Q2 2022 Ryman Hospitality Properties Inc Earnings Call
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[music].
During the conference today, Please press Star zero.
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Welcome to Ryman hospitality properties second quarter 2022 earnings conference call hosting the call today for Ryman hospitality properties are Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Mark.
For your honesty with President Ms, Jennifer Hudson, Chief Financial Officer, and Mr. Patrick Chaffin, Chief Financial Officer.
This call will be available for digital replay. The number is 808 391246 with no conference I D required.
At this time all participants have been placed in a listen only mode. It is now my pleasure to turn the floor over to MS. Jennifer Hutchison Ma'am you may begin.
Good morning, Thank you 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 expects or 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 result, we discuss or project today, we will not update any forward looking statement, whether as a result of new information future events or any other reason.
We will also discuss non-GAAP financial measures today, we reconciled each non-GAAP measure to the most comparable GAAP measure in exhibit to todays release.
I will now turn the call over to Colin Thank.
Thank you Jan and good morning, everyone.
The second quarter was another remarkable quarter for our company and our hospitality business and particularly the momentum we generated in our hospitality business. During the fourth quarter is really rebounded from the low point that you see.
Omi called wave and generally carry through to several new record performances in the second quarter. Let me take some of these milestones for the second quarter was our best quarter ever in the history of the game, but it's a transient ADR.
This was an increase of 30.
1% over the second quarter.
19 and 21 the.
The second quarter was also a record all time.
For us for both total revenue and total adjusted EBITDA.
For our hospitality segment and those records were not by narrow margin second quarter. Adjusted EBITDA was a total of 22 million higher than the next best quarter in our adjusted EBITDA margin was also an all time record up 125 basis points above the next task.
Okay.
Regarding our fourth production the second quarter saw the highest ADR all new definitely bookings for all future years $243 on a monthly basis. We also saw a few records we did in the quarter for example.
April was the single best most profitable month for adjusted EBITDA.
For the Gaylord hotels brand in the second highest margin month on record.
And.
The individual hotel level, the Gaylord Rockies Gander distinction of studying the single highest occupancy month on record for any Gaylord hotel when it reached 92, 4% for the month of June .
From just about every angle you look our results this quarter were a testament to our capital allocation strategy and the actions that we've taken over the last several years to meet the challenge of the pandemic head on and to position our hotel business to thrive in the eventual recovery. These steps included.
Gaining retaining over 80% of ourselves force, even as the hotels were closed and working hand in hand, we got called custom of the meeting planner should we booked their business. We also continued critical a critical planned capital investments, each and expansions rooms and meeting space upgrades.
We can forget F&B outlets and other amenities, we streamlined our operating models for efficiency to better face rising wages and other inflationary costs and we re imagined in many respects.
Our approach to leisure program, and finding new ways to attract and retain premium leisure demand around our traditional group business. All of this work was manifest in the second quarter.
These figures are good.
I've just shared with you and I couldnt be more pleased with the job that our team and the Marriott change out hotels to pool to produce. These results. This is a good moment to remind everyone that this is indeed was still in essence, a recovery quarter for us. Despite all of these rat holes we have.
Complexity performance with five fewer occupancy points in the quarter than in the second quarter of 19 loss pre pandemic here. This tells US we have more opportunity ahead to build on that success with occupancy finally gets back to pre pandemic levels and we continue to set our sights on a new record.
In the years to come, particularly in an environment, where new supply growth remains limited and now on the books a pace for glu.
Rooms revenue in the years ahead exceeds pre pandemic levels now.
I know what some of you folks are thinking about so let's address it head on before I go into any more about any more detail about the quarter and our outlook and some of your thinking well. These records are nice, but that's a few weeks ago and don't you know, there's a big recession coming inflation is out of control and so on.
And I think that reflects some misunderstanding Atlanta business and become a backdrop compared to past economic cycles as I've just noticed that house makes it a hospitality business instead of new car and a recovery period.
And the demand to meet amongst the majority of our customers remains high and pent up many of our customers have not held their annual meeting.
It's critical to their mission of enabling financial health in many cases for literally over two years that isn't very different set of circumstances than we were going into the 2009 period than the great financial crisis was unfolding what we're hearing from our customers right now and Patrick can go into that a little bit more.
Is that they are proceeding with their plans suddenly they read the news to you in a few have noted that that keeping an eye on the equity markets when the macro economic data, but right now on a net basis the need and the pressure to resume teams is waiting out and that is evidenced for example.
Recent production in the second quarter, we booked 600000 group rooms group room nights, which was only 8% below the second quarter with 19 and as I mentioned at the top of the call ADR on these new bookings was at an all time record, 15% higher than the second quarter of 19.
14% higher than the second quarter of last year.
By the way our production for July again showed a pretty strong second pretty strong segment of play.
So we are seeing solid interest from our customers and our full book of business. As a result remains in excellent shape as of June 30, We had 43 nine points of net occupancy net group occupancy on the books for 2023. This is 1.2 points.
When we had the same time last year looking ahead to 'twenty, two and its only 0.07 points less than we had an 18 to 19 and that is despite 3% more rooms inventory for the Gaylord palms expansion in the denominator today compare to that to this point.
2019, but more importantly, you must factor in the rate growth that we've seen over the last couple of years in that production and that group ADR on the books for next year is 3.8% higher than our T. One position at this time last year and 10% higher than actually one position.
