future payments under contracts and contingent commitments as of September 30, 2017:~~

Interest Rate
Less than
1 Year⁽¹⁾
Due in 1 to
3 years Due in 3 to
5 years Due in
Over 5 years Total
(%) ($ in thousands)
Revolving Credit Facility ⁽²⁾
0.50% $ 131
$ 1,014
$ 1,015
$ 161
$ 2,321
Term Loan⁽³⁾
4.32% - 5.39% 7,172
60,564
62,999
573,261
703,996
Senior Notes due 2020 8.00% —
57,600
388,800
—
446,400
Cap Cana land purchase obligation⁽⁴⁾

—
10,625
—
—
10,625
Operating lease obligations
255
1,697
1,397
719
4,068
Total Contractual Obligations $ 7,558
$ 131,500
$ 454,211
$ 574,141
$ 1,167,410

~~________~~


~~(1)~~	~~The period less than 1 year represents the remaining obligations in 2017.~~

~~(2)~~

The interest rate is the contractual commitment fee of 0.5% applied to the undrawn balance of $100.0 million as we had no outstanding balance on our Revolving Credit Facility as of September 30, 2017. The interest rate for any outstanding balance on our Revolving Credit Facility is LIBOR plus 300 basis points with no LIBOR floor. LIBOR is calculated using the average forecasted one-month forward-looking LIBOR curve for each respective period.


~~(3)~~	~~The interest rate on our Term Loan is LIBOR plus~~ ~~300 basis points~~ ~~with a~~ ~~1% LIBOR floor. LIBOR was calculated using the average forecasted three-month forward-looking LIBOR curve for each respective period.~~


~~(4)~~	The remaining $10.6 million of the purchase price is due on the earlier of (i) two years from the beginning of construction or (ii) the opening of the Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana resorts.

~~Off Balance Sheet Arrangements~~

~~We had no off balance sheet arrangements for the three and nine months ended September 30, 2017 and 2016.~~



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Adjusted EBITDA:
Yucatàn Peninsula	$	18,484		$	20,824		$	83,814		$	93,070
Pacific Coast	2,869			3,758			23,327			27,242
Dominican Republic	7,161			5,460			35,174			31,263
Jamaica	6,688			1,821			25,421			11,590
Segment Adjusted EBITDA	35,202			31,863			167,736			163,165
Other corporate - unallocated	(9,322		)	(7,544		)	(26,331		)	(23,354		)
Management fees	152			—			503			—
Total consolidated Adjusted EBITDA	26,032			24,319			141,908			139,811
Less:
Other expense (income), net	390			(1,939		)	1,836			(626		)
Share-based compensation	1,182			1,843			5,072			2,803
Loss on extinguishment of debt	—			—			—			12,526
Transaction expenses	1,447			1,893			7,678			11,193
Severance expense	333			—			333			442
Other tax expense	399			175			1,257			598
Jamaica delayed opening accrual reversal	—			(41		)	(342		)	(152		)
Pre-opening expenses	87			—			87			—
Property damage insurance proceeds	(203		)	—			(203		)	—
Repairs from hurricanes and tropical storms	—			765			—			765
Add:
Non-service cost components of net periodic pension cost (benefit)	335			(157		)	492			565
Interest expense	(7,637		)	(13,099		)	(35,151		)	(41,187		)
Depreciation and amortization	(20,138		)	(13,808		)	(51,709		)	(40,093		)
Net (loss) income before tax	(5,043		)	(5,441		)	39,822			31,547
Income tax provision	(379		)	(226		)	(6,606		)	(20,105		)
Net (loss) income	$	(5,422	)	$	(5,667	)	$	33,216		$	11,442

~~Critical Accounting Policies and Estimates~~

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our 2016 Consolidated Financial Statements included within Form 8-K filed with the SEC on March 14, 2017. Since the date of our 2016 Consolidated Financial Statements included within Form 8-K, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them except for those disclosed in Note 2 to our Condensed Consolidated Financial Statements.

~~Fair Value of Financial Instruments~~

Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, trade and other payables, accounts payable to related parties, deferred consideration and debt. See Note 5, “Fair Value of Financial Instruments,” to our Condensed Consolidated Financial Statements for more information.

~~Related Party Transactions~~

~~See Note 7, “Related Party Transactions,” to our Condensed Consolidated Financial Statements for information on these transactions.~~

~~Recent Accounting Pronouncements~~

~~See the recent accounting pronouncements in the “Impact of recently issued accounting standards” section of Note 2 to our Condensed Consolidated Financial Statements.~~

Note 20. Subsequent events

In preparing the interim Condensed Consolidated Financial Statements, we have evaluated subsequent events occurring after September 30, 2018. Based on this evaluation, there were no subsequent events from September 30, 2018 through the date the Condensed Consolidated Financial Statements were issued.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of Playa Hotels & Resorts N.V.'s (“Playa”) financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Playa and its subsidiaries.

Cautionary Note Regarding Forward-Looking Statements

This quarterly 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 and results of operations. Likewise, 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 quarterly 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 factors discussed in our filings with the United States Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC March 1, 2018, together with the following factors, could 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 on the lodging industry in particular;

the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;

the success and continuation of our relationships with Hyatt and Hilton;

the volatility of currency exchange rates;

the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future, including the rebranding of two of our resorts under the all-inclusive “Panama Jack” brand and rebranding of certain resorts recently acquired from Sagicor (as defined below) in Jamaica;

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;

our ability to obtain and maintain financing arrangements on attractive terms;

the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which we operate;

the effectiveness of our internal controls and our corporate policies and procedures and the success and timing of the remediation efforts for the material weakness that we identified in our internal control over financial reporting;

changes in personnel and availability of qualified personnel;

environmental uncertainties and risks related to adverse weather conditions and natural disasters;

dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;

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.

Explanatory Note

At 12:00 a.m. Central European Time on March 12, 2017 (the “Closing Time”), we consummated a business combination (the “Pace Business Combination”) pursuant to a transaction agreement by and among us, Playa Hotels & Resorts B.V. (our “Predecessor”) and Pace Holdings Corp. (“Pace”), an entity that was formed as a special purpose acquisition company, for the purpose of effecting a merger or other similar business combination with one or more target businesses, and New Pace Holdings Corp. In connection with

the Pace Business Combination, which is described in detail in our Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on March 14, 2017, we changed our name from Porto Holdco N.V. to Playa Hotels & Resorts N.V. In addition, in connection with the Pace Business Combination, (i) prior to the consummation of the Pace Business Combination, all of our Predecessor's cumulative redeemable preferred shares were purchased and were subsequently extinguished upon the reverse merger of our Predecessor with and into us, and (ii) Pace's former shareholders and our Predecessor's former shareholders received a combination of our ordinary shares and warrants as consideration in the Pace Business Combination. Our Predecessor was the accounting acquirer in the Pace Business Combination, and the business, properties, and management team of our Predecessor prior to the Pace Business Combination are the business, properties, and management team of the Company following the Pace Business Combination.

Our financial statements, other financial information and operating statistics presented in this Quarterly Report on Form 10-Q reflect the results of our Predecessor for all periods prior to the Closing Time. Our financial statements and other financial information also include the consolidation of Pace from the Closing Time of the Pace Business Combination to September 30, 2018.

On June 1, 2018, we completed a business combination with certain companies affiliated with Sagicor Group Jamaica Limited (collectively “Sagicor”) whereby Sagicor contributed to us a portfolio of all-inclusive resorts, two adjacent oceanfront developable land sites located on the North Coast of Jamaica, a management contract for the management of one of the resorts and all of Sagicor's rights to “The Jewel” hotel brand. The portfolio included four existing resorts including the 495-room Hilton Rose Hall Resort & Spa, the 268-room Jewel Runaway Bay Beach & Golf Resort, the 250-room Jewel Dunn’s River Beach Resort and the 225-room Jewel Paradise Cove Beach Resort & Spa (collectively the “SagicorAssets”). It also included an 88-unit hotel tower and spa, two developable land sites with a potential density of up to 700 rooms and a hotel management contract for the Jewel Grande Montego Bay. The existing Sagicor Assets were previously managed by an external third-party operator but we assumed management of the Sagicor Assets upon the closing of the transaction. Consideration for such assets was comprised of 20,000,000 of our ordinary shares of Playa’s common stock and $93.1 million in net cash, pursuant to certain post-closing adjustments. In addition, two individuals nominated by Sagicor joined Playa’s Board of Directors upon the consummation of the transaction.

Our financial statements and other financial information also include the consolidation of the Sagicor Assets from June 2, 2018 to September 30, 2018.

Overview

Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. Playa owns and/or manages a total portfolio consisting of 20 resorts (7,769 rooms) located in Mexico, Jamaica, and the Dominican Republic. In Mexico, Playa owns and manages Hyatt Zilara Cancun, Hyatt Ziva Cancun, Panama Jack Resorts Cancun, Panama Jack Resorts Playa del Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns and manages Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Dunn’s River Beach Resort, Jewel Grande Montego Bay Resort & Spa, Jewel Runaway Bay Beach & Golf Resort and Jewel Paradise Cove Beach Resort & Spa. Playa also owns five resorts in Mexico and the Dominican Republic that are managed by a third party and Playa manages the Sanctuary Cap Cana, in the Dominican Republic. We believe that the resorts we own and manage are among the finest all-inclusive resorts in the markets they serve. All of our resorts offer guests luxury accommodations, noteworthy architecture, extensive on-site activities and multiple food and beverage options. Our guests also have the opportunity to purchase upgrades from us such as premium rooms, dining experiences, wines and spirits and spa packages.

For the three months ended September 30, 2018, we generated a net loss of $5.4 million, total revenue of $142.8 million, Net Package RevPAR of approximately $175.27 and Adjusted EBITDA of $26.0 million. For the three months ended September 30, 2017, we generated a net loss of $5.7 million, total revenue of $118.3 million, Net Package RevPAR of approximately $174.97 and Adjusted EBITDA of $24.3 million.

For the nine months ended September 30, 2018, we generated net income of $33.2 million, total revenue of $465.2 million, Net Package RevPAR of approximately $214.10 and Adjusted EBITDA of $141.9 million. For the nine months ended September 30, 2017, we generated net income of $11.4 million, total revenue of $433.0 million, Net Package RevPAR of approximately $217.24 and Adjusted EBITDA of $139.8 million.

Our Portfolio of Resorts

As the date hereof, the following table presents an overview of our resorts. None of the resorts we own individually contributed more than 12.8% of our Total Net Revenue or 18.7% of our consolidated Adjusted EBITDA for the nine months ended September 30, 2018. The table below is organized by our four geographic business segments: the Yucatán Peninsula, the Pacific Coast, the Dominican Republic and Jamaica.



