Ryman Hospitality Properties, Inc. (REIT)

Welcome to Ryman Hospitality Properties' first quarter 2020 earnings conference call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark Fioravanti, President and Chief Financial Officer, and Mr. Patrick Chaffin, Chief Operating Officer. This call will be available for digital replay. The number is 800-585-8367. and the conference ID number is 6554839. At this time, all participants have been placed on listen-only mode. It is now my pleasure to turn the floor over to Mr. Mark Fioravanti. Sir, you may begin.

Thank you. Good morning, everyone. Thanks for joining us today. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 including statements about the company's expected financial performance. Any statements we make today that are not statements of historical fact may be deemed to be forward-looking statements. Words such as believes or expects are intended to identify these statements which may be affected by many factors including those listed in the company's SEC filings and in today's release. The company's actual results may differ materially from the results we discuss or project today. We will not update any forward-looking statements whether as a result of new information, future events, or any other reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure in an exhibit to today's release. And with that, I'll turn the call over to Colin.

Thank you, Mark, and good day everyone. First of all, I hope this call finds all of our regular analysts and investors who are joining us well right now during this unprecedented period. I'm happy to report that our team at Ryman is doing just fine. We're all healthy, secure and laser focused on managing our company through this debacle and getting back to serving our customers again in the safest and most secure environment possible across our wonderful hotels and entertainment venues. I suppose I could spend time talking about our first quarter results which were on a Really strong track through the months of January and February. In fact, for the majority of the first quarter, 2020 was shaping up to be the phenomenal year which we've been expecting for a long time. Alas, that was not to be as COVID-19, the outbreak unfolded rapidly in the months of March, culminating in nationwide stay-at-home orders and ultimately our decision to close the Gaylord Hotels on March 24th as well as most of our entertainment venues around that time as well. At this moment, January and February seem like ages ago and our attention and I'm sure yours is focused entirely on what the rest of 2020 will look like once we reopen and what our industry and our business will look like in 2021 and beyond. Of course, our answers to these questions must come with the caveat that the situation is fluid. and our current expectations and plans are subject to change pending new data or developments. The reality is there is so much at this time that we cannot control but what we're doing is focusing intensely on the things that we can influence and that is what I'd like to talk about this morning. Before I delve into the details, let me remind you of our background. I remember the many discussions we had with the potential REIT investors back in 2013 as we were in the throes of converting from a C Corp to a REIT. The comments I often heard was that our management was not made up of REIT folks, we were operators. We were in fact the folks that crafted the Gaylord brand. Well at times like these our background comes in handy. We know what needs to be done. and are in detailed discussions with our manager, directing what we want to see occur across all aspects of the reopening process. So first, our hotel segment and our forward book of business. Prior to March, our hotel business was in the best shape it's ever been. We entered this year with 8 million net room nights on the books for all future periods, including the Gaylord Rockies, which was a record by far. In fact, the total cancellations and attrition related to COVID-19 as of Friday the 1st of May, after netting out the time 167,000 room nights we had rebooked already by that date, is still just under 10% of that forward book of business for all future years which we entered 2020 with. and with 74% of those COVID-19 cancellations clustered between February and June of this year and 35% of related rebookings placed into the second half of this year, we continue to have a very decent booker group business for the latter part of 2020. Specifically, as of May 1st, we had 742,000 net room nights on the books for the second half of 2020, which compares to 902,000 at the same time last year for the second half of 2019. Of course, this assumes we open our hotels in the mid-June to July timeframe, which I'll talk about in a moment. But let me also give you an update on our pace for 2021 as well. Looking at next year, as of the first quarter end, March 31st, We had 42.2% net occupancy room nights on the books for 21. Now while this is down compared to the extraordinary comparisons of 46.9 points we had at this time last year for 2020, it is exactly in line with 42.2 points we had for 2019 back during the first quarter of 18. And just to remind you, 2019 was a record year for our company. And to be clear, These are all apples to apples comparisons, including the Gaylord's Rockies. So at this point, 2021 looks like a typically good year when you compare it to our recent history. Furthermore, we know that meeting planners remain active, and not just latter in 2020 and 21, but well into the future. While our first quarter 2020 gross Bookings declined year over year by approximately 107,000 room nights to 288,000. Our gross bookings just in the month of March were 126,000 and only 29,000 of those were COVID-19 rebookings. Likewise, as we also disclosed in our business update a couple of weeks ago, our sales team generated 3.9 million new leads in the month of March and that excludes a half a million leads related to previous COVID-19 cancellations. The sales teams at Marriott and our asset management team at Ryman have done a terrific job of juggling the inbound cancellations and rebooking activity with regular long-term booking activity. Our overarching emphasis throughout this process has been the same as always, focusing on the customer and their needs and creating, building and cementing long-term profitable relationships. That is why even early on, before government restrictions and shutdowns were put in place, our teams focused on accommodating customers' concerns around cancellations by finding alternative dates for meetings rather than aggressively pursuing cancellations and attrition fees. We're seeing the fruits of this strategy now as our rebookings continue to build and I'm sure when we get into the Q&A Patrick will give you an update on what has transpired since the end of April on rebookings as well which is all good news. When you look at all this data and the work we are doing on the sales side with our customers and you consider that the new supply of large group hotels was thin even before this incredible disruption then anyone with a long-term view should understand why we have confidence that despite recent COVID-19 cancellations, our competitive position in the group's market will come out of this period stronger than before. Now let me talk about the reopening process and what our businesses look like when we come out of all of this. This is what we've been spending a great deal of time on during the shutdown period, working closely with our partner at Marriott, on the hotel side to design, implement those best practices for each phase of reopening that will ensure our customers and employees feel safe and secure upon their return. Now let me tell you how we've been thinking about this. Last week, I conducted several media interviews as May 2nd witnessed the 10-year anniversary of the Great Flood of Nashville. A time when most of our businesses in this city were