Q3 2020 Ryman Hospitality Properties Inc Earnings Call
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In hospitality properties.
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Welcome to Ryman hospitality properties third quarter 2020 earnings conference call.
Hosting the call today for Ryman hospitality properties are Mr., Colin Reed, Chairman and Chief Executive Officer, Mr., Mark feel good on T., President and Chief Financial Officer and.
Mr., Patrick Chaffin, Chief operating officer and.
Mr., Scott Bailey, President Opry Entertainment group.
This call will be available for digital replay.
The number is 805.58367 and the conference I'd number is 567.
8843.
At this time, all participants have been placed on listen only mode.
It is now my pleasure to turn the floor over to Mr. Mark Fioravanti, Sir you may begin.
Thank you Maria good morning, everyone. Thanks for joining us today, we apologize for being in a few minutes late we had some technical challenges with our dial in.
But it is 2020, so I wouldn't expect anything less.
For this year so.
This call may contain forward looking statements as defined in the private Securities Litigation Reform Act of 995, including statements about the Companys expected financial performance.
Any statements we make today that are not statements of historical fact may be deemed to be forward looking statements words, such as believes or expects are intended to identify these statements, which may be affected by many factors, including those listed in the company's SEC filings and in today's release.
The company's actual results may differ materially from the results, we discuss or project today we.
We will not update any forward looking statements, whether as a result of new information future events or any other reason, we will also discuss non-GAAP financial measures today, we reconcile each non-GAAP measure to the most comparable GAAP measure in exhibit to todays release I will now turn the call over to Karla.
Thank you Mark and good morning, everyone well.
Well I.
I never imagined I would start off on the earnings call sounding optimistic after a quarter in which we reported $35 million of negative adjusted EBITDA E. But that is just how strange this year has been.
The third quarter was our first full quarter of operations since reopening for about five Gaylord hotels, and we observed many green shoots and encouraging sequential trends in this business as we move through the last three months and the same can be said for entertainment business I'd like to highlight many of these because I believe the data from.
Our third quarter performance provides solid evidence of the strong position. Our company is in as we get closer each day to a vaccine and fair and therapeutic resolution to the COVID-19 pandemic.
None of us can say precisely when they will occur, but if we assume as most experts do that a viable vaccine as possible around the end of this year or the beginning of 21 with some additional time to achieve widespread distress distribution and we can paint a very good picture for you of how we expect our business.
To perform over the next 12 to 18 months once more regardless of the exact timing of that inflection I can assure you that the longer term in 22 and beyond that business is poised to emerge from this period and an even better position them before Cove in 19, and I'll discuss the unique.
Reviews of our business and the broader trends in the industry and the economy that gives us the confidence to say just that so.
So let's look at the progress we made in the third quarter.
For starters, we considerably improved our adjusted EBITDA on a sequentially compared to the second quarter of this year. When we were essentially fully shutdown by in fact $30 million, our adjusted EBITDA loss in the quarter of 35.3 million combined with average monthly intra.
<unk> expense and debt service of nine to 9.5 million and about $4.4 million in maintenance capital expenditures in the quarter represents a cash burn of about 22.7 million per month. During the quarter. This is below our forecast of 25 million per month, which we provided in early September.
Which was itself below the 28 to 30 million range, we estimated in our second quarter call in early August the primary drivers of this steady improvement in cash burn are the positive trends we've seen in a hotels both from a revenue and expense perspective since we reopened four.
Our consolidated hotel segment third quarter occupancy was 14.6% today are.
Down only 3.8% compared to the third quarter of last year now if we exclude the national which remain closed in the third quarter and at two small overflow hotels, the combined occupancy rate from initial reopening through September 30.
For just the for Gaylord hotels has been 18.1% at an average day rate of $184. This combination of occupancy rates and solid outside of the room spend we have seen is calm comfortably above the levels necessary to justify the reopening decision.
And as being primarily driven by the amount of leisure transient demand, we've been able to end use throughout the summer and early fall.
And we continue to see this in October which has performed better than we'd expected expected, especially in light of the current increases in COVID-19 cases in the news globally naturally this has all as optimistic as we head into the holiday season, which is typically our strongest period for leisure trends in.
And in which we believe we have a compelling program programming slate this year.
We began with that Halloween program and now we're moving into our Thanksgiving and Christmas displays, which will be headlined by our first ever I Love Christmas movies event that will occur around Thanksgiving.
Through year end. This program replaces the Isaac exhibit we have typically hosted and instead gives us gives that guests an opportunity to immerse themselves in 13 scenes from classic Warner Braava Christmas films, such as else Polar Express and Christmas vacation.
We have been selling tickets since October 1st and Im pleased with the response, including both ticket and room night packages drilling down a little bit our occupancy levels has been led by the Gaylord Texan, which achieved over 27 points in the third quarter that is an average of 486 rooms sold.
Good day and.
Included in that we were pleased to host almost 8100 group room nights in the quarter the Texan as well in fact, the Texan turned in an operating profit in the third quarter with a positive adjusted EBITDA of.
