Q2 2021 Ryman Hospitality Properties Inc Earnings Call
Yeah and received the performances from pages, as well and famous brand and market environment and hospitality.
[music] and many thanks.
On top and Hulu.
We are there on why and I agree.
You may want and are now.
And promise junior debt.
At <unk>.
Or are you always will be for it.
Yes.
[music] so GAAP.
Ladies and gentlemen, this is the operator your conference is scheduled to begin momentarily until that time your lines will again be placed on music hold thank you for your patience.
Moving forward.
[music] long ago and demand.
On the fab.
And long ago and.
And now with that Oh man.
1 day.
Nowadays day.
[music] Adobe and <unk>.
Alright.
Yeah.
Hello, and welcome to Ryan hospitality properties.
Second quarter 2021 earnings conference call.
Hosting the call today for Ryman hospitality properties are Mr. Colin Reed, Chairman and Chief Executive Officer.
Mr Mark Fioravanti, President and Chief Financial Officer at.
And.
Mr. Patrick Chaffin, Chief operating officer.
And Mr. Scott Bailey, President Opry Entertainment group.
This call will be available for digital replay the number is 8.
805, 8583, and 6.7 and the conference I D number is 52597 and 9.5.
At this time, all participants have been placed on listen only mode.
It is now my pleasure to turn the floor over to Mr. Mark Fioravanti, Sir you may begin.
Good morning, Thanks for joining us today on.
This call may contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995, including statements about the company's expected financial performance any statements. We make today that are not statements of historical fact may be deemed to be forward looking statements words, such as believes or expects are intended to identify.
These statements, which may be affected by many factors, including those listed in the company's SEC filings and in today's release.
The company's actual results may differ materially from the results, we discuss or project today.
We 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 exhibit to today's release and.
And with that I'll turn the Florida Colin.
Thank you Marvin and good morning, everyone as those of you who follow US closely may have already seen from our last investor update published just over 2 weeks ago.
By month acceleration in a business that we witnessed in the first quarter continued to gain steam throughout the second quarter on.
Highlight a few of these remarkable writes a change to which I can now add some preliminary July results as well just to emphasize a gay and how rapid the pace of recovery has been and our industry and for our company and the stock.
And out of the second quarter and April as the vaccine was soon and the early stages of national nationwide rollout. We sold just over 20000 group room nights travel and our hotels.
Total hotel occupancy for April excluding the National was 30 per cent and these group room nights represented about 28% of all room nights as leisure trends and continued to constitute the majority of our guests that month.
2 months later in June we saw a surged over 69000 group room nights or 47% of total room nights traveling and the month as overall occupancy stood excluding the national reached nearly 59% to add to this and I'm happy to report that in the month of July with the.
With the Gaylord National once again open we service for the 5 resorts nearly 105000 group room nights this year to day to seed and extraordinary rate of change for such a short time and agro business such that week by week over the last few months at continually outpaced are at.
Total forecast. Meanwhile, average daily cancellations and June fell to a post Covid love about a thousand room nights per day, the fourth consecutive month of steady decline and not that far off from our pre Covid average of about 600 room nights per day over the 2000.
And in 19, and 2019 time period canceling the cancellation and attrition fees collected and the second quarter also mirrored this decline falling to 7.6 million from $10.2 million in the first quarter and from a peak of 16 million and the fourth quarter of 2020.
Even as cancellations for we are pleased with our increasing capability to collect on our contracted terms as group room nights for increasing cancellations will re seating on the production side organic new bookings continue to overtaken outpaced COVID-19 related re bookings reached.
And 63% of total bookings in the month of June, which we were very pleased to see.
And lastly, 1 of the most positive signs for us in this stage of the recovery has been a in the year for the year activity to date and every month and the second quarter. We book more group room nights for travel by the end of the current year than we did for the corresponding month and 19th at.
And in June we had 34% more lead volume for the remaining in the year for the bookings and we did in June of 2019, and just hot off the press in the year for the bookings for July were about 25000.
Our room nights at this is purely group room nights up 14000 room nights on July of 19, and the and then you in the year for the U. This was a by the way at a record for July and the for the production. In addition, when.
When we look at lead volumes over the past 2 weeks for groups looking to book a meeting in 2021. It is up significantly compared to the same time and 2019 and a typical year like 19, we see lead volume start to decline because there are fewer days to book into and there is less room.
