Q1 2021 Ryman Hospitality Properties Inc Earnings Call
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Welcome to Ryman hospitality properties first quarter 2021 earnings conference call.
Hosting the call today from Ryman hospitality properties are Mr. Colin Reed, Chairman and Chief Executive Officer Mr.
Mr. Mark do you have it on T, President and Chief Financial Officer, and Mr. Patrick Chaffin, Chief operating officer.
This call will be available for digital replay the number is 8005858 and 367 and the conference IV number is seven nine and 86514.
At this time, all participants have been placed on listen only mode.
And it's now my pleasure to turn the floor over to Mr. Marks out of it on T. Sir you may begin.
Thank you Maria and good morning, everyone. Thanks for joining us.
This call may contain forward looking statements as defined in the private Securities Litigation Reform Act 1995, including 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 our <unk>.
Tended 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 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 exhibits.
And as release and with that I'll turn the call over to Colin. Thank you Mark and good morning, everyone well. Another two months of has passed since we last updated you and I am pleased to say that the green shoots we observed in the fourth quarter from 2020 continue to grow and the first quarter of 'twenty, one, but before I walk through.
Some of our company's performance metrics. During this period I'd like to point out two other recent developments related to COVID-19 that are really important and particularly to our company that is as of may 2nd more than 147 million Americans have received at least one COVID-19 vaccination.
And $105 million of now being fully vaccinated debt is up significantly from the 63 million and 19 million total and when we lost convened and indeed today more than 40% of U S. Adults over the age of 18, and now fully vaccinated and over 56% of the adult population is rich.
At least one dose.
And it's and it was only recently and in mid April that the vaccine became available to all items regard regardless of age or health status.
Z and roll that has always been one of the biggest variables outside of our controls and so we're very pleased with how it has progress so far and what this means for our industry. The positive impact of this rollout was observed last week here in Nashville, when the city announced that it will be lifting all restrictions on indoor venues aside from a.
Mask mandate now this is good news for the operating house Ryman auditorium, the Ole Red Nashville here, the Wild horse Illumina and of course, Gaylord Opryland, which stands to gain most from the lifting of these restrictions than any other other business units now, let's take a look at what's happening and our business and then there's a lot of good.
Used to unpack and the trends that we are tracking so we've also published and Investor supplement this quarter that goes into more depth on many of the points I will mention I urge you to obtain a copy of that supplement as I will just touch on some of the highlights now first hotels continue to outperform.
On our expectations and a rapidly evolving environment for the first quarter, we achieved 24% occupancy.
And our hotels, excluding the Gaylord national which remains closed during the quarter. Now this was down sequentially from the 24, 5% and open hotels achieved and the fourth quarter of 2020, however, given how strong our fourth quarter has always been from holiday leisure travel.
We expected the first quarter to be a little bit more challenging.
For this customer segment.
And Ed here, the second quarter is off to a great store as we surpassed 30% occupancy from the month of April excluding and the Gaylord National now on a Alicia has carried a lot of weight for us through this valley over the last 12 months and we have learned a great deal about how to enhance this aspect of that business.
<unk> and target and leisure and the future at the end of the day Gaylord hotels are predominantly group houses as we move now into the recovery phase. It is that group business, where we are most happy to see trends and indicators continuing to move and the right direction. So what are we seeing and growth as we outlined.
And last quarter, we expected the return of growth and the early days of the vaccination rollout to be led by small organizations and what we call Smith and this is what we're witnessing we accommodated over 26000 group room nights and the first quarter, which is small by historical standards, but.
And an increase of 50% sequentially from the fourth quarter of last year of these about 70% were associations or other groups on about 30% corporate.
And the monthly trend was upward from January to March full group room nights with 12000 and traveling in the month of March alone.
While we continue to experience group cancellations in the first quarter, we've seen a slow but steady deceleration and the pace of cancellations since the vaccine and became available. We began 2021, averaging about five to 7000 group room nights canceled per day, but it is April.
But as of April 30th the two week moving average was down to 2200 cancellations per day. Furthermore, the window for new cancellations continue to gradually shrink, whereas the average canceled room nights and the 30 days ended January 30 of this year was about 107 day.
Zhao from arrival now three months later as of the end of April that window is down to 92 days. This means.
As time goes on groups are waiting a little bit closer to their travel day to make the go no go decision, reflecting and interest and increased anticipation of being able to hold their meetings as well.
And of those groups that.
And do still cancel we continue to see we continue to lead should I say, the industry and rebooking rates with 66%.
Of room nights lost during the pandemic rebooked as of April 30th Index, I think that number Patrick.
As of yesterday morning grew to 61 eight and.
And it is not only re bookings, where we're seeing very encouraging activity.
We are seeing it in and organic sales production as well of the 382000 and future group room nights, we booked in the first quarter organic bookings unrelated to COVID-19 cancellations represented 44% now this was the highest contribution of all.
