Good morning. Welcome to the 9:15 A.M. session at Citi's 2023 Global Property CEO conference. I'm Smedes Rose of Citi Research. We're pleased to have with us Ryman Hospitality, CEO, Mark Fioravanti, and Chairman, Colin Reed. 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 AD desk. For those of you in the room or on the webcast, you can sign in to liveqa.com and enter code GPC23 to submit any questions. If you're here in the room and you just wanna use one of the mics that we have here, feel free to do that as well.
Chris, I'm gonna turn it over to you to just quickly introduce the company for us, and provide any opening remarks, and then we'll just jump into some Q&A. Thank you both for being here.
Thanks, Smedes. Good morning to you and Mark has asked me to do the overview. First of all, just wanna say we're happy to be here back meeting in person, and we like this conference, and it's one that we feel is very important. First of all, our company is really made up of two parts. We are a hospitality business that owns five of the top 10 convention resorts in the United States under the brand Gaylord Hotels. Marriott is our manager. We own 10,400 rooms in these five hotels. The smallest of our hotels is 50% bigger than this one.
So, about 70% of our rooms' revenue are generated from groups, big groups. We identified about 20 years ago that there were about 26,000 of these large groups in the United States that rotate from market to market year by year. We built a brand, a system of hotels that capture these consumers and rotates them through the organization. We enter every year with about 50 points of occupancy on the books, unlike most of our competitors. These are contracts that we have signed year by year. Last year, as an example, we booked well over 2 million room nights for future years, we went into 2023 with about just a fraction under 50%, 49.6%.
The other part of our business is leisure. When we built these hotels. Come on in. When we built these hotels, we decided that when consumers come to our hotels, they're there for three, four days, they wanna have fun. We put a lot of entertainment in our business. We have extraordinarily good pool complexes, spas, stuff like that. As a consequence of that, 30% of the business that we generate is leisure. Last year, in the month of December last year, we set an all-time record. We never had a month like it for our company, a lot of that business was leisure. We're very, very excited.
The other part of our business that we are also very excited about is our entertainment business. We have this business called, we call OEG, Opry Entertainment Group. We own quite a few of the iconic assets in the city of Nashville. Some of them you may have heard of, the Grand Ole Opry, the Ryman. We own these businesses. We have an extraordinary relationship with the country artists community. We've, we also own the Moody Theater and a complex in Austin and Texas. We have relationships with Austin City Limits. We have recently taken on a partner. We've taken on a company called Atairos. Atairos, 100% of its money comes from Comcast NBCUniversal, and we have taken this 30% partner on to help turbocharge our entertainment business.
That's our company, and we're very excited about it. With the growth in the company over the last few years has been really stellar, and we're excited about the next period of time.
Thanks. Let's start out. You know, Mark, maybe you can just give us, you know, what are the top three reasons an investor should buy shares of Ryman today?
Sure. I would start with, you know, in Colin's description, he mentioned the group nature of the portfolio and the visibility and stability that that provides from the contractual nature of that group business. When you think about the mix of our business moving forward, I know there's a lot of concern around the economic environment. Given that contractual nature, that provides a really a shock absorber for us as it relates to profitability in the event of a downturn. You can see that if you look at our results from 2009. We also, about 30% is leisure transient, as Colin mentioned, which, you know, is a substitute for higher cost vacations. We have no business transient exposure.
We feel like we're very well-positioned, in the event that, we do see a slowdown in the economy. More important than that, and probably the second reason is that we've been playing offense, since mid-2020. We've invested significantly in our businesses through the pandemic, and we have tremendous momentum coming out of
Out of the pandemic, despite Omicron in the first quarter of last year, both our entertainment business and our hotel business exceeded 2019 performance and set records both on a consolidated basis and on a same store basis. You know, we have industry leading RevPAR growth. We have industry leading EBITDA per occupied rooms. This business has a tremendous amount of momentum, as we come out of the pandemic. You wanna do number 3?
