Q1 2020 Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until the time your lines will again be placed on musical. Thank you for your patience.
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Good performances from stage of the World famous Grandevo offerings.
Hospitality properties.
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Sadly from the telecasts.
Welcome to Ryman hospitality properties first quarter 2020, <unk> earnings conference call.
Hosting the call today from Ryman hospitality properties are Mr., Colin Reed, Chairman and Chief Executive Officer.
Mr., Mark Fioravanti, President and Chief Financial Officer, and Mr., Patrick Chaffin, Chief operating officer.
This call will be available for digital replay. The number is 805 858367 and the conference I'd number is 655 or eight threenine.
This time, all participants have been placed on listen only mode.
It is now my pleasure to turn the floor over to Mr. Mark Fioravanti, Sir you may begin.
Thank you a good morning, everyone. Thanks 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 expects are intended to it.
I find these statements, which may be affected by many factors, including those listed in the company that SEC filings and in today's release.
The company's actual results may differ materially from the results, we discuss where project today, we will not update any forward looking statements whether as a result of new information future events or any other reason.
We'll also discuss non-GAAP financial measures today, we reconcile each non-GAAP measure to the most comparable GAAP measure in an exhibit to today's release.
With that I'll turn the call over to calm.
Thank you Mark and good day, everyone first of all I hope this call fines all of that regular analysts and investors who are joining us well right now doing this unprecedented period.
Hi, happy to report that our team at Ryman is doing just fine.
We're all healthy secure and laser focused on managing at companies through this.
The debacle and getting back to serving serving our customers again in a safe system, most secure environment possible across a wonderful hotels and entertainment venues.
Suppose I could spend time talking about our first quarter results, which were on a really strong track through the month of January and February.
Back to the majority of the first quarter 2020 was shaping up to be the phenomenal year with which we've been expecting for a long time Alas that was not to be as cobot 19, or the outbreak unfolded rapidly in the months of March culminating in nationwide stay at home orders.
And ultimately add decision to close the Gaylord hotels on March 24, as well as most of our entertainment venues around that time as well.
At this moment January and February seemed like ages ago and a attention.
And I'm sure Yours is focused entirely on what the rest of 2020 will look like once we reopened what a industry and a business will look like in Twentytwenty want them beyond of course ounces to these questions. Most come with a caveat that the situation is fluid and at current XP.
Dictation, some plans are subject to change pending new data for developments.
The read the reality is there is so much at this time that we cannot control, but what we're doing is focusing intensely on the things that we can influence and that is what I'd like to talk about this morning.
Before I delve into the details let me remind you that background I remember the many discussions we had with the potential reach investors back in 2013 as we were in the throws of converting from a sequel to read the comments I often heard was it that our management was not made up a refocus we.
Operators, we were in fact, the folks that crafted the Gaylord brand.
Well at times like these background comes in handy, we know what needs to be done and a deep and in detailed discussions with a manager directing what we want to see occur across all aspects of the reopening process. So first a hotel segment and afford to book of business.
That's a much at hotel business was in the best shape. Its everything we entered this year with 8 million net room nights on the books for all future periods, including the Gaylord Rockies, which was a record by fall in fact, the total cancellations and attrition related to cope with 19 as of Friday, the first of.
After netting out the at the time 167000 room nights, we we had rebooked already by that date is still just on the 10% of that Ford book of business for all future years, which we entered 2020 with.
And this and with 74% of those cobot 19 cancellations cluster between January I Beg your pardon February and June of this year and 35% of related re bookings placed into the second half of this year. We continue to have a very decent book of business so that a lot.
As part of 2020.
Specifically as it may 1st we had 742000 net room nights on the books for the second half the Twentytwenty, which compares to 902000 at the same time last year for the second half of 19 of course. This assumes we opened a hotels in the mid June to July.
Hi, timeframe, which I'll talk about in a moment, but let me also give you an update on F pace for 21 as well.
Looking at next year.
So the first quarter in March 31st we had 42.2% net occupancy room nights on the books to 21 now while this is down compared to the extraordinary comparisons of 46.9 points we had.
At this time last year for Twentytwenty. It is exactly in line with 42.2 points. We had for 2019 back during the first quarter of 18, and just to remind you 2019 was a record year for our company and to be clear.
These are all apples to apples comparisons, including the Gaylord Rockies. So at this point Twentytwenty, one looks like a typically Goodyear forever.
Compared to when you compare to our recent history. Furthermore, we know that meeting planners remain active and not just a latter in twentytwenty and 21, but well into the future. One last first quarter Twentytwenty gross bookings decline year over year by approximately 170.
2000 room nights to 288000 at gross bookings just in the month to March were 126000 that not only 29000 of those what cobot 19 re bookings likewise as we also disclosed in our business update a couple of weeks ago as cells.
Team generated 3.9 million new leads in the month tomorrow and that excludes a half a million leads related to previous cobot 19 cancellations. This sales teams at Merian and asset management team a refinement have done a terrific job of juggling the inbound cancellations.