And on a new bookings to sales performance and the last four quarters, our lead volume through organic business are also accelerating any and in fact, we're being.
Being led by short term and in the year for the meetings rather than distant dates. We just received the fresh sales figures for the month of April for.
And for example, and the in the year for the year production that is room nights booked for travel.
By the end of this year that number was 52000 room nights for context that is up 28000 room nights or 119% overall in the year for the year production from April 2019, non April 2020, but over pre COVID-19.
April of 19 in fact that is an all time record for in the year for the year bookings for any month of April that is still only 11000 of those room nights were associated with COVID-19, Rebooking, yes that means we contracted 41000, new organic non.
On re booked room nights, but travel this year just in the month of April alone. It appears April is also the first month since March of last year. When the pandemic first hit that organic new sales production has exceeded COVID-19, Rebooking production now at this time this type of short term.
Activity is very encouraging data to us and let me explain why remember despite all of the cancellations. We've experience they continue to be concentrated into the 2020 and 21.
Further out we have consistently maintained and nearly comparable pace of Grupo casino on the books compared to typical pre COVID-19 levels in fact for some years such as 25 and 26. Thanks to the rebuilt kings, we have more net group occupancy on the books and we did fatigue.
T five and T. Six at the same time two years ago overall in April we booked 190000 and room nights, which was up 110000 room nights, we booked in 2019 with about 90% of this april's production falling and the is.
T plus zero to T plus five now what that means is that with this base of business still in place for 'twenty. Two and later there is potential for 'twenty, three or even next year to be as good or better than the pre COVID-19 levels. If we can continue to book group rooms.
The same pace that we've experienced over the last couple of months now the important takeaway here is that all of the dominoes falling and the right direction at this moment and in some cases, even falling faster than we expected. The first domino was the vaccine and from there we have begun to see cancellations decelerate hence.
<unk> windows coming in and new organic bookings accelerate lead volumes increase and finally group room nights traveled per month has grown sequentially throughout the first quarter.
This is exactly the confluence of events you want to see as we return to normal.
Now, let's talk about.
The future some more before the COVID-19 pandemic Ryman distinguished itself. Among its peers is not just a typical reed buying and selling assets or trying to find the next hot geographic Marty market. We've always had growth always had a growth mindset at our company.
And as long as long term stewards of investing capital re investing innovating and expanding around.
Assets and a supply constrained industry to deliver outsized returns to our shareholders. It is in this context supported by the trends and data I've just walked through that we announced today the acquisition of the 35% of the Gaylord Rockies that we do not.
From a joint venture partner Reed development those of you who have followed our company for many years know that leap with the original architect of the Gaylord Rockies before we convert it to our reach and 2012, when we converted to transfer that development rights to readout over the subsequent and five years, we partnered with Reed and stay.
<unk> initially as a minority equity.
And asset manager in the construction phase than majority owner at 65%. After we acquired the interest there is private equity funds and now we are delighted to acquire Reed is 35% sure, bringing this hotel fully into the Ryman hospitality portfolio along with 100.
30 acres of adjacent land, which is not part of the original JV, but one separately by reader and areas. This transaction has an attractive financial proposition that a purchase price of $210 million. We expect it will be accretive to <unk> in 2020 now Mark Hooper.
And more details on this trend transaction itself and how we view the returns going forward, but this deal terrorists broad strategic benefits to and hospitality business, which I believe are very compelling as 100% owned.
100% on Gaylord hotels, we now have total control of the positioning of the Gaylord Rockies in sync with the rest of the portfolio combined with the adjacent land. This control gives us significant option value whether that is a resumption of the suspended rooms expansion project.
Or other investment concepts like a potential soundwaves product will overflow hotels or other future development at or around the site.
And a short time Gaylord Rockies has become the premier non gaming convention resort in the West and when you look at the possibilities and that market with the adjacent air lift from from the tremendous airport and the lack of competing product. There is a tremendous opportunity to grow not only the asset itself into and opryland.
Right.
And opryland on the west, but also the surrounding areas into something like National hub National Humble was essentially and empty riverbank before gaylord the Gaylord national right and has since become a thriving confluence of hospitality food beverage and gaming and tourism and just to remind you.
We're excited to be reopening the gaylord national on or around July one.
I see no reason why over time the area around the Gaylord Rockies Couldnt evolve and a similar vision vision.
Late last week, when we were finalizing and a purchase agreement on the rock as Mark pointed out something to me, which I really think as with you will considering as we entered the pandemic and March of 2020. The Gaylord hotels brand was made up of 9000 rooms and since that time, we've increased the room.
<unk> by 800 rooms, with the palms expansion on the Rockies purchase or about a 9% increase so as you think about the future growth and this sector reflect on the fact that no. Other hospitality REIT comes close to what we have accomplished from a growth potential and our.
<unk> post COVID-19 should allow us to show greater growth and those companies who have stood still have shed assets through this period.