I'll give number three, if you don't mind. We converted to a real estate investment trust back in 2013. We've been in business for 10 years. The skinny on us because we are operators, not real estate guys, was that, you know, we were probably going to, you know, have a hard problem being a real estate investment trust from a TSR perspective. When you step back and look at the performance of our company on a one year, three year, five year, 10 year basis, and you compare our company to all of the other folks that we get compared to, our TSR for this period of time is one, one, and one. We have generated so much more value for our shareholders.
One of our shareholders, Mario Gabelli, wrote me a note last week saying, "We want to induct Ryman into our hall of fame for the value that what you guys have created for us over this period of time." I come from the old school. I, you know, if I'm gonna build a house, I wanna make sure I've got a builder that's done it before that knows what the hell they're doing, and that's what we believe we are. I think the trajectory of our company today is probably stronger than it's ever been in the decade that we have been a real estate investment trust.
One of our competitors put out a beautiful deck last a couple of weeks ago in preparation, I think, for the analyst season, and I think it was on page two. There was this beautiful summary of TSR, and they had themselves as one of against the other hotel companies, hospitality companies that we get peered against. The only problem was they forgot to include us. We're very proud of what we've done, and we anticipate having a lot of fun here over the next few years.
Okay. Okay, thanks for that. You know, I wanted to start out kind of big picture. You ended the year with, I think, gross bookings about 2.7 million room nights for all future years. You know, what have you seen in terms of pricing of those rooms for 2023 and 2024, maybe relative to kind of 2018, 2019 levels? How do you think about yield management in terms of the current economic environment?
In terms of pricing, you know, and as you know, Smedes Rose, in the back half, when you look at our fourth quarter production, we've been able to drive group rate in those forward bookings, and that's really a combination of a couple of things. One being just there's been tremendous demand for group meetings coming out of the pandemic. You know, we're at all time highs in terms of lead volume. What's interesting about the 2.7 million room nights that you referenced is that as we entered 2023 with 50 points of occupancy on the books, 76% of those room nights were booked pre-2022.
The rate improvements that we're seeing coming out of the pandemic are not reflected in those bookings for 2023. As we move through 2023 into 2024 and 2025, those pre-2022 room nights burn off, and we'll roll into these newer room nights that are being put on the books. What you'll see is that we'll have a nice tailwind as it relates to group pricing in 2023, 2024, 2025 and beyond, which should help us drive, you know, not only the top line, but also drive margin improvement as we move through the year.
You know, one of the things you've mentioned is obviously you have more visibility given your focus on groups. You're coming into the year with, I think, about 50% of occupancy points on the books. You can correct me if there's some fine-tuning there. One of the questions I wanted to ask, and it's a question from the audience too, is maybe you can talk about the in the year, for the year group bookings. You know, what's in your guidance now, and kind of what do you typically achieve, you know, in sort of a normal year?
Yeah. We're coming in just under a fraction of 50 points, right? It's like, I think it's 49.8 points of occupancy, which is about where we averaged pre-pandemic. Varies by a point or two each year, but that is a normalized year. As you think about how business will roll on the remainder of the year, as we spoke earlier, about 30% of our room nights are leisure transient, that's in the year, for the year. Then we'll put on another 10-15 points of in the year, for the year group business, which gets you to that mid-70s kind of occupancy. This year should look much like a pre-pandemic year for us.
We're set up, you know, we're set up as we normally would be pre-pandemic with what we're coming in with the books. The beauty of this year is that, you know, when you look at lead volumes, they're up significantly over 2019 levels, and I'm sure you've heard that from many of our peers. There is a, you know, there will be continued compression of groupAnd the challenge for us is, you know, just given the fact that, you know, we've got 50 points, it's, you know, it's finding availability and putting the right groups in the right places.
With lead volume so high, are you also seeing higher than normal conversions into definite, you know, room night bookings?
It really comes down to patterns and availability for us.
Mm-hmm.
