Okay, thanks. Welcome to Citi's 2024 Global Property CEO Conference. I'm Smedes Rose of Citi Research. We're pleased to have with us Mark Fioravanti and Colin Reed from Ryman Hospitality. This session is for Citi clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast and at the AV desk. For those of you in the room or on the webcast, you can go to liveqa.com, enter code GPC24 to submit any questions, or you can just raise your hand, and we have lots of mics here in the room. So, Mark and Colin, I'm going to turn it over to you. Mark, maybe you just want to introduce the company a little bit and provide any kind of opening remarks that you have.
And then I think what we're really interested in is hearing two or three top reasons why you think investors should buy the stock today, and then we'll get into some Q&A. And as always, thank you for being here.
Great. Thanks, Smedes, for having us today. So, Ryman Hospitality Properties, we are a hospitality REIT. We're focused on the large group segment. We're about a $10.5 billion TEV company. As I said, about 70% of our business is group. Most of that is large group. The remaining portion of our business is primarily leisure transient business. We have a very unique operating model relative to our peers in that we have six really purpose-built group hotels. They're large in scale, a significant amount of meeting space, over 250 sq ft per room. And they're operated as a portfolio with a single manager, which is Marriott. And what that allows us to do is to attract, retain, and rotate large group customers. And that large group business has a number of unique attributes that we think are extremely valuable.
First, we have an average booking window of approximately three years. We have very good visibility into our business. We enter a year typically with about 50 points of occupancy on the books. When you look at our aggregate business on the books currently, we have about $1.9 billion on the books for all future years because these bookings are contractual in nature. We have the ability to collect attrition and cancellation fees in the event that a group has to cancel their meeting. During the pandemic, we captured about $181 million in fees. That adds some stability to our profitability. Then the retention component of this, about 50% of our revenue is recurring revenue in that that revenue is generated by groups who have had business with us in the last two years.
Stability, visibility, and then recurring revenue are three factors that we think are extremely important and ultimately allow us to generate sector-leading financial results, whether that's at the property level in terms of total RevPAR per room or EBITDA per room. We generate a significant premium to our peer set. We covered this in our recent investor day, but we have a sustainable organic growth path through reinvestment. We'll invest approximately $1 billion over the next four years into our existing properties in both enhancements and expansions. Most of that investment will come through our balance sheet. We have the ability to generate the free cash flow to drive that investment without having to go to the capital markets.
Then in addition to our hotel business, I'll just close it out by saying we have a very unique growing entertainment business that's focused on country music and the country lifestyle consumer. And ultimately, we can create some value there through separation of that business. In terms of the top three reasons, I think, to own the company, one, the unique focus that we have and the visibility and stability that it creates. Two, the meaningful organic growth. And then third, and probably most importantly, I would say that it's the management team. We have an incredible management team with a track record of delivering superior returns. If you look over the last 20 years, we've built this brand and this portfolio, ultimately selling the management to Marriott. We've been proven capital allocators. And the result of that has been we've had leading shareholder returns.
If you look at our total shareholder return over the last three years, five years, 10 years, we're, I think, have the highest return of anyone else in our sector.
Okay. Yeah, that's great. Thank you. So let's talk about some of those things a little bit more. I mean, you mentioned so 70% group. I think everybody knows you focus on group. But just kind of breaking out a little bit on kind of the group components, could you maybe speak to, of the 70% group, how much is driven by corporate business and maybe how much is by what in the industry world of SMERF, so social, military, education, religious, fraternal, etc., and kind of maybe help us get our arms around that a little bit?
Yeah, we're about 45% or so corporate, about 40% association, the remainder SMERF. That's the group side of the business. And then, as I said before, about 30% transient business, leisure transient.
Yeah. And then so you also talked at your investor day about really highlighting the pricing opportunity in your group business over the coming year. So could you maybe speak to how are you executing on that and maybe where do you see the most, I guess, sort of pricing power? Is it more with corporates? Is it with associations? Is it with SMERF? Maybe just kind of talk about where the opportunity is to continue to increase pricing.
