Grupo Posadas B de C : Annual Report

GRUPO POSADAS, S.A.B. de C.V.

Prolongacion Paseo de la Reforma 1015, Torre A, Piso 9

Col. Santa Fe Cuajimalpa, delegacion Cuajimalpa

Ciudad de Mexico, 05348

Series "A" shares representing the corporate capital of Grupo Posadas, S.A.B. de C.V. quoted on the Bolsa Mexicana de Valores, S.A.B. de C.V. (Mexican Stock

Exchange)

Ticker Code: Posadas A

The shares are registered in the National Securities Registry and quoted on the Bolsa Mexicana de Valores (Mexican Securities Exchange), S.A.B. de C.V.

Registration in the National Securities Registry does not imply certification of the merit of the securities, nor of the issuer's solvency, of the accuracy or truthfulness of the information contained in this Annual Report, nor does it validate those acts which, if applicable, were in violation of the law

ANNUAL REPORT PRESENTED IN KEEPING WITH THE GENERALLY

APPLICABLE PROVISIONS TO SECURITIES ISSUERS AND OTHER MARKET

PARTICIPANTS FOR THE CORPORATE YEAR ENDING

DECEMBER 31, 2023

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INFORMATION RELATED TO DEBT SECURITIES IN EFFECT ISSUED BY

GRUPO POSADAS S.A.B. DE C.V.

Debt Instruments	Senior Notes Due 2027
Ticker symbol	"POSADA"
Amount	US$385,700,000
Issue Date	December 15, 2021
Maturity Date	December 30, 2027
Issue term	A single payment on December 30, 2027
Interest and calculation	Step up interest rate:
year 1: 4%, year 2: 5%, year 3 and 4:7%, years 5 and 6: 8%
procedure
(PIK option for years 1 and 2)
Interest payment periods	Every six months, in the months of June and December
	PIK option up to 50% of interest at a rate of 6% for year one and 7% for
Lugar y forma de pago de	year two.
intereses y principal	Neither of these two options was exercised.
	All amounts due are to be wire transferred through the "Trustee"
Amortization and early	"Make-Whole" clause
amortization
	Administrative and Guarantee Trust of:
	1. Hotel Fiesta Americana Reforma
	2. Hotel Fiesta Americana Guadalajara
	3. Vacation property real estate:
	a. Grand Fiesta Americana Los Cabos
	b. Fiesta Americana Villas Los Cabos
	c. Live Aqua Residence Club Los Cabos
	d. Fiesta Americana Acapulco
Guarantee	e. Fiesta Americana Cozumel
f. Fiesta Americana Cancun
	g. The Explorean Kohunlich
	h. 16 apartments in the Nima Bay complex located in Puerto Vallarta
	4. Account Receivables of the Company's Vacation Club products:
	(Timeshares, Access & Kivac)
	5. Additional investments that the Company may execute.
	Pledge Agreement of segregated bank accounts to deposit all cash
	collections from the Vacation Club products and the trust rights
	related to a development located in Acapulco Diamante, Guerrero.
Trustee	Banco Invex, S.A., Grupo Financiero Invex, Trust Division, as trustee of
a guaranty trust.
Rating by rating institution and	S&P Global Ratings, "B",
*See website:
its meaning*
www.standardandpoors.com/es,
	Citi Agency & Trust, as "Trustee", and Banco Nacional de Mexico S.A.,
Common representative	a member of Grupo Financiero Banamex, Trust Division as "Collateral
	Agent"
Depositary	Citi Agency & Trust
	Applicable withholding rate on the date of this report, regarding
	interest paid on Senior Notes is subject to (i) for foreign resident
	individuals and legal entities, for tax purposes, to a 4.9% withholding
	tax provided that a series of conditions are met, (ii) if any of these
	conditions, such as in article 7, second paragraph of the LMVT.N.is not
Tax rules	met, residents abroad may be subject to a 10% withholding tax. In both
	cases, advisors should be consulted regarding the tax consequences
	of investing in Senior Notes, including the enforcement of specific
	rules relating to their particular
	situations. It is possible that the tax rules in force may be modified
	during the Program period and during the Issue term.
Calculation Agent	Citi Agency & Trust

T.N. These are the initials in Spanish for the Ley Mexicana de Valores, which translates into English as the Mexican Securities Law

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The Issuer shall operate in accordance to its applicable corporate by-laws, legal and contractual provisions, including those provided for in the 2027 Senior Notes indenture, upon determining the reserves related to a change of control, corporate restructuring, including acquisitions, mergers, split offs and sale or encumbrance of material assets, taking into consideration the participation of the holders of the previously specified securities, to the extent attributed by such provisions.