devastated and our two primary businesses were shut down for six months. At the time, the consequences were awful, just like now. But I remember quite vividly saying to our team at the time, let's focus on how we can bring these great assets back to a position that is stronger than they were when we went into this situation. And that is precisely how we are thinking about COVID-19. The fact is society here in the United States has been shaken to its core with this pandemic and our responsibility is to provide a safe, clean environment when our customers return. And our goal is to be the very best at this and to develop a reputation as the best that will drive greater loyalty and higher retention. In multiple conversations I've had with the leadership of one of the nation's best hospital systems, this is what I think will happen. There will essentially be a bridge period that we will have to deal with between reopening and such time there is a viable vaccine that comes forth and customers, employees will feel safe to go about business the way they did prior to COVID-19. During this bridge period, companies like ours will have to adopt enhanced practices to keep our customers and employees secured and I will describe some of these in a moment. But first our thoughts around the opening dates. Right now we anticipate and are planning towards the reopening of Opryland Palms, Texan and the Rockies in mid to late June. The Gaylord National we are currently planning on reopening slightly later in mid to late July. Our entertainment venues in Nashville such as Old Red We anticipate opening slightly earlier as the state's governor has given the national leaders discretion as to when they may reopen and city officials here have indicated a number of benchmarks that if met in May would permit that to happen. All of these dates are of course subject to change but are meant to communicate our current planning posture. Now reopening does not mean going back immediately to the way Group meetings were held just before this crisis. There will be differences, which we expect to roll out in phases. Broadly, phase one would be the most restrictive, employ some of the same recommended social distancing guidelines in our hotels and venues as we see across the nation today. For example, this would include reduced setups in dining and banquets, banquets to space guests further apart, as well as no standing at bars, reduce staffing and requiring PPE for employees and so on. What is really the number one focus for us however is the development of an entirely new set of cleaning protocols utilizing across the board hospital grade equipment, materials and methods including introduction of electrostatic sprayers for example. To help us overcome this aspect We're in discussions with a major medical center to form a partnership whereby Gaylord Hotel employees can receive training on these new methods from their experts with ongoing compliance checks and monitoring. Hand-in-hand with these cleaning protocols is an effort to redesign our processes to minimize physical guest touchpoints, often taking advantage of more enhanced technology. From a sales perspective, in the first 90 days we'll focus specifically on the leisure customer as more rigid distancing restrictions induce less friction for these customers than for the larger gatherings. We see pent-up regional travel demand in the leisure segment and an opportunity in local markets, social events and gatherings that may have been postponed by stay-at-home orders and need to find a new venue. Phase 2 of our reopenings will involve what we describe as moderate distancing measurements. These might include increasing dining capacity but not fully to 100%, increasing staffing and so on, but of course maintaining the new frequency and level of cleaning and disinfecting. Phase 3 or minimal restrictions would be a return to what could be called the new normal. allowing guests to go above their routines with less noticeable disruption and normal staffing levels but with new cleaning and touchless technology investments and best practices remaining in place. The exhaustive list of procedures and practices in each phase and the duration of each are to be determined but this is to give you all an idea of how we're thinking about a return to normal and what our industry looks like on the other side of this. The good news is that as recently as this past weekend, doctors are saying there could be a viable vaccine by year end, which will be good news for 21, which as I illustrated, our book of business looks pretty good. It's our guiding principle in all of this detailed work to be at the forefront of our industry, taking the lead in setting the standards as safe operations for both customers and employees. that they have come to expect of the Gaylord brand and our entertainment brands. Now while I've painted an operational picture, we're still finalizing many of the details and we'll have more to say later in May. This includes working on the financial specifics of what these practices mean for our margin structure. We expect to be able to give more detail on this once we get back opening and reporting on our results. Now let me touch on our entertainment business for a minute and share with you some of my thoughts as it relates to the three primary brands. First, All Red. We expect to open each location under Phase 1 social distancing sometime mid to late May and providing COVID-19 is in check in each market, we expect these establishments to be operating at 100% capacity with live music by the end of July. The Ryman will be somewhat challenged this year simply because so many artists have cancelled their entire tours for the year. Given the fact that so many artists live here in Nashville, we'll probably be able to book concerts on a one-off basis, but we expect that by 21 we should have a strong concert calendar. As regards the Grand Ole Opry, initially we expect to open it up with an audience sometime in July, but with social distancing. Depending on how quickly Nashville tourism cranks up, we'll decide on how many weekly shows we host. So that's where we are today and I understand that there are likely many more questions that there are answers at this point. Now what I want to emphasize is that this management team has been through many crises. We experienced the nationwide travel shutdown in the days following September the 11th. We endured a deep painful recession after the great financial crisis of 2008 and 2009. And we bounced back from natural disasters such as the Nashville flood which shut down Gaylord Opryland, our largest asset, for a full six months. And in all of these cases, this company and its management team never lost sight on the long term, and we followed the same playbook, focusing on the long term needs of our customers, employees, and our assets, and ensuring that we are prepared and ready for the inevitable recovery. Because make no mistake, our industry and our company will recover. We don't know whether that will take weeks or months or a year, but we do know that groups and individuals desire to travel, to gather in person, to make connections, to share knowledge and to bond over common interests. This is not going away. Even in a world where work at home emerges more prevalent, we've seen before that companies adopting these arrangements often increase the frequency of large group meetings. in order to make up for lost daily interactions. This fundamental underlying demand for fellowship and for travel is simply human nature and that is not going away. That is why we are confident that our company and our one of a kind hotels and entertainment venues will emerge on the other side of this stronger than how we entered. And with our competitive moat Our competitive moat against an even smaller supply pipeline will only widen. Now with that, I'll turn over to Mark to touch base on the balance sheet and what we've been up to with the banks. Mark.

