Q2 2020 Ryman Hospitality Properties Inc Earnings Call
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Good performances stage of the World famous Randall Whoppers Wyman hospitality offerings.
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Welcome to Ryman hospitality properties second quarter 2020 earnings conference call.
In the call today from Ryman hospitality properties on Mr., Colin Reed, Chairman and Chief Executive Officer, Mr., Mark Fioravanti, President and Chief Financial Officer.
Mr., Patrick Chaffin, Chief operating officer.
Mr., Scott Bailey, President Opry Entertainment group.
This call will be available for digital replay the number is 805 858367.
And the conference I'd number is 4586 to eight five.
At this time, all participants have been placed on the listen only mode.
It is now my pleasure to turn the floor over to Mr. Mark fields Donte, Sir you may begin.
Right. Thank you Maria 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 facts may be deemed to be forward looking statements.
Words, such as believes or expect are intended to identify these statements, which may be affected by many factors, including those listed in the company's FCC filings 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 from new information further events or any other reason we will also discuss non-GAAP financial measures today, we reconcile each non-GAAP financial measure to the most comparable GAAP measure.
In the exhibits in today's release I'll now turn the call recall.
Thank you Mark and good morning, everyone.
When we last spoke on that first quarter cool in May at Gaylord hotels in the majority of the entertainment venues were closed as the nation grappled with flattening the curve during the initial outbreak of 'cause it 19.
I'm happy that as we meet today. Some three months later for that five Gaylord hotels are a gain open and we've been able to resume some reduced capacity operations across several of the entertainment assets as well.
Of course, we still have a ways to go to return to pre pandemic business levels as the challenges our economy in a country faces a far from over time frankly, no one knows how long this recovery will take however, based on the initial success that some of the early virus.
At the centers around the country of having battling back the pandemic and then the rapid progress we're seeing all the therapeutic vaccine front in my view. Despite some recent case increases in some states. The overall outlook for an eventual resolution has meaningfully improved over the past three months and as a concert.
Quinn's I'm from I phone family of the believes that we will be in a recovery in the foreseeable future.
So rather than throw up at hands and feel sorry for ourselves over the last three months at company has been diligently focused on two key areas to ensure we all in the best possible positioned to benefit from that recovery diesel minimizing our expenses in cash fun and positioning our assets.
And our business to not only participate in the recovery when it does come but more importantly to capitalize on this opportunity. This has us asking questions like how can we grow at market share in the large group meetings business remember all group business in this nation has been canceled over the last fall.
Some quite probably over the next few months and every single meetings businesses. Stressing. This is in fact of time of opportunity how can we deliver better customer service and do so in a more cost effective way.
And in that vein, how do we have ryman help Marriott become a better manager of our assets.
From an entertainment perspective, no one in this country is sitting and see it is constant concert halls, all the life, that's sitting at home watching Nicholas Netflix Amazon prime or streaming their favorite content. So how do we take advantage of this initial.
We do not just want to the resilience and come through the situation, Bruce, but kicking but rather we want to businesses to come out stronger than before we have used this same approach in park in Pos whether it was the great financial crisis, the flooding national into 10 or a reconversion in 13 too.
Each of these difficult situations, we as a company became better more focused and stronger and I am confident that you will see the same outcome in the months in years ahead.
Before I get into the those questions first a brief comment on what is going on in that business today, a more importantly cash burn.
In the second quarter during that which matures during the majority of which essentially all of that businesses for shutdown and monthly cash burn rate was approximately $31.7 million per month. This is simply at consolidated adjusted EBITDA E plus our cash interest expense and debts.
Service, but excludes the discretionary capital investments, we continue to put into.
To look at the Gaylord palms. This figure is well below our initial estimates in may of around 42 million and better than the updated estimate of 35.2 million that we communicated in a investor update on June one. So we're pleased with US success in reining in our cash expenses quickly.
Effectively during the second quarter.
Now the four or five Gaylord hotels as well as several of entertainment venues reopened and operating at levels that one remaining open we expect this cash burn during the third quarter should continue to improve to approximately 20 to 30 million per month, Mark will elaborate in a moment.
Some of the details of our cash uses as well as a current liquidity and how that translates into substantial runway runway to wait out this pandemic.
Suffice to say, we feel very good about our ability to whether these low levels of occupancy or shutdowns for quite some time.