Now, let's talk about our entertainment.
And this which in many ways has mirrored the progress we've seen at <unk> hotels. These last few months that is short term trends on <unk>.
Moving and the right direction and the underlying vision for growth is on <unk>. We continue to have a full slate of contracts on the books for the Ryman and for the final five months of the year and when we talk to the office and they manage managers. They are all looking forward to resuming normal touring schedules later this year.
The individual event venues will likely vary across the country in terms of capacity and restrictions that is why we are fortunate that our existing venues in markets that are fair and get ahead of the curve in terms of COVID-19 prep prevalence and I will see most of that restrictions and can pass.
Capacity restraints east or removed, our Ole red venues across Tennessee, and Florida. For example are currently at full capacity aside from some minor limitations on bonds flows on standing at bonds and as I've mentioned things are about to change here in Tennessee, one thing that stood out to us at this time.
And then make recovery process has unfolded.
Just how much live and in person and entertainment as a category really matches to people concerts and live entertainment and now viewed as among them.
Among the most resilient and out of home entertainment categories and you see this in the market today with premium live entertainment assets are in high demand, yet and short supply. There are very few public comparables, but if you look at some of the hardest hit segments of COVID-19 shutdowns a year.
You can pick companies like glide nation, and Madison Square Garden and it does.
Matt on all of these companies values have since sold back in anticipation of recovery to levels, even higher than pre COVID-19, and now all of this tells me as investors expect these businesses to make and accelerate recovery and we certainly agree with that this phenomenon.
Validates the view that we have long held which is that the assets that we have in Apple and entertainment group, especially the Ryman auditorium, and the Grand old operating on not only valuable irreplaceable and then we have layered in the Ole Red brand as an extension of the Opry Ryman and live.
Experience, adding and next generation artist and consume the funnel and driving content creation capabilities beyond Nashville, we've woken them altogether with a digital strategy anchored by country lifestyle networks Circle and I'm happy to Talbot Circle was named best streaming TV platform.
The recent 2021 digit day video video and TV Awards and March head of major players like <unk>, Samsung TV plus to the atmosphere and local now circle is now available through NBC, Universal Peacock, Universal's Peacock, Roku and Red Red Bar.
<unk> free like Tvs, Samsung TV, Vizio, smart cost and zoom mode and that is on top of its linear distribution through gray television for total reach of nearly $150 million potential to use that as a tremendous reach and a very short time for service.
For a new service and as has excited.
And we're very very excited about the next two to three years brings for this.
This particular part of that business to wrap up wherever we look at our portfolio things are moving rapidly and the right.
Direction, and we expect continued progress as more vaccine milestones are reached.
And the short term, we will stay focused on executing our recovery gain and minimizing our cash burn while longer term, we look to guide our company back to a positive.
Sustained growth such as we experienced before COVID-19, and this is evidenced in our Rockies acquisition that we announced today. So now let me turn it over to Mark to give you for him to walk you through details of a little bit more details on the transaction and talk about cash flow.
Thanks, Colin and the first quarter the company generated total revenue of $84 $2 million and a net loss to common shareholders of $104 $5 million from $1 90 per fully diluted share on.
And on a non-GAAP basis, the Companys first quarter consolidated adjusted EBITDA.
It was negative $22 4 million and <unk>.
<unk> available to common shareholders was a negative $55 million from <unk> 91 per fully diluted share.
These losses are all greater when compared to the fourth quarter of 2020. It is important to emphasize that our business demonstrated sequential improvement throughout the first quarter and the quarter performed substantially better than we had anticipated we.
We had expected that the normal post holiday seasonal decrease and leisure transient demand coming before large scale vaccine distribution could be achieved to drive the return of group business would lead to a larger decrease in revenue and profitability than we actually experienced.
As Colin outlined this was due to several factors, including better transient occupancy and ADR attrition and cancellation fee collection.
Other than expected early group turn out and success and controlling expenses.
These results reduced our cash burn for the <unk>.
For the quarter compared to our expectations and February we communicated that we believed our first quarter cash burn before capital expenditures would be and the range of 23% to $26 million per month, our actual cash burn for the first quarter averaged $17 9 million per month.
And keeping with the improving month by month trends that Colin described and our operating metrics lead volumes and so on.
We saw the same cadence and our cash burn and that has steadily improved steady improvement from January $24 $3 million burn through March at $10 8 million.
Looking ahead as the recovery continues our cash burn will improve each quarter. So on month by month results may have more sequential variability, depending on where leisure holidays and the travel dates of groups still on the books fall on the calendar.
Whereas previously we expressed our view that second quarter cash burn might fall and a range of mid to high teens. Our latest day of leads us to believe that it will be below that range at approximately $10 million to $13 million per month with most of the improvement coming in late may and into June.
And the third quarter, we believe that our hotel segment, our entertainment segment and our consolidated corporate results will be in positive territory for both adjusted EBITDA and cash burn.