$345000 and that figure is off to a $2.4 million of expenses that were quite clearly devoted specifically to cope at 19 mitigation, which includes severance fellow benefits and specific materials supplies.
Texas. The Texan was followed by the Gaylord Rockies, which achieved only 19, which achieved over 19 points of occupancy in the third quarter.
Rockies had a modest loss in terms of adjusted EBITDA, but if you also exclude the approximate one and a half million dollars of similar direct COVID-19 related expenses. This property would have also been in the black by about 200000, another way to look at this performance.
Is this alta excluding COVID-19 costs at hotels portfolio generated a pro forma operating loss of only $3 million per month on an occupancy of just 15% during the third quarter. Now this is really a remarkable in chief achievement.
For the.
The operating and asset management teams of our company both in terms of scaling our expenses quickly in response to the southern demand shock as well as on the revenue side quickly pivoting to optimize drive to leisure demand in the absence of meaningful group business. It really confirms the reopening these 400.
Tell us was absolutely the correct decision we plan we plan to continue to build on this momentum.
I should add that we are accumulating valuable lessons from this experience that we will carry forward with us well after this.
Pandemic is over.
Another bright spot for our hotels was what it was with regard to cancellation and attrition fees, where we were able to collect close to 7 million in the third quarter. This is an area of that business, where who we've been very conservative in setting expectations and I've often emphasized how we approach prioritizing rebooking.
And preserving customer relationships remediate collection of full contractual fees now that were open what we've been able to do and in many of our customer conversations is to strike a great balance between collecting some partial cancellation fees upfront in exchange for a re.
Okay and that is being a win win for us and for the customer and this brings me to yet another green shoots in our hotel business and that is our sales activity and the on the books pace for the short and long term.
Third quarter gross new bookings totaled 669000 room nights, which is which was a decline from the third quarter of last year only a little over 22000 room nights now of course, a substantial amount about 77% of these new room nights were those.
Bookings of co would relate to cancellations, which I just mentioned, but nevertheless, these are real downstream bookings in fact as of October 30 years, Weve Rebooked now over 54% cobot related cancellations today, frankly, I do not know of another company.
Space with this type of performance and is above aspiration will goal of 50%, which we set at the outside at the outset of the pandemic back in.
Mid March but to have the quarter sales. What is remarkable is that the flipside of that 77% means that 23% almost one quarter about sales activity in the last three months were entirely new future bookings meeting planners right now are experiencing something David.
Never experienced in their careers with essentially every city Convention center closed in every large groups canceled in the near future. These folks so distracted and I find it remarkable that we have their attention to the extent we do so.
Well certainly the pace of new bookings has slowed as meeting panas not surprisingly await more clarity on the next 12 months or so there remains an encouraging levels of activity in some of the outer years that is 22 and beyond planners and customers feel they have more visible visibility and still.
Still comfortable making longer term plans the net net bottom line.
Cancellation re bookings new bookings is that and is that as of September thirtyth, we still have over 38 points of occupancy.
On our books for next for next year Twentytwenty. One of course this is below where we would typically be sending with two months left to go before the start of the new year, which is normally in the range of 45% to 50 points or so but under the current circumstances. So this is a substantial book of business, which is mostly.
Concentrated in the second through the fourth quarters of next year. We believe this bodes quite well should a vaccine are right by the year end by the end of the end of this year with potential for widespread distribution to be achieved by the midpoint of next year in a best case scenario with the team.
Finally vaccine approval and distribution that Haitians people sense and returned to normal our current book would imply that the second half of next year could look pretty close to normal again I'll emphasize that this is under a timely vaccine scenario, which of course is out of our control, but appears to be one reasonable possibility.
According to the experts. Furthermore, if you look past next year, we have.
39.7 points of net occupancy on the books for 2022, which is in fact slightly ahead of last year's pace. When we had 39.2% points of occupancy on the books for T plus two or 21 or 2021 at that time.
This means that today when we look past. The next 14 months, we are still looking at a healthy normal book of business.
In the long term.
As long as this environment does not track on for another year or so.
Now this is the point, where you are probably wondering what water what about the future loan your industry peers be permanently changed as a result of Cove at 19.
We've had many conversations with investors recently and meeting planners.
And obviously this this is the question that needs very clear clarification. They say, it's great that you still have this book of business, but what about the nature of group travel itself off the COVID-19, one should be replaced by zoom over like a one corporation simply stopped traveling.
So let's talk a little more about the big picture trends in the years ahead of why we believe we will emerge in an even better position just as we have up to par shocks like September 11th the financial crisis or the great cloud of Nashville, We've always talked about the special attributes of that group business that makes it so distinct from.
Performance of travel, both leisure and transient both leisure transient business trends and we've always.
Emphasize the supply side of the equation as well.
We don't see any of these key advantages dissipating as a result of Cove at 19 in fact, we see them, becoming more entrenched now let's talk about disruption first for example, zoom and the idea of virtual meeting until the related work from home trend now while soon or the like is a wonderful wonderful.
Sales for the world for workforce collaboration and small team meetings or for a sales person to check in with the clients. It cannot replace at 500 or 1000 person keynote networking conference on incentive rewards trip for 200 of the company's best salespeople all the manufacturing company that wants to showcase.