In 18 in total we had on June 36, 6% more group revenue on the books for next year compared to this time in 'twenty, one and all.
11, 5% more than we had at the midpoint of 18 looking into 19.
Bottom line, we feel great about where we stand right now and about our business and the fundamentals behind it.
That said the economic backdrop that we cant control and perhaps this is a good time to notice that we also collected $15 million in cancellation.
$50 million I should say in cancellation and attrition fees in the second quarter, putting a running total two out of the $110 million Mark since the start of the pandemic now of course, we were glad to see that this number trended down month to month in the quarter as we move further away from the Omnicom.
And impacts and we'd like to see this continue downwards as the group recovery continues but these fees are an important feature of how we design our business to weather top stock whether it's all the time, so I want to remind you all that as long as I'm addressing concerns about recession recessionary risks by Mark.
We'll discuss some additional color about each property, but suffice it to say we were very pleased with our hospitality business this quarter, but it almost makes you forget that he was out of these six months ago. When we were at 32 points of occupancy for the month of January .
But anyway I'll, even after the bikes with the army Chrome wife took out of the first quarter, giving full year guidance, our adjusted guidance for EBITDA I E that is a segment that is still on par with 2019 levels, which I'll, let Jennifer walk through in more detail.
Turning to entertainment the most exciting news with the execution of the acquisition of block 21 in the quarter and the subsequent closing of our strategic investment, where the terrorists and NBC universal which values. The new combined Opry Entertainment goes on block 21.
Just over $1 $4 billion on a segment basis, our entertainment business delivered 22 million of adjusted EBITDA in the second quarter.
Which what it ended up being towards the lower end of that guidance was nevertheless, a record quarter for this segment as well both as reported and on a same store basis compared to our initial expectations. A few factors contributed to the result, being an even bigger record one is a slight delay in closing.
<unk> 21 versus our original timetable, which not only reduce the contributions of block 21 for the second quarter, but it also means we will get a bit late to stop on the many growth initiatives. We have planned for this asset some of which will now be felt more in 'twenty three instead of a lighter this.
Yeah as we've recently at a plentiful.
Turning to our brand of luxury business, we've seen a slower recovery than expected in the customer segment that we call touring travel or what is more easily described as organized buses and bus tickets as part of the package itineraries also the offering we've experienced some reduce availability or.
Pop drawing office in Nashville during the summer as many of them have accelerated depends on national and international touring activity due to the faster recovery journey to the jewelry.
Due to the faster recovery for them when they come so I am reading too quickly.
Certainly great news for the office and the millions of the country lifestyle consumers visiting their shows it does take away some of that stability for us to showcase them at home has often we would like here in Nashville, and finally, there's been widespread softness right now in our in the advertising market, which is down from <unk>.
Line revenue that several joint venture even as circle waiting some showed nice increases around our original content and the benches costs have been following the plan that we had in place. This confluence of factors is why we brought our guidance for this segment down a bit to reflect that in.
<unk> for the full year.
Still expecting a record year for profitability for this business when you compare what we would ship in the second quarter are to.
To the same time in 2019 on a same store basis I call entertainment portfolio to live with no less than 35% adjusted EBITDA growth compared to pre pandemic levels.
So for now our focus is solidly on getting to work implementing our exciting plans for block 21 in the ACL liked it.
Ownership.
Also cleared to commence construction on our old led Las Vegas location right in the heart of the strip, which we expect to complete in the early fall of next year and we're now actively engaged with our partners or the terrorists and NBC universal on our roadmap and strategic initiatives across the business.
We look forward to sharing more as we move forward.
Together, our policy to hand over to Mark to go into a little bit deeper information on the hotel business and then to.
Jennifer to update our balance sheet Mark Fioravanti.
Thanks, Colin good morning, everyone.
As Colin noted has noted this was an excellent quarter for our hotel business.
Several all time records achieved but let me just take a moment to common at the property level on some of the specific drivers of the performance.
Robert downward Rockies led the brand in occupancy for the quarter at 76, 6%.
The land the palms, and the techs and all had similarly strong performances.
Occupancy was up 74% the problems in text and finished within two to three points of second quarter 2019 levels.
I would note that the palms occupancy performance includes 300 additional rooms.
91% increase in that properties available rooms.
Iraqis occupancy was up eight points as 2019 with his first year of operation and the hotel was not the stabilized.
And while off your land trailed its 2019 performance by six points. It's important to note that obviously had a tough comp as occupancy in the second quarter of 2019 exceeded 81%.
All four hotels had excellent ADR growth over the second quarter of 2019.
<unk> from Citi.
15, 6% for Rockies off the 22% at the Texan, which in each case was notably led by the transient segment.
Versus the second quarter of 2019, the Rockies transient ADR grew 46, 5% coupon.
<unk> 39, 9%, followed by often Atlanta, 37% and detection at 36, 5%.
Group ADR also performed well growing on average 11, 5% across the four hotels.
All four hotels delivered very good outside the room spend for groups in house with other revpar protected up nine 3%.
<unk>, 22.5% Rockies 26, 7% compared to the second quarter of 2019.
Popular and lives of leaders in other Revpar up one 2% as the mix shift from corporate to the association room nights led to more modest growth in outside the room spending.
