Q4 2020 Ryman Hospitality Properties Inc Earnings Call
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Welcome to Ryman hospitality properties fourth quarter 2020 earnings conference call.
Hosting the call today from Ryman hospitality properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark do you have it on T President and Chief Financial Officer.
Mr. Patrick Chaffin, Chief operating officer.
And Mr. Scott Bailey, President all free Entertainment group.
This call will be available for digital replay.
The number is 805 858367 and the conference I day number is 7189891.
At this time all participants have been placed in a listen only mode. It is now my pleasure to turn the floor over to Mr. Mark feel free to empty Sir you may begin.
Thank you Maria and 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 1095.
These statements about the company's expected financial performance.
Any statements we make today that are not statements of historical fact may be deemed to be forward looking statements words, such as believes or expects are intended to identify these statements, which may be affected by many factors, including those listed in the company's SEC filings and in today's release the company's actual results may differ materially from the results we discuss our <unk>.
<unk> today, we will not update any forward looking statements, whether as a result of new information future events or any other reason.
We will also discuss non-GAAP financial measures today, we reconcile each non-GAAP measure to the most comparable GAAP measure and the exhibits to art to today's release.
Now I'll turn the call over to Colin.
Thank you Mark and good morning, everyone.
Before I begin I want to express my own in our company's deepest sorrow had the passing of our friend on his Sorenson Ani was a magnificent CEO and a great man and I was on it to get to know him beginning at the time of a REIT conversion.
Through that transition in the years that followed we got to know each other pretty well and I have tremendous respect of Ani My thoughts are with his family at this time and he will be sorely missed by myself my team and the entire lodging industry.
When we spoke back on November 3rd I must have quantified my remarks at least half a dozen times with something to the effect of when we have a vaccine.
At that time I was confident that we would see a vaccine announced either by the end of 2020 or perhaps early this year it turned out to be less than a week later on November 9th when the vaccine data from Pfizer was published and that was quickly followed by a more positive news from another manufacturer today.
We have two FDA approved vaccines and distribution and it looks like there'll be others in the pipeline. This is tremendous news from our world our country and of course, our industry now as we turn our attention to the progress of distribution rather than discovery I believe the anticipation amongst our ryman and Mary.
It teams and amongst our customers and meeting planners is truly palpable.
I've been in the hospitality business for over 40 years, and I've seen a lot of cycles, several national and global crises and many other ups and downs, but I've never seen a situation like this if you go around and talk to people from all walks of life and all occupation young and old they've all been to one degree or another locked.
Down cooped up or otherwise have had the normal way of life life disrupted for almost a full year now and im not just talking about here in the United States, but across the world. This situation. We're in at the moment. There is nothing like the financial crisis of one nine or any other previous recession or crisis back in two.
Nine we didn't have millions of people at home looking out of the window wondering whether they were going to go on vacation again, when they could attend the conference and see their colleagues again and when they win when would they be able to see their children competing their favorite Don So sporting competition.
And while a handful of industries related to travel at restaurant I've certainly been hit quite hard over these past 12 months. So many other aspects of our economy has continued to thrive which is also very unlike 2009 as such conditions are ripe for very healthy recovery. It is our belief that we'll begin to see.
These first cracks in the ice in the coming weeks and months that is because every day in this country, where now administering about 1.8 million vaccine doses as of February 21st So the 63 million doses of <unk>.
Minister here in the United States, and almost 19 million individuals have received that full two dose regime.
It is being projected that sometime in April at least one vaccine will be available to everyone regardless of age or health categories by that time. If this progress continues and if the COVID-19 case numbers continue to fall as they have.
Since the seven day average peaked back on January 11th then I believe that pent up demand will begin to search and let me assure you that company will be ready, but first let me talk about some of what we've achieved in the fourth quarter and what we've learned about our business from this period, which we will apply.
Going forward and then I'll review, how we are positioned for the rest of the year and beyond and finally share some of the encouraging data we have seen more recently for the month of January.
We are very pleased with how our fourth quarter win for US we came into the quarter thinking that with group travel is still largely suspended and the national closed we might burn somewhere between 22 and $24 million of cash per month on a consolidated basis. Remember this was at the time that Covid nine.
The team was surging again in many communities with thinking about the the Lockdowns. Therefore, we focused our efforts intensely from what we've always done well in the fourth quarter and that is driving leisure transient without seasonal programming at the core of this strategy if youll skeptical of what I've, just said earlier about pet.
Up demand and.
And specifically about family is looking to get out and experienced some normalcy again, Jeff.
Just look at the million plus tickets, we sold across our holiday programs in our four hotels in the fourth quarter, we achieved 24, 5% occupancy in the fourth quarter across our open hotels, which excludes national now that sounds low for your average hotel, but when you.
Talking about hotels of 1800 to 2800 rooms.
A gaylord hotel designed primarily for groups that is quite a few leisure customers.
And while Asia leisure, sorry, I forget my.
Yeah.