In terms of liquidity, we ended the quarter with a zero balance on our revolving credit facility and $67 million of unrestricted cash on hand for total liquidity of $767 million or.
Our overall liquidity was enhanced by the senior note offering we completed in mid February and talked about on our last call, where we retired $400 million of 5% senior notes maturing in 2023 and replace them with an upsized $600 million senior notes issue at four 5% maturing in 2029.
The upsides of $200 million provided a measure of flexibility to make investments and our business during the pandemic disruption to put the company and the best position to take advantage of the eventual recovery.
As Colin mentioned through the pandemic, we prudently deploy capital at the palms national and Rockies, thereby entering the recovery cycle with a portfolio of hotels that is larger and a better physical condition, allowing us to aggressively compete grow market share and generate solid returns.
While we will continue to remain.
While we will continue to maintain and aggressive posture towards growth, we will do so with the intent of deleveraging our balance sheet as our business levels and equity value returned to pre COVID-19 levels, we will consider all capital market options, including the equity market to fund recent our new growth opportunities as efficiently as possible.
Now in terms of recent capital investments I just mentioned.
We've completed the Gaylord National Gaylord palms expansion.
And as with any large scale project of this size there are still punch list items to be closed out and invoices to pay so we have approximately $15 million remaining to be spent.
This project has come in on budget and on time with our initial projections.
The completion of this expansion is timely and positions this property well for group recovery, we're beginning to see.
We're also making very good progress on a full guestroom renovation at the Gaylord national with approximately $12 million remaining to be spent on this project.
And this project is anticipated to be complete and June just in time for the properties reopening on July one.
Finally in terms of the Gaylord Rockies transaction announced today as Colin described this deal carries a very compelling set of strategic benefits to our company at the same time, it's a very attractive use of capital on its own terms.
We intend to pay.
For the $200 million transaction price using cash on hand, and on our revolver, which was paid down by $200 million of incremental liquidity that we raised in February. So we're effectively redeploying this incremental capital into our high return opportunity.
And at a later date, we expect to revisit the $800 million property level debt, which matures in 2023 and use our balance sheet to explore interest savings opportunities.
For this price, we're acquiring a 35% incremental economics of the hotel that we did not already own including future expansion potential.
And as a reminder, any expansion of the hotel carries the same substantial tax rebate structure as the existing hotel.
We're also acquiring approximately 130 acres of land surrounding the hotel that was not part of the JV structure, but it was on separately by our partners.
As Colin said this plan and carries tremendous option value from a future development anchored by the presence of the Gaylord Rockies and we have great examples of that around off really and the Texan and National Harbor like.
Like these the greater Denver market is one we really loved and has all the attributes you'd like for a top tier group Mark meetings market.
Denver International, which 10 minutes east of the hotel branches, the fifth busiest airport and the country with 69 million passengers in 2019, including $3 2 million international passengers.
Day to Colorado ranked six for percentage of population growth over the last decade, and the state flow tax burden and the favorable economic incentive structures are long term drivers of development and economic growth.
We believe the impact of the Gaylord Rockies is only just beginning to be felt an immediate region and will continue to spur more economic development and transfer transform the area around our hotel.
So and the and we looked at this transaction does not strategic to our current portfolio, but a long term commitment of capital to a market. We see is very compelling.
In terms of valuation at a price of $210 million with the $800 million of debt on the property. This implies and asset value of approximately $1 $4 billion. That's effectively a 12, 5% 13 times forward multiple on a stabilized post COVID-19, adjusted EBITDA figure by the year 2023.
<unk>, excluding any hotel expansion where.
And where our capitalization rate on net operating income of seven to seven 5%.
If one is size and approximate market value of the raw and purchase and deduct that from the applied hotel valuation.
Got.
It is and our view more like a 12 to 12 five times multiple of a potential stabilized 2023, adjusted EBITDA or 758% cap rate.
The transaction should also be accretive to <unk> and its first full year and offer a low teens IRR on its own before any expansion refinancing or other strategic value that we can bring a sole owner.
If you look at our overall Rockies investment history since our initial pre construction equity investment 2000, and 2016 and total we've acquired the Rockies for and implied multiple of approximately $10 3 million to $10 eight times projected 2023 adjusted EBITDA.
So that's a great price and return profile for us considering our view of the overall market and the strategic value. We believe we can create on the site.
In conclusion, I joined with Colin and emphasizing that we see encouraging improvements and all the key operating and financial indicators that we track across our businesses and while we are by no means over and done with the pandemic impact to our businesses. We think that we're at a point, where we're getting some clarity on how the future will unfold as the vaccine and continues to do its work.
And we are encouraged enough by what we see that we continue to put capital to work, where we believe it will drive long term value, whether thats and expansions enhancements renovations or acquisitions like the latest transaction and with that I'll turn it back to Colin Thanks Marc.