Yeah, the pricing opportunity is really across the group. And the outcome of that pricing will be a remix of corporate and association and SMERF as we move that price up. But it's more than just a pricing exercise or a pricing strategy. If you look over the last five years and if you look at what we're proposing to do for the next four years, it's really about investing capital into these hotels to change the value proposition and to continue to elevate the brand and the services and the product that we offer to consumers, right, increasing that price-value opportunity. And that's really how consumers look at this. They look at what's the value they're getting for the price. So it's not simply a pricing exercise. It's really about delivering more to the consumer at a higher price point.
Yeah. I mean, and you guys have done a little bit of that. You added rooms at the Palms. You added the SoundWaves feature, I think, in Nashville. And the returns have been really solid on those investments. Can you talk about the returns you're forecasting for the $1 billion of investment? And then maybe we can just talk a little bit more about what you're doing near term. I think you're doing about $400 million of investing this year. And there's some disruption associated with that. But maybe just help kind of break out kind of the overall returns and maybe specifically what's underway for this year.
Yeah. So when we underwrite these projects, typically in the mid to high teens, unlevered. And that's been our experience with these projects, whether they're rooms expansions, whether they're incremental meeting space, breakout space, food and beverage reconcepting, etc. In terms of what is ongoing currently, we're doing a considerable amount of work right now at the Gaylord Rockies. We'll open a 25,000 sq ft meetings pavilion there, adding some incremental meeting space. We're also reconcepting the Grand Lodge, which is the big center atrium in that hotel. The way it was originally constructed, it was primarily theming. It was a lake and a caboose and some plant material. It is the highest value real estate in that hotel, and it was not sellable.
So what we're doing is that we're creating a number of opportunities there from a food and beverage perspective to create buyouts and to monetize that space going forward, in addition to adding incremental seats to the existing food and beverage outlets as well as adding a new food and beverage outlet there. Having that additional capacity will allow us then ultimately to expand the hotel and have the food and beverage capacity necessary to service those guests.
What's the investment there at the Rockies?
The Grand Lodge is about $45 million, I believe. I think we've got another $25 million or $30 million in the incremental meeting space.
Okay. Great. Quick advertisement. We're doing a field trip to Denver in May, which will include the Gaylord Rockies. So if anyone wants to come and see what's going on, definitely sign up. We appreciate your guys including that property on that tour. I guess I wanted to just ask you, I mean, with the lodging space in general, there's always a huge focus on the broader U.S. macroeconomy. Seems like we're not heading into the recession that maybe was feared a year ago. But we'll see. I guess the jury's still out. But maybe you could just speak a little bit to kind of are you seeing any cracks in demand or concerns from some of your larger customers who are maybe pausing or just kind of any thoughts around sort of the tenor of your conversations with people who are making bookings?
I'll take a breath. Go ahead.
You're getting tired. So first of all, as a company across our businesses, we're not seeing any "cracks in the economy." Things look pretty good. We monitor this stuff basically every week. There are indicators to us in terms of around group, for instance, lead volumes, how to lead volumes, the inbound inquiries we're getting from our customers. Over the course, you heard us talk about this in the Investor Day. Over the course of the last 12 months, we've consistently seen lead volumes go up. This is one of the reasons why we're very comfortable about deploying $1 billion plus in these projects because what we're about, going back to something Mark talked about, is the creation of value. If you think about this conference that we're all at here, we're here for three days locked away.
We look at the price, $300, whatever you're paying for a room. But when you think about your experience in a building like this, you probably have, I don't know, 40, 60 interactions with folks around here. You line up trying to get a lunch. You line up trying to get an elevator. You have bellman that may take you to your room. You're having many, many different experiences. And how well the hotel does that, in your minds, creates this notion of the value that this organization is bringing to you. And what we've been about as a company over the last decade is building this sustainable value in the minds of the customer that leads us to the retention of the customer, that leads us to the ability to expand our product, that we retain more customers as lead volumes go up.
That is what has been going on with our organization over this last decade. That is why, as Mark said in his opening remarks, we have had, when you look at our total shareholder returns in the sector that we're in, we're one, one, one, and one, whether you look at us on a one-year, three-year, five-year, 10-year basis. It's because this is not just about physical product. It's about the overall service levels that you're delivering to the customer. So if you go back to 2009, the industry went off massively. Back in 2009, the hospitality industry was off anywhere from 15%-20% in revenue depending upon where you did business and anywhere from 30%-40% in profitability. Our business was off 9% and 10%. It's simply because so much of our business is booked years in advance
And so no, we're not seeing any cracks in the economy. When you look at the business that we have on the books for this year, business we have on the books for next year, it is up compared to the same time last year, T+1, T+2. So we're in pretty good shape. And this is why we are going to embark on deploying a fairly large chunk of capital that would deliver very high rates of return. And that's the thesis of our organization.