Name of Resort	Location	Brand and Type	Operator	Year Built; Significant Renovations	Rooms
Owned Resorts
Yucatán Peninsula
Hyatt Ziva Cancún	Cancún, Mexico	Hyatt Ziva (all ages)	Playa	1975; 1980; 1986; 2002; 2015	547
Hyatt Zilara Cancún	Cancún, Mexico	Hyatt Zilara (adults-only)	Playa	2006; 2009; 2013; 2017	307
Panama Jack Resorts Cancún	Cancún, Mexico	Panama Jack (all ages)⁽¹⁾	Playa	2002; 2009; 2017	458
Hilton Playa del Carmen All-Inclusive Resort ⁽²⁾	Playa del Carmen, Mexico	Hilton (adults-only)	Playa	1985; 2009	513
Panama Jack Resorts Playa del Carmen	Playa del Carmen, Mexico	Panama Jack (all ages)⁽¹⁾	Playa	1996; 2006; 2012; 2017	287
Secrets Capri	Riviera Maya, Mexico	Secrets (adults-only)	AMResorts	2003	291
Dreams Puerto Aventuras	Riviera Maya, Mexico	Dreams (all ages)	AMResorts	1991; 2009	305
Pacific Coast
Hyatt Ziva Los Cabos	Cabo San Lucas, Mexico	Hyatt Ziva (all ages)	Playa	2007; 2009; 2015	591
Hyatt Ziva Puerto Vallarta	Puerto Vallarta, Mexico	Hyatt Ziva (all ages)	Playa	1969; 1990; 2002; 2009; 2014; 2017	335
Dominican Republic
Dreams La Romana	La Romana, Dominican Republic	Dreams (all ages)	AMResorts ⁽³⁾	1997; 2008	756
Dreams Palm Beach	Punta Cana, Dominican Republic	Dreams (all ages)	AMResorts	1994; 2008	500
Dreams Punta Cana	Punta Cana, Dominican Republic	Dreams (all ages)	AMResorts	2004	620
Jamaica
Hyatt Ziva Rose Hall	Montego Bay, Jamaica	Hyatt Ziva (all ages)	Playa	2000; 2014; 2017	276
Hyatt Zilara Rose Hall	Montego Bay, Jamaica	Hyatt Zilara (adults-only)	Playa	2000; 2014; 2017	344
Hilton Rose Hall Resort & Spa	Montego Bay, Jamaica	Hilton (all ages)	Playa	1974; 2008	495
Jewel Runaway Bay Beach & Golf Resort	Runaway Bay, Jamaica	Jewel (all ages)	Playa	1960; 1961; 1965; 2007; 2012	268
Jewel Dunn’s River Beach Resort	Ocho Rios, Jamaica	Curio by Hilton (adults only)	Playa	1957; 1970; 1980; 2010	250
Jewel Paradise Cove Beach Resort & Spa	Runaway Bay, Jamaica	Curio by Hilton (adults only)	Playa	2013	225
Jewel Grande Montego Bay ⁽⁵⁾	Montego Bay, Jamaica	Jewel (all ages)	Playa	2016; 2017	88
Total Rooms Owned					7,456
Managed Resorts
Sanctuary Cap Cana ⁽⁴⁾	Punta Cana, Dominican Republic	Sanctuary (adults-only)	Playa	2008; 2015; 2018	184
Jewel Grande Montego Bay ⁽⁵⁾	Montego Bay, Jamaica	Sagicor (condo-hotel)	Playa	2016; 2017	129
Total Rooms Operated					313
Total Rooms Owned and Operated					7,769

________

⁽¹⁾ Pursuant to an agreement with Panama Jack, we have rebranded these resorts under the Panama Jack brand. The rebranding was completed in 2017.

⁽²⁾Pursuant to an agreement with Hilton, this resort was rebranded as a Hilton all-inclusive resort on November 1, 2018. The resort is still owned and operated by Playa.

⁽³⁾Effective November 20, 2018, this resort will be operated by Playa and will be rebranded as a Hilton all-inclusive resort.

⁽⁴⁾Owned by a third party.

⁽⁵⁾Playa acquired an 88-unit tower as part of our acquisition of the Sagicor Assets. The 88-room tower is currently closed but once re-opened will operate as part of the Jewel Grande. Playa manages the majority of the units within the remainingtwo condo-hotel towers that comprise the Jewel Grande, as these two towers are owned by Sagicor.

Results of Operations

Three Months Ended September 30, 2018 and 2017

The following table summarizes our results of operations on a consolidated basis for the three months ended September 30, 2018 and 2017 ($ in thousands):



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Revenue:
Package	$	123,633		$	102,093		$	21,540		21.1	%
Non-package	18,800			16,249			2,551			15.7	%
Management fees	152			—			152			100.0	%
Cost reimbursements	227			—			227			100.0	%
Total revenue	142,812			118,342			24,470			20.7	%
Direct and selling, general and administrative expenses:
Direct	91,573			75,807			15,766			20.8	%
Selling, general and administrative	28,489			23,008			5,481			23.8	%
Pre-opening	87			—			87			100.0	%
Depreciation and amortization	20,138			13,808			6,330			45.8	%
Gain on insurance proceeds	(686		)	—			(686		)	100.0	%
Reimbursed costs	227			—			227			100.0	%
Direct and selling, general and administrative expenses	139,828			112,623			27,205			24.2	%
Operating income	2,984			5,719			(2,735		)	(47.8	)%
Interest expense	(7,637		)	(13,099		)	5,462			(41.7	)%
Other (expense) income, net	(390		)	1,939			(2,329		)	(120.1	)%
Net loss before tax	(5,043		)	(5,441		)	398			(7.3	)%
Income tax provision	(379		)	(226		)	(153		)	67.7	%
Net loss	$	(5,422	)	$	(5,667	)	$	245		(4.3	)%

For a description of the operating metrics discussed in this section and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating Performance,” below. For discussions of Adjusted EBITDA and a reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA Margin (as defined below) for the three months ended September 30, 2018 and 2017:

Total Portfolio



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	79.2		%	78.5		%	0.7		pts	0.9	%
Net Package ADR	$	221.40		$	222.80		$	(1.40	)	(0.6	)%
Net Package RevPAR	175.27			174.97			0.30			0.2	%
	($ in thousands)
Net Package Revenue	$	118,810		$	98,674		$	20,136		20.4	%
Net Non-package Revenue	18,719			16,121			2,598			16.1	%
Management Fee Revenue	152			—			152			100.0	%
Total Net Revenue	137,681			114,795			22,886			19.9	%
Adjusted EBITDA	$	26,032		$	24,319		$	1,713		7.0	%
Adjusted EBITDA Margin	18.9		%	21.2		%	(2.3		)pts	(10.8	)%

Comparable Portfolio



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	79.9		%	78.5		%	1.4		pts	1.8	%
Net Package ADR	$	222.54		$	222.80		$	(0.26	)	(0.1	)%
Net Package RevPAR	177.87			174.97			2.90			1.7	%
	($ in thousands)
Net Package Revenue	$	100,313		$	98,674		$	1,639		1.7	%
Net Non-package Revenue	15,933			16,121			(188		)	(1.2	)%
Management Fee Revenue	152			—			152			100.0	%
Total Net Revenue	116,398			114,795			1,603			1.4	%
Adjusted EBITDA	$	21,458		$	24,319		$	(2,861	)	(11.8	)%
Adjusted EBITDA Margin	18.4		%	21.2		%	(2.8		)pts	(13.2	)%

Total Revenue and Total Net Revenue

Our total revenue for the three months ended September 30, 2018 increased $24.5 million, or 20.7%, compared to the three months ended September 30, 2017. Our Total Net Revenue for the three months ended September 30, 2018 increased $22.9 million, or 19.9%, compared to the three months ended September 30, 2017. This increase was driven by an increase in Net Package Revenue of $20.1 million, or 20.4%, and an increase in Net Non-package Revenue of $2.6 million, or 16.1%. This increase in Total Net Revenue was due to a $21.3 million increase attributable to the acquisition of the SagicorAssets and an increase of $1.6 million at our comparable portfolio.

Our comparable resorts for the three months ended September 30, 2018 exclude the following: Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn’s River Beach Resort, and Jewel Paradise Cove Beach Resort & Spa, which we purchased on June 1, 2018.

The following table shows a reconciliation of Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the three months ended September 30, 2018 and 2017 ($ in thousands):



	Three Months Ended September 30,				Increase/Decrease
	2018		2017		Change			% Change

Net Package Revenue
Comparable Net Package Revenue	$	100,313	$	98,674	$	1,639		1.7	%
Non-comparable Net Package Revenue	18,497		—		18,497			100.0	%
Net Package Revenue	118,810		98,674		20,136			20.4	%

Net Non-package Revenue
Comparable Net Non-package Revenue	15,933		16,121		(188		)	(1.2	)%
Non-comparable Net Non-package Revenue	2,786		—		2,786			100.0	%
Net Non-package Revenue	18,719		16,121		2,598			16.1	%

Management Fee Revenue
Comparable Management Fee Revenue	152		—		152			100.0	%
Non-comparable Management Fee Revenue	—		—		—			0.0	%
Management Fee Revenue	152		—		152			100.0	%

Net Revenue:
Comparable Net Revenue	116,398		114,795		1,603			1.4	%
Non-comparable Net Revenue	21,283		—		21,283			100.0	%
Total Net Revenue	137,681		114,795		22,886			19.9	%
Plus: compulsory tips	4,904		3,547		1,357			38.3	%
Cost reimbursements	227		—		227			100.0	%
Total revenue	$	142,812	$	118,342	$	24,470		20.7	%

Direct Expenses

The following table shows a reconciliation of our direct expenses to net direct expenses for the three months ended September 30, 2018 and 2017 ($ in thousands):



	Three Months Ended September 30,				Increase/Decrease
	2018		2017		Change		% Change
Direct expenses	$	91,573	$	75,807	$	15,766	20.8	%
Less: compulsory tips	4,904		3,547		1,357		38.3	%
Net direct expenses	$	86,669	$	72,260	$	14,409	19.9	%

Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our net direct expenses for the three months ended September 30, 2018 were $86.7 million, or 62.9% of Total Net Revenue and $72.3 million, or 62.9%, of Total Net Revenue for the three months ended September 30, 2017.

Net direct expenses for the three months ended September 30, 2018 increased $14.4 million, or 19.9%, compared to the three months ended September 30, 2017. Net direct expenses increased due to the acquisition of the SagicorAssets, which accounted for $14.4 million of the change. Direct operating expenses fluctuate based on various factors, including changes in occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increase as a result of higher revenues.

Direct expenses consists of the following ($ in thousands):



	Three Months Ended September 30,				Increase/Decrease
	2018		2017		Change			% Change
Direct expenses:
Food and beverages	$	22,906	$	18,032	$	4,874		27.0	%
Guest costs	1,391		919		472			51.4	%
Resort salary and wages	30,744		26,062		4,682			18.0	%
Repairs and maintenance	4,450		4,266		184			4.3	%
Utility expenses	9,421		7,524		1,897			25.2	%
Licenses and property taxes	805		548		257			46.9	%
Incentive and management fees	2,151		2,055		96			4.7	%
Hyatt fees	3,248		2,980		268			9.0	%
Panama Jack fees	183		—		183			100.0	%
Hilton fees	862		—		862			100.0	%
Other supplies and expense amortization	1,583		896		687			76.7	%
Transportation and travel expenses	1,220		1,083		137			12.7	%
Laundry and cleaning expenses	1,269		613		656			107.0	%
Property and equipment rental expense	370		728		(358		)	(49.2	)%
Entertainment expenses	1,370		826		544			65.9	%
Office supplies	241		1,012		(771		)	(76.2	)%
Other operational expenses	4,455		4,716		(261		)	(5.5	)%
Total net direct expenses	$	86,669	$	72,260	$	14,409		19.9	%

Selling, General and Administrative Expenses

Our selling, general and administrative expenses for the three months ended September 30, 2018 increased $5.5 million, or 23.8%, compared to the three months ended September 30, 2017. Included in these results are increases in transaction expense, share based compensation expense and increased insurance expenses due to increased insurance premiums over prior year.