In fact, I've lived here for 40 years, and while Asia was the lion's share of the fourth quarter room nights at 88% of rooms sold we also sold over 17000 group room nights in the quarter as well.
We paid this transient influx with extremely careful expense control as we rethink many of our processes processes and operating models and run leaner more efficiently and with better utilization of technology. We also collected $16 million of cancellation fees in the quarter as part of that.
Broader strategy around rate bookings. The net result was that hotel segment came in profitable posting a positive $1 $8 million of adjusted EBITDA, and that's including the losses of the shutdown at Gaylord National.
This was a substantial sequential improvement from the adjusted EBITDA loss of $23 6 million. The hotel segment has suffered in the third quarter.
Opryland Texan and pumps all contributed positive adjusted EBITDA.
Reflective of their location and more open markets, while Rockies was a slightly negative contributor Colorado has been one of the states to reopen at a more judicious pace, but we're optimistic and working closely with government and health <unk> health authorities, there to demonstrate as safe.
Writing capabilities Gaylord National remains closed, but we have had some productive conversations over the past few months with Union at this hotel and together we've agreed upon a number of modifications to how that hotel operates particularly around our F&B outlets. These changes will position.
<unk> for long term success post post COVID-19, and we currently anticipate reopening it sometime near the middle of this year.
Altogether. This performance was quite a feat for our hospitality segment I'd like to commend our team here and all the stars in our hotels for the job they did under such unusual circumstances.
Circumstances, which was so unlike any previous Gaylord holiday season.
Our entertainment business also picked up additional steam in the fourth quarter, our physical venues continue to optimize.
For state and local capacity constraints with the Ryman and the operating hosting shows that 25% seating capacity and our Ole red locations operating at about 50%. Despite this revenues for this segment were up 17% sequentially from the third quarter and we cut our segment adjusted.
EBITDA loss of 33% to a loss of $4 3 million together. These improvements our consolidated adjusted EBITDA a loss in the fourth quarter by over $28 million or 80% sequentially from the third quarter to only $6 6 million.
This reduced our monthly cash burn as a company offer including cash interest expense to 12 million per month compared to that initial expectation of $22 million to $24 million as we entered the month. So we were pleased with how all of our assets performed and while we would expect the seasonal benefits of the hall.
Days to be less strong in the first quarter. We think this enthusiasm from our leisure hotel customers and from our country lifestyle fans entertainment business, a powerful indicators of that pent up demand that I think we said all around us.
Let's bring forward to the future from what we see unfolding for our company given that we're on the cusp of this national vaccination effort back in November before the vaccine effectiveness became news we hosted a gathering at the Gaylord Texan.
Group called meeting plan is international some of you may know them as NPI one of the one of the professional associations for F for folks in our industry now why they were owned property in Dallas. We survey. These attendees on a range of topics around COVID-19, and its impacts on the meetings business.
The key question that we asked was assuming a vaccine is widely distributed by the end of the first quarter of 'twenty, one how would your client organization and feel comfortable about resuming in person meetings and over 75% of the ounces was sometime before the fourth quarter of $2000.
'twenty one.
That data from meeting planners substantiates the mood I described earlier about eagerness of people companies and associations to begin meeting again, if you want more data look at our existing book of business at the last count as of February 21st while we had seen about two and a half million room nights canceled since <unk>.
March of 2020, the start of the pandemic over 59% of those have been rebooked with US for later dates this exceeds even our most ambitious re booking goal.
50%, which we set at the beginning of the pandemic and thus far the majority of cancellations have heavily concentrated of course into 2020, and then into the first half of 'twenty. One as of December 31st 2020. For example, we came into this year is still having 28% group book.
You can see on the books weighted mostly to the third and fourth quarter coming up now that's obviously well below where we usually start a new year, which would typically be around 50%, but it is still.
A substantial volume of business certainly for the back half of this year and when you break it down by quarter. We started this year with 43 points from 33 points of occupancy for the third and fourth quarters, respectively compared to 52 and <unk> 43 at the same time last year in short we are.
Started this year off pace my only nine points of occupancy for the third quarter and 10 points of occupancy in the fourth quarter.
If a company if our country can reach its ambition ambitious vaccination gulf's by April as outlined then this implies a potential for a decent second half, but more importantly is the longer term picture. Once you look past this year and peak into 'twenty. Two for example at future book.
Looks nearly identical to prior years at the end of 2020, we had virtually the same group occupancy on the books for 'twenty two as we did a year ago for 'twenty. One those numbers are 49, now compared to $41 three last year and the trend looks similar down the law.
Until 2025, where we have slightly more occupancy on the books now than we did a year ago for 24, and that's of course, partly due to some of these bookings that we have been undertaking.
And Thats just the occupancy points when you look at the ADR for these on the books.
On the books group room nights for each each of the next several years, we see consistent growth in every year to summarize the data the cancellation horizon remains not too distant and beyond that horizon things continue to look pretty healthy we don't see customers shifting their long term preferences away.
