Q3 2019 Earnings Call
The I'm worried each brand.
Hi, good so how do you guys have about God bless them.
You are looking to performance and stage world famous Grindelwald.
In hospitality properties Scott.
Welcome to the Ryman hospitality properties third quarter 2019 earnings conference call.
During the call today from Ryman hospitality properties are Mr., Colin Reed, Chairman and Chief Executive Officer Officer Mr. Mark.
They are Bonnie.
President and Chief Financial Officer.
Mr. Patrick trace then.
Chief Operating Officer, Mr., Scott Lynn Executive Vice President and General Counsel.
This call will be available for digital replay that number is 800 585, Athree six seven and the conference I'd number is 4888 901 at this time all participants have been placed on listen only mode. It is now much.
Laser to turn the floor over to Mr., Scott land, Sir 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, maybe deemed to be forward looking statements words, such as believes work specs are intended to identify.
These statements, which may be affected by many factors, including those listed in the company's FCC 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 exhibit to todays release I'll now turn the call over to call.
Thank you Scott and good morning, everyone. Now those of you that have read our press release will no doubt was concluded that a company had a very solid third quarter, one that in fact and tone is quite different from the other companies in our sector that we often compared to.
Now over the last few weeks, Mark and I have undertaken several non deal Roadshows meeting many current and prospective shareholders. Both in the U.S., sending Canada. One question, we constantly get all stays why is that performance. So different with the follow up is it just where we are in the cycle.
The question sounds simple enough, but the ounces are a little bit more complex.
It is unlike the rest of that sector, we have built a business or in that case, a brand that is customer focus not bricks and mortar focuses focused.
Is it go before we handed the brand over the Marriott we identified the customers we wanted to build a long lasting relationship with.
They all the groups, who want an all under one roof experience and the by and large rotate market to market. Each year. Then we went out and build a portfolio of world class hotels. The physically office. These customers what they want great product and a great entertainment backed by great service in spaces tailored to each.
Each customer's individual needs and these hotels that operate together moving customers year by year from hotel to hotel.
The consequence of this predetermine strategy is that our current results and I suspect the results you'll see from us over the next year or two will be driven much less bias cycle than by this strategy and its execution, which has helped us build this tremendous book afford business.
From these loyal customers of ours. Furthermore.
We've been expanding in refining a hotels, both physically and operationally to capture more leisure customers as well as more groups and it's a combination of these strategies together with an asset management team that really understands large group hotels that are driving out performance not only for this last quarter.
And I suspect for many quarters to come and of course. This is not a strategy that's easy to replicate for competitors or new entrance for sauces. It takes many years, if not a decade to build one of these great hotels and once that is done you have to have the knowledge and expertise to effectively yield.
The hotel full of the right groups at the right time, some fundamentally you have to deliver the high level of service that these groups expect in house, if you want them to come back. So we really like cap position apart from the question of why the other.
The question of why the other question. We get is what are you seeing from the strengths and weaknesses perspective, given the fact that sentiment right now from our competitors and those who write about a industry is somewhat negative so here's what I would say about that current group behavior looks solid groups are turning up attrition in kind.
Installation rates a modest spending is consistent with what we have seen over the last year bookings that good issue. We've seen from out released this morning and by the way lead volumes at the end of this quarter were up 13% compared to the same time last year and we do not see any shift in meeting planet Haven.
At this current time, so all things considered at group segment looks pretty good.
Fred on group business things also pretty good and we're optimistic about an upcoming leisha heavy fourth quarter, but please remember we do not reloads rely solely on a tourist desire to visit one of them markets. We build programming that generates its own demand led by a holiday.
Program, which will kick off very soon a thanksgiving.
Now, let me turn into some highlights for the quarter and I'll start with the sales performance across the portfolio.
As we expected the third quarter was a strong bookings quarter in the three months ended September on the same store basis, excluding the Gaylord Rockies, we booked 582000 gross group room nights for all future years. This is an increase of over 26% compared to the third quarter of last year.
And these room nights came with a healthy 5% increase in rate compared to last year's third quarter bookings given the lead volumes we expect.