Its new line of products to hundreds of dealers.
And professional association members don't typically pay thousands of dollars for the privilege of attending a virtual conference nor will the vendors and exhibitors who want to sell their profit to sell to those professionals pay to pitch their products and services, if they cannot set of physical booz and an exit.
In an exhibit hall to capture foot traffic Indeed for association groups, the annual meetings and conferences and typically the number one driver of revenue to support their mission and often their very existence. So we don't see technology disrupting this business in a meaningful way and as a reminder associations enough.
And on corporate groups comprise about one half of our corporate of our group business in a given year for corporate customers, who May Institute more work from home arrangements for their day to day operations. We believe the human nature dictates. The mall employees are distributed at home.
Great to their design and incentive to occasionally GABAA and network in a safe environment with their colleagues once they no longer interact daily.
A big believer in the power of corporate culture culture.
And when folks are working remotely it's so hard to develop this distinct industry, leading culture. There. Therefore, I believe that if companies do become more work from home over time. The good companies will always bring that people together from time to time now I'm going to break from my script here and share. Your quick story last December we held.
[music].
Annual Board meeting.
At December Board meeting at our Colorado, Colorado Hotel American I was walking the convention and exhibition space and there was a large tech company meeting there about 500 people will guess wall. This company was one of the virtual meeting businesses that have become a household name in this country since cobot.
And that is what our hotels with the industry, leading meeting space per room, our custom custom designed to them that companies like that to do come together build culture talk strategy and celebrate.
Finally, even if one insist that there must be some disruption from technology to at least the smallest groups I would note that the smallest slide slice of that group business that is meetings of less than 100 room nights on peak only account for 10% of that group business in short we believe the fun.
Demand for most of the motive motivations for why groups make will not materially change in the postcode world and on the supply side. The entrenchment of our advantages is even clearer supply growth in large 1000, plus room convention hotels with Das meeting space has been.
Limited for several years now due to a number of structural and economic factors that we have often talked about these include close deep.
Deep pocketed financial sponsors with long enough time horizons willing to take on development risk.
Then in Pos in decades passed and the reduced availability in municipal incentives, which often are required to.
Often required to make the the economics of new construction work and there's simply nothing about COVID-19 that we see leading to improvements in supply. Indeed, we believe you are more likely to see much in the competitive supply come out of the industry has some of the old vertical.
No.
Large group hotels that need a ton of capital in more dense urban downtowns.
Which lack the volume of meeting and outdoor space of our assets become less attractive to groups in the immediate post cobot era.
Posts in the postcode world industry, leading meeting space per room at horizontal footprint to open eight trimas at all under one roof experience that requires little use of public transport trade transportation or travel beyond the can control confines of hotels becomes quite compete becomes.
Quite a compelling offering as long as Copeland remains in the memories of customers. So we see a very bright future for hotels now let me quickly touch on our entertainment business.
As as a lot of lot lot happening there.
A discussion has to start with the old Red brand, where our reopen restaurants have been conforming really well under the circumstances that includes the ongoing capacity constraints here in Nashville old rate Gatlinburg has been the real standout here approaching pre go with levels of performance lately with revenues down 22% in the quarter.
But only 13% in the most recent month of September. Meanwhile, adjusted EBITDA in the quarter was up 68% over last years quarter and was within 20% of our pre cobot plan heading into this year. So we're really encouraged by this and believe that that as the tourists.
As markets recover in Nashville, animal and Orlando. These locations will play catch up with Gothenburg as well turning to music venture then venues. We are very excited just stopped.
We were very excited just after the quarter ended to begin phasing in live audience is once again at the graph at the Grand old our pre show, which we've been live streaming throughout this pandemic.
As a consequence of our collaboration with Metro.
Nashville Health Department and the city's COVID-19 top schools, we were able to welcome six 500 ticket it gets to witness the 95th anniversary show on October.
Since that time because of the rigorous safety protocols, we put in place we've been committed to move the audience from 500 to 800 and now to the 1100, which represents about a 25% capacity while audiences will continue to be limited in the foreseeable future. We plan to continue in the.
In December we shows on Friday and Saturday.
Though we may add more shows at a later date an increase the audience size as we work along alongside Metro health authorities to ensure proper.
Safety precautions and one very interesting thing that we've noticed about these ticket sales when we reintroduced live audiences at the operator is that a large percentage of them were purchased outside of Tennessee on essentially a week's notice from locations that would be considered flying distance such as well.
Washington State.
We believe this is a very powerful indicator of the pent up demand among our target consumers and confirmation of the new customers were able to convert and bring into our brands through our extended digital reach and streaming products, which we'll talk about in a second turning to ryman.
The third quarter, we successfully piloted piloted live at the Ryman pay per view concert series. This was a run of six week lead Friday night concerts through September the 18, beginning in week four of the series. We will also entry. We also introduced a limited in venue audience of 100.
And the 25 people, which grew each week each.
Each subsequently committing us to host up to 375 by week six and currently we have committed now to conduct these shows that a 25% capacity or approximately 590 guess this hybrid of live audience plus pay per view model proves successful during its initial run delivering on AG.