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TABLE OF CONTENTS

1) GENERAL INFORMATION	5
a) Glossary of Terms and Definitions	5
b) Executive Summary	6
c) Risk Factors	12
d) Other Securities	39
e) Significant Changes to Securities Rights Registered in the National Securities Registry	41
f) Public Documents	42

2) THE COMPANY	42
a) History and Development of the Company	42
b) Business Description	48
i) Principal Activity	48
ii) Distribution Channels	50
iii) Patents, Licenses, Brands and Other Contracts	52
iv) Principal Clients	55
v) Applicable Legislation and Tax Situation	55
vi) Human Resources	58
vii) Environmental Performance	59
viii) Market Information	61
ix) Corporate Structure	64
x) Description of the Company's Principal Assets	64
xi) Judicial, Administrative or Arbitral Proceedings	70
xii) Representative Shares of Corporate Capital	74
xiii) Dividends	75

3) FINANCIAL INFORMATION	76
a) Selected Financial Information	76
b) Financial Information by Business Line, Geographic Zone, and Export	76
c) Material Loan Information	77
d) Management Comments and Analysis of the Operating Results and Financial Situation of the
Company 2023 - 2022	80
i) Operating Results	80
ii) Financial Situation, Liquidity and Capital Resources	101
iii) Internal Control	105
e) Critical accounting judgments and key sources of estimation uncertainty	105

4) ADMINISTRATION	106
a) External Auditors	106
b) Related Party Transactions and Conflicts of Interest	107
c) Management and Shareholders	108
d) Corporate By-laws and Other Agreements	119

5) CAPITAL MARKETS	122
a) Securities Structure	122
b) Share performance on the Securities Market	122
c) Market Maker	122
6) PERSONS RESPONSIBLE FOR THE INFORMATION CONTAINED IN THE ANNUAL
REPORT	123
7) ATTACHMENTS	123

Audits of the independent auditors for 2023, 2022 and 2021, reports of the Audit Committee and

Corporate Practices Committee.

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1) GENERAL INFORMATION

a) Glossary of Terms and Definitions

TERM	DEFINITION
"BMV" or "Securities Exchange"	Shall mean Mexican Securities Exchange Market, S.A.B.
	de C.V.
"CNBV"	Shall mean National Banking and Securities Commission.
"Company", "Group" or "Posadas"	Shall mean Grupo Posadas, S.A.B. de C.V. and its
	subsidiaries.
"Issuer"	Grupo Posadas, S.A.B. de C.V.
"Audited Financial Statements"	The financial statements audited by Galaz, Yamazaki,
	Ruiz Urquiza, S.C. for the corporate years ending
	December 31, 2023, 2022, and 2021 included in the
	present Annual Report.
"Fibras"	Mexican trusts principally established to develop, acquire,
	lease, own and operate hotels.
"Report"	The present Annual Report.
"RNV"	National Securities Registry under the National Banking
	and Securities Commission.
"$" or "Pesos" or "M.N."	Currency of legal tender in the United Mexican States.
"US" or "Dollars"	Currency of legal tender in the United States of America.
"M"	Millions.
"NIIF" or "IFRS", due to its initials in English	International Financial Reporting Standards
"Vacation Properties"	Company Segment responsible for marketing and
	operation of vacation products, i.e. time-share, and
	vacation plans, i.e. pre-payment and discount club.
"NPS"	Net Promoter Score: index that measures the customer´s
	loyalty to the brand.
Posadas System	Group of hotels that are managed under the brands of
	Grupo Posadas, S.A.B. de C.V., whether as owned,
	leased, operator or franchised hotels.
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b) Executive Summary

This executive summary briefly summarizes information regarding the 2023 performance of Posadas. This information is insufficient for an exhaustive financial analysis or to make decisions related to Posadas' financial information. Therefore, the investing public should read both the Annual Report, including the audited consolidated financial statements, as well as the corresponding notes completing and clarifying the information contained in the consolidated financial statements before making an investment decision.

