Q4 2021 Ryman Hospitality Properties Inc Earnings Call
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[music].
Hello, and welcome to the Ryman Hospitality properties fourth quarter and full-year 2021 earnings conference call.
Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark Fioravanti, President and Chief Financial Officer, Mr. Patrick Chaffin, Chief Operating Officer and Mr. Scott Bailey President All free Entertainment group. This call will be made available for digital replay.
The number is 89342123 with no conference ID required. At this time all participants have been placed on listen-only mode. It is now my pleasure to turn the floor over to Mr. Mark Fioravanti. Sir, you may begin.
Thank you, Ashley. Good morning, and thank you everyone for joining us today.
This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the company's expected financial performance.
Any statements we make today that are not statements of historical 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 in exhibit to today's release and with that, I'll turn it over to Colin.
Over to Colin.
Thanks, Mark and good morning, everyone. Well, quite a lot has happened since we last spoke on November 2nd, the time when the word omicron meant very little to anyone and the Delta variant was still fresh in our collective memory.
Starting in December we saw the rise of the Omnicom variant, the tallest wave as COVID-19 cases since the pandemic began. However, we were fortunate as
This latest wave appears to have passed with much less severity due to the widespread vaccination in what experts are telling us is the lesser virulence of this particular strain. Today just about three months after the first omicron case was reported in the US. The daily average new cases have just fallen out of the 87%
from the peak on January 14th. For our part, we did experience an increase in group cancellation activity during this wave.
From December through now, which will primarily impact the early part of this year and we'll talk about that in a moment. However, the fourth quarter, as you know is that most leisure focus periods of the year in this segment shine for us in many ways with throughout this quarter.
In the fourth quarter, we hosted over 272,000 leisure transient room nights, an increase of 2.4% over the fourth quarter of '19.
172000, leisure transient room nights, an increase of two 4% over the fourth quarter of 19.
Our last pre-COVID fourth quarter. Now what's more impressive is that these transient room nights were sold at an ADR over 25% higher than the fourth quarter of '19, helping push at total ADR growth.
19.6% over the same period. Now for the month of December.
Transient ADR alone was up 35% over December of 19.
At total rooms revenue of $53 million for the month of December was within about 1% half a million bucks of setting an all-time monthly rooms revenue record and the crazy thing is this was at a 60% occupancy for that particular month.
Clearly, the Gaylord hotels brand driven by the investments, we've made into alisha and holiday programming food and beverage offerings and unique resort amenities such as our sound waves is resonating strongly with our targeted leisure guests and families as they seek out fun, safe, upscale and luxury gateways.
Strong leisure performance allowed us to sustain our occupancy on a sequential basis as we held the fourth quarter occupancy of 53% compared to 54.5% in the third quarter. Despite both the expected seasonal falloff in growth.
And the significant impact that the earlier Delta variant cancellations had on the group side of our business in the fourth quarter and plenty of growth still did travel in the quarter as we hosted almost 236,000 group room nights about 54% of what we saw in the fourth quarter of '19.
We also collected a $20 million of attrition and cancellation fees in the fourth quarter attributable to those delta cancellations from before December bringing our total full year collections to $48 5 million. The bottom line is our company delivered positive monthly average.
Cash flow after debt service.
Just over $18 million for the moment, which is above the estimate we provided in early November.
In the mid-teens and this is again notwithstanding the rise of omicron that we sold late in the quarter. Now as we did with the Delta Varun in November let me give you some context of what is going on with omicron in within our business and some color around what we're seeing and hearing in terms of group reaction.
During the Delta wave, we experienced about 183,000 group room night cancellations for all future periods attributable to that theory. Since the omicron variant became dominant in early December, we've attributed approximately 177 room night cancellations through February 21st.
To this particular wave. We do expect there will be more to come as new COVID-19 cases, while still falling have not fully reached the lows of last summer, which is the first time at average daily cancellation reached their pre-COVID-19 baseline.
Now, let me give you a little bit more information on this. I was talking to Patrick earlier this morning, that'd be clear when we assess data to compare this year's cancellation activity to a previous period, we normally look for continuing weeks of activity, but it would seem from the last two weeks cancellation activity.
We are now at or below 2019 levels and as a consequence of this, we are guardedly optimistic that omicron is behind us.