Now, let me talk about what we're doing to reposition that business to maximize the opportunity before us both near term during this.
Pause in group travel and long term for the eventual recovery as some of you know we reopened the Gaylord Texan on June eight and Gaylord palms, Opryland and Rockies on June 25th.
Gaylord National remains close, but we continue to monitor this market closely and will reach and it will reopen when we believe it is warranted.
Actually with group business essentially suspended our focus on these reopenings has been on the drive to leisure market and generating at least enough revenue and EBITDA from the hotels to justify remaining open and waiting return of the good customer we know families and individuals may be reluctant.
To take international long distance slides, but still have a strong urge to take some or full break as many states loosen. This stay at home restrictions. This represents an opportunity for hotels each of which are an easy drivable reach to literally millions of families. Thus we have been.
Very carefully targeted thus we have very carefully targeted these markets and and results to date have been pretty good view certainly given the circumstances. In fact this has been a revealing experiment in some ways. We used to hearing the description, particularly from some members of the sell side.
The Rylance hotels, a purely growth focused and not really leaves it leisure destinations of course. The reason, we don't do as much leisure business apart from a usual summer on holiday periods, you said assets, a very attractive to the group customer and this and actually stifles. This space available for the leisure customer.
Penn Pandemics, notwithstanding we love the group business. It is predictable repeat on highly profitable from an outside of the room perspective, however that should not be taken to mean that gaylord results and convention centers and not an attractive.
Year round destination for leisure guess quite the contrary some of you may overlook the first part of that label resorts and focus on the second part Convention Center, those who followed us over the years know that we have proactively investing substantial capital to add an upgrade resort amenities.
These include spas pools, waterparks multiple SMB concepts expensive atriums retail shops, and customized programming that offers unique leisure demand generators combined with our proximity to downtown tourist markets. The truth is we can drive significant leisure volumes.
We truly want to this unique window in time serves as a labar tree demonstration of that is also to advantage that the expansive all under one roof nature of our hotels gives us the square footage to accommodate increase social distancing pretty easily for example, many of our SMB out.
So configured.
Out in the open under the cover of tool beautiful atriums with lots of airflow and at public areas and corridors are designed to be widened spacious to accommodate the movement of large groups. This allows I guess to feel quite comfortable visiting us on top of the hospital, great cleaning and disinfecting disinfecting.
Processes, we have rigorously put in place. So when group was suddenly taken out of the equation and we instead executed at leisure marketing strategy post reopening at hotels were able to capture more than their fair share of limited amounts of leisure travel that is taking place in our markets for example.
In the full week.
Ending on the.
Holiday Saturday fourth of July just off the we had reopened the four hotels the Gaylord Ceran, a transient revpar indices from 159% at the Rockies to 194% at Opryland and up to 210% of both Texas and the pound.
Yes, there is a style.
Percentages.
Competitive hotels in those markets now while this reflected occupancy levels of only 14% to 24%.
For hotels have asked size this trend translates to more than a few leisure guests on top of which we were able to achieve good day rates ranging from $187 to $214 per night.
No. Just so you don't think I've been selective in sharing data on one holiday week, Let me give you the star Revpar indices for the latest available weekend during the 25th in July.
During this period total occupancy is at our for open Gaylord hotels ranged from 14% at the palms to 26% at the Texan that's for the full week and by the way in case, you think these occupancy sound low 26% of the Texan is the equivalent of 95% occupancy.
At a 500 room hotel.
For the same week transient 80 hour range from 159 at the Rockies to 194 of the Texan, resulting in transient revpar indices of over 160%, So the Rockies and opryland hundred 75% for the farms and 217% for the Texan now one.
Last one stat regarding occupancy three of the four hotels experienced the highest transient occupancy. This last weekend since opening and we're very pleased with this trajectory finally, we've seen better than anticipated performance from SMB outlets since opening.
And we've even had a few group trial.
Groups travel, including one large group a couple of weeks ago.
Of over 2000 room nights.
This is how hotels are performing right now, which frankly, we're pretty pleased with given the circumstances, but the important question.
Questions I suppose is when does the group segment really recover and has this segment's suffered any long term permanent damage.
Now if you think about this segment from a macro perspective covert 19 has decimated it over the last few months as I said earlier almost all group business. In this nation has been canceled tens of billions of dollars of loss revenue in every meeting planting company in the country has been massively disrupted the.