In addition, Aqua line was the only property to experience a decline in attrition and cancellation revenue.
<unk> received several large cancellation fees in the second quarter of 2019 that were well above historic norms.
The combination of strong leisure ADR robust outside the room group revenue, including attrition and cancellation fees.
On top of our operational improvements delivered strong flow through on incremental revenue at the palms Rockies and Texan ranging from 49, 7% the palms to 65, 3% at the Texan when compared to 2019.
Op margin and flow through versus 2019 was challenged by the group mix and a decline in fee collections.
Finally, I want to comment on the national because what we saw in the financial performance. There was quite encouraging to US is the D. C market continues to recover.
When we look at this hotel's overall margins and flow through were clearly seeing the positive impacts of our capital investment and the operational improvements we have undertaken during its extended COVID-19 shutdown.
The national occupancy trailed the second quarter of 2019 by 17 points I would note that like off Atlanta Hotel faced a very tough 2019 comp of 81, 4% occupancy and despite this reduction in occupancy the national adjusted EBITDAR margin was only down 2% compared to the.
Same theory.
In fact, if you exclude the interest we receive on the Gaylord national bonds margins at the hotel level, where in fact comparable to 2019 levels down only 60 basis points, despite 17 fewer points of occupancy.
This tells us the new staffing model invest and investments we've made in fact, F&B concept and are beginning to pay dividends.
Specifically food and beverage was $2 $5 million lower than the second quarter of 2019 due to the reduced occupancy however, food and beverage profit was up $1 million.
This is really good news is valid it's much of the hard work that went into addressing the challenges with the national over the last two years.
In terms of what we're seeing in the labor market and staffing levels, we did see year over year wage rate inflation in the quarter and an average of 19% across the portfolio.
These increases have been offset by rate and pricing increases and improvements in hours per occupied room inefficiencies in our property leadership structure.
We feel comfortable with our current staffing levels relative to our targets.
As with our practice prior to the pandemic, where we have difficulty filling roles who rely on contract labor.
So overall, we feel good about our ability to continue to navigate any pressures in the labor market.
Remaining a preferred employer and creating a culture to retain the best people and by doing so deliver great value to our guests. So they return time and time again.
Now, let me turn it over to Jennifer to provide a balance sheet and liquidity update as well as our opinion.
Thank you Mark.
And second quarter. The company generated total revenue of $472 million and net income to common shareholders of $53 million or 91 cents per fully diluted share.
Company cars its acquisition of block 21 for $255 million in the quarter, including contract price adjustments and an assumption of 136 million that's the MBS that.
Subsequently, we received net proceeds of $296 million from the sale of 30% of operating entertainment great tariffs.
As well as the recapitalization of everyday with a new $300 million term loan.
We use these proceeds to retire our $300 million term loan a and.
And other borrowings under our corporate revolving credit facility.
This left the company with an Undrawn revolver.
[noise] undrawn $55 million revolver, and routine and $179 million in unrestricted cash at quarter end, our total liquidity of $934 million, excluding $10 million in lines of credit.
With total net debt of $2.68 million in trailing 12 months adjusted EBITDA Army $408 million. This puts our current net leverage at approximately $6 six time.
And based on the midpoint of our guidance range, which I'll cover in act, we would expect to end the year at approximately five times, which is close to the upper end of our preferred range.
Based on strong performance of our hotel portfolio in the second quarter and the items impacting our entertainment. Colin described we have revised our full year guidance and our outbound mountains, you mean third quarter guidance.
For this third quarter of 2022, we expect our hospitality business to deliver between $125 million to $130 million of adjusted EBITDA.
Consolidated company to produce 137.
Hundred and $46 million and adjusted EBITDA Army.
For the full year 2022, we expect our hospitality segment to deliver 475 million to $490 million of adjusted EBITDA already.
I would point out that this represents an increase of $32 million at the midpoint.
Compared to the $15 million I wish the second quarter exceeded our previous guidance.
And perhaps most notable at the mid point of $482 $5 million.
With our hospitality segment right at 2019 performance.
Which is remarkable when you recall with Congress to the first quarter and this year just a few months ago.
For the Entertainment segment, we expect full year adjusted EBITDA inclusive of block 21 to be in the range of $70 million to $80 million, which is a reduction of $8 million at the midpoint, reflecting the factors that Colin described earlier.
Lastly for our corporate segment, we expect a full year adjusted EBITDA loss to be in the range of $32 million to $33 million, Jeff at midpoint and $5 million more than our prior guidance.
This change is primarily due to the strong performance of our hotel segment, maybe you have to accrue for higher incentive compensation this year.
And that change on a consolidated basis it increased the midpoint of our full year adjusted EBITDA guidance by $19 million.
Range of $514 million to $538 million of close to $16 million above our consolidated 2019 results at the midpoint.
With that I'll turn it back over to Colin Thanks, Jim.
Kathy that's Casey sorry, let's open up the lines for questions. Please.
Thank you Sir at this time, if you would like to ask a question. Please press star one on your Touchtone phone.
You may remove yourself from the queue at any time by pressing the pound to you. Once again that is star one to ask a question, we'll pause for just a moment to allow questions to queue.
Thank you. Our first question will come from Dori Kesten with Wells Fargo. Your line is now open.