And rebooking activity with regular long term booking activity.
Overarching emphasis throughout this process has been the same as always focusing on the customer and then needs and creating building and cementing long term profitable relationships that is why even early on before government restrictions and shutdowns will put in place.
Teams focus on accommodating customers concerns around cancellations by finding alternative dates for meetings, rather than aggressively pursuing cancellations and attrition fees. We're seeing the fruits of the strategy now as I review re bookings continued to build and I'm sure we'll get into the queue and I Patrick will give you an up.
They don't what has transpired since the.
End of April on re bookings as well, which is all good news when you look at all this data.
And the work we're doing on the sell side with our customers when you consider but the new supply of large group hotels was thin even before this incredible disruption that anyone with a long term view should understand why we have confidence that despite recent cobot 19 cancellations at competitive in it.
Position in the group's market will come out of this period stronger than before.
Now, let me talk about the reopening process I'm, what our businesses look like.
When we come out of all of this this is what we've been spending a great deal of time on during the shutdown period working closely with a partner Marriott err on the hotel side to design implement those best practices for each phase of reopening that will ensure all at customers and employees feel safe and.
Secure upon their return now let me tell you how we've been thinking about this.
Last week.
I conducted several media interviews.
As may 2nd.
Witness the 10 year anniversary of the great slot of Nashville, a time when most of that businesses in this city would devastated and a two primary businesses were shut down for six months.
The time the consequences woeful, just like now, but I remember quite vividly, saying two at team at the time, let's focus on how we can bring these great assets back to a position that is stronger than they were when we went into the situation and that is precisely how we're thinking about cobot 19.
The fact is society here in the United States as being shaken too it's cool with this spend them and that responsibility is to provide a safe clean environment. When it went out customers return and add goal is to be the very best of this and to develop a reputation as the best that will drive greater.
Hello, LC and higher retention.
In multiple conversations I've had with the leadership of one of the nation's best Hospital systems. This is what I think will happen.
They will essentially be a bridge period that we will have to deal with between reopening and such time there is a Bible vaccine.
The comes forth and customers employees will feel safe to go about business the way they did prior to cope with 19.
During this bridge period companies like ours will have to adopt enhanced practices to keep that customers and employees secured and I will describe some of these in a moment. The first thoughts around the opening dates right now we anticipate and are planning towards the reopening of Opryland palms, Texas.
And the rock is in mid to late June Gaylord Nashville National We are currently planning on reopening slightly later in mid to late July.
Entertainment venues in Nashville, such as old Red wind, we and we anticipate opening slightly earlier as states Governor has given the Nashville leaders discretion as to when they may reopened and city officials. He have indicated a number of benchmarks that if met in may.
That to happen all of these days are of course subject to change but are meant to communicate at current planning posture.
Now reopening does not mean going back amazed at each of the way.
Group meetings were held just before this crisis, there will be differences, which we expect to rollout in phases broadly phase one would be the most restrictive employees. Some of the same recommended social distancing guidelines in our hotels and venues as we see across the nation. Today. For example, this would include which you said.
Ops in dining and banquets banquets to space gets further apart as well as knows snapping a balls reduced staffing and requiring pp equal employees and so on what is what is really the number one focus for US. However is the development of an entirely new set of cleaning program.
Verticals utilizing across the board hospital grade equipment materials and methods, including introduction of electro static Sprayers for example to help US overcome this aspect we're in discussions with a major medical center to form a partnership whereby Gaylord hotel employee.
These can receive training on these new methods from the experts with ongoing compliance checks monitoring hand in hand with these cleaning protocols is an effort to redesign at processes to minimize physical guest touch points, often taken advantage of more enhanced technology from a sales perspective in.
The first 90 days will focus specifically on the leisure customer as more riches as more rigid distancing restrictions in juice less friction for these customers then for the logic gatherings, we see pent up.
Regional travel demand in the leisure segment and an opportunity in local markets social events and gatherings that may have been postponed by stay at home orders and needs to find a new venue phase two of that reopening. This will involve what we described as moderate.
Distancing measurements. These might include increasing dining capacity, but not fully to 100% increasing stopping and so on but of course maintain the new frequency and level of cleaning and disinfecting phase three or minimal restrictions would.
Would be a return to what we could be call what could be called the new normal, allowing guests to go above their routines with less noticeable disruption and normal staffing levels, but with new cleaning and touch for this technology investments and best practices remaining in place.
Exhaustive list of procedures and practices in each phase and the duration of each ought to be determined but this is to give you all in idea of how we're thinking about a return to normal and what a industry looks like on the other side of this the good news is that as recently as this past weekend.
Doctors as saying that could be a viable vaccine by year end, which will be good news for 21, which which as I illustrated that book of business looks pretty good.
It's out guiding principle and all of this detailed work to be at the forefront of that industry, taking the lead and setting the standards as safe operations for both customers and employees that they have come to expect the Gaylord brand and entertainment brands now while at painted on operational.