Interesting thing is that when you talk to the planners and by the way, we do they inform us that they and their clients want and intend to me when the able to and it is.
In our opinion this segment will recover to previous levels. The question is when and the answer I believe is at the time the nation feels it's safe to travel and congregate inside in numbers in short when there is a vaccine available so with that as a backdrop, let me talk about how.
Now the future stacking up from a demand perspective and to do that let's start with cancer room nights and more importantly, the re bookings.
In our formal press release, we talk about cancellations and re books as of the end of June but let me give you the latest numbers as of Friday, 31st of July last Friday total loss room nights INAV company for.
Backwards and all three or four forwards was one.
Really in 579000 room nights, which translates to about 737 million of loss revenue.
We're finding that the average cancellation window has been running at about 100 days out as groups to make the decision and so all of these cancellations around 93% falling into 2020 and the other 7% into 2021.
Early part of 2021 more importantly, we've successfully re book now 684000 room nights, representing just over $300 million of revenue into future periods for about a 43% re bookings rate, thus far and as.
You will comprehend if you read the earnings script that that pace of Rebooking has in fact accelerated in the month of July as strategy from the beginning of this pandemic has been to emphasize re bookings with that valued customers and these have gained momentum over the course of the quarter and as I said.
Certainly into the third quarter.
Where appropriate and warranted, we've also been able to collect some attrition and cancellation fees, which also contributed to the improved monthly burn rate versus expectations as regards cancellations and attrition fees, let me be clear on how we're dealing with these fees.
As a company with Marriott and this is where we currently this is kind of thoughtfulness process through the end of the third quarter is one way, but if groups and wanting to cancel in the fourth quarter and into 21, we're taking the position that attrition and cancellation fees at view on the sale side, you'll see that we.
Booked 655000 room nights in the second quarter, which is a really good number of which 516 with work from those re bookings I mentioned, but more notably we booked a 139000, new room nights for future travel beyond Twentytwenty.
And hot off the press here are the preliminary group sales numbers for July in July of 92019, we booked 131000 room nights.
This July we booked 196000 room nights of which 131000 will re bookings and approximately 65000, where new bookings in the month of July not only on the meeting planners still active beyond twentytwenty, but we as a company continued.
To have a sizable book of business.
For.
21, and 22 already contracted to be precise as of June Thirtyth, We had 1.64 million net room nights on the books for 21 or 43.4 points of of net occupancy, which is that is down only one point compared to where we stood in June.
Tier of 18 for 2019.
Next for 22, we had we have 1.46 million room nights on the books or 38.4 points of net occupancy on the books as of the 30 as of June that is in fact up 1.6 points compared to the same time last year.
In 19 to 21.
In addition for both years 21, and 22 about 56% of.
Of the on the books room nights in the first half of the year and the balances for the second half.
Now this volume of business on the books and sentiment from the meeting planners is extremely important because it speaks to how rapid recovery may look for as segment of the industry. Once the customer gets comfortable about traveling in a sense at group businesses like the loaded spring, which upon successful launch of the vaccine or effect.
Therapeutics or simply a control of the pandemic to manageable levels has the potential to experience as a more rapid rebound just due to the business on the books that I believe some investors and sell side analysts.
Giving it.
Our in fact, given his credit for I think some analysts are looking back and nine when bookings in the if in the year for the year will materially impacted due to the financial challenges corporations and associations, we're having pull over the border, but today, what is stopping companies and associate.
Patients is more at a fear in government mandates and when these has lifted I believe this sector of the industry will recover pretty quickly.
This is the situation, we are nurturing and preparing a hotels for and we believe our hospitality segment is still well positioned.
For a decent 2021, and even a better twentytwenty too once any.
Once any of these factors manifest now turning to entertainment segment like hotels, we reopened and Nashville, and Gatlinburg already locations in the second quarter as well as hosted the Grand opening of our already Orlando location, all three venues it became forming well despite their respective social distancing rule.
Sales and other measures, which both national and Gatland, the with both national and Gatlinburg delivering positive adjusted EBITDA in the month of June.
I would note that on July 3rd the city of Nashville did roll back its modified.
Rolled back to a modified phase two of their reopening plan, which limits restaurants, 50% capacity down from 75%. The other bright spot for entertainment business in the quarter has been the success. We've had in the digital part of this business. We're using this opportunity when people spending.