Depreciation and Amortization Expense

Our depreciation and amortization expense for the three months ended September 30, 2018 increased $6.3 million, or 45.8%, compared to the three months ended September 30, 2017. This increase is due primarily to the acquisition of the SagicorAssets and asset additions as part of the property renovations at Panama Jack Resorts Cancun, Panama Jack Resorts Playa del Carmen and Hyatt Ziva & Zilara Rose Hall in the prior year that have a full quarter of depreciation in the current year.

Gain on Insurance Proceeds

We received $0.5 million of net business interruption insurance proceeds during the three months ended September 30, 2018, which related to the impact of Hurricane Maria at the Dreams Palm Beach and Hurricane Maria and Hurricane Irma at Dreams La Romana during the third quarter of 2017. We also received an additional $0.2 million of property damage insurance proceeds at Dreams Palm Beach during the three months ended September 30, 2018. During the three months ended September 30, 2017, we had no such gain.

Interest Expense

Our interest expense for the three months ended September 30, 2018 decreased $5.5 million, or 41.7%, as compared to the three months ended September 30, 2017. This decrease was primarily attributable to the change in fair value of our interest rate swaps of $4.0 million and the non-cash impact of capitalized interest of $0.6 million.

Income Tax Provision

The income tax provision for the three months ended September 30, 2018 was $0.4 million, an increase of $0.2 million compared to the three months ended September 30, 2017, during which quarter we reported an income tax provision of $0.2 million.

The increased income tax expense was driven primarily by a decrease in the tax benefit associated with future tax liabilities of some Mexican entities. The $4.2 million increased discrete tax expense associated with foreign exchange rate fluctuations was almost fully offset by the $4.2 million decrease in tax expense from decreased pre-tax book income in our tax paying entities.

Adjusted EBITDA

Our Adjusted EBITDA for the three months ended September 30, 2018 increased $1.7 million, or 7.0%, compared to the three months ended September 30, 2017. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

Nine Months Ended September 30, 2018 and 2017

The following table summarizes our results of operations on a consolidated basis for the nine months ended September 30, 2018 and 2017 ($ in thousands):



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Revenue:
Package	$	402,627		$	373,502		$	29,125		7.8	%
Non-package	61,752			59,505			2,247			3.8	%
Management fees	503			—			503			100.0	%
Cost reimbursements	349			—			349			100.0	%
Total revenue	465,231			433,007			32,224			7.4	%
Direct and selling, general and administrative expenses:
Direct	250,742			231,567			19,175			8.3	%
Selling, general and administrative	87,742			76,713			11,029			14.4	%
Pre-opening	87			—			87			100.0	%
Depreciation and amortization	51,709			40,093			11,616			29.0	%
Reimbursed costs	349			—			349			100.0	%
Gain on insurance proceeds	(2,207		)	—			(2,207		)	100.0	%
Direct and selling, general and administrative expenses	388,422			348,373			40,049			11.5	%
Operating income	76,809			84,634			(7,825		)	(9.2	)%
Interest expense	(35,151		)	(41,187		)	6,036			(14.7	)%
Loss on extinguishment of debt	—			(12,526		)	12,526			100.0	%
Other (expense) income, net	(1,836		)	626			(2,462		)	(393.3	)%
Net income before tax	39,822			31,547			8,275			26.2	%
Income tax provision	(6,606		)	(20,105		)	13,499			(67.1	)%
Net income	$	33,216		$	11,442		$	21,774		190.3	%

For a description of the operating metrics used in this section and non-U.S. GAAP measures and a reconciliation of Net Package Revenue, Net Non-package Revenue, Management Fee Revenue and Total Net Revenue to total revenue as computed under U.S. GAAP, see “Key Indicators of Financial and Operating Performance,” below. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

Total Portfolio



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	83.2		%	82.6		%	0.6		pts	0.7	%
Net Package ADR	$	257.25		$	263.00		$	(5.75	)	(2.2	)%
Net Package RevPAR	214.10			217.24			(3.14		)	(1.4	)%
	($ in thousands)
Net Package Revenue	$	390,365		$	363,766		$	26,599		7.3	%
Net Non-package Revenue	61,718			58,954			2,764			4.7	%
Management Fee Revenue	503			—			503			100.0	%
Total Net Revenue	452,586			422,720			29,866			7.1	%
Adjusted EBITDA	$	141,908		$	139,811		$	2,097		1.5	%
Adjusted EBITDA Margin	31.4		%	33.1		%	(1.7		)pts	(5.1	)%

Comparable Portfolio



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	83.6		%	82.6		%	1.0		pts	1.2	%
Net Package ADR	$	260.87		$	263.00		$	(2.13	)	(0.8	)%
Net Package RevPAR	218.06			217.24			0.82			0.4	%
	($ in thousands)
Net Package Revenue	$	364,924		$	363,766		$	1,158		0.3	%
Net Non-package Revenue	57,940			58,954			(1,014		)	(1.7	)%
Management Fee Revenue	503			—			503			100.0	%
Total Net Revenue	423,367			422,720			647			0.2	%
Adjusted EBITDA	$	134,549		$	139,811		$	(5,262	)	(3.8	)%
Adjusted EBITDA Margin	31.8		%	33.1		%	(1.3		)pts	(3.9	)%

Total Revenue and Total Net Revenue

Our total revenue for the nine months ended September 30, 2018 increased $32.2 million, or 7.4%, compared to the nine months ended September 30, 2017. Our Total Net Revenue for the nine months ended September 30, 2018 increased $29.9 million, or 7.1%, compared to the nine months ended September 30, 2017. This increase was driven by an increase in Net Package Revenue of $26.6 million, or 7.3%, and an increase in Net Non-package Revenue of $2.8 million, or 4.7%. This increase in Total Net Revenue was due to a $29.2 million increase attributable to the acquisition of the SagicorAssets and by an increase of $0.7 million at our comparable portfolio.

Our comparable resorts for the nine months ended September 30, 2018 exclude the following: Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn’s River Beach Resort, and Jewel Paradise Cove Beach Resort & Spa, which we purchased on June 1, 2018.

The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the nine months ended September 30, 2018 and 2017 ($ in thousands):



	Nine Months Ended September 30,				Increase/Decrease
	2018		2017		Change			% Change

Net Package Revenue
Comparable Net Package Revenue	$	364,924	$	363,766	$	1,158		0.3	%
Non-comparable Net Package Revenue	25,441		—		25,441			100.0	%
Net Package Revenue	390,365		363,766		26,599			7.3	%

Net Non-package Revenue
Comparable Net Non-package Revenue	57,940		58,954		(1,014		)	(1.7	)%
Non-comparable Net Non-package Revenue	3,778		—		3,778			100.0	%
Net Non-package Revenue	61,718		58,954		2,764			4.7	%

Management Fee Revenue
Comparable Management Fee Revenue	503		—		503			100.0	%
Non-comparable Management Fee Revenue	—		—		—			0.0	%
Management Fee Revenue	503		—		503			100.0	%

Net Revenue:
Comparable Net Revenue	423,367		422,720		647			0.2	%
Non-comparable Net Revenue	29,219		—		29,219			100.0	%
Total Net Revenue	452,586		422,720		29,866			7.1	%
Plus: compulsory tips	12,296		10,287		2,009			19.5	%
Cost reimbursements	349		—		349			100.0	%
Total revenue	$	465,231	$	433,007	$	32,224		7.4	%

Direct Expenses

The following table shows a reconciliation of our direct expenses to net direct expenses for the nine months ended September 30, 2018 and 2017 ($ in thousands):



	Nine Months Ended September 30,				Increase/Decrease
	2018		2017		Change		% Change
Direct expenses	$	250,742	$	231,567	$	19,175	8.3	%
Less: tips	12,296		10,287		2,009		19.5	%
Net direct expenses	$	238,446	$	221,280	$	17,166	7.8	%

Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our net direct expenses for the nine months ended September 30, 2018 were $238.4 million, or 52.7%, of Total Net Revenue and $221.3 million, or 52.3%, of Total Net Revenue for the nine months ended September 30, 2017.

Net direct expenses for the nine months ended September 30, 2018 increased $17.2 million, or 7.8%, compared to the nine months ended September 30, 2017. Net direct expenses increased primarily due to the acquisition of the SagicorAssets, which accounted for $19.2 million of the change. Direct operating expenses fluctuate based on various factors, including changes in occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increase as a result of higher revenues.

Direct expenses consists of the following ($ in thousands):



	Nine Months Ended September 30,				Increase/Decrease
	2018		2017		Change			% Change
Direct expenses:
Food and beverages	$	61,298	$	55,396	$	5,902		10.7	%
Guest costs	3,595		2,890		705			24.4	%
Salaries and wages	85,607		77,189		8,418			10.9	%
Repairs and maintenance	10,782		11,292		(510		)	(4.5	)%
Utilities	21,733		22,149		(416		)	(1.9	)%
Licenses and property taxes	2,299		1,779		520			29.2	%
Incentive and management fees	9,038		9,035		3			0.0	%
Hyatt fees	12,293		10,754		1,539			14.3	%
Panama Jack fees	538		—		538			100.0	%
Hilton fees	1,110		—		1,110			100.0	%
Other supplies and expense amortization	4,196		2,884		1,312			45.5	%
Transportation and travel expenses	3,244		3,220		24			0.7	%
Laundry and cleaning expenses	3,106		1,906		1,200			63.0	%
Property and equipment rental expense	2,882		3,239		(357		)	(11.0	)%
Entertainment expenses	4,018		2,650		1,368			51.6	%
Office supplies	1,383		3,161		(1,778		)	(56.2	)%
Other operational expenses	11,324		13,736		(2,412		)	(17.6	)%
Total net direct expenses	$	238,446	$	221,280	$	17,166		7.8	%

Selling, General and Administrative Expenses

Our selling, general and administrative expenses for the nine months ended September 30, 2018 increased $11.0 million, or 14.4%, compared to the nine months ended September 30, 2017. This increase was primarily driven by an increase in share-based compensation expense of $2.3 million and the acquisition of the SagicorAssets, which accounted for an additional $3.3 million of expenses.

Depreciation and Amortization Expense

Our depreciation and amortization expense for the nine months ended September 30, 2018 increased $11.6 million, or 29.0%, compared to the nine months ended September 30, 2017. This increase is primarily due to the acquisition of the SagicorAssets and to asset additions as part of the property renovations at Panama Jack Resorts Cancun, Panama Jack Resorts Playa del Carmen and Hyatt Ziva & Zilara Rose Hall in the prior year that have a full nine months of depreciation in the current year.

Gain on Insurance Proceeds

We received $2.0 million of net business interruption insurance proceeds during the nine months ended September 30, 2018, which related to the impact of Hurricane Maria at the Dreams Punta Cana and Dreams Palm Beach and the impact of Hurricane Maria and Hurricane Irma at Dreams La Romana during the third quarter of 2017. We also received an additional $0.2 million of property damage insurance proceeds at Dreams Palm Beach during the nine months ended September 30, 2018. During the nine months ended September 30, 2017, we had no such gain.

Interest Expense

Our interest expense for the nine months ended September 30, 2018 decreased $6.0 million, or 14.7%, as compared to the nine months ended September 30, 2017. This decrease was primarily attributable to the net decrease of $3.6 million due to the pay down in April and December 2017 of the senior unsecured notes issued by our Predecessor (the “Senior Notes due 2020”) offset by the add-on to our Term Loan, the non-cash impact of capitalized interest of $2.7 million and a decrease in the non-cash amortization of the discount and deferred financing costs of $0.7 million. This was partially offset by the change in fair value of our interest rate swaps of $1.6 million.

