This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero. Welcome to Ryman Hospitality Properties Third Quarter 2021 Earnings Conference Call. Hosting the call today from Ryman Hospitality's properties are Mr. Colin Reed, Chairman and Chief Executive Officer, and Mr. Mark Fiovante, President and Chief Financial Officer, Mr. Patrick Chaffin, Chief Operating Officer, and Scott Bailey, President, Opry Entertainment Group. This call will be available for digital replay. The number is 800-938-2113, with no conference ID required. 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 Biovanti. Sir, you may begin.
spk07: Good morning, and thank you 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 reasons. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure and exhibit to today's release. I'll now turn the call over to Colin.
spk05: Thank you, Mark, and good morning, everyone. When we last spoke on August 3rd, we were on the front slope of a rising wave of COVID-19 Delta variant cases and bombarded by headlines about the potential return of the restrictive measures we saw last year. Today, three months later, we are past the peak of that wave and now clearly on a downward slope. As of the end of last week, the national seven-day average of new COVID-19 cases had fallen over 59% from its peak on September 13th and about 19% in the last two weeks. And hospitalizations have followed the same trend. And I'm happy to report that despite the impact of the Delta variant in the third quarter, It's remarkable that our business performed in the upper end of our expectations, which we originally set and communicated before the Delta wave began. On a consolidated basis, we generated over $18 million of positive cash flow per month in the third quarter, which we define as adjusted EBITDA, less cash interest and debt service. This is compared to our expected range, again determined pre-Delta, of 16 to 19 million of positive cash flow per month. This is an impressive performance and I want to quantify the impact of the Delta variant on our business during the third quarter because from the headlines we all read and from the media in general in August and September, you sometimes got the impression that the sky was falling and we would be returning to government mandated lockdowns and gathering restrictions. In the third quarter, we saw about 160,000 room nights lost related to concerns over this Delta variant. However, let me give you some important context around this figure. First, 160,000 room nights is about 5% of the total cancellations we have experienced since the start of the pandemic. So in scale, the impact of the Delta wave was and is nothing like what we went through last year or earlier this year. In addition, 93% of these third quarter cancellations were for travel dates this year, or roughly 40% for the third quarter and 53% for the fourth quarter, with only a handful spilling into 2022. This means the cancellation window we experienced in the third quarter was shorter, about 50 days on average, compared to the roughly 90-day window for cancellations during the first phase of this pandemic. What this demonstrates to us and what we are hearing from the meeting planners themselves is that there continues to be a strong need and desire to hold their meetings. So many of these gatherings are mission critical to their organizations and they are waiting until the last possible moment as they watch the data before making any cancellation decisions. As a result, as the Delta variant wave subsides, the cancellation window has been shrinking, which is good news for us as we look towards next year. As of the end of the third quarter, we had 44 points of net group occupancy on the books for 2022, compared to 47 points at the end of the third quarter of 2018 for 2019, our last pre-COVID year. These group room nights for next year also contracted at a 6.5% higher rate than our T1 rooms at the same time in 2018. Therefore, in total, we have more group rooms revenue on the books for next year than we had at the same point in time headed into 2019, which turned out to be a record year for our business. And, of course, it's important to highlight that even with these recent cancellations, we still traveled over 300,000 group room nights in the third quarter. That is more than double the number of group room nights that travel with us in the first half of the year before the Delta wave. For the quarter, our hotel portfolio reached 54.5% occupancy with a peak of 63.4 in the month of July just before the Delta variant took hold. In fact, for the peak month of July, excluding the just reopened Gaylord National, which only reopened on the 1st of July, the other four Gaylord hotels reached 69 points of occupancy for that month. Now, think about that for a moment. We reached nearly 70 points of occupancy in hotels of our size, including the additional inventory of 300 new rooms at the Gaylord Palms. Again, this is a clear signal of the pent-up demand among both group and leisure travelers for what our hotels have to offer. I would add, that we've already seen cancellations materially decline in recent weeks after it became more apparent that the Delta wave had subsided in mid-September, which brings us to another very important dynamic to note in agribusiness, which is that we collected over $10 million in cancellation and attrition fees for the third quarter. For context, through the end of the third quarter, we have collected $28 million in cancellation and attrition fees year-to-date, which is the same level of fees we collected in 2009 during the great financial crisis. As you know, the contractual nature of our business provides a level of downside protection which we have highlighted with you often over the years and sets us apart from the rest of our hospitality peers that