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spk08: Hello and welcome to the Ryman Hospitality Properties fourth quarter and full year 2021 earnings conference call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark Fiervanti, President and Chief Financial Officer, Mr. Patrick Chaffin, Chief Operating Officer, and Mr. Scott Bailey, President, Opry Entertainment Group. This call will be made available for digital replay. The number is 800-934-2123, 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 Fiorvanti, so you may begin.
spk02: Thank you, Ashley. Good morning, and thank you, everyone, 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 it over to Colin.
spk01: Thanks, Mark, and good morning, everyone. Well, quite a lot has happened since we last spoke on November 2nd, a time when the word Omicron meant very little to anyone. and the Delta variant was still fresh in our collective memory. Starting in December, we saw the rise of the Omicron variant, the tallest wave of COVID-19 cases since the pandemic began. However, we were fortunate as this latest wave appears to have passed with much less severity due to the widespread vaccination, and what experts are telling us is the lesser virulence of this particular strain. Today, just about three months after the first Omicron case was reported in the U.S., the daily average new cases has fallen over 87% from the peak on January 14th. For our part, we did experience an increase in group cancellation activity during this wave from December through now, which will primarily impact the early part of this year, and we'll talk about that in a moment. However, the fourth quarter, as you know, is our most leisure-focused period of the year, and this segment shined for us in many ways throughout this quarter. In the fourth quarter, we hosted over 272,000 leisure transient room nights, an increase of 2.4% over the fourth quarter of 2019, our last pre-COVID fourth quarter. Now, what's more impressive is that these transient room nights were sold at an ADR over 25 percent higher than the fourth quarter of 19, helping push at total ADR growth 19.6 percent over the same period. Now, for the month of December, transient ADR alone was up 35 percent over December of 19. Our total rooms revenue of 53 million for the month of December was within about 1 percent, half a million bucks, of setting an all-time monthly rooms revenue record. And the crazy thing is, this was at a 60% occupancy for that particular month. Clearly, the Gaylord Hotels brand, driven by the investments we've made into our leisure and holiday programming, food and beverage offerings, and our unique resort amenities such as our sound waves, is resonating strongly with our targeted leisure guests and families. as they seek out fun, safe, upscale, and luxury getaways. Strong leisure performance allowed us to sustain our occupancy on a sequential basis, as we held the fourth quarter occupancy of 53% compared to 54.5%, in the third quarter, despite both the expected seasonal fall-off in group and the significant impact that the earlier Delta variant cancellations had on the group side of our business in the fourth quarter. And plenty of groups still did travel in the quarter, as we hosted almost 236,000 group room nights, about 54% of what we saw in the fourth quarter of 2019. We also collected $20 million of attrition and cancellation fees in the fourth quarter, attributable to those Delta cancellations from before December, bringing our total full-year collections to $48.5 million. The bottom line is our company delivered positive monthly average cash flow after debt service of just over $18 million per month, which is above the estimate we provided in early November. in the mid-teens, and this is, again, notwithstanding the rise of Omnicom that we saw late in the quarter. Now, as we did with the Delta variant in November, let me give you some context of what is going on with Omnicom within our business and some color around what we're seeing and hearing in terms of group reaction. During the Delta wave, we experienced about 183,000 group room night cancellations for all future periods attributable to that variant. Since the Omicron variant became dominant in early December, we've attributed approximately 177 room-night cancellations through February 21st to this particular wave. We do expect there will be more to come as new COVID-19 cases, while still falling, have not fully reached the lows of last summer, which is the first time our average daily cancellation reached their pre-COVID baseline. Now, let me give you a little bit more information on this. I was talking to Patrick earlier this morning. Now, be clear, when we assess data to compare this year's cancellation activity to a previous period, we normally look at four continuing weeks of activity. But it would seem from the last two weeks cancellation activity, we are now at or below 2019 levels. As a consequence of this, we are guardedly optimistic that Omicron is behind us. Now, this subtotal of Omicron cancellations represents about 5.6% of all group room nights lost since the pandemic began. So just as with the Delta wave, it's important