Ryman Hospitality Properties, Inc. (REIT)

Welcome to Ryman Hospitality Properties' third quarter 2022 earnings conference call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark Fiorvanti, President, Ms. Jennifer Hutchison, Chief Financial Officer, and Mr. Patrick Chaffin, Chief Operating Officer. This call will be available for digital replay. The number is 800-839-6798 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 Ms. Jennifer Hutchinson. Ma'am, you may begin.

Good morning. 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 reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP financial measure to the most comparable GAAP measure in exhibits to today's release. I will now turn the call over to Colin.

Thanks, Jane, and good morning, everyone. The third quarter was another exceptional period for our company, setting and surpassing several records just as we did last quarter. At the highest level, this was the best third quarter performance ever for total revenue, total adjusted EBITDA RE, total adjusted EBITDA RE margin, for our hospitality segment. And notice I did not include occupancy on that list. That is what is impressive as our hotels delivered 62 million more in revenue, 28 million more in adjusted EBITDA RE, despite 5.6 fewer points of occupancy compared to the last pre-pandemic third quarter of 2019. I've been asked over the past year by a few of our peers and several of our investors as to why our results are so good compared to the rest of the hospitality REITs. And frankly, it comes down to a few key differentiators. First, we've insisted that our manager looks after our frontline staff through the pandemic because it's those individuals who looks after our customers. Second, we've worked with our manager to overhaul our management ranks and improve overall productivity and efficiency. Third, we continue to deploy and invest capital even in the face of a 30-month pandemic, so that the physical product creates real value for our customers. Fourth, we've enhanced and invested in our sales processes, and at the same time, increased the size and effectiveness of our sales teams. And by the way, we at Ryman, Patrick, Mark, Jen, and I, bring these teams together regularly and honor and motivate them, and that is one of the reasons why our room production is so strong. And it doesn't stop there. We at Ryman arrange and host events for our large customers so that they know that we truly care about them and their organizations. You know, it's funny. When we converted to a REIT back in 2013, we shied away from talking about our operating DNA. But today, after years of superior results, it's clearly an understanding of operations and the customer that makes a great hotel and in turns create value. That, of course, and a manager that is willing to work with us that has respect for our knowledge. So now back to the results. Both group and leisure customer segments contributed to this top and bottom line delivery. For example, another quarterly record was our leisure transient ADR of $288, up 42% over the third quarter of 2019. and adding $5 sequentially to the previous all-time leisure ADR record set in the second quarter of this year. Groups also delivered healthy ADR growth of their own, with the average rate for group hotel room nights in the quarter up 11% compared to the third quarter of 2019. On top of these room revenue gains, we continue to see strong outside-of-the-room spending behavior by our groups in the third quarter. That is evidenced by another record, total banqueting revenue of $122 million was the highest all-time quarterly banquet spend by groups across the Gaylord brand, surpassing the previous record set just prior in the second quarter of this year. And that is despite a mix shift of 12,000 fewer group room nights in the third quarter compared to the second. Now one thing all groups seem to have in common this year has been a willingness to spend on property. After waiting up to two years during the pandemic, it should come as no surprise to see our groups designing bigger and better programming as they finally make their return to in-person events, and we're happy to accommodate them. Of course, we're ready and able to deliver bigger and better banqueting experiences thanks to the investments and capital we have deployed across the portfolio during recent times. whether in new and expanded ballrooms, event lawns, or extensive F&B outlets and all the reconcepting that we have done over this period. Group performance was broad-based across markets, and on an individual basis, each Gaylord Hotel managed to set a record for best third-quarter total revenue or total adjusted EBITDA RE, and in four cases set records for both. The top prize must go to our newest hotel, the Gaylord Rockies, which also picked up the trophy for the highest quarterly occupancy in the history of a Gaylord Hotels brand at 86.9%. Now, maybe 86.9% to most REITs that operate 300-room hotels doesn't sound that spectacular, but the Rockies has 1,500 rooms, and to sell approximately 120,000 room nights in a quarter without a casino is pretty special. So this is quite a notable accomplishment and illustrative of what our hotels are capable of achieving as group demand continues to return. We're also particularly pleased with the Gaylord National as the broad repositioning of this hotel's F&B offerings laid on top of the strong banquet performance of groups in general that I just mentioned delivered an $8 million increase in F&B profitability on an incremental $9 million of F&B revenue, or a flow-through of 88% in this department when compared to the third quarter of 2019. This contributed to an 82% adjusted EBITDA RE flow-through rate for the hotel overall against the same time period. The combination of Four rooms renovation that we completed during its extended pandemic closure and the extensively redesigned F&B layout has us excited about this hotel and what it can do in the next few years. Speaking of the future ahead, let's discuss for a minute our sales production. We added 614,000 gross room nights to our forward book of business in the quarter. These room nights came with really good ADR growth across all individual out years with an average contracted rate at $252. And in case you're wondering, yes, that is another all-time record for quarterly gross booking ADR. This rate also represents an increase of 17% over last year's third quarter booking ADR and 25% over the third quarter of 2019. In this inflationary environment, and with the strong outside of the room spend behavior we're seeing from groups, we continue to place a high priority on sustaining ADR growth in our sales activity. Looking a bit closer at our production, the in-the-year, for-the-year strength that we have been commenting on all year in 22 has continued and transformed here towards the end of the year into excellent short-term momentum for T plus one bookings that is groups going into 2023. To be precise, compared to the third quarter of 2019, our new gross bookings for travel next year, or T plus one, increased 13% or 52% when compared to the third quarter of last year. At the very top of the sales funnel, our lead volumes generated in