And meeting space available. However, we're seeing meeting planners, who who would begin to look further out into say next year and now more interested in potentially book and meetings for this year plus there is more availability at our hotels than in a typical standard year. These data points.
Indicate to me a real desire for businesses and organizations to get back together in person soon and when you look at the rapid progress over just the last 6 or 7 months I don't know how you can cannot but conclude that group travel and staging a strong comeback very different from and.
Anything we have seen impostor economic cycles, which is something we have stressed from the beginning so much for debuted the group will be the last sector for the hotel industry to recover.
Now I know what is on many of you on mines are debt, whereas you're listening at this moment does that as well what about the headlines we're seeing with this delta variant and the uptick in COVID-19 cases doesn't that name we headed right back to where we were a few months ago now let me tell you what we're hearing right now at this moment on.
On the ground and the markets. We operate at first we believe it's important to remember the context, we're not in 2020 any more when there was no vaccine and there were fears of the health care system capacity.
Capacity being overwhelmed with serious illness second health authorities have advised that the case increases we have seen in many states and recent weeks have driven predominantly by the on vaccinated. The so called vaccine breakthrough cases have certainly it could in some instances as well, but even at.
Amongst these breakthrough cases, the same authority and experts confirm that the vaccine is effective at preventing high rates of serious illness, and hospitalizations against the Delta variance from everything we're hearing that the state County, and city levels and end market city leaders at less worried about case accounts now.
And they were in 2020 because at this instead they are focused more on hospitalizations and health care capacity, which remain at very good shape as the case numbers remain quite low relative to last year, even if the headline per said increases sound block at.
As long as we remain within that capacity, we don't anticipate return and widespread interventions like mandate mandatory mosqui distancing and other restrictions, particularly particularly in the markets. We operate in and instead, we expect to see a continued emphasis on driving vaccine adoption in those regions of the.
The country with low with a low uptake and I'll note and I'll note here that we as a company at doing our part and we don't we've gone to great lengths to encourage and make it easy for people to get vaccinated and we see at customers doing the same as part of their meeting planning activity as well. So we will continue to watch this delta.
And it's very closely but to date, we have not seen a material impact and our hotels and if we do see 1 we would expect it to be modest.
To be a modest impact as vaccination rates and immunity continues to increase.
Surprisingly positive as the first half of this year has been what we're even more excited about is how our business stands for the long term, including the remainder of 'twenty, 1, but well into 'twenty 2 'twenty 3 and later.
You should all be familiar by now with our strategy from the start of this pandemic, which was to pry out as Reed bookings.
Are we booking at the last room nights cumulative cumulatively since the first COVID-19, and cancellations began in early 2020, we have materially exceeded our targets of 50% by Rebooking, 67% of all canceled room nights. That's success has left us with a.
Formidable book of business for not only the rest of 'twenty, 1 but for the next several years and when you layer on on the capital we have invested into our businesses, including at entertainment business, which I'll talk about in a minute or so you have a powerful combination to researching businesses and mulch.
Simple mature and capital projects, which we expect to for.
Fuel growth well into the future.
Now starting with just the remainder of this year at the end of the second quarter total group room revenue on the books for the second half of 'twenty..1 was <unk> 72 per cent of the same period for 19. The second half of this year will also benefit from the reopening of the Gaylord national which occurred as schedule.
On July 1st Indeed, the National hosted its full first full house group, we call after reopening checking in on the 18th of July while the National was close we took the opportunity to.
And to compete fleet and ambitious 63 million full renovation of all guest rooms, and initiated a repositioning of our food and beverage operations and the positive for stance from the first groups to experienced and new product is affirmed this decision for us and we're very happy with how the national performed and stuff months back turn.
At 22 next year.
And this will be the first full year of a 100% ownership at the Gaylord Rockies after buying out at final 35% at the JV and surrounding acres this year for $210 million and it will be the first full year of a comp.
At the contribution from our $158 million Gaylord palms expansion with at which added 302 rooms, and 96000 more square feet Amazing and event space plus and expanded resort pool product that opened in June as of July 1st at total hotel portfolio.
Portfolio had 43 points of group occupancy on the books for 'twenty, 2 which is not far off the pace of 45 points, which we had on July 1 of 2018 for 19 at.
Last full pre Covid actualized here and do remember that it's not quite apples for apples, we have 300 more rooms. This year. So.