to remember that neither of these waves are anything like the painful experience that 2020 and early 21 were for our company and our industry. Another difference to note this time is that the recent Omicron cancellations have tended to have the shortest cancellation window of the pandemic, about 40 days out on average. Approximately 85% of these cancellations thus far have been for travel from December through March. This compares to about a 50-day average cancellations for the Delta variant and a 90-day window early in the pandemic. Anecdotally, it also appears to us that a greater share of these recent cancellations are less motivated by preemptive caution as they are by practical reality, given how prevalent Omicron became. Several cancellation groups simply had too many positive cases amongst their members that it wasn't in fact practical to hold the meeting. so they were unable to travel, even if the organizers may have actually wanted to go ahead. Between the data and these anecdotal conversations we've had with meeting planners, it seems evident that groups are very eager to resume the progress we are making on getting back to normal as soon as practical, as this latest wave subsides. And when that happens, we will be well-positioned. Turning to our fourth quarter sales production, we booked over just shy of a million room nights, 993,000 to be precise, in the fourth quarter, up 74% from the fourth quarter of 2020, and down less than 1% against the one million room nights contracted in the fourth quarter of 19. And 70% of this activity were new meetings, with the balance being rebookings. Furthermore, over 20% or 200,000 of these room nights were for T plus one or for, to say a different way, 2022. In fact, on a net basis, we added over 54,000 room nights in the fourth quarter of 21 for travel in 22. Now, to put this in terms of occupancy, we increased our net occupancy on the books for 22 from 44% as of September 30th to 46% as of December 31st. Now it's important to remind you that Omicron took most of its bite out of this position after December 31st. About 137,000 of the 177,000 Omicron cancellations I mentioned just a second ago came in after December 31st. for travel primarily in the first quarter. Therefore, it may be helpful here to drill down just a little bit into these figures to get a better picture of the potential that we're seeing for 2022 as Omicron recedes and our in-the-year, four-year sales activity picks up. Now, while we were down about nine points of net group occupancy the first half of 22 compared to 19, to start the year and subsequently lost some more of those rooms due to Omicron in January and February. For the second half of this year, we're only down 1.5 net occupancy points compared to 2019 at the start of the year. Don't forget, we have 300 more rooms in our inventory for 2022 than we did for 2019 in these denominators. then when you layer in the rate growth on the books for these rooms relative to the same time in 19, which was 7% higher overall for 22, you see the potential for us to perform moving through the year as the Omicron hangover wanes. In fact, for the third and fourth quarters of 22, we had more group room revenue on the books at the start of this year than we did for the third and fourth quarters of 19, at the beginning of that year. Now here is where I'm excited to highlight that after 2021 ended for the month of January in 2022, we had the best in the year for the year bookings performance for any January since 2013. And we believe that this in the year for the year momentum will continue because in the year for the year leads were up 50% across our portfolio compared to lead volumes at the end of January 2019. So the bottom line is that while we lost some net occupancy to Omicron in the early days of this year, our second half position, our short-term sales momentum, and our lead volumes for this year have us very optimistic that we can work our way back towards our original pre-Omicron expectations for the year. subject really only to the availability on our calendar to accommodate the lead volumes we have. And all of this sales activity, we're not being shy on rate either. Our ability to capture rate while continuing to post solid booking numbers is not simply a response to the inflationary data that we're all reading about over the recent months. Rather, when we look at the investments we have made and are making in our assets, it's clear to us how favorable our product compares to the competition, which has not seen much in the way of new supply, innovation, or come to that investment throughout this long economic cycle since 2009, especially through the last couple of years as we've been wrestling with COVID. We've invested literally hundreds of millions of dollars of capital into our hotel portfolio over the last few years, And that is on top of the $800 million introduction of the Gaylord Rockies. And we have many more interesting and exciting projects we are working on that will further enhance our competitive positioning. You may be familiar with these projects we have completed in the last couple of years. But given the fact that we've got a