We expect to fourth quarter bookings to be very healthy as well, but on a year over year basis, we do not expect them to match the record 1 million plus room nights, we booked in the fourth quarter of 18 was which was just an incredible performance.
In addition, the Gaylord Rockies booked 109000 net room nights in the third quarter, which was a 40% increase over last year overall when you look at how we ended the third quarter was 6.47 million net same store room nights on the books for all future periods. This is up.
332000, 5.4% against the same time last year.
We look at how the final month of September nearly matched our all time September record from 16, when you consider the increase in a lead volumes.
Teen percent of finally, how attrition and cancellation.
In the quarter were inline or better than three year averages. When you why all of these factors in up you. This is one of the best group sales environments that company has seen.
The next couple of years continue to shape up nicely.
For example for 2020.
We already have 50.3% same store net occupancy on the books as of September 30th compared to 46.5% Amdocs occupancy on the point.
Once that we had on the books in September 18 for 19, one year ago and to remind you 19 is a record view for us for those of you being.
That have followed our company for some time unit you know that we typically start a new year with around 50 points of occupancy on a on the books for the coming 12 months for us to exceed this mark in September was still another quarter to go before we into the new new before we enter the new year. This is in our opinion pretty excited.
Stuff. Meanwhile, Gaylord Rockies had 59.6 net occupancy points on the books for next year as of September compared to 48.9 at this time last year for 19 now want to portion let that sink in for a second 59.6 spin.
Sentiment occupancy points on the books.
I've never seen a new hotel, especially one of this size have almost 60 points of occupancy on the books was second year of operation three months before we start the new year Needless to say, we're very excited for what 2020 holds for this hotel it's against this backdrop.
Strength visibility of momentum in our business, we're able to increase our full year guidance for most of them metrics.
Time, this year and I'll, let Mark walk you through the end of visual ranges, but lets drill down.
Into each of our segments current performance a bit more let's start with hospitality.
Freeland here in Nashville, led the pack in the third quarter with 12% Revpar and total revpar growth balance between 80 and occupancy now Soundwaves helped drive nearly a 15% or 800000 room night, increasing leisure demand on top of the full group patent incremental.
Arjun will flow through it all plan was sustained by a few factors you'll see it will come into one degree or another across as same store portfolio in the third quarter.
The first of these is a difficult comparison created by the recognition in the third quarter of last year of a onetime credit Indonesia.
At each of their hotels for the proceeds passed on to owners by Marriott from the site of its event, but purchasing platform. This nonrecurring credit last year makes a quarter margins a tougher comparison at baseline across the board for all of that same store hotels secondly, the mix of groups at all.
Opryland and in the third quarter.
As well as at the Texas and the National as you will see will more skewed towards associations and what we call Smith groups as compared to the more corporate heavy mix that we had in house last year. What this means is we saw more groups released their members to our restaurants in SMB.
Outlets for meals instead of feeding them at Kate banquets, which drove topline revenue growth could reduce overall food and beverage margins.
Finally, like Heck competitors, we would be remiss in not to discuss labor costs, not just at opryland, but across that portfolio and I want to be very clear on how we view labor cost increases as compared to handle IP is in many of you think about them.
First we fully expect labor costs to be a big factor for us because we are in attractive markets.
Growing markets, where our customers want to travel and when you in a competitive label now could you make decisions based upon how you feel about the next year and the year after that that means when you have the volume of business on the books for the upcoming year that we have and that I've just discussed in the lead volumes into a market.
We have then it's necessary to be proactive and invest in labor now.
Together with our manager we want to invest during periods of strength into our people just like we do without physical assets to ensure that we have competitive and rate and retain the experience team members that drive the kind of high levels of customer satisfaction that winds JT JD power awards and keeps group custom.
It was.
Booking back into a rotation year on year out we're off the view that we should reinvest margin now to ensure we retain the best people and the most experience on hand to welcome the volume of gas, we expect to have in 20 and 21.
When you don't have that kind of visibility in demand on your books like most of our peers and you just live for the next month will the next quarter, then if the natural to be reactive and try to hold the line on wages and perhaps than you might get away with making your margin in the short term, but then you have to cross shipping doesn't hope you won't have to worry about.