43 points of occupancy if you restate those 300 rooms, we're almost at the same level as we were in 18 and for 19 now what is more those group room nights for next year are contracted at a 6% higher ADR than the equivalent T..1 room nights for 18 that yields over 3.
$343 million of group rooms revenue on the books for next year or for 7 more than at this time and 18 looking into 19, we find the same pattern of consistent rate growth. When we perform this comparison for each subsequent year such that even though she is that fair.
Marginally behind and al occupancy points during the pandemic that has 22 and 'twenty 3 nevertheless remain on par or ahead in terms of group rooms revenue and those years that are on par or ahead and occupancy points, which is 24 and 25 that well ahead in terms of group rooms.
Revenue and that's just a snapshot as of the first at July as new organic bookings continue to recover as I just mentioned they have outpaced re bookings for now 3 months now we expect to be able to further improve at on the books position for these future years and make up for lost time this is especially.
And possible given the scarcity of new supply and the large group hotel space, which was the case long before Covid and will no doubt be the case long after given the structural and economic barriers to build and open assets like at all of which supports the case for continued pricing power and ADR growth. This.
Degree of visibility into the largest component component on that business is something no 1 else and this industry and I believe.
Or I believe many other industries, where the real estate related or not can speak to a considerable contracted book of business and $800 million still maturing high return and capital investments demonstrate that our company has the capability to not only return to the.
For 2019 levels of performance, but to support them and the years to come now to be clear I speak speak for both at combined businesses and that statement because at entertainment segments recovery has been low less rigorous than at hotels over the last 6 months some highlights.
You will have seen in our investor presentation, such as how the Grand Ole Opry showed sold 80% of its available seats for the months of June including for full capacity sold out shows with attendance above 4400 people or how at quarter and we had 130.
Shows scheduled at the Ryman and for July through to December compared to 107 shows scheduled during the same time period and 19 and just like at group business, we have great for book.
And our core entertainment venues for next year, where you have 147 confirm concepts at the Ryman, while at the same time and 18, we only had 45 confirmed for 19 and what is interesting. However.
Is it fuel primary focuses on when we might see Pos and 19 levels and our entertainment business is already there in the month of June on a same store basis that is if you exclude the contribution of Ole Red Orlando and the impact of that circle media joint venture neither of which existed 2.
Years ago, the core entertainment assets that the Opry Ryman.
The Ole Red Nashville, Gatlinburg, and the wild wholesaler and general Jackson in June of 'twenty, 1 exceeded that June 19 performance in terms of profitability as I said on that at last call. The resurgence of consumer demand for large entertainment has been 1 of the bright spots and all of it at all.
And the pandemic recovery at aligns with something we've always emphasized and that group hotel business and at hotel and entertainment business, which is people claim crave interest and experiences and Nashville has been a beneficiary of this increase in demand.
Do you know that during the pandemic 5 different airlines at added 34 routes to national to Nashville International Airport and out of the top 25 airports and the country Nashville ranks fifth and recovery.
Airport passenger accounts into Nashville is almost back to pre pandemic levels, which is quite remarkable DNA and national symbol has been undergoing at $1.2 billion airport expansion to accommodate the increase and passenger traffic over the past several years and just recently opened a new state of the at terminal 2.
Welcome. These visits visitors throughout the second quarter at hotel and entertainment business certainly benefited for people for from People's desire to get out and travel again ensure the second quarter was another step forward across our businesses.
With key measurements measures that we track continuing to move and the right direction and 1 last thought last week I had the opportunity to sit down with a partner and 1 on the nation's preeminent investment funds and he posed this question to me. He said as I've looked back over the years preceding Covid, it's apparent the ryman and theres not much.
And Lee, but materially outperformed its competitive set and I wonder why that is is it something structural and mine.
Answer was as follows 1 within our hotel business, we have developed a strong customer base strategy that drives growth that drives loyalty and repeat visitation, it's not a product based strategy and 2 at capital deployment has been focused on high returning projects and you don't see us buying hotel.
That generate marginal returns over our weighted cost of capital and 3 by and large we finance growth through our balance sheet and taking advantage of our strong cash flows and we're not a serial issuer of equity and I went on to say so if you think about the next few years.
Because of that focus on the treatment of our customers through the pandemic, we expect to come out of this stronger than we went in and as the hundreds of millions of dollars of capital we have deployed and high returning projects over the last several years mature wait just we expect to see good growth and earnings and high returns on equity net.