From an in person meetings at lead volumes are of course down significantly from a year ago, but our expectation is that we will once again see lead volumes pick up for new bookings as the vaccine is more widely distributed in fact, Patrick gave me some data yesterday about what we've seen in February.
Patrick when we get to the Q&A you can share that data.
I want to say a word here on our customer mix because.
We feel that a lot of questions from investors and analysts about this.
The growth the industry is incredibly diverse.
COVID-19, aside on any given day, if you walk around at hotels, it's really full of corporate attendees in business attire.
We're not a business transient brand at all for that matter, we host everything from cheer and dance competitions to social military or for total groups to affinity and professional associations for everything from Turkey hunting to comic books. The diversity is really something to behold in our hotels.
Most of these types of groups greatly wanted to convene once again for social reasons or for personal reasons and not least of all because so many associations their meetings underpin their own organizations budget and the budgets of the sponsors.
Zibet isn't so so do we think there'll be a slow return for some customer types and all of this of course, we would expect that they may very well be some corporate meetings that are pushed off.
For a period.
But you must not confuse a small sample size with the entire meetings industry, but as Ive cautioned you on our last call not to equate.
But just as I caution to you on our last call not to equate zoom video conferencing with the ability to GAAP of 500 to 1000 people for camaraderie and team building.
Now finally, what have we learned from all of this.
It's great that we see a path for demand to come back to normal in the not too distant future, but how about us and the supply side of the equation and what we'd be doing differently first as you can see in the fourth quarter with AD manager, we truly re imagined the cost model of many aspects of our hotels to reach.
Stability at these levels of occupancy was not something we initially projected.
That we will be able to achieve but we rolled up our sleeves, we identified several changes that.
We estimate can drive an increase of 100 to 125 basis points of adjusted EBITDA.
Margin in a fully normalized post COVID-19.
COVID-19, well compared to our pre COVID-19 margins and then in our leisure business, which we've always put a lot of research and effort into we are pleased with the way that we're able to drive additional transient business and.
And extend the seasonal windows.
Youll see us applying many of these lessons in future in future years to sustain the success. We've had this year and growing at target leisure demographic. We are working on a lot more than just these areas. We expect will see supply changes in our space in the wake of this crisis and we are working very closely with Marriott.
To talk about how we address market share going forward in the group business. We think this is an opportunity we are thinking about how we align that business with post with the post Covid world to make what was already the top brand for non gaming group business scheduled hotels with all of that competitive advantages include.
The meeting space, a managed service asset quality.
<unk> desirable markets that we're in and so on.
We've been looking at how we make this even better in a moat even wider in the future.
In our entertainment business, we've made tremendous strides in our digital strategy over this pandemic period from introducing paid livestreams to driving audiences to our social media network in some ways. This crisis has really accelerated the key part of our strategy for this segment, which is which was weaving together FIS.
<unk> and digital digital assets, and creating and driving more content out to fence wherever they are and by the way.
Just as in our hotel business, we have a really good book of business on tap for the second half of 2020 in our Entertainment segment, Let me give you a quick.
Example, here for the five months from August this year to year end. We currently have 129 days booked at the Ryman that's clearly.
Let me say that Thats nearly the same number as the $1 32 concerts or events that we actualized the alignment for the same period in 19, and we've more than a dozen ryman events in the works that are likely to be confirmed multiple holds on the remaining open days with the only exceptions of Christmas and new year now think about this for a month.
If it all goes well.
With the vaccine to the point that at venues can be back to full capacity before August then.
Could potentially fill more constant seats at the Ryman for the last five months of this year immediately post COVID-19 than we did in the last five months of 19 immediately pre COVID-19. So.
To conclude so to conclude if you can't tell by now we're very optimistic about our entire portfolio.
100% focused on making what we believe are the best businesses in that category is better now finally, let me just give you a little bit a snippet of what went on in January which continues to provide encouraging data.
On the transient side according to stall.
The Gaylord brand performed at 152% Revpar index for the month, a 96% increase from January of 2020 that is essentially a doubling of our transient market share compared to last year in the month of January and on the group side as sales production in the month of January of 19 nine.
Group room nights represented an increase of 20% compared to January of 2020, and these room nights came in seven with a 7% higher ADR than we booked last January.
And as I say, Patrick will share some data on the lead volume.
So for now things are trending in the right direction.
As we move into 'twenty, one and lastly, regardless, regardless of precisely how long it might take to restore to pre COVID-19 levels I want to assure you that we have the liquidity liquidity and runway ahead of us to get there earlier. This month, we closed on a new senior notes issue to refinance.
400 million, 5% notes due in 2023.
I gave much of the same presentation that I have this morning to the bond investors on that deal and when the presentation was over we had $2 $6 billion of orders for $400 million issue and were able to upsize the deal to $600 million and still come in at four 5% the low end of that.
<unk> of our price expectations all accomplished in about six hours. This is a great vote of confidence from markets in our company and the continued value and the continued value of assets, which significantly boosted our already strong liquidity and with that let me turn it over to Mark to talk about our balance sheet.