More time at home to deliver more of that content digital TV digital.
And how time, saying that and continuing to build that brand and deepen relationships, so that customers and form new ones. For example, how weekly Saturday night Opry live shows on now averaging well over 2 million view 2 million viewerships each week across all distribution points, which includes.
Circle TV as circle TV joint venture US affiliate TV stations, Dishnetwork, Sling, TV and social media as show show streaming platforms. That's based on a growing average of 1.3 million digital streams of the show each week.
This affiliate markets, adding another 588000 average weekly views addition, sling, adding another 150000 circle TV is not yet rated so its viewership is not even yet calculated into the EPS estimates and no doubt is is it is significantly additive circle is expected to begin.
Rating late fall this year.
And add decision to offer our pre lives a digital livestream has proven very powerful keep in mind that 1.3 million digital streams of this show is just the average over many weeks, but golf Brooks and Tricia you. We saw nearly 4 million digital screens that that evening in July Vince.
And Rayva delivered 2.4 million streams all in our pre life has just shy of 25 million digital streams over 21 weeks, we've been live streaming we plan to continue to offer the free livestream options through the duration of this pick pandemic, leading to a launch of circle subs.
Scripts and video on demand or Espod product in only 21. Meanwhile, circles appetizing supported video on demand or a board product is scheduled to launch in Q3 this year.
And with distribution partners, we expect to reach an additional 60 million plus consumers and digging into the numbers surplus is doing a fantastic job finding a younger generation on consumers for our content for example, 39% of the viewers aged 18 to 34, 31%.
Yeah.
Viewers, a 25 to 44 and 42% a 35 to 34 circle TV views also report watching frequently 29% say they watch several times a day, while 56% of watching at lease weekly we're really excited about this data and believe these consumers are on course to become the.
Next generation of fans and guests across the entertainment platform, both physical and digital.
So while the pandemic has certainly taken a toll on physical businesses, the timing of that push into digital.
Entertainment business was really good and we likely look back at this period as one that only accelerated the growth of the content and distribution side for that business.
So in summary, while this pandemic has been devastating for our country, our economy and our business, particularly I do believe we're seeing green shoots that give us cause for optimism that we will manage through this in the not too distant future in the meantime, everything that we can control an optimist optimize as a company.
In this period, we're doing aggressively.
This has the jewel benefit of maximizing at time horizon and liquidity during the pandemic, while also transforming and positioning our business to thrive even better.
Than before when all and.
And.
That business will be absolutely better.
When we get out of this stock tunnel, so with that let me.
Over to Mark to give you some color on the financials.
Thanks, Collyn in the second quarter. The company generated total revenue of $14.7 million, that's virtually all of our assets in the hospitality Entertainment segments were closed for most of the quarter with some modest reopening revenue late in the quarter.
Net loss to common shareholders was $173.5 million or a loss of $3 in 16 cents per diluted share.
A couple of onetime onetime items that negatively impacted our second quarter net income included $15 million write off of our deposit for the canceled acquisition of block 21, and a $19 million impairment charge on a gaylord national bonds related to reduced room revenue projections due to covert 19.
On a non-GAAP basis, the company's consolidated adjusted EBITDA Ari was a loss of $65.2 million for the quarter in adjusted funds from operations available to common shareholders was a loss of $90.7 million or $1.65 per fully diluted share.
Our cash interest expense for the second quarter was $28.7 million and we amortized $1.25 million of our term loan b to our cash debt service was $30 million in the quarter for approximately $10 million per month, which is in line with the estimate we provide provided in our investor update on June Onest.
To be clear the actual semi annual coupons on our senior notes are paid in April in October however, when I refer to cash interest expense for any quarter run a monthly basis, we treat the notes interest as a monthly outlay.
Together as Colin mentioned, our monthly cash burn in the second quarter on a consolidated basis was therefore about $95.2 million worth $31.7 million per month on average.
This excludes the discretionary capital investment that we continue to make encompassing the palms expansion, which we believe best positions the hotel for the eventual recovery.
As of June Thirtyth, we had spent approximately $99 million our of our projected $158 million budget, leaving $59 million remaining can be spent on this project.
We continue to expect this project to be complete in available to open in April of 2021.
All other capital expenditures had been reduced a minimal essential maintenance, except for our planned rooms renovation at the Gaylord national.