whole bunch of new shareholders, let me just quickly recap the activity that we've undertaken. We expanded our Gaylord Palms and Gaylord Texans, each by 300 new guest rooms and approximately 90,000 square feet of new, modern, functional, high-tech meeting and breakout space. We renovated the entire 2,000 rooms at the Gaylord National and are nearly complete with a full concepting of the dining experiences there as well. We've invested $90 million to build the first of its kind water experience at Sound Waves in Opera Band And by the way, you know, given what has happened with the performance of Soundways through COVID, we see a strong investment case to replicate this feature elsewhere. We have planned approximately $45 million of enhancements to the Gaylord Rockies to realize our original vision for this hotel. Now that it's under our sole ownership. And we're revamping the Texan Riverwalk and planning to renovate the original 1,400 rooms at the Palms. to match the recent expansion there. The list continues to expand as we regularly invest to grow and evolve with our customers and their needs. And we believe our customers, both existing and increasingly newcomers alike, appreciate the differentiated experience our investments create. And we believe this will add further value. And we really do believe that these events will set us aside from the competitive set. This is a tremendous advantage for our portfolio, and we expect that the true earnings power of our hotel business, supported by the virtuous cycle of high return capital deployment that we sustained through the difficult years of 20 and 21, will become increasingly evident as this pandemic tide recedes in 22 and beyond. Now, turning to our entertainment business, it appears the tide is already quite further out. as the live entertainment industry overall continues to thrive post-pandemic. A brief look at the performance of our own assets on a same-store basis, which would exclude All Red Orlando and the Circle joint venture, neither of which existed in 2019, shows that this remained true in the fourth quarter of 2021. On that basis, same-store revenue grew 11%, and adjusted EBITDA increased 7%, over the fourth quarter of 19. You've all heard us say for years how valuable we believe the Opry Entertainment Group is, and in recent quarters, we've continued to emphasize how that value is becoming more apparent following COVID, as people's desire to connect again in person and experience live entertainment came roaring back in 2021. We believe this continues to be the case, and this is why we've continued to invest in growing the scale of our venue network and the size of our customer reach, both organically and through our pending acquisition of Block 21 in Austin and its famed ACL Live at the Moody Theatre. We've also announced in the fourth quarter what will be our largest all-red venue coming to Las Vegas in 2023 at the southeast corner of Flamingo and Las Vegas Boulevard, right on the Strip, in front of Ballet's across the street from the renowned Bellagio Fountains. It will consist of 27,000 square feet over four stories and a performance capacity close to 700 people topped by a 4,500 square foot rooftop. When both deals are complete, Block 21 and All Red Las Vegas, our venue network will span coast to coast from Las Vegas to Austin to Nashville to Orlando. We'll be able to reach our fans wherever they are and help bring the artists we have developed relationships with to new markets and new audiences. We really believe our entertainment business is a valuable jewel, and while ultimately it may not belong in the REIT, we're committed to nurturing its growth, stewarding in its brands, and maximizing its potential value for shareholders when the time is right. And we believe these two major investments are an important step to that path. One last development that I'm happy to announce is the expansion of our board with the addition of two new members this week, both of whom should be familiar names to our long-term shareholders. Michael Roth rejoins our board after one year absent, and we're delighted to have his incredible experience and history with our company. Oh, that's Mike. My Apple Watch. My Apple Watch. These things are so disruptive. Apologies for that. So we're very happy to have Michael back on our board. And as some of you may have read this morning, Mark Fioravanti, our President and Chief Financial Officer, will be joining our board as well. Mark has been essential to the growth and returns that this company has delivered over the last couple of decades through both his strategic advice and his financial stewardship. of our balance sheet, which was particularly vital these past two years as we navigated the COVID pandemic. Mark has been a trusted advisor to me going back not only through our time at Ryman and its predecessor, Gaylord Entertainment, but even further to our shared time together at Harrah's before I came over to this company. I'm pleased to have Mark's counsel now directly in the board room with me. And with that, let me hand over to him to recap our balance sheet and liquidity and a little bit of financial data as well, Mark.
