Ryman Hospitality Properties, Inc. (REIT)

To Ryan Hospitalities Properties, Second Quarter 2021 Earnings Conference Call. Hosting the call today for 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, and Mr. Scott Bailey, President, Opry Entertainment Group. This call will be available for digital replay. The number is 800-585-8367, and the conference ID number is 525-9795. 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.

Good morning. 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 exhibits to today's release. And with that, I'll turn the floor to Colin.

Thank you, Mark, and good morning, everyone. As those of you who follow us closely may have already seen from our last investor update published just over two weeks ago, the month-by-month acceleration in our business is that we witnessed in the first quarter continue to gain steam throughout the second quarter. I'll highlight a few of these remarkable rates of change, to which I can now add some preliminary July results as well, just to emphasize again how rapid the pace of recovery has been in our industry and for our company. At the start of the second quarter in April, as the vaccine was still in the early stages of nationwide rollout, we saw just over 20,000 group room nights travel in our hotels. Total hotel occupancy for April, excluding the national, was 30%, and these group room nights represented about 28% of all room nights, as leisure and transient continued to constitute the majority of our guests that month. Now, just two months later in June, we saw a surge to over 69,000 group room nights, or 47%, of total room nights traveling in the month, as overall occupancy, still excluding the national, reached nearly 59%. To add to this, I'm happy to report that in the month of July, with the Gaylord National once again open, we serviced for the five resorts nearly 105,000 group room nights. This year to date has seen an extraordinary rate of change for such a short time in agribusiness. such that week by week over the last few months, it continually outpaced our internal forecasts. Meanwhile, our average daily cancellations in June fell to a post-COVID low of about 1,000 room nights per day, the fourth consecutive month of steady decline, and not that far off from our pre-COVID average of about 600 room nights per day over the 2018 and 2019 time period. Cancellation and attrition fees collected in the second quarter also mirrored this decline, falling to 7.6 million from 10.2 million in the first quarter and from a peak of 16 million in the fourth quarter of 2020. Even as cancellations fall, we are pleased with our increasing capability to collect on our contracted terms. As group room nights were increasing, cancellations were receding On the production side, organic new bookings continue to overtake and outpace COVID-related rebookings, reaching 63% of total bookings in the month of June, which we were very pleased to see. And lastly, one of the most positive signs for us in this stage of the recovery has been in-the-year, for-the-year activity to date. In every month in the second quarter, we book more group room nights for travel by the end of the current year than we did for the corresponding month in 19. And in June, we had 34% more lead volume for the remaining in-the-year, for-the-year bookings than we did in June of 2019. And just hot off the press, in-the-year, for-the-year bookings for July were about 25,000 room nights. This is purely group room nights. Up 14,000 room nights on July of 19. And the new in the year for the year, this was, by the way, a record for July in the year for the year production. In addition, when we look at lead volumes over the past two weeks, for groups looking to book a meeting in 2021, it is up significantly compared to the same time in 2019. In a typical year like 19, we see lead volumes start to decline because there are fewer dates to book into and there is less room and meeting space available. However, we're seeing meeting planners who would begin to look further out into, say, next year, are now more interested in potentially booking meetings for this year. Plus, there is more availability at our hotels than in a typical standard year. These data points indicate to me a real desire for businesses and organizations to get back together in person soon. Now, when you look at the rapid progress over just the last six or seven months, I don't know how you cannot but conclude that group travel is staging a strong comeback, very different from anything we have seen in past economic cycles, which is something we have stressed from the beginnings. So much for the view the group will be the last sector of the hotel industry to recover. Now, I know what is on many of your minds as you're listening at this moment, and that is, well, what about the headlines we're seeing with this Delta variant and the uptick in COVID-19 cases? Doesn't that mean we're headed right back to where we were a few months ago? Now, let me tell you what we're hearing right now at this moment on the ground in the markets we operate in. First, we believe it's