Since his later the caps, perhaps because she's thing as a chance the cycle is just going to turn down anyway, but we do not have that luxury if you will we simply have too much business on the books and in a funnel that to protect a few margin dollars today would cost us potentially much more in the.
Future. So that's how we think about this subject now turning back to offer that results specifically the net effect of all of this was still very healthy 11.2% growth in adjusted EBITDA Ari.
Though adjusted EBITDA margins did decline of modest 20 basis points year over year.
The Gaylord Texan was a similar story.
As at Opryland, with very strong revpar growth of 8.8% and total revpar growth of 5.9% adjusted EBITDA growth of 4.5 was due to the same three margin influences I've. Just discussed this was some additional nonrecurring comparison challenges created by the risk.
Merits expansion key money in the third quarter of last year, the increasing in expansion related real estate taxes, this year and a meaningful reduction interest in attrition and cancellation fee fees compared to last year, which of course carries a 100% margin all in all given these moves.
Pieces, we were very pleased with the bottom line performance at protection as well now moving to Orlando, the Gaylord palms experienced nearly flat revpar growth, but unlike the other hotels the palms due to.
Did see a mix shift more towards premium corporate groups, resulting in a very heavy healthy 5% total revpar growth.
Adjusted EBITDA declined 4% as the other factors I discussed reinvestment in labor the absence of a onetime Mary credit this year. Unlike the text and a decrease in attrition and cancellation fees offset the pickup in high margin SMB revenue by now you can see the patent and Gaylord national.
Was much the site Revpar growth of 7.2 was quite good wireless shift to more Smith type groups over premium corporates last year held total revpar in checkup.
Minus 2% this dynamic along with labor investment the nonrecurring Marriott credit that I, just repeated plus an additional nonrecurring cost unique to the national this quarter in order to account for a change in the way we accrue for sick pay all contributed to adjust.
Good EBITDA decreasing 12%.
Okay now, let's talk about the Gaylord Rockies glanced at our results and you Didnt know at company you might think the Rockies was modest that was our oldest and biggest hotel seeing as it produced over 29 million of adjusted EBITDA in the third quarter.
All the pieces click to the Gaylord Rockies in the third quarter, we celebrate bank, putting excellent trends in traffic consulting bookings we continue.
To move ahead with detailed design look for possible expansion and we easily watching to see how the fourth quarter trends in business performs which has always been a question Mark for us with a hotel of this type in this location.
And we put all that all of that programming in place, including the Rockies first year advice and a cautiously optimistic we will see good trends. It results given what we have seen so far and while we together with our partner will make the final decision on the expansion soon but now we're quite comfortable raising our adjusted EBITDA Guide.
In this range once again for this property from a range of 80 to 84 million to 83 to 86 million.
The performance of the Gaylord Rockies. So this year is wonderful on its own but is also emblematic of the themes around our entire hotel business that we point, we've been pointing out to you for some time with only schools. So in road shows so when we sit down with investors one on one on one conferences that his group.
Demand is really healthy and growing while new supply remains constrained and a shot should not be a surprise that when a new asset like this finding comes online that demand should be so strong. We think this really validates what we've been saying for the past several years and points to the great potential for more off.
Attunitys to serve that customers in new new markets and so that is something we increasingly thinking amount studying alongside our manager.
All right, let's move onto our entertainment business in the third quarter revenue and adjusted EBITDA eight for Entertainment segment grew a robust 19.8 and 47.2, respectively now some of that growth.
Is the addition of the Oelrich gatlinburg initiates figures as well as the easier comparison due to the apps absence of Opry city stage when you strip out the out strip. These out however, and just look at our legacy Nashville business, excluding all of our old red locations and Opry City.
Those legacy businesses grew revenue and adjusted EBITDA by 16% and 13% respectively that is just tremendous performance speaks to both the growth in Nashville continues to experience and the great job at teams have done finding new and innovative ways to deliver.
The value out of these historic assets.
All right Nashville location in its first third quarter comparison grew adjusted EBITDA, 8% as the team continues to drive more touristic traffic more gray DOCSIS in content on stage and more special events through the roof top and Backfilling spaces, we're looking forward to opening out already Orlando.
