We’ve got a lot of moving pieces here and it’s hard to kind of discern it, but I think if you just kind of forget about like, so many of the moving pieces and if you can just focus on the underlying fundamentals, I think it’s a positive story.
Shaun Kelley : Very helpful. Thanks Bruce. And then my follow-up would just be a little bit more kind of thought around margins. I think we’re all increasingly comfortable with the cost and inflation growth that domestic hotels and presenting you have a lot of experience and a lot of colleagues and contacts in that world. So we – I think we all know what they’re up against which is probably the lower bound of mid-single-digit. Let’s call it four odd percent inflationary pressure is probably what many companies we talk to are looking for. The question for Playa is more what – let’s leave FX out of it, because we know that separate, but like excluding FX, what’s different for Playa is the wage pressure you face a little higher just given what’s going on in the local dynamics there, that offset by procurement. Just help us think about the layers that are a little different given your portfolio and your exposures?
Bruce Wardinski: Yeah, you hit that on the head. So, excluding the effects of FX as kind of we look out to ’24, we expect call it 4% to 4.5% OpEx growth. The biggest contributing factor to that at least in ‘24 is labor cost mostly in Jamaica. They actually did a large minimum wage increase in the second half of 2023 with 44%. And so you’re lapping, you’re annualizing that figure in 2024. And they’ve also changed around some of the smaller to small extent minimum wage of benefits and PTO and things like that in Mexico. But the Jamaica kind of catch up is the largest impact of that kind of 4% to 4.5%. That’s 80 to 100 basis points of that is Jamaica’s impact. So the nice part is once you get through this year, you start to lap some of the impacts of that, because, when you look back at kind of trends and you go back to last ten years of when they raise, usually after big kind of catch up raise like that you’re probably not going to see another big junk, immediately the next year.
And the same thing we’ve seen in Mexico and the Dominican it’s usually every couple of years they move minimum wage or something like that. So, Jamaica is the biggest focus. Insurance, it will be – it’s still too early to tell, but it should be far better from everything we’ve seen from initial meetings with insurers. We will be renewing our insurance in April. But all signs point to a much better renewal. It certainly won’t go backwards, there won’t be up, 40% to 50% like it was last year. And then to your point, some of the things that we’ve done on procurement and staffing have really helped us lower that margin and leverage point to your point. I mean, if you don’t mind, I mean, I mentioned before those reductions on the procurement side, there mid-single-digits, high-single-digit savings per category and that drove savings in 2023 for basically the back half of the year of about $1.5 million bucks.
And so you annualize that it’s roughly $2.5 million. And so essentially those – that relates to – that results in a roughly 20 to 25 basis points of annualized cost savings, and we are only 30% of the way through. So now if you kind of extend what we’re planning to attack in 2024, where we’re targeting another 20% to 25% of the cost basis, if all goes well, cumulatively by the end of ‘24, we will reduce our cost base by roughly 30 to 35 basis points permanently with more to attack from there. So, to your point, there’s – we can’t do a whole lot about labor, other than staffing which we’re not going to yank out a bunch of staff. So our focus is on what we can control and that’s procurement and some of the staffing that we do in the shoulder periods.
So I know that the long answer, but that’s kind of what we’re facing at least in our markets versus with us we guys in the U.S. are facing.
Shaun Kelley : Very clear. Thanks, Ryan. Thanks, Bruce.
Bruce Wardinski: Thanks, Shaun.
Operator: The next question comes from Chad Beynon with Macquarie. Please go ahead.
Chad Beynon : Morning. Nice results. Thanks for taking my question. Bruce, with respect to I guess, non-same store growth you talked about some of the ROI projects that you’re working on in Mexico to kind of elevate the rankings and ratings within those luxury categories, but beyond this, how are you thinking about kind of where the opportunities could be? Whether it’s in the mid-range like what you had announced with Wyndham? Maybe additional luxury ROI projects in the current portfolio or maybe expanding beyond this? How are you just thinking about kind of the next five years? Where you want additional focus to be? Thanks.
Bruce Wardinski: Sure. Perfect. Perfect, Chad. And as you head into next five years, it’s perfect, because, literally we are – we have a major focus in term life on the next five years of CapEx. Okay? And what we can do with our existing portfolio. We have great opportunities in the existing portfolio and there kind of been three different, call it, buckets, okay? One is what you talked about, okay, where can we just do ROI projects that include our ability to get higher rates, okay, and that can be rooms renovations, that can be adding amenities, or it can be a number of things that are in kind of in that buckets. The second bucket is rooms addition. We have a couple different locations where we have the ability to add rooms and there is no higher kind of incremental ROIs than adding rooms, because you don’t have to add a significant amount of infrastructure.