Now, this subtotal of omicron cancellations represents about 5.6% of all group room nights lost since the pandemic began. So just with the delta away, but it's important to remember that neither of these waves of anything like the painful experience that 2020, and early '21.
This subtotal of Almay Chrome cancellations represents about five 6% of all group room nights lost since the pandemic began suggest says with the delta away, but it's important to remember that neither of these waves of anything like the painful experience that 'twenty 2020, and early 'twenty one.
Well for our company and our industry. Another difference to note at this time is that the recent omicron cancellations.
Tended to have the shortest cancellation window of the pandemic about 40 days out on average. Approximately 85% of these cancellations thus far have been for travel from December through March. This compares to about a 50-day average cancellations for the Delta variant and a 90 day window early in the pandemic.
Anecdotally. It also appears to us that a greater share of these recent cancellations are less motivated by preemptive caution as they were by practical reality, given how prevalent omicron became several cancellation, we simply had too many
Positive cases amongst the members that it wasn't in fact practical to hold the meeting.
So they were unable to travel. Even if the organizers may have actually wanted to go ahead. Between the data and these anecdotal conversations we've had with meeting planners. It seems evident that groups are very eager to resume the progress we are making on getting back.
Jack.
To normal as soon as practical as this latest wave subsides. And when that happens we will be well-positioned. Turning to our fourth-quarter sales production, we booked just shy of a million room nights 993,000 to be precise.
In the fourth quarter up 74% from the fourth quarter of 2020 and down less than 1% against the 1 million room nights contracted in the fourth quarter of '19. And 70% of this activity were new meetings with the balance being rebookings. Furthermore, over 20% or 200,000
of these room nights were for T plus one or to say it different way 2022. In fact, on a net basis, we added over 54,000 room nights in the fourth quarter of '21 for travel in '22.
To put this in terms of occupancy. We increased our net occupancy on the books for '22 from 44% as of September 30th% to 46% as of December 31st. Now it's important to remind you that omicron
took most of its bite out of this position after December 31st.
About 137,000 of the 177,000 omicron cancellations I mentioned just a second ago came in after December 31st for travel primarily in the first quarter. Therefore, it may be helpful here to drill down just a little bit into these figures.
To get a better picture of the potential that we are seeing for 2022.
As omicron recedes and are in the year for the year sales activity picks out. Now while we were down about nine points of net group occupancy in the first half of '22 compared to '19, to start the year and subsequently lost some more of those rooms due to omicron in January and February for the second half.
This year, we're only down 1.5 net occupancy points compared to 2019 at the start of the year. Don't forget we have 300 more rooms in our inventory for 2022 than we did for 2019 in these denominators.
Then when you layer in the rate growth on the books for these rooms relative to the same time in '19, which was 7% higher overall for '22, you see the potential for us to perform moving through the year as the omicron hangs out of the waves.
In fact, the third and fourth quarters of '22, we had more group room revenue on the books at the start of this year than we did for the third and fourth quarters of '19.
At the beginning of that year. Now here is where I'm excited to highlight that after '21 ended for the month of January in 2022, we had the best in the year for the year bookings performance for any January since 2013, and we believe that this in the year.
For the momentum will continue because in the year for the year leads were up 50% across that portfolio compared to lead volumes at the end of January 2019. So the bottom line is that while we lost some net occupancy to omicron in the early days of this year as second half
Positioned as short term sales momentum in our lead volumes for this year have us very optimistic that we can work our way back towards a regional pre omicron expectations for the year subject really only to the availability on our calendar to accommodate the lead volumes we have.
And all of this sales activity, we're not being shy on rate either. Our ability to capture rate while continuing to post solid booking numbers is not simply a response to the inflationary data that we're all reading about over the recent months. Rather when we look at the investments we have made in and are making
in our assets, it's clear to us how favorable product compares to the competition, which has not seen much oh in the way of new supply, innovation or come to that investment throughout this long economic cycle since 2009, and especially through the last couple of years as we've been wrestling with COVID.
Wrestling with Covid.
We've invested literally hundreds of millions of dollars of capital into our hotel portfolio over the last few years and that is on top of the $800 million introduction of the Gaylord Rockies and we have many more interesting and exciting projects. We're working on that will further enhance our competitive positioning.