<unk> cash burn rate for the rest of the year.
Thanks, Colin and the fourth quarter the company generated total revenue of $126 $5 million.
A $56 million increase.
Sequentially over the third quarter net loss to common shareholders was $79 7 million or a loss of $1 45 per fully diluted share.
Improvement of $38 million over the third quarter were <unk> 60 per share.
On a non-GAAP basis, the Companys fourth quarter consolidated adjusted EBITDA was.
It was negative $6 $6 million representing.
An improvement of approximately $28 6 million from the third quarter.
<unk> available to common shareholders was negative $31 million or a loss of <unk> 56 per fully diluted share, which improved $29 million sequentially or <unk> 53 per share or cash interest expense in the fourth quarter was $27 4 million and we amortized $1 $25 million of our term loan b print.
<unk> so our debt service was approximately $28 $7 million in the quarter or about $9 $6 million per month, which is about flat to the third quarter.
This puts our monthly cash burn rate in terms of adjusted EBITDAR EBITDA R E and debt service at $11 $8 million per <unk> in the quarter to $12 6 million after including maintenance capital spend.
Yes.
This was a substantial improvement from both our third quarter cash burn rate and our initial forecasting going into the quarter.
One driver of this reduction as Colin alluded to was a substantial improvement in our leisure transient business fueled by our successful holiday programming during the quarter. We hosted over 161000 transient non group room nights down only 37% from the fourth quarter of 2019, Despite government government restrictions sales.
With distancing our inability to produce our annualized programming and the continued closure of Gaylord National we were.
Were also successful in maintaining ADR, which was up one 6% compared to the fourth quarter of 2019.
So we're pleased that we drove this occupancy not through discounting, but through the appeal of our programming, which has always been a hallmark of our transient strategy.
Another material contributor to our cash burn reduction was the collection of $16 million in cancellation fees in the quarter.
The majority of these fees were for the travel dates in 2021, rather than past cancellations for 2020, we continue to prioritize the long term value of each customer relationship and cancellation fees are only a part of that equation. So future collections remain uncertain and we don't model material increases in these fees when we think about our near term cash.
Earned rates.
Finally, our focus on expense controls and efficiency in our hotel segment contributed to the improvement improved margin performance as the incremental flow through sequentially from the third to the fourth quarter was about 47% or an improvement in adjusted EBITDA <unk> of over $25 million on an increase in revenue of $54 million in our hotel.
Segment.
One last note is that while consolidated adjusted EBITDA Ari did benefit from about $8 $4 million and employee retention tax credits. We also accrued a near equivalent amount per furlough severance costs. So these essentially offset in the quarter was driven.
Primarily by improving fundamentals.
Looking ahead to 2021, we're optimistic about the trends, we're seeing in our markets and in our businesses, but how quickly our businesses recover will be determined by a variety of external factors, we don't control such as vaccine distribution Covid case loads and government restrictions.
In the first quarter, we do not anticipate the same level of transient demand due to normal seasonality. So we expect our first quarter cash burn rate to increase to a range of $23 million to $26 million for maintenance capital.
We expect that between increased vaccine.
Availability the initial return on certain group types, such as smurfit associations and the seasonal pickup in leisure demand, our second quarter cash burn will improve to the mid to high teens again before any maintenance capital.
And while it is hard to determine the inflection point as we move into the second half of the year, we anticipate our monthly cash burn rate before maintenance capital will reach breakeven in the third quarter and become positive in the fourth quarter.
In terms of our balance sheet and liquidity, we ended the fourth quarter with $56 $7 million of unrestricted cash and $593 million available under our revolving credit facility.
Subsequent to the end of the quarter, we took advantage of a very strong bond market issued $600 million of new four 5% senior notes at par for net proceeds of approximately $591 million. We used these proceeds to retire our $400 million, 5% notes due in 2023, which become callable at par.
In April.
We also paid down our revolver balance and added approximately $191 million of liquidity to our balance sheet and extended our weighted average maturity from three.
Four years to four seven years.
This transaction left us on a year and pro forma basis with total liquidity of $847 million for just over.
Or just over $819 million after setting aside approximately $21 $4 million to complete the Gaylord palms expansion.
Finally in the fourth quarter, we closed on an extension of our covenant relief for our secured credit facility with our long standing Bank group. The second amendment extends our covenant waiver through the first quarter of 2022 and lowers covenant thresholds for the second quarter of 2022.
We also improved our flexibility during the waiver period with increased cap on discretionary capital and certain investments in.
In summary, our company is in a solid financial position our markets and businesses are improving we have a significant book of group business in the back half of the year, our cash burn rate is declining and our balance sheets in good shape. We're excited to close the book on 2020 and look forward with optimism the 2021 accounts.
And with that I'll turn it back to <unk> question in the book on 2020, we're excited yes.
Thank you Mark Maria let's open up the call for questions.