are not as group-focused. With all of our hotels now open and operating and plenty of group meetings successfully, and given there were no further governmental restrictions on gathering sizes in our markets, the collectability of our contracted fees for groups who do choose to cancel has become much stronger. Now, switching over from group for a moment, the other area of momentum in our hospitality business, which was even less affected by Delta, is the powerful resurgence we've seen in our leisure demand. We sold over 215,000 transient room nights in the third quarter, which is over 11% more than in the third quarter of 19 before COVID-19. And our transient ADR in the quarter exceeded $250, which is almost 24% higher than the third quarter of 2019. This transient momentum has continued into the fourth quarter, which is very exciting for us as we head into our most leisure-heavy months of the year over the holiday season. We recently began publicizing our 2021 Christmas program for the Gaylord Hotels, which this year will be a completely new multi-century experience built around the Warner Brothers Elf franchise with several highly unique interactive challenges for families to complete. This program is generating great response, driving material leisure transient pickup compared to last year. The bottom line is that while the Delta wave took a bite out of our group business in the third quarter, which will also linger into the fourth, It did not stop the broader reawakening that we have been witnessing in our hotels since the beginning of this year when the vaccine rollout commenced. And when it comes to our entertainment business, the effect of Delta was barely noticeable. Indeed, our entertainment business was just a few percentage points from matching the levels of 2019's third quarter on a same-store basis. That is, excluding the contributions of both Old Red Orlando and our Circle Media joint venture, neither of which we had in the third quarter of 19, revenue and adjusted EBITDA RE in the third quarter were 92% and 95% respectively of 2019's third quarter. Live entertainment demand has clearly been reanimated post-pandemic. That is also why we're excited to have reached a new agreement with Stratus Properties announced last week to acquire Block 21, the one-of-a-kind mixed-use entertainment complex in the heart of downtown Austin. Block 21 is anchored by the iconic 2,750-seat ACL Live at the Moody Theater and accompanied by the 310 at ACL Live Club, the 251-room W Austin Hotel and over 50,000 square feet of premier Class A commercial space. We could spend quite a bit of time discussing the menu of exciting opportunities created by this marriage of Nashville, the music city, with Austin, the live music capital of the world. Those of you who have followed our company since before COVID-19 know the history of this transaction, which we had originally announced in December of 19, but were forced to cancel in the depths of the pandemic. We stayed in close contact with Stratus throughout the past year and a half, and we were delighted to bring this deal back to fruition. And as we said the first time we announced this acquisition, opportunities to own assets like this in an absolute fantastic growth market like Austin do not come around very often. The acquisition of Block 21 will be a transformational deal for entertainment segment providing not only a tremendous increase in scale and geographic diversification, but also a host of opportunities to leverage our existing capabilities, including our artist and audience relationships, to create value across our physical and digital platforms. For example, we see opportunities to further utilize the ACL live venue across all day parts, to cross-market our customer bases and cross-promote content and artists between ACL Live and our other venues and channels, to improve the W Austin hotel utilization, especially in our wheelhouse of group business, and finally, to enhance margins through shared services. And to be clear, we expect to be accretive. We expect this deal to be accretive to AFFO in its first full year. Therefore, as Delta fades into the fourth quarter, our focus is squarely on returning to growth. This includes the investments we are making in Block 21 to supercharge our live entertainment strategy and the significant amount of capital that we have deployed into our hospitality business in the last three years that we look forward to maturing in the years to come. These include the Texan and Palms expansions, sound waves at Opryland, the national renovation, and our full ownership stake in the Gaylord Rockies. And we take a full plate of further future investment opportunities under consideration across our businesses, from scouting new locations for Old Red to develop opportunities for the recently acquired land around the Gaylord Rockies, to further enhancements, renovations, and expansions across our hotel portfolio to continue to serve our group, and leisure customers and their involving needs as this long-awaited recovery continues to take hold. Now, before I hand it over to Mark, who will review our balance sheet and the financial details of the Block 21 transaction, let me just make one last comment. I've been in this business for a long time, and I've witnessed my share of crisis over that span, COVID-19 merely being the last. However, as I sit here today, I cannot overemphasize how excited I am about everything happening in our portfolio and the opportunity set in front of us. Our teams inside and out of our hotels and entertainment venues have done just a wonderful, tremendous job taking care of our customers and our assets through this extraordinary period of time. And I believe we as a company have emerged better for it given everything we've learned. So with that, let me hand over to Mark.