You may be familiar with these projects we have completed in the last couple of years, but given the fact that we got a whole bunch of new shareholders. Let me just quickly recap at the activity that we've undertaken. We expanded our Gaylord palms and Gail Texans, each by 300 new Guestrooms and approximately 90,000 square
feet of new modern functional high tech meeting them breakout space, we renovated the entire 2000 rooms at the Gaylord National.
And are nearly complete with a full concept team of the dining experiences there as well.
We've invested 19 million to build a first of its kind water experience at soundwaves and offer them and by the way given what has happened with the performance of Soundwaves through co, but we see a strong investment case to replicate this feature elsewhere, we have planned approximately $45 million of enhancements to the Gaylord Rockies.
To realize our original vision for this hotel now that's under our sole ownership and we're revamping the Texas Redeemable and planning to renovate the original 1,400 rooms at the palms to match the recent expansion there. The list continues to expand as we regularly invest.
To grow and evolve with our customers and their needs. And we believe that customers both existing and increasingly newcomers alike appreciate the differentiated experience and investments create.
We believe this will add further value.
Further value.
And we really do believe that these events will set us aside from the competitive set this is a tremendous advantage for our portfolio and we expect that the true earnings power of our hotel business supported by the virtuous cycle of high return on capital deployment that we are.
We sustained through the difficult years of 2021 will become increasingly evident as this pandemic tide recedes in '22 and beyond. Now turning to our entertainment business. It appears that the tide is already quite further out as the live entertainment industry overall continues to thrive post pandemic.
We sustained through the difficult years of 2021 will become increasingly evident as this pandemic tide recedes in '22 and beyond. Now turning to our entertainment business. It appears that the tide is already quite further out as the live entertainment industry overall continues to thrive post pandemic.
A brief look at the performance of our own assets on a same-store basis, which would exclude Ole red Orlando and the circle joint venture neither of which existed in '19 shows that this remains true in the fourth quarter of '21. On that basis same-store revenue grew 11%.
Adjusted EBITDA increased 7% over the fourth quarter of '19. You've all heard us say for years, how valuable we believe the Opry Entertainment group is. And in recent quarters we've continued to emphasize how that value is becoming more apparent following COVID-19. As people's desire to connect again.
And personally and experience in live Entertainment came roaring back in 2021. We believe this continues to be the case and this is why we've continued to invest in growing the scale of that venue network and the size of our customer reach both organically and through our pending acquisition of block 21 in Austin.
And its famed ACL live at the Moody theater.
We've also announced in the fourth quarter, what will be our largest ole red venues coming to Las Vegas in '23 at the southeast corner of Flamingo and Las Vegas Boulevard right on the strip in front of Bally's across the street from the renowned Bellagio fountains. It will consist of 27,000 square feet.
Over four stores in our performance capacity close to 700 people topped by a four and a half thousand square foot rooftop. When both deals a complete block 21 and Ole Red Las Vegas venue network will span coast to coast from Las Vegas to Austin to Nashville to Orlando. We will be able to
Reach out fans wherever they are and helped bring the artists we have developed relationships with to new markets and new audiences. We really believe our entertainment business is a valuable jewel and while ultimately may not belong in the REIT, we're committed to nurturing its growth Stewart and his friends and maximizing.
Its potential value for shareholders when the time is right. And we believe these two major investments are an important step to that path.
One last development that I'm happy to announce is the expansion of that board with the addition of two new members.
This week, both of whom should be familiar names to our long term shareholders. Michael Roth rejoins and our board after one year absent and we're delighted to have his incredible experience and history with our company.
That's my Apple Watch.
These things are so disruptive.
Apologies for that.
So we're very happy to have Michael back on that board and some of you may have read this morning, Mark Fioravanti, President and Chief Financial Officer will be joining our board as well Mark has been essential to the growth and returns that this company has delivered over the last couple of decades through both his strategic advice in his financial stewardship of our balance sheet.
Which was particularly vital these past two years as we navigated the COVID-19 pandemic. Mark has been a trusted advisor to me going back not only throughout time at Ryman and its predecessor, Gaylord entertainment but even further to our share time together at Harris before I came over to this company. I'm pleased to have Mark's counsel.