Okay. I mean, I guess one thing I wanted to ask you a little bit more about. So you've had the JW Marriott now in the portfolio purchased from Blackstone. And you've talked about probably investing a little bit more in that and making it more like sort of you're Ryman-izing it, I guess, if you will. And we talked a little bit about this at the investor day. But that hotel right now does not have kind of the favorable local tax breaks that you have on the rest of your portfolio. So is it just inherently a lower margin investment? Or to make incremental investment, would you try to work with the local authorities to bring tax incentive financing, I guess, to that property? And how difficult is that in today's environment?
Well, from an incentive perspective, I mean, typically when you see tax incentives for economic growth, right, it's typically associated with a downturn in the economy. If you look back at the various projects that we've undertaken over the last 20 years, right, it's finding that opportunity where a community's looking for incremental economic development and really using our hotels as a catalyst for growth. And if you look at National Harbor or if you look at what's happened in the Dallas market, you see that surrounding growth occurring. As it relates to the Hill Country, we haven't had conversations locally as it regards to tax incentives. We're just now starting to think about what the long-term growth opportunity is there. We've really been focused on kind of the nearer-term opportunities to bring that asset into our portfolio. We purchased that at about 12x.
If you look at 2024 at the midpoint, it would be a little under 12, maybe like 11.8x this year's EBITDA. But the work that we're doing, not only in terms of bringing it into the portfolio, but some of the enhancements that we're talking about making will ultimately essentially buy that multiple down, much like you saw if you look at what's happened in Texas over the last 14 years as we've expanded that hotel, that multiple was around 6x is our investment in that. So it's not necessarily that we have to have an incentive from a public incentive through high-return investments in utilizing the existing infrastructure that's there. We can essentially create really favorable returns for shareholders by using that existing facility and, again, buying that multiple down. And when we think about assets as potential acquisition opportunities, that's ultimately what we're looking for.
Where can we create value based on what we do in the group space as opposed to just buying something and operating it as is? If it's a hotel that doesn't have that growth potential, that opportunity, then it's probably not the right opportunity for us.
Group, in general, has been kind of a silver lining for the industry. I would say that and the fact that there's very little kind of meaningful supply growth, particularly for larger full-service or group assets. Maybe you could speak to what you're seeing on kind of sizable group assets under construction. Just in general, I don't know if you can share stats or if this is something that you're able to track. But I mean, are you benefiting just from the fact that group sort of seems to have found a new kind of resurgence with corporate America working from home and that kind of thing and associations coming back? Or are you sort of taking share from maybe higher-cost cities, potentially lower quality of lots of quality of life issues that are kind of playing in some centers?
Maybe just give us a sense of how you guys have maybe benefited from those things.
So let's put this into perspective. There is this general desire, I think, by folks who follow our industry that they like to homogenize group. They think group is vanilla. It all looks the same. It doesn't. This work-from-home phenomenon, we sort of think about it as a business that is very much in group as sort of a non-event around the edges. We are focused very clearly on a particular group of customers. That is these large 600 people plus that rotate from market to market year by year. That is who we really focus our efforts against. We need 80-100 of those groups a year in each hotel. When we have that, life is perfect. We run 75-80 points of occupancy with very high rates of return. The group industry right now looks very favorable.
A lot of organizations have come out of COVID saying, "Wouldn't it be nice for us to bring our people together and celebrate and talk culture and talk strategy?" And there's a little bit of benefit, a little bit of tailwinds that are occurring from that phenomenon. But our business is very different. We focus on this core group of consumers that rotate from market to market year by year. The other point, if I could come back to the San Antonio, reason we did San Antonio, the other part of all of this is the importation and exportation of customers. When you're in a market like San Antonio, which is a world-class convention resort market, this hotel is probably the best hotel in that market. Yes, it only has 1,000 rooms. Yes, we have a desire to move it to 1,300-1,500 rooms and more convention space.
