Good afternoon. Appreciate you joining us here at NAREIT. My name is Bill Crow. I cover the lodging and hotel sector, as well as industrial and office REITs for Raymond James, and have done so for the last 30 years, something like that, too many years. Really pleased to be here with the management team from Ryman Hospitality. I've been happy to cover Ryman since , 2008, somewhere in that range, when they were a C corp that ultimately converted into a REIT. They are the ones that developed the Gaylord brand. They currently own all of the Gaylord properties that are open and operating. And we can go into into details of the portfolio and what and whatnot.
To my immediate right is Mark Fioravanti, who is the CEO of the company. Jennifer Hutcheson, on his right, your left, CFO of the company. So I always think it's fair, with this audience, to give you a chance to kind of give a broad opening statement on who the company is and kind of what is that drives the outperformance, well, let's be honest, the outperformance that we've seen through the last few years of the stock.
Yeah. So as, as Bill said, we are, we were the developers, owners, and operators of the Gaylord Hotels brand, until we converted to a REIT in 2013. And we function as a REIT in a very unique way versus others in our sector, in that our, our hotels are essentially a single brand, and work as a portfolio. We rotate groups from market to market, and we have broad, broad relationships with these large groups that, that travel. About 70% of our business is group. And what that affords us is a high level of visibility because of the booking window. Our average booking window is about three years.
We currently have about $1.9 billion worth of business on the books for all future years. It also provides stability in addition to visibility. Because of the contract nature of our business, when groups cancel, we collect cancellation and attrition fees. And through the pandemic, we captured over $100 million of fees. And in 2009, which was obviously a severe downturn but not a pandemic, we collected about $28 million of fees. So, those fees help bolster our profitability at times when the economy is weak. So that focus on large group hotels is one of the things I think that makes us very unique, and it is a sustainable competitive advantage. We also have a meaningful organic growth pipeline.
In our Investor Day in February, we outlined about $1 billion of projects that we'll undertake over the next 4 years to generate incremental EBITDA growth. This is a mix of expansions as well as renovations and upgrades to our various properties. So, that's another thing I think that makes us unique. These platforms are so large. Our smallest hotel is 1,500 rooms and about 450,000 sq ft of meeting space. So these large platforms, we're able to make investments and continue to grow their profitability based on what consumers are telling us in terms of what their needs and desires are as they conduct meetings across the portfolio.
In addition to our hotel business, we also have an entertainment business that we actually operate within a taxable REIT subsidiary called Opry Entertainment Group. It's a very rapidly growing, very unique live entertainment business that is focused on the country lifestyle consumer. And we own brands like, ACL Live at the Moody Theater in Austin, Texas, the Grand Ole Opry, the Ryman Auditorium, so these are iconic brands in the country music genre. That's a business that we love, has grown dramatically, and ultimately, our strategy there will be to separate that business so that we'll ultimately have two separate public companies. We think that's the way to maximize value for shareholders overall, is to have those two businesses stand alone.
Lastly, I would say that, you know, I think that one of the things that makes us unique is our management team. We have a well-tenured management team. I became CEO in January of 2023 after over 20 years with the company. Colin Reed, who is now our Executive Chairman, has been with the company 22 years. Jennifer's been with us 20, and our senior management team, on average, has probably been with the company 18 or 19 years. So we have a well-tenured management team who actually built the brand and built the hotels. So we know this business very well, and I think that if you look at our total shareholder return, I think that speaks for itself over the last 20 years or so.
I think one of the things you pointed out was the booking window. 70% of your business, on average, a three-year booking window. What is the typical booking window for business transient or leisure travelers these days? Are we talking weeks?
Yeah, you're talking weeks to you know, 30 days out. So, you know, we have associations who, on average, book about four years in advance. Some of the very large, large associations book eight, nine years in advance. Corporates are, you know, around 18 months. So when you look at our average, it's about three years.
There's a rotational aspect of your business that I think you've highlighted in the past.