This coming spring and continue to evaluate new markets, where the brand resonates with our country consumers Youre also seeing it couple of weeks ago and announcement from US unveiling the branding for a new media joint venture with Gray television venture will be known as social media referencing both the iconic wouldn't.
Circle.
On the Grand old offered stage as well as the immersive 360 degree media platform that will bring views into come into country music in a circle social media is a key piece of our interest payments segment strategy that will create a window into all of the best moments that happen in a venue.
In Nashville, and throughout the south connecting fans with offices, both new and legendary and coming to them wherever they are whether through linear 24, seven television streaming media devices or in connected venues. We continue to expect to launch the linear TV.
Prong of this strategy in early 2020 actively investing in content as we speak with the degree of inbound activity from ounces and well known creative names continuing to surprises on the heels of the heels of this strong third quarter for the Entertainment segment will also racing at full year guidance.
Thank you for adjusted EBITDA for.
For the segment from a range of 52 to 56 million.
To a range of 54 to 56 million. We're also investing meaningfully into the second half was 92019.
In our human capital for the entertainment business, adding key leadership roles across the organization. So that all the pieces function together as one strategic business, serving the same country lifestyle consumer.
In summary, as we expected the third quarter was very strong one for a company same store hotels delivered revpar and total revpar growth phone above.
History, and we booked well over half a million room nights at a very attractive rated and.
A very attractive rate and I knew us hotel the Gaylord Rockies delivered almost 30 million of adjusted EBITDA Our E.
Yes, the quarter of operation our entertainment business continued to churn out double digit revenue and adjusted EBITDA growth both on the legacy basis, and consolidated with new venues and along those same store hotel margins were restrained aside from the impact of nonrecurring credit and charges.
Between last year this year the balance of the impact Bulls down to an investment on our part to prepare the hotels for great book of business, we see a head in 20 and 21, but nevertheless, as a large shareholder Im company by the fact that we grew FFO and AFFO.
26% and 23% in the quarter and so while most of the industry sit here today and it looks around disease sort of this flat zero to 1% growth type of Red Paul.
So to around there we're looking at our business and we see just so many avenues for growth.
At the end of the third quarter, we see about 10% more net room revenue on the books for as same store hotels in 2020, we see an incredible second your business lined up for the Gaylord Rockies.
Such that we are close to pulling the trigger an expansion that we see sound waves ramping into his second year and discussing internally the potential to add rooms on additional overflow hotel in Nashville as a result, we see at Gaylord palms expansion in Orlando, making progress on time and on budget and selling.
Well and we see a busy calendar and entertainment business in 2020.
Opening up already Orlando and kicking off the linear TV offering from Megis name Circle media venture so the future looks pretty exciting from where we sit and on that forward. Looking note are pointing out that we were very active in the third quarter and into the month of October as regards that balance sheet, we first refund.
Instead of 350 million of 5% senior notes coming due in 21 with 700 million of new form three quarter eight years senior notes and last week, we closed bank group.
On repricing an extension of our second secured credit facility secured credit facility, which reduced interest rates added several years and maturity an upsize the funding term loan portion the combined of these.
Combined effect of the increase senior notes in term loan and sizing provides greatly increasing liquidity in the form of available revolver capacity to continue to pursue the opportunistic investments across both business segments.
Now, let me turn over to Mark to finish this fall out.
Thanks, Collyn good morning, everyone.
In the third quarter the company generated total revenue of $379.8 million, an increase of 30% from the prior year. This was driven by strong 5.6% revenue growth in our same store hotels double digit organic growth in our entertainment segment, plus the new contributions of Gaylord Rockies.
Brad Gatlinburg.
Income available to common shareholders, which excludes the minority interest attributable to our partners with the Gaylord Rockies declined 1% in the third quarter to $22.3 million were 43 cents per fully diluted share.
The small decline in net income is due to the increase in interest in depreciation expenses from the consolidation of the Gaylord Rockies the write off of deferred financing costs in association with our refinancing activity and a modest increase in our effective tax rate.