And now directly in the board room with me and with that, let me hand over to him.
To recap our balance sheet and liquidity and a little bit of financial data as well, Mark.
Sheet, and liquidity and a little bit of financial data as well Mark.
Thanks, Colin.
In the third quarter. The company generated total revenue of $377.4 million and a net loss to common shareholders of $6 million or 11 cents per fully diluted share. On a non-GAAP basis. The company's third quarter consolidated adjusted EBITDA ARI was positive
of $85.6 million and AFFO available to common shareholders was $52.1 million or 94 cents per diluted share.
This marks the third consecutive quarter of positive consolidated adjusted EBITDA Ari since the first quarter of 2020 before the COVID pandemic.
Considering the reduced actualized group occupancy due to Delta cancellations. We are pleased with the hotel margin performance in the quarter. At 53%, hotel occupancy was down 23 points, including 204,000 group room nights when compared to the fourth quarter of 2019.
Nonetheless, our hotel's adjusted EBITDA margin was 25.5% down just six percentage points.
I caution here about comparing our fourth quarter margin to the immediately preceding third quarter for our read on the current recovery trajectory, even though occupancy was similar sequentially in the fourth quarter, our hotels typically generate lower margin holiday programming revenue.
In addition to the seasonal difference, this year we serviced approximately 71,000 fewer group room nights compared to the third quarter due to the near term Delta cancellations. This mix change negatively impacted high margin banquet business volumes in the quarter.
In terms of what is happening on the labor side, we did see some modest wage margin pressure versus the fourth quarter of 2019, as we went into the quarter staff or higher levels of group occupancy they were on the books prior to Delta's arrival.
Retaining key staff in a tight labor market is a priority for us in order to be prepared for the volume of business we have on the books in '22 and beyond.
And while we've endured double digit percentage wage growth versus the first fourth quarter of 2019, we have metered its effects through advances in productivity by improving hours worked per occupied room at the management level, our leader count is down compared to the fourth quarter of 2019, as we've adopted structural changes in our staffing model coming out of the pandemic.
These operational adjustments combined with strong ADR growth at cancellation fee collections helped to offset higher wage rates and the sudden mix shift an occupancy headwind from the delta variant.
As our higher-margin revenue sources fully recover that his group travel normalizes and the associated banquet banqueting and outside the room spending that comes with it and occupancy fully returns our hotels should generate superior margins compared to pre-pandemic levels.
Looking ahead, it is still a bit too soon for us to return to our traditional guidance format. Given the tail end of Omicron is just now passing through and new data is coming in quickly. However, as Colin alluded. We're very encouraged by our recent near term production for 2022, including in the year for the year production in January.
And the relative resilience of group lead volumes despite the emergence of omicron variant in December.
And while we expect the first quarter to be impacted by omicron.
With solid group occupancy and rates on the books, good in the year for the year momentum and continued leisure strength.
Barring any new adverse COVID-19 developments, we expect to see more normalized levels of occupancy and business mix as we transition to the second half of the year.
Turning to the balance sheet. Due to our positive cash flow, we reduced our net debt by $76 million and ended the quarter with total available liquidity of over $650 million, consisting of $140 million of unrestricted cash and $510 million of availability under our revolving credit facility.
With a continued recovery in our business, we anticipate exiting our credit covenants.
Facility covenant waiver on schedule in the second quarter of this year.
In addition to the resumption of our regular FF and E reserve contribution in 2022, we plan to deploy approximately $200 million of capital in new unit and enhancement opportunities in both our hotel and entertainment businesses.
This includes $125 million to fund the balance of the $260 million purchase.
For the acquisition of block 21 in excess of our assumed $135 million mortgage.
We continue to work through the [CMBS] approval process and expect the acquisition of block 21 to close by the end of the first quarter.
Given these high return investment opportunities, we do not currently anticipate reinstating our dividend in 2022, unless we are required to do so under REIT rules.
In addition to investments that further our competitive advantage.
Our priority for the cash we generate will be to delever the balance sheet, returning to pre-pandemic target leverage levels. And with that, I'll turn it back over to Colin for any closing remarks.
Thanks, Mark. No, let's get straight to questions. Ashley, if you could open the phone lines up please that would be good.