Using this period of closure to make progress on this project is advantageous and we expect to renovate approximately 1000 rooms are one half of the hotel by year end.
This project is being funded separately out of RF any reserve balance, which as of June thirtyth contained approximately $55 million and is not included in our unrestricted liquidity or cash burn rate calculation.
Regarding our liquidity with Reopenings underway and the amendments to our corporate credit facility Gaylord Rockies term loan complete we felt it was no longer necessary to retain the large cash balance on hand that we drew down from our revolver in March when the pandemic initially came as a shock to the markets.
Consequently to avoid the negative interest carry in June we paid down $375 million of that $400 million draw and ended the quarter with a revolver balance of $25 million, leaving $675 million of availability.
The $675 million of revolver, a bit availability plus our unrestricted cash on hand of $82 million gives us total available liquidity as of June thirtyth of approximately $757 million.
This is down from the $910 million available at the end of the first quarter. The difference between our $31.7 million monthly burn rate in the second quarter, which is based on adjusted EBITDA RV plush plus cash interest and the actual average monthly reduction on our total liquidity of $51 million per month.
As approximately $30 million of capital that we put towards the construction of the columns expansion in old Red Orlando.
Timing of our semi semiannual notes cash interest payment I referenced earlier and changes in working capital, including $6 million and ticket refunds for operating Ryman shows that were carried as deferred revenue and finally, approximately $1 million of owner funded maintenance capital items that were deemed critical.
We're pleased that we were able to bring our cash burn rate down below the levels. We initially communicated under the shutdown scenario.
While we currently live in a highly unpredictable environment at present with a cost measures. We have taken today the projected level of operations at our hotels and venues reduced interest expense after paying down the revolver in some modest attrition and cancellation revenue, we projected our third quarter monthly cash utilization to be slightly by.
Better than in the second quarter.
And in the range of $20 million to $30 million.
Again, thats on a fully consolidated basis, excluding any minority interest in the cash usage at the Gaylord Rockies.
Assuming that this burn rate where to persist with no additional assets coming online no improvement in operations beyond levels projected in the third quarter from material increases in attrition and cancellation fees. This implies about 24 months of available liquidity after setting aside the remaining capital required to complete the palms expansion.
With no near term maturities our loan amendments in place and approximately approximately 24 months of liquidity. We're confident that we have this financial strength to whether a prolonged slowdown from this pandemic and with that I'll turn it back over to calling for any closing remarks.
Thanks, Mark the owning closing comment ill make before we open up the questions is that we've given you a lot of detail. This morning, and we've done that on purpose. Because we are deeply engaged as a management team in the actual reopening and running of all of that businesses. We havent just handed over the range to a manager we think.
Through crises like this before not quite like this split pandemic, but we've been through crisis before and and so we wanted to share with you everything were up two so Maria let's open the lines up for questions. Please.
Thank you at this time as far as now open for questions in order to ask a question simply press Star then the number one on your telephone keypad. If at any point. Your question has been answered on your wish to remove yourself from the Q press the pound key.
Our first question comes from the line of Smedes Rose of Citi.
Hi, good morning.
You guys provided a lot of encouraging information about the pace of bookings and Rebooking.
And I was just wondering if you could talk a little bit about.
The rates at which you are able to that you're making these bookings I guess relative to where they.
What they were on the Rebooking side and then what are the new book.
And is there any particular properties that you're seeing more sort of concentration in terms of demand relative to others.
Right.
Smeets. Good morning. This is Paul let me.
To Patrick to get into the detail.
Even about phone here.
Patrick It's made good morning, its Patrick.
Yes, so we actually I'll give you July information on worked after Q2, our July production. The Collin referenced a few moments ago came in very encouraging numbers and we actually saw a 17% increase in average daily rate booked during the month of July for future periods as far as where there.
Or any specific winners or losers I mean that really was very well balanced our rate play across the hotels. There was no specific hotel that did better than others and then if you look at the second quarter second quarter as a whole when the worst of the pandemic was really start to unfold HDR came in.
Essentially slightly up a basically flat to last years second quarter of 2019, and again it was pretty much well balanced across the portfolio of hotels from a transient perspective, we've seen very encouraging rates, we've been talking about numbers between $160 up to $200 plus.