Grupo Posadas, S.A.B. de C.V. is the largest hotel operator in Mexico based on the number of hotels and rooms, (Source: 2023 Posadas Chain Study with Information from Smith Travel Research Census Database to December 2023).

As of December 31, 2023, the Company had 200 hotels and resorts operated and/or franchised under Posadas' brands, representing a total of 30,446 rooms in Mexico and the Caribbean; 86% distributed in urban destinations and the remaining 14% in beach destinations. Consequently, it serves a broad base of tourist and business travelers.

For most of 2023, out of the 200 hotels, the Company was the majority owner of 12 hotels, operated 140, franchised 33 and leased 15.

The Company has expanded through strong brand positioning and development, which ensures service consistency and client recognition. The Company operates its hotels in Mexico principally through Posadas' brands, which have been updated in diverse aspects: Live Aqua (Live Aqua Urban Resort, Live Aqua Beach Resorts, Live Aqua Boutique Resort, Live Aqua Residence Club, Grand Fiesta Americana (GFA), Curamoria Collection, Fiesta Americana (FA), The Explorean, Fiesta Americana Vacation Villas, IOH, Fiesta Inn (Fiesta Inn Express, Fiesta Inn LOFT), Gamma and One Hoteles. Additionally, the new brands Funeeq and Dayforia are soon to be launched onto the market.

Live Aquais the 5-star Resorts brand1, that offers a wide variety of services and luxury rooms with avant-garde details and designs focused on creating unique and sensorial experiences, seeking to attract foreign and domestic high-economic level tourism to beach and urban destinations. During the last few years, we have been consolidating both the services offered and the international luxury standards, as well as the iconic experiential excellence under this brand. Our most demanding guests can find a sophisticated yet relaxed atmosphere, avant-garde design, and international cuisine, to satisfy all their needs. This is the brand under which in 2021 we initiated operations in a 347-room Beach Resort in Punta Cana, Dominican Republic.

Live Aqua Residence Club (LARC)is a vacation membership offering a variety of the Live Aqua high- level family residential real properties.

Grand Fiesta Americanais the 5-star1 hotel brand located in the most important cities offering an exclusive and personalized lodging experience with superior service and quality expectations but without losing the warm hospitality that characterizes Mexico. It focuses on persons searching for an exceptional luxurious Mexican experience in a sophisticated and contemporary environment.

Curamoria Collectiongroups 5-star or unclassified hotels that operate under franchise, where the traveler can find original, iconic, or trendy installations especially allocated for boutique hotels, with an emphasis on design or originality, gourmet experiences, authenticity, and luxury.

Fiesta Americanais the leading 5-star hotel chain in Mexico with services, amenities, and installations ideal for creating memories and great moments for the whole family. It is designed for pleasure and/or business travelers seeking 5-star hotels with all the services and amenities of large hotels. Fiesta Americana Vacation Clubis part of this hotel family, which is our family vacation membership with properties located in the most important beach destinations of our country.

The Exploreanis the 4-star Resort brand 2 centered on outdoor experiences and activities in natural environments, leaving behind daily routine by coming into contact with nature, without sacrificing all the comfort of a renowned hotel.

1. Classification given according to the self-assessment mechanism regulated by the Ministry of Tourism (SECTUR).
2. Classification given according to the self-assessment mechanism regulated by the Ministry of Tourism (SECTUR).

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Fiesta Innis the 4-star2 brand that adapts to current business travelers' needs excellently located, multifunctional areas, comfortable rooms, meeting rooms, event halls and restaurants. Forming part of this brand are Fiesta Inn Suites, Fiesta Inn Loft and Fiesta Inn Express variations, likewise, addressed to business and/or leisure travelers, providing a comforting and productive stay through the design, comfort, and functionality of each space. The rooms are fully equipped to be adapted for working, eating, or resting.

The Gammabrand is a collection of 3 and 4-star2 hotels, under franchise, with each hotel keeping its unique architecture, decoration, design style and personality. It is directed to people that, regardless of their reason for traveling, are looking for local traditional lodging locations expressing the essence of that place they are visiting through its architecture and leaving aside hotel chain standardization.