Chip.
We're still finalizing many of the details and we'll have more to say later in May. This includes working on the financial specifics of what these practices mean for a margin structure, we expect to be able to give more detail on this once we get back opening and reporting on our results now let me touch on our entertainment business for a minute and.
Yeah, we do some of my thoughts as it relates to the three primary brands first already we expect to open each location on the phase one or social distancing sometime mid to late may provide and providing cobot 19 is in check in each market. We expect these establishments to the operating at a 100%.
Capacity with live music by the end of July the Ryman will be somewhat challenge this year's simply because so many offices of cancel their entire to us for the year.
Given the fact that so many office live here in Nashville will probably be able to book concepts on a one off basis, but we expect the by 21, we should have a strong constant calendar as regards the Grand Ole Opry initially we expect to open it up.
With an audience sometime in July but was social distancing, depending on how quickly Nashville tourism cranks up we will decide on how many weekly shows we host that's where we are today and I understand that they're likely many more questions.
There are offices at this point now what I want to emphasize is that this management team has been through many crisis, we experienced a nationwide travel shutdown in the days following September the 11th when viewed a deep painful recession up the great financial crisis of two I wait until <unk> nine and we bounced back.
From an natural disasters, such as the Nashville, flawed, which shutdown Gaylord opryland largest acid for full six months and in all of these cases this company and his management team never lost side on the long term and we follow the same playbook focusing on the long term needs of our customers.
Employees and assets and ensuring that we are prepared and ready for the inevitable recovery because make no sense, but make no mistake, our industry and our company will recover.
We don't know whether that will take weeks or months or a year, but we do know that groups and individuals designed to travel to gather in person to make connections to share knowledge and to bond overcome interest this is not going away.
Even in a world where work at home emerge is more prevalent we've seen before the companys adopting these arrangements often increase the frequency of large group meetings in order to make up for lost daily interactions. This fundamental underlying demand for fellowship input travel is.
Simply human nature and that is not going away that is why we are confident that our company and a one off kind and one of a kind hotels and entertainment venues will emerge on the other side of the stronger than how we ended.
And with that competitive mode.
Cadenced and even smaller saprolite.
Yes.
At competitive moat against and even some smaller supply pipeline will only wide now with that I'll turn over to Mark to touch base on the balance sheet and what weve been up to with the banks markets. Thanks column in the first quarter. The company generated a total revenue of $313 million down.
30.6% from prior year.
It's noteworthy that prior to the closure of our businesses from covert 19, our company's revenue increased 17.5% in the first two months of the year net income available to common shareholders declined $75.9 million in the first quarter, two a loss of $46.5 million or 85 cents per fully diluted share our first.
Quarter net income included $14.1 million in payroll costs associated with covered 19 of which approximately $10 million were approved for the second quarter. In addition, we recognize two noncash charges of $5.8 million credit loss on held to maturity securities associated with the Gaylord national bonds and a 26.
$27 million valuation allowance on net deferred tax assets.
Moving to our non-GAAP metrics the company generated $66.9 million of adjusted EBITDA Ari, 41.8% decrease from last year adjusted funds from operations available to common shareholders declined 58.3% to $32.4 million were 59 cents per diluted share both at you.
That EBITDA, Ari and a FFR were negative negatively impacted by the $40.1 million uncovered related costs.
Colin outline we have a great deal of confidence in the long term outlook for our business and our balance sheet and liquidity are key elements that outlook.
Let me briefly summarize our current position in our expected cash utilization rates, which will illustrate our ability to withstand this period of disruption even prolonged.
In mid March when we saw rapid accelerate accelerating impact of club at 19, we took the cautionary stuff of drawing $400 million from our revolving credit facility to ensure we have access to as much liquidity, because we might foreseeably need.
Consequently, we ended the first quarter with $662 million of unrestricted cash on hand.
Combined with the additional $300 million of borrowing capacity still available under the revolver and adjusted for the $52 million of dividends that had already been declared prior to that covered 90 pandemic and was payable in April we effectively started the second quarter with a pro forma form a total available liquidity of approximately $910 million.
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In addition to our unrestricted liquidity.
We had approximately $65 million of restricted cash available in our hotel FF any reserve fund, which can be used for ordinary course maintenance of our properties.
Consistent with our strategy to retain sales teams to focus on re bookings we made the decision to bring six hotel accounting personnel Bakken furlough too aggressively pursue collection of our hotel accounts receivables.
Over the last 30 days, we reduced our hotel they are balanced by nearly 50% or $27 million, making positive impact on our cash flow.
Comparing our liquidity to our initial monthly cash burn rate of approximately $42 million, which will which will decline of approximately $32 million has ramped down cost run out. This implies nearly 18 months of liquidity based on our cash on hand in 24 months after factoring in the additional $300 million of revolve.
City.
These burn rates reflect the implementation of our operating expense reduction initiatives the suspension of future dividends, the postponement of non essential capital projects and other cost savings initiatives implemented across the company.