Roles for profitability from streaming purchases like ticket sales sponsorships, while generating a high degree of favorable media exposure and obvious feedback we're excited to build on this model as a promising path through the pan through the pandemic period, and we have more shows and lined up in the.
Fourth quarter in the meantime at all fans across the country are increasingly finding us online and over the air not only through those live at the offering and the Grand old off pre live streams, but also through the content, we deliver direct to consumers through our new linear TV television network and video on demand.
Ill circle at broadcast of our pre live which are carried by circle and over 80 network affiliates achieving that.
Achieve an average rating of 2.2 per show through the Ptwenty five weeks ended September 19, we've seen circle social media following an engagement grow steadily along.
Alongside these viewership numbers and we added new distribution partners for the network in the quarter fans can now access.
Through our network affiliates satellite cable and as of September the smart TV platforms of growth because of Vizio, Samsung and cone cost soon.
These additional video on demand platforms reach of 89 million monthly average consumers and circle is off to a halt starts on them with over 20 million minutes of viewing time to date since launch live TV screens that exceeded $40 million in over.
100 countries since the second week of March and the off pretty like consistently ranks number one on the post on live streaming shops across ocean or genres, not kiss country and all of these streaming interactions will drive demand to add businesses. Once we get our lives back and we're excited about the future.
We encourage you to visit circle, all access dot com and check it out for yourselves. So in conclusion, while is no sugar coating that this is an extraordinary tough time for our businesses and for our customers our employees and our communities in which we do business COVID-19 in a weird way.
Giving us the opportunity to rethink and re engineer at businesses.
So so when these crazy tightens up behind US, we will emerge stronger than we were when this pandemic hit seven months ago. So thats a lot of data wanted to give you.
A lot of information on what's going on in our businesses and now let me turn the.
For over to Mark.
Thanks, Collyn, let me first remind investors that we've posted a brief supplemental investor presentation on our website.
I'd encourage you to review the data in that document alongside our remarks on this call in our earnings release.
Third quarter. The company generated total revenue of $70.2 million, which was a $55.6 million increased sequentially from the second quarter with the most when most of our assets were closed no.
Net loss to common shareholders was $117.7 million or a loss of $2.14 per fully diluted share, which is a $55.8 million sequential improvement over the second quarter.
Our third quarter results include a $7.8 million nine non cash charge as we recorded a credit loss related to the Gaylord national bonds due to continued closure in reduced rooms revenue projections for that hotel.
On a non-GAAP basis, the company's consolidated adjusted EBITDA, Ari was negative $35.3 million, representing a sequential improvement.
Of approximately $30 million from the second quarter and adjusted funds from operations available to common shareholders was a negative $60.3 million or a loss of one dollar nine per fully diluted share, which improved $30.4 million sequentially.
Our cash interest expense for the third quarter was $27.1 million and we amortized $1.25 million of our term loan B principle. So our debt service was $28.4 million in the quarter or about $9.5 million per month.
This is consistent with the second quarter in line with the estimates we provided in our investor.
We also spent approximately $4.4 million on essential maintenance capital. It was not funded by RF Anthony Reserve.
Together these three components, our adjusted EBITDA already lost our debt service and are not funny maintenance capital expenditures puts our approximate monthly cash burn for the third quarter at $22.7 million.
This is over $2 million better than we anticipated in our investor update in early September and mine $9 million per month better than our burn rate in the second quarter.
In addition, we spent approximately $21 million towards the completion of the Gaylord palms expansion, leaving $37 million remaining to spend on that project, including our construction contingency.
We continue to minimize all other capital expenditures with the exception of the rooms renovation at the Gaylord National which is ongoing while the hotel is closed.
This renovation like all of our past room renovations is being funded separately by our funny reserve, which carries its own restricted balance of $40 million as of the quarter end rather than from unrestricted liquidity.
As of September Thirtyth, our unrestricted cash on hand was $52.2 million, which combined with our available capacity under our revolving credit facility of $665 million provides total available liquidity of $723 million.
From this we would deduct the $37 million, we have earmarked to spend to complete the gaylord palms as well as 26 and a half million dollars that we spent on our sites semi annual interest payments for our senior notes subsequent to the quarter end in October this payment covered the prior six months accrued interest there was already counted.
And our cash burn for those earlier months this.
This leaves pro forma available liquidity going forward from September thirtyth of $653.7 million and are currently forecasted cash burn rate for the fourth quarter of $22 million to $24 million. This implies just over 28 months of available liquidity. If we continue to run at our current levels of performance with.
No vaccine no improvement in group travel or other change in status.
We have no near term maturities and our covenant waivers are in place to the first quarter of 2021 with modified annual Capex annualized calculations thereafter.
We have an excellent relationship with our long standing Bank group, if we need additional covenant relief beyond this period, we're confident we can obtain it.
So we continue to be in a strong position to weather the current situation for an extended period if needed.
No. We believe an inflection for our industry will come sooner for the reasons Colin outlined starting with the consensus scientific view a viable vaccine rollout late this year early next.