important to remember the context. We're not in 2020 anymore when there was no vaccine and there were fears of the healthcare system capacity being overwhelmed with serious illness. Second, health authorities have advised that the case increases we have seen in many states in recent weeks are driven predominantly by the unvaccinated. Those so-called vaccine breakthrough cases have certainly occurred in some instances as well. But even amongst these breakthrough cases, the same authorities and experts confirm that the vaccine is effective at preventing high rates of serious illness and hospitalizations against the Delta variants. From everything we're hearing at the state, county, and city levels in our markets, city leaders are less worried about case counts now than they were in 2020 because of this. Instead, they are focused more on hospitalizations and healthcare capacity. which remain in very good shape, as the case numbers remain quite low relative to last year, even if the headline percent increases sound large. As long as we remain within that capacity, we don't anticipate return of widespread interventions like mandatory masking, distancing, and other restrictions, particularly in the markets we operate in. Instead, we expect to see the continued emphasis on driving vaccine adoption in those regions of the country with a low uptake. And I'll note here that we as a company are doing our part, and we've gone to great lengths to encourage and make it easy for our people to get vaccinated. And we see our customers doing the same as part of their meeting planning activity as well. So we will continue to watch this Delta variant very closely, but to date we have not seen a material impact in our hotels. And if we do see one, we would expect it to be modest, to be a modest impact as vaccination rates and immunity continues to increase. As surprisingly positive as the first half of this year has been, what we're even more excited about is how our business stands for the long term, including the remainder of 21, but well into 22, 23 and later. You should all be familiar by now with our strategy from the start of this pandemic, which was to prioritize rebooking the lost room nights. Cumulatively, since the first COVID-19 cancellations began in early 2020, we have materially exceeded our targets of 50% by rebooking 67% of all canceled room nights. That success has left us with a formable book of business for not only the rest of 21, but for the next several years. And when you layer on all the capital we have invested into our businesses, including our entertainment business, which I'll talk about in a minute or so, you have a powerful combination of two resurging businesses and multiple maturing capital projects, which we expect to fuel growth well into the future. Now, starting with just the remainder of this year, at the end of the second quarter, total room revenue on the books for the second half of 21 was 72% of the same period for 19. The second half of this year will also benefit from the reopening of the Gaylord National, which occurred as scheduled on July 1st. Indeed, the National hosted its first full house group a week after reopening, checking in on the 8th of July. While the National was closed, we took the opportunity to complete an ambitious $63 million full renovation of all guest rooms and initiated a repositioning of our food and beverage operations. The positive response from the first groups to experience the new product has affirmed this decision for us, and we're very happy with how the National performed in its first month back. Turning to 22 next year, this will be the first full year of our 100% ownership of the Gaylord Rockies after buying out our final 35% of the JV and surrounding acres this year for 210 million. And it will be the first full year of the contribution from our 158 million Gaylord Palms expansion, which added 302 rooms and 96,000 more square feet of meeting and event space, plus an expanded result pool product that opened in June. As of July 1st, a total hotel portfolio had 43 points of group occupancy on the books for 22, which is not far off the pace of 45 points, which we had on July 1 of 18 for 19, last full pre-COVID actualized year. And do remember, that it's not quite apples for apples. We have 300 more rooms this year. So, you know, 43 points of occupancy if you restate those 300 rooms. We're almost at the same level as we were in 18 for 19. Now, what is more, those group room nights for next year are contracted at a 6% higher ADR than the equivalent T1 room nights for 18. That yields over $343 million of group rooms revenue on the books for next year, or 4.7 more than at this time in 18, looking into 19. We find the same pattern of consistent rate growth when we perform this comparison for each subsequent year, such that even those years that fell marginally behind in occupancy points during the pandemic, that is 22 and 23, nevertheless remain on par or ahead in terms of group rooms revenue. And those years that are on par or ahead in occupancy points, which is 24 and 25, they're well ahead