In terms of major growth capital projects as we previously announced we are proceeding with the completion of our Gaylord palms expansion, which has approximately $79 million of spend remaining and we will be completed in April 2021.
The capital for the Palms is not included in our minimal minimum cash burn calculations and should there be a material change in our view of the environment. We can delay completion of the palms project in a risk to capital spend.
We have delayed the start of the Gaylord Rockies expansion indefinitely.
After the ended the quarter, we reached an agreement with our long standing bank through to amend our secured credit facility covenants to ensure that the full $300 million a revolver remain available during this period of business disruption.
The amendment relieves us from the three financial maintenance covenants for a 12 month period through April 1st 2020, We also have an option to exit the amendment early at our choice for the trajectory of our business warrant. The amendment carries a modest increase in pricing on our term loan aid revolver borrowings as well as certain temporary restrictions on use of capital.
In summary, when you add the balance sheet HCC balance sheet strength and liquidity of our company to our contracted book of future group business.
And the early meeting planner activity, we're seeing you can understand where we drive so much confidence that we will successfully navigate this situation with that I'll turn it back over to column for any closing remarks.
Mark. Thank you I will withhold any closing remarks, maybe to the end.
Maria Let's open the lines up questions. This time please.
Thank you the floor is now open for questions. If he wants to ask a question at this time. Please press Star then the number one on your telephone keypad. If at any point. Your question has been answered you may remember yourself from the Q by pressing our team.
Our first question, that's coming from Smedes Rose City.
Hi, everyone.
I wanted to ask you as you move towards reopening and you gave.
Timelines for that.
What kind of level of occupancy.
You see I guess.
Surpassed the kind of 32 million a month.
Cash burn if you can work down to I mean, what level of occupancy would that become.
Less of a bird I guess and then yes show, where do you see breakeven.
Yes.
You want to make sure that good morning, Smedes. This is Patrick.
So when we initially opened were going to be more reliance on transient until the group market really starts returning in greater numbers.
And so getting open is the first hurdle so in the first month or so we're expecting that our occupancy will be somewhere in the twentys.
And as we move through the summer we are projecting currently occupancy rates of about 30% to 35%.
We think that if we can get to about 35% given the increased costs associated with cleanliness standards, social distance scene, and ensuring that the hotels stay clean and disinfect, which adds cost.
You know around 30% to 35% occupancy will get us to a breakeven status as we move into the fall we expect our occupancy will.
It continue to increase.
And we're working through we think that is right now we would say 50, sixtys and as far as occupancy percentages and one of the things that is encouraging smedes weve.
Let me sort of digress from your question about breakeven but.
We are having quite a lot of success on this re bookings the numbers Patrick.
Today since since.
The first of increased almost 200000.
Room night, we books and quite a bit of that is going into the back end of this year and as what I said in my prepared remarks, we have.
North of 700000 room nights as off the first in May.
Into the back end of this year, so when Patrick talks about 30 ish percent percentage points this going to be spikes here.
Week by week, because we've still got a ton of group business on the books.
Particularly as we get into late August September October.
So that's how we think about it and let me add two accounts brought up because there are spikes that will occur in our business as larger come through.
And occupancy rises and that drops down again as we wait for the next our troops come through we are not managing the business in the same way that we have previously we will not be returning to a.
Staffing model that is normal for some time, we're being very diligent and ensuring that we have the minimal levels to ensure that theres. Good guest satisfaction experience yet at the same time.
We are conserving our cost and managing with with doing more with less if you will.
Thank you Sir you when you rebook rooms.
So the contracts the same or our clients are customers getting any sort of incentivization to rebook or is it just due to some of the contract.
Did you understand that no I didn't understand.
Explain what what Smedes said is that when we report king business that we lost in that period, how we modifying the contracts.
In and giving folks discounts on whatever it may be to quote get them to re book and I.
So to that question.
I would tell you that the incentive that we've placed out there to rebook the businesses that we are not aggressively.
Pursuing collection of cancellation fees.
And so if we're rebooking a piece of business that was supposed to travel in April and let's say, it's not going to travel in November the cancellation language that was in the original contract now applies to the Rebook date now we will continue to work with them because obviously they will expect that they may not be able to hit the root block that they originally had four.
Forecasted so that maybe another area, where we work with them and provide an incentive to go ahead and book their travel, but we're not granting massive concessions or anything out of ordinary.
It's a partnership with these customers they understand that we're doing everything we can do not pursue cancellation in this environment and therefore, the reciprocation of that is they're working with us to to put together the best piece of business. They can for the future.
Okay.
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Thanks means.
Our next question comes from the line of Chris Woronka Deutsche Bank.
Hey, good afternoon, guys and glad to hear the entire team they're staying well.
My question was on.
If you look out a little bit and I know your business is always kind of been a tetris puzzle in terms of how you you put things together now there is even more moving pieces.
When we think the 2021 and 2022.
Just trying to get very high level idea of.