In terms of adjusted EBITDA already the company generated $119.1 million on a fully consolidated basis were $108.1 million after exclusion of the minority interest in the Gaylord Rockies. These results represent growth rates of 40.6% and 27.7% respectively.
Excluding the Gaylord Rockies, our same store hospitality segment generated $79.6 million of adjusted EBITDA already an increase of 2.1% year over year.
Attrition in the third quarter was 14.2% a slight increase over the third quarter 2018, but below the third quarter 2017, and within our recent range. Likewise in the year for the year cancellations of approximately 8700 room nights ticked up slightly from the third quarter of 2018, but recall that the third quarter of late.
Last year was a very low level in was itself down over 42% against the third quarter of 2017.
So all in all our attrition and cancellation levels remain in a stable range and we see no patterns emerging.
Moving to FFO available to common shareholders. The company generated $78 million in the third quarter or an equivalent of one $1.50 cents per diluted share that's over a 22% increase on a per share basis compared to the third quarter 2018.
Year to date through September Thirtyth, Hey, AFFO per share a $5 in two cents is up 19% against the first nine months of 2018.
As we like to highlight this level of AFFO growth is unique to ryman, among our peers and reflects the strong backdrop of both our group hotel business and our entertainment business as well as the many opportunities available to us to deploy capital at high rates of return.
That brings us to our balance sheet as of September Thirtyth, We had total debt net of unrestricted cash of $2.51 billion outstanding at the very beginning of the third quarter in early July we refinanced the Gaylord Rockies construction debt entering into a new 800 million dollar term loan, which we discussed on our second quarter call.
Following this transaction September we refinanced our $350 million, 5% senior notes due in 2021 with a new issue of 500 million dollar of 4.75% senior notes with a net proceeds of the increased issue side applied towards borrowing under our revolver.
Subsequent to the end of the third quarter in early October we took advantage of strong demand in the high yield markets to addition to issue an additional $200 million tack on to the initial senior notes offering this time at a premium to par. This brought the weighted average interest rate across the entire new notes issue to approximately 4.68.
Percent.
The proceeds of this tack on offering we're also applied against our revolving credit facility. So that our net debt was unchanged compared to the quarter end.
But our available liquidity falling both offerings, which includes both unrestricted cash and capacity under our revolver now exceed $778 million.
Also subsequent to the quarter end this past week in fact, we closed a repricing of extension of our secured credit facilities, including an increase from 200 million to $300 million of our new fund a term loan aid facility, our revolver and term loan a now mature and 2024 in 2025, respectively compared.
Into 2021 in 2022 before the extension, while our leverage based pricing grid for both facilities decreased between five and 45 basis points, depending on the tier for the savings of about 15 basis points at our current tier.
Given that our quarter end revolver balance after giving effect to the subsequent $200 million tack on notes offering is only approximately $23 million, we use the additional $100 million of proceeds from the upside term loan a to repay a portion of our outstanding term loan b, thus improving the interest rate on this amount and getting an additional year maturity has.
The final Stefani's transactions, we swap $350 million or the remaining $387 million of term loan b balance to a fixed interest rate at an all in cost of approximately 3.22%.
We achieved several objectives in this entire series of balancing balance sheet transaction.
Dating back to July 1st we substantially increase the weighted average maturity of our debt to approximately 5.4 years with our earliest maturity now in 2023 second we lowered our weighted average interest rate of approximately 4.3% and locked in a greater mix approximately 85% of fixed rate exposure things.
Very favorable low rate environment.
Finally, we're also improving our ability to pursue additional growth opportunities by reloading, our revolver capacity and by improving a number of covenants as it provisions in both the new nodes and our credit facility that will provide us with more flexibility in areas such as permitted investments and debt baskets going forward.
Now turning to guidance is Kolon described this in our performance year to date.
And visibility into the final quarter the year, we're tightening our guidance ranges and increasing the midpoint of our Revpar and total revpar guidance for Revpar. We now expect full year growth of 3.5% to 4% an increase of 25 basis points. The midpoint for total Revpar, we expect full year growth, 4% to 4.5%.