Income Tax Provision

The income tax provision for the nine months ended September 30, 2018 was $6.6 million, a decrease of $13.5 million compared to the nine months ended September 30, 2017, during which period we reported an income tax provision of $20.1 million. The decreased income tax expense was driven primarily by the $5.1 million decrease in tax expense from decreased pre-tax book income in our tax paying entities, and an increased discrete tax benefit of $8.3 million associated with foreign exchange rate fluctuations.

Adjusted EBITDA

Our Adjusted EBITDA for the nine months ended September 30, 2018 increased $2.1 million, or 1.5%, compared to the nine months ended September 30, 2017. For discussions of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures,” below.

Key Indicators of Financial and Operating Performance

Net Package Revenue

Net Non-package Revenue

Net Revenue

Management Fee Revenue

Cost Reimbursements

Total Net Revenue

Occupancy

Net Package ADR

Net Package RevPAR

Adjusted EBITDA

Adjusted EBITDA Margin

Comparable Non-U.S. GAAP Measures

Net Package Revenue, Net Non-package Revenue, Net Revenue, Management Fee Revenue, Cost Reimbursements and Total Net Revenue

“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities, net of compulsory tips paid to employees in Mexico and Jamaica. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Revenue is recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized.

“Net Non-package Revenue” represents all other revenues earned from the operations of our resorts, other than Net Package Revenue, net of compulsory tips paid to employees in Mexico and Jamaica. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue includes revenue associated with guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages, which are not included in the all-inclusive package. Revenue not included in a guest’s all-inclusive package is recognized when the goods are consumed.

“Net Revenue” represents Net Package Revenue and Net Non-Package Revenue. Net Revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition. In analyzing our Net Revenues, our management differentiates between Net Package Revenue and Net Non-package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day.

“Management Fee Revenue” is derived from fees earned for managing hotels owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of revenue, and an incentive fee, which is computed as a percentage of profitability. Management Fee Revenue was immaterial to our operations for the nine months ended September 30, 2018, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our business in the future as we enter into more management contracts.

“Total Net Revenue” represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue for the nine months ended September 30, 2018 and Net Package Revenue and Net Non-package Revenue for the nine months ended September 30, 2017. “Cost Reimbursements” is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance. Cost reimbursements is derived from the reimbursement of certain costs incurred by Playa on behalf of resorts managed by Playa and owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on Operating income or Net (loss) income.

Occupancy

“Occupancy” represents the total number of rooms sold for a period divided by the total number of rooms available during such period. Occupancy is a useful measure of the utilization of a resort’s total available capacity and can be used to gauge demand at a specific resort or group of properties during a given period. Occupancy levels also enable us to optimize Net Package ADR by increasing or decreasing the stated rate for our all-inclusive packages as demand for a resort increases or decreases.

Net Package ADR

“Net Package ADR” represents total Net Package Revenue for a period divided by the total number of rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the all-inclusive segment of the lodging industry, and is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.

Net Package RevPAR

“Net Package RevPAR” is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance measure in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.

Adjusted EBITDA and Adjusted EBITDA Margin

We define EBITDA, a non-U.S. GAAP financial measure, as net income or loss, determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax and depreciation and amortization expense. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:

Other expense, net

Impairment loss

Pre-opening expense

Transaction expenses

Severance expense

Other tax expense

Gain on property damage insurance proceeds

Share-based compensation

Loss on extinguishment of debt

Non-service cost components of net periodic pension cost (benefit)

Other items which may include, but are not limited to the following: management contract termination fees; gains or losses from legal settlements; repairs from hurricanes and tropical storms; and Jamaica delayed opening accrual reversals.

We believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other expense, net), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time.

The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our “Board”) and management. In addition, the compensation committee of our Board determines the annual variable compensation for certain members of our management based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.

We define Owned Resort EBITDA as Adjusted EBITDA before corporate expenses and management fee income. EBITDA, Adjusted EBITDA and Owned Resort EBITDA are not a substitute for net (loss) income or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, EBITDA, Adjusted EBITDA, and Owned Resort EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented.

For a reconciliation of EBITDA, Adjusted EBITDA and Owned Resort EBITDA to net income as computed under U.S. GAAP, see “Non-U.S. GAAP Financial Measures.”

“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue. We believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful.

Comparable Non-U.S. GAAP Measures

We believe that presenting Adjusted EBITDA, Total Net Revenue, Net Package Revenue and Net Non-package Revenue on a comparable basis is useful to investors because these measures include only the results of resorts owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate Comparable Adjusted EBITDA, comparable Total Net Revenue, comparable Net Package Revenue and comparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were not owned or in operation during some or all of the relevant reporting period. For the three and nine months ended September 30, 2018, our non-comparable resorts were: Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort, Jewel Dunn’s River Beach Resort, and Jewel Paradise Cove Beach Resort & Spa, which were acquired on June 1, 2018.

For a reconciliation of net income to Comparable Adjusted EBITDA as computed under U.S. GAAP, see “Non-U.S. GAAP Financial Measures.” For a reconciliation of comparable net package revenue, comparable net non-package revenue, comparable management fee revenue and comparable total net revenue to total revenue as computed under U.S. GAAP, see “Net Package Revenue, Net Non-package Revenue, Net Revenue, Management Fee Revenue, Cost Reimbursements and Total Net Revenue” in this section.

Segment Results

Three Months Ended September 30, 2018 and 2017

We evaluate our business segment operating performance using segment Net Revenue and segment Adjusted EBITDA. The following tables summarize segment Net Revenue and segment Adjusted EBITDA for the three months ended September 30, 2018 and 2017 ($ in thousands):



	Three Months Ended September 30,				Increase / Decrease
	2018		2017		Change			% Change
Net Revenue:
Yucatan Peninsula	$	57,087	$	59,630	$	(2,543	)	(4.3	)%
Pacific Coast	16,211		15,872		339			2.1	%
Dominican Republic	27,580		26,139		1,441			5.5	%
Jamaica	36,651		13,144		23,507			178.8	%
Segment Net Revenue	137,529		114,785		22,744			19.8	%
Other	—		10		(10		)	(100.0	)%
Management fees	152		—		152			100.0	%
Total Net Revenue	$	137,681	$	114,795	$	22,886		19.9	%



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Adjusted EBITDA:
Yucatan Peninsula	$	18,484		$	20,824		$	(2,340	)	(11.2	)%
Pacific Coast	2,869			3,758			(889		)	(23.7	)%
Dominican Republic	7,161			5,460			1,701			31.2	%
Jamaica	6,688			1,821			4,867			267.3	%
Segment Adjusted EBITDA	35,202			31,863			3,339			10.5	%
Other corporate - unallocated	(9,322		)	(7,544		)	(1,778		)	23.6	%
Management fees	152			—			152			100.0	%
Total Adjusted EBITDA	$	26,032		$	24,319		$	1,713		7.0	%

For a reconciliation of segment Net Revenue and segment Adjusted EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 19 to our Condensed Consolidated Financial Statements.

Yucatán Peninsula

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Yucatán Peninsula segment for the three months ended September 30, 2018 and 2017:



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	84.4		%	86.2		%	(1.8		)pts	(2.1	)%
Net Package ADR	$	239.94		$	242.21		$	(2.27	)	(0.9	)%
Net Package RevPAR	202.62			208.80			(6.18		)	(3.0	)%
	($ in thousands)
Net Package Revenue	$	50,482		$	52,019		$	(1,537	)	(3.0	)%
Net Non-package Revenue	6,605			7,611			(1,006		)	(13.2	)%
Net Revenue	57,087			59,630			(2,543		)	(4.3	)%
Adjusted Resort EBITDA	$	18,484		$	20,824		$	(2,340	)	(11.2	)%
Adjusted Resort EBITDA Margin	32.4		%	34.9		%	(2.5		)pts	(7.2	)%

Segment Net Revenue. Our Net Revenue for the three months ended September 30, 2018 decreased $2.5 million, or 4.3%, compared to the three months ended September 30, 2017. Net Revenue at all properties in this segment except Hyatt Ziva Cancun decreased $3.9 million compared to the three months ended September 30, 2017. The strong performance of Hyatt Ziva Cancun, which accounted for a $1.4 million increase, offset these decreases.

Segment Adjusted EBITDA. Our Adjusted EBITDA for the three months ended September 30, 2018 decreased $2.3 million, or 11.2%, compared to the three months ended September 30, 2017. Adjusted EBITDA at all properties in this segment except Hyatt Ziva Cancun decreased $2.8 million compared to the three months ended September 30, 2017. This was offset by strong performance of Hyatt Ziva Cancun, which accounted for a $0.5 million increase. All properties within this segment have been affected by increased insurance premiums and increased energy costs year over year which have contributed to a $1.1 million decrease in Adjusted EBITDA compared to the three months ended September 30, 2017.

Pacific Coast

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-Package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Pacific Coast segment for the three months ended September 30, 2018 and 2017 for the total segment portfolio ($ in thousands):



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	72.5		%	68.0		%	4.5		pts	6.6	%
Net Package ADR	$	227.42		$	231.95		$	(4.53	)	(2.0	)%
Net Package RevPAR	164.86			157.71			7.15			4.5	%
	($ in thousands)
Net Package Revenue	$	14,045		$	13,435		$	610		4.5	%
Net Non-package Revenue	2,166			2,437			(271		)	(11.1	)%
Net Revenue	16,211			15,872			339			2.1	%
Adjusted Resort EBITDA	$	2,869		$	3,758		$	(889	)	(23.7	)%
Adjusted Resort EBITDA Margin	17.7		%	23.7		%	(6.0		)pts	(25.3	)%

Segment Net Revenue. Our Net Revenue for the three months ended September 30, 2018 increased $0.3 million, or 2.1%, compared to the three months ended September 30, 2017. This increase was due to the performance of Hyatt Ziva Puerto Vallarta, which accounted for a $0.3 million increase in Net Revenue compared to the three months ended September 30, 2017.

Segment Adjusted EBITDA.Our Adjusted EBITDA for the three months ended September 30, 2018 decreased $0.9 million, or 23.7%, compared to the three months ended September 30, 2017. This decrease was due to the performance of Hyatt Ziva Los Cabos, which accounted for a $1.3 million decrease in Adjusted EBITDA compared to the three months ended September 30, 2017.

This decrease was offset by the strong performance of Hyatt Ziva Puerto Vallarta, which accounted for a $0.4 million increase in Adjusted EBITDA compared to the three months ended September 30, 2017. As noted above, all properties within this segment have been affected by increased insurance premiums and energy costs year over year which contributed to a $0.6 million decrease in Adjusted EBITDA compared to the three months ended September 30, 2017.

Dominican Republic

The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Dominican Republic segment for the three months ended September 30, 2018 and 2017 for the total segment portfolio:



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	79.6		%	77.0		%	2.6		pts	3.4	%
Net Package ADR	$	165.90		$	161.54		$	4.36		2.7	%
Net Package RevPAR	132.10			124.38			7.72			6.2	%
	($ in thousands)
Net Package Revenue	$	22,800		$	21,468		$	1,332		6.2	%
Net Non-package Revenue	4,780			4,671			109			2.3	%
Net Revenue	27,580			26,139			1,441			5.5	%
Adjusted Resort EBITDA	$	7,161		$	5,460		$	1,701		31.2	%
Adjusted Resort EBITDA Margin	26.0		%	20.9		%	5.1		pts	24.4	%

Segment Net Revenue. Our Net Revenue for the three months ended September 30, 2018 increased $1.4 million, or 5.5%, compared to the three months ended September 30, 2017. This increase was due to the performance of Dreams La Romana and Dreams Punta Cana, which accounted for a $1.6 million increase in Net Revenue compared to the three months ended September 30, 2017. This was partially offset by Dreams Palm Beach which accounted for a $0.2 million decrease in Net Revenue compared to the three months ended September 30, 2017.

