Ryman Hospitality Properties, Inc. (REIT)

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.

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.

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.