Net I wouldn't trade at position for any other company and a sector. So now let me turn it over to Mark to go through some more of the financials. Thanks.
Thanks Colin.
And the second quarter the company generated total revenue of $179 million.
And a net loss to common shareholders of $57.9 million or a net loss of $1.5 per fully diluted share.
On a non-GAAP basis, the Companys second quarter consolidated adjusted EBITDA.
It was positive $28.2 million and <unk> available to common shareholders was negative $1.6 million or negative <unk> <unk> per diluted share.
This marks the first quarter of positive consolidated adjusted EBITDA.
Since the first quarter of 2020 before the COVID-19, pandemic and we saw steady sequential progress and this measure month by month, reflecting the rapid pick up and our group business that Colin described.
April was close to breakeven at a negative $1.2 million followed by our first positive month in May at $2.8 million before jumping to a positive $26.5 million in June.
These figures consistently exceeded our internal expectations moving through the quarter and allowed us to substantially exceed the cash burn guidance that we provided on our February earnings call.
Specifically, we had cash interest expense and debt service of approximately $29.3 million and the quarter, leaving us, leaving us with an average cash burn rate of only about $1 million per month substantially better than the $10 million to $13 million, we initially anticipated going into the quarter.
As we noted in our Investor supplement issued 2 weeks ago. We continue to expect further improvement in both our hospitality and entertainment businesses based on their existing book books of business.
We expect positive adjusted EBITDA and positive cash flow after debt service and both the third and fourth quarters and are looking forward to retiring the term cash burn for good.
As Colin said, we are watching the delta very closely for any impact on our business notwithstanding that scenario. We continue to expect third quarter positive cash flow defined as adjusted EBITDA less our average monthly debt service before maintenance capital and a range of $16 million to $19 million per month.
In terms of liquidity, we ended the quarter with $225 million at outstanding on our revolving credit facility, mostly attributable to the purchase of the 35% interest and the Gaylord Rockies from our prior joint venture partner, which closed in the quarter.
This leaves $475 million of available capacity and another $72 million of unrestricted cash for total available liquidity of $547 million.
The company put an ATM program in place for the second quarter No equity equity was raised through this program to date.
We view it as giving us added flexibility with which to take advantage of future investment opportunities or and <unk>. Some of the significant capital we have invested and our business in recent years and at we're excited to see finally mature after the COVID-19 disruption.
We provided a comprehensive breakdown on these investments and our most recent investor supplement and Colin has emphasized several of them again today.
I would encourage you to go through each of these investments using our investor supplement as a guide and look at the capital we've committed and our expected returns.
Confident that if you go through this exercise you will be as enthusiastic as we are about the future of both our hotel and entertainment business.
With virtually all of this capital deployed we expect to delever over the coming quarters and by the end of next year anticipate approaching our long term target leverage levels once again.
And with that I'll turn it back to Colin for any closing remarks.
Mark I think for.
Sure.
And getting getting through.
The next few minutes, let's just go straight to Q&A Q on Q.
Q&A so at Crystal.
You could open up the lines.
We look forward to hearing for <unk>.
Some of the analysts have to say.
At this time, if you would like to ask and audio question. Please press star 1 on your Touchtone phones. Once again that is star 1 to ask and audio question 1 moment for your first question.
Your first question comes from the line of Shaun Kelley with Bank of America.
Hi, good morning, everyone.
Colin and Mark.
Just wanted to.
And maybe obviously theres a lot of eyeballs and attention being placed on sort of what's happening very much at the margin here with COVID-19 and the variance out there. So Colin you obviously touched on this for prepared remarks, and it doesn't sound like there's too much concrete for you to give us spike.
We've definitely heard a little bit of concern around incremental cancellations in Las Vegas, and I wanted to get your kind of like latest up to date thinking have you have you seen either anything at the margin there and maybe you can give us a little bit of an update around given the group nature of the properties themselves.
<unk>.
And <unk> mandates of requirements and how you think that would impact business if they're if they're in place a day at any of your properties and and what your sort of outlook for that kind of looking forward might be.
Well, Sean we are.
We're obviously watching this hour by hour.
And we're watching this with a with a massive microscope and.
Patrick spends a lot of his time talking to the health and I'll hop.