Thank you the floor is now open for questions. If you wish to ask a question at this time simply press Star then the number one on your telephone keypad again that is star one if at any point. Your question has been answered or you wish to remove yourself from the queue press the pound key.
Our first question comes from the line of Smedes Rose of Citi.
Alright, thank you.
I was just wondering if you could talk a little bit more about some of the mix of bookings that you're seeing near term and longer term you mentioned a little bit about some of the association.
I'm trying to sort of square that against correct growth step and a room rate FTSE share for the quarter. If you could just maybe give us a little more color on how that strength thing.
Sure.
Patrick you want to answer Smedes question by the way Smedes good morning too.
Good morning, Good morning, Smedes, it's Patrick.
So, let's talk a little bit about what we're booking for the longer term. So let's talk a little bit about who's interested in booking in the short term.
From a longer term perspective, we are very pleased that the mix of business really has not shifted away from what we've seen historically, so the corporate association and Smurf mix that we've seen historically in our business largely holds true as we look out into the long term bookings and who's looking beyond.
The Covid crisis in the short term, though as we look at groups that are looking to get back to beating sooner.
We've referenced some of this in previous discussions.
A lot of more of the Smurf type business and some associations and when I say smurf Im talking about sports meetings, our educational meetings or celebratory meetings training.
Training meetings multi level marketing groups.
A mix of folks who are very motivated to get moving and meeting as soon as possible. So in the short term a little bit more on the <unk> side against smart stands for social military education will religious and fraternal and as we move into the longer term back into 2022 and beyond the groups that are looked.
To travel are very consistent with our historical mix of corporate Association and smart.
Okay. Thanks.
And then any thoughts on when you guys could see.
Moving forward with the national reopening.
Yes.
We've been a little coy over the last several months because we've been in some fairly deep discussions with.
Organized labor in that market just to.
Just to remind you. This is those folks on the phone and this is only a union hotel and.
We've had I would say I would describe it as very cordial discussions here and very productive.
And I think now Patrick we we are gearing up to open this hotel sometime mid to late second.
Second quarter.
The good news is that will be done on a complete room refurbishment.
Being aggressively pursuing here for the last six to nine months and so that's the plan of action there anything to add.
No the only thing I would add is.
That as we look to reopening there.
Obviously, we're watching very closely what's happened what happens on the group side of the business because of that hotel.
Does have its labor structure that Colin just referenced really needs for the group recovery to be in process.
And the second thing I would tell you is we're working really closely with the county, and the state and that market to ensure that the restrictions that are in place allow the hotel to operate as it needs to be reopened and we appreciate very much both the county in the state's partnership and working through that process right now.
Patrick.
Smedes first question talking about bookings.
Would you answer very well just use this as an opportunity to just touch on the what we've seen on lead volume is here in the last.
Few several weeks.
Everyone in our industry, we are watching lead volumes very closely.
And as we finished out 2020, our lead volumes had deteriorated to the point that they were down about 74% year over year.
We've been watching very closely and we're tracking it on a weekly basis and we're encouraged by the fact that we've seen some improvement in that.
Was down about 74% in terms of group lead volumes has now improved slightly to down about 58% and thats happened in the last several weeks.
<unk>.
Notably in the past two to three weeks, we've seen that start really coming up so we're starting to see some things that are encouraging and we're going to have to see those continue but it is a.
A bit of a sigh of relief that we're finally seeing some positive trends emerging.
Great. Thanks for all that detail.
Thanks Smedes.
Our next.
Question comes from the line of Chris <unk> of Deutsche Bank.
Hey, good morning, guys.
And I appreciate all the detail as always.
<unk>.
Our question is we've heard from from some other hotel companies.
We don't have to name them, but.
The day, they look to capture some virtual some revenues from from virtual meetings until we reach a point where everybody is back in person, which will hopefully be sooner rather than later is that something you guys can consider and does it maybe extend beyond.
The Covid period, I mean is that is that really a longer term opportunity or just some color on how you look at that.
Okay.
Let me give you the.
The cute answer to all of this.
We.
Where you spend you will energy as a business.
As determined by what you want the outcome to be we want the outcome to be people come back to our businesses and <unk> businesses and this is why we put so much effort on this re booking process, Chris now we booked almost six rebooked almost.
60%.
In a market like.
Colorado that numbers in excess of 70%.
I suspect that you will hearing.
We are trying to.
Help help some customers with the virtual process and putting a.
Hopefully a line of business in there to actually generate revenue.
Thank a lot of that is due to the fact that some of those companies haven't had the success in re booking that we have and so we're not spending a whole lot of time on that obviously Marriott.
As the largest hotel company in the World is something that they've they've looked at but our focus right now is driving customers back into our facilities.
That is where the real economics of this industry day.
Okay.
It's helpful. Colin and then a follow up for you.
I would I would argue that probably four of your five markets are have been seeing population inflow before COVID-19 and are likely to continue to see population inflow after COVID-19.
And you've done a really nice job in Nashville kind of becoming.
<unk>.