So Mario let's.
Let's open the lines for questions.
Covered a lot of territory here this morning and let's.
And that's still work.
<unk> and the analyst community have on their minds. Thank you.
The floor is now open for questions. If you wish to ask a question and at this time simply press Star then the number one on your telephone keypad.
At any point. Your question has been answered you may remove yourself from the queue by pressing the pound key.
Our first question comes from Shaun Kelley of Bank of America.
Hi, Good morning, everyone. Thanks for taking my question congratulations on the Rockies deal.
Maybe just to start with that.
Thank you for all the clarity on the underwriting.
Could you just talk a little bit maybe more about the strategic vision and positioning here.
As it relates to both the land purchase and sort of the opportunity around the hotel tower expansion Colin just what are your what's your thinking here.
Spending this money upfront.
Sort of changed the timeline at all for the possible.
And the possible hotel expansion, there and just how are you thinking about the opportunity set.
Yeah sure sure and that's a really good question and it's something that.
Mark and on and Patrick has spent a lot of time talking to talking to our board about.
So if you think about opryland here in Nashville, Tennessee, and if you think about like for instance, Nashville, we get on average about 13 to 15 million tourists come through here.
It has grown.
Very.
Good convention market. It is that we have and airport.
It has somewhere in the $13 million to $15 million day claimants claimants.
It doesn't really have.
Hub system here and has won international flight now if you if you jumped to Colorado, if you've jumped to Denver.
This hotel is 1500 rooms.
Largest hotel of its time.
Next to.
A mecca of tourism thing the Rockies.
It sits next door and Apple.
We have 65 million deep claimants claimants on an annualized basis has three hubs does pre COVID-19 about 10 international flights a day and it's one of the fastest growing.
Our tech centers in the United States of America. So it has that belief as a company that debt that we can do over time with the rock is what we have done over time with Gaylord Opryland and Gaylord Opryland is 2880 rooms.
It was on track to generate about $150 million of EBITDA for 2020, pre COVID-19 66, 650000 square feet and meeting space was going to accomplish the highest occupancy and our system in 2020 simply because.
Groups want to go there and it is our belief that over time, we can do the same thing with the Rockies. We can we can essentially make the rock is the dominant group house on the central and Western coast of the United States of America, and and so this line.
And purchased 120 acres, it's not something that we're probably going to.
Lay out a plan six months from now and so we're going to go build this we're going to go build that we will we will do it with a developer just I'm sure. It's similar to what went on and National Harbor, but we have this vision this hotel over time.
Ken growth, there's no reason why it can't.
Move to two and a half thousand rooms, we were going to expand it pre COVID-19 as you know by by 300 rooms simply because of the tremendous amount of business the.
Hotel was able to accommodate and his first year of operations. So we're very excited about the Rockies and frankly, if it hadn't been for COVID-19, we probably would not we would not have been able to purchase this interest and the way we did and this thing came together by the way very rapidly and we started.
Started having conversations with the owner group.
I think about three weeks ago, Mark I think it was about three weeks ago.
I mean, we've been having ongoing patients.
Over the last year to after two years, but we actually.
<unk> progress about three weeks ago. So that's the vision.
That's great and.
And again I think given what we already know about unit level economics, there it's super attractive.
So Seth.
The second question slightly different gear would be to just can we get an update on.
I think some of this is in the supplement but I, but I just wanted to get your color on how 2000 and sort of the back half of 'twenty, one and 'twenty. Two specifically are kind of filling in on what you've got on the books right now clearly pace has been difficult because youre seeing on a constant cancellation and sort of re book.
And but.
Are you seeing either a more compressed calendar in 'twenty, one that is and it is holding together as you look into the third and fourth quarter and maybe more specifically I think the number was 41% in 2022, but how do you think thats going to firm up as we get.
Three and six months from today as we look out to 2022.
Yes.
I'm going to turn this question over to Patrick.
Sure.
To justify its existence and being here Patrick.
But before.
Before I do that let.
And let me say this if I could.
The thing that is very very hard right now Sean and I have never experienced this in my career is the pace of change that we are dealing with.
What has occurred here over the last four to six weeks as this nation.
Yes.
No.
By and large 50% of the nation adult vaccinated the pace of change here is is quite something.
And and and and.
And the old, saying, one swallow doesn't make a summer right.
We booked 50000 rooms, plus in the <unk> in the month of April.
Never seen that in the month of April that type of production in the month of April.
What we're seeing right now bookings bookings in general are accelerating lead volumes and increasing cancellation rates are decreasing.
How what is going to happen four weeks from now when these cancellation rates continue to decline from the tremendous declines we've seen here over the last over the last two months and this is this is the hard thing.
And the other good part about all of this is.
Leisure bookings outperforming and a very high rate and my.
<unk> got tells me that as we get into the latter parts of Mei and kids, whether theyre learning online or whether that learning and the cost room break.