spk02: Thanks, Colin. In the third quarter, the company generated total revenue of $377.4 million and a net loss to common shareholders of $6 million, or 11 cents per fully diluted share. On a non-GAAP basis, the company's third quarter consolidated adjusted EBITDA RE and was positive $85.6 million, and AFFL available to common shareholders was $52.1 million, or $0.94 per diluted share. This marks the third consecutive quarter of positive consolidated adjusted EBITDA RE since the first quarter of 2020 before the COVID pandemic. Considering the reduced actualized group occupancy due to Delta cancellations, we are pleased with the hotel margin performance in the quarter. At 53%, Hotel occupancy was down 23 points, including 204,000 group room nights when compared to the fourth quarter of 2019. Nonetheless, our hotel's adjusted EBITDA RE margin was 25.5%, down just six percentage points. I caution here about comparing our fourth quarter margin to the immediately preceding third quarter for a read on the current recovery trajectory. Even though occupancy was similar sequentially, In the fourth quarter, our hotels typically generate lower margin holiday programming revenue. In addition to the seasonal difference, this year we serviced approximately 71,000 fewer group room nights compared to the third quarter due to the near-term Delta cancellations. This mixed change negatively impacted high margin banquet business volumes in the quarter. In terms of what is happening on the labor side, we did see some modest wage margin pressure versus the fourth quarter of 2019. as we went into the quarter staff for higher levels of group occupancy that were on the books prior to Delta's arrival. Retaining key staff in a tight labor market is a priority for us in order to be prepared for the volume of business we have on the books in 22 and beyond. And while we've endured double-digit percentage wage growth versus the fourth quarter of 2019, we have muted its effects through advances in productivity by improving hours worked per occupied room, And at the management level, our leader count is down compared to the fourth quarter of 2019 as we've adopted structural changes in our staffing model coming out of the pandemic. These operational adjustments combined with strong ADR growth and cancellation fee collections helped offset higher wage rates and the sudden mixed shift in occupancy headwind from the Delta variant. As our higher margin revenue sources fully recover, that is group travel normalizes in the associated banqueting and outside-the-room spending that comes with it, and occupancy fully returns, our hotels should generate superior margins compared to pre-pandemic levels. Looking ahead, it is still a bit too soon for us to return to our traditional guidance format, given the tail end of Omicron is just now passing through and new data is coming in quickly. However, as Colin alluded, we're very encouraged by our recent near-term production for 2022, including in-the-year, for-the-year production in January, and the relative resilience of group lead volumes despite the emergence of Omicron variant in December. And while we expect the first quarter to be impacted by Omicron, with solid group occupancy and rates on the books, good in-the-year, for-the-year momentum and continued leisure strength, Barring any new adverse COVID developments, we expect to see more normalized levels of occupancy and business mix as we transition to the second half of the year. Turning to the balance sheet, due to our positive cash flow, we reduced our net debt by $76 million and ended the quarter with total available liquidity of over $650 million, consisting of $140 million of unrestricted cash and $510 million of availability under our revolving credit facility. With a continued recovery in our business, we anticipate exiting our credit covenant facility covenant waiver on schedule in the second quarter of this year. In addition to the resumption of our regular FF&E reserve contribution in 2022, we plan to deploy approximately $200 million of capital in new unit and enhancement opportunities in both our hotel and entertainment businesses. This includes $125 million to fund the balance of the $260 million purchase for the acquisition of Block 21 in excess of our assumed $135 million mortgage. We continue to work through the CMBS approval process and expect the acquisition of Block 21 to close by the end of the first quarter. Given these high return investment opportunities, we do not currently anticipate reinstating our dividend in 2022 unless we're required to do so under REIT rules. In addition to investments that further our competitive advantage, Our priority for the cash we generate will be to deliver the balance sheet, returning to pre-pandemic target leverage levels. And with that, I'll turn it back over to Colin for any closing remarks.
spk01: Thanks, Mark. No, let's get straight to questions, Ashley. If you could open the phone lines up, please, that would be good.
spk08: Certainly, and at this time, if you would like to ask a question, please press star 1 on your touchtone phone. You may withdraw your question at any time by pressing the pound key. Once again, that is star and one. And we'll take our first question from Sean Kelly with Bank of America. Please go ahead.