How much of that business, you might be able to ultimately recapture with the idea being that 2022 could hopefully be.
A super terrific year for you guys is that the way you're looking at it or or.
Missing something that some of this business doesn't doesn't rebook.
No no.
Let me.
Let me give it a little bit of a stat, and then I'm going to hand back over to Patrick.
Fill in the detail here 21 on 22 already setting up to be a good year notwithstanding the cobot 19 loss of business that we are attempting to book this year next year in the year. After the one of the challenges that salespeople have is so much of this law.
Our business up for clients, they're already had business on the books for 21 of 22, there's a lot of these regular customers that we have a long lasting relationship with.
Our goal and we have not said this before but I'm going to site now at goal is to what we have talked to the Marriott sales organization about is the goal to them.
And to asset management team is to re book 50 to potentially 60% of this business over the course of the next few months into the rest of this year next year and the year often so.
As we sit here today, we are quite happy with where we sit for a 21 and 22 looks really good so.
Pat do you want to anything you want to add to that yeah. So let me give you some data points.
To backup with Colins already said, if you look at 21.
Pairing it to 20 to 20 at this point is kind of difficult given what's happened in 2020, So let's let's go back to the last year that we actualized, which was 29 team and was a record in terms of occupancy we did about 75.8% across the brand in terms of occupancy.
21, compared to where we stood at this time for 19 is pacing ahead about 1.2%. So despite the distractions of Cobot 21 continues to stack up very nicely against that record performance in 2019, and where it stood at a similar period in time, if you look at 20 to 22.
As pacing ahead of where we stood at the same time for 21 20 toothpaste in about 4.3% ahead.
If you think about the rebook is that we've been talking about and as Colin mentioned a moment ago were just at about 200000 re bookings as of last night.
About 20% of those re bookings have gone into 2021 and about 10% to 12% have gone into 2022. So both years are pacing ahead and both years are benefiting from the Kobe to re books and we've got a lot of lead volume as it relates to covert cancellations.
So it was still working aggressively with those meeting planners and corporate clients to accommodate and I'm sure there's going to be more business over the next few months that we will put into those years that you've just reference Chris.
As a result of these co that 19 bookings cancellations.
Okay. Okay. Appreciate all that color very helpful and then.
Just a question kind of on the on the margin structure and it's more of a longer term question because I know that right. Now things are are not norbord, you're having to make all kinds of adjustments, but is there anything longer term that.
Makes the margin structure better or worse, you mentioned incremental cleaning, which is probably going continue for a long time, but but on the on the labor staffing model or anything or no again, when we get back to normal revenue do we get back to kind of normal margins.
I I would suggest that if if if magically by the end of this year. There is a vaccine and our society here in the United States in 21 becomes comfortable.
And we can all get back to sitting in stadiums watching football basketball Gulf whatever it may be and the same with conventions.
There is I think no reason why at business cannot be at all.
Around the margins that we operated in 2019 and the reason I say that is yes, they're going to be practices that we will overlay.
Into the businesses that we did into the businesses that we didnt have in 19, but on the other hand, you know I know as an organization and I know in discussions with Marriott, we're looking for ways in which we can in fact improve the business with the learnings of the last few maam.
So I think yes, we'll have news you protocols in place, but I believe that will be more efficiency in these businesses.
Usually that Patrick Yeah, I mean Collins laid out the vision for us it's to be stronger we emerge on the other side and so we are.
Yes in the short term changes to the cost structure, especially on the labor side and really asking the tough questions as the occupancy built up into the future do we need to return to the same levels that we were at before even when occupancy returns. So that is the challenge we've laid out and our marry up partners are rising to the challenge.
And we're working together in a very very.
Positive way to to answer that question and come out stronger on the other side.
Okay very good alright, guys.
Thank you my study state staying healthy.
All right next question Maria.
Our next question comes from the line of Bill Crow Raymond James.
Gentlemen.
Good afternoon.
Questions from me.
The details you provided on the phasing.
And it seemed like.
The entertainment side of things.
It was pretty quick to go from phase one you're talking about by the end of July you're going to be in phase. Three I think is what you said what are you thinking from a phasing perspective on the hotels.
How long is going to take to get there.
So bill good morning. This is Patrick Great question right now we have laid out the phases and 90 day increments and so our three phases are 90 days each.
So obviously the first two phases essentially get us to the end of the year.
If things change we reserve the right to modify those phases, but.
Where we stand right now based on the best available information, we felt that the first two phases at 90 days each will give us the end of year and that was appropriate yes. So much of it is going to depend bill on the.
Speed of anti viral medicines and vaccines.
If we're if all of these you've sort of prognostications, we hear about.
Our daily come come true.
This morning.
There was a new.
Second phase trial of a vaccine that sent the company stock up eight bucks on.
Everyone everyone's getting excited about that if this stuff comes quicker and let me let me say this and this is probably majoring as my friends at Monte pricing used to say this is majoring in the bleeding obvious.
There is not being a time in this.