Correct, yeah. So there's a natural behavior that occurs in most large groups. Large groups typically rotate from market to market, year by year. They do that for one of a couple reasons. One is to keep their meetings fresh and attractive to their attendees. The other is many associations are required by their charter to rotate geographically so that they're touching their membership over multiple years. And so, you know, one of the thesis that our business model is built on is having these large hotels operate as a portfolio with a single manager in markets where groups wanna go to and deliver consistent, high-quality service across those properties. So it allows us to negotiate multi-year contracts, you know, with our customers.
So they may be in Opryland this year, next year they're going to Orlando, and then in year three, they're going to the Texan, for example, in Dallas. So what we like about that is that we establish very, very strong relationships with these guests. We understand what they want and need from a service and physical product perspective, and that informs our capital deployment. You know, the other thing that it does for us is it creates a recurring revenue stream. If you look at. If you, if you add together groups that stay with us year-over-year, coupled with the portion of our transient leisure business that's that visits us each year, about 49% of our revenue is recurring revenue, and we think that's a very powerful model.
Very, very unique in the space. I think, you know, we, as hotel analysts, we always look at RevPAR, Revenue Per Available Room. It's occupancy times rate that spits out some magic number, then you look at the growth year-over-year. Your business is a little different. Because of the large group nature and because of the amenities offered by the properties, you really focus on total RevPAR. And it's a much different answer and outcome than if you just look at RevPAR. Maybe you can explain that a little bit.
Yeah. So it's not, it's not unlike the casino business. We obviously don't have a casino, but it's not unlike the casino business in that about 60% of our revenue is generated outside of the room. So that are things like catering, AV, restaurant, food and beverage, retail, spa, golf, parking, resort fee, attrition and cancellation fees when we collect them, and that's a very important part of the model. And it's really why we generate more EBITDA per room than any of our peers on average. Because once we get that customer on-site, we essentially capture all of their trip spending. You know, it's the notion is it's everything under one roof. So once your group is on-site, we can take care of all your needs, and you don't have to leave the facility, and therefore, we capture that revenue.
I wanna turn to fundamentals because I think everybody's looking for cracks out there with the consumer, and you know, how much is the economy slowing? Is it slowing? Different price points, et c. Maybe you could kinda shine a light on what you're seeing from a demand perspective outside the room spend trends. Any change in cancellation, attrition issues, anything like that, I think that would be helpful for everybody.
Yeah. So let's take it in the two pieces: group, which is the 75% of our business, and then the leisure transient, which is about 25%. From a group perspective, group is performing very, very admirably this year. You know, we'll travel a record number of group room nights this year, a little over 2 million room nights. Our group pace for the rest of this year is about 34,000-35,000 room nights ahead of last year. We're seeing very strong outside the room spend as it relates to catering, and you're really seeing that across the industry. Groups are traveling, and groups are spending on property. And you know, catering is from a food and beverage perspective a very high margin as a business. So we're seeing real strength in group.
We talked about on our first quarter call a little bit, we're seeing some normalization as it relates to the leisure transient customer. And when you look at what's occurring, I think it's a couple of things. I think that the lower-rated leisure customer may be drawing back a little bit. But I think the primarily, what's happening is that we're seeing a behavior shift back to a normalized behavior that we saw pre-COVID, which is more people are taking cruises, more people are traveling internationally, more people are substituting trips to markets like New York, San Francisco, et c. These are markets that didn't perform well coming out of COVID. If you look at the top 25 markets in the U.S. from a leisure transient perspective, in the first quarter, those markets were up in total about 2.7% in terms of revenue.
If you look at markets that, where we, our footprint, which is a Nashville, Dallas, Denver, Orlando, all markets that we love for the long- term, those are markets that came out of COVID very rapidly, so it's a tougher year-over-year comparison. When you look at markets like New York, San Francisco, Chicago, et c., they're seeing nice growth in transient because, you know, people haven't been traveling to those markets. So, group remains incredibly strong. We're seeing a little bit of that normalization on the leisure side.