Thanks Colin. In the first quarter, the company generated a total revenue of $313 million, down 15.6% from the prior year. It's noteworthy that prior to the closure of our businesses from COVID-19, our company's revenue increased 17.5% in the first two months of the year. Net income available to common shareholders declined $75.9 million in the first quarter to a loss of $46.5 million, or 85 cents per fully diluted share. Our first quarter net income included $14.1 million in payroll costs associated with COVID-19, of which approximately $10 million were approved for the second quarter. In addition, we recognized two non-cash charges, a $5.8 million credit loss on health and maturity securities associated with the Gaylord National Bonds, and a $26.7 million valuation allowance on net deferred tax assets. Moving to our non-GAAP metrics, the company generated $66.9 million of adjusted EBITDA RE, a 41.8% decrease from last year. Adjusted funds from operations available to common shareholders declined 58.3% to $32.4 million, or $0.59 per diluted share. Both adjusted EBITDA RE and AFFO were negatively impacted by the $14.1 million in COVID-related costs. As Colin outlined, we have a great deal of confidence in the long-term outlook for our business, and our balance sheet and liquidity are key elements of that outlook. Let me briefly summarize our current position and our expected cash utilization rates, which will illustrate our ability to withstand this period of disruption, even if prolonged. In mid-March, when we saw a rapid accelerating impact of COVID-19, we took the precautionary step of drawing $400 million from our revolving credit facility to ensure we have access to as much liquidity as we might foreseeably need. Consequently, we ended the first quarter with $662 Thank you for joining us today. We had approximately $65 million of restricted cash available in our hotel FF&E reserve fund, which can be used for ordinary course maintenance of our properties. Consistent with our strategy to retain sales teams to focus on rebookings, we made the decision to bring six hotel accounting personnel back in furlough to aggressively pursue collection of our hotel accounts receivables. Over the last 30 days, we've reduced our hotel AR balance by nearly 50% or $27 million, making a positive impact on our cash flow. Comparing our liquidity to our initial monthly cash burn rate of approximately $42 million which will decline to approximately $32 million as ramp down costs run out. This implies nearly 18 months of liquidity based on our cash on hand and 24 months after factoring in the additional $300 million of revolver availability. These burn rates reflect the implementation of our operating expense reduction initiatives The suspension of future dividends, the postponement of non-essential capital projects, and other cost savings initiatives implemented across the company. In terms of major growth capital projects, as we previously announced, we are proceeding with the completion of our Gaylord Palms expansion, which has approximately $79 million of spend remaining and will be completed in April of 2021. The capital for the Palms is not included in our minimum cash burn calculations, and should there be a material change in our view of the environment, we can delay completion of the Palms project and arrest the capital spend. We've delayed the start of the Gator Rockies expansion indefinitely. After the end of the quarter, we reached an agreement with our long-standing bank group to amend our secured credit facility covenants to ensure that the full $300 million of Revolver remain available during this period of business disruption. The amendment relieves us from the three financial maintenance covenants for a 12-month period through April 1, 2020. We also have an option to exit the amendment early at our choice, should the trajectory of our business warrant. The amendment carries a modest increase in pricing on our term loan A and revolver borrowings, as well as certain temporary restrictions on use of capital. In summary, when you add the balance sheet strength and liquidity of our company to our contracted book of future group business, and the early meeting planner activity we're seeing, you can understand where we drive so much confidence that we will successfully navigate this situation. With that, I'll turn it back over to Colin for any closing remarks.