Hi, Thanks, Good morning, everyone I'm I have a few questions on the outlook how much is assumed in Q3 and four for cancellation and attrition fees.
Okay.
He's already as Patrick.
You know, we would expect to see a decline in the second half of the year and our attrition and cancellation fees, you know somewhere in the $10 million to $20 million range for the second half of the year is probably where we're going to end up.
Okay and was the reduction in your outlook.
Outlook was that solely due to.
The later than expected closing of block 21, Hum and stuff and plans that you had I guess, we're not able to put in place or was there anything else that was driving that.
Well the delay on block 21, and its integration is as a portion of that you know.
The business was re ramp from Covid, we've seen Oh.
Some impact from the tour and travel business as Colin mentioned, it's impacting you know.
The opry attendance as well as our daytime tour business IP offering the ryman.
You know Collin also mentioned in the script that.
You know availability novartis with the artists touring post pandemic that increased schedule has reduced availability.
For some of the a list artists at the Opry House.
And then you know we've seen.
Some softness, particularly in Orlando as it relates to our old Red there that old Red is located near the Convention Center.
Convention traffic there is running.
A bit below pre pandemic levels, so that combined with the.
The the tragedy that occurred.
One car and a few months ago as having some implications for for that location. Because we are located in icon park as well so.
So all of those are all those issues are really contributing to how we view the entertainment business further.
For the rest of the year I would say, though that.
That business has performed extremely well as Colin shared.
On the call through the first half and as you look at the second half if you look at the implied.
On our second half EBITDA growth versus 19 at the midpoint, we are projecting 55% growth over 2019 levels in terms of profitability for that business in the second half. So it's a it's a terrific.
That business is having a terrific year, yeah, and let me add to this mark the book.
We we try.
Always to be extremely transparent.
With you folks.
Analysts and investors and as you all know we went through this process last year, where we sat down with 10 interested companies that wanted to partner with us on this business and we felt they all wanted a plant to be built we built the plan based upon.
The way we for 2022.
Was was going to play out and what is basically happened is the only chrome wave that hit us in in in the middle of the Winter December January February .
Was not frankly, something but we we plan for them and they've had.
A marginal impact on consumer behavior. This is a timing issue. This is not a fundamental change of the business trajectory. This is a timing issue you know the processing business will be back they they they group large citywide convention business and the Orlando market will.
The back the artists that are out there that have been locked out for two years, you know those folks they're going to take a breather and come back to Nashville. The other part of all of this that I'd really love with all of these artists all over the country and internationally plane is that they are creating new fans that we can then turn around them.
Going back to Nashville. So this is a timing issue.
The fundamental change to our hotel business is is it's so exciting because what we've essentially done here is we have re rated the the hotel industry outside of the hotel business here over the last one to two years. This is why we are saying they believe in.
In leisure rate people are now prepared to pay.
Pay the rate that we are putting before them for the for the fabulous array of of.
Stuff that we put into our hotels and our group side is just getting stronger and stronger by the day and you know I had to lie group room night production was very healthy at about 110.110 million room nights produced some Patrick what was that right alongside them.
19 over 19, our July production was up about $58 or about 29, 8%. So so so you know the entertainment business. This issue is a timing issue.
And and block 21, we look really forward to you know getting the hotel read sitting down on and and planning the the the Moody theater renovation, but we will do this as a timing issue that we're very excited about the underlying trajectory of this company I know.
That was a long winded answer to a very short question, but I felt like I have to give it to you.
But that's fine.
Is that is it fair to say then just to summarize all of that that has compared to three months ago on your outlook for the hospitality business.
Next year I guess your internal outlook has improved and perhaps I'm not claiming outlook soon again.
Again for next year, not not 'twenty, two where there's perhaps finances.
I think you know I think our I view of the entertainment business next year hasn't changed hasn't changed for next year given some of this delay in the in the in the you know in the recovery I think our business next year is going to be.
Very good and you know what we're having many different discussions we have our friends from the terrorists here Wednesday evening, and Thursday, and you know we've built many interesting ideas on how to improve this business and grow it further so no I'm I'm pretty excited about it to 22.
And she's very.
Okay Yeah.
Thanks Dawn.
Thank you. Our next question will come from Smedes Rose with Citi. Your line is now open.
Hi, Thanks, I had a couple of questions. The first one maybe just kind of as we think about the outlook for the rest of the year can you just help us think about what sort of the effective tax rate would be at least relative to our forecast for taxes were a little higher in the quarter and just kind of trying to think about that going forward.
Hi, This is Jennifer.
But we didn't have a reconciliation.
For adjusted EBITDA in the supplemental schedules to our earnings release and that that change you align for kind of the.
Combined total tax provision for what we're projecting for the year just kind of a reconciliation for our full year guidance and as you noticed it sounds like that.
Yeah that number is a little bit higher than what we've typically seen in the past and I guess, one unfortunate byproduct of having a hard calculation. It takes a while and higher income taxes and all that kind of comes with that so.
The other thing that impacted that estimate is kind of a tie.
Timing in the rapid ramp of this recovery kind of limit your ability to maybe manage your taxes again within a particular given year, we have had a fair amount of Nols.
Years, and we've been steadily utilizing those in and then we'll start to wind down and that Unfortunately has meant as well with and we've created new and while there's been recent tax laws that have been enacted that huh.