You know, one of the phenomenons that we've seen post-pandemic is that given the increase in leisure business, we've been able to push group rates during periods of lower group demand. Those SMERF groups, you know, associations, youth-oriented sports groups, et cetera, we've been able to push rate because we can fill those rooms with a higher quality leisure customer. You know, that's a combination of not only the phenomenon, I think that all properties have seen post-pandemic, but the fact that, you know, throughout really pre-pandemic through today, we've invested significantly in leisure-oriented amenities, you know, pool complexes, food and beverage reconcepting, spas, et cetera, to drive that leisure demand and drive a higher quality leisure customer.
Yeah, I wanna talk about leisure in a little bit. I guess just sticking with group, a little more, you know. I guess there's kind of three things, you know. Could you talk a little bit on about what you're seeing on group composition, kind of what kinds of groups are coming back, what maybe, what the reasons are? Where do you see weakness, where you think maybe eventually you'll see strength? Maybe you could just talk bigger picture. Do you think that Ryman Auditorium properties are taking share from, like, higher cost core, you know, quote-unquote, core U.S. cities in a post-pandemic world?
Well, let's start with what we're seeing in terms of, you know, group demand currently. As you would expect, most of the end-of-year, for-the-year business is corporate. It's a shorter term booking window. You know, associations have a much longer lead time. Many of those we, you know, we rebooked during the pandemic. You know, we rebooked 70% of the 3 million room nights that were canceled. We're seeing solid corporate demand. As I said, that is creating, compression. What was the second part of your...?
I was wondering if you feel like, and I don't know if you can measure this, but are you taking share from other core higher cost U.S. cities like Chicago, New York, San Francisco?
Well, yeah. I mean, certainly, I think that there are groups that, you know, do not wanna be in specific markets, you know, whether it's Chicago, San Francisco, Portland. You know, we're fortunate in that our geographic distribution is such that, you know, Nashville, Dallas, Orlando, Washington, D.C., Denver, you know, those are all high quality markets that, you know, have strong economic growth, strong job growth and tourism growth.
Let me weigh in on this a little bit. In terms of the meeting planner. When COVID hit, most of our competitors sent all their people home. What we instructed Marriott to do was to keep all of our salespeople on property with the convention services people to kiss and love the meeting planners that are all being, you know, really impeded because places like this were just shut. We canceled, through COVID, 3 million room nights because people couldn't meet. The efforts of our people, we rebooked 70% of those room nights into future years. The other thing that we did as a company is we instructed Marriott to go out and recruit the best of the best salespeople in the country from our competitors, and they did.
We went out and recruited somewhere between six and 10 new world-class salespeople. You know, this industry, people sort of think that the group industry is sort of a homogeneous industry. It operates the sort of same way. It doesn't. There are winners and there are losers. There's those companies that do it really well and those companies that don't do it well at all. One of the things that we've been able to do is build extraordinary loyalty with our group of consumers that rotate from market to market year by year. I think the answer to your question is yes, we are stealing share. I don't think it's because of the beautiful assets that we manage. I think it's the endeavors of the people that build the relationship with the customer that sign the contract.
We're gonna continue to go on the front foot, recruit the best people we can. You know, Mark and I do things that the rest of hospitality really don't do. Like as an example, we hosted 25 of the nation's top meeting planners at a dude ranch last year in Wyoming in July. We're gonna do the same thing this year. This group of customers generated somewhere in the 180,000 room nights a year for their big companies that they are responsible for. Coming out of that, we booked, you know, somewhere between 50,000 and 70,000 room nights. We just go about it differently. Yes, we are stealing share, and that's one of the reasons our business, we have the highest EBITDA per hotel room in our sector. It's because we operate a little bit more efficiently.
In terms of, I mean, group composition, you said you've booked associations. I mean, do you see associations coming back more quickly? I feel like the person attending the association meeting is flying in on their own dime and with higher airline costs. Is that impacting attendance at all? Is the need to get back together more overwhelming than their costs?
We're certainly not seeing that. I'm laughing because last week we hosted a massive association at Opryland. The association was the Wild Turkey Federation. This is a group of conservationists that conserve wild turkeys and then shoot them. They've been a customer of ours for 25 years. Last week, their exhibition on Friday and Saturday set an all time record. Instead of their highest record before was 54,000 people turning up on Friday and Saturday at Opryland. Last week, they had 65,000. You know, the association market is really alive and well, and we're booking our fair share of the association market as well as corporate.