Mark, thank you. I will withhold any closing remarks maybe to the end. Maria, let's open the lines up for questions this time, please.

Thank you. The floor is now open for questions. If you wish to ask a question at this time, please press star then the number one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. Our first question is coming from Smedes Rose of Citi.

Hi, everyone. I wanted to ask you, as you move towards reopening and you gave some timelines for that, what kind of level of occupancy Do you, I guess, surpass the kind of $32 million a month of cash burn that you think you can work down to? Like, I mean, what level of occupancy would that become, you know, less of a burn, I guess? And then where do you see breakeven? Yeah. Pat, you want to?

Sure. Good morning to me. This is Patrick. Yeah, so, you know, we initially opened, we're going to be more reliant on transient until the group market really starts returning in greater numbers. And so, you know, getting open is the first hurdle. So in the first month or so, we're expecting that, you know, our occupancy will be somewhere in the 20s. And as we move through the summer, we are projecting currently occupancy rates of about 30 to 35%. We think that if we can get to about 35% given the increased costs associated with cleanliness standards, social distancing, and ensuring that the hotels stay clean and disinfected, which adds cost, that around 30 to 35% occupancy will get us to a break-even status. As we move into the fall, we expect our occupancy will continue to increase, and we're working through what we think that is right now. would say, you know, 50s, 60s as far as the occupancy percentages.

And one of the things that is encouraging, Smeets, we've, let me sort of digress from your question about breakeven, but we're having quite a lot of success on this rebooking. The numbers, Patrick, today since the first have increased almost 200,000 room night re books and quite a bit of that is going into the back end of this year and as what I said in my prepared remarks we have you know north of 700,000 room nights as of the 1st of May into the back end of this year so when Patrick talks about 30 ish percent percentage points there's going to be spikes here week by week because we've still got a ton of group business on the books particularly as we get into late August, September, October. So that's how we think about it.

And let me add to what Colin's brought up. Because there are spikes that will occur in our business as large groups come through and occupancy rises and then drops down again as we wait for the next large group to come through, we are not managing the business in the same way that we have previously. We will not be returning to a We have a staffing model that is normal for some time. We are being very diligent in ensuring that we have the minimal levels to ensure that there's good guest satisfaction experience, yet at the same time we are conserving cost and managing with doing more with less, if you will.

Can I just ask you two, when you rebook rooms, So are the contracts the same or are clients or customers getting any sort of incentivization to rebook or is it just you just move the contract?

Did you understand that? No, I didn't understand that. I'll explain it. What Sleet said is that when we're rebooking business that we lost in that period, are we modifying the contracts and giving folks

I would tell you that the incentive that we've placed out there to rebook the business is that we are not aggressively pursuing collection of cancellation fees. And so if we are rebooking a piece of business that was supposed to travel in April and let's say it's now going to travel in November, the cancellation language that was in the original contract now applies to the rebook date. Now we will continue to work with them because obviously they will expect that they may not be able to hit the room block that they originally had forecasted. So that may be another area where we work with them and provide an incentive to go ahead and book their travel. But we are not granting massive concessions or anything out of the ordinary. It's a partnership with these customers. They understand that we are doing everything we can to not pursue cancellation in this environment and therefore The reciprocation of that is they're working with us to put together the best piece of business they can for the future.

Okay. Thank you, guys.

Thanks, Nate.

Our next question comes from one of Chris Rowanka of Deutsche Bank.