Limit the amount that goes into it.
Now that doesn't mean that all else being created that you can apply in a given year, although they can carry forward and definitely now which is the upside to that so again, that's gotten a little bit of a timing issue there.
Well, so I'm a little bit of an anomaly in 'twenty 'twenty. Two we may continue in the future to me relative to historical periods, where we were able to utilize more of our NOL.
You know are higher than the pre pandemic level taxes, but I'm, probably a little more stabilized level than what you were saying what where taxes in 2022 in terms of tax cash taxes. So.
Okay I appreciate that and then Colin just wanted to ask you a big picture and you talked to this before and I know, it's probably a couple of years out, but with Chula Vista now breaking ground, you know and they've talked about the number of room nights. They expect to book and kind of our goals I'm. Just wondering do you all things equal would you.
You expect now for some of your groups, but you've talked about rotating through the Gaylord resorts.
Hard to see gap now or as they start to include in their lineup or do you think that's not necessarily something that would be kind of concerned about over the next couple of years.
Hey, Smedes this is Patrick.
No we do not expect to see any negative impact from Chula Vista quite the opposite if you recall, what we did with deal with Rockies. When we started the pre sales on that property.
We set a very aggressive acquisition target so to make sure that the new hotel is bringing in new groups that the brand had never been exposed to the second part of that is to make sure that the.
The existing groups that are already traveling through our hotels are simply adding to their rotation. So if we had a group that was hitting some of our east coast properties and we were missing out on the West coast rotation will now pick up their west coast rotation. So we've been very clear about where we are opening Rockies and his chula Vista prepares to start their sales effort to.
Get those aggressive acquisition targets out there and to monitor very closely to make sure that we are.
Having the sales of Chula Vista will be accretive to the brand overall and expanding the overall rotation of a particular group through the brand. So we definitely don't see that as a negative we think it is a plus for the entire brand long term.
Okay.
Okay. Thank you.
Yeah.
Thank you. Our next question will come from Patrick shelf lift Truest Securities. Your line is now open.
Hey, good morning, everyone.
Yeah.
My first question you had mentioned some some.
Sizable cancellations at the Opry land into two I'm just wondering what was driving that was there any common themes are behind that that was my first question. Thank you.
Yeah, just to clarify what was being spoken to is that we saw a cancellation collections declined versus the second quarter of 19 at opryland. So what really what was going on was an anomaly in the second quarter of 2019 at Opryland, where they had two very large groups canceled and we were able to collect on both of those.
And so it's sort of a high watermark in terms of collections in the second quarter at Gaylord Opryland. So we didn't see an increase in cancellations at opryland per se in the second quarter of 'twenty. Two we were just referencing why we saw a decline in collections 20.
<unk> 22 versus 2019.
Okay. Thank you.
I misheard you.
Thank you for the clarification.
And then my next question I'm, calling in and I'm pretty sure I know the answer to this but.
Hum.
So.
There there.
When we look at supply versus a prepped for various cities.
Nashville continues to lead the way you know historically supply you know because you have a differentiated product has not been an issue would you assume that.
That would be the case of the new supply coming in this year and next year.
Yeah.
As far as Nashville is concerned.
Yeah, Yeah that Nashville, when I look at the lodging econometrics that does have Nashville.
Fortunately the greatest amount of yeah.
Yeah, Yeah yeah.
You know Patrick.
Patrick we could spend 20 minutes talking about Nashville here I've got a meeting today lunch meeting with the head of the airport.
Because they just approved a new.
Our expansion of the airports coming on top of the one with like just they're just finishing up.
Million dollar expansion on the reason for it is Nashville does not have enough gates to accommodate the demand for flights coming into this town and and so the the issue of supply in this market. It's got to be addressed by what do you think is.
Happening on the demand side and what we're seeing is unprecedented demand right through this market.
And it is quite quite amazing you know that the demand for hotel rooms Airbnb.
In the city of Nashville.
And the reason for it is people are discovering this this product called music, but we have here.
All across the nation, you know I I'll give you an a silly example, hum golf books manager.
Randy Banana told me that that they have gotten back about a month and a half ago for an island tourism, where they launched.
Five concepts that they're not doing five concept since September and the Irish rugby football stadium in Dublin, and they sold 400000 tickets in the space of 6000 at the end of it. They had 80000 on the Whitelist. That's 12, 5% of the population of Ireland wanting to seek a brooks in Dublin.
And this is going on all across you know Europe all across this country. They the sauces set out in the communities you know doing what they do so well and people want to turnaround and come to Nashville, and this is the reason why frankly, Patrick you've seen some of the.
Enormous.
Our sales on a per room basis that we've seen in this market over the course of the last you know.
Three or four months hotels trading at somewhere between a half a million in you know almost a million dollars a key in Nashville, Tennessee, and and so am I concerned about you know another three or 4000 hotels rooms being built frankly at a.
You know 200 rooms here 300 rooms here am I concerned about that this is not going to touch the group business, but it's going to allow more accommodation of the leisure business and by the way when you look at all of the entertainment assets. We have in this town the more consumers come to Nashville, the better entertainment.
So it's kind of performed so it's a long winded answer of saying you know we love what's going on here.