And over to Patrick and a secondhand. He spent a lot of time talking to each of the.
Health organizations that sort of govern the jurisdictions that are hotels sit in.
We saw we saw.
And in Las Vegas.
Some.
And some mandate.
And was put back in about wearing mask and I think probably that that's having some impact but as we talk to our communities here in Texas Nashville here in Tennessee.
We look at what's going on and Florida.
Colorado.
It was early and aggressive in and dealing with Covid and the early stage of it.
At least stages, we don't we don't see any.
Major changes and things like mass mandates, we've had 1 or 2 groups come at us talk to us about potentially not turning up in August September.
But for.
From our perspective net net when you look at what is going on and off and on the and on the leisure side of our business day in the year for the year bookings I mean look we booked in July 25000 room nights in July group room nights for this year in July and that was Delta variant.
And is not something that's occurred and the last week. It's it's been ongoing here for the last month.
No we're not.
Not overly concerned about this we're obviously keeping at BD eyes on it but that's how I would describe at Patrick do you want to weigh in on Sean's question, Yeah, Hey, Sterling, It's Patrick I'll give you a for data points just to backup what Colin has already told you on the masking.
We are in jurisdictions that may have said, we recommend masking, but we're not in any jurisdiction and and operating right now that has mandated masking so at as an option for both our guests and for our employees on on property.
Second thing I would tell you is that from a transient prospective accounts perspective or accounts point, a moment ago, what we have seen as far as group disruption from the Delta variance, we've seen really strong transient production and so we think that that will serve to mitigate any impact from delta and the short term.
Let's talk a little bit about cancellations, we have had a few but it's pretty minor.
And if you look across what we've incurred thus far we've had you know let's see.
Say 15000 room nights cancel.
That is really not that significant it's less than <unk>.
And 2 or 3% of what we currently have on the books for Q3 and less than 1% is canceled for Q4, and we're kind of pushing back on those and saying Hey, canceling for Q4 at this point would be very premature.
The other thing I would tell you at those contracts the whole enforceable. So that's correct. There's no force majeure discussion here and then the Collins point around in the year for the year leads you look at what we produced in July and the lead volume that we're seeing in July in the year for the year lead volume is up about 21% over where it stood.
For 2019.
Masking and remains a choice transient remained strong.
Lead volumes are very encouraging to us and the impact from cancellations has been slight minor at this point, but we continue to watch it and we will.
And to see how to best respond to at each of our hotel Patrick the other the other piece of data that you share with me yesterday afternoon.
And as the lead volume jump, we've seen and the last week.
Yes.
And it's been.
What we were expecting to see Sean with the debt.
Constant debate, that's going on regarding this delta there and all of the political issues that are going on around the country do you know what happens with schools and.
Tyson foods, and making things mandated now and on all this rhetoric, we were expecting to Seattle lead volumes week over week, which we check flat to down but last week was quite the exception, yes, we've watched over the past 2 weeks a steady recovery.
Early in July we saw the impact of Delta is the media frenzy around that really started and our lead volumes did start to slow down a bit.
But to Colin pointed in the past couple of weeks, we've seen at coming back very strongly both from and in the year for the year perspective, as well as for T plus 1 or in this case 2022 and those are the 2 years that we're watching most closely right now so.
We're watching what's happened and the U K and.
And we're watching more and more companies mandate and vaccines and we think these are both very positive bellwethers for where this this issue is heading for us.
And.
As every day goes by with people getting vaccinated and not at the rate any of us would like to see with people contracting that delta variance with the immunity in the in the community from those that have had at getting nearer and nearer to herd immunity as everyday goes by so.
We may have a little bit of choppy choppiness here for the next 3 to 4 months, but.
And I feel certain that very soon and this thing is going to be well and truly behind us.
Thank you for that and then just as my follow up you guys.
And if given great clarity and disclosure with the investor presentation on what Youre seeing on the forward book of business.
And last update there was as of July 15th.
Just any change and effectively sort of how those numbers look today positive or negative, but just any change at the margin on sort of what was provided back there or is it relatively steady as you look at particularly revenues on the books for Q3, the trend into Q4, and then and then obviously for 'twenty 'twenty 2.
No.
I would say that.
When we when we pushed that out that data out and the middle of July.
We were pretty excited about what we were seeing and notwithstanding the.
<unk>.
The massive debate around around the Delta area.
2 weeks 3 weeks later, when we look at at production.