Hey, good afternoon, guys, and glad to hear that the entire team there is staying well. My question was on, as you look out a little bit, and I know your business has always kind of been a Tetris puzzle in terms of how you you put things together. And now there's even more moving pieces. You know, when we think the 2021 and 2022, just trying to get a very high level idea of, you know, how much of that business you might be able to ultimately recapture with the idea being that, you know, 2022 could hopefully be Thank you for joining us today.

Thank you for joining us today. What we have talked to the Marriott Sales Organization about is that our goal to them and to our asset management team is to rebook 50 to potentially 60% of this business over the course of the next few months into the rest of this year, next year, and the year after. So as we sit here today, We are quite happy with where we sit for 21, and 22 looks really good. So, Pat, anything you want to add to that?

Yeah, so let me give you some data points to back up what Colin's already said. If you look at 21, you know, comparing it to 2020 at this point is kind of difficult given what's happened in 2020. So let's go back to the last year that we actualized, which was 2019. Thank you all for joining us today. 22 is pacing ahead of where we stood at the same time for 21. 22 is pacing about 4.3% ahead. If you think about the rebookings that we've been talking about, and as Colin mentioned a moment ago, we're just at about 200,000 rebookings as of last night. About 20% of those rebookings have gone into 2021 and about 10 to 12% have gone into 2022. So both years are pacing ahead. and both years are benefiting from the COVID re-books.

And we've got a lot of lead volume as it relates to COVID cancellations that we're still working aggressively with those meeting planners and corporate clients to accommodate and I'm sure there's going to be more business over the next few months that we will put into those years that you just referenced, Chris, as a result of these COVID-19 bookings. Oh, cancellation, should I say.

Okay, okay. Appreciate all that color. Very helpful. And then just the question kind of on the on the margin structure, and it's more of a longer term question, because I know that right now things are not normal. And you're having to make all kinds of adjustments. But is there anything longer term that, you know, makes the margin structure better or worse? You mentioned incremental cleaning, which is probably going to continue for a long time, but but on the on the labor staffing model or anything? or now again when we get back to normal revenue do we get back to kind of normal margins?

I would suggest that if magically by the end of this year there is a vaccine and our society here in the United States in 21 becomes comfortable and we can all get back to sitting in stadiums watching football, basketball, golf, whatever it may be, and the same with conventions. There is, I think, no reason why our business cannot be at or around the margins that we operated in 2019. And the reason I say that is, yes, there are going to be practices that we will overlay into the businesses that we didn't have in 2019, but on the other hand, You know, I know as an organisation, and I know in our discussions with Marriott, we're looking for ways in which we can in fact improve the business with the learnings of, you know, the last few months here. So, I think, yep, we'll have new protocols in place, but I believe there will be more efficiency in these businesses. Would you agree with that Patrick?

Yeah, I mean Colin's laid out the vision for us. It's to be stronger when we emerge on the other side. And so we are assessing the short-term changes to the cost structure, especially on the labor side, and really asking the tough questions as the occupancy builds up into the future. Do we need to return to the same levels that we were at before, even when occupancy returns? So that is the challenge we've laid out and our Marriott partners are rising to the challenge and we're working together in a very, very Thank you, guys. Thank you. Thanks, buddy.

Stay healthy. All right. Next question, Maria.

Our next question comes from the line of Bill Crow of Ren and James.

Gentlemen, good afternoon. A couple of questions from me. I like the details you provided on the phasing. And it seemed like, you know, on the entertainment side of things, it was pretty quick to go from phase one. You're talking about by the end of July, you're going to be in phase three, I think is what you said. What are you thinking from a phasing perspective on the hotels? How long is it going to take to get there?

So, Bill, good morning. This is Patrick. Great question. Right now, we have laid out the phases in 90-day increments, and so our three phases are 90 days each. So, obviously, the first two phases essentially get us to the end of the year. If things change, we reserve the right to modify those phases, but where we stand right now, based on the best available information, we felt that the first two phases at 90 days each would get us to the end of the year, and that was appropriate.

Yes, so much of it is going to depend, Bill, on the speed of antiviral medicine and vaccines. If all of these new sort of prognostications that we hear about you know hourly, daily come true and you know this morning there was a new second phase trial of a vaccine that you know sent the company stock up eight bucks and you know everyone's getting excited about that. If this stuff comes quicker and let me say this and this is probably majoring As my friends at Monty Python used to say, this is majoring in the bleeding obvious. There has not been a time in this planet's history where you've had so many countries and organizations focused on one particular issue like this. And so my personal view is, I think, and talking with my doctor friends at Vanderbilt, I think that there will be vaccines available You know, sometime towards the end of this year, early next year. And that will, without doubt, influence how we think about the phasing. So, right now, Patrick has laid it out, and that's based on having something in the first quarter of next year.