At this time, if you would like to ask a question. Please press star one on your touchtone phone. You may withdraw your question at any time by pressing the pound key.
Once again that is star and one. And we will take our first question from Shaun Kelley with Bank of America. Please go ahead.
Hi. Good morning, everyone. Mark, congratulations on the board seat, I think that's very well deserved.
Thank you.
So.
Thanks for all the color everyone just on.
The trend lines, Colin, I think the story is.
I think it's really quite clear. I wanted to dig in on let's call it the second half recovery cadence. I think you're pretty precise date occupancy on the books only down one and a half percentage points. Rate's up. If we think about that formula, what do we need to see on the margin side? Or what would you expect to see is a better question.
On the margin side, if you get that mix of business in the second half.
Just so we can sort of manage and think about expectations for overall profitability.
I'll start and then I'm going to pass it over to Patrick.
But the other part of all of this.
You got to remember that you know.
We're sort of seen as a group hotel business.
Business.
The analyst community you know that's the way you guys sort of describe us, but I think what we have proven here is way up.
We're a downside more than that when you look at the performance.
Of our business in the fourth quarter.
Generating $8 million of EBITDA almost setting.
$8 million of EBITDA almost setting.
An all time rooms revenue record in December of the $50 million of rooms revenue in that one month.
With 60 points of occupancy. It was because of the tremendous strength and the emergence of AD business as a very strong leisure accommodator and the reason for it is the fact that you know.
We've done so many things to enhance these hotels over the last decade or so.
Enhance these hotels.
The last decade or so.
And you know when you see lesion rate and I'm going to get to your question second when do you see leisure rate up.
In the month of December compared to 2019 up 35%, the customer really does appreciate what we are doing.
One of the.
One of the keys to the answer to your question in terms of margin is the sustaining of this level of leisure business that we have been building through this pandemic.
For the last two years and sustaining the right and if we can deliver those room nights, there's leisure room nights.
Into the periods of time when the leisure consumer, you know, it was really wanting to travel at the rates that we have been accomplishing our margins are going to be just very very fine.
The the.
The periods of time, when the leisure consumer you know it was really wanting to travel at the rates that we have been accomplishing accomplishing our margins are going to be just very very fine.
So Patrick, I mean, you might want to talk a little bit about the stop that we have done to eliminate cost out of that business to make sure that our margin.
Performs very very well. Absolutely. Hey, good morning, Shaun, it's Patrick just to build on Colin's point.
The hotels and I and my team are in the hunt for second half of this year or two to get Revpar and margin back to 2019 levels that is our goal now that barring another variant.
Things that Colin just mentioned that were counting on to make that happen and what we're executing against is continuing to drive transient ADR starting to move group ADR up obviously, that's going to lag a little bit because of the nature of the long term nature of our contracts.
Counting on to make that happen and what we're executing against is continuing to drive transient ADR starting to move group ADR up obviously, that's going to lag a little bit because of the nature of the long term nature of our contracts.
But then to Colin's point really honing in on labor management, we've been doing more with less for the past two years.
We think that we can sustain that. We think we've got the right talent in place and then we're deploying additional technologies to help us do that as well. And then finally, getting group occupancies back to levels that allow us to deliver margin and RevPAR similar to what we saw in second half of 2019.
Alright.
Sean I know this is going to sound a little amount of dramatic, but I really I would say this to my board yesterday, when and when we were having a conversation about 'twenty two 'twenty three in Mako sharing our long range plan. You know my sense is only com has really helped to sort of rewrite.
Selves and AI is the consumer.
You know we've.
Our relatives leisure rate.
Was.
Up until about two or three years ago pretty anemic and it was something that we have been really focused on with Marriott.
As a manager and Patrick and his team had been beating the living daylights out of the revenue managers. So now enter stage left here. We here, we got Omnicom group.
Group group, so the source of it sort of evaporates and and we said now is the time for us to demonstrate that we can get really good rate growth and look when we talk about right. We're not talking about you know.
Offering rooms, a thousand Bucks a night that a lot of these result locations are doing and that will that will absolutely pulled back at some point in time.
But what we have done is pushed out Ray top you know relative to hotels that were in the P is settled and my view is that.