And I would just put a fine point on it by saying a lot of our transient business is driven to enjoy our holiday programming and our summer Ah Waterpark and water features here at Opryland, and so there's a lot of local and regional business and so you know the the new supply that's key.
And then does not really give us a lot of concern because they do not have the type of programming or the type of attractions that we havent give or not Atlanta, but continues to drive that local and regional business and then to college point.
Very little of that group focused as far as the new supply that's mostly downtown located and so it really doesn't cause a great concern for us and that's starting to move out into the suburbs now because they see.
The extraordinary costs.
That is going on you know the real estate and so yeah, we're seeing hotels being built in greenhouse in Brentwood and it's it's it's just going to add to the you know to be a little of this town. So no. I think this is what is going on is good stuff.
Okay.
Thank you a very thorough answer.
Thanks, Thanks, Patrick good talking to you.
Your next question will come from Shaun Kelley with Bank of America. Your line is now open.
Hey, good morning, everyone.
Just wanted to ask about the demand outlook, specifically, you know what number of Colorado, which is the <unk>.
11, 5%, if I, if I caught it correctly for 'twenty 'twenty three group revenues on the books.
I just wanted to unpack that a little bit first yeah. Two parts first would be could you just talk a little bit about I believe that that's really revpar, but could you talk a little bit about what you're seeing on sort of the outside the room or the ancillary spending that kind of goes into the total revpar formula. What are you just seeing from groups in your mix between corporate and association. So how is that trending relative to the kind of on.
Underlying rate growth that you're seeing.
Yeah, Patrick can deal with that and then Pat you May also want to just remind everybody even though we're talking up 11% for next year are the 19 talk about what we think next year's Alicia right will be achieved.
Yeah, So let's take each one of those from an outside the room perspective, you know what.
On the books for next year is really just the food and beverage minimums. In addition to the rooms, but I'll tell you that the trends that we've seen in the second quarter and what we're anticipating for the remainder of here that gives us a lot of encouragement, we're seeing the group room contribution on the banquet side continuing to increase we're seeing numbers from a lot of groups.
If you went back to 19 or in some cases exceeding 2019.
And then as we continue to push pricing, we think that outside the room and we'll continue to see a real positive trend.
You know groups are definitely very quickly moving back to spending the same levels or more than they did previously with us back in 2019 pre pandemic from a mix perspective, we think 'twenty 'twenty three is going to be more favorable than 2022, we're continuing to watch that obviously, we have a lot to book here in the next six months and so we'll be watching that closely with our sales team.
But from a leisure perspective, the college point I would I guess I would note just what we did in the past seven days, our ADR on the leisure transient side was an all time high of $305 across the brand over the past seven days.
So we continue each week to see either as solid as the week prior or setting new records and so from a leisure perspective, we're very encouraged obviously it won't last forever, but we are making sure that we continue to make improvements and enhancements in the hotels. So that we're continuing to improve the value proposition long term, so that even as rates makes.
Start to slow from a growth perspective, we have reasons to to continue moving our pricing or at least hold.
Yeah.
Great Great color. Thanks for that Patrick and then just just as the follow up so for thinking about this level of demand.
Into next year can you help us think about the you know the cost environment. So Mark gave some are some detail on this in his prepared remarks, but just help us think about the bridge of sort of how much cumulative inflation, yeah, we should be thinking about so you know, it's a fancy way of saying our margins sustainable as we think about kind of the remaining two.
Two quarters this quarter and the remaining two quarters of this year heading into next or do we need to be thinking about pressures there as it relates to the to the inflation side as a partial offset to the growth that you're seeing on the topline.
Yeah.
So this is this is oh this is stuff that we spend a lot of time, a lot of time thinking about and suddenly in a hotel business, having very extensive discussions with our with our friends from Marriott.
We we took club.
And then and initiative.
Last year, basically with Marriott to say, we'd go to reengineer.
Organization of these massive hotels employ anywhere from you know.
So 150 to 1700, 50 people and we've been able to do that and and particularly on the on the on the labor side and Mark do you want to.
Talk a little bit about what we've been able to accomplish on the labor side and what we believe the impacts of that would be for next year.
Yeah, I mean, we as Colin said, we worked with Marriott to restructure leadership, which is really a supervisor.
And where we're currently tracking in the second quarter, our total leadership the head count across the portfolio.
Down a couple a couple of hundred about 15%.
So there's some efficiencies.
Created there it also creates opportunities for those leaders.
To have an increased span of control. So as you think about leaders growing their career and developing their skills and it creates a great Oh, we think a higher quality.
Leader, if they move up through the ranks so we have a decline in.
And management costs.
Look at the second quarter of our our hours per occupied room and it was down about 10%.
So we are seeing some more efficiency there and then as I mentioned in the remarks, our wage rate is up about 19%, but when you look at the wage margins in the second quarter. It actually improved 50 basis points. So you know all of these efficiencies coupled with.
You know some of the the pricing strength that we've seen him you know certainly we think that the.
The margins that we're seeing are sustainable and in fact, you know will expand as a group.
Through this year and next year.
Thank you very much.
Thank you.
Yeah.
Thank you. Our next question comes from Jay Kornreich with F. N B C. Your line is now open.
Hey, Thanks, good morning, congrats on the quarter.