Yeah, no, I appreciate that. And we all know it's uncertain at this point. So, it's good to know what you're thinking. Going back to a question, I think it was Smeets that asked about the adjustments to the contracts. I'm just If I was a group planner and I was going to book something for 2021, I'd probably demand that I could get out of it somehow or with lower penalties. What are you seeing because of this uncertainty? How do you book new business? I'm not talking rebooking. I'm just talking about new business. And you guys still demand the same level of penalties on cancellation and attrition.

Do you want to deal with that, Patrick?

Yeah, I mean, so we're dealing with it in real time, Bill, because as you saw in our release, you know, in March, as all of this was really coming to a head, we still booked 85,000 room nights that were unrelated to COVID or rebookings. So meeting planners continue to book.

And by the way, those contracts, they weren't, you know, they weren't, you know, smashed to pieces in the favor of the meeting planner. These were contracts that, by and large, looked like our contracts that we were putting in place in February and January.

That's right. And then we booked more in April. So we're dealing with it in real time. It's always on a case-by-case basis because each group has different needs and different concerns. But I will tell you that while we have seen a concern around pandemics going forward, we are sticking to our guns. If you recall back After the financial crisis, everyone told us there was no way we would ever get our cancellation and attrition language to be as strong as it was prior to 2008 and 2009. And we, if anything, had strengthened our language following the financial crisis. And so we are working with meeting planners and helping them understand that once this is behind us, it will be a return to normalcy from a contract perspective. And we are not running into major obstacles with that. There is more concern around pandemics. And so we're working through Those discussions with meeting planners as they arrive.

Alright, then one more for me. Absolutely understand turning off the capital spigot here. But how anxious are you to get started on the Rockies expansion? And do you think that could happen late this year so that you're not disrupting as much business going forward?

Um, look, The interesting thing is the amount of cancellations of the Rockies is, of all of our hotels, it is the least cancelled. We went into this year with a huge book of business for the Rockies. Our view of the Rockies long term has not changed whatsoever. At this stage, I don't think that we will be Moving ahead with the Rockies until such time as we have passed up or set aside our covenant modification that we made with the bank. So when we get to the point where we say we're tearing up the modification that we have put in place through the first quarter of next year, When that goes away, then I think we can get to the point where we're back to business and we can make judgments about blocks of capital like that. I don't think we're going to be moving ahead with that this year. I think it may be a mid-next year type of decision for us.

I think that's how we think about it, Mark. Bill, the physical structure of that expansion It doesn't create a lot of customer disruption. No. It's a wing off the hotel. There's no additional new meeting space. And so we can undertake that, I think, without a lot of customer issues. Great.

All right. That's it for me. Thanks.

Thanks, Bill. Thanks a lot. Any more questions, Marie?

Our next question comes from one of Dori Keston of Wells Fargo.

Thanks guys. Assuming you reach your goal of rebooking 50% to 60% of the canceled business, what occupancy do you think you'd start 2021 with?

I'll tell you what we'll do. We'll give you that info when we get nearer to 21. We haven't done guidance for 21 yet. We're dealing in the trenches right now. I'm the eternal optimist. I feel 21 is going to be a decent year, providing we can get this scourge under control, COVID-19 under control. And I think let's get through this third quarter, get through this second quarter, through the third quarter, and we can be a lot more transparent about that. But as we sit here right now, we're pretty comfortable about 21.

I would remind you that 21 versus 19 is pacing ahead as far as where we were as far as what was on the books. If you compare it back to 20, which again, 20 was a phenomenal year as it was building up before this all happened, it is I think about 42 points of occupancy on the books for 21 versus about 46 for 2020. Down a little bit versus 20, up versus 19. who knows what happens between now and the end of the year, but right now it stands to be a strong year.

Okay. So should we be assuming that it's phase three before you start collecting cancellation and attrition fees?

No. Go ahead, Colin. No, no. I mean, we did that in stereo, but no. I mean, talk to Dory about the way we've What's your way with thinking about this, please?

Yeah, so I guess the first thing I would say is we are collecting cancellation even now. If you look at March and April, we collected about $4.1 million roughly in attrition and cancellation across those two months, even as all of this was going on. We understand that there is the COVID impact and we're kind of looking to the, I don't know, let's say August timeframe as far as sort of when that really

The complicated thing with COVID-19 is so many of our behaviors, the client customer's behavior, hotel's behavior, has been influenced by dictates from local, state, and federal government. And so, you know, as we think about those restrictions falling away, then there is no doubt that you know companies are not being told you can't travel and when those restrictions fall away companies like us are not being told you know we prefer you to not have people meeting in your meeting rooms so I think as we move we move into the August September timeframe we we feel that we're going to have a lot more leverage in the collection of this Thank you for joining us today.