Yeah. Whether it's association or corporate, you know, what we've heard from meeting planners is that the desire and need to meet are far greater than their concerns about, you know, how the back half of the year might look or what the economy will look like in the fourth quarter or 2024. There is a real desire to get back together.
I wanted to, you mentioned the groups rotating across your properties. There's another Gaylord property under construction in Chula Vista, kind of basically outside of San Diego, that you're not involved with. You know, how confident are you that that will generate more group demand that will maybe help you on the margin versus just cannibalizing your existing customer base as they rotate into a new property that you won't be participating in?
Yeah, I mean, look, that's certainly, you know, we've built four of these now, that has been the case with, you know, with each and every property that's been built. You have to remember that, you know, we have no distribution for the brand west of Denver. You know, to have a brand presence on the West Coast that can service customers and can service our current customers who rotate in and out of our brand because of a lack of distribution, you know, we think ultimately, you know, this is, you know, the tide lifts all boats. You know, we're working with the team at Chula Vista.
The sales teams are all working together, as a brand to, you know, introduce the brand to new customers, those customers that we have that rotate to the West Coast to capture those customers. We feel like ultimately, this is a plus for the brand and a plus for our assets as well.
Okay. Let's just kind of circle back on leisure for a moment. I'd also like to touch on the entertainment business. You know, leisure, you know, you talk about setting records in December of 22. You know, you're sort of setting up for tough comps, I guess. That's, you know, a question that we get continually is, like, how deep is leisure demand, particularly in an economy that might be softening up? You know, the rates have been really strong relative to 19 levels. Maybe just speak to that and kind of what you're seeing and your confidence that you can continue to put up the same kind of-
Leisure continues to be strong, both in terms of demand and in terms of rate. You have to understand that our leisure is regional, primarily regional drive-ins, staycations, so shorter duration within about a 300-400 mile radius. What we do with our assets is that we create a destination through the assets and through programming. Whether that's holiday periods throughout the summer or, you know, Christmas holidays, et cetera. We give people reasons to come and spend a few days with us, with their family or with their spouse. You know, we've made some significant investments in our assets over the last five years or so as it relates to leisure, with pool complexes, both indoor and outdoor, food and beverage, et cetera.
We have continued to improve the offering through the pandemic. There is a price value relationship, I think, that's a little bit different for us than someone who's gonna fly to a resort for a week, et cetera. They drive in, they spend two or three nights with us with their kids. You know, they visit pools, spas, restaurants, retail, et cetera. They have a great time and they go home. We haven't seen any weakness either in demand or pricing as it relates to that segment.
The other thing we do is we induce demand by putting explicit programming in these facilities. Like, for instance, from Thanksgiving through end of the first week of January, we brought about 100 ice carvers from Harbin in China that live in this village at 11,000 feet. They come over, we convert one of our ballrooms in each of our hotels, and we put this magical exhibition of ice carvings on. We put 1.2 million people through these ice carvings in that period from November to the end of the first week of January, which was, you know, up 150,000 on the best previous year we'd ever done, which was back in 2019, because these folks couldn't move around China because of COVID.
We do that, and we do it in other times of the year, too. That's why our leisure programming is very different to what you tend to see in other 1,000 room, 1,500 room hotels.
Okay. You provided a full year outlook and guidance, some a number of ranges which I think contemplate different, you know, economic, the way the economy plays out. Are you still comfortable with 100 to 150 basis points of margin improvement versus pre-COVID levels? In your guidance at the low end, do you contemplate negative same store RevPAR growth at all for any particular quarter?
At the low end, we do not contemplate negative same store RevPAR growth. At the midpoint of our range, I think it's 60 basis points of margin improvement at the midpoint, and we still feel comfortable with that 100-150 basis point increase longer term. That's really driven by... Right? There's a number of puts and takes as it relates to margin. The most obvious headwind is wage rates. Wage rates are up across the industry. When you look at our performance, you know, we found ways to maintain our wage margin through pricing, through technology, through reorganizing some of how our hotels are staffed. I'll give you a perfect example of that.