Company that in that market for not just lodging, but entertainment. So the question is if you look at a couple of these other markets that have favorable population trends does that make you want to go deeper in those markets or do you go back a few years and say I want to be I want to be in another market.
Whether it's on the lodging side or the entertainment side.
Chris.
Knowing you the way I do I think the answer to that question.
We like to create.
Businesses that.
Beyond comparable.
That that you don't see anything like him and and one of the beauties of being in a market like Nashville, with 2880 rooms, and 650000 square feet and Fabulous Entertainment options.
Pre COVID-19, we were thinking we need more guestroom simply because of what you just talked about the market was pre COVID-19 was vibrant it's growing more companies are moving in tremendous real estate development same thing for Texas same thing for Orlando.
You go to the you go to.
Denver and you look at the.
The large community.
Around that city, and we see we see long term unprecedented growth and we like to continue to expand our businesses and create.
Our competitive moat and I know you've heard us say that before so.
We have.
Effectively we have plans for potentially growing each of our hotels, except that hotel in Orlando, where we've just we will have in next month that completed but we just don't have a lot more real estate there, but we like we like this and by the way you know as well aside the iron ores on.
On this on these types of projects, where you add 300 rooms.
Whatever it may be 80000 square feet of meeting space. These are not 8% IRR with a cost of capital of 757%. These are 16% IRR. So we believe we create a hell of a lot more value now if we can find a market that has a profile of a similar.
The profile to the markets, we're already in and we find a community that wants to support us.
With some tax incentives to get the the project well across that threshold of course, we're going to look at that.
Okay.
Very helpful. Thanks, Colin.
Thanks, Chris.
Our next question comes from the line of Dori Kesten of Wells Fargo.
Thanks, Good morning.
Is it your expectation if we look out a few years.
Building on Chris's question that occupancy at your hotels may exceed prior peak levels, just given the pickup in leisure interest in any of our brands.
That's.
That's how that's high.
Hypothesis we've.
Look when we went into this story.
The way, we try and run these these businesses when we went into this we challenge Marriott we had.
Meetings with that organization here three weeks ago with David David Merit was here.
And every meeting we're having with these folks it's how do we make the economics of these businesses better how do we gain market share. There are so many group hotels in this country and large convention centers around this nation.
Net of really ticked off their customers over the last 12 months.
We havent done that we have we have open arms and helped our customers and that's why we've rebooked as notch businesses. We have I think there is an opportunity here over the next one to three years to build even stronger relationships with our customers and build and build market share.
And then on the cost structure of these businesses.
Learned a lot we've learned that in a market like Texas, where we had a 175 manages with all of these different disciplines that when we reopen these businesses, we open them up with materially less number of.
The chiefs and and.
And so.
That's why.
My prepared script. This morning, I said I think we as a company can improve our margins, 115% here going forward.
And if you combine that with cost efficiencies with real margin improve with real.
Revenue growth and I would tell you I think we've learned a hell of a lot about the leisure programming here. We've proven we've always had really good creative leisure programming in our hotels and that's why.
Hotel like for instance, in Orlando has materially outperformed most of the other large convention oriented hotels around it simply because we treat these hotels like theaters, we put a different backdrop in place and we put creative programming in place and so I think we've learned a lot and I.
That's going to help us Patrick as we think about the seasons of lesion prospectively. So.
I'm very excited about the prospects of our hotel business just as I am very excited about what we've been able to accomplish on our entertainment side non.
I'm really of the mind that two three years from now this is going to be a better business than it was when we went into this and by the way when we went into 'twenty. It was going to be a very best year.
All across our company and I really do think we have the attributes in place from making it even better.
Thanks, Mark when you were when you were walking through the quarterly cash burn for the remainder of the year.
In cancellation and attrition team.
We've we've assumed as we look.
For 2021, we've assumed a what I would consider a normalized environment for cancellation fees were not we havent made assumptions around.
Significant ramp up of spikes in cancellation fees as we move forward.
Let me add so in market.
You've obviously this question, so well, but I want to I want to add to it.
We sit around and we try and project what this nation is going to do here over the next few months and it is so impossible to answer because we're not in control of this vaccine rollout we're not in control of government actions in communities like Nashville that right now says that.
We can only per 25% of the seats filled 25% of the seats in our theaters here and 50% in the restaurants and so we.
We try and be when we communicate with the likes of folks like <unk>, we try and be very cautious and conservative so.
We never have to come back and say you know instead of saying that is a cash burn rate of X in fact, it's X plus 10%.
We've projected cash burn rates second quarter third quarter fourth quarter of last year and every time, we've managed around that and come in materially.
Materially less so.
<unk>.
I at this stage and not hung up on what our second quarter cash burn rate is going to be what I'm focused on now is how does this business really start to ramp up fourth quarter 'twenty two 'twenty three that's what I'm interested in.
Okay. Thank you.
Thanks Dara.
Our next question comes from the line of Shaun Kelley of Bank of America.
Hi, good morning, everyone.