Oneis the practical and affordable 3-star2 hotel brand with modern design and accelerated development. It is designed for pleasure and/or business travelers searching for hotels with guaranteed fair-price and friendly service focused on self-service in a variety of destinations and key locations, but without losing the trustworthiness, comfort, and cleanliness of a chain hotel.

IOHis the 4-star2 hotel brand that merges spaces to satisfy travelers searching for flexibility in multipurpose trips, but where design and digital solutions prevail for modern and hyper-connected guests.

Regarding new hotel development, the Company strengthened the hotel portfolio with 11 openings during 2023:

1. Gamma Queretaro
2. Curamoria Tres79
3. Curamoria El Hotel Casona142
4. One Mazatlan Zona Dorada
5. Gamma Los Cabos
6. Kempinski Cancun3
7. Fiesta Inn Mazatlan Zona Dorada
8. One Irapuato
9. Gamma Puebla Hotel Señorial
10. One Morelia Acueducto
11. Hotel Sumiya Cuernavaca

So far in 2024, the following management contracts have been concluded: Hotel Gamma Acapulco Copacabana and Hotel IOH Merida Mid-Center.

The Hotel Fiesta Americana Monterrey Pabellon M. converted 4 single rooms into 2 Master Suites, similarly the Hotel One Puerto Vallarta increased the room number by 23.

As of December 31, 2023, the Company continues a development plan comprising different commitment level agreements to operate 18 new hotels with 3,428 rooms. Of the total investment for the aforecited projects amounting to $14,332 million (USD $848 million), Posadas contributed 2% of the funds and 98% was contributed by outside investors. This represents an 11% room supply increase.

These hotels openings will begin in the second half of 2024, and pursuant to the commitments assumed by the owners of said properties, they are expected to be fully operational by 2026. The average operating life of these contracts is more than 15 years. Of these openings the following stand out: Live Aqua Playa Mujeres, Live Aqua Riviera Cancun, Grand Fiesta Americana Riviera Cancun, Fiesta Americana Mazatlan Zona Dorada and Grand Fiesta Americana Punta Cana Los Corales, in the Dominican Republic.

We also announced a strategic alliance with legendary European luxury hotel brand Kempinski, intending to market the Kempinski Hotel Cancun with 363 rooms in Quintana Roo. This decision is the result of the appreciation of Posadas' solid marketing network in Mexico, the United States, and the remainder of the American continent.

We are continuing with the 28-unit development project in Acapulco Diamante, which operation is programmed within the next two years.

3 Under an inventory distribution agreement.

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During 2023, social, cultural, and economic changes were not the only challenges we had to face. The course of economic policy taken in Mexico resulted in a near 13% peso (MXN) appreciation that forced us to adjust our planning especially in the second and third quarters of the year. Our responsiveness in recent years and the results of 2023 portray Posadas as a company capable of adapting and adjusting to any challenge.

In terms of operation, our hotels had a 10% increase in effective rates compared to the previous year. During the year the demand in the country showed growth in almost all areas compared to 2022, this allowed us to obtain better results. We can say that we maintained our leadership in all brands: penetration of the accumulated effective rate for Resorts was 120%, for Upscale & Luxury hotels 128%, and for Midscale & Economy hotels 113%.

In the hotel system operating under Posadas brands, we had an average occupancy factor of 66% and a 10% effective rate growth "RevPar" compared to the previous year. As for distribution channels, the best performance is observed in general public groups and individuals with a growth of 15% and 17%, respectively. Together, these two channels accumulated 34% of room revenue in the year.

RESORTS

This segment continued to perform well. There was an occupancy increase of almost 3pp, reaching a 79% average annual occupancy and maintaining the same effective peso rate obtained the previous year. However, we obtained a 13% effective dollar rate growth in comparison to 2022.

The general public groups and individuals segment showed significant 28% and 16% growth respectively compared to the previous year. Together, these two channels accumulated 34% of room revenue for the year in this segment.

UPSCALE & LUXURY HOTELS

In this segment we obtained 76% of room nights through our own channels. Furthermore, the individual's business and group segments recovered and operated above 2022 levels with 15% and 14% growth respectively.

Average annual occupancy increased by almost 3pp reaching 63%. The effective rate improved 12% in the same period. Operating margins improved thanks to tight expense control, room rate appreciation and increased Food and Beverages revenues.