For the month of July, which was where we expected it to be.
And we look at the organic bookings for July.
And we in fact I think the in the year for in the year bookings and July came in a little stronger than we expected and and so I would say to you that.
And a mood as an organization at belief and where this where the organization is going is the strongest is as strong today as it was 2 weeks earlier, when we put out when we put out that release.
And.
We generated in the month of June we haven't yet and they haven't gotten yet the financials for the month of July we we have a good sense of where revenues came in and they came in.
At pretty pretty good in terms of our expectations that you know and the month of June we generated $20.25 million of EBITDA at.
Up from almost at Goose egg and.
And and our revenues in the month and the month of July.
We are indeed stronger than the month of June so.
We are moving and the right direction really rapidly and and we are and.
And so.
We're pretty happy with where we at <unk>.
I would tell you that our re forecast and July was increasing and essentially every 3 to 5 days. So July just kept getting stronger and stronger through the month to Collins point. The other thing I would tell you that what has changed.
Just even since we put the supplement out there and.
Typically at this point and the year are in the year for the year demand kind of falls off a cliff and folks kind of move on to T plus 1.
There's still so much pent up demand that our in the year for the year continues to be very very strong. So what thats indicated to us is that at the end of year for that your booking window has been elongated because of COVID-19.
And so while we have a very good book of business on the books for the second half of this year.
There continues to be a lot of strong interest. So if delta continues to cause disruption and potential cancellations, it's very encouraging to us that there is so much demand looking to book into the second half of the year just in the past few weeks, that's new that we should be able to replace any delta impact with.
Thanks for all the detail as always.
Thanks, Sean.
Your next question comes from the line of Smedes Rose with Citi.
Hi, good morning.
I just wanted to ask a little bit about what youre seeing on.
At the margin side, and I guess, specifically about.
Have you been able to to restock at the levels that you would expect at our U.
Would you expect to be able to maintain and when you look at like the real margin for the quarter was actually higher from where it was for 2019 that will come on.
Absolute levels, but at a higher margin.
Is that something that you think you can.
Continue with going forward or do you have more staff that needs to come back as demand levels continued to growth.
Simple question complicated answer it really is a complicated answer there are we do have.
In both at our hotel business in some markets and in our entertainment business here Scott we have.
We have some labor inefficiencies, where we are we're doing job fairs recruiting.
And and.
And the margins in our business are benefiting from the fact that our customers are returning at a far quicker rate than our employees at returning and so but we're managing through that and and our managers are doing a really good job.
The other thing that's going on is that we have.
Made some.
Fairly healthy labor cost increases over the last month to 2 months, both at our hotel and in our.
Entertainment business, but correspondingly the other potable and this is we've been able to.
Affect pricing.
Particularly and surprisingly so on our hotel business and I'm going to turn over to Patrick and a second and I'll.
Pushes over to Scott to talk a little bit about the entertainment business.
But I think the.
And there's going to be some rebalancing here through the course of this year as we return to normalized occupancy as you know remember.
And.
And the month of June we ran at 57 points of occupancy we've still got.
At 15 to 20 points of occupancy to go.
Although out on our entertainment business the amount of coverage that we're pushing through and the amount of people, we're putting into the seats.
As good and as strong as what we saw back in 19.
So there will be some shake out here and there will be some sort of structural changes that will occur through the next 6 months, but we're not moving off of the position that we have been fairly.
Vocal about over and over the last 6 to 9 months and that is that when we at 1 way through this.
And we expect to run at businesses with <unk>.
Improved margins because you and you go through a crisis like this you learn certain things you learn how to adapt and deal with some other structural problems.
Had thrown at us so that would be my 60000 foot pack and you want to talk a little bit about get into the detail a little bit with Smedes, yes.
Yes, just to give some additional context to what Colin has already offered up youre right are.
Our margins, especially on the room side are benefiting from the fact that we simply don't have enough folks on house to fully serve as to the level, we historically would.
Yet we have very high Occupancies were addressing that there is a labor shortage across the country for us specifically and rooms front desk and culinary those are the areas, where we're trying to get some other folks stepped up quickly.
We are having to increase wages some were user referral bonuses to the extent and we can signing bonuses et cetera.
And so we do know that there will be labor expense increases however to Collins point, there's a lot of levers that we're pulling to offset that for the future to ensure that we come out of this leaner.