Patrick I wanted to follow up kind of to your initial remarks about talking about the Smiths business you might get an award for first time smurf he's ever been used on a public conference call but.
Im wondering on Ido.
You say longer term is that mix.
Talked about do you think that's possible in 2022 to get back to what we consider let's call. It normal mix for Ryman or does it have to be longer than that just given what you already might now about how 22 are shaping up.
Yes, I would tell you that I think the second half of 'twenty. Two is absolutely back to a more of a normalized mix in the first half of 'twenty. Two we're just kind of watching to see how that holds we got a normalized mix on the on the <unk>.
Yes, absolutely the day.
Alta is the short term business that gets booked between now and the year and for 2022 and the question is.
What is going to be the behavior of the broad growth market and.
Right now I anticipate corporations being a little bit slower companies.
I think you'll agree that this out of ascent, but we are seeing some very interesting stuff.
As shown as Patrick said in this Murphy area. So the key for next year is going to be what happens between now and the year end.
I'd say in this kind of as a follow up to <unk> question as well one of the things that we're watching closely is on the corporate side, even here in Nashville in the other markets in which we operate were already seeing corporations reduce their office space footprint.
As they.
Take into account the opportunities to work from home and reduce their costs, we've been saying for a long time that we felt that that was going to occur and help us on the medium side, because it would be a greater need to bring folks together to meet face to face on a regular basis and so as we see that really starting to take place as large corporations are reducing their.
Footprints I think that's one of the things we're watching to see if that gives us an immediate boost on the corporate side, even though they are cautious right now a year from now will they be as cautious and will they be booking more mediums. So theres a lot of things at play in flux right now.
Yeah. This is <unk>.
Probably going to go into.
Unanswerable part.
Question, but.
Obviously, there's a lot that's been discussed around pent up leisure travel demand, you've seen and talked about from the signs for your business, but we're also starting to get the question on sort of pent up group or corporate travel demand. So.
It sounds like it's too early to actually I feel like if you see that you might have said it by now but you just kind of want to ask maybe even theoretically is there a chance that we could actually see people trying to crowd the calendar a little bit to make up for events that have been canceled for two years in 2022 is that like a realistic possibility.
How could ryman take advantage of that or the lead times too long to really be able to capitalize on something like that.
Look it depends I suppose if you look at the glass half full or half empty.
My personal view is I think youre going to see a lot of it I know how we.
We had a board meeting yesterday.
Orders were sitting on a virtual board bold call.
This is a company that spent this slide focused on meetings, but we're on a on a bold call using zoom technology. In every one of our board members assigned we go to meet face to face we want to go do it and May another board I'm on.
Same dialogue same dialogue happening and it's happening all across all across our assets.
<unk>, so on the sort of half full.
Individual in this company and I truly believe there's a lot of demand pent up demand and I think when.
Patrick described.
A 15 point ish change in lead volume in the last several weeks I think thats, an illustration and I think the more as society gets.
Comfortable with the notion that COVID-19 is pretty much behind us as the rates come down and vaccination goes up I think you start to see you start to see the light switch Tony and I do believe there is an inflection is going to be an inflection point in this nation that where people.
Not to say we're out of here, we're going to get out of that basis, we're going to have funds and we're seeing that on the entertainment side, we're seeing it on the concert side.
Every week, we are filling 1100 people in the Opry house on a Saturday night.
From outside of that from outside of Nashville, and these people are coming so I.
I tend to agree with you.
I'm not sure I'm agreeing with you shown but I think that the hypothesis you laid out.
As is potential here.
It could really drive.
Drive our industry.
I think we as a company are really prime to do well here because with the quality of assets, particularly on the leisure side.
If transient as a lead indicator for what's going to happen with group then there's definitely the possibility for pent up demand to exist because we're definitely seeing the transient excitement building as the vaccination strategy continues to rollout and gain momentum.
Great. Thank you everyone.
Thank you Sean.
Again, ladies and gentlemen, if you wish to ask a question simply press Star then the number one on your telephone keypad.
Our next question comes from the line of Bill Crow of Raymond James.
Hey, good morning, maybe I could start.
I'll start with Patrick on the new bookings Patrick when you when you have groups you've dealt with from the past, but not in the past year or year and a half.
Any change in the T&D expectations the numbers.
If you've got somebody who is on the books, that's looking to travel in the back half of 'twenty. One obviously, we're going to be working with them on the attendee level. If theyre looking at 'twenty, two 'twenty three 'twenty four and beyond.
Theres not a lot of the discussion of Hey, we don't think we can get back to our historical levels. It's really just how soon is it before how long is it before we can get back to those historical levels. So we've not seen a material shift downward in the contracted blocks that those groups, who historically dealt with our bookings for the future.
Sure.
Thank you Patrick.
What made the.
<unk>.
What provided the ability to collect the fees the cancellation and attrition fees at this juncture I mean are these groups that had a book to rebook.
And finally canceled altogether, what was what was different because I know you couldnt really collect much in the way of fees.
Given the circumstances during this past year.