Segment Adjusted EBITDA. Our Adjusted EBITDA for the three months ended September 30, 2018 increased $1.7 million, or 31.2%, compared to the three months ended September 30, 2017. This increase was due to the performance of all hotels in the region. All properties within this segment have been affected by increased insurance premiums year over year which contributed to a $0.1 million offset to the increase in Adjusted EBITDA compared to the three months ended September 30, 2017.

Jamaica

The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Jamaica segment for the three months ended September 30, 2018 and 2017 for the total segment portfolio:

Total Portfolio



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	74.3		%	65.4		%	8.9		pts	13.6	%
Net Package ADR	$	247.82		$	315.03		$	(67.21	)	(21.3	)%
Net Package RevPAR	184.18			206.05			(21.87		)	(10.6	)%
	($ in thousands)
Net Package Revenue	$	31,483		$	11,753		$	19,730		167.9	%
Net Non-Package Revenue	5,168			1,391			3,777			271.5	%
Net Revenue	36,651			13,144			23,507			178.8	%
Adjusted Resort EBITDA	$	6,688		$	1,821		$	4,867		267.3	%
Adjusted Resort EBITDA Margin	18.2		%	13.9		%	4.3		pts	30.9	%

Comparable Portfolio



	Three Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	72.2		%	65.4		%	6.8		pts	10.4	%
Net Package ADR	$	315.31		$	315.03		$	0.28		0.1	%
Net Package RevPAR	227.67			206.05			21.62			10.5	%
	($ in thousands)
Net Package Revenue	$	12,986		$	11,753		$	1,233		10.5	%
Net Non-Package Revenue	2,382			1,391			991			71.2	%
Net Revenue	15,368			13,144			2,224			16.9	%
Adjusted Resort EBITDA	$	2,114		$	1,821		$	293		16.1	%
Adjusted Resort EBITDA Margin	13.8		%	13.9		%	(0.1		)pts	(0.7	)%

Segment Net Revenue. Our Net Revenue for the three months ended September 30, 2018 increased $23.5 million, or 178.8%, compared to the three months ended September 30, 2017. This increase was due to the performance of Hyatt Ziva and Zilara Jamaica which accounted for a $2.2 million increase and the acquisition of the SagicorAssets, which accounted for a $21.3 million increase in Net Revenue compared to the three months ended September 30, 2017.

Segment Adjusted EBITDA. Our Adjusted EBITDA for the three months ended September 30, 2018 increased $4.9 million, or 267.3%, compared to the three months ended September 30, 2017. This increase was due to the performance of Hyatt Ziva and Zilara Rose Hall which accounted for a $0.3 million increase compared to three months ended September 30, 2017 and the acquisition of the SagicorAssets, which accounted for the remaining $4.6 million increase. Hyatt Ziva and Zilara Rose Hall continues to show positive results after completion of renovations in 2017. Comparable properties within this segment have been affected by increased insurance premiums and energy costs year over year which were a $0.5 million offset to the increase in Adjusted EBITDA compared to the three months ended September 30, 2017.

Nine Months Ended September 30, 2018 and 2017

We evaluate our business segment operating performance using segment Net Revenue and segment Adjusted EBITDA. The following tables summarize segment Net Revenue and segment Adjusted EBITDA for the nine months ended September 30, 2018 and 2017 ($ in thousands):



	Nine Months Ended September 30,				Increase / Decrease
	2018		2017		Change			% Change
Net Revenue:
Yucatan Peninsula	$	200,025	$	209,305	$	(9,280	)	(4.4	)%
Pacific Coast	65,081		67,377		(2,296		)	(3.4	)%
Dominican Republic	99,493		96,935		2,558			2.6	%
Jamaica	87,141		49,091		38,050			77.5	%
Segment Net Revenue	451,740		422,708		29,032			6.9	%
Other⁽¹⁾	343		12		331			2,758.3	%
Management fees	503		—		503			100.0	%
Total Net Revenue	$	452,586	$	422,720	$	29,866		7.1	%



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Adjusted EBITDA:
Yucatan Peninsula	$	83,814		$	93,070		$	(9,256	)	(9.9	)%
Pacific Coast	23,327			27,242			(3,915		)	(14.4	)%
Dominican Republic	35,174			31,263			3,911			12.5	%
Jamaica	25,421			11,590			13,831			119.3	%
Segment Adjusted EBITDA	167,736			163,165			4,571			2.8	%
Other corporate - unallocated	(26,331		)	(23,354		)	(2,977		)	12.7	%
Management fees	503			—			503			100.0	%
Total Adjusted EBITDA	$	141,908		$	139,811		$	2,097		1.5	%

________

⁽¹⁾Primarily includes a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of Hyatt Ziva and Hyatt Zilara Rose Hall. This reversal concluded in the first quarter of 2018.

For a reconciliation of segment Net Revenue and segment Adjusted EBITDA to gross revenue and net income, respectively, each as computed under U.S. GAAP, see Note 19 to our Condensed Consolidated Financial Statements.

Yucatán Peninsula



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	87.0		%	88.5		%	(1.5		)pts	(1.7	)%
Net Package ADR	$	276.11		$	280.56		$	(4.45	)	(1.6	)%
Net Package RevPAR	240.17			248.30			(8.13		)	(3.3	)%
	($ in thousands)
Net Package Revenue	$	177,553		$	183,804		$	(6,251	)	(3.4	)%
Net Non-Package Revenue	22,472			25,501			(3,029		)	(11.9	)%
Net Revenue	200,025			209,305			(9,280		)	(4.4	)%
Adjusted Resort EBITDA	$	83,814		$	93,070		$	(9,256	)	(9.9	)%
Adjusted Resort EBITDA Margin	41.9		%	44.5		%	(2.6		)pts	(5.8	)%

Segment Net Revenue. Our Net Revenue for the nine months ended September 30, 2018 decreased $9.3 million, or 4.4%, compared to the nine months ended September 30, 2017. Net Revenue at all properties in this segment except Hyatt Ziva Cancun decreased $14.5 million compared to the nine months ended September 30, 2017 due to their decrease in both Net Package ADR and Occupancy compared to the prior year. The strong performance of Hyatt Ziva Cancun, which accounted for a $5.2 million increase, offset these decreases.

Segment Adjusted EBITDA. Our Adjusted EBITDA for the nine months ended September 30, 2018 decreased $9.3 million, or 9.9%, compared to the nine months ended September 30, 2017. Adjusted EBITDA at all properties in this segment except Hyatt Ziva Cancun decreased $10.8 million compared to the nine months ended September 30, 2017. This was offset by the performance of Hyatt Ziva Cancun, which accounted for a $1.5 million increase in Adjusted EBITDA compared to the nine months ended September 30, 2017. All properties within this segment have been affected by increased insurance premiums and energy costs year over year which contributed to a $1.4 million decrease in Adjusted EBITDA compared to the nine months ended September 30, 2017.

Pacific Coast

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-Package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Pacific Coast segment for the nine months ended September 30, 2018 and 2017 for the total segment portfolio:



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	76.7		%	73.0		%	3.7		pts	5.1	%
Net Package ADR	$	282.56		$	303.31		$	(20.75	)	(6.8	)%
Net Package RevPAR	216.77			221.36			(4.59		)	(2.1	)%
	($ in thousands)
Net Package Revenue	$	54,800		$	55,959		$	(1,159	)	(2.1	)%
Net Non-Package Revenue	10,281			11,418			(1,137		)	(10.0	)%
Net Revenue	65,081			67,377			(2,296		)	(3.4	)%
Adjusted Resort EBITDA	$	23,327		$	27,242		$	(3,915	)	(14.4	)%
Adjusted Resort EBITDA Margin	35.8		%	40.4		%	(4.6		)pts	(11.4	)%

Segment Net Revenue. Our Net Revenue for the nine months ended September 30, 2018 decreased $2.3 million, or 3.4%, compared to the nine months ended September 30, 2017. The decrease was due to the performance of Hyatt Ziva Los Cabos, which accounted for a $3.1 million decrease in Net Revenue compared to the nine months ended September 30, 2017. These results were partially offset by Hyatt Ziva Puerto Vallarta, which accounted for a $0.8 million increase in Net Revenue. Hyatt Ziva Los Cabos has had less group business due to cancellations versus the prior year, whereas results from Hyatt Ziva Puerto Vallarta have remained strong. As groups generally pay increased rates, a decrease in group business contributed to the decrease in Net Revenue compared to the nine months ended September 30, 2017.

Segment Adjusted EBITDA.Our Adjusted EBITDA for the nine months ended September 30, 2018 decreased $3.9 million, or 14.4%, compared to the nine months ended September 30, 2017. This decrease was due to decreased Adjusted EBITDA by both hotels in this region compared to the nine months ended September 30, 2017. All properties within this segment have been affected by increased insurance premiums and energy costs year over year which contributed to a $0.6 million decrease in Adjusted EBITDA compared to the nine months ended September 30, 2017.

Dominican Republic

The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-Package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Dominican Republic segment for the nine months ended September 30, 2018 and 2017 for the total segment portfolio:



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	84.8		%	82.9		%	1.9		pts	2.3	%
Net Package ADR	$	193.11		$	192.60		$	0.51		0.3	%
Net Package RevPAR	163.72			159.74			3.98			2.5	%
	($ in thousands)
Net Package Revenue	$	83,849		$	81,813		$	2,036		2.5	%
Net Non-Package Revenue	15,644			15,122			522			3.5	%
Net Revenue	99,493			96,935			2,558			2.6	%
Adjusted Resort EBITDA	$	35,174		$	31,263		$	3,911		12.5	%
Adjusted Resort EBITDA Margin	35.4		%	32.3		%	3.1		pts	9.6	%

Segment Net Revenue. Our Net Revenue for the nine months ended September 30, 2018 increased $2.6 million, or 2.6%, compared to the nine months ended September 30, 2017. This increase was due to increased Net Revenue by Dreams La Romana, which accounted for $3.1 million compared to the nine months ended September 30, 2017. This was partially offset by the performance of Dreams Punta Cana and Dreams Palm Beach, which accounted for a decrease of $0.5 million in Net Revenue compared to the nine months ended September 30, 2017.

Segment Adjusted EBITDA.Our Adjusted EBITDA for the nine months ended September 30, 2018 increased $3.9 million, or 12.5%, compared to the nine months ended September 30, 2017. This increase was due to increased Adjusted EBITDA by all properties in this region. All properties within this segment have been affected by increased insurance premiums year over year which were a $0.1 million offset to the increase in Adjusted EBITDA compared to the nine months ended September 30, 2017.

Jamaica

The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Net Revenue, Adjusted Resort EBITDA and Adjusted Resort EBITDA Margin for our Jamaica segment for the nine months ended September 30, 2018 and 2017 for the total segment portfolio.