spk09: Hi, good morning, everyone. Mark, congratulations on the board seat. I think that's very well deserved. Thank you. So thanks for all the color, everyone, just on the trend lines, Colin. I think the story is, I think it's really quite clear. I wanted to dig in on, let's call it the second half recovery cadence. I think You were pretty precise that occupancy on the books only down one and a half percentage points, rates up. If we think about that formula, what do we need to see on the margin side, or what would you expect to see is a better question, on the margin side if you get that mix of business in the second half, just so we can manage and think about expectations for overall profitability?
spk01: Yeah, I'll start, and then I'm going to punt it over to Patrick. But the other part of all of this that you've got to remember that we're sort of seen as a group hotel business. The analyst community, that's the way you guys sort of describe us. But I think what we have proven here is we're We're a damn sight more than that. When you look at the performance of our business in the fourth quarter, generating $88 million of EBITDA, almost setting an all-time rooms revenue record in December of over $50 million of rooms revenue in that one month with 60 points of occupancy, it was because of the tremendous strength and the emergence of our business as a very strong leisure accommodator. And the reason for it is the fact that we've done so many things to enhance these hotels over the last decade or so. And when you see leisure rate up, and I'm going to get to your question in a second, when you see leisure rate up, you know, in the month of December compared to 2019 up 35%, the customer really does appreciate what we are doing. So one of the, you know, the keys to the answer to your question in terms of margin is the sustaining of this level of leisure business that we have been building through this pandemic over the last two years. and sustaining the rate. And if we can deliver those room nights, those leisure room nights, into the periods of time when the leisure consumer is really wanting to travel, at the rates that we have been accomplishing, our margins are going to be just very, very fine. And so, Patrick, I mean, you may want to talk a little bit about the stuff that we have done to eliminate costs out of our business to make sure that our margin performs very, very well.
spk04: Absolutely. Hey, good morning, Sean. It's Patrick. Just to build on Colin's point, the hotels and I and my team are in the hunt for second half of this year to get rev par and margin back to 2019 levels. That is our goal. Now, that's barring another variant. The things that Colin just mentioned that we're accounting on to make that happen. And what we're executing against is continuing to drive transient ADR, starting to move group ADR up. Obviously, that's going to lag a little bit because of the nature of the long-term nature of our contracts. But then to Colin's point, really honing in on labor management. We've been doing more with less for the past two years. We think that we can sustain that. We think we've got the right talent in place. And then we're deploying additional technologies to help us do that as well. And then finally, getting group occupancies back to levels that allow us to deliver margin and rev par similar to what we saw in the second half of 2019.
spk01: Sean, I know this is going to sound a little melodramatic, but I've said this to my board yesterday when we were having a conversation about 22 and 23, and Mark was sharing our long-range plan. My sense is Omicron has really helped us sort of re-rate ourselves in the eyes of the consumer. You know, we've, our relative leisure rate was up until about two, three years ago, pretty anemic. And it was something that we have been really focused on with Marriott as our manager. And Patrick and his team have been beating the living daylights out of the revenue managers. So now enter stage left, here we got Omicron. you know, group sort of evaporates. And we said, now is the time for us to demonstrate that we can get really good rate growth. And look, when we talk about rate growth, we're not talking about, you know, offering rooms at a thousand bucks a night that a lot of these, you know, resort locations are doing. And that will absolutely pull back at some point in time. But what we have done is pushed our rate up, you know, relative to hotels that we're in the . And my view is that I really, and I've said this to the Marriott leadership, and Patrick has too, as has Mark, that we expect these rates to sustain themselves into 22 and 23. And I think we have an opportunity here to fundamentally redefine the profitable opportunity, profitability opportunity for these hotels.
spk09: It's great. And then my second question, sort of along the same lines, would just be, can you help us think through a little bit of the, let's call it, this is a bad word, or the vintages or cohorts of prior year bookings, right? Because we are seeing this really dramatic pricing environment. And in a way, if corporate comes back as quickly as maybe your occupancy suggests, I'm thinking you probably would actually have more pricing power than maybe your contracts would allow you to have. So can you just help us think about how quickly you can push up maybe the corporate and associate some of those longer-term contracts in pricing? And again, obviously, there's a value proposition there, so I'm not to say you're aggressively taking price and not giving something back. But truthfully, there's going to be a lot of demand out there for your product, and how quickly can you adjust to that on the corporate and association side?