Mark, you and Jennifer and the team announced a sizable capital deployment plan, four years, $1 billion, while maintaining the balance sheet and the current structure that it is. Can you talk about what the intent of that is, what the expected returns on that investment are?
You want to do that?
Yeah, great. What we've talked about is about $1 billion of capital opportunities across all of our hotels, including all of the Gaylord hotels that Mark outlined, as well as the JW Hill Country that we acquired in mid-2023. These span meeting space renovations and enhancements, possible additions, rooms renovations, food and beverage enhancements and expansions, and as well as new amenities, like the addition of SoundWaves, which is a product that we have in Opryland today. It's an indoor-outdoor water experience that we could see driving benefits at both the Rockies and the Gaylord Texan. Where we focused our efforts more immediately is at Gaylord Opryland, with the meeting rooms expansions there and some design and conceptual work around additional food and beverage outlets and opportunities there.
What we've seen is, with a property with nearly 2,900 rooms, it could benefit from additional food and beverage seating, and additional offerings. We're also completing some work at Gaylord Rockies to add a usable, sellable space and a group pavilion, as well as renovating and completely transforming the Grand Lodge there in the main atrium space, adding additional food and beverage concepts and enhancements there as well. Beyond that, we're looking at possible rooms additions at Rockies as well, and renovating the remaining rooms at the Gaylord Palms this year. So quite a bit of opportunity.
What's the targeted return on that investment spend?
You know, it really depends on the type of projects. We've outlined a lot of different kinds of capital spend there. So, you know, the profile is going to be different for a rooms expansion versus a you know, meeting space enhancement or renovation, or a you know, rooms renovation. So but typically, we're gonna target mid- to high-teen returns for any growth CapEx projects that we undertake.
That's mid to high teens on levered.
Yeah. Attractive returns. Mark, you did something you haven't done in a long time. You acquired an asset this past year, San Antonio. It's not a Gaylord. It's not flagged a Gaylord, at least not yet. Just beautiful JW Marriott Hill Country Resort. Can you talk about the reasons why you bought it and what your vision is there?
Yeah. So, the JW in San Antonio is a hotel that we've admired for a long, long time. We've actually tried to buy it a couple times in the past and could never, you know, make the transaction work out. But, the hotel is a terrific hotel. It's a 1,002 rooms, 260,000 sq ft of meeting space, 2 TPC golf courses. It's the home of the Valero Texas Open, which is the PGA event the week prior to the Masters. It has a 9-acre pool complex, and it like our hotels, it's a heavy group house. So they run about 60% group, 40% leisure.
It's just a terrific asset that has the ability to grow and be expanded, and it sits in a really strong market, which is San Antonio. San Antonio is a rapidly growing economy. You know, it's the southern end of that Austin-San Antonio metroplex, which is exploding. They're doing about a $1.9 billion airport expansion in San Antonio now, which will increase the airlift dramatically. So it's just, i t's a market that we like, and we like the state of Texas a lot. It's a market that we like, and it's a really terrific asset. You know, when we looked at it and the things that we brought to the table, we felt like there was real opportunity in the hotel buy.
Number one, bringing it into our portfolio and leveraging our other hotels and rotating customers in and out of that property, both into the JW and out of the JW, back in the Gaylord. You know, their weakest months of the year are in the winter and holiday period, which is one of our strongest because we program our hotels with a tremendous amount of holiday programming, that's very, very unique. And so we feel like there's an opportunity to drive incremental business there. And then we think long- term, there's an opportunity to add rooms and meeting space to that hotel and materially grow its profitability. So it fits very nicely into our portfolio and into our group strategy. But most importantly is that there is a tremendous opportunity for us to influence how that hotel performs going forward and drive incremental value for shareholders.
W hen we look at real estate, it's so much about supply and demand. We know your demand is there. Can you talk about new supply that might be out there that could kind of threaten your strategy here?