We have had groups who've called and wanted to cancel for October and November, and they have canceled. And as always, everything is a case-by-case basis depending on each group that we're talking to. But those groups that have canceled for October and November, we're having discussions around the cancellation fees that are out.

But it's fair to say that for the second half of the year, the options are you collect a fee. I mean, potentially they rebook again or you have some small percentage that falls out. Is that fair?

Yeah, if they fall out, then we will be pursuing collection of the fee. And if they have a rebook clause or if there is language that allows them to move to another date with maybe a smaller fee on the front end, I mean, again, it depends on the contract. But if you're in the fourth quarter and you're canceling, it is difficult for us to step forward and say, we forgive any cancellation. Let's just look to a rebook.

Okay. Thank you.

The amount of cancels we've seen, You know, late third quarter, fourth quarter are fairly minimal.

Yeah, I mean, by far, the vast majority is in the February through June timeframe, around 75% of the cancellations.

Okay, thank you guys.

Thanks, Tori. Any other questions, Maria? Maybe a couple more questions if there are any, and if not, we'll move on with our business.

We have a question from the line of Sean Kelly of Bank of America.

Hi, everyone. Good afternoon, Colin and team. So I'd love to just maybe stick with this behavioral kind of question or discussion because I think it's really interesting, right? Your business is so unique in the regard and the exposure on the group side. And what I'm kind of trying to get to is, as we think about this discussion with the meeting planners and their kind of willingness or desire to rebook and work with you, you know, what are they asking for to get the confidence to, you know, not just rebook, but actually make the trip or make, you know, make the group meeting? You know, is it Thank you for joining us today.

This is a very very important question you've asked and it's something that we as an organisation have spent a lot of time with our manager I hate to say it this way but insisting that we don't sort of speculate on what they want that we actually understand clearly what they want and there's been a ton of engagement are here around that question, and that's helping shape the vision of what our businesses stand for when we open them up and come out of this. So Patrick, do you want to try and answer Sean's very important question?

Absolutely. Sean, the number one thing they're asking for is to understand what it looks like to be in a Gaylord Hotel once they return. They want to understand what the cleaning standards are, the techniques, the equipment, the processes, the diligence, the frequency, everything around it. When we can give that to them and we are very close to being able to hand over a packet to them that walks them through exactly how we manage the space, the cleanliness, everything. Once we can do that, I think we will be meeting their need and starting to instill confidence to your point a moment ago. Arriving at what that packet needs to include and what the techniques are that we need to be following has been sort of a two-pronged, maybe even three-pronged process. The first is we've been watching very closely the research that a lot of different firms have been doing to understand where consumers, meeting planners, group attendees' minds are, what's important to them, what they want to see to start getting confidence around traveling. So that's the first prong. The second is we've actually reached out to groups, and we've been working with some very long-standing, large group customers to understand what their needs are, what they want to see, and we've even given a couple of them the opportunity to look at our standards ahead of time in advance to give comment back to us as far as do they see... And help shape those too. Correct. And then the third is to ensure that we're not just saying it but that we're actually delivering on it. Colin mentioned that we are working with an outside medical system to potentially get their review and endorsement of the cleaning standards and the processes that we're employing. So this is the number one thing we've been working on right now is giving the meeting planner peace of mind in the form of a packet of what we're going to be doing, and we've used multiple sources to arrive at what that should be. Marriott came out a couple of days ago with their commitment to clean and what that program looks like, and that obviously is the foundation on which our program is built.

And just let me say one other thing, Sean. The importance of this outreach is critical. The importance of engaging with the meeting planner and the customer at this stage in shaping the vision of our businesses is critical. And by the way, we've thrown out a couple of statistics this morning. We've said that we've rebooked about 20% of the business that we lost in that March and April timeline, which is and obviously the cancellations in May and June we booked 20% and we said our goal is somewhere in the 50-60% but let me tell you why we say our goal is 50-60% because in our outreach to the meeting planner when we talk to them about do they have an interest in rebooking the number that we sort of have stumbled across in these discussions is that potentially 80% of this business, the meeting planner has a desire to try and find a date in our forward calendar to rebook. And the reason we're able to give this level of detail is because of the outreach that salespeople at Marriott and the leadership of Marriott with us have been able to undertake here. And we're going to follow that through in real time on all of these protocols that we will be putting in place when we open these hotels up. So we really are looking at the future here as a company and not sitting here scratching our head, you know, feeling like victims. We're looking at this as an opportunity to build even a stronger relationship with these group customers.