spk01: Yeah. So remember, this is the way we would typically look. If we went back to 2019 and we're sitting there looking at 20, we would be sitting there with 50 points of business contracted, or we've already made the decision. And by the way, we're not moaning and groaning about that. That's really good stuff. I mean, to have You know, no other company has 50 points of occupancy typically, you know, on the books in contract form. But we do. So therefore, if you believe your goal for the year should be 80, 20% is going to be leisure, 10% is going to be in the year for the year, we have, you know, 30 points of occupancy that we're in total control on vis-a-vis rate. And so, you know, that's the way we think about our business. And We've been very aggressive with our salespeople. We keep calling them our salespeople, Marriott salespeople, but they're our salespeople. We've been very aggressive with these folks in terms of pushing and pushing and pushing rates. So, you know, we do have the ability to affect quite a large part of our business. And then, of course, all of the outside of the room spend, you know, that is something that we negotiate regularly. in real form a month before the group turns up. So there's opportunities there too.
spk04: Hey, Sean, this is Patrick. Let me give you a couple of points just to further highlight what Colin's saying. Long-term group pricing, we have a very different narrative than everyone else, and it's been highlighted in the previous comments. On the transient side, we can drive right up, not simply because of inflation, but because of the amenities that we offer and the programs that we offer, which are truly unique to our properties. On the group side, We've been investing heavily into our assets over the past few years, even in the midst of COVID. So F&B is being reconcepted and revitalized. Room renovations, new renovated space, new rooms have been added, and additional amenities added all across the board. So from a long-term perspective, our sales folks can share a very different value proposition, that rates aren't just going up because of inflation realities. They're going up because we have more value to offer. In the short term, I mean, just to give you a data point that we're very excited about, January in the year for the year lead volume was the highest lead volume we've ever seen in a January for the brand. And I know a lot of folks have said, well, you know, is corporate coming back? Well, corporate was the main driver of that best lead volume for in the year for the year in January that we've seen. 78% of the leads in January are coming from corporate. So corporate is clearly showing signs of strengthening very quickly. And with that being for in the year, for the year, and our ability to impact the pricing just in the year, for the year, we're very encouraged that, you know, that volume of business coming through, we can truly drive prices up both on the group side and the transient side in the short term.
spk02: Corporate's high value outside the room, too. Yeah, that's right. Another big advantage.
spk00: Yep, you're right. Thank you for all the color. Thanks, Joe, and thanks for your focus. Thank you. Appreciate it.
spk08: And once again, as a reminder, to ask a question today, that is star and one. And we will take our next question from Bill Crow with Raymond James. Please go ahead.
spk06: Good morning, guys. Appreciate all the color thus far, Mark. Congratulations on the new side hustle. Question for you, which is on the balance sheet and your intent to de-lever the But you have, what, 200 million plus of wants for the balance of the year. And I'm just wondering how you're thinking about financing it. Obviously, you raised equity at one point, earmarked for Austin, and that was used to kind of get you through the last 24 months. Do you revisit that financing method again here?
spk02: I think, I mean, certainly that is an option for us. As you know, Bill, we have an ATM in place that we haven't utilized to this point, so we do have some flexibility. You know, our stock, we've been very pleased with how it's recovered relative to where we were 18 months ago or even a year ago. So equity is an option. As the business recovers, though, these businesses, when we start to get back to pre-pandemic occupancy levels and at the rates that we're seeing in terms of incremental leisure business in the year for the year group business and some of the spending patterns, these hotels will produce a lot of free cash flow. as we move through the year, I think we have a lot of different options in terms of how we think about financing growth. And from a leverage perspective, if you start to re-ramp our EBITDA, our leverage comes back in the line pretty quickly with our pre-pandemic levels. So just from a leverage ratio perspective. So we feel like We have a number of different options here going forward. We obviously have a maturity in 23 with the Rockies, so that's something that we'll be looking at and be probably looking more broadly at our overall bank facility and how we refi that property in conjunction maybe with an extension of that facility.