spk07: Thank you, Colin, and good morning, everyone. In the third quarter, the company generated total revenue of $306.9 million and a net loss to common shareholders of $8.5 million, or 16 cents per fully diluted share. On a non-GAAP basis, the company's third quarter consolidated adjusted EBITDA RE was positive $86 million, And AFFO available at common shareholders was $52.1 million, or $0.94 per diluted share. This marks the second quarter of positive consolidated adjusted EBITDA RE since the first quarter of 2020 for the COVID-19 pandemic. And as Colin noted, we delivered in the upper end of our previously expected range for monthly cash flow as we've defined it, generating an average of over $18 million per month in the quarter. These results are a marked improvement in our business over the third quarter of last year when we had substantial monthly cash burn during the height of the pandemic and illustrates how far our businesses have recovered in the last 12 months. While cancellation rates in the last few weeks related to Delta have maturely improved, as Colin noted, approximately one-half of those group cancellations occurred for travel dates in the fourth quarter. These cancellations will have a lingering impact on this current fourth quarter. We expect that fourth quarter average monthly cash flow after debt service will be in the mid-teens as those cancellations flow through the balance of this year. In terms of liquidity, due to our positive cash flow, we retired $45 million of our revolver in the third quarter and ended with an outstanding balance of $180 million. This left $520 million available, and combined with the $53.2 million of unrestricted cash gives us approximately $573 million of available liquidity. As we announced last week, the purchase price for the acquisition of Block 21 will be $260 million, of which we will assume approximately $138 million of the property's existing non-recourse CMBS debt. We plan to finance the balance of approximately $122 million using our available liquidity. We expect the transaction to be accretive to AFFO on a full year basis and the combined purchase price net of a projected $11 million of cash reserves acquired represents approximately 15 times the last 2019 pre-COVID adjusted EBITDA of block 21 and approximately 12 times our anticipated 2023 adjusted EBITDA contribution. This acquisition is fully permitted under our existing credit facility covenant waiver, and we expect to be able to exit that waiver on schedule early next year. The company once again did not tap our existing ATM program in the third quarter, but it remains in place and available to us as we look at our recent and upcoming capital investment activity. This includes Block 21 and the many exciting opportunities we see for the newly combined entertainment portfolio after this transaction. as well as the next generation of expansions, enhancements, or improvements across our hotel portfolio. And with that, I'll turn it back to Colin for any closing remarks.
spk05: Thanks, Mark. No, I'll hold my remarks. Let's, Emma, go do some Q&A, and then maybe we'll have a closing remark at the end.
spk06: At this time, if you would like to ask a question, please press star one on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and one to ask a question, and we will take our first question from Bill Crow with Raymond James.
spk09: Good morning, guys. Mark, just following up where you left off on block 21 and the financing on a long-term basis, is that accretive in the first full year if you maintain your capital structure? In other words, kind of a 50-50 debt equity assumption?
spk07: Yes, marginally. Okay.
spk09: Okay. And then the other question I wanted to clear up is on the cancellation fees. What do they look like? What have you collected for the fourth quarter, if you can tell us that? And based on cancellations as you look forward, can you give us a picture for what those fee collections could be next year?