Well.
We.
This is a real complicated question your question sounds so easy, but it is complicated.
Because it depends on when you book depends on.
Our position and depends on also whether you are a loyal with us depends on whether you are a multiyear or with US we deal with these customers not homogeneously, but.
Very individually so last year, we took the decision from most of the year that we understand that the oil government restrictions in place and it was impossible for groups to travel and that's why we spent so much time and effort.
<unk> these customers now if a customer.
In the fourth quarter of last year said, Hey.
If the vaccine announcements.
Middle late November.
Hey.
We don't want to come in June July of next year.
I hope position with that customer has changed we changed dramatically and we said in all probability.
Ability, there's going to be vaccines available theres going to be no government restrictions in place and therefore this is not a force majeure.
Situation.
But I don't want to get too much into the weeds here Bill.
Net.
We then would say to that growth if it's a group that we've seen so many times, but we understand what youre, saying.
So here's what we will do we will renegotiate with you youll cancellation fee, but we would like you to rebook for whenever it may be.
The next available date for you and some of those groups have already gone up.
Business on the books with us for 'twenty, two 'twenty three 'twenty four.
So that's how we've gone about it and Patrick and his team have had enormous day by day contact with the sales organization of Merit. We are deeply involved in this process and thats why in that fourth quarter, we collected.
Ton of cancellation fees, but the vast majority of that was all for 'twenty.
<unk> <unk> the beginning of 2021, so you want to add to that Patrick Yeah, I would tell you.
If there are three ingredients. The first is we kept our sales team onboard.
And as a result, we had a very highly engaged approach to communicating with our customers. Our group customers. We've told you before it's about 100 points of contact to go through one of these negotiations the second ingredient I would say is a long term relationship and so theres more of a view of a partnership and that they understand that we are trying to make sure that we are around for the <unk>.
Long term to serve their needs on the group side and the third that's really allowed us to collect cancellation fees, especially in the fourth quarter is an uncertainty and this is what Colin speaking to an uncertainty as to when force measure is no longer in effect and so if we're having conversations about the second quarter third quarter fourth quarter of 'twenty one.
The cancellation and Theres uncertainty on that group side as to whether or not there'll be under force majeure and be able to exit that contract with no.
No penalty then we have the ability to collect a little bit more cash in the short term and potentially re booked them for the future as well. So I would say those are the three ingredients and I credit the sales team on the phenomenal job and making all that happen and majoring in the obvious as every day goes by it.
And communities are chain.
Changing the restrictions positively.
The vaccination rates are going up the leverage we have in those and those discussions are improving dramatically as stack of chips are going up daily in the in the discussions here. So.
So.
Interesting period of time ahead of US I think over the next two to three months.
Colin I have two very quick easy to answer question. So I think number one is there any potential with block 21 resurfaces.
And number two is any commentary on the timing of the Rockies expansion.
So.
The first is that our our desire.
<unk>.
For the market of Austin, Texas is no different today than it was a year ago.
And as circumstances change, it's something that we certainly would look at.
And frankly, we keep in touch with those people, we didn't abandon them 12 months ago, Mark Mark has some.
Almost every other week two weeks four weeks conversations with these folks and stopped us the same with the people.
That deal with Austin City limits, so that that we'll see how that progresses as that company a company reestablishing and look the thing about the thing about Colorado.
We've been shocked.
Those groups have rebooked in Colorado.
We booked over 70% of those lots room nights.
<unk>.
And I've been very surprised how well that hotel has done given the restrictions that are in place in Colorado, because Colorado has had some daily.
Significant COVID-19.
Case counts and but it's being managed very well and it's coming down but the answer is we love that hotel and we see that a hotel you have heard me say this before bill.
<unk>.
<unk> operating land can be 2000, and 880 rooms, with 6600 50000 square feet in a magnificent pool complex and stuff like that in a town like Nashville.
I don't see any reason long term why that hotel in Colorado Con evolve and grow to the same status as our product over time. So we look we love that hotel and potentially.
As soon as we can we can grow it we will.
Great I appreciate all the commentary of the day. Thanks, Thanks Bill.
One more question I think Mark what do you think.
We're also wherever the Tampa.
Are there any other questions.
I just wanted to ask the questions Murray.
I am showing no further questions at this time, Sir excellent probably all getting off on the next.
The next company.
He is still on the phone. Thank you for your time this morning.
As you can tell from out.
Dialog here, we are very optimistic about the rebuilding of this organization and.
And we're going to be a better company coming out of all of this stuff. So thank you for your time do you have any further questions you know how to get hold of us.
And thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
You were listening to performance fees from the stage of the world famous Grand Ole Opry Ryman hospitality properties company.
Meaning.
Good day.
Take care.
Okay.
With the annuity interest income.
John.
Free cash flow.
Thanks.
Our GAAP.
Yeah.
Thank you.
Yes.
He resolved.
Mark.
Okay.
He was off.
GAAP net.
Okay.
Yes.
Okay.
Okay.
Yes.