Planets history, where you've had so many countries and organizations focused on one particular issue like this and so my my personal view is I think and talking with my Doctor friends of Vandevelde, I think that there will be vaccines available.
Sometime towards the end of this early next year and that will without doubt influence, how we think about the phasing so.
Right now Patrick is laid it out and Thats based on having something in the first quarter of next year.
Yes, no I appreciate that and we all know it's uncertain at this point so.
Good I know you're thinking.
Going back to a question I think it which means that asked about the the adjustments for the contracts I am just if I was a group planner and I wish I was going to book So for 2021 I'd probably.
And that I could get out of it somehow.
Slower penalties or what do you what are you seeing big because of this uncertainty how do you how do you booked new business, that's not going Rebooking I'm, just talking about new business.
And and you guys still demand the same level of penalties on cancellation and attrition.
You want to deal with that yeah, I mean, so we're dealing with it in real time Bill because as you saw in our release in March as all of this was really come into ahead, we still book 85000 room nights are unrelated to covert so.
Or re bookings so meeting planners continue to book and by the way those contracts they won.
They won.
Yeah.
Smashed the pieces in the favor the meeting planner. These were contracts that by unlocks look like at contracts that we were putting in place in February and January that's right and then we booked more in April so we're dealing with in real time, it's always on a case by case basis, because each group has different needs and different concerns, but I will tell you that we.
While we have seen a a concern around pandemics going forward, we're sticking to our guns. If you recall back after the financial crisis, everyone told if there was no way, we would ever get or cancellation and attrition language to be a strong as it was prior to 2008 nine.
And we if anything has strengthened our language following the financial crisis.
So we are working with meeting planners and helping them understand that once this is behind us it will be a return to normalcy from a contract perspective, and we're not running into major obstacles with that there is more concern around pandemics and so we're working through those discussions with meeting planners that they arrive.
Alright, and then one more for me.
Absolutely understand turning off the capital spend here.
But.
So anxious are you to get started on the Rockies expansion and.
Do you think that could happen late this year, so that youre not disruptive as much business going forward.
Look.
We the interesting thing is the amount of cancellations as the Rockies is.
Of all of that hotels.
It is the least canceled.
And.
We went into this year with a huge book of business.
For the Rockies, So our view of the Rockies long term has not changed whatsoever and so at this stage I don't think the we will be.
Moving ahead with the Rockies until such time as we have.
We have.
The Pos stop all set aside.
Covenant modification that we made with the banks so when we get to the point, where we say were out of the without tearing up the the modification that we have put in place for the.
Through through.
The first quarter of next year when that goes away then I think we can we can get to the point went back to business and we can make judgments about blocks of capital like that so I don't think we're going to be we're going to be moving ahead with that this year I think it may be a mid.
Mid next year type of decision for US I think thats, how we think about Yvonne yes, bill the structure of the physical structure that expansion.
Doesnt create a lot of customer disruption.
It's a weighing off the hotel there is no additional new meeting space. So we can undertake that I think without a lot of customer.
Customer issues.
Alright, alright, that's it for me thanks.
Thanks, Bill Thanks Fellows.
Any more questions Marie.
Our next question comes from the line of door Kesten of Wells Fargo.
Thanks, guys, assuming you meet your goal of Rebooking, 50% to 60% of the canceled business what occupancy do you think you'd start 2021 with.
I'll tell you what we'll do well give you that aim so when we get near its a 21.
Please wait we havent, we havent done guidance, but somebody wanting yet with.
With daily in the trenches right now.
Look I.
On the eternal Optimist, I feel 20 one's going to be a decent year, providing we can get this this scourge under control because at 19 under control and up and.
I think let's get through let's get through this quarter. It gets through this second quarter through the third quarter can we can be a lot more transparent about that but as we sit here right now would look pretty comfortable about 21.
Yes, I would remind to hey, Dori I would remind you that 21 versus 19 is pacing ahead as far as where we were his first what was on the books and if you compare it back to 20, which again 20 was a phenomenal year as it was building up before this all happened.
It is I think about 42 points of occupancy on the books for 21 versus about 46 for 2020, so down a little bit versus 20 up versus 19, So who knows what happens between now and the ended the year, but right now stands to be a strong year.
Okay.
So should we be assuming that the phase three before you start collecting cancellation and attrition fees.
No.
No no I mean.
We both have been or is it we did that in stereo but.
No you.
So two dory about the way we've worked with thinking about this plays yeah. So I guess the first thing I would say is we are collecting cancellation. Even now if you look at March and April we collected about $4.1 million, roughly and attrition and cancellation across those two months, even as all this was going on.
We we understand that there there is the cobot impact and we're kind of looking to the I don't know lets say August timeframe as far as sort of when that really comes to an end and folks really can't claim that theres much of an impact beyond that and let me just at the complicating thing with co. The 19.
Is so many of our behaviors that the client customers' behavior hotels behavior has been influenced by dictates from local state and federal government and so you know we as we as we think about those restrictions falling away.