spk03: Hey, Bill, this is Patrick Chapman. As we look to the fourth quarter, you know, I think this was already mentioned, we're expecting – in the mid-teens, not quite as high as what we saw in the fourth quarter of 2020, but pretty close. It's a much easier discussion with meeting planners as they cancel for Delta in August and September. And so as we collected roughly $9 or $10 million in the third quarter, we expect mid-teens for the fourth quarter. And based on how everything's going so far, that we are standing by that forecast. As we look to next year, we do expect those cancellation fees to start declining rapidly as we're seeing fewer and fewer cancellations. I mean, Delta, at the peak of Delta, we were seeing 3,000 to 5,000 cancellations per day. Room nights. Room nights. And that's now dropped to below our pre-pandemic level of about 600 per day. So we're definitely getting back to a much more normalized state of cancellations. And therefore, we would expect to see cancellation fees decline in 2022. All right.
spk09: I may jump back in. Thanks.
spk05: Hey, Bill, let me just add one thing to Mark's comment about accretion, the first year of operation. It's going to take us a good 12 to 18 months to put things like tours into the Moody Theater facility. it's going to take us some time to get the renovations of this hotel done, which, I mean, we're very excited about it. I mean, you think about that W Hotel, you know, we purchased that baby, you know, 250 a key, something like that, you know, not 2.2 million a key. And so, you know, this thing will crank up, I think, in that 12 to 24-month period, but We're very excited about this deal.
spk09: Great. Thanks, Colin.
spk05: Thanks, Bill.
spk06: We'll go next to Sean Kelly with Bank of America.
spk04: Hey, good morning, everyone. Colin, you were rattling a couple of these off quite quickly at the beginning, and I just wanted to make sure I caught it. So I think you gave sort of your updated performance metrics as it relates to what's on the books for 2022. If I caught it correctly, I think it was 42% occupancy on the books. That's a modest – maybe I could just start there. Was that the right number? No, no.
spk05: The number – I didn't rattle. I said it so succinctly. We have 44 points of net occupancy on the books, which compares to 47 at the end of the third quarter of 18 for 19. But the rate is materially higher. So net-net, we've got more group revenue on the books. for next year than we did in 18 for 19. But, you know, the other piece of this, this is very important. The group part of this is very important. And, by the way, we saw really good group bookings in the month of October and lead volumes. We'll have all of the lead volume data here, Patrick, in the next 24 hours. But, you know, we booked a bunch of rooms in the month of October. But the thing you've got to keep focused on, in my mind, is is you know can we keep the level of leisure business that we have seen in the middle of this pandemic next year you know our product is fabulous you know the assets that we own are really great for the leisure customer you know we we we booked in the third quarter 11 more leisure rooms at a rate that is about 20, I think the number was 20% up on last year. So when we talk about our group business revenue-wise being above where we were in 18 for 19, I am hopeful that our leisure production is going to be materially better in 22 than we saw in the year of 2019. I've sort of branched out from your question. That's how we sort of see the world next year.
spk04: Thanks for clarifying, and sorry about the rattle. So let's just – but the 44 compares to, I believe, on the last update – 43, if I looked at the data correctly. So you did actually see things fill in a little bit more for 22, and just help us think through, do you expect to get those last couple points, or do you actually hold them back as we move through the fourth quarter because the rates you're seeing are so good, you want to see what you can do in the year for the year? Just talk a little bit about maybe the booking psychology for the last kind of fill-in for 22. Yeah, yeah.
spk05: So I'll give you my answer, and then I'm going to throw it over to Pat to amplify. You know, what we have told our sales folks is that we want to put occupancy on the books for next year. Rate is obviously important, but, you know, we want to bring our people back to work, and we want to put occupancy on the books. And so, you know, I don't know what – I haven't got the detail of the 160,000 room nights that we booked in October, Patrick, in terms of, you know, T plus one. We'll have that data here shortly. Okay. Do you have that data?
spk03: I do.
spk05: All right. Well, put it on.