spk01: The capital expenditure that we will we will spend or may spend. Basically, most of this capital is capital that generates pretty good returns. We don't have major refurbishments that we have to do. We haven't been milking these assets. We've deployed capital into Things like, as Patrick talked about, additional rooms, additional banqueting space, food and beverage operations. And so if we believe the world is going to return to normalcy and we believe what we see going on with the meeting planner right now, we believe that the transient side of our business that we have, I think, done a really good job of over the last couple of years, We believe that what is going on in our entertainment business, the growth that we're going to see there, if we believe all of this stuff, as Mark said, our balance sheet transforms pretty rapidly. And we're very excited about this, very excited.
spk06: All right. And then just out of curiosity, you've got one hotel that is union labor. When does that contract come back up?
spk01: Well, we renegotiated it through COVID. Patrick?
spk04: Yeah, so the CBA, the union came and basically asked if they could punt a year, and so we were supposed to be negotiating that, but we're going to push that back another year. So I would say 2023 we'll be actively in discussions with the union about what form that CBA will take. Okay.
spk06: All right. That's it for me. I appreciate the time. Good talking to you, Bill. Thank you. Yep. Thanks.
spk08: We'll take our next question from Chris Wawonka with Deutsche Blank. Please go ahead.
spk05: Hey, good morning, guys. And, Mark, congratulations on the board appointment. It would be great to have you there. Super addition. Appreciate it. Sure. Yeah, so the question was, you guys covered a lot of ground on rates, both kind of the group and the transient side, and, you know, it all sounds pretty good. My question is on the on the non room stuff, you know, are you able to also kind of take pricing there? I know it's probably not to the same extent you're getting on, on like leisure rates, but you know, is there an opportunity to kind of, um, just take everybody higher there given that, that how much higher their room rates are going?
spk04: Yeah. Hey Chris, it's Patrick. Um, yes, you're absolutely right. And to Colin's point a few minutes ago, you can price, um, you're outside the room offerings, whether it be food and beverage or anything else, in real time. And there's sort of three levers. You can either just increase price, which you have to be very careful of to make sure that you're not driving value down for your consumer. So you can also work on portion control, and you can rebalance the offerings based on cost realities. So if chicken is a bit high and beef is a greater opportunity, rather than just jacking up the price on chicken, you can shift over to beef for a short period of time. So we are pulling all three levers, pricing, rebalancing the offering, and then portion control.
spk02: Chris, from a CapEx perspective, if you look at how we have reconcepted a significant part of our food and beverage, for example, what we're doing at the National, what we're going to do at the Palms, we're moving to more grab-and-go, reconcepting some restaurants to improve, you know, not only from a customer-facing perspective, but also from an efficiency perspective, it's going to help us quite a bit on the food and beverage margin perspective.
spk04: Yeah, we're trying to build more flexible operations so that if you're 20% occupancy versus 80% occupancy, you can have the food and beverage outlets open. They just operate very differently and flex up and down.
spk05: Okay, very helpful. And then as a follow-up, this is a little bit of a strategic question for you, Colin. You've got a lot of good options on your plate in terms of things you can still do with the existing portfolio, Rocky's expansion and SoundWaves elsewhere, and you're bringing in Block 21. But I know pre-COVID you had also talked about potentially doing something more in Nashville at Opryland with maybe a different kind of hotel. Just any thoughts on that? and it seems like you still do a lot with Nashville, and given how much growth that city is seeing, how do you prioritize some of these kind of in-the-portfolio opportunities?