But really and I've said this to the Marriott leadership and Patrick has to that Mark that we expect these rates to sustain themselves into 'twenty, two and 'twenty three.
And we I think we have an opportunity here to <unk>.
The mentally.
Redefine the profitable opportunity profitability opportunity for these hotels.
It's great and then my second question sort of along the same lines would just be.
Can you help us think through a little bit of the let's call. It the just a bad word or the vintages are cohorts of prior year bookings right. Because we are seeing this really dramatic pricing environment and in a way if corporate comes back as quickly as maybe your occupancy suggests.
I'm thinking you probably would actually have more pricing power than maybe your contracts would allow you to have sue can you just help us think about how quickly you can push out maybe the corporate and association associates some of those longer term contracts.
And again, obviously there is a value proposition there so not to say you're aggressively taking price and not giving something back but truthfully.
Theres going to be a lot of demand out there for your product and how quickly could you adjust to that on the corporate and association side.
So remember this is what would typically this is the way we would typically look if you're if you are if we went back to 2019 and we're sitting there looking at 'twenty.
We would be sitting out with 50 points of business contracted or we've already made the decision and I'm by the way, we're not moaning and groaning about that that's really good stuff I mean to have.
No other company has 50 points of occupancy typically.
On the books in contract form, but we do so therefore, if you believe youll your goal for the year should be a 20% it's going to be leisure, 10% is going to be in the for the year.
We have we have you know 30.
30 points of occupancy that we were in total control on visa B right and so.
Now that that's the way, we think about our business and we have been very aggressive with our sales people.
We keep calling them as salespeople merit sales people over there are salespeople, we've been very aggressive with these folks in terms of pushing and pushing and pushing right. So you know we.
We do have the ability to affect quite a large part of our business and then of course all of the outside of the room spend.
That is something that we negotiate in real form you know a month before the group tons up so there's opportunities there too. Thanks, Sean this, especially maybe a couple of points just to further highlight we call them, calling saying.
A long term group pricing, we have a very different narrative than everyone else and its been highlighted in the previous comments on the transient side, we can drive rate up not simply because of inflation, but because of the amenities that we offer and the programs that we offer which are truly unique to our properties on the group side, we've been investing heavily into our assets over the past few years, even in the midst.
The Covid, so F&B is being re concept it and revitalized room renovations new renovated space.
New rooms have been added an additional amenities added all across the board. So from a long term perspective, our sales folks can can share a very different value proposition that rates arent, just going up because of inflation realities, but going up because we have more value to offer in the short term I mean, you should give you a data point that we're very excited about janney.
In the year for the year lead volume was the highest lead volume we've ever seen in a January for the brand.
And I know a lot of folks, who said well as corporate coming back well corporate was the main driver of that best lead volume for in the year for the year in January that we've seen 78% of the leads in January are coming from corporate so corporate is clearly showing signs of strengthening very quickly and with that being four in the year for the year and our ability.
Two.
Impact of pricing just in the or for the year, we're very encouraged that that volume of business coming through we can truly drive prices up both on the group side and the transient side in the short term.
Corporate corporates high value outside the room too yeah, that's correct the other big advantage.
Right. Thank.
Thank you for all the color.
Thanks, Joe and thanks for your focusing I appreciate it.
And once again as a reminder to ask a question today that is star and won it and we will take our next question from Bill Crow with Raymond James. Please go ahead.
Hey, good morning, guys.
I appreciate all the color thus far mark congratulations on the new side Hustle.
For you.
Question for you, which is on the balance sheet and your intent to Delever.
But you have what 200 million plus.
What's the balance of the year and I'm, just wondering how you're thinking about financing, there's obviously <unk>.
Raised equity at one point.
Mark for for Austin, and that was used to kind of get you through the through the last 24 months.
Do you revisit that.
The.
Financing method again here.
I think I mean, certainly that is an option for us as you know bill we have had.
We have an ATM in place.
We havent utilized to this point.
So we do have some flexibility.
Our our stock we've been very pleased with how it's recovered.
Relative.
Relative to where we were 18 months ago or even a year ago.
So so equity as an option.
As the business recovers, though.
These businesses when we get when we start to get back to.
Pre pandemic occupancy levels and at the rates that were.