And with that I'll turn it back to Collin for any closing remarks.
No closing remarks, thank you very much.
Maria will open the floor to questions.
Thank you the floor is now open for questions. If you wish 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 and you wish to remove yourself from the queue press the pound key.
Our first question comes from the line of Smedes Rose of Citi.
Hi, Thanks.
Colin I agree with you on certainly on the longer term outlook for.
Your relative.
Advantages and the group space as it eventually recovers.
I wanted to ask you just kind of in the near term when you from your last Jack. This one we saw a pretty significant cancellations in the first quarter.
I think it's about 20% decline in room nights on the books for the first quarter, which I realize is out of your control because the pandemic so around.
But.
Very favorable we bookings trend I mean is it just a matter of people getting to kind of re book.
You know as the longer this thing lasts and they just keep sort of moving down the curve or.
Are they paying penalties in order to rebook or maybe if you can provide a little more color around that.
Yeah.
And I'm going to push us over as low for Patrick to weigh in on this this is he is living and breathing. This every single out the day.
Yes.
The the reality is that.
When we when we all went into this thing back at our conference back in March.
When we really starting first in the first week of March really started talking about all this with the general consensus was that at that time, we Didnt know everyone. So maybe second quarter of this year.
This thing would we would we would be over the hill of moving moving away moving back to normalcy, but the reality is this COVID-19 is just taking longer.
To deal with and and.
There's no question that meeting planners.
Looking have looked to aggressively at the first quarter and the reason they do that as you understand this means is that our contracts are set up in a way that if they cancel inside of six months our group contracts have very explicit if they cancel inside of six months the penalties that they have.
A materially higher than if I cancel outside of six months. So we have seen leakage in the first quarter that we haven't seen a ton of leakage in the second third and fourth quarter.
And we are hoping that we get to this inflection point here with vaccine sometime between now and the year end. The we'll keep our second and third quarters pretty much intact, but our relationship with the meeting planning community has been very very good over the last several years.
Yes, and we've as you've seen our numbers weve been able to reap of 54% of the cancel room nights.
And I don't expect.
Any any.
Degradation to our ability to.
Two.
Rebook Rebook. These room nights our relationship is is pretty good now with government restrictions falling away, although we've seen in the last.
We call it to the last few days some major changes taking place across Europe will it knows what happens post election in this country to restrictions.
That will change that will change.
How we prosecute.
Cancellation and attrition fees.
Over the course of the next over the course of the next three to four months, but I would say generally speaking we're optimistic that we're going to see the trends continue in our favor here over the next two to three months Patrick you want to weigh in on this sure. Good morning space. It's a very good question are we just allowing folks to kick the can down the.
Road, what you saw in the third quarter as an increase in the collection of cancellation fees that we compare to the second quarter, what's going on there that the vast majority of that is for cancellations into 2021 and what we are doing is we are no longer just saying Hey, Rebooking is fine but were collecting cash in the short term as well as re booking so we recognize.
Still a stressed environment, but as we move into 2021 as we promised we would we have been putting greater penalties out there for just simply rebooking into the future. So we're having great success and you saw the $7 billion of lifted in the third quarter of this year.
If you look at the.
The combination of getting some cash and also getting the rebooking, we're having great success in making sure thats just not going out.
10 years in the future. The majority of those re bookings are going to the next three years. We also have a lot of re bookings and cash collection discussions that are still in process and may be hard to believe but on average our sales team is having to spend.
A large amount of time with every single one of these ruble re bookings it's about 100 individual points of contact that they have to make with that meeting planner to go through the full process of hey, we have to cancel let's get a rebooking out there and let's talk through the cash that we're going to have to pay to you. So meeting planners are feeling that it's getting more and more analyzing.
Turning to cancel and rebook in 2021, because they are having to pay the cash they don't want to they are waiting until they absolutely have to make the call to do that and as a result, we're getting a little bit of cash we're getting rebooking, there's tremendous value in having those re bookings into the next three or four years and we are moving through this process.
Yes, as we get closer and closer to a portion is you are no longer being in place.
Thanks, I appreciate that and then the other thing I just wanted to ask as we think about the cash burn are you you mentioned, some severance and furlough fees in the quarter, what do you see that.
Going forward I mean, I guess, the severance pieces could have more onetime in nature. So maybe can you sort of breakout what you're seeing there.
Yes.
The you know, we're not going to be replicating the severance pieces the severance pieces we've done.
We've we've eliminated quite a lot of jobs here in our hotel business. Patrick you have the numbers that your fingertips, yes. So if you think about the third quarter on average when we extend out an additional quarter from a benefits perspective to to continue providing benefits to the folks it's about $2 million to $3 million.
<unk> expense for the quarter.
On the sovereign side.
We incurred six and a half to about $7 million in severance in the third quarter of this year and to call. His point that will we hope that won't be replicated because we hope this entire pandemic will become into and out of the short term.
So that's kind of the run rate that we've been seeing but but let me just emphasize and touched on that a little bit in the script.
No.
We we've been we've been forced to.
With this pandemic, we've been forced to make some decisions here that you know in the ordinary course of business, we probably wouldn't have made where weve.