From a transient rate perspective quite honestly, we've been setting records in terms of the transient rate that we've been able to achieve each week has been a very pleasant surprise to see how much we were able to push rate.
On the transient leisure side, our amenities are very unique our pool offerings, our programming and folks have been very clear with us that they are willing to pay higher rates to be able to enjoy our unique offerings. So that's 1 lever we're pulling on the group side I would just.
Refer back to what we saw on July or July production ADR grew about 10% for.
For all future years, so we're having great look at.
And capability and driving rate on the group side for the future to cash.
Collins point, we're reworking, our pricing and food and beverage outlets, we're reworking our menus to make sure that we take advantage of where cost works best for chicken is higher because of something that we're going to move towards beef and back and forth and we're going to push pricing where appropriate and then we're looking very hard and having on.
Ongoing discussions last month this month and next month.
Around which management physicians do we need to invest and hire talent and be able to reduce our numbers across the board. So lots of levers that we are actively pulling to offset the cost and labor increase and very encouraged by what we've been able to achieve so far.
A lot of a lot of detail smedes, but.
It's not a simple simple.
Question anything on the entertainment side do you want a range.
And then we're seeing the same thing we're seeing high demand obviously, we're taking advantage of some price and flexibility. We do have some costs that are coming in with.
And increased labor costs.
And so we're seeing and June sales 6.5% increase.
Versus 19 in terms of margins and think that comes down a little bit.
But we're we're obviously taking advantage of.
Some of the opportunity in terms of the consumer demand and we think that that will continue to say we also invested during a at the time of Covid.
We knew that we would come out of it and we wanted to make sure that we do.
Didn't come out of it at the same kind of company that we walked into and we made some efficiency decision.
Decisions during that time, and including bringing in some new technology like a new ticketing platform, that's going to allow us to be more efficient and the out years.
I'm, just kind of finishes up with 1 statement smedes.
If you if you if you own and run businesses that call iconic what people want to come and spend time.
You have a much greater chance of being able to adapt your pricing model.
If you run businesses that are vanilla like everybody else.
It's real hard this is going to be some organizations to struggle through the labor shortages and COVID-19 and pricing increases and inflation that we read about daily, but I think businesses like ours.
Hotel businesses, the product physical product and the stage at the at convention facilities that we operate.
A pretty extraordinary and the sustained within our entertainment business. So we get through this.
Great. Thanks for all that detail appreciate it.
Thank you.
Your next question comes from the line of Chris <unk> with Deutsche Bank.
Hey, good morning, guys and appreciate all the helpful data points, thus far.
I was hoping maybe you can talk a little bit about composition of the.
The group's youre seeing and kind of their tendencies and booking as we look out for the back half and into 2022, and you mentioned I think the 6% rate growth versus 19.
Yes.
And I guess the question is does that imply that there is a bigger mix of corporate and higher rated business or are you seeing the associations also willing to pay more for.
For for next year and beyond.
This is.
This is a.
Not pushing to sound patronizing and this is a very good question.
So Patrick.
Some very good data points here to try and address. This question. This is this is very critical to the future of our business.
Yeah, Hey, Chris.
Let's talk a little bit about what we saw at travel in Q2, because that's a great starting point.
Very encouraged by the fact that of what the groups that traveled in Q2, 40% of those were corporate I think thats, a little surprising to a lot of folks, but very encouraging to us and I would say a direct result of a lot of our re booking efforts.
Association was about 22% as we looked at the back half of this year, We're seeing association come back stronger even as corporate continues to strengthen as well.
We saw in Q2, a lot of our large group.
Folks are customers, we're returning about 28% of what traveled and Q2 was large group for 1000, plus which again is very very encouraging because I think a lot of folks were looking at Q2 and assuming that it would just be a lot of small group, which it was not.
If you look at our mix for 2022.
We're encouraged by the fact that as we sit right now we have a slightly higher percentage or mix of corporate business on the books for 2022, when you compare it to where we stood.
And going into 2019, so that is very very encouraging to US Association is very similar to what we look how we stood going into 2019.
From a rate perspective, because you also added on a question around or the association is willing to pay if you look at our July production.
Association rate increase for July production was 15%. So some very very encouraging signs that we're seeing corporate business come back quicker than I think most anticipated our mix for 2022 is very similar to what we've seen and our most successful performance years and the path.
<unk>.
