Ryman Hospitality Properties : Q4 2020 Ryman Hospitality Properties Inc Earnings Conference Call Transcript

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EDITED TRANSCRIPT

RHP.N - Q4 2020 Ryman Hospitality Properties Inc Earnings Call

EVENT DATE/TIME: FEBRUARY 26, 2021 / 3:00PM GMT

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CORPORATE PARTICIPANTS

Colin V. Reed Ryman Hospitality Properties, Inc. - Chairman & CEO Mark Fioravanti Ryman Hospitality Properties, Inc. - President & CFO Patrick Chaffin Ryman Hospitality Properties, Inc. - Executive VP & COO

Scott Bailey Ryman Hospitality Properties, Inc. - President Opry Entertainment Group

CONFERENCE CALL PARTICIPANTS

Chris Jon Woronka Deutsche Bank AG, Research Division - Research Analyst Dori Lynn Kesten Wells Fargo Securities, LLC, Research Division - Senior Analyst Shaun Clisby Kelley BofA Securities, Research Division - MD

Smedes Rose Citigroup Inc., Research Division - Director & Senior Analyst

William Andrew Crow Raymond James & Associates, Inc., Research Division - Analyst

PRESENTATION

Operator

Welcome to Ryman Hospitality Properties Fourth Quarter 2020 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. Mark Fioravanti, President and Chief Financial Officer; Mr. Patrick Chaffin, Chief Operating Officer; and Mr. Scott Bailey, President, Opry Entertainment Group.

This call will be available for digital replay. The number is [phone], and the conference ID number is 7189891. (Operator Instructions)

It is now my pleasure to turn the floor over to Mr. Mark Fioravanti. Sir, you may begin.

Mark Fioravanti - Ryman Hospitality Properties, Inc. - President & CFO

Thank you, Maria. Good morning, everyone. Thanks for joining us today. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 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 the exhibit to our -- to today's release.

And I'll now turn the call over to Colin.

Colin V. Reed - Ryman Hospitality Properties, Inc. - Chairman & CEO

Thank you, Mark, and good morning, everyone. Before I begin, I want to express my own and our company's deep sorrow at the passing of our friend, Arne Sorenson. Arne was a magnificent CEO and a great man, and I was honored to get to know him beginning at the time of our reconversion. Through that transition and the years that followed, we got to know each other pretty well, and I had tremendous respect for Arne. My thoughts are with Arne's family at this time, and he will be sorely missed by myself, my team and the entire lodging industry.

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When we spoke back on November 3, I must have qualified my remarks at least half a dozen times with something to the effect of when we have a vaccine. At that time, I was confident that we would see a vaccine announced either by the end of 2020 or perhaps early this year. It turned out to be less than a week later on November 9 when the vaccine data from Pfizer was published, and that was quickly followed by more positive news from another manufacturer. Today, we have 2 FDA-approved vaccines in distribution, and it looks like there'll be others in the pipeline. This is tremendous news for our world, our country and, of course, our industry.

Now as we turn our attention to the progress of distribution rather than discovery, I believe the anticipation amongst Ryman and the Marriott teams and amongst our customers and meeting planners is truly palpable. I've been in the hospitality business for over 40 years, and I've seen a lot of cycles, several national and global crises and many other ups and downs, but I've never seen a situation like this. If you go around and talk to people from all walks of life and all occupations, young and old, they've all been to one degree or another lockdown, cooped up or otherwise have had their normal way of life disrupted for almost a full year now. And I'm not just talking about here in the United States, but across the world.

This situation we're in at the moment is nothing like the financial crisis of '09 or any other previous recession or crises. Back in 2009, we didn't have millions of people at home looking out of the window wondering whether they were going to go on vacation again or when they could attend a conference and see their colleagues again and when would they be able to see their children compete in their favorite dance or sporting competition. And while a handful of industries related to travel or restaurant have certainly been hit quite hard over these past 12 months, so many other aspects of our economy have continued to thrive, which is also very unlike 2009. As such, conditions are ripe for very healthy recovery.

It is our belief that we'll begin to see these first cracks in the ice in the coming weeks and months. That is because every day in this country, we're now administering about 1.8 million vaccine doses. As of February '21, over 63 million doses have been administered here in the United States and almost 19 million individuals have received their full 2-dose regime. It has been projected that sometime in April, at least 1 vaccine will be available to everyone, regardless of age or health categories by that time. If this progress continues and if the COVID-19 case numbers continue to fall, as they have since the 7-day average peaked back on January 11, then I believe that pent-up demand will begin to surge. And let me assure you, our company will be ready.

But first, let me talk about some of what we've achieved in the fourth quarter and what we've learnt about our business from this period, which we will apply going forward. And then I'll review how we are positioned for the rest of the year and beyond and, finally, share some of the encouraging data we've seen more recently for the month of January.

We are very pleased with how our fourth quarter went for us. We came into the quarter thinking that with group travel still largely suspended and the National closed, we might burn somewhere between $22 million and $24 million of cash per month on a consolidated basis. Remember, this was at the time that COVID-19 was surging again and many communities were thinking about further lockdowns. Therefore, we focused our efforts intensely on what we have always done well in the fourth quarter, and that is, driving leisure transient with our seasonal programming at the core of this strategy.