Consolidates and I've talked about this before where weve consolidated leadership roles.
And.
Its extraordinary that.
[music].
When you when you when you run four hotels at about 18% occupancy and if you eliminate the code that costs were almost breakeven and the reason for it is that we've made some very aggressive decisions on the consolidation of physicians with Marriott in these businesses.
I would say, though.
When we when we get over this hill get through the get through the tunnel.
We won't be uniformly.
Putting the structures in place that existed in February of this year.
And I suspect that we will see improvement in our margins coming out coming.
So as we get.
As we emerge from from from this pandemic so.
We just got a few more months to deal with this cash burn, but then I think our business will will recover will recover very quickly and unlike.
The vast majority of the hotel industry.
We do have these contracts in place where groups want to come and we had groups in September and October that wanted to come to opryland willing to actually travel and do this.
We couldn't because we were on the on the Metro health restrictions. So I think our business will I think our business will recover pretty quickly when the consumer has a sense of that it's safe now too.
Travel.
Great. Thank you guys.
Thanks Nate.
Our next question comes from the line of Shaun Kelley of Bank of America.
Hi, good morning, everyone.
Colin and Patrick I wanted to stick with the maybe the cancellation fee mechanic first and just just to dig a little deeper. So obviously this quarter, you've kind of done a little bit more of a hybrid where you give some refund and some some.
Some enforcement for the in exchange for the Rebooking I guess as we move into let's throughout the key in the fourth quarter and Q1 does does that pattern stay about the same or do we actually see you move back to more of a traditional model, where you have I guess, even more enforcement of cancellation fees and really what I'm asking is where you could.
Collect more cash as time goes on here or are we going to just continue to strike that balance and you feel comfortable with what that balance is right now.
So Sean this is a very.
Complicated question.
That you've lost it sounds simple, but it isn't.
And and if I remind you that backing out of nine when we lost about 130 540000 room nights when companies were just arbitrarily canceling because of the financial crisis, we collected that year $28 million in cancellation fees three.
Reason, we were able to do that is because there was no dispute in the.
The dispute in the in the quality of the contract here, it's a little bit more it's a little bit more difficult because we've got government interfering.
In the relationship between us and the customer government is saying.
You you know it.
You can travel.
Okay.
Here in Nashville up until about a month ago, we couldn't hold more than 20 people group of 20 people under the ordinances that were in place. So the complicated part of all of this is what is going to be the overhang from federal government and state government and Metro.
And the and the different health departments, we we've we've got.
Restrictions that have been put back in place.
In the state of Colorado recently, now we've got a waiver at our hotel, but this is changing at dialogue with the consumer. This is the government interference now I suspect and what's going to happen here is that we will be there will be a vaccine that will arrive.
At some point it will be disseminate to it will it will be distributed not disseminate distributed.
And you will see easing of government restrictions that that will give us a ton more teeth in the negotiation with out with our customers. If a customer comes to us today and says hey.
I feel like I need to cancel because I'm not sure I can get my people together, let's pick a date June of next year.
Al argument to that customer is that.
Very likely there's going to be no restrictions in travel of June of next year. They are for us the cancellation fee. So a lot of this dialogue depends on.
The customers. So they are loyal frequent are they willing to rebook some of it will depend on.
When it is some of that will depend on where it is whether its tennessee or whether it's Texas and that how that's why Patrick was saying there is as weve as weve looked at it customer by customer Theres up to potentially 100 interactions per customer.
When a customer cancels a large group with us. It is so complicated but we are navigating this on a case by case basis, but I expect and I think Patrick I'm going to shut up here and let you weigh in on this but I suspect that we should start seeing an increase in cash cancers.
Relation and attrition fee collections, because its out our assumption that the restrictions will add over over the next two to three months and the reason we were able to collect 7 million and most of it was late in the quarter.
Because restrictions in that third quarter government restrictions were easing and that basically we are having with with customers where it was a little bit more explicit than than it had been earlier, where we have these restrictions in place. So I may shut up.
Yes, the only thing I would add to that I agree 100% with what colonsay.
As long as we're essentially meeting planners are not they're both waiting on a vaccine announcement for state restrictions to start lifting when that happens then these conversations become much easier right now we're still uncertain and there is a lot of unknown and so it's a difficult conversation to have and that's why it takes 100 touch points or interactions with each customer.
To make this happen.
I would remind you though that a lot of the cash we're collecting right now is for 2021 cancellations as I mentioned.
When we're talking to Smedes, a moment ago, the vast majority roughly about 90% of what we collected in Q3 cancellation fees was 420 21.
So once we have a vaccine announcement and state research and start to lift the conversation becomes much easier and it becomes much more focused on cancellation fee collection, but I would tell you that our hope is that once portion reserves no longer even part of the discussion cancellations. We hope will subside and then we'll have less discussion Steve and B.
But even have to have conversation around cancellation fees. So our hope is that once these restrictions subside once vaccine has been announced cancellations start to subside and the conversation becomes less and less about even having a cancellation at all so fee collection will subside with the cancellations.