Total Portfolio



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	77.2		%	70.1		%	7.1		pts	10.1	%
Net Package ADR	$	301.13		$	355.39		$	(54.26	)	(15.3	)%
Net Package RevPAR	232.44			249.26			(16.82		)	(6.7	)%
	($ in thousands)
Net Package Revenue	$	74,163		$	42,190		$	31,973		75.8	%
Net Non-Package Revenue	12,978			6,901			6,077			88.1	%
Net Revenue	87,141			49,091			38,050			77.5	%
Adjusted Resort EBITDA	$	25,421		$	11,590		$	13,831		119.3	%
Adjusted Resort EBITDA Margin	29.2		%	23.6		%	5.6		pts	23.7	%

Comparable Portfolio



	Nine Months Ended September 30,						Increase / Decrease
	2018			2017			Change			% Change
Occupancy	75.5		%	70.1		%	5.4		pts	7.7	%
Net Package ADR	$	381.51		$	355.39		$	26.12		7.3	%
Net Package RevPAR	287.85			249.26			38.59			15.5	%
	($ in thousands)
Net Package Revenue	$	48,722		$	42,190		$	6,532		15.5	%
Net Non-Package Revenue	9,200			6,901			2,299			33.3	%
Net Revenue	57,922			49,091			8,831			18.0	%
Adjusted Resort EBITDA	18,061			11,590			6,471			55.8	%
Adjusted Resort EBITDA Margin	31.2		%	23.6		%	7.6		pts	32.2	%

Segment Net Revenue. Our Net Revenue for the nine months ended September 30, 2018 increased $38.1 million, or 77.5%, compared to the nine months ended September 30, 2017. This increase was due in part to the strong performance by Hyatt Ziva and Zilara Rose Hall, which accounted for an increase in Net Revenue of $8.9 million compared to the nine months ended September 30, 2017. The remaining increase can be attributed to the acquisition of the SagicorAssets which accounted for a $29.2 million increase compared to the nine months ended September 30, 2017.

Segment Adjusted EBITDA. Our Adjusted EBITDA for the nine months ended September 30, 2018 increased $13.8 million, or 119.3%, compared to the nine months ended September 30, 2017. This increase was due in part to the strong performance by Hyatt Ziva and Zilara Rose Hall, which accounted for an increase in Adjusted EBITDA of $6.5 million compared to the nine months ended September 30, 2017 and to the acquisition of the SagicorAssets, which accounted for the remaining $7.3 million increase. The Hyatt Ziva and Zilara Rose Hall continues to show positive results after completion of renovations in 2017. Comparable properties within this segment have been affected by increased insurance premiums and energy costs year over year which were a $0.7 million offset to Adjusted EBITDA compared to the nine months ended September 30, 2017.

Non-U.S. GAAP Financial Measures

Reconciliation of Net (Loss) Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)

The following is a reconciliation of our U.S. GAAP net (loss) income to EBITDA, Adjusted EBITDA, Owned Resort EBITDA and Comparable Adjusted Resort EBITDA for the three and nine months ended September 30, 2018 and 2017 ($ in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net (loss) income	$	(5,422	)	$	(5,667	)	$	33,216		$	11,442
Interest expense	7,637			13,099			35,151			41,187
Income tax provision	379			226			6,606			20,105
Depreciation and amortization	20,138			13,808			51,709			40,093
EBITDA	22,732			21,466			126,682			112,827
Other expense (income) ^(a)	390			(1,939		)	1,836			(626		)
Share-based compensation	1,182			1,843			5,072			2,803
Loss on extinguishment of debt	—			—			—			12,526
Pre-opening expense	87			—			87			—
Transaction expense ^(b)	1,447			1,893			7,678			11,193
Severance expense	333			—			333			442
Other tax expense ^(c)	399			175			1,257			598
Jamaica delayed opening accrual reversal ^(d)	—			(41		)	(342		)	(152		)
Gain on property damage insurance proceeds ^(e)	(203		)	—			(203		)	—
Repairs from hurricanes and tropical storms ^(f)	—			765			—			765
Non-service cost components of net periodic pension (cost) benefit ^(g)	(335		)	157			(492		)	(565		)
Adjusted EBITDA	26,032			24,319			141,908			139,811
Corporate expenses	9,322			7,544			26,331			23,354
Management fee income	(152		)	—			(503		)	—
Owned Resort EBITDA	35,202			31,863			167,736			163,165
Less: Non-comparable Adjusted Resort EBITDA^(h)	4,574			—			7,360			—
Comparable Adjusted Resort EBITDA	$	30,628		$	31,863		$	160,376		$	163,165

________


^(a)	Represents changes in foreign exchange and other miscellaneous expenses or income.


^(b)	Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including the business combination with Pace in 2017; the redesign and build-out of our internal controls and strategic initiatives, such as possible expansion into new markets.


^(c)	Relates primarily to a Dominican Republic asset/revenue tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax provision we eliminate from our calculation of EBITDA.


^(d)	Represents a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of Hyatt Ziva and Hyatt Zilara Rose Hall. This reversal concluded in the first quarter of 2018.


^(e)	Represents a portion of the insurance proceeds related to property insurance and not business interruption proceeds.


^(f)	Represents repair and maintenance expenses at Hyatt Ziva Los Cabos due to Tropical Storm Lidia and Dreams Punta Cana due to Hurricane Maria for $0.4 million and $0.3 million, respectively. These are expenses incurred that are not covered by insurance claims or offset by insurance proceeds.

^(g)

Represents the non-service cost components of net periodic pension (cost) benefit recorded within other (expense) income in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. Previously, these expenses were presented within direct expense. We include these (costs) benefits for the purposes of calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.


^(h)	Adjusted EBITDA for Sagicor Resorts.

Seasonality

The seasonality of the lodging industry and the location of our resorts in Mexico and the Caribbean generally result in the greatest demand for our resorts between mid-December and April of each year, yielding higher occupancy levels and package rates during this period. This seasonality in demand has resulted in predictable fluctuations in revenue, results of operations, and liquidity, which are consistently higher during the first quarter of each year than in successive quarters.

Inflation

Operators of lodging properties, in general, possess the ability to adjust room rates to reflect the effects of inflation. However, competitive pressures may limit our ability to raise room rates to fully offset inflationary cost increases.

Liquidity and Capital Resources

Our primary short-term cash needs are paying operating expenses, maintaining our resorts, servicing of our outstanding indebtedness, and funding any ongoing development, expansion, renovation, repositioning and rebranding projects. As of September 30, 2018, we had $17.1 million of scheduled contractual obligations remaining in 2018.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under our Revolving Credit Facility which permits borrowings of up to $100.0 million and which matures on April 27, 2022. We had cash and cash equivalents of $137.7 million as of September 30, 2018, compared to $137.8 million as of September 30, 2017 (excluding $1.0 million and $4.6 million of restricted cash, respectively). We plan to fund our Hyatt Ziva and Zilara Cap Cana development project over the next 12 to 15 months with the cash we have on hand, as well as our cash generated from operations. As of September 30, 2018, there was $0 outstanding under our Revolving Credit Facility. When assessing liquidity, we also consider the availability of cash resources held within local business units to meet our strategic needs.

Long-term liquidity needs may include existing and future property developments, expansions, renovations, repositioning and rebranding projects, potential acquisitions and the repayment of indebtedness. As of September 30, 2018, our total debt obligations were $999.1 million (which represents the principal amounts outstanding under our Revolving Credit Facility and Term Loan, excluding a $2.8 million issuance discount on our Term Loan and $4.7 million of unamortized debt issuance costs). We expect to meet our long-term liquidity requirements generally through the sources available for short-term needs, as well as equity or debt issuances or proceeds from the potential disposal of assets.

Financing Strategy

In addition to our Revolving Credit Facility, we intend to use other financing sources that may be available to us from time to time, including financing from banks, institutional investors or other lenders, such as bridge loans, letters of credit, joint ventures and other arrangements. Future financings may be unsecured or may be secured by mortgages or other interests in our assets. In addition, we may issue publicly or privately placed debt or equity securities. When possible and desirable, we will seek to replace short-term financing with long-term financing. We may use the proceeds from any financings to refinance existing indebtedness, to finance resort projects or acquisitions or for general working capital or other purposes.

Cash Flows

The following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our Condensed Consolidated Statements of Cash Flows and accompanying notes thereto included in the Condensed Consolidated Financial Statements ($ in thousands):



	Nine Months Ended September 30,
	2018			2017
Net cash provided by operating activities	$	91,056		$	65,766
Net cash used in investing activities	$	(161,682	)	$	(78,655	)
Net cash provided by financing activities	$	92,119		$	112,124

Net Cash Provided by Operating Activities

Our net cash provided by operating activities is generated primarily from operating income from our resorts. For the nine months ended September 30, 2018 and 2017, our net cash provided by operating activities totaled $91.1 million and $65.8 million, respectively. Net income of $33.2 million for the nine months ended September 30, 2018 included significant non-cash expenses, including $51.7 million of depreciation and amortization, $5.1 million of share-based compensation and a $1.8 million gain on the fair value of our interest rate swaps, offset by changes in our assets and liabilities through the normal course of operations. Net income of $11.4 million for the nine months ended September 30, 2017 included significant non-cash expenses, including $40.1 million of depreciation and amortization and $12.5 million of loss on extinguishment of debt, $11.2 million of transaction expenses, offset by changes in our assets and liabilities through the normal course of operations.

Net Cash Used in Investing Activities

For the nine months ended September 30, 2018 and 2017, our net cash used in investing activities was $161.7 million and $78.7 million, respectively.

Activity for the nine months ended September 30, 2018:

Acquisition of the Sagicor Assets for $93.1 million

Purchases of property and equipment of $67.3 million

Purchase of intangibles of $1.5 million

Activity for the nine months ended September 30, 2017:

Purchases of property and equipment of $75.6 million consisting of $45.7 million used for the acquisition of land in Cap Cana, Dominican Republic and $29.9 million in capital expenditures

Purchase of intangibles of $0.4 million

Contract deposit of $2.7 million

Capital Expenditures

We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise and license agreements and management agreements. Capital expenditures made to extend the service life or increase the capacity of our assets, including expenditures for the replacement, improvement or expansion of existing capital assets (“Maintenance Capital Expenditures”), differ from ongoing repair and maintenance expense items which do not in our judgment extend the service life or increase the capacity of assets and are charged to expense as incurred. We have approval rights over capital expenditures made by our third-party manager as part of the annual budget process for each property they manage. From time to time, certain of our resorts may be undergoing renovations as a result of our decision to upgrade portions of the resorts, such as guestrooms, public space, meeting space, gyms, spas and/or restaurants, in order to better compete with other hotels in our markets (“Development Capital Expenditures”).

The following table summarizes our capital expenditures for the nine months ended September 30, 2018 and 2017 ($ in thousands):



	Nine Months Ended September 30,
	2018		2017
Development Capital Expenditures
Hyatt Ziva and Zilara Rose Hall	$	1,160	$	8,613
Panama Jack Resorts Cancun	3,380		4,224
Hyatt Zilara Cancun	1,221		1,551
Hyatt Ziva Puerto Vallarta	626		1,551
Panama Jack Resorts Playa del Carmen	1,007		447
Hyatt Ziva and Zilara Cap Cana	49,798		4,725
Total Development Capital Expenditures	57,192		21,111
Maintenance Capital Expenditures ⁽¹⁾	10,060		8,834
Total Capital Expenditures	$	67,252	$	29,945

________


⁽¹⁾	Typically, maintenance capital expenditures equate to approximately 3% to 4% of Total Net Revenue.

Net Cash Provided by Financing Activities

Our net cash provided by financing activities was $92.1 million for the nine months ended September 30, 2018, compared to $112.1 million provided by financing activities for the nine months ended September 30, 2017.