spk03: Yeah. So just talking about what we booked in October, we booked about 163,000 room nights. About 51,000 of that was going into T-plus-1 or 2022. That's a good number. And as you think about that, our average in October for T-plus-1 is about 33,000 to 35,000 room nights. 2019 was our high point. It was the best that we ever did in terms of how many room nights we booked in. It was about 60,000, 63,000, something like that. So not quite as good as the very best we ever did, but certainly above the average at 51,000. And so Delta obviously had some impact on 2022, and it slowed down folks. It didn't necessarily stop them from looking, but it stopped them from the decision-making process. And so to your question, Q4 is a very important quarter for us. We do expect that Delta will have a little bit of hangover because it takes us, we talked about 90 day cancellation window, it takes us about 90 days to sort of overcome and get the lead volumes going again. And so we do think that they'll continue, we saw what happened in October was very encouraging and we hope that that will continue through the rest of this quarter But I think a lot of what we saw in the second quarter will occur again in 2022. And what I mean by that is in the second quarter of this year, we saw a lot of in-the-year, for-the-year business start showing up again and pent-up demand starting breaking free. So we're hopeful and are looking towards 2022 and believing that there will be more in-the-year, for-the-year business than we saw in 2021. So, yeah, we have a little bit of ground to make up if you're comparing us to 2019, the best ever. And fourth quarter will be important in helping close some of that gap. But we think that the end-of-year, fourth-of-year business will be displaying the fact that pent-up demand is ready to start booking again.
spk07: Ned, Ned. Keep in mind you're comparing occupancy rates with the 300 more rooms at the Palms as well.
spk05: Right.
spk07: We're selling more rooms.
spk05: Yeah, that's a good point. But, Ned, Ned, we're pretty encouraged with what has gone on with this glide slope of Delta and witnessing the behavior of the meeting planners, the When Patrick gave me these numbers for October yesterday, it surprised me a little bit, surprised me on the upside. And the number he's just gotten this morning for the T plus one, that 50 plus thousand room nights, that's really encouraging. So I'm pretty optimistic, you know, absent another wave of whatever. I think 2022 hotel-wise is going to be, could be pretty good for us.
spk04: Great. And maybe just as my final question would just be, could you talk a little bit about, I mean, obviously we did see occupancy pick up a lot in the quarter, July, you know, and August both. Can you talk a bit about just what's the group spending behavior? So when people are on site, how are you seeing them act relative to maybe kind of, let's call it pre-COVID type levels in terms of you know, uptake on food and beverage, uptake on other amenities. Just, yeah, what's the psychology of the groups as they are, you know, once they're actually on site?
spk03: Do you want to take it? Yeah, Sean, I would sum it up as the psychology is we want to get back to business. We want to get back to meeting. And so when they're on site, we are seeing folks opening up the pocketbook. Obviously, they're trimming their budgets just to match up to the occupancy of the group that's in-house. So maybe they have fewer attendees simply because of Delta or something else. But on a per-person basis, you know, we're very encouraged by what we've seen, and we're getting, you know, corporate has been getting back to 2019 levels in many cases. So folks are definitely ready to get moving. You know, we've talked about this before. People know that they need to be meeting again, and once they get together, they're excited to be together again, and that's showing up in the food and beverage revenues that they're capturing. Thank you very much. Thanks, John.
spk06: We'll go next.
spk10: Thanks. I wanted to ask you a little bit more about next year as well. And you talked about the significant rate improvement for the groups that are on the books now for 22. But could you maybe talk a little bit more about what you're seeing on the expense side? And I mean, for the quarter, for what it's worth, your margin was better than what we had expected. But I'm just wondering if there's a you know, what you're seeing on kind of labor costs and food and beverage costs and, you know, how much of those rate increases will kind of flow through to margin improvement next year. Yeah.
spk05: Well, why don't I let Patrick handle this rather than me starting and then handing over? You go for it.