Also at 25 basis increase over our prior range.
In terms of adjusted EBITDA already we're reiterating our previous guidance range for our same store hotels based on the margin factors, we discussed earlier.
For the Rockies as Colin mentioned, we're increasing the midpoint of our expectations for adjusted EBITDA Ari at this hotel by $2.5 million and for our entertainment segment for increase our expectations.
For the full year by $1 million at the midpoint.
In terms of net income our guidance range has been updated to reflect changes in interest expense to the refinancing activity, which would include the increased right off the deferred financing costs you can find a reconciliation of our guidance range for net income in the earnings release schedules finally, our guidance for AFFO, which excludes these deferred financing costs.
Has increased by $2.9 million at the midpoint to a range of 351.1 million to $360.3 million.
At the mill at the midpoint of 355.7 million, our AFFO guidance for 2019 represents a 17.8% growth rate over our full year 2018.
And with that I will turn it back over to account for any closing remarks.
I'm going to us timing to open up the lines, but let me just say this we've taken 35 minutes here. This morning, so little bit longer.
Supposedly the path lousy quarterly we'd have done it not so much in much.
Creative mode, but we have so much going on as a company right now which is driving these.
Driving these numbers that we felt that we need to give you a little bit more color as to what is going on so tami, let's open up the lines for questions. Please.
Thank you ask your question. Please press star one on your telephone keypad again that is star. One. Your first question comes from the line Smedes Rose City.
Hi, good morning.
I wanted to follow up on.
Actually with Patrick last quarter.
You talked a little bit more about some of the trends within group booking specifically to contract.
Contract terms.
Hey, being taken in kind of banquet spend and I was wondering if you could maybe.
Just provide some incremental color on those three pieces.
Relative to our last call.
Sure Good morning Smith.
So.
Given.
The volatility this kind of going on the markets into Collins point earlier of the questions around where we are in the cycle and how that's impacting our business. We've spent a lot of time, putting a little bit more diligence a normal into.
Booking trends and also attrition and cancellation and I guess I would say from the outset that we're comfortable that theres nothing really systemically going on in the group's space and our additional diligence is really just proven back to us that there are groups that cancel time to time there are groups, the Detroit, but theres nothing going on that give us any pause.
As our concern from a group bookings perspective.
We knew that the third quarter would be strong for us and thats exactly how it played out.
We are facing the challenge, which is a good challenge to have the fact that we have very little availability for the next two or three years out, but we still have strong leads Colin mentioned earlier that our leads were up 13%.
We see our prospects continuing to grow as well Tentatives are down just a little bit just simply from the fact that we had a good finished the quarter in sort of emptied out some of the funnel there, but the booking trends continue to build in a positive way from a bank would spend perspective as you could see in the quarter, we had a little bit of a mix shift which drove.
Less margin for us because we had more groups that are of association or lower rated what we call SMERF groups and therefore, they use the outlets more than they do banquet and functions, but thats just the lumpiness of how a year plays out and we expect fourth quarter to be pretty good but from a perspective of what they're booking for the future minimums.
On banquet spend continue to move in a healthy direction and we feel comfortable that there's no concern or systemic issues going on there and then from a space perspective, obviously, we one of the hallmarks of our brand.
Is that we're very disciplined and our sales team has very disciplined and making sure that we don't give away more space than we need to so that we have additional space to sell to other groups that discipline continues to pay off for us and as you can see both the 19 and our expectations for 20, our space is very highly occupied for the next few years and.
We're finding ways to fit more and more groups into the space to to really maximize the utilization of that space. So across the board very favorable trends continuing for us and we're not seeing any Patrick.
As a rhetorical question, we're not seeing any.
Easing in the standards, so that contracts across our portfolio with very diligent about this message and we wouldn't we reported the 5% increase in room rate for a reason right and that is.
The reason is that when when things start going off a cliff like they did in a nine and 10.
Back in 2009, 2010, you saw rooms being booked the rates on the pressure, we're not seeing that so the quality of that contracts have very good today, yes, Colin rest as a great point that I'll just add onto.