So from our group perspective, we've seen recently, some nice healthy increases in rates being booked and from a transient perspective rates that are more than enough for us to feel very comfortable with having the hotels open have you may want to.
Just talk a little bit about.
The mix shift wide were up 17% in July 17 cents houses store.
Yes, so what cones alluding to the fact that part of what drove the improvement year over year was the fact that we booked more room nights into T plus four and beyond and because that mix is being a little bit more heavily weighted towards.
Here is that are much farther out T plus four through T plus six you're obviously going to be capturing higher rate as a result, but I would tell you that even if you look at T plus one what we booked in July was up about 12% from a rate perspective.
So it's not overly bound to the future periods, we're seeing nice healthy rate growth even in the more immediate periods to close wanted people to yes and smedes.
This needs one of the.
One of the reasons.
We we talk about the situation being as it as it as it is unfolding situation of 2020 and covert.
And.
As being one or two of your brother and who have sort of try to connect to parallel to to nine.
When the willful fell off a cliff the we're not seeing the same pricing pressure.
In all of the dialogue, we're having with asked salespeople that we saw into a nine when markets like Las Vegas literally wages.
Dropping pricing dramatically, we're not seeing that and which I think bodes well.
For the recovery of this sector.
Great. Thanks, and then just ask you on B.
Circle TV that you mentioned.
Can you just like maybe just a broad sense of kind of.
The economy, it's for that where do you start subscription model a critical I think what sort of the ranges that you think that could maybe.
Bill to over time.
Yes in terms of revenue with I guess or however, you think about.
Scott Ballys, where this morning, and president of Entertainment business, Scotland, CECA, yes, good morning.
So.
We have the way we've modeled it is relatively modest in terms of uptake on the last five but what we are doing is where we will be putting our marquee assets such as the life operated Cowen and referenced before that has generated about 25 million streams on a.
21 week period, so we'll be moving that behind the subscription wall and we anticipate over a three year period will achieve breakeven with the subscription video on demand service.
Great.
Thank you for color.
Our next question.
Next question comes from the line of Chris Woronka Deutsche Bank.
Hey, good morning, guys.
What I wanted to ask and thanks for all the data point very very helpful and certainly appreciate them.
As Youre looking at the at the at the bookings that are starting to come in whether it's for early next year or 2023 are you seeing any changes in terms of size of the groups for.
Other composition of the group or the amount of food and beverage they want to guarantee or anything like that is there any noticeable change yet and those dynamics.
Mr. Chaffin, Circ, Hey, Chris Badger good here from here.
Despite what we saw in July to give you some very relevant and real time data, we actually saw growth and the number of bookings in the larger groups. So.
When we look at non cobot related re bookings and you're just looking at the the new room nights that are being book, we're seeing some healthy growth in some of the larger groups. So.
We're not seeing folks pull back and say hey, large groups are not going to be meeting in the future. Let's just stick to the small groups I will say, though that we're we're focused on in 2020 trying to capture as many small groups in the near term as possible because they're more likely to travel, but as we're booking new business for the future, we're not seeing any real.
Yes, but we are seeing healthy growth across and including in the large group segment.
Okay. Thanks, Thanks, Patrick and then.
Wanted to ask if you guys have done any there's been a lot of talk about.
In closing and maybe that's more in certain markets and might not be a ton of big group boxes, the close but should still theoretically be some kind of benefit you guys. How do you maybe call. It how do you think about that in the context of.
Yes, there are being a benefit down the road and even if it's yours out that but maybe more of a market share grab.
Well so so the way to think about this Chris is.
The the hotels that are sort of talking about that we have sort of little bit of rhetoric about will maybe they won't reopened.
These are not hotels that have two three 400000 square for the meeting space that focus towards the customer that we tend to go after the custom of the Patrick just just referenced.
So look I think in some of these forgive me, saying it this way in some of these mall.
Union concentrated big cities urban cities in America that it will probably be less supply coming out of this because the margin.
Margin of profitability in these big oven City hotels is.
Fine somewhat less I mean, they generate decent revenue levels and decent.
Occupancy levels, but the cost structure is very very high and up but these at this is now at competition. One thing I will say, though on this subject is that I think at thesis today.
If if huge losses question is that we're going to see very little new competitive supply that goes off that our business that type of business is capable of doing these 1000 2000 3000 room.