Very on Okay, I get it its very complicated but thank you for the detailed answer for both you and then just as a follow up call and in the prepared remarks, you mentioned that.
If we look out at the booking pattern you could have an event because of the way I guess some of the re bookings are occurring your second half of 21 could if the vaccine and all these other things played out could actually look a lot like 2019 levels I'm. Just wondering if you could help us with that bridge a little bit more I think you.
Give you in the slide deck, a little clarity around the room night declined in 2000 and kind of the second half of 21, Q3 and Q4 as we look at those they look like they're down something like low double digit, but I, but I guess you also have some rate gains that are there.
So could you just help us with that bridge a little bit more.
And how exactly that that would work right now.
Do you want to tackle that one mark.
Yes, Hey, Sean if you look at in that slide on page seven.
We we provide by quarter are on the books net.
Net room nights red.
Revenue in occupancy by quarter for next year and compared to the last two years and if you if you compare.
The second half of 21 in terms of where we sit now versus where we were.
In 19 or 20.
We're down about $4 million in the third quarter and about $9 million in the fourth quarter revenue in terms of revenue hip but it's it's a we've got about 100 and about a $150 million of rooms revenue on the books right now for that back half. So it's a strong back.
Hap.
Right now when you compare to historical averages, it's it's not very far behind where we were for 19.
We're actually ahead in the third quarter for versus where we were in 18 for 19 in flat.
Compared to where we were for 19.
In the fourth quarter, and if you take on top of that.
Improvements that we expect to make in the actual cost structure. These businesses.
And and just the general sentiment of the leisure customer.
I mean.
In the middle of a raging pandemic. These four hotels of hours of essentially done about 18 points of leisure business.
And so if you feel like the back end of next year.
People have had the shackles taken off with them and.
Ill prepared to move around.
You know I know I'm, often accuse has the tunnel optimists, but the.
The back end of next year could look pretty decent.
If all things equal with this with this pandemic.
But certainly there is no dispute about 2021 of those two.
22 looks like.
The numbers and a detailed are super Super helpful. And then just my last really a clarification point would just be on.
Just what's the kind of right timeline for let's call. It a rolling cancellation here so is it.
Let's say that basically on a six month out basis is when you start to really see those.
Those negotiations that discussion point with the meeting planners really picking up usually there's probably some kind of language in the contract that might get them to a place where your board Board forces that conversation is that is that kind of t. minus six months about the right period that people are working off of or is it shorter or longer than that or just how are you kind of seeing that that timing play out.
Yes.
I'm going to push as other Patrick because he spends a lot of time on this subject we talk about that a lot internally.
It took about that time line yes.
I guess I would start by saying it really depends on the group side because the area of the country. They are coming from and the sector or segment of group that they function to them. So it depends on the group, but on average to your point at about 180 days or six months prior to their arrival.
They ratchet up to the more penalizing level of cancellation fee. So a lot of groups, we'll start reaching out and there's uncertainty and so theyre feeling the water to try to understand.
Where where our heads from an RFP and gaillard perspective, and trying to figure out whether or not they should go ahead and cancel.
If if that discussion goes forward then we will focus more on cancellation fees, obviously, because it is 180 days out and there is you know we don't believe force measure will be in effect, a 180 days from now we've seen on average, though most of the cancellations occur between 90 and 110 days from a rival so thats when most folks pulled the trigger.
So if you think about that that's why we're seeing a lot of cancellations for 2021 first quarter. Because we are now in that primary cancellation window for groups, who are saying we have to make a decision.
So, let's go out and start the process of talking through cancellation fees and a rebooking.
Very helpful. Thank you all.
Thanks, Sean.
Our next question comes from the line of Bill Crow of Raymond James.
Hey, good morning folks.
Patrick any any change in the economics and recruit.
Book business.
Is there any sort of kind of trade off between.
Payment of some sort of cancellation fee.
Plus the Rebooking kind of nets that that's the case.
And to to zero or even.
You know honestly, we've done a lot of work around this to try to understand the value of Rebooking and obviously given the cash burn that we're going through right now and the fact that cash is king. It is obviously very important for us to collect some cash and as you saw in the third quarter were doing that we've been talking about that lot for the past few minutes.
But I would tell you as we look at the Rebooking Theres a lot of value for us and the Rebooking. We are not just rebooking at the same rate that this canceled that were booking at an elevated elevated rates are 80 ours is actually growing and the rebooking that were booking for the future as well as the fact that.
We are capturing more than one year on most occasions. So if you're canceling for 2021 were going to rebook you for 23 and 24, maybe even 25, so as we look at the value the value of that Rebooking. If our sales team does their job, which that definitely been doing is of great value to us in the future.
So cash for now to help us weather the storm, but then the Rebooking is hugely valuable to us for the future.
All right.
Thank you Mark.
What is your estimate maybe maybe it's in the note.
The release, but estimate for cancellation and attrition fees in the fourth quarter.
Basically thanks.
Actually we've assumed a kind of a consistent rate of cancellation collections no material increases.
Okay. The Collin I just wanted to pick two things off you number one any update on the national and what you're thinking there.