Yeah. So, you know, the hotels that we own are, you know, w ell, there's one being built right now in San Diego, and it's a $1.3 billion project. So these are all $1+ billion projects that take a long time to develop and really require either a subsidy from a tax perspective or a casino, frankly, to make the returns work. And so when you think about how difficult it is to find a location that groups want to go to, undertake, you know, that kind of investment, and then the timeline to develop it, these are very, very difficult assets to build. And therefore, there aren't a lot on the horizon.
If you look, if you look today at just hotels of over 1,000 rooms, and really, let's just, just look at it, a meeting space over 100,000 sq ft of meeting space, I think there's 3 under development today. There's the Gaylord Pacific, there's the new Loews in Dallas, and then there's the Kalahari Waterpark in Virginia that's being built. Beyond that, there's really nothing on the horizon. So, you know, as, as we look forward, you know , we're in a growing group business, and that growth in the group segment is occurring in large groups in an environment where there's very limited new supply, and that's one of the reasons why, you know, we're aggressively deploying capital because we don't see any new supply on, on the horizon. And it, it's gonna allow us to continue to grow our market share and to continue to build, you know a sustainable economic advantage and an economic moat around these hotels.
We've got about 10 minutes left. I want to turn to the folks that actually came in to see us and see if there are any questions in the audience. Yes, sir.
For Gaylord Pacific, are you basically going to follow the same playbook for the Rockies, meaning joint venture, partner, expectation that you'll end up owning the whole thing eventually?
Well, we're not.
[That certainly worked at the Rockies.]
Yeah, it did work. It worked quite well. You know, we're not in that hotel today. It's a deal that we did initially back in 2004 or 2005. You know, the answer to your question is, I guess, you know, we'll see what happens. We were a partner at the Rockies from the beginning through the development phase. We're not a partner today, so it will all depend on, you know, what Ares and RIDA Development want to do, how that hotel performs and how it looks and, you know, is there an opportunity for us to be involved in that property in a way that generates, you know, that's accretive to shareholders? So w e're certainly a logical buyer. You know, when the time is appropriate and if the opportunity presents itself, we'd certainly look at it.
In fact, and you touched on the entertainment business, but. And you touched on an eventual spin or sale of that business. It's not an insignificant business. Maybe you could kinda, from a sheer size perspective, I think your venture partner valued it at $1.4 billion roughly?
Correct. Yeah, $1.4 billion. It'll do, it'll do about $100 million this year of, I don't know what our, what's our midpoint?
$105 million.
$105 million is the midpoint?
$105 million.
Okay, is the midpoint.
EBITDA.
So it's about $100 million business this year. We've got about $8 million-$10 million of construction disruption this year in that business, because we're doing some work at Block 21. And we've closed the Wildhorse Saloon, which is a 70,000 sq ft honky-tonk we have in Nashville that we're reconcepting with Luke Combs, the singer, into a new brand called Category 10. So that's a business that's grown rapidly, and as I said earlier, has some very unique brands. W e have a 6-unit chain of entertainment venues we've developed with Blake Shelton called Ole Red. We just opened in earlier this year, we opened one in Vegas at the corner of Las Vegas Boulevard and Flamingo, s o it's right. The pedestrian walkway from the Bellagio ties into our, the second story of our building, and it's off to a terrific start. It's a really, it's a great product and a very unique product in that market, and it's performing very well. So yeah, it's a terrific business, you know, upscale and, with terrific brands.
Yeah. So you're gonna have some real optionality from a balance sheet perspective if you do ultimately sell or spin that business. Certainly the Gaylord Pacific could be an option, but, but reinvesting in your existing portfolio . There aren't many opportunities to buy on the open market these days. You got the one that was out there, but I assume you consistently look for opportunities to grow your portfolio.