MIDSCALE & ECONOMY HOTELS

In the last year, this segment achieved extraordinary results: a 65% average occupancy, a 17% increase in RevPAR and a cumulative generated room revenue through our channels of 78%. In addition, our operating margins had a 0.4 pp increase compared to 2022.

LOYALTY

In 2023, our loyalty products generated 36% of the entire Posadas hotel occupancy system, translating into approximately 2.2 million room nights. A new business approach bringing more clearly, accessibly and faster our different loyalty products to our guests allowed a 3% global sales increase compared to the previous year (adjusted due to unobtained November and December sales because of Hurricane OTIS).

Fiesta Rewards continued growing, closing the corporate year with more than 460 active members in the last twelve months. The Company Loyalty program "Fiesta Rewards" maintains, in alliance with Santander Bank, a credit card under shared brand Santander-Fiesta Rewards, thru which clients obtain travel benefits. To 2023 corporate year closing, the Santander-Fiesta Rewards credit card has more than 255,000 card holders. In the same year 73,000 new cardholders were affiliated.

Fiesta Rewards and Santander Bank continued their alliance signing a new 10-year contract which main purpose is accelerated portfolio growth through new card placement and increased cardholder billing. Beginning 2024, the product is simplified into Gold and Platinum level cards and the classic card is no longer promoted.

Fiesta Rewards has significantly contributed to Posadas' retention of valuable clients and maintenance of stable income during different business cycles. Fiesta Rewards members receive varying benefits such as points, preferential rates, point exchanges per accommodation night in Posadas´ affiliated hotels, catalogue

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items, airplane tickets, automobile rental, amongst others. Fiesta Rewards has an experienced marketing program through which members can enjoy musical, gastronomic, sporting events, amongst others.

In November of 2023, vacation membership Fiesta Americana Vacation Club Access became Access Fiesta Rewards, thus taking advantage of market positioning. This evolution consists of a renewed brand identity and new benefits for its members, added to the Fiesta Rewards product portfolio. Amongst its benefits is a 40% discount in 1 million hotels throughout the world, Fiesta Rewards point bonus, 2X1 plane tickets, amongst others. The membership is valid for 5 years and has 3 plans: Classic, Gold and Platinum. At the end of 2023, it has 23,000 members.

The Company operates the following Vacation Products:

• Fiesta Americana Vacation Club (FAVC) is a timeshare vacation club in which members purchase a "40 year right to use" represented by annual points related to a specific installation. FAVC points, furthermore, may be exchanged for lodging at any of seven complexes located in Los Cabos (Villas and Resort), Baja California Sur; Acapulco, Guerrero; Cancun, Cozumel (two complexes) and Kohunlich (Chetumal), Quintana Roo, and Puerto Vallarta, as well as any Company-operated hotel. Additionally, FAVC members may use their points at Resorts Condominium International (RCI) complexes and Hilton Grand Vacation Clubs, or at any affiliated complex in different parts of the world. The Company has operated FAVC for more than 22 years.
  As of the close of 2023, there are 28,081 members.

1. Live Aqua Residence Club (LARC) is a timeshare vacation membership with a select choice vacation residences and high-end hotels, and travel services so that season after season members can travel with distinction and personalized attention. By acquiring this product, they buy a "40 year right to use " represented by annual points granting the right to use a specific residential facility. Moreover, points may be exchanged in other LARC brand residential developments (located in Puerto Vallarta, Los Cabos, and Huatulco), or in the Fiesta Americana family hotel complexes. Members also have access to the alliance with Resorts Condominium International (RCI), Hilton Grand Vacations, Vail, and the Registry Collection through which members can exchange their points to lodge in one of the destinations in different parts of the world stated in the agreement.

As of the close of 2023, there are 1,761 members.

1. Access Fiesta Rewards (formerly "Fiesta Americana Vacation Club Access") is an exclusive discount membership for our clients allowing them to choose as they wish the travel moment, to destinations either in Mexico or abroad at very attractive prices.
   Access Fiesta Rewards attained a 16% share of room night production of all loyalty products, growing 84% in comparison to 2022. During 2023, this product represented a 45% share of all products net sales.

As of the close of 2023, there are 22,768 members.

1. Viaja Plus is the online subscription platform that, allied with Travel & Leisure Group, offers the Mexican market an annual travel subscription allowing travel in Mexico and abroad with rate discounts of up to 40% at more than 600,000 hotels.