spk01: Well, we look at it through two very distinct screens. We look at each market, and we look at the hotel's relative positioning in that market and how we, by the deployment of capital, can create essentially an economic moat around that asset to make that asset, you know, the big dog by far. And that is what we've been able to do in most of our hotels. And so, you know, Patrick yesterday, when we had our board meeting and, you know, we asked him to talk to our board about some of the aspirational ideas that we're thinking about, you know, you could see, you know, an additional over and above what we have announced, anywhere from, you know, $500 million to three-quarters of a billion of additional projects that we could deploy into our existing assets. And so how we prioritize is, you know, we look at each hotel in each market, how do we create the economic moat around it, And then it comes down to return on invested capital. We don't, and Chris, I don't mean to throw rocks at any of our competitors, but we don't go out and buy hotels at 9% rates of return. We deploy capital into things that generate 15% rates of return. And I think that's frankly one of the reasons why our stock is you know, basically trading almost at an all-time high when, you know, many of our competitors are trading at, you know, 20, 30, 40%, in some cases 50% off of their all-time highs because we have deployed capital, you know, I think in a very, very efficient way and the shareholders have appreciated that. So that's how we think about it. And the, you know, the really exciting thing is that, we've got lots of opportunity to further the dominance of our hotels in the markets that they're in. And that's very exciting. And we have the same opportunity to deploy capital into our entertainment business. And so I'm really excited. This is not just doing the old stage stuff because we're in front of some analysts, but I'm very, very excited about the next two, three years for our company and I think what we can accomplish here.
spk05: Okay, very good. I appreciate all the color. Thanks, guys. Thanks, Bob.
spk08: And once again, as a reminder, that is star and one for your questions. We will pause a moment to allow any further questions to queue.
spk01: Okay. Well, if there are no other questions, then we will thank everyone for their time this morning. and we can get on growing our company.
spk08: And we did actually get a question from Smetis Rose with Citibank.
spk01: Oh, okay. That is fine. We'll take Smead's question any day.
spk08: All right, and Smead, your line is open.
spk07: Great, thanks. Sorry, I thought it logged in, but I guess I wasn't. So you went through a lot of information, but I wanted to just quickly ask you on the old red that you're putting in in Las Vegas, Is that a fully on-balance sheet development for you, or will you be partnering? And I'm just wondering, I'm sure it will be very successful, but if for whatever reason it isn't, what sort of, I guess, how could you extricate yourself from it, if should that be necessary?
spk01: Okay. So we have a long-term ground, Liz. The way we've negotiated it is that we can get out of that ground lease and we will build the infrastructure that goes on top of that ground lease. And that will, you know, be at or around about 30 million bucks. And that will be our investment. And, you know, that type of benchmark is the same You know, game plan that we applied here in Nashville, we've applied in Gatlinburg, we applied in Orlando. And, you know, frankly, the performance of these old reds are very, very good and generating really good rates of return. And I cannot think of a better location for an old red anywhere in America than where we're putting this one. This is main and main. in one of the nation's, well, probably the most important adult entertainment destination in America, arguably in the world. And so we can extricate ourselves if we need to. I think that would be the least of our concerns in this particular market. I think we're going to be wringing our hands thinking, how can we double the size of this baby? But that's for a different discussion at a different time. You want to weigh in on that one?
spk02: No, I mean, the only thing I would add is that, you know, if you spend any time on a casino floor, you'll quickly realize those are our people, right, from a consumer perspective.
spk03: In the space in and around where the red is going on, there's additional upgrades like valleys converting over, which was recently announced, the horseshoe. So there's an investment in that particular space.
spk01: Yeah, but, you know, here's the bottom line. Forty-five million people a year go to Las Vegas, and this particular site, 125,000 to 150,000 people a day walk by, you know, and then you think about the competitive supply of a country lifestyle, music-centric business in Las Vegas. There isn't one. So, you know, this is going to be a hell of a deal for us. Wish we could make it bigger.
spk07: I just wanted to kind of get a little more color there. I appreciate it. Thank you.
spk01: Thank you. Was that the question, Phil? I'm sorry. Was that the question, Smeets?
spk07: Yep, that was it.
spk01: Okay, well, we'll see you in about a week and a bit's time, huh? That's right. Looking forward to it. Thank you. All right, Ashley, I think we're done. I appreciate it, everyone. Thank you very much for being on the call this morning.
spk08: Thank you, and this does conclude today's program. Thank you for your participation. You may disconnect at any time.
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