Any other questions, Sean? Yeah, yeah, thank you for the detail on that. I appreciate it. I think it's important. And then the other thing was if you could help dimensionalize two things. So one is just sort of across the property, and I know these are going to vary dramatically, but just some directional color would be helpful. One is drive-to and fly-to, right? So just kind of what kind of overall mix across the portfolio you depend on. I know it's going to vary widely, but I think some color there as we think about That mix will be important. And then the other kind of mix would be corporate versus association. Are you seeing meaningful differences in rebooking our conversations in those two segments?

Yeah. I mean, look, I hate to patronize you, but those are also very, very critical questions. How we think about flight two and drive two, how we think about how quickly the airlines open back up, A critical, critical part of how we think about the rest of this year. Pat, do you want to tackle that? And then the corporate versus association. This is, on the corporate association, you know, this is the first time in, you know, I've lived here in America 32 years, been in the hotel business 32 years, never ever seen, you know, the amounts of association cancellations that we've witnessed here over the last, you know, 8 weeks. and because of this very unusual situation of shutting hotels down. So you want to tackle those two, Patrick?

Yes. So as I mentioned earlier, let me go back to that. The first 90 to 120 days are going to have a higher percentage mix of transient consumers and we are working on our marketing campaign to really be top of mind for consumers with really three key messages. Safety is paramount for us here at the hotels. We are a great local regional staycation for you so that you don't have to drive across the country or get on a plane. We are close and much closer than you realize. And third, we have unique amenities that you find in very, very few hotels. And so we're going after those transient, those leisure transient consumers with that messaging So that in the first 90 to 120 days, we're driving more transient. That's where our mix will be heaviest.

And they will be more drive-in than fly-in.

Correct. Now, the fly-in market then, we believe, starts to recover as we get into the fall as the airline capacity, to Colin's point a moment ago, starts to increase given the fact that government has taken a stake in the airlines and wants to see them increase their capacity. On the corporate and association front, I would tell you both have an equal desire or appetite to rebook. But remember, a lot of associations may only have one or two meetings in a year, and they're booking out for great periods into the future. So a lot of associations may have a desire to rebook, but they're not going to be able to rebook for the back half of 20 or 21, because they may already have that satisfied. And so we're going to pick them up in the next rotation in their calendar. The rebooks will be further out, whereas corporate can pick up and rebook in a shorter term, more immediate fashion. So hopefully that answers your questions.

Yeah, both do. Thank you very much.

Thanks, Sean. One more question, and then we've got to go. And it's not because we've got a date on the golf course. We've got multiple meetings here today, telephonic meetings. So one more question, Maria, and then we'll shut it down.

Our final question comes from one of Patrick Scholes of SunTrust. Hi, good afternoon.

I wonder if you can give us an update on the acquisition. You know, certainly the world's changed since you first entered into that contract. Talk about, you know, why you still want to go forward with it, what the lenders are saying to you, and is there any possibility you can renegotiate that contract more favorably? Thank you.

Patrick, good afternoon. This is Colin. You're talking Block 21, right?

Patrick.

Yeah, okay. So, let me be very clear here, and there is no final decision at this time, but here are the facts. Clearly, the businesses, like Block 21, have been impaired all across the nation. You know, we own We own assets that look like Block 21 and our businesses have been impaired. Artists are not touring at this moment, so certainly for this year, this business, and with folks not staying in hotels, this business has been impaired. The conditions of the purchase include Ryman assuming some CMBS debt but in order for the debt to be transferred, the CMBF servicer has to approve this. Now when we agreed to purchase the block, we put up a $50 million deposit but if the servicer fails to approve the transfer by the 9th of June, we can terminate the contract and get our deposit returned. So our plan is to continue to evaluate the extent of the impairment of Block 21 continue to evaluate the choices we have for the use of the capital that we've set aside for Block 21, such as the reduction of debt or stock repurchases until such time as our agreements with the banks fall away. But until the servicer approves or not approves, or when they do approve or not approve, we then have 10 business days to close the transactional walk. So that's where we are. There's no final decision. We're evaluating this. There's no really more detail that's occurred since we had our call two or three weeks back and that's where we are on block 21. Thank you. Does that make sense?

Yes, it does. Thank you.

Thank you, Patrick. All right, everyone, thank you for joining us today. And upward and onward, everyone stay fit and healthy. And Maria, thank you for doing the job you have done before for us so well. Thank you.

Thank you, everyone. This does conclude today's conference call. You may now disconnect.