And then number two.
Any any.
Concerns that we may see greater unionization around the country.
Over the next four years.
Well I think.
So.
First question. The second question, obviously heavily linked.
The wheel when I say, we the.
The powers that Marriott are engaged with.
Organized labor, having discussions around look rules, some flexibilities that we want to put in place.
In Washington, and I believe as I get updated on those discussions I think they are moving in the right direction. So right now we've said end of the year.
We were going to continue to look at when it makes the most economic sense to reopen that hotel. So thats, where we are but we're making we're making headway I think the question I think the question. The second part of your question.
A lot of it is going to be dependent upon what happens today in the country.
There was a very interesting article in the Wall Street Journal couple of days ago about right to work states and about.
If there is a blue wave in the country.
This does all that change.
Do you see legislation changing all of that and I think a lot of it is going to be dependent upon the political environment within the country is organized labor more emboldened or not and but.
But look we what we what we have done the night I know you know this build because weve. We had you at our hotels you understand the culture.
The way we run these hotels when I say, we Marriott when we handed app businesses over to Mary we handed businesses over with a very distinctive culture and we have very people centric and I think businesses like that are going to be harder to unionize businesses.
Really don't care so much about their people so.
I don't know the answer to your question I think a lot of it is going to be dependent upon which direction. This country goes from a unit from a from a political perspective, but I do know this the things that we do to build culture will help and needs of ties any attempt to.
Put organized labor in any of our businesses.
All right. Thanks team.
Thank you would do one more question Maria if there are if there are if there is someone else and if there isn't then we will we'll move on with the day.
Our final question will come from the line of Patrick Scholes of Trust.
Hi, good morning, everyone.
It sounds like one group meetings good to come back some time whenever that is next year that they may be hybrid bad.
With people in physical attendance and people doing it can mean virtually.
Just curious on how you think about like revenue is logistic from that or is it possible you can collect any fees from the virtual attendees and if so how would that happen.
Thank you.
So it's going to be based.
Remember the groups that we just spent time talking about the the amount of business that we have on the books the next year.
They are rolling contract phone so if the comp the comp if the company or the association comes to US and says it's going to be a little hotter in the short term for us to get these people to move that going to have to renegotiate these contracts with us so we'll be ready to renegotiate.
Re negotiate with them, but you know Patrick it's interesting.
It was.
We we hosted a new piece of business, a Texas that Texas Hotel.
About a month and a half ago and it wasn't a piece of business that was on the books pre pandemic. It was a piece of business that was in.
A city Convention center and it was a large manufacturing industrial manufacturing company that produces farm equipment.
And they were going to hold this convention at this convention center, but the convention center arbitrarily shut shut down and said you know we can't hold your convention they came to us and they said what we would like to do is hold hybrid audio text.
Texas Hotel because in Texas, There was no restriction on on the size of meetings. They wanted to bring in three 400 people have their of their corporate said, it's a massive company. If I told you the name, which I'm not going to.
You would note, but they also have thousands of dealers around the country and the reason that they were having their convention at a convention center was because they wanted to bring all the dealers and that can touch and feel their equipment.
And Doug, but what was interesting is that the.
The technology that they use.
Failed them on the first day and this company came back to us and say it.
We're never going to do anything quite like this again, so those two points to this.
First point is I do believe that there is an opportunity for a company like us with a beautiful.
Trims and meeting space that we have to may be cannibalized.
Those businesses that are today 456000, 8000 people in a can in a city convention center staying in in in.
Hotels around that Convention center, there may be a new piece of business that we could we could build the hybrid with that with that group inside of one of our businesses.
But you know I think whether there will be a new revenue streams for the hybrid.
Downstream from customers that we that our customers today, I think thats going to be individually negotiated as a twist and turn over the next 12 months.
Hey, Patrick this is Patrick I would just add two columns points.
If we're streaming video.
For folks to be able to participate from home, we should be able to monetize the extension of that technology to them and whether that's been a registration fee or something but I think it's very fair to say that we could potentially have a hybrid model for three to six months or something like that.
I would point out though is that we should have advance notice from the groups that they're not going to be able to travel with original contracted group block. So from an attrition perspective, we'll know that they're not going to be able to show up with that number and sell into that what I would also add to that that is where we're seeing a little bit of a recovery start to occur in small groups.
The 10 to 300 on peak those are ideal for filling in the gaps left by larger groups not been able to travel as many folks into their meeting. So while we may have a hybrid approach for a period of time as small group continues to recover we'll be able to sell those groups into some of these gaps that are created.
And I think there's definitely going to be some pent up demand so the opportunity potentially fill some of those gaps left by the larger groups.
Yeah.
So.
That was a genuine attempt allowance on so your question is a complicated question.
And.
But.
I can tell you if there are opportunities to capture revenue.
We're going to do that.
Okay very good thank you.
Thank you Maria Thank you and everyone. Thank you for joining US this morning, and if you have any follow up questions of.
Any of US you know, where we are and I. Appreciate your time and I know, we've shed a lot of info with you but.
We like to be transparent here and give you all the details of what we're up to it. So thank you for joining us.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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