That we're seeing in terms of.
Incremental leisure business in the year for the year group business.
And some of the spending patterns and these hotels will produce a lot of free cash flow. So.
We move through the year.
I think we have a lot of different options in terms of how we think about.
Financing growth and from a leverage perspective, if you if you start to re ramp our EBITDA our leverage comes back into line pretty quickly with our pre pandemic levels.
So just from a from a from a leverage ratio perspective, so we feel like.
We have a number of different options here going forward.
We obviously have a maturity in 'twenty three.
With the Rockies, So that's something that we'll be looking at.
Probably looking broad more broadly at our overall.
Our bank facility and how we refi that property in conjunction maybe with an expansion of that facility.
The capital expenditure that.
We we will we will spend or may spend.
Basically most of this capital is.
Is capital that generates you know.
Pretty good returns, we we we don't have major refurbishments that we.
We have to do we havent been in a milking. These assets. We've got we've deployed capital into into things like as Patrick talked about additional rooms additional bank additional banqueting space food and beverage operations and so if we believe the world is going to return to normalcy and.
We believe what we see going on with the meeting planner right now we believe that the.
The transient side of our business that we have I think done a really good job all of over the last couple of years, we believe that what is going on in our entertainment business. The growth that we're going to see there. If we believe all of this stuff as Mark said, our balance sheet transforms pretty rapidly.
And we're very excited about this very excited.
Alright, and then.
Just out of curiosity, you got you've got one hotel that is union.
Labor when does that when does that contract come back up.
Well, we renegotiated it recovered Patrick yes. So.
The CBA the Union came in basically asked if they could pump a year.
And so we were supposed to be negotiating that but we're going to push that back another year. So I would say 2023 will.
We will be actively in discussions with the union about what form that CBA will take.
Alright, that's it from me I appreciate the time.
Television. Thank you yeah. Thanks.
And we will take our next question from Chris <unk> with Deutsche Bank. Please go ahead.
Hey, good morning, guys and Mark congratulations on the on board appointment.
Great to have you have you there Super addition.
Sure.
Sure. Yeah. So question was you guys covered a lot of ground on.
On rates.
Kind of the group and the transient side and you know it all sounds pretty good.
My question is on the.
On the non room stuff are you able to also kind of take pricing there I know, it's probably not to the same extent youre getting them unlike visa rates, but.
Is there an opportunity to kind of just take everybody higher there given that the how much higher the room rates are going.
Yeah, Hey, Chris It's Patrick Yes.
Yes, so youre absolutely right to Colin sported a few minutes ago, you can price.
You're outside the room offerings, whether it be food and beverage or anything else in real time, and theres sort of three levers you can either just increased price, which you have to be very careful to make sure that you are not you know driving value down for your consumer. So you can also work on portion control and you can rebalance the offerings based on cost realities right. So a chicken is a bit high in beef as a greater.
Opportunity rather than just jacking up the price on chicken you can shift over to be for short period of time. So we are pulling all three levers pricing.
Rebalancing the offering and then portion control.
Chris from a capex perspective.
You look at how we have.
Re concept it.
A significant part of our food and beverage. It for example at what we're doing at the National what we're going to do with the palms, we're moving to more <unk>.
Grab and go re concept in some restaurants to improve.
Not only from a customer facing perspective, but also from an efficiency perspective, it's going to it's going to help us quite a bit on the margin food and beverage margin perspective, yes, we're trying to build more flexible operations. So that if you're 20% occupancy versus 80% occupancy you can have the food and beverage outlets open they just operate very differently.
<unk> and flex up and down.
Okay very helpful and then as a follow up this is a little.
A little bit of a strategic question for you Colin.
<unk> got a lot of good options.
Your plate in terms of things you can still do with the existing portfolio Rockies expansion in Soundwaves elsewhere.
You're bringing in block 21, but you know I know pre Covid you had also talked about potentially doing something more in Nashville at opryland with a maybe a different kind of hotel just any thoughts on it seems like you still have a lot you could still do a lot with Nashville, and given how much growth that so do you see how do you prioritize some of these.
In the portfolio opportunities.
Well, we look at it through two two very distinct screens.