But we have the ability, because we run our hotel business as a system, to import customers into that hotel, thus improving the underlying economics of that hotel, but also exporting customers from that hotel into our existing system. And so the value creation here is not just going and buying a hotel for a 12x multiple and hope like hell the market improves and the business is going to generate a reasonable return over a 10-year period. There is a strategy here to fundamentally change the to bring more customers into this hotel and to export the customers this hotel gets into our existing portfolio.
So let me ask you this. So you said 80-100 groups per year, average size is 600. So with San Antonio and then Chula Vista, which I know is not part of your ownership structure, but it is part of the Gaylord system or will be, do you have confidence that, I guess, those properties will generate, I guess, between them 180 new groups of 600 or more that will kind of support the system versus cannibalizing your existing system?
Yeah. This means there's 24,000 of those groups in the country, 24,000. Our relative share of this is like 2%, 3%. So the groups exist. It's just that we don't have the distribution or the room accommodation to accommodate these folks.
60% of the JW's business today is group. They're already generating group demand. We're not starting from zero there.
Right. So you have some that you can migrate into the broader system, and then you'll bring new groups in.
Yeah. And by the way, the ownership group of Chula Vista, the same partners we had in Denver, as you well know, and Mark and I have a particularly close relationship with these folks. And we have a good sense of what is going on booking-wise and how many of those bookings are new to the Gaylord system. And the numbers are very, very significant. I'm not privileged to talk about the exact numbers, but the numbers of new customers that that hotel is seeing outside of the system is material. And that's good stuff because we can then pick those customers up. If Aaron and his team and Marriott do a really good job, we can pick them up and then rotate them into our existing system.
Yeah. I know you can't share specifics, but you feel optimistic around the booking pattern for Chula Vista. Do you know more or less when it's going to open?
2026.
I think they've pulled it late next year. I think they've pulled it to the fall of 2025.
2025?
Yeah.
Oh, wow. Good.
Maybe late next year. Okay. Longer term, I mean, you've been asked this a lot, but I don't know if you have any updated thoughts. I mean, would you have any interest in participating economically in that asset?
We'll see.
Okay.
I mean, look, we like the market. We did the original deal there, found the location, and negotiated, excuse me, I'm joking. I mean, incentive package 15 years ago.
Yeah. I know. But at the end of the day, this is all about economics. If we have a choice of investing $100 million in a project that's going to generate for our shareholders a 10% rate of return versus a 16% rate of return, it's a no-brainer. The reason we're investing where we're investing is because we have a high degree of comfort that the returns are going to be way above our weighted cost of capital. And again, I hate to sound arrogant, but this is one of the reasons why we've outperformed this sector hands down over the last decade, pick it.
One of the things I was curious about, coming out of the pandemic, there was lots of discussion around higher construction costs. It's one reason why we've seen a decline in the hotel supply, I think, is costs are high, land costs are high. But putting aside land costs, what would it cost to build on a per-key basis a hotel, the kind of scope and size of one of yours, just roughly?
It would be an excess, I would say, of $1 million a key. I mean, and that really gets back to, I guess, your question on the JW. When you think about that's a 1,002-room hotel. We paid $800 million for it. So like $780 a key. You couldn't build that hotel for $780 a key. It's got two championship golf courses, nine acres of pool complex, 1,002 rooms, 250,000 sq ft of meeting space. And so to a certain extent, I guess, it just means that's your when you think about your subsidy, that's your subsidy is kind of where we bought that versus where your replacement costs would be.
Yeah. That suggests there probably won't be a lot of building in that space for some time besides a couple of the bigger ones that we already know about. But maybe we can switch for a moment just to the entertainment side of the business. As a background, I mean, you sold a minority interest, I think, about 17x EBITDA. I know in our approach to the company, we value that piece at 17x. And then we kind of back out and see what sort of the hotel piece of the business is trading at. And the multiple looks much more reasonable, frankly, if you look at just the hotel piece in isolation. But can you talk about any kind of timeline to separate the business? How's the relationship with Atairos and NBCUniversal? Yeah. And I'll stop there. And I've had a couple more questions on that.
But always good to get an update on that.
If I'm not mistaken, you asked this question at our investor day a couple of months ago. But the answer is going to be pretty much the same. We're on a very good glide slope, I think. We've seen very good EBITDA growth over the last 2-3 years. We expect to see very good EBITDA growth over the next 2-3 years. We've got a lot of really good things happening. In terms of monetizing the business, we've already really started that with this sale of 30% to Atairos, which is the money behind Comcast NBCUniversal.