Breakup for summer I think on Alicia business and the back end of this year is going to be pretty pretty pretty good. So.
My sense is the back end of this year is going to be good and next year. If you look at page 14 of our supplement it really it really amplifies and how much business. We've got on the books and by the way these numbers don't take into consideration.
<unk> and what actually occurred in April so Patrick.
Yeah, Hey, Shaun this is Patrick it's good to talk to you. This morning, and just the accident and add to what Colin has already said we are seeing.
And the recovery coming together, we officially initially were talking about some of these murphy groups. The affinity groups that were dance tier sports et cetera, we've started to see pharma and medical sourcing and starting to travel again, and we're very encouraged that and just the past few weeks, we started seeing some of the west coast Tech starting to book for the.
Second half of 2021 as well as into 2022, now theyre not doing user conferences, but they are starting to look at internal sales meetings, which is a very encouraging.
Thought for the West Coast Tech to really start moving and a positive direction as we look at the second half of 2021, we have about 786000 room nights on the books, that's about 21 points of occupancy.
That's about half of where we were for 2019, but it is a recovery and we've seen.
Think about January February March April.
Started out the year with maybe 7000 room nights of business on the group side traveling and a month that grew up to 8000 and that grew up too.
Into the low teens and then we just closed out April and were above 20000 room nights that have traveled.
In the month of April on the group side. So as we look out to the future. We're seeing that steady increase and we are getting to the point now where we think we're going to be booking more in the year for the year room nights and a given month than we see from a cancellation perspective, and thats very very encouraging given where we've come from if you look at the second half.
This year, it's a.
A little bit more heavy on the association side, which is exactly what we'd expect.
We have more association on the books and we do from a corporate perspective, but as you move into 2022, our corporate and association. Both are getting back to levels that were very similar to what we saw on 2019 as far as what was on the books. So we are clipping along.
We remain cautiously optimistic but all of the metrics are starting and point to a very positive momentum building for us.
So.
And we're very encouraged with what we see.
Thank you both.
Thank you.
Our next question comes from the line of Smedes Rose of Citi.
Alright. Thank you I just wanted to ask you a little bit more on the on the corporate group booking side what are you seeing.
Some kind of resurgence are you getting any sense that corporations are.
Eager to basically spend and the west going forward, having spent the last year.
Travel budget essentially or.
Kind of any changes and sort of.
Willingness to spend from corporate clients and not so much from me.
Association side, and what you're hearing on the corporate groups.
Sure, Yeah, Hey, Smedes.
Yes, I would say that what we're hearing from corporate groups.
They have essentially been and a lockdown state and they remain concerned with safety and so they're watching CDC and theyre watching the vaccination.
Trajectory, but theres a lot of pent up demand and there's a tremendous desire for corporations to get back together and celebrate and so as we look to the second half of 2021 and their desire to get back together, yes, theyre expecting to come with smaller numbers.
For those who are already on the books and for those who are booking into the second half of this year theyre coming in at.
Exactly what they would expect but.
I would say that they're very anxious to get back together and they're very anxious to to create a positive culture after everyone sort of being separated so.
I think they are going to be cautious from a numbers perspective, but our spend per person is not something we're necessarily seeing them pulling back on.
Okay. Okay. Thanks, and then I just wanted to ask you too or are you, having any trouble on the labor side, either having to pay people more to come back or any kind of shortages, we sort of hear deferring.
Stories around that strength, where you guys are seeing.
So for instance, as we've as we've been opening up our entertainment business and and now.
Calling now we know that come late may 14th we can actually put 2200 people and the Ryman on 4400 people and the Opry House, we've been calling some of the on call.
Folks that were laid off and we've been having I think pretty good success, it's been a little bit more challenging and our hotel business I think that is a fair way to describe it Patrick.
Until until this.
This government unemployment benefit.
And is out there.
And.
And.
And as curtailed.
There's other folks that like sitting at home.
Collecting their unemployment checks.
The only thing I would add to that as you know for a lot of other folks who are ready to come back.
More of Theyre looking at the hours and saying look I need to be able to make sure I can get a certain number of hours every single week and so as we are planning for the future, we're making sure that when we bring them back we can guarantee them a certain number of hours and that's very dependent on the group side continuing to recover so as we're seeing these group numbers tick up and.
And build on one another and gives us more confidence to go ahead, and let folks know hey, we want to bring you back.
And we can guarantee the hours so for those who haven't moving on to a different industry or even those who have inc.
They can come back at a good wage rate and we can guarantee their hours and then we should be able to get there, but it is challenging right now.
Yes, Craig the only thing on the only thing I'd add to that is.
Good employers people who've looked after that people you've heard us talk about.
The people culture.
We've been focused on as we built the Gaylord hotels brand.
Essentially 18 years ago.
Good employers people, who have good connections with their people will have an advantage other those employers.