We do a lot of research with our customers one of the customer concerns or just satisfied that we get with group sometimes is that we're a little bit less willing to budge on some of our contractual terms.
And that's something that we continue to manage the relationship with our customers.
But I see that as a positive sign that we do have a little dissatisfaction out there from time to time, because we're not willing to compromise on our attrition and cancellation.
Policies and clauses, we have to make sure we protect ourselves in case the economy moves in the different direction.
Thanks I appreciate.
Detail I wanted to ask you to set the Rockies is obviously had a really successful first year of operations.
I think it's probably fair to say these large properties tend to ramp over kind of a multiyear period so that just.
Just as we think about your two of the Rockies I mean.
You say this property is kind of generally reaching its.
Run rate potential maybe faster in year, one than you had initially anticipated.
Well the the thing that I would say as surprised as is the amount of new business from companies that have been booked into the Gail of system before that we're picking up.
Essentially from from the West Coast, We we had a sense we did a lot of research here prior to pulling the trigger on the steel we had a sense that it was going to be good than it is really good.
And and that's evidenced by the continue build in the amount of room nights in the room nights the booking so.
Look my what I've said to Mike what I've said to the team internally here. When you when you think about the positioning of Opryland in Nashville, and you think about where all pretty land in Nashville was as a city 510 years back.
Right now, we get 50 million.
Deployments I think thats going to grow the forecast for next year is pushing 18 million tourists into this town next year.
And.
And if you if you look good the size of the National Airport and you compare that to what's going on in Denver.
65 million deployments three hubs 10 international flights and no competitive supply in that market might my sense is that this hotel.
The hotel in in Aurora can over time evolved to a hotel as big as and as dominant as applied.
And and so when you when you say about maturation. The hotel will see very very very good jump next year in Red Paul I mean, it will be it will be a really big jump in Revpar next year simply because we got 10 more points of occupancy on.
Books as of the into September for next year as we did this time last year for this year and and so.
So that we are not going to wait going to not let.
A shortage of capacity.
Impede the growth of this business. So I sold to see this business evolving here over the next five to 10 is.
To our pre land like but the difference is unlike.
I'll put line gets no tax rebates. This hotel will get tax rebates for the next 25 to 30 years. So I see this is a really world class opportunity that we have to continue to as as demand increases to continue to expand this hotel create more jobs midpoint can.
On the impact for the state of Colorado So.
We're very excited about this hotel.
Thanks.
Thanks Nate.
Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.
Hi, good morning, everybody.
Colin I just wanted to maybe stick with the Rockies to start I'm going to try and ask I think.
And finally different way, which is on.
Just trying to kind of get our arms around how much of.
How far this property is outpacing sort of your own expectations.
Productivity, meaning like the gains this year can continue into future periods versus how much youre, just able to fill up a little bit more this year, that's been kind of where he thought I mean again as we compare to the overall portfolio with let's call. It 60 points on the books versus closer to 50 for the overall it would seem like there is a really encouraging second year.
Ramp story still on top of the space, but just how much of it is how much of that is true versus.
Getting us too excited about just demand, it's really being pulled forward a little bit.
I don't know how to answer that question.
Other than other than we expect we will guide we will let you know at guidance here.
Part of next year, when we finish all of our planning processes with Marriott, but I'm expecting to see Revpar growth in this hotel next year, well north of 10% and and I expect to see really good EBITDA ramp and.
And and.
And we're not going to let it sort of peak next year, we were not going to do that and.
Patrick I don't know what other kalla, we can give at this stage I mean deal the thing I would add I think we're comfortable saying at this point is that we've had better pickup in banquet than we anticipated.
Groups of really bought in on the bank with side and we have a high mix the corporate groups in house, so that that makes sense and that's very encouraging. The second is transient has built better than we expected.
It takes time to build a transient base.
Customer loyalty, that's doing better than we anticipated and.
From a productivity and efficiency perspective, we're on target and continuing to make the improvements the team there to their credit.
We asked them to focus on labor, they did that and it's paying dividends for us.
Now the other thing is that.
As whenever you opened hotels like this and and we are lira unique management team in the sense that.
We built five of these that these things and.
And and we've opened up and so.