So it's you know the leisure transient segment has clearly been quite strong for you with the record 80 ours goes talks about and perhaps you may want to retain a greater exposure to this segment going forward than the 28% of demand historically, but as we're facing some macro headwinds and fears of recession, which you gave some commentary on <unk>.
Trying to lean more into the Ctrip group bookings, which may be more sticky or is the thought to continue to push the leisure demand kind of as much as you can while you can.
Yes.
Another another very good question. Another question that we spend time thinking about so first of all on the group side.
When you think about this this this.
This core group of consumers that we really focus on which is a 600.
Plus at peak.
We have such a short small market share.
With these groups and if we can if we can if we can generate 80 to 100 of those groups per hotel per year.
These hotels run you know at about 80 points of occupancy and our goal is to absolutely generate that level of sustainable group demand into these hotels. That's why you know over over Covid. We have we have stuck with our friends at <unk>.
Our it and said we want to increase the quality and the quantity of group sales. Our bodies that are that are focused exclusively to apple to up to a particular brand and we found that and and that's one of the reasons Youre seeing production levels, where they are and we've also been you know.
Think looking after these hotels and the way we have the refurbishment of these hotels were able to get this jumping right than we've seen here over the last 12 to 12 to 24 months now on the other hand, the leisure side of the business, we'd become a lot more excited about because we are we.
Haven't been able to change the rate structure over the last 24 months, you know by about 50 to $60 per room. So.
And and we've also you know testing the thesis through.
Through a COVID-19 soundwaves and what that has done well and what the amount of rooms that is generated outside of the room spend so I will I will I will tell you. This that we we've spent a lot of time over the last few months thinking about the the next things that.
We do to stimulate the leisure side of this business because we're not we're not satisfied as a company running these hotels at 80 points of occupancy 75 to 80 points of occupancy we want to push that occupancy up and improve the profitability of these hotels. So I don't think you're going to see a major change.
<unk> in the percentage of leisure business that we're doing but I think he is going to continue to see us adding a minutes is opting rate improving profitability and I think we may put more resources to the group side, because our sense is the way we have treated.
The meeting planner through Covid, the meeting planning the meeting planning community likes what we were doing and so.
I know, that's a getting a long winded answer to a very it sounds a simple question, but it it's a very complex question.
And and I really do think that we can gain share in group, but I think at the same time by increase improving the amenities grow leisure room nights too.
I mean, when you look at the when you look at the second quarter, our mix was essentially 75% grew 25%.
Transient so it's it's it's pretty consistent with our historic mix.
When you look at transient room nights quarter over COVID-19 versus 22 were essentially flat. So it's you know we are.
The investments we are driving better rates on transit, but we're not we haven't.
Alright, Chris we've moved into transient drive to drive occupancy, it's really our business coming back to.
It's kind of post pandemic with pre pandemic war.
But we've been able to reprice a.
Repriced the business.
And I would say that for the full year just said further.
Expand to marks point, we would expect to be about 70 per cent grew 30% transient so to both their points. We're really just trying to grow the overall pie not shift the mix between the two segments.
We'll keep pushing on the living daylights out of a rate.
Thank you Ben that's that's all really helpful color and then I guess, just specifically on the Gaylord national.
Some commentary on that you know, it's been a bit of a laggard, but did have a nice pick up to about 64% occupancy in the second quarter. Just any thoughts you can provide in terms of how you see that trending in the second half of the year and into next year.
You won't take it yeah, yeah were real.
Really pleased with how you know national was close to an additional 16 to 18 months longer than the remainder of the brand and so a little bit more challenged as far as recovery in the D. C market has shown some some challenges in recovering, but we're very pleased with where it's heading obviously that a hotel realize a little bit more on the group side.
But what we've been able to accomplish during the shutdown period and since it's been reopened is to increase the flexibility and operations to refresh the product booking rooms, and food and beverage to upgrade the quality of our management team and to really re cast the culture. There. So we expect to see guillot national continuing to recover.
And I would say the 2023.
You know our expectations is it will be a very favorable year end that hotels should be catching back up to its a you know two.
2019 levels and potentially exceeding them similar to what the rest of the brands is done already this year.
Great. Okay. Thanks, so much for the time.
Thank you Katy.
We're almost at the top of the Yeah, maybe time for one more question.
If there is no.
Yes, Sir our last question will come from Bill Crow with Raymond James Your line is now open.
Hi, Good morning, I apologize I have a couple of questions feel free to give us short answers just clarification on the cancellation and attrition fees.
Are they recognize where they're actually paid or are they.
When it occurs in the actual quarter I'm trying to see what sort of lag, we're dealing with and kind of the anticipation for the third quarter.
Yeah, we we only recognize the revenue once it's actually received that may correspond to when the room.
Room nights were supposed to travel it may not but we only recognize the revenue once it's received.
So it's possible you could double book right you could double dip resell. The rooms is is there some of that that goes on.
Yeah. There is some groups include rebuilt clauses, so that if we do.
Book additional rooms or groups into the pattern that they've left open with their cancellation they get some credit for that some groups do not include that in their contract. So there are opportunities to potentially double dip at times.
No.
Patrick I'm going to stay with you.
Just help me understand whether.
Whether we should be really excited about the fact that the 601000 rooms that were booked in the second quarter is perfect and make the headlines 15% up from 19 sounds terrific, but if these rooms are all booked in.
For 2020 for 2025.