We do. You know, we have our short list of hotels that we like, and when they come on the market, we certainly look at them. I mean, we bought the JW off market. We bought Block 21 in the entertainment business off market as well, but we continue to kind of keep our ear to the ground. You know, the reality for us though is that in both businesses, we have a very focused strategy, and that is on the group customer, and then on the entertainment side, the country lifestyle consumer. And I think that one of the reasons we've been successful over the last 20 years is the things we haven't done, not just the things that we've done.
We've, you know, we stay in our lane and are very focused on what our objectives are, and we'll continue to do that. If a hotel comes along that has the scale and the opportunity for improvement, like the JW, we would certainly pursue that. But, you know, that's what we're looking for, and we're only gonna pursue it in a way that's accretive to shareholders. We're not gonna overpay for assets just to get assets.
Anything else out here? Go ahead.
Gaylord got a good name in the conference business. Is there any thought or advantage to rebranding Hill Country to Gaylord Hill Country? Is that anything?
I don't know. It would need to be expanded dramatically to become a Gaylord. The property. But more important, you know, the JW brand has a tremendous reputation with groups as well, and the JW is a higher-rated brand than Gaylord. Yes, in terms of rate. Their average rate they generate is higher than a Gaylord hotel. We like that JW brand, and we're gonna keep it a JW and continue to enhance it. What we've done though is, with the help of Marriott, is, we've brought that JW into our portfolio. So the Marriott executive who oversees the Gaylord portfolio oversees the JW. The sales teams are integrated with the sales teams of our portfolio. The finance team, revenue management, marketing, that business, even though it's a different brand, is integrated into our portfolio, so we're selling it like it's part of the portfolio, and you know, that's an important opportunity for us because that's how you get the synergies.
[Fusion with your planners?]
No.
[They get it?]
They get it. They get it, and it, you know, it appeals. Gaylord appeals to a certain segment of their customer base and the JW customer or the Gaylord customer. There's a certain portion of the Gaylord customer that is interested in that JW. And it's both, it's brand rate, and it's also then scale, right? If a lot of our groups that are in Gaylord hotels today are too big to go into a thousand-room hotel.
Jennifer, I'd like you to take a minute or two to talk about the balance sheet. Maybe you could touch on the dividend, which has undergone dramatic growth after we came out of COVID, and maybe how we should expect about the growth. I know it's a board decision, but going forward.
Sure. We're currently at $1.10, and as a point of reference, per quarter, per share, cash dividend. Pre-COVID, we were at $0.95 before we suspended it. Our last full year, we paid out was $0.90 a share, so we're well above that now. As Bill, as you mentioned, we began ramping quickly, faster, faster than many, just on the heels of our great operational performance, which allowed us to de-lever quickly. We're largely back to where we wanna be on our balance sheet with even, you know, stronger liquidity, I would argue, than we've historically had. We, you know, began the year with $1.3 billion of liquidity and have stayed right around that, where net leverage-wise, a little over 4x.
If you pro forma for the full year of the JW Hill Country, we're a little below that. And we've kind of like being in the 4x-4.5x net leverage range. So we're operating really well. Feel really good about where our balance sheet is, and even with the, you know, $1 billion of CapEx opportunity that we've identified for the next four years, I think based on what we're seeing within our business, what we can generate in free cash flow and the state of our current balance sheet, you know, we can continue doing that, funding these opportunities, without necessarily taking up our net leverage outside of our range at all. So it's a good. We feel comfortable with where we're at.
Yeah, the only thing I would add is that at $1.10 a quarter right now, that's about a 4.2% yield.
Yeah, pretty attractive yield. So I'll just wrap it up by saying if you haven't had a chance to go inside a Gaylord property and understand why the DNA is different than nearly every other hotel you've ever been in, you know, if you're in Orlando or Nashville or Washington, D.C. or Dallas or Denver, a m I leaving one out?
Texas.
Dallas, yeah. If you get a chance to go in there, go in and take a look around. It's a very different product, and you'll understand why they have this advantage with the groups that they do. So with that, if you join me in thanking Mark and Jennifer for their presentation.