Mark's and my view about the timing of this separation is probably something that we would look at more so towards the end of next year, early into 2026, simply because of all of the projects that we're working on, projects that we've talked about publicly and some that we haven't talked about publicly. We've restacked the management of this business over the course of the last 12 months. It's on a very good trajectory. It's a very exciting business, quite frankly.
Relationship with Atairos and NBC is very good. We launched the People's Choice Country Awards last year as well as an Opry Christmas special with NBC. Both of those were renewed and will happen again later this year. Later this month, we'll start a 16-week run of the Opry on Sky Arts in Northern Europe. So we'll be testing that with NBC to see how it performs. That's a very strong country music market. There's not a lot of country music content on in that market. So we're really excited to see how that performs in the U.K. And as you may know, we have direct flights on British Airways from the U.K. to Nashville. So we think that bodes well for tourism as well.
Do they have a window coming up where they can increase their ownership percentage if they're optioned, or?
They do. They have a window at the end of this year and at the end of next year. They can buy a total of an additional 19%.
19%?
Yeah, to 49% total.
Maybe just some Ole Red and Las Vegas opened fairly recently. How's that trending? I know we saw pictures on Twitter or X of lines outside for people trying to get in. But how's it fitting into the overall market? Are you happy with what you're seeing?
I wish it was twice the size.
Okay. What was the investment? How are you thinking about the returns?
Well, we opened. It's very interesting. We've staggered, essentially, the physical opening of this because we didn't want to stress the kitchen area of this business. So we've had the third floor sort of semi-shut down. And then the roof, it's been colder than hell in Las Vegas over the last not this last week. It's been really good this last week. But having said all of that, we've been averaging about $100,000 a day in revenue in this facility, which is above our pro formas. And we're very excited about it. We're doing a grand opening in the middle of April where Blake is going to come in for two nights and play. And I'm sure we're going to be in on day two by every casino host in that town. And we're really looking forward to it.
Okay. I know it's not part of the near-term story, but kind of longer term, would you see potentially having video poker at the bar? That seems to be a highly profitable thing to do in Las Vegas. Is that something that you would see, or do you sort of foresee it being a non-gaming facility indefinitely?
Well, we could certainly contemplate doing something like that after we separate the business. While it's within the company, it's a little bit more of a challenge.
Yeah. Okay. Okay. But maybe a longer-term enhancement potential there. Anywhere else that Ole Red is on deck to open that you can share?
Not at this stage, but it's a brand with a lot of legs, as, by the way, will be our Category 10 that we're doing with Luke Combs, which I.
Yeah. Category 10 opens. The flagship will be in Nashville, right?
It'll open in essentially two parts. It's staggered opening. Middle of the year, we'll have the first and second floor basically done. But the big part of it is what we're doing on the roof and the third floor. That'll open towards the end of the year, but maybe early part of next year. But that's going to be a little bit of a game changer, I think, in Nashville for us.
Do you see multiple locations for that over time?
Yes. Yeah. We didn't do this deal with Luke Combs to have it one-on-one.
I mean, can you share where the next locations will be, or is that still sort of under?
No.
Okay. How many do you think you can have? I mean, is it like three or four, or is it like dozens, or?
We'll see when we get there.
Okay. All right. I know we're coming in towards the tail end of the session here. Did have a few kind of just bigger picture questions for you. The first is we think about 2025 and just U.S. RevPAR overall. Let's say it's going to be around 3.5%. What do you think same-store EBITDA for the industry could be in 2025 with a 3.5% RevPAR backdrop?
Industry. In terms of growth, I would say it's probably flat to maybe down marginally. That's for the industry, not for us.
For us. Yeah. Yeah. I'm sure you'll be much better, but just maybe flat for the industry. And then as we think about the lodging sector, overall lodging REITs, do you think there'll be more, fewer, or the same number a year from now?
We haven't rehearsed these, but there should be fewer. I think they'll be the same. I don't know what you mean.
Okay. So flat, same. And then for Ryman, I mean, I think we know the answer here, but your best real estate decision today is buy, sell, build, redevelop, or repurchase stock?
I would say reinvest in existing properties, buy the right properties, and build in the right markets with the right incentives. But probably not buyback stock given our trajectory.
And that brings us to the end. Thank you. Appreciate your time.