Groups I don't think you're going to see hotel side that bill here in the next three to five years. So look we got to get through this tunnel and.
And I am very optimistic when we get through this tunnel the amount of business that we will have on the books because of the things that we're doing is going to be very very healthy and businesses I am very confident on our NOL stick in my head in the San here I feel very confident that business will recover.
Here sometime and 21 and 20 to 23.
We will get to a point where at businesses will be stronger coming out of this than we were going into it that feel about it.
Okay very helpful. Thanks Count.
Thanks, Chris.
Again, ladies and gentlemen to ask a question simply press Star then the number one on your telephone keypad again that is star one.
Our next question comes from line of Shaun Kelley of Bank of America.
Hi, Good morning, everyone and thank you again for all that extra detail and some of the month today trend. So.
I'd like to go back to the sort of Rebooking activity, if we could.
You know just it seems like if we go back.
From where we were obviously and maybe April and May.
The overall Rebooking pattern here has accelerated I think you highlighted even from the release here at 40 versus I think 43 in July.
Could you give us a little bit more color on maybe how that trended fully across the across the quarter and second quarter on in that building that 43% number enter into July and then secondarily, what we'll just wait in what do you think is driving that activity is some of it a little bit of the concern.
Turn around if you looked at 100 day window are we getting close enough on Q4 that people are now incented to possibly rebook credit rather than pay a cancellation fee or is it way more positive and not in terms of the dialogue with.
Customers on the planners and exactly what they want to accomplish just are they more optimistic about the future effectively.
You want to take that Patrick what do you want me to.
Our new not quality or however, you want to do it.
Go forward Okay.
Hey, Sean It's Patrick let me give you some data points to think about it and let me know if any additional follow up.
So just to clarify a mixture because I know there's been a little.
Confusion in the past so the 43% is measuring rebooked as a percentage of the total cancellations from when this began to where we stand today. So that again, we started our re bookings effort in late March retaining our sales team and having them focused on that to preserve relationships and in some cases do.
Preserve the organizations because if we had cash collected or cancellation on some of these organizations. They simply would've gone bankrupt. So again just to clarify that 43% as across the entire collection of cancellations that we've seen since this all began back in March that has been building obviously as we got to the end of the second quarter. It continued to gain.
Momentum and so it's been a nice slow build over the period and as uncertainty I think a lot of folks are hopeful that as we get into fourth quarter potentially we have a vaccine type event and so welcome cancellations continue I.
I would say that the re bookings are folks are feeling more comfortable about putting something on the books for 21 22 and beyond.
You're right that as we were looking at 100, a cancellation window as we're getting into a period of time when folks it should be canceling for fourth quarter. If they still have uncertainty we are seeing from those calculations started to come in.
The meeting planner have to shop, two choices are in front of them that can either go ahead and cancel now and work with us to report or they can take the chance and wait and see and see if theres still a force majeure type event in place.
Our approach has been to work with them proactively and go ahead and identify future periods that they're more comfortable where so that we're not playing a waiting game that harms both parties.
In the long run and so I would tell you that we're working with these groups and then that allows us to say look now that we work towards Rebooking event with you as you try to write the uncertainty of whether or not you can actually have a meeting in the fourth quarter et cetera, Let's let's talk about how we look at the cancellation will we do rebooking, but we can also parts.
Actually collect a little bit of cash in the interim and so it allows us to work very proactively with a group try to get a little cash get some future meetings on the books they feel better in the long run and we have a little bit more certainty around what our fourth quarter will look like as a result.
There are some data points, let me know if you still have any additional questions. There's a lot of moving pieces in the us and we take every single one of these cancellations on a case by case basis.
Yeah, Patrick that that's a great start so I get a debt 43 is then basically cumulative over everything Thats happened post Covitz then if we can but if I can drill and just maybe I don't know and I don't know if even track. It this way, but just even directionally for groups that are canceling in more recent piece.
Sorry, its or months so more like June July.
Are you seeing again, just just I guess overall from that from that sector from that cohort if you will a.
Higher interest in Rebooking I am I is that is that the behavior that you are seeing so effectively as we might be getting.
Closer to now kind of a normalization or again, some sort of optimistic outcome. We're just seeing or is this indicative of changing behavior in your view, maybe that's a better way of asking it.
Yes, I think I think we would answer the question, it's sort of anecdotal.
The reality what happened what happened in that in that second quarter is.