spk03: Yeah. Smeets, you're very correct. Labor is the biggest challenge. You know, we've seen increases in the third quarter versus 19 of about 20% in terms of labor wage increases. Now we're working very hard to offset that. We've talked about this for several months that we are targeting significant decreases in our management head counts simply because we've learned so much through COVID and we can operate with fewer folks, highly talented, highly compensated, but fewer bodies. And so we've targeted, you know, around the mid-teens in terms of reductions in headcount and management ranks to help offset the hourly increases in wages. Pricing in our rooms is obviously helping, and obviously the food and beverage can be priced in more real time. And, you know, meeting planners understand that food and beverage is going to go up as the cost of meat and proteins go up. We're doing other things, though, to help offset that by bringing some of our meat preparation, protein preparation in-house and doing some of the butchering in-house. We're making housekeeping optional. We're installing more and more technology to help with the check-in process, with beverage ordering process, with wayfinding. So looking for more and more opportunities to have less bodies in play, more efficient and easier for our customers to actually use us. We're moving to more grab-and-go options on the food and beverage side because it's much more efficient to offer grab-and-go as opposed to sit-down dining. Obviously, we'll continue to have that option, but just looking for more and more ways to do things efficiently and then looking for efficiencies on the utility side with cogeneration and other opportunities. So doing a lot of things to help offset that. We're in our budget process right now. We have not landed on what that margin is going to be. But between the increases in rate and a lot of the efficiencies we're achieving, we're hopeful that we can offset a lot of the labor increases.
spk05: You know, Smead's calling. I'm going to give a shout out to not our manager, Chris Nazzetta, who made a comment. He was being interviewed. I don't know when it was, but it was reported here. I read it maybe on Sunday or Monday. He made a very important point, which is this industry that we are very much part of, both entertainment business as well as our hotel business, is unique in one respect. We can reprice our business basically every day. And so we've been on the offense as it relates to rate, and we've been on the offense as it relates to cost. And that's why I think you saw margins the way they were in the third quarter. I'm not saying this is easy, but, you know, I feel like 22 is going to be a good year for this company.
spk07: I think we still, when you net it all down, we still believe that we have margin expansion post-pandemic versus pre-pandemic.
spk05: Yeah, because of all of the things we've done from an offensive perspective.
spk11: Is that okay, Smeech? Yeah, no, that's good. I wanted to ask just one more question about the bookings you're seeing, and do you have any sense of, are you getting, I guess, maybe new customers that are coming in that maybe, you know, previously have gone to other, you know, larger, kind of, quote, unquote, core cities that are choosing, you know, to your destination, whether it's Denver or Dallas or Orlando, or do you think that you can kind of comment on that?
spk03: Yeah, Smeet's a good question. We've actually hired additional sales resources who are specifically focused on the acquisition and stealing market share away from some of our competitors, and we are having success with doing that. Initially, it came in the form of folks couldn't meet maybe where they wanted to in the past, and so we became a new option for them. and we've been able to win over their business. So we've specifically hired sales folks to help us do that, and we're very encouraged by what we're seeing.
spk05: And again, I don't want to keep touting the same horn. This was a directive that we made to our manager, Mario, months ago. I mean, literally probably 12 months ago in the height of the pandemic. And that is, we want to go on the offense here. We do not want to be a victim here. We want to go recruit the best salespeople that have been disenfranchised by our competitors. And that's what we've done. And we'll probably do more of that. And it sets us up really well for next year. Thank you. Thank you.
spk06: We'll go next to Dora Creston with Wells Fargo.
spk01: Hey, thanks. Good morning. You previously said that in order to spin out the entertainment business, you needed a base of about $75 million in EBITDA and the right management team in place and an improving operating environment. Is there any update that you can give us regarding your view on the timing of the spin?
spk05: No. No, simply because we've got just so much going on with this business right now. We've got a TV platform going. media platform that is in a growth mode. We've got to bring in Block 21 fully and explain to our shareholders what this group of assets look like. We're working on other growth initiatives at this stage. But I feel confident that Over the course of the next few months, six months, nine months, we will be able to, one way, shape, or form, demonstrate to our shareholder group the underlying value of this enterprise, whether it's standalone or whether it's still within the company remains to be seen. But this is a very valuable business and one of which we're very excited about.
spk01: And how are you thinking about your holiday programming longer term? I mean, would you expect to return to ICE or have you found that the programming of last year and this year may have a better return?