We don't go out and just buy and operating business. We we we opened these things.
And there are some things that we're going to do to refine this hotel here over the next 12 months now I'm not talking about adding more rose im talking about refinements in the existing core hotel to make that hotel a better hotel to compete more facility.
On on in sort of the nation here. So there will be refinements that we will do we will probably pull the trigger on the expansion after we have.
Finished dialoguing with out with upon the here.
And and we expect this hotel to see continued good growth over the next two to three years.
Great. Thanks.
Thanks for the color and then just as my kind of follow up on.
Obviously, there are few call outs and calling you went into some detail in your prepared remarks about the labor.
Cost environment and also sort of why you are investing the way you are on can you just help us think come out and again. It also kind of point towards 2020, so apologize in advance but.
Like can you help us think about can you get if we think about these investments and the margin profile. This year can we still expect and or get.
Operating leverage next year, despite having an elevated level of labor investment you just kind of help us think about that yes.
Yes, thats shown that Thats a good question. The answer is yes simple the reason we're doing it we as we went into great pains. On this is that we want to make sure that we send the signals to have people that we care about and even though Mary there on the Marriott payroll, we pay for it and we.
We look at these people. This app people I mean went went off the typical traditional own up in the retail space. We look at these people as people, we we know and care about and love and so the answer is the answer is we've done this because we think it's the right thing, but we believe with the.
Revenue growth that we anticipate getting next year, there will be operating leverage in this business.
Great. Thanks very much.
Thank you.
Your next question comes from the line of Chris Woronka with Deutsche Bank.
Hey, good morning, guys.
Promise I won't ask about 2020.
Anyway, but.
Wanted to kind of explore the downtown you guys have had a lot of success with your entertainment assets over the years and we see a lot of kind of.
The modern hotel supply down there, which probably is overall beneficial but the question is do you guys. Do you see any is there any desire to be part of that that hotel development downtown given the success you've had with your other assets over the years.
No.
And.
We we level of that supply being built we level. These abbvie in these.
Opening up and operating 5000 all of them in Nashville, because they are the they have they provide a of accommodation for people who.
Come here to listen to Great music and.
Eight and drink and have fun.
And ultimately subscribe to that OTI platform that we will be launching in the middle of next year. So we don't feel like we have to be into hotel market downtown here.
At this stage and so thats, how we feel about it any hotel investment we make here we'd want to leverage investments we made the sound waves.
The other entities out there that's a good point mark So that's how we think about and Chris.
Okay actually that was the answer is kind of hoping to hear so.
Good good job on that second question was shifting to the Rockies and as we look at the kind of early success not just not just financially for.
You guys, but for the for the city in the property in the employees and such I mean does that does that may be for other municipalities. You might have had conversations do you think that.
Seeing what's happening in maybe getting an expansion there, which creates more jobs and economic interest I mean does that maybe make another municipality closer to.
Coming over to the finish line it to the extent that you you are in discussions is that helpful. At the margin.
Well.
There's a big difference between talking about something and actually doing it right and so what we now have is we now have to photograph. So one of the Gaylord National and National Harbor, and we have had photograph now.
The.
The success of the Rockies and so the if you go back and read the script that I know, we said a lot of stuff in this 35 minutes, but it was there was a paragraph four to what I talked about the success of the Rockies has emboldens us to look at other municipal.
How it is and we are we're working on that as a company because youre right. This is what's happened is extraordinarily compelling and and and so it would be in the right market in the right.
Probably on the other side of the railroad tracks not in a downtown environment, but in a REIT market that something like this could be replicated for the benefit of VUL and something that we're looking at and pursuing.
Okay makes sense very good thanks Collyn.
Thanks, Chris.
And there are no further questions at this time I'll now turn it back to our speakers for any closing remarks.
Tommy Thank you and thank again, thanks again, everyone for joining.
The call and taking an interest in our company. If you have any further questions you can get hold of I'll folks.
For.
I think most of you would have marks number.
All my number and we'll be happy to communicate and thanks, a lot and.
Have a good day everyone.
Ladies and gentlemen that concludes today's conference call. Thank you for participating you may now disconnect.