1. 1. Fiesta Americana VACATION CLUB 25th EDITION, beginning in 2023, to celebrate the 25th anniversary of our Vacation Club, Posadas issued a special membership in April 2023 called FAVC 25th Edition, which has had very good market acceptance. FAVC 25th Edition membership income recognition is as follows:
      FAVC 25th Edition membership income recognition occurs at two moments:
2. At the time of formalizing the contract, since the Entity considers that the right is granted to the client for points backed by vacation property and the performance obligation is fulfilled by transferring an enforceable right to third parties, and by transferring the control of the

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properties to the membership buyers. This recognition is the same as used for the traditional FAVC membership.

1. When the member uses the Edition Points or their right to use them expires, that is, once the lodging service is provided or when the period agreed in the contract with the client for their accrual elapses. Additionally, an estimate is recognized for those points that will not be used by the members of the program upon expiration, referred to as breakage.

At the end of 2023, the memberships sold in the April to December 2023 period are 3,585.

Collectively, loyalty products contributed 35% to hotel occupancy in the entire hotel system, obtaining through direct channels 2.3 million room nights.

The membership installment sales portfolio balance, as of December 31, 2023, was $6.824 million, representing a 5% increase compared to the previous year.

During the 2023 tax year, 1,705 member contracts with fully paid memberships who failed to pay their maintenance fee for 2 consecutive years were cancelled. This cancellation is equivalent to 6.9 million points, representing $55.9 million pesos which are returned to the FAVC or LARC programs' property inventory, as applicable.

Regarding the Company's financial situation, year-end income was $9,209 million pesos ($10,4684 million, as reported to the Mexican Securities Exchange) obtaining a $1,786 million peso EBITDA and a $1,006 million-peso IFRS majority net profit. Cash balance at 31 December 2023 was $1,841 million pesos (US$109 million), $108 million more than the previous year on a comparable bases after adjusting for the Senior Notes repurchase for US $7.5 million, and the 12.7% appreciation of the Mexican peso against the US dollar since 65% of the cash is invested in dollars. Total assets amounted to $18,250 million pesos.

The following expenditures were paid with obtained cash flow:

• • Payments to the SAT (Tax Administration Service) for $416 million corresponding to the tenth and last annual payment pursuant to the concluding agreement entered into with the Mexican tax authorities in 2017.
  • Capital expenditure investments in the amount of $339 million pesos.
  • Debt service in the amount of $338 million pesos corresponding to interest on the Senior Notes.
  • Interest on the Inmobiliaria del Sudeste financing for $11 million pesos and $34 million principal amortization.
  • Repurchase at market value of US$7.5 million of Senior Notes, with a flow implication of US$6.6 million. After cancelling these Notes, this unpaid liability balance is US$385.7 million.
  • On September 21, 2023, the S&P Global Ratings agency informed the Company that it adjusted its corporate rating upwards from 'B-' to 'B' due to continuous improvement in its operational and financial performance.
• Continuing the corporate simplification process, the merger of the following companies was formalized in 2022: Inmobiliaria Administradora del Bajio, S.A. de C.V, Promocion y Publicidad Fiesta, S.A. de C.V and Direccion Corporativa Posadas, S.A. de C.V were merged into Soluciones de Lealtad S.A. de C.V., as the surviving company. The merger became fully enforceable on June 6, 2023. It is important to note that as of this report date, the merger notice is pending authorization by the tax authority.

On June 22, 2017, the subsidiary Inmobiliaria del Sudeste, S.A. de C.V., owner of hotel Fiesta Americana Merida obtained a secured trust loan for $210 million for a seven-year term. The funds will be used for corporate purposes including refurbishment of hotel public areas. As of December 31, 2020, the remaining balance amounted to $159 M. On August 27, 2020, the second amendment agreement was signed by which the bank granted a 12-month grace period deferring interest and principal payment starting in April 2020. The third amendment agreement to the modified and restated contract, dated April 23, 2021, establishes that interest will be paid quarterly until April 23, 2022, and on this same date monthly principal payment will be resumed beginning

4 As of 2023, in the profit and loss statement, we have added the revenues and costs related to advertising and marketing (promotion and advertising), centralized services (hotel executive committee payroll and other recoverable expenses, amongst others) that were previously presented as net. With this change, the Administration segment revenue is better seen.

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