I don't know that that 15% keeps up with inflation, so help us understand about.
How we should feel about that number to that.
Yeah, that's a great question and the reality is we're not to the level that we need to be yet we are ramping the sales team is incentivize this year to start pushing group rate and they've started moving in that direction and we've seen great results, but to your point, we still have a ways to go. So if you think about it as a C 130 trying to get after.
Our runway.
We've got the mobilized we've got them focused they're getting great results, but there's still a lot of runway.
To get down before we get the plant fully up in the air. So we would expect to see group rate continue to grow and then we'll see whether or not we actually ended up in a better position, maybe if a recession does occur which is not a good thing, but it could slow down the inflationary environment and we ended up with a group rate much higher on the books than what actually.
You know materializes post recession.
It's important also to note, though that you know when you consider in the year for the group.
Transient business in outside the room spending the vast majority of our revenue is actually transacted in the year. So we do have the opportunity.
To move pricing in those areas and.
Combat inflation, if it continues to run at a high level.
Yeah, Yeah, no I appreciate that.
Colin maybe for you My last question just on the entertainment side.
You know tours are normalizing I guess I don't remember in all the years that we've we've covered you you've talked about Turing impacting your ticket sales that are the operator and I'm. Just this is something new at least that I am hearing them and I'm just curious whether there's maybe.
Somebody.
Downtown the options with that all sounds impacting demand.
Yeah. So.
What happens in a non pandemic environment is that you know office, we'll do the Big office will do you know a stadium to every other year.
The not so big artists will do a arena too.
Every other year and that's just the way the cycle works and so this theres always you know a few losses that are not out on the road. What has happened here is nobody's spin out on the road for US two years and so everybody now is out on the road I mean, that's just what is going on here.
And and and and it's just it's just it's just a little bit more of a challenge and but you know it's not it's not something that is going to be with us for a long time I mean, it just isn't yeah. They.
The only thing I would add to it as you know the hotel is seeing the same thing we have a lot of tour and travel business comes through in the fourth quarter that comes to see both the operating as well as the holiday programming that the hotel is a little bit older demographic.
And so they're they've been a little bit more hesitant to get back out on the road and travel around you know these are the buses that have a little bit older demographic on them and so we expect to see them come back, but it'll probably be 2023 before that segment fully recovers. So we've seen it consistently both at the hotel as well it would seem that the operator somebody of these bus operators and I have a terrible.
Time sort of the kind of dynamic I mean, you know these older Fabs are not out driving around America is just it's just it's in the process of recovery and but look the pointed them out my table.
And in his in his comments a few minutes ago.
Businesses are.
Tremendously over pre pandemic levels and this business is going to be really good next year and really good the year after and we just got a little bit of a timing issue around the edges. It's the opposite of what's going on in that hotel business.
Okay. Thank you.
Thank you Sir.
I understand we got one more question.
Yeah.
Hi, I'm, sorry question will be from Chris Morocco with Scotiabank. Your line is now open.
Oh, Hey, guys I really appreciate you squeezing me at the end there.
Caller. Your this is more of a.
That's a hypothetical question I mean, we.
Two years ago, we were thinking about what group business is going to look like in the future and you know here we are getting good rates, but the question is how has behavior groups. If you see a changed at all maybe it's a geographic question, maybe it's a type of group kind of question, but are you seeing any changes.
They want to utilize that.
Group meeting space.
The answer to the question is are the.
That there there are so many groups that absolutely want to get back to meeting people have recognized that being locked up in a basement is not ideal for long term health and viability of businesses.
And and we're seeing a lot of a lot of groups wanting to wanting to me you know and that's this just this is what we've done on Patrick We you were at a big sales.
South meeting a couple of weeks ago, you wanted just yeah.
Yeah, absolutely Krishna.
Correct.
Talk to you I will tell you we've talked about meeting planners. Our sales team has talked a lot of folks in fact, theres a huge event going on here in Nashville, right now with FEMA 2022 and.
There's been a very consistent message back from meeting planners and that is yes. We understand there are recessionary fears we understand the volatility that we've seen in the second quarter.
But until that materializes and we absolutely have to take different actions, we're going to continue to meet because we are way way behind and backlog and getting our groups together and it is hurting our businesses and so we've got to get folks face to face again, and I would tell you I mean, it kind of proves itself out and what we saw in the second quarter and you think about the.
Out of volatility in the market the amount of uncertainty and economic theories out there in the second quarter and yet our groups picked up much better than we were expecting and what we'd wash them down too. So they materialized in greater numbers, they materialize with better outside the room spend than we anticipated even in the midst of all the volatility and uncertainty.
What's going on in the second quarter, so what they're saying to US is very clear we're going to continue moving forward and trying to cut down on that backlog of meetings and if we have to take action, we'll take it at the appropriate time, but I think one of the messages I've heard over and over again as we've seen the value of meeting face to face and we need to make sure that that doesn't disappear from our horizon.
At any point in the future.
Yeah.
Okay. That's very helpful. Appreciate the I appreciate the details guys. Thanks again.
Thank you Alright, I think Katie went down appreciate everyone being on the call. This morning. If you have any follow up questions. You know how to get hold of US appreciate everything. Thank you have a good day.
Okay.
Ladies and gentlemen. This concludes today's event you may now disconnect.
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