During COVID, we engaged Marriott in a process where we wanted to relook at how our hotel's management structure was set up. It was a very siloed structure. We thought it was had some efficiency opportunities. Through that process with Marriott, we were able to reconfigure the supervisor and above ranks at each of our hotels to flatten that organization, give greater span of control to managers. Ultimately, where we've ended up is we've reduced headcount in that layer of our organization at our hotels by about 12%. We've gone from about 1,450 supervision above, down to about 1,220. You know, that's been a way to drive efficiency.
We've also made, right.
Can I just interrupt you for I'm sure it's a little different by market, but just labor and benefits, increases in 2023, what's roughly the percentage increase you're expecting for your lower workforce?
It's gonna be in the 5%-6% range is where we think it will come in this year.
Okay.
Significantly lower than what, you know, what we've seen over the last several years.
In addition to overall RevPAR and RevPAR growth expectations, you've also reduced costs to help underpin margin expansion. That's on the labor side. Are there any other areas that you've able to take costs out of the system that will help support margin growth?
Mobile check-in, and, you know, using technology to continue to drive efficiencies is an area that we're very focused on. During the pandemic, you know, we reconcepted all of our food and beverage at the Gaylord National. Because of that reconfiguration, we were able to restructure our labor and back of house kitchen staffing, which has helped us from a margin perspective there. You know, when you think about margin going forward, you know, one of the important aspects is this tailwind that we talked about earlier.
As older room nights, on the group side burn off as we move through 2023 to 2024, 2025, and these new group room nights come on at higher rates, that's gonna provide a very nice tailwind to margin expansion for us.
Okay. Let's focus on the entertainment side of the business. I think it's roughly $100 million of EBITDA. The growth last year, I think, was a little slower than your initial expectations, and part of it, I think, was 'cause you attributed to people not coming back to the concert venues quickly enough or that the programs from the artists were a little bit less than you were anticipating. How is that shaping up for this year? In your guidance for OEG, does that include a contribution from the Ole Red that will be opening in Las Vegas, I think, in fourth quarter?
Go ahead.
You go for it.
In terms of Ole Red Las Vegas, it does include a modest contribution. That asset will open in November, early November, in time for the Grand Prix there. We're very, very excited about that. It's a tremendous location, right on the Strip at Las Vegas Boulevard in Flamingo. It'll be our largest Ole Red, and I think it's about 150,000 people a day walk past that location. We're excited about that.
Growth-
Growth.
Growth.
Growth in the entertainment business. Are the concerts coming back?
Yeah.
Production of the artists, all that kind of stuff that you had talked about was slowing down results.
Yeah. We're seeing a normalization of concert schedules. you know, it is still a little bit heavier than what we've traditionally seen, but it is normalizing. Our forward book for concerts in terms of utilization, we're right on target at this point to have a very good year at both The Ryman and Block 21 in Austin, Texas. that is normalizing.
Okay. I mean, would you... You know, you've talked about potentially spinning out that business, or I think, your partner has an option to increase their ownership. You know, how do you see that playing out over the next couple of years? What would you like to see playing out over the next couple of years?
Well.
Go ahead. You wanna take this?
No, sir. Go ahead.
Okay. you know, we've been very consistent in our Description of what we would like to see happen with this business. we've been very clear over the last five years, the goal here would be to at some point separate it, spin it. The investment community that likes entertainment is a little different from those that like real estate. what we are planning on doing here over the next couple of years is continuing to build the growth strategy of this business, which has been pretty steep here. We're in the process of bringing in a new president for that business.
At some point we anticipate separating it when we have the right growth strategy in the minds of the shareholders, out there, where we can capture the right multiple for this business. You know, I think sometime in the next 2-3 years, we will be hopefully separating it.
Okay. For Ole Red Las Vegas, you know, you mentioned 150,000 people walk by that spot every day, but, you know, not to push back, but I mean, they could also keep walking 'cause they wanna go play slot