We look at each market and we look at it the hotels relative positioning in that market and how and how we buy the deployment of capital by the deployment of capital can create essentially an economic moat around that asset to make that asset.
They don't by far and that is what we've been able to do in most of our hotels.
And so you.
Patrick yesterday, when when we had our board meeting and we all seem to talk to our board about some of the aspirational ideas that we're thinking about.
You know the you could you could see an additional over and above what we've what we have announced anywhere from 500 million to three quarters of $1 billion of additional projects that we could we can deploy into into our existing assets and and so.
And so how we prioritize is you know we look at each hotel in each market how do we create the economic moat around it and then it comes down to return on invested capital.
We don't.
And Chris I don't mean to throw rocks at any of our competitors, but we don't go out and buy hotels at 9% rates of return, we deploy capital into things that generate 15% rates of return and I think that's frankly, one of the reasons why our stock as you know.
Basically trading almost at an all time high when many of our competitors are trading at 2030, 40% in some cases, 50% off their all time highest because we have deployed capital.
I think in a very very efficient way and the shareholders have appreciated that so that's how we think about it and the you know the really exciting.
Citing thing.
Is is that we've got lots of opportunity to further the dominance of our hotels in the markets, they're in and that's very exciting and we have the same opportunity.
Deploy capital into our entertainment business and so I'm really excited.
There is not you know.
So just doing the old stage stuff because we're in front of some analysts, but I'm very very excited about the next two to three years for our company owned I think what we can what we can accomplish here.
Okay very good I appreciate all the color. Thanks, guys. Thanks, Bob.
And once again as a reminder, that is star and one for your questions and we will pause a moment to allow any further questions. Thank you.
Okay.
Yes.
I have no. Other questions. Then we will thank everyone for their time this morning, and we can get on them.
Growing our company.
And we did actually get a question from Smedes rose with Citibank.
Oh, okay.
It is fine we'll take Smedes Smedes question any day.
Alright Anthony.
Quinn.
Great. Thanks, sorry, I got a locked in but I can say weapon.
We went through a lot of information, but I wanted to just quickly ask you on the overrides that you're putting in in Las Vegas exactly fully on balance sheet development for you or will you be partnering and I just wondering I'm sure. It will be very successful, but if for whatever reason is it what sort of.
I guess, how could you extricate yourself from an extra pad that's it.
Perry.
Okay.
So.
We have a we have a long term ground lease.
The way we've negotiated it is that we can get out of background noise and we will build the infrastructure that goes on top of that ground lease and that will be outerwear round about 30 million Bucks.
And that will be our investment and.
You know that.
That type of benchmark is is the same.
<unk> plan that we applied here in Nashville, we've applied in Gatlinburg, we applied in Orlando.
And and.
And frankly, the performance of visa Ole Reds are very very good add and generating really good rates of return and I cannot think of a better location for an old red anywhere in America.
Then where we're putting this one this is main and main and in and one of the nations well probably the most important at all.
Entertainment destination in America, arguably in the world and so.
We can excellent extricate ourselves if we if we need to I think that would be the least of our concerns in the in this particular market.
I think we're gonna be wringing, our hands thinking how can we double the size of this baby, but that's a different for a different discussion at a different time.
You want a great one.
Thanks.
I mean, the only thing I would add is that if you spend any time on our casino floor. You will quickly realize those are our people.
From a from a consumer perspective.
In this space.
Around where they are already going on there's additional upgrades like valleys converting over which was recently announced the horseshoe. So there's an investment in that particular space yet.
Yes.
Here's the bottom line 45 million people a year ago to Las Vegas, and this particular site of 125 to 150000 people a day, we will fight.
And and and then you look at think about the competitive supply of a country lifestyle music centric business in Las Vegas, there is somewhat.
So you know this.
This is going to be a hell of a deal for us.
I wish we could make it.
Okay.
Just wanted to kind of get a little more color. There appreciate it. Thank you.
Thank you is that was that the question Phil.
I'm sorry was.
Was that the question Smedes.
Yes that was it.
Let's say you will see you about Nevada.
Nevada, we kind of bits time huh.
That's great. Okay, I'm looking forward to going forward. Thank.
Thank you.
Okay.
Hi, Ashley I think wed appreciate it everyone. Thank you very much for being on the call. This morning.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.
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