Then there is no doubt that companies and not being told you can travel and when those restrictions for away companies. So I tell us not being told you know we prefer you to not have people meeting annual meeting rooms. So I think as we move we move into the oldest.
September timeframe.
We feel that we've got to have a lot more leverage in the collection of this.
Cancellations, if we saw choose to do that rather than treating the long loyal customers away.
Hey, we'd be in the way we've been dealing with those customers over the last couple of months. So.
I think this will be at transitioning.
Process for cancellation and attrition fees would you agree with that yeah and to further build on that we have had groups who called in one of the cancel for October November and they have cancelled and as always everything of a case by case basis, depending on each group that we're talking too, but we would those groups that have capital for October.
Our November we're having discussions around the cancellation fees that are owed.
But it's fair to say that for the second half the year. The options are you collect a fee.
I mean potentially may rebook again, you have some small percentage that falls out.
Is that fair.
Yeah. They fall out then we will be pursuing collection of the fee and if they would if they have a rebook clause or if there is language that allows them to move to another date with maybe a smaller fee on the front end that I mean again it depends on the contract, but if you're in the fourth quarter and your canceling.
It is difficult for us to step forward and say, we forgive any cancellation lets just look to a rebook.
Thank you.
The amount of cancels we've seen.
Linked quarter fourth quarter fairly minimal.
Yes, I mean by far the vast majority is in the February through June timeframe around 75% of the cancellations.
Okay. Thank you guys.
Thanks Stuart.
Any other questions Maria wheel.
Bill.
Maybe a couple more questions. If they are already and if not we'll move on with our business.
We have a question from the line of Shaun Kelley of Bank of America.
Hi, everyone. Good afternoon, Collin and team Sue on I'd Love to just maybe stick with US. This behavioral kind of question or discussion today I think it's really interesting right. Your businesses. So unique in that regard in any exposure on the group side on and what I'm kind of trying to get too.
Who is on as we think about on discussion with the meeting planners and they're kind of willingness or desire to rebook and work with you.
What are they asking for it to get the confidence to you're not just rebook, but actually make the trip or make.
Make the group meeting.
It is specific cleaning standards or do they know yet what the what they really want I assume there trusting you that you're going to put in place. Some of these best practices, but but I guess kind of curious on what's the ask at the moment just because on.
I think we're all sitting here wondering a little bit of like what you're going to take to get kind of people moving again, a little bit and it's going to be somewhat pronounced in your style of business or some color there would be interesting.
This is.
This is a very very important question, you've Austin is something that.
That we as an organization have spent a lot of time with managed care.
Okay.
I hate to site this way, but insisting that we don't sort of speculate on what they want that we actually understand clearly what they want and this has been a ton of engagement.
Here around that question and that's helping shape.
The vision of what our businesses stand for.
When we opened them open them up and come out of the South Patrick do you want to China onset shown is very important question absolutely Sean the number one thing they're asking for is to understand what it looks like to be into Gaylord hotel.
Once they return they want to understand with clean standards are the techniques the equipment the processes the diligence the frequency everything around it.
When we can give that to them and we're very close to being able to hand over a packet to them that walks them through exactly how we manage the space to cleanliness everything once we can do that I think we will be meeting their need and starting to instill confidence to your point a moment ago, arriving that what that packet needs to include and what the techniques are that we need to be.
Following has been sort of a two pronged maybe even three prong process. The first as we've been watching very closely.
The research that a lot of different firms have been doing to understand where consumers meeting planners group attend these mines are what's important to them what they want to see to start getting confidence around traveling so thats. The first prong. The second as we've actually reached out to groups and we've been working with some very long standing large group custom.
Immersed understand what their needs are what they want to see and we didn't get a couple of them the opportunity to look at our standards head of time in advance to give a comment back to us as far as do they see and help shape does to Colorado and then the third is to ensure that we're not just saying it but there were actually delivering on it Collin.
I mentioned that we are working with an outside medical system.
To potentially get their.
Review and endorsement of the cleaning standards and the processes that were employing so this is the number one thing we've been working on right now is giving the meeting planner peace of mind in the form of a packet of what we're going to be doing and weve used multiple sources to come to arrive at what that should be.
Mary I came out a couple of days ago with their commitment to clean and what that program looks like and that obviously is the foundation on which our program is built.
And.
Just just let me say one other thing shown the importance of this outreach is critical the importance of engaging with the meeting planner and the cost in the at this stage in shaping the vision about businesses is critical and by the way.
We've thrown out a couple of statistics. This morning, we've said that we've rebuilt about 20% of the business that we lost in that March and April timeline, which is and obviously the cancellations in may and June we booked 20% when we set a goal is somewhere in the 50% to 60% but.
I would tell you why we we say a goal is 50 to 60 because in our outreach to the to the meeting planner when we talk to them about our that do they have an interest in rebooking.
A number that we sort of have stumbled across in these discussions is that potentially 80% of this business. You know the meeting planner hasn't has as a desire to try and find a date.