spk05: No, we love ICE. The problem is with all of the travel restrictions from China to this country, we spent two, three months with applications into China. Beijing to try and get visas for these artisans from Harbin. And unfortunately, because of the travel restrictions, this was dragging on and we couldn't get it. So we had to make an audible here. And that's why we've gone with ELF, which we're very excited about. But I think, Patrick, we will bring ICE back as soon as we can get those folks from China.
spk03: Yeah, Dory, this is Patrick. We definitely even further believe in the power of ice. I would say, though, that what we've learned over the past two years is how we can take some of the interactive programming that we've got in place now to further enhance ice and make it even more exciting and a little bit fresh, as well as the fact that we've gotten better at the ancillary offerings around ice, some of the other attractions. So I would say that we've learned more about our transient customer, we've learned more about what they like on the holiday side, and we've learned how to to enhance ICE for the future. So we're very excited as we look forward and get the Chinese artisans traveling again, hopefully next year.
spk01: Okay, thanks.
spk06: We'll go next to Chris. We'll go next to Chris Maronco with Digibank.
spk00: Hey, good morning, guys. Thanks for all the updated points. I have a question about do you know how much – business that canceled, whether it's yours or maybe broader industry view hasn't, hasn't rebooked yet. It seems like there's, there's a pretty good opportunity. You guys are already getting a lot of rate growth for next year. It seems like there's even more rate growth opportunity coming shorter term, right? Because there's going to be just a shortage of space as everybody gets more confident in their, in their need to meet. So is there any, is there any way to quantify that? Or maybe that's more of a 2023 opportunity as well. I, I, I,
spk05: You know, we find it difficult to quantify simply because our competitors, the folks you sort of tend to, or the analyst community tend to compass to, really don't disclose too much data around group cancellations, rebooks. I mean, we're really one of one when it comes to this degree of transparency, I think. The point you're making is extraordinarily important because the meetings industry has been decimated over the last 18 months. And this is one of the reasons why we went on the offense in terms of going and recruiting salespeople, why we went, you know, in the first week of COVID, why we instructed Marriott to instruct our salespeople that, let's not worry about cancellation fees and argue about force majeure. Let us do rebooks. And we're at 65% of the almost 2 million room nights that we've rebooked. 65% of the almost 2 million room nights have been canceled. We're working with a big bucket of room nights that have canceled with us that haven't rebooked. And we're working through that process. But the competitors of ours have have also suffered the same set of issues. And we see this as a huge opportunity. And particularly, the other part of it all is these city convention centers that just shut their doors down and basically shunted their customers and said, we can't hold these conventions. And You know, we've picked up some business from these companies that have been, you know, essentially shuttered and, you know, put them into hotels of ours. And so there's a big opportunity here. Every time, you know, Patrick, every time we have seen, you know, problems within the group industry, this occurred in 2009. There are those organizations that treated the customer well and those organizations that didn't. And we came out of 209, a stronger company, and I bet you that the same thing is going to happen here. We are going to attract new customers. We're going to attract the best salespeople, and I think that really bodes well for 22, 23, and 24. Do you want to add to that? I think you captured it. Thanks, Matt.
spk00: Great. Well, thanks, Colin. And then follow up for you on when we think about kind of the out years, you obviously have the opportunity to expand the Rockies. How would you, and there's obviously whatever the cost may be to do that. How do you weigh that against a potential to buy an existing property or to another market or possibly a joint venture in a new market for you? Just trying to get a sense as to, how important building that historical rotation strategy is versus possibly getting, you know, obviously a pretty attractive return on expanding Rockies.