And we're seeing a willingness not just from the corporate side, but also on the association side to pay higher from a rate perspective going forward Patrick.
Patrick I've heard.
I wanted to analysts and so we'll make the observation that they don't think that large groups are going to come back.
As quickly as small groups.
I don't know where that data is coming from but could you give.
Chris to amplify a little more on his question.
Facts and what has gone on with large growth.
Yes.
So the point I made a moment ago, we are seeing for 1000, plus definitely traveling already and if you look at because I've been watching this 1 very carefully what's happening and the lead volume side.
I'm very pleased to say that 1 of the stronger performance in terms of lead volume recovery is on the 500 to 2000 and.
Peak room night group size, so, they're traveling and greater greater numbers I mean, if you look at April may and June.
Large group was recovering through the second quarter and from a lead volume perspective looking towards the future.
Large group is getting stronger and stronger so very very encouraging information for us to see.
Yes, thanks, guys.
Super helpful. Maybe if I can sneak in a.
The second 1.
Colin you guys have built up this entertainment business over time, obviously took a little bit of a pause for COVID-19, but maybe thoughts on on re accelerating some other things you were considering a few years ago in terms of where you want to take that business now that we are.
I think hopefully on the other side of this thing.
Yes.
Yes.
Yes look.
At this business in our opinion.
Has only gotten stronger and our mines.
Over the last 12 months.
When you see 1 as being going on with circle the distribution the organizations that want to hitch their wagon to this platform. When you look at the inbound inquiries, we get from organizations that want to partner with US on this business. If you look at some of the.
Deals that have been done recently.
In live entertainment.
This business is very.
Has got a very strong runway.
And I suspect.
Chris over the next 2 to 3 months.
You will hear us talk about ex <unk>.
At ways too explicit ways in which we are going to.
Expand this business.
Very excited about it.
Okay very helpful. Thanks, guys.
Thank you.
Crystal Navy 1 more question.
Thank you Sir your last question will come from Chris <unk> with Wells Fargo.
Thanks, Good morning, everyone.
Can you can you tell us how attrition changed from April to July versus what was initially booked at the meeting planners.
Yeah, Hey, George it's Patrick.
And I would tell you that going into Q2 and as we were preparing for Q2 and Q3 several months ago, we were expecting and attrition numbers to be much higher than historical norms.
And it's definitely still a component because you still have areas of the country, where folks are more hesitant, but I would say from and nutrition perspective, we're not seeing the levels that we anticipated they are higher than historical norms, but they are moving and a positive direction pretty quickly. So.
So we're very encouraged by what we're seeing.
Just to give you some perspective, we would normally operate let's say, 14% to 15% attrition.
Operating at 18% to 19% and the second quarter, so a little elevated but certainly not the 30% to 35% debt we were fearful might occur.
Okay.
And then other lodging companies are talking about business transient and leisure overlapping and.
Leisure or whatever you want to call. It just adding to the length of stay do you think that same concept exist with <unk>.
And leisure.
I mean, we've tried to make sure that we built these assets where they have the leisure components to encourage folks to stay on our length of stay has not materially changed to date.
And are attracting a lot more leisure and we have historically.
But from a group perspective, we've not seen a material change and the length of stay although we are seeing.
Groups that all family oriented booking into that business because of the shift yes. That's fair I mean, you've heard us talk about cheerleading groups and other sports groups.
Where theres a lot more of a family component to it so to <unk> point the mix early on and the recovery has favored some of those more family friendly groups and I would tell you sound waves here at Gaylord Opryland has been.
And a very positive way slammed all summer long our pool Paradise Springs at Texan has been operating at full capacity, our offering at palms, especially with the new River components that we added with the expansion has stayed busy so that the pools have been busting at the seams and a very positive way.
And we're along.
Okay. Thanks.
Crystal Hey, it is 7 minutes before the top of the and we have maybe time for 1 more question.
At this time, if you would like to ask and audio question. Please press star 1.
No no other question.
Okay. Thank you everyone for.
Moving on the call today any questions that you may have offline you know where we are appreciate it very much. Thank you.
This concludes today's conference call you may now disconnect.
Okay.
Okay.
Yes.
Okay.
And.
[music].
Yes.
[music].
Yes.
For us.
And.
Okay.
Okay.
Okay.
These non-GAAP measures.
Yes.
And.
And now.
[music] value.