In App forward calendar to re book and the reason we're able to give this this level of detail is because of the outreach that.
Salespeople Marriott and the leadership of Marriott.
With that with US has been able to undertake here and we're going to follow that through in real time on on all of these protocols that we will be putting in place. When we opened these hotels out so.
We really are looking at the future here as a company and not sitting here scratching our head feeling like victims. We're looking at this is an opportunity to build even a stronger relationship with these these these group customers.
Any other question Sean.
Thank you for the detail and I appreciate it think it's important and then the other thing was on if you could help dimensionalize two things. So one is just sort of across the property and I know these are going to vary dramatically, but just directionally.
Directional color would be helpful. One is on drive to fly to right. So just kind of what kind to overall mix across the portfolio you dependent on I know, it's going to vary widely but I think some color there as we think about.
Next we'll be important and then the other kind of mix would be corporate versus association or are you seeing meaningful.
Differences in Rebooking, our conversation and those two segments.
Yes, I mean look I hate to patronize, you, but those.
Also very very critical questions.
How we think about fly to and drive to.
How we think about how quickly the airlines open back up.
Critical critical part of how we think about the rest of the ship how do you want to tackle that and then the corporate versus association. This is on the corporate on a SaaS Corporate Association. This is the first time in.
I live here in America, 32 years being in the hotel business 32 years never ever seen.
The amounts of association cancellations that we we've witnessed here over the last.
Eight weeks.
And because of this very unusual situation of shutting shutting hotels down.
So you want to tackle those to Patrick yes, So as I mentioned earlier when I go back to that the first 90 to 120 days are going to have a higher percentage mix of transient consumers and we are working on our marketing campaign to really be top of mind for consumers with really three.
Key messages.
Safety is paramount for us here at the hotels, we are a great local regional Staycation for you. So you don't have to drive across the country or get on a plane. We are close and much closer than you realize and third we have unique amenities that you find and very very few hotels and so we're going after those transient those lease.
Your transient consumers with that messaging so that in the first 90 to 120 days, we're driving more transient and that's where our mix will be heavier and they will be more drive in the flying correct. Now the fly end market. Then we believe starts to recover as we get into the fall as the airline capacity to Collins point, a moment ago starts to increase given.
The fact that government has taken a stake in the airlines and wants to see them increase the capacity.
On the corporate and Association front I would tell you both have an equal desire or appetite to re book.
But remember a lot of associations may only have one or two meetings in a year and they're looking out for great periods into the future. So a lot of associations may have desire to rebook, but they're not going to be able to two rebook for the back half 20 or 21, because they may already have that satisfied and so we're going to pick them up in the next rotation.
In their calendar So association.
The re books will be further out, whereas corporate can pick up and rebook in a shorter term more immediate fashion.
So hopefully that answered your questions.
Yes, two thank you very much.
Thanks, Sean one more question.
And then we go to go and it's not because we've got.
They go up a date on the Gulf closely lift of Gulf multiple meetings here today Telephonic meeting so one more question Murray on them, we shut it down.
Our final question comes from the line of Patrick cells with Suntrust.
Hi, good afternoon quarter could give us an update.
The cost.
Acquisition.
Certainly the world's changed since you first entered into that contract.
Talked about.
Well I just want to go forward where that.
What the lenders are saying to you and is there any possibility you can be negotiate that contract what favorably.
Thank you.
We're talking Patrick Good afternoon. This has caused you talking block 21 right.
That's right.
Yes, Okay. So let me be very clear here and.
There is no final decision at this time, but here are the facts.
Clearly the businesses.
Like block 21 have been.
Impaired all across the nation, we own we own assets that looked like block 21, and our businesses Affinion pad artists and not taking.
Obviously not tiering at this moment, so certainly for this year.
You know this business and with folks know staying in hotels. This business has been in pad. The conditions of the purchase include Ryman, assuming some CMBS debt, but in order for the debt to be transferred the CMBS service has to occur.
This now when we agreed to purchase the block, we put up a $50 million deposit, but if the services fails to improve approve the transfer by the ninth of June we can terminate the contracts and get out deposit returned so our plan is.
Can you to evaluate the extensive the impairment block 21 continue to evaluate the choices we have for the use of the capital that we've set aside for block 21.
Such as the reduction of debt or stock repurchases until such time.
And it's still pretty purchases until such time.
Yes.
Payments with the banks fall away, but until.
Servicer approves or not approves.
Or when they do approval not approved we then have 10 business days to close the transactional walk. So that's where we are there is no final decision. We're evaluating this is no really more detail that's occurred since we had.
Coal two or three weeks back and that's why we own on block 21.
Thank you.
Does that make does that make it makes sense.
Yes. Thank you.
Thank you Patrick Alright, everyone. Thank you for joining us today and upward on almost every one stay fit in healthy and Maria. Thank you for doing the job you have done before for so well. Thank you.
Thank you everyone. This does conclude today's conference call you may now disconnect.
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Hello.
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