the third quarter for arrival in all future years increased 54% from a year ago and were up 5.3% compared to the third quarter of 2019. Now this is an important number to highlight as it represents the first quarter post-pandemic that our lead volumes for all future years eclipsed the same time in 2019. Now I'm not giving you these highlights and records simply to pat ourselves on the back for our strategy and our capital allocation decisions. Certainly, we believe these results on top of the second quarter's equally impressive performance are a validation of our strategy going into and coming out of the pandemic. However, we also read the news and the analyst reports that you guys produce, and we know the investment community is rightfully focused on the macro economy right now and the triple threats of recession, inflation, and interest rates. So sharing this data is to be transparent and show you what we're seeing internally, both right now in terms of group behavior on property and looking ahead in terms of meeting planner sentiment and willingness to book new meetings. And the short of it is we do not see the headlines of recession playing out in our business at this moment. The desire for our customers to get back to their regular programming is proving to be more powerful a more powerful influence on behavior right now than the economic concerns we are all being subjected to. And as we remind you often, for many of our customers, particularly associations who rely on registration fees, exhibitor fees, and sponsorship fees, their annual meeting is their primary economic concern. But if our year-to-date results are not enough, let me rewind the clock briefly and remind everyone what happened to our company in the last true mega recession following the global financial crisis in 2009. If you look back to that year, first virtually all of our cancellations were confined to the corporate segment. And on those cancellations, we collected close to $28 million in fees. Now when it was all over for 2009, we experienced about a 10% decline in revenue and a 9% decline in adjusted EBITDA. compared to an average revenue and profitability decline amongst our peers of 22% and 38% respectively. So when we sit down and we plan for the future, we're not thinking foremost about navigating the economy. We're thinking about how we're going to best serve the 46.6 points of net group occupancy on the books already for 23% and the 36.7 points on the books already for 24. We're thinking about how we can further upgrade, expand, or enhance our meeting space, our food and beverage outlets, and our resort amenities to further differentiate our assets against an extremely limited supply growth backdrop for group hotels. We're thinking about how we can design more compelling leisure programs around our peak group periods, to induce even more high-rated affluent transient demand. During every session or period of disruption we've endured over the years, we've emerged a leaner and stronger hotel business, and it's certainly the case right now as we emerge from this pandemic. And in our entertainment business, which I'll turn to now, we're thinking about how we can extend our reach amongst the country lifestyle consumer, or how we can create even more value from our iconic national assets as this city continues to experience such incredible growth. So those are the top most issues that we focus on on a day-to-day basis here, not the latest GDP numbers or the pronouncements of ill-informed journalists or politicians. Now, some more color on our entertainment business. On a total basis, Opry Entertainment Group delivered 21.1 million of adjusted EBITDA RE in the third quarter, which was within our updated guidance range. As most of you know, this was the first full quarter following both the acquisition of Block 21 in Austin and the sale of 30% of our OEG business to our new partners at Teros and NBC Universal. And since 2019, We've also opened two new all-red locations in Orlando and at Nashville International Airport, as well as launched our investment into Circle, our linear and streaming network. When you exclude these subsequent acquisitions and investments and look at our business on a same-store basis, our core entertainment business saw revenue growth of 19% and EBITDA growth of 21%, compared to the third quarter of 2019. This is the same type of growth we saw pre-pandemic as the city of Nashville, the surge back to its prior trajectory. Now I remind you, over 40% of the US population lives within 600 miles of this city. And the most recently published data from the city through June of 22 shows visitor metrics setting records this year, just like so many of our businesses. For example, June of this year was the highest ever monthly visitor traffic through National Airport at 1.83 million passengers, over 9% above June of 2019. And in the same month, hotel demand across Nashville of 875,000 room nights was also a monthly record, up 11% over June of 2019. At this moment, there are 50 new hotel developments in Nashville, Davidson County, And the city projects over 2,600 new rooms to open in the next two years, with another 4,000 behind them still in planning. And to remind everyone, these are not large group hotels to compete with Opryland. These are leisure and transient-focused properties that will deliver and host 1,000 more downtown visitors. And many of these new visitors will end up seeing a show at the Ryman, touring the Opry House, or spending an evening at Old Red or the Wild Horse. And we'll be ready for them. And when they leave Nashville to return home or they go to Austin or Las Vegas for their next musical pilgrimage, we'll be there continuing to engage with them, whether through our investments in expanding the All Red footprint or deepening our virtual reach across linear television, digital streaming, or online. We have a menu of exciting new strategic options to pursue alongside our partners at Ateros and NBC. These conversations and plans that we're having with these folks are well underway. This is a part of our business that I'm looking forward to driving forward and spending more time in discussions over with Teros and with the artist community as we build a truly one-of-a-kind platform to connect the country lifestyle consumer with the content and the artists that they love. Now, to that end, With all our businesses operating at record or near record levels of performance, there's no better time for me to transition the day-to-day CEO role to my long-term colleague and partner here, Mark Piravanti. Mark has been instrumental in getting our company to these levels, and I'm confident he will sustain and grow them in the future. Mark will assume this new combined role as President and CEO on January 1, and I will step into the position of Executive Chairman for both Ryman and Opry Entertainment Group. It has been an honor to lead this company for the past two decades, and I am extremely proud of all that we have accomplished, and I know it will be in great hands with Mark at the helm. So with that, let me turn it over to Mark. We will discuss latest outlook, and then Jen will wrap up talking about a much-improving balance sheet.