in terms of group rooms revenue. And that's just a snapshot as of the 1st of July. As new organic bookings continue to recover, as I just mentioned, they have outpaced rebookings for now three months now. We expect to be able to further improve our on-the-books position for these future years and make up for lost time. This is especially possible given the scarcity of new supply in the large group hotel space, which was the case long before COVID and will no doubt be the case long after, given the structural and economic barriers to build and open assets like ours, all of which supports the case for continued pricing power and ADR growth. This degree of visibility into the largest component of our business is something no one else in this industry, I believe, or I believe many other industries, whether real estate related or not, can speak to. Our considerable contracted book of business and our $800 million of still maturing, high-returning capital investments demonstrate that our company has the capability to not only return to the 2019 levels of performance, but to surpass them in the years to come. Now, to be clear, I speak for both our combined businesses in that statement because our entertainment segment's recovery has been no less rigorous than our hotels over the last six months. Some highlights you will have seen in our investor presentation, such as how the Grand Ole Opry sold 80% of its available seats for the month of June, including four full-capacity sold-out shows with attendance above 4,400 people, or how At quarter end, we had 130 shows scheduled at the Ryman for July through to December, compared to 107 shows scheduled during the same time period in 19. And just like our group business, we have a great forward book in our core entertainment venues. For next year, we have 147 confirmed concerts at the Ryman, while at the same time in 18, we only had 45 confirmed for 19. Now, what is interesting, however, is if your primary focus is on when we might surpass 19 levels, our entertainment business is already there in the month of June on the same store basis. That is, if you exclude the contribution of Old Red Orlando and the impact of our Circle Media joint venture, neither of which existed two years ago, the core entertainment assets of the Opry, the Ryman, the all-red Nashville Gatlinburg, the Wild Horse Saloon General Jackson in June of 21 exceeded their June 19 performance in terms of profitability. As I said on our last call, the resurgence of consumer demand for large entertainment has been one of the bright spots in all the pandemic recovery. It aligns with something we've always emphasized in our group hotel business, and our hotel and our entertainment business, which is people crave in-person experiences. And Nashville has been a beneficiary of this increase in demand. Do you know that during the pandemic, five different airlines have added 34 routes to Nashville International Airport? And out of the top 25 airports in the country, Nashville ranks fifth in recovery. Airport passenger counts into Nashville is almost back to pre-pandemic levels, which is quite remarkable. BNA, the Nashville symbol, has been undergoing a 1.2 billion airport expansion to accommodate the increase in passenger traffic over the past several years, and just recently opened a new state-of-the-art terminal to welcome these visitors. Throughout the second quarter, our hotel and entertainment business certainly benefited from people's desire to get out and travel again. In short, the second quarter was another step forward across our businesses with key measures that we track continuing to move in the right direction. Now, one last thought. Last week I had the opportunity to sit down with a partner of one of the nation's preeminent investment firms, and he posed this question to me. He said, as I've looked back over the years preceding COVID, It's apparent that Ryman has not marginally but materially outperformed its competitive set. And I wonder why that is. Is it something structural? And my answer was as follows. One, within our hotel business, we've developed a strong customer-based strategy that drives loyalty and repeat visitation. It's not a product-based strategy. And two, our capital deployment has been focused on high-returning projects, And you don't see us buying hotels that generate marginal returns over our weighted cost of capital. And three, by and large, we finance growth through our balance sheet and taking advantage of our strong cash flows. And we are not a serial issuer of equity. And I went on to say, so as you think about the next few years, because of our focus on the treatment of our customers through the pandemic, we expect to come out of this stronger than we went in. And as the hundreds of millions of dollars of capital We have deployed in high-returning projects over the last several years mature. We expect to see good growth in earnings and high returns on equity. Net-net, I wouldn't trade our position for any other company in our sector. So now let me turn over to Mark to go through some more of the financials. Mark?