spk05: Yeah. You know, this is the real interesting part of that job, and I think it's going to be something that, you know, Mark and I and Patrick will spend a ton of our time weighing here over the next six months because, you know, We're in a very fortunate position that we have a lot of opportunity here to grow this company, and we've got some really exciting return projects that we can do. We've proven the thesis of SoundWaves. When we built this baby, there was a lot of concern of, did we build it too big? Why did you put a water park in a big group, dominant group hotel like Opryland? But when you look at the 240,000 tickets we've sold this year, I beg your pardon, room nights we've sold this year, we've really proven the thesis of this thing. It's operating at or above our internal rates of return, which we had mid-teen. So balancing these types of projects, with the unique opportunity of finding an asset in a market that would aid the rotational strategy is something that we're spending a lot of time on right now. Um, but I really do believe that net net six, nine months, 12 months from now, we're going to demonstrate to our shareholders that we have got a tail here of growth that is, that is pretty compelling. And, um, I'm not going to tell you which one comes first, which one comes second. And by the way, the same thing applies to our entertainment business. We've got some really good interesting opportunities in our entertainment business as well. So this is going to be a fun period of time for us, I think, over the next 12 months. Not as we stab ourselves in the chest being the victim. It's how we transform this company for its next wave of wonderful growth.
spk00: Okay. Well, very good. Appreciate all the thoughts, Colin. Thanks, bud.
spk06: We'll go next back to Shoals with your securities.
spk08: Hi. Good morning. A couple questions here. You know, it sounds like, you know, there's been a bit of geographic shift in, you know, taking some business from other markets. Any particular markets, that you have been able to take share from? Certainly, markets like New York City, San Francisco, Chicago are really hurting right now as far as group business. Any particular markets that stand out to you?
spk05: I don't know how to answer that question because it's not obvious from the information that we've sent that you can conclude that. Our business has been pretty solid all the way across And yes, we've recruited salespeople out of Las Vegas and Southern California, and we'll continue to focus on those markets. But our business, the amount of business that we have conducted in this third quarter has been pretty uniform across each of our businesses. And we've seen a lot of customers that we've seen in prior years. Do you want to add any comment to that, Patrick?
spk03: No, I would agree. I mean, geographically, I think it's pretty consistent. I think we've picked up some opportunities out of the tech area. We've picked up some opportunities out of the medical devices and services areas. But geographically, I think it's pretty consistent.
spk08: Okay. Okay. I have two more questions here. Outside of... the purchase of block 21, how should we think about CapEx spend for next year?
spk05: Well, at this stage, the only capital that we have got planned for next year would be the capital replacement reserve. I mean, we don't have any major projects that we've announced yet.
spk07: Yeah, beyond just FF&E and maintenance, we'll be finishing up the F&B repositioning at the National, where we will put some capital to work at Block 21. To be announced. Correct. But in terms of the enhancements, we think about tour product, food and beverage, et cetera. But that's not a significant amount of money. So the biggest, depending on when we close Block 21, whether it's year-end or early in the first quarter, that will be the biggest capital outlay.
spk08: Okay. Thank you. My last question, and I won't use the term rattle, but... Google says ran through quickly for that. You had mentioned, did you say for 4Q, mid-teen monthly positive cash flow? Was that correct? And if so, is that a comparable figure? I look at the monthly PDFs that you put out. Is that comparable to what you had talked about most recently, the positive 16 to 19? Is that kind of apples to apples how to think about that?
spk05: Yeah. Yeah. So here's the hard thing as we get into the fourth quarter. The fourth quarter shifts from group dominant to leisure dominant. And leisure, we all know, is booked short term. So what we've seen so far into the fourth quarter is for leisure has been exciting. And the issue is, does that continue? So, you know, we've said mid-teens, and we're pretty comfortable with that. And then we move into 22, where group takes over again.
spk08: Okay. Fair enough. Thank you for the clarification. I'm good. Thank you.
spk05: Thank you. Thanks.
spk06: I will turn the program back over to Colin for any closing or additional remarks.
spk05: Emma, thank you. And folks on the call, thank you very much indeed for taking the time this morning. We're very excited about where our company sits. We're very excited about the growth opportunities for 22, those that we have already announced, and hopefully we'll have some more interesting projects to share with you over the months ahead. And if there are any more questions that you may have that you want clarification on, please feel free to reach out to either Mark Fioravanti or Todd Seaford, our guy. And thank you again. Look forward to meeting face-to-face at some point. And if we don't speak beforehand, have a great holiday season, both Thanksgiving and the Christmas program. Thanks very much.
spk06: This does conclude today's program.
Disclaimer