Having operated the business with the same.
Centered around people and so it'll be a struggle, but I think we will do a better job and most of our competitiveness.
Great. Thank you.
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 you have given out thus far.
I had a question on as we think about.
Second half and more about next year Patrick.
Discuss the fact that there has returned to more normalization in terms of the.
I guess composition of the groups, but are they or do you think they performed similarly from a from a total revpar standpoint or are there mix shifts going on kind of.
Behind the scenes that are that are going to.
And kind of kind of muddy those comparisons.
Yeah, Chris I would say that.
Definitely it's going to be choppy and the second half of 2021 right. We are going to see more of this Murphy type groups that are anxious to get back associations are moving back in.
And the corporate is starting to recover as I mentioned earlier, we're seeing a thought there as we get into 2022 from where we stand right now looking at the mix on the books.
It appears that corporate is holding and doing a good job of.
Not backing off and saying Hey, we can't travel. So we are confident based on what's on the books right now the 2022 would be more of a historical mix composition.
We'll see how they spend when they actually get on property.
And if they increase their events they increase their spending that remains to be determined but right now from a mixed perspective on the books. The composition is similar to 2019.
Okay.
Got it fair enough and then.
Congratulations on picking up the rest of the Rockies.
And you've talked about possibly expanding that rate at some point and the future.
Wanted to kind of look back to the Texan and its been several years since that initial expanse and open I know you have I think some excess land there.
A property you look to and I know, we're now starting to talk about multiple expansion projects, which you don't normally talk about it once but just thoughts on longer term potential tax and also.
Well yeah. So.
If the question that Shaun Kelley asked about the vision for the Rockies and.
You would have asked the same question about the vision for <unk>.
<unk> and remember the Texan has evolved into the most.
The dominant group house and the state of Texas.
Not of hotels that operates at the same level of profitability and.
And the markets of Austin, San Antonio is the Best Group Hotel in Texas, and we do have line there.
We have the ability to expand.
And and and it will be it'll be down.
Purely as demand builds remember the techs and.
And I remember, Chris and someone asked me a question on analysts asked me a question and it was back into out five to six it was about a year and a half year. After we opened the hotel and we were generating 40 about $45 million, a month and a $45 million and EBITDA on the go.
<unk>.
The view was where does this go we said we thought this hotel has tremendous potential and we've done many expansion projects. They are building.
The golf, Texas area.
Expanded the pool complex two to three times.
And we built with room expansion and that hotel was on a on a run rate in 2000.
And 'twenty to accomplish about $110 million of EBITDA. So.
We believe that hotel has the DNA.
We can we can continue to expand it over time as demand.
Grows.
Into into that market and that's how I think about that project.
Okay very helpful. Thanks, guys.
Thank you Chris.
Our next question comes from the line of Bill Crow of Raymond James.
Hey, good morning, Thanks, and congratulations on the Rockies Colin.
Yes.
Following up on Christmas call Chris's question.
What point do you think about.
New unit growth versus expanding existing properties, how important is the <unk> nature of the business in a world with <unk>.
Restricted capital how do you make those choices.
Yes, I mean look this is not rocket science and Mark if you want to jump in on this question.
And what we.
We've gone about this business very different from the other the other companies that you track, we started focusing on the customer first.
Rather than the physical product and a physical market.
And and.
And that is what's led to these five behemoths group houses that also two ton of leisure business and.
And the customer that we focused on bill as you well know is this group of consumers that want to hold once a year convention.
And.
Somewhere over 600 rooms at peak rotate their convention market to market year by year and what we what we what we built is what we built this brand to do was to essentially accommodate anywhere from 75 to 100 of those groups per year into <unk>.
Each hotel and if we do that we know that we can generate really high returns and and as you will know we've tended to build these babies on the other side of the railroad tracks, because we tend to get incentives to help defray the capital costs and improve the return on investment so.
And over time and in this country. There's 26000 of these groups. So they were when we last did that all the research.
And what we need to accommodate if you take five hotels times 80, that's 426000 that we need to accommodate on annual annualized basis now as we do a good job and each of these hotels retaining those customers and rotating them. What has occurred is that.
The demand has pre COVID-19 has continued to grow and that's why we've expanded the Texan we've expanded the palms. We've had we built Colorado and we expect we were going to expand Colorado and just candidly between us pre COVID-19, we were contemplating putting more room.
Here at operating line, which is.
Crazy to think about on the largest convention hotel in this country non gaming hotel and this country, we were thinking and expanding it. So at leases is continuing to to loved these customers and and then continue to expand these hotels and you won't.
No the internal rates of return on and expansion for US is somewhere in the anywhere from 12 16, 18% internal rate of return on it.
Leverage IR.
And that is massively superior to going out and building a new building.
And our market.
What you have to build all the infrastructure and everything else and hopefully you can get some incentives, but the internal rates of return on a on a new build anywhere in this nation tends to be I would think mark and about in and around the 8% 9% range. So we've always focused on and we've always for.