If you're skeptical of what I've just said earlier about pent-up demand and specifically about families looking to get out and experience some normalcy again, just look at the 1 million-plus tickets we sold across our holiday programs in our 4 hotels in the fourth quarter. We achieved 24.5% occupancy in the fourth fourth quarter across our opened hotels, which excludes National. Now that sounds low for your average hotel, but when you are talking about hotels of 1,800 to 2,800 rooms at a Gaylord hotel designed primarily for groups, that is quite a few leisure customers. And while leisure was the lion's share of the fourth quarter room nights at 88% of rooms sold, we also sold over 17,000 group room nights in the quarter as well.

We paired this transient influx with extremely careful expense control as we rethink many of our processes and operating models and run leaner, more efficiently and with better utilization of technology. We also collected $16 million of cancellation fees in the quarter as part of our broader strategy around rebookings. The net result was our hotel segment came in profitable, posting a positive $1.8 million of adjusted EBITDA, and that's including the losses of the shutdown Gaylord National.

This was a substantial sequential improvement from the adjusted EBITDA loss of $23.6 million the hotel segment suffered in the third quarter. Opryland, Texan and Palms all contributed positive adjusted EBITDAre reflective of their location in more open markets, while the Rockies was a

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slightly negative contributor. Colorado has been one of the states to reopen at a more judicious pace, but we're optimistic and working closely with government and health authorities there to demonstrate our safe operating capabilities. Gaylord National remains closed, but we have had some productive conversations over the past few months with our union at this hotel. And together, we've agreed upon a number of modifications to how that hotel operates particularly around our F&B outlets. These changes will position National for a long-term success post COVID-19, and we currently anticipate reopening it sometime near the middle of this year.

Altogether, this performance was quite a feat for our hospitality segment, and I'd like to commend our team here and all the STARS in our hotels for the job they did under such unusual circumstances, which was so unlike any previous Gaylord holiday season.

And our Entertainment business also picked up additional steam in the fourth quarter. Our physical venues continued to optimize for state and local capacity constraints, with the Ryman and the Opry hosting shows at 25% seating capacity and our Ole Red locations operating at about 50%. Despite this, revenues for the segment were up over 17% sequentially from the third quarter. We cut our segment adjusted EBITDA loss 33% to a loss of $4.3 million. Together, these improvements cut our consolidated adjusted EBITDAre loss in the fourth quarter by over $28 million or 80% sequentially from the third quarter to only $6.6 million. This reduced our monthly cash burn as a company after including cash interest expense to $12 million per month compared to that initial expectation of $22 million to $24 million as we entered the month. So we were pleased with how all of our assets performed. And while we would expect the seasonal benefits of the holidays to be less strong in the first quarter, we think this enthusiasm from our leisure hotel customers and from our country lifestyle fans in our Entertainment business are powerful indicators of that pent-up demand that I think we sense all around us.

Now let's bring forward to the future and what we see unfolding for our company given that we're on the cusp of this national vaccination effort. Back in November before the vaccine effectiveness became news, we hosted a gathering at the Gaylord Texan of a group called Meeting Planners International. Some of you may know them as MPI, one of the professional associations for folks in our industry. Now while they were on property in Dallas, we surveyed these attendees on a range of topics around COVID-19 and its impact on the meetings business. The key question that we asked was assuming a vaccine is widely distributed by the end of the first quarter of '21, how would your client organization feel comfortable about resuming in-person meetings? And over 75% of the answers were sometime before the fourth quarter of 2021. That data from meeting planners substantiates the mood I described earlier about eagerness of people, companies and associations to begin meeting again. If you want more data, look at our existing book of business.

At the last count, as of February '21, while we have seen about 2.5 million room nights canceled since March of 2020, the start of the pandemic, over 59% of those have been rebooked with us for later dates. This exceeds even our most ambitious rebooking goal of 50%, which we set at the beginning of the pandemic. And thus far, the majority of cancellations have been heavily concentrated, of course, into 2020 and then into the first half of '21. As of December 31, 2020, for example, we came into this year still having 28% group occupancy on the books weighted mostly to the third and fourth quarter coming up. Now that's obviously well below where we usually start a new year, which would typically be around 50%, but it is still a substantial volume of business certainly for the back half of this year. And when you break it down by quarter, we started this year with 43 points and 33 points of occupancy for the third and fourth quarters, respectively, compared to 52 and 43 at the same time last year. In short, we started this year off-pace by only 9 points of occupancy for the third quarter and 10 points of occupancy in the fourth quarter.

If our company -- if our country can reach its ambition -- ambitious vaccination goals by April, as I outlined, then this implies a potential for a decent second half but more importantly is the longer-term picture. Once you look past this year and peek into '22, for example, our future book looks nearly identical to prior years. At the end of 2020, we had virtually the same group occupancy on the books for '22 as we did a year ago for '21. Those numbers are 40.9 now compared to 41.3 last year. And the trend looks similar down the line until 2025, where we have slightly more occupancy on the books now than we did a year ago for '24, and that's, of course, partly due to some of these rebookings that we have been undertaking.

And that's just the occupancy points. When you look at the ADR for these on the books, group room nights for each of the next several years, we see consistent growth in every year.

To summarize the data, the cancellation horizon remains not too distant. And beyond that horizon, things continue to look pretty healthy. We don't see customers shifting their long-term preferences away from in-person meetings. Our lead volumes are, of course, down significantly from a year ago, but our expectation is that we will, once again, see lead volumes pick up for new bookings as the vaccine is more widely distributed.

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