Activity for the nine months ended September 30, 2018:

Principal payments on our Term Loan of $7.3 million

Proceeds from debt issuance of $99.5 million

Activity for the nine months ended September 30, 2017:

Principal payments on our existing term loan of $364.1 million and our Senior Notes due 2020 of $121.6 million

Proceeds from our term loan of $528.7 million, net of a $1.3 million discount

Issuance costs of debt of $8.0 million

Payments of our deferred consideration to the Real Shareholder of $2.5 million

Recapitalization as part of the Pace Business Combination of $79.7 million

Senior Secured Credit Facility

Playa Resorts Holding B.V., a subsidiary of ours, holds a senior secured credit facility (“Senior Secured Credit Facility”), which consists of a term loan facility which matures on April 27, 2024 and our Revolving Credit Facility which matures on April 27, 2022. We borrowed $530.0 million under our initial term loan facility on April 27, 2017 (our “First Term Loan”). We received net proceeds of approximately $32.5 million from our First Term Loan after prepaying our existing Senior Secured Credit Facility and a portion of our Senior Notes due 2020 and deducting a debt issuance discount of $1.3 million and unamortized debt issuance costs of $2.6 million.

We borrowed an additional $380.0 million under an incremental term loan facility (our “Second Term Loan” and together with the First Term Loan, the “Term Loan”) on December 6, 2017. We received no proceeds from the Second Term Loan after full repayment of our Senior Notes due 2020 and deducting a debt issuance discount of $1.0 million and unamortized debt issuance costs of $0.2 million.

Our Term Loan bears interest at a rate per annum equal to LIBOR plus 2.75% (where the applicable LIBOR rate has a 1.0% floor), and interest continues to be payable in cash in arrears on the last day of the applicable interest period (unless we elect to use the ABR rate in which case, interest is payable on the last business day of each of March, June, September and December). Effective March 29, 2018, we entered into two interest rate swaps to mitigate the long term interest rate risk inherent in our variable rate Term Loan. The interest rate swaps have an aggregate fixed notional value of $800.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate.

On June 7, 2018, we entered into the Second Amendment to Amended & Restated Credit Agreement (the “Amendment”), which amended the Amended & Restated Credit Agreement, dated as of April 27, 2017 (the “Existing Credit Agreement”). The Amendment amended the Existing Credit Agreement to, among other things (i) effect an incremental term loan facility of $100.0 million (the “Incremental Term Loan” and, together with the existing terms loans that were in effect prior to the Amendment, the “Term Loan”) that was incurred pursuant to the exercise of our option to request incremental loans under the Existing Credit Agreement and (ii) decrease the interest rate applicable to the Term Loan by 0.50% to, at our option, either a base rate plus a margin of 1.75% or LIBOR plus a margin of 2.75%. The other terms to the Existing Credit Agreement, including those disclosed in our Annual Report on Form 10-K filed with the SEC on March 1, 2018, were not effected by the Amendment.

Our Term Loan requires quarterly payments of principal equal to 0.25% of the original principal amount of the Term Loan on the last business day of each March, June, September and December. The remaining unpaid amount of our Term Loan is due and payable at maturity on April 27, 2024 (subject to the Springing Maturity Date). We may voluntarily prepay borrowings at any time without premium or penalty, subject to customary breakage costs in the case of LIBOR-based loans, as well a premium of 1% applicable in the case of a repayment of the Term Loan in the first six months following the closing date of the Term Loan in connection with certain transactions that have the effect of refinancing the Term Loan at a lower interest rate

Our Revolving Credit Facility bears interest at variable interest rates that are, at the Borrower's option, either based on LIBOR or based on an alternate base rate derived from the greatest of the federal funds rate plus a spread, prime rate, or a one-month euro-currency rate plus a spread. We are required to pay a commitment fee ranging from 0.25% to 0.5% per annum (depending on the level of our consolidated secured leverage ratio in effect from time to time) on the average daily undrawn balance.

The Senior Secured Facility requires that most of our subsidiaries, and in some limited cases the Company, comply with covenants relating to customary matters, including with respect to incurring indebtedness and liens, paying dividends or making certain other distributions or redeeming equity interests, making acquisitions and investments, effecting mergers and asset sales, prepaying junior indebtedness, and engaging in transactions with affiliates.

Pace Business Combination

At the Closing Time, we consummated the Pace Business Combination resulting in Playa Hotels & Resorts N.V. having 103,464,186 shares outstanding with a par value of €0.10 per share. As a result, we received an additional $79.7 million in cash and all outstanding preferred shares of our Predecessor were purchased as well as all associated paid-in-kind dividends ($353.9 million in total), which were subsequently extinguished as part of the reverse merger in the Pace Business Combination. The additional capital was used for general corporate purposes.

Contractual Obligations

The following table sets forth our obligations and commitments to make future payments under contracts and contingent commitments as of September 30, 2018 ($ in thousands):



	Less than 1 Year⁽¹⁾		Due in 1 to 3 years		Due in 3 to 5 years		Due in Over 5 years		Total
Revolving Credit Facility ⁽²⁾	$	132	$	1,015	$	668	$	—	$	1,815
Term Loan principal payments	2,525		20,200		20,200		956,148		999,073
Term Loan interest payments ⁽³⁾	14,035		112,443		110,261		73,446		310,185
Cap Cana land purchase obligation ⁽⁴⁾	—		10,625		—		—		10,625
Operating lease obligations	369		1,885		1,147		157		3,558
Total contractual obligations	$	17,061	$	146,168	$	132,276	$	1,029,751	$	1,325,256

________


⁽¹⁾	The period less than 1 year represents remaining obligations in 2018.


⁽²⁾	The interest commitment on our Revolving Credit Facility is calculated based on the contractual commitment fee of 0.5% applied to the undrawn balance of $100.0 million as we had no outstanding balance on our Revolving Credit Facility as of September 30, 2018.


⁽³⁾	The interest commitment on our Term Loan is calculated based on LIBOR plus 275 basis points with a 1% LIBOR floor and the estimated net settlement of the related interest rate swaps. Projected interest rates range from 5.01% to 5.78%. Payments were calculated using the average forecasted one-month forward-looking LIBOR curve.


⁽⁴⁾	The remaining $10.6 million of the purchase price is due on the earlier of (i) two years from the beginning of construction or (ii) the opening of the Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana resorts.


⁽⁵⁾	We are unable to reasonably estimate the timing of future cash flows of our pension obligation of $5.4 million and have excluded this from the table above.

Off Balance Sheet Arrangements

We had no off balance sheet arrangements for the three and nine months ended September 30, 2018 and 2017.

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements included herein have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts and related disclosures. A number of our significant accounting policies are critical due to the fact that they require us to exercise a higher degree of judgment and estimation based on assumptions that are inherently uncertain. While we believe our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions, which could have a material effect on our financial position, results of operations and related disclosures.

We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our 2017 Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 1, 2018. There have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them except for those disclosed in Note 2 to our Condensed Consolidated Financial Statements.

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, trade and other receivables, accounts receivable from related parties, trade and other payables, accounts payable to related parties, derivatives and debt. See Note 16, “Fair value of financial instruments,” to our Condensed Consolidated Financial Statements for more information.

Related Party Transactions

See Note 7, “Related party transactions,” to our Condensed Consolidated Financial Statements for information on these transactions.

Recent Accounting Pronouncements

See the recent accounting pronouncements in the “Standards not yet adopted” section of Note 2 to our Condensed Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of operations, we are exposed to interest rate risk and foreign currency risk which may impact future income and cash flows.

Interest Rate Risk

The risk from market interest rate fluctuations mainly affects long-term debt bearing interest at a variable interest rate. We ~~may~~currently use ~~derivative financial instruments~~an interest rate swap (see Note 15 of our Condensed Consolidated Financial Statements) to manage exposure to this risk. ~~We currently do not have any interest rate swaps or similar derivative instruments.~~ As of September 30, ~~2017,~~2018, approximately ~~59%~~20% of our outstanding indebtedness bore interest at floating rates and approximately ~~41%~~80% bore interest at fixed rates. If market rates of interest on our floating rate debt were to increase by 1.0%, the increase in interest expense on our floating rate debt would decrease our future earnings and cash flows by approximately ~~$5.3~~$2.0 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at ~~$0.0 million.~~$0. If market rates of interest on our floating rate debt were to decrease by 1.0%, the decrease in interest expense on our floating rate debt would increase our future earnings and cash flows by approximately $2.0 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $0.

Foreign Currency Risk

We are exposed to exchange rate fluctuations because all of our resort investments are based in locations where the local currency is not the U.S. dollar, which is our reporting currency. For the nine months ended September 30, ~~2017~~2018 approximately 6%7.3% of our revenues were denominated in currencies other than the U.S. dollar. As a result, our revenues reported on our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income are affected by movements in exchange rates.

Approximately ~~80%~~80.1% of our operating expenses for the nine months ended September 30, ~~2017~~2018 were denominated in the local currencies in the countries in which we operate. As a result, our operating expenses reported on our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income are affected by movements in exchange rates.

The foreign currencies in which our expenses are primarily denominated are the Mexican Peso, Dominican Peso and the Jamaican Dollar. The effect of an immediate 5% adverse change in foreign exchange rates on Mexican Peso-denominated expenses at September 30, ~~2017~~2018 would have impacted our net income before tax by approximately ~~$6.1 million.~~$6.6 million on a year-to-date basis. The effect of an immediate 5% adverse change in foreign exchange rates on Dominican Peso-denominated expenses at September 30, ~~2017~~2018 would have impacted our net income before tax by approximately ~~$2.7 million.~~$2.5 million on a year-to-date basis. The effect of an immediate 5% adverse change in foreign exchange rates on Jamaican Dollar-denominated expenses at September 30, ~~2017~~2018 would have impacted our net income before tax by approximately ~~$1.5 million.~~$2.7 million on a year-to-date basis.

At this time, we do not have any outstanding derivatives or other financial instruments designed to hedge our foreign currency exchange ~~risk, and we do not plan to enter into any such instruments in the future.~~ risk.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.We maintain a set of disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the ~~"Exchange Act"~~“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that ongoing evaluation, and considering the continuing review of controls and procedures that is being conducted by our Chief Executive Officer and Chief Financial Officer, including the remedial actions and the material weakness in internal control over financial reporting disclosed below, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, ~~2017 as a result of the material weaknesses described below.~~2018.

Changes in Internal Control Over Financial Reporting.There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial ~~reporting, except as follows:~~

reporting. As previously disclosed in the Company’s ~~Current~~Annual Report on Form ~~8-K~~10-K for the year ended December 31, 2017, filed with the SEC on March ~~14, 2017,~~1, 2018 (“Form 10-K”), we have identified, and Deloitte & Touche, LLP, the independent registered public accounting firm that audited our Consolidated Financial Statements ~~for the years ended~~as of December 31, ~~2016~~2017 and ~~2015,~~2016, and for each of the three years in the period ended December 31, ~~2016,~~2017, included in our Form 10-K and the related Condensed Financial Information of Registrant included in this quarterly report, has communicated, a material ~~weaknesses~~weakness in our internal control over financial reporting that existed as of December 31, ~~2016.~~2017. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis.

We ~~have~~previously reported the following ~~two~~ material ~~weaknesses~~weakness in our internal control over financial reporting that existed as of December 31, ~~2016,~~2017, which ~~have~~has not been ~~remediated:~~

~~We have not formalized our accounting policies and procedures or the associated internal controls (including the monitoring~~remediated as of ~~such internal controls) to ensure accurate and consistent financial reporting in accordance with accounting principles generally accepted in the United States of America.~~

September 30, 2018:

Our information technology controls, including system access, change management, and segregation of duties ~~backups and disaster recovery plans,~~ are not sufficiently designed and implemented to address certain information technology risks and, as a result, could expose our systems and data to unauthorized use ~~alteration~~ or ~~destruction.~~

~~These material weaknesses increase the risk of a material misstatement in our financial statements.~~ alteration.