Groups had no clue as to whether there would be.
A vaccine and where the people would actually start to travel again, whether the economy was going to open up again and and.
We as an organization, we insisted that our manager retain all of the salespeople.
And our hotels and deeply engaged with every single customer and the reason why bookings, except the re bookings accelerated through that that that second that second quarter was simply it just takes time for every single discussion negotiation.
Finding the available patent for that particular customer and so just.
As the as the weeks when by we will we were just getting further into the dialogue with those customers, but the reality what we are seeing and this is this is why we were very pleased to get 65000 room nights non covert related booked in July.
Is the meeting planner the meeting planner.
Constituency seems to be getting more comfortable that there is going to be a solution to this problem and and as we read daily of the you know the six potential vaccines that are under various trials in this country a new here guys like Foushee say they should be a vaccine.
Double in the fourth quarter, we're seeing a greater degree of confidence in the Hobson.
And mines of the meeting planning community so.
Thats why we will we will vary you think about it in July we booked.
We booked essentially 50% in the middle of the some of what you really don't have a lot of meeting planning activity in the meat in the middle of this summer, we booked 50% of the new room nights.
The percent of the room nights, new room nights that will vote in the second quarter and so I think I think that as we get into the third quarter witnessed continue to see cancellations for business that we've got on the books for third and fourth quarter, but I anticipate the.
You know slowing here that if the cancellation numbers and a continued growth in the Rebooking numbers, yes, and this is Patrick again thing I would add to this is just to give you some insight into the process window, when a meeting planner costs to cancel.
They do not immediately say, let's go ahead and re book. It is the very beginning of a dialogue and process for Rebooking and so when you consider the massive amount of cancellations that occurred in the March April may and June timeframe.
You start to understand that with all of these many many many many meetings cancelling and all of the dialogue that has to begin with limited number of sales resources, it's going to take time for the pick the move through the Python, but now we've we've gotten through the process and Theres enough time has occurred that we're starting to see more and more re bookings occur because.
That dialogue that's been happening over the course of many weeks and we're picking up pace because our sales folks are having timed finally go through that entire process with every single meeting planner and that's why you're seeing that momentum.
Build up as we've gone into July.
That's really helpful. From me both thank you and then just the only other follow up would be when you think about that 65000, let's call. It net new or sort of non covert related room nights, I mean, thats super encouraging that theres almost sort of any level of activity.
Out there for folks so can you put that perspective relative to.
Any sort of monthly trough type production numbers, we saw back during the global financial crisis. Collin I mean, you made that you made the comment earlier that difficult Perry to compare Q and obviously I think for those of US who have lifted both.
We agree there's sort of no comparison, but we're all looking for something so.
Can you help us think about just sort of that level of activity right now and what that could mean relative to sort of maybe trough production backend yes.
Okay.
I don't I don't I don't have the month by month break down about nine but we'll we'll get we'll go back and dig that information out and get it to you, but I can tell you when we were living through it Mark and I It was pretty damn anemic.
As it was anemic and the.
Salespeople were having a hard time getting customers to commit and and you know.
So this is this is this is very interesting wants what is what is going on here because.
There are literally thousands and thousands of meeting planning organizations across the nation on every single one of these people. All these organizations have been so heavily disrupted.
Meeting planting companies don't necessarily deal with one customer they have multiple customers and so.
Now they are starting around trying to figure out what they do about the meeting that's coming up in September or meeting that.
That was due for the June but at the same time not only are they trying to resolve all of those issues in deal without deal with us on the re bookings what we're seeing new business in good volumes, you know and that's that's what's encouraging here and and so we'll get you comparables.
Nine, but it was pretty anemic.
Thank you everyone.
Thank you.
Again, ladies and gentlemen in order to ask a question simply press Star then the number one on your telephone keypad.
At this time Im showing no further questions I'll turn the floor back over to Mr. read for any additional closing remarks, okay. Maria Thank you very much and.
As you the Delta. This morning, Thank you for doing that taking an interest in that company.
These.
Very difficult times and we.
Doing at a level best to navigate through this morass and the same time, keeping all of that people in this organization motivated to be ready to take advantage for.
Two when this when.
Cobot 19 is finally put behind US. So thank you everyone and if you have any other questions you know how to get hold a marketed seaford.
On the here at.
The company. Thank you very much.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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