Focus on.
Effective deployment of capital and we much prefer to expand hotels and the other part of all of this.
And we love is that the big and we make these hotels and the more compelling they become the harder it is for them to be competed against so that's how we think about it.
Yes.
Yes, and mark to that point Bill.
And the barriers to entry that debt.
This segment has right. It is a double edged sword in terms of of growing distribution.
And particularly.
And when Youre looking at acquisitions and.
We've looked at acquisitions and the past pre pandemic.
And we were looking at.
Purchases.
But we have a very narrow I think Tom.
Target set because of the.
The discipline, we have around the business, we want to be in and.
And frankly in those cases, we weren't able to underwrite those acquisitions.
Successfully versus what other people are willing to pay for and when we looked at alternative uses of capital. So it's not that it's not that we are opposed to doing it. It's just that we haven't we haven't found the.
I guess the appropriate situation, yet compelling from a financial perspective versus our alternatives.
And this is Patrick Bill let me just add one last thing, which is we've made it clear that we are interested in and the west coast.
At some point.
And that's an opportunity for us, but I would point out to you that as we built up the book of business at Rockies, 40% of the room nights that were booked into that hotel were brand new to the brand and fact, 15% of them were brand new to Marriott overall, so while we would love to have presence even further west we are tap.
And into the heart of the demand based on the West coast through Gaylord Rockies and have some say having success with that so yes, we would love to be right and the heart of the West coast, but we're definitely getting into that demand base.
Gaylord Rockies and so we will as Mark and Colin have already pointed out continue to be very prudent and how we deploy capital and make sure. We don't do anything Thats stupid just to get there because we are tapping into that demand base with our Gaylord Rockies properties.
That's helpful.
Quick from me.
Colin you mentioned in your prepared remarks early on that you were seeing strength and T plus five and and <unk>.
Plus six from re booking activity and I'm just.
Or is that really rebooking or these are these are.
Are these.
The group's pain cancellation fees I mean, clearly, it's a rebooking from a 'twenty 'twenty 2021.
Event and going out five or six years doesn't seem like it's really re book.
Can you just talk about the economics of that.
Yeah, No what I said was that in the month of April we booked.
About 190000 room nights of which.
It was the first month, where the majority of the room nights.
New organic room nights, not re books and.
And what I said is that percentage of those room nights fell into the years T plus zero through T plus.
Six I think I've said on the.
On her my remarks in front of me now.
So what I'm, saying is that this is this is really good stuff what is going on.
And that building the building this block of business and.
And again.
If you look at.
I know this is a very.
And.
Varying from your question Bill, but this page 14 about debt that we put out you look.
You look at the.
The revenue that we have on the books Q on Q2 Q3 Q4. This does didn't include for next year. This didn't include the production that we did in April and I think the actual April production for 2022 was about 26000 room nights.
And so.
If you compare if you compare this revenue that we've got on the books because the rate is higher compared to what we had on the books back.
At the same period for 2019 with basically almost there, but we've got we've got a different portfolio.
We've got now the ability to own 100% of the Rockies, we talked the palms coming we've got Soundwaves maturing.
So my sense is 90.
'twenty 'twenty two is is going to be a good year for us and.
If we continue to book and we continue to see what we've seen over the last month for.
For the next months and next two months.
And.
Wanted to get really excited about 'twenty two.
Hey, Bill the only thing I'd add to that.
If you look at our cancellation and collections, you've seen and we did $16 million and Q4 and $10 million and Q1, those are big big numbers and so if youre, if youre re booking with us beyond.
The next two to four years, we're going to put a lot more emphasis on collecting cash because that is a long way out and so we are saying hey, we don't just want a rebooking.
Want to pick up more than one year and the rotation and when and pick up two or three if we can and we need some cash and that's why we're having great success with the cancellation fees at the levels that youre seeing because we are thinking about the long term and applications and saying that 2020 $526 seven and 28, that's a long time from now so we need cash and the short term.
And we need more than just one year and youre re booking, but what what's driving that and length of re booking is to let the bookings the average booking window all of those customers. Those are large groups, who already have the next set already and five years booked.
So that's the next available date for those big meetings.
Gotcha understood great color. Thank you.
Thanks Bill.
Alright, it's top of the out and Maria I think we roll on we will shut it down now and.
And if there are other.
Analysts and investors that have questions. They know how to get hold of us.
With towards Mark on.
Me and thank everyone for their time this morning, and I can tell you. This debt let me just say one less day.
And I was I was reflecting here early this morning with Mark a.
A year ago. When we were doing this the world was miserable and I've got to say that.
I much much much prefer the environment that we're now seeing to the environment, we saw one year ago.
And thank you everyone for taking the time this morning Maria Thank you.
And thank you ladies and gentlemen, this does conclude today's call you may now disconnect.
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