~~As of September 30, 2017, we have continued~~We continue to take steps to remediate ~~these~~the identified material ~~weaknesses. We are in~~weakness. The Company has engaged a third party consulting firm to assist the process of implementing improved processes and controls, such as a new accounting system to limit the use of manual processes and formalizing policies and procedures related to our finance and accounting and information technology. Additionally, we are workingCompany with ~~third-party advisors to implement a monitoring environment to test~~ the implementation of SAP, which is a global information technology solution designed to address the elements which give rise to our ~~new controls. Effectiveness~~material weakness. As of September 30, 2018, SAP was successfully implemented in our corporate entities. We expect to implement SAP in our remaining operational entities, in phases, throughout 2019. However, effectiveness will need to be successfully tested over several quarters before we can conclude that the material ~~weaknesses have~~weakness has been remediated. There can be no assurance that we will be successful in making these improvements and in remediating our current material weakness in a timely manner, or at all, ~~and in remediating our current material weaknesses,~~ and we may not prevent future material weaknesses from occurring.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

InWe are involved in various claims and lawsuits arising in the ~~ordinary~~normal course of ~~our~~ business, ~~we are subject to~~including proceedings involving tort and other general liability claims and ~~administrative proceedings, none~~workers' compensation and other employee claims. Most occurrences involving liability and claims of ~~which~~negligence are covered by insurance with solvent insurance carriers. We recognize a liability when we believe ~~are material or would be expected to have,~~the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material ~~adverse~~ effect on our consolidated financial ~~condition or~~position, results of ~~operations. The outcome of claims, lawsuits and legal proceedings brought against us, however, is subject to significant uncertainties.~~operations or liquidity.

Item 1A. Risk Factors.

At September 30, ~~2017,~~2018, there have been no material changes from the risk factors previously disclosed in the Company's ~~Current~~Annual Report on Form ~~8-K~~10-K for the year ended December 31, 2017, filed with the ~~SEC~~Securities and Exchange Commission (“SEC”) on March ~~14, 2017,~~1, 2018, which is accessible on the SEC’s website at www.sec.gov.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On December 13, 2016, in connection with the business combination between the Company, Playa Hotels & Resorts B.V. (our "Predecessor") and Pace Holdings Corp. ("Pace") (the "Business Combination"), Pace entered into subscription agreements with certain investors, including certain members of Pace management and affiliates, pursuant to which such investors agreed to subscribe for and purchase, and Pace agreed to issue and sell to such investors, newly issued shares of Pace (the “Pace Private Placement”). On March 10, 2017, upon the consummation of the business combination between Pace and us, as consideration to shareholders of Pace in the Business Combination, each share of Pace purchased in the Pace Private Placement was exchanged for an equivalent number of our ordinary shares, par value €0.10 per share (our "Ordinary Shares"). We issued a total of 5,064,654 Ordinary Shares to investors in the Pace Private Placement, which Ordinary Shares were not registered under the Securities Act at the time of issue in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), and/or Regulation D promulgated thereunder. The resale of the Ordinary Shares issued in the Pace Private Placement was subsequently registered with the Securities and Exchange Commission ("SEC") pursuant to a Registration Statement on ~~Form S-1~~ ~~filed with the SEC on May 1, 2017.~~

On March 10, 2017, as consideration paid to TPG Pace Sponsor, LLC, a Cayman Islands limited liability company and the sponsor of Pace (formerly, TPACE Sponsor Corp., a Cayman Islands exempted company) (“Pace Sponsor”), in connection with the business combination of Pace with us, we issued to Pace Sponsor the following securities: (i) 2,000,000 warrants to acquire our Ordinary Shares in the event that the price per Ordinary Share underlying the warrants on the NASDAQ is greater than $13.00 for a period of more than 20 days out of 30 consecutive trading days after the closing date of the business combination but within five years after the closing date of the business combination (“Earnout Warrants”), and (ii) 14,666,667 warrants to acquire one-third of one Ordinary Share, at the price of one-third of $11.50 per share, subject to certain adjustments described in the Warrant Agreement between Computershare Trust Company N.A., Computershare, Inc. and us (“Founder Warrants”).

On March 11, 2017, as consideration paid to the holders of our Predecessor ordinary shares (the “Playa Common Shareholders”) in connection with the merger of our Predecessor into us, we issued the following securities to the Playa Common Shareholders: (i) 50,481,822 shares of our Ordinary Shares; (ii) 7,333,333 Founder Warrants; and (iii) 1,000,000 Earnout Warrants.

Each Playa Shareholder received its pro rata portion of the number of Founder Warrants issued to the Playa Common Shareholders and its pro rata portion of the Earnout Warrants issued to the Playa Common Shareholders.

The Earnout Warrants and the Founder Warrants were not registered under the Securities Act at the time of issue in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

On March 10, 2017, Pace entered into certain securities purchase agreements (the “Securities Purchase Agreements”) with the holders of our Predecessor's preferred shares (the “Playa Preferred Shareholders”) to acquire all of the preferred shares, par value $0.01 per share, of our Predecessor (the “Playa Preferred Shares”). The Company, as Pace’s successor in interest under the Securities Purchase Agreements with the Playa Preferred Shareholders following the consummation of the business combination between Pace and us, acquired all of the Playa Preferred Shares from the Playa Preferred Shareholders at a price of $8.40 for each outstanding Playa Preferred Share (plus any accrued and unpaid dividends thereon through March 10, 2017), for an aggregate consideration value of approximately $353.8 million (which includes accrued but unpaid dividends on the Playa Preferred Shares through December 31, 2016, plus any additional accrued but unpaid dividends thereon after December 31, 2016 through the closing of the Business Combination). The Playa Preferred Shares were unregistered securities, which were purchased by us in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Playa Preferred Shares were extinguished after our purchase of such securities.

On March 11, 2017, after the merger of Playa into us, we issued 82,751 Ordinary Shares to Playa employees, their family members and persons with business relationships with Playa (the “Playa Employee Offering”) for an aggregate purchase price of $798,547.15. The sale of Ordinary Shares in the Playa Employee Offering was made in reliance upon an exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as a transaction not involving a public offering. The resale of the Ordinary Shares issued in the Playa Employee Offering was subsequently registered with the SEC pursuant to a Registration Statement on Form S-1 filed with the SEC on May 1, 2017.None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not ~~Applicable.~~applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The following exhibits are filed as part of this Form 10-Q:



Exhibit Number		Exhibit Description


10.1		~~Executive Employment Agreement,~~Separation agreement between David Camhi and Playa Management USA, LLC, dated as of August 15, 2017, by and between Playa Resorts Management, LLC and Ryan Hymel (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on August 17, 2017)September 14, 2018

31.1		Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

3232.1		Certification of the Chief Executive Officer ~~and~~pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from Playa Hotels & Resorts N.V.’s Quarterly Report on Form 10-Q for the period ended September 30, ~~2017,~~2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income,, (iii) Condensed Consolidated Statements of Cumulative Redeemable Preferred Shares, Shareholders' Equity and Accumulated Other Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows,, and (v) the ~~notes~~Notes to the Condensed Consolidated Financial Statements

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		Playa Hotels & Resorts N.V.

Date:	November ~~7, 2017~~6, 2018	By:	/s/ Bruce D. Wardinski
			Bruce D. Wardinski
			Chairman and Chief Executive Officer
			(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal financial officer of the registrant.




		Playa Hotels & Resorts N.V.

Date:	November ~~7, 2017~~6, 2018	By:	/s/ Ryan Hymel
			Ryan Hymel
			Chief Financial Officer
			(Principal Financial Officer)



	December 31, 2016		Level 1		Level 2		Level 3
Fair value measurements on a recurring basis:
Deferred Consideration	$	1,836	$	—	$	—	$	1,836



	Deferred Consideration
Balance as of December 31, 2015	$	4,145
Total losses included in earnings (or change in net assets) ⁽¹⁾	160
Settlements	(625		)
Balance as of March 31, 2016	3,680
Total losses included in earnings (or change in net assets) ⁽¹⁾	49
Settlements	(638		)
Balance as of June 30, 2016	3,091
Total losses included in earnings (or change in net assets) ⁽¹⁾	28
Settlements	(628		)
Balance as of September 30, 2016	2,491
Total gains included in earnings (or change in net assets) ⁽¹⁾	(36		)
Settlements	(619		)
Balance as of December 31, 2016	1,836
Total gains included in earnings (or change in net assets) ⁽¹⁾	(26		)
Settlements	(630		)
Balance as of March 31, 2017	1,180
Total losses included in earnings (or change in net assets) ⁽¹⁾	675
Settlements	(735		)
Balance as of June 30, 2017	1,120
Total losses included in earnings (or change in net assets) ⁽¹⁾	5
Settlements	(1,125		)
Balance as of September 30, 2017	$	—



	Carrying Value		Fair Value
	As of September 30, 2017		Level 1		Level 2		Level 3		Total
Financial liabilities not recorded at fair value:
Debt:
Term Loan	$	519,948	$	—	$	—	$	537,214	$	537,214
Revolving Credit Facility⁽¹⁾	—		—		—		—		—
Senior Notes due 2020	357,751		—		379,531		—		379,531
Total	$	877,699	$	—	$	379,531	$	537,214	$	916,745



	Carrying Value		Fair Value
	As of December 31, 2016		Level 1		Level 2		Level 3		Total
Financial liabilities not recorded at fair value:
Debt:
Term Loan	$	356,937	$	—	$	—	$	363,060	$	363,060
Revolving Credit Facility⁽¹⁾	—		—		—		—		—
Senior Notes due 2020	471,380		—		513,405		—		513,405
Total	$	828,317	$	—	$	513,405	$	363,060	$	876,465



			Fair Value Measurements as of December 31, 2016
	Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs	Input
Deferred Consideration	$	1,836	Discounted Cash Flow	Discount Rate	4.00%
				Forward Rate	4.63	%	-	5.00%
				Expected Term	7 months
Term Loan	$	363,060	Discounted Cash Flow	Discount Rate	3.00%
				Forward Rate	4.00	%	-	5.33%
				Expected Term	32 months



	As of September 30,			As of December 31,			Weighted average
	2017			2016			useful life
Strategic Alliance	$	3,717		$	3,748
Licenses	991			987
Other	2,632			2,196
Acquisition Cost	7,340			6,931

Strategic Alliance	(3,693		)	(3,472		)
Other	(1,920		)	(1,484		)
Accumulated Amortization	(5,613		)	(4,956		)

Strategic Alliance	24			276			3 years
Licenses	991			987
Other	712			712			3 years
Carrying Value	$	1,727		$	1,975



Year of Redemption	Redemption Rate %
2017	104%
2018	102%
2019 and thereafter	100%



	Interest Rate	Less than 1 Year⁽¹⁾		Due in 1 to 3 years		Due in 3 to 5 years		Due in Over 5 years		Total
	(%)	($ in thousands)
Revolving Credit Facility ⁽²⁾	0.50%	$	131	$	1,014	$	1,015	$	161	$	2,321
Term Loan⁽³⁾	4.32% - 5.39%	7,172		60,564		62,999		573,261		703,996
Senior Notes due 2020	8.00%	—		57,600		388,800		—		446,400
Cap Cana land purchase obligation⁽⁴⁾		—		10,625		—		—		10,625
Operating lease obligations		255		1,697		1,397		719		4,068
Total Contractual Obligations		$	7,558	$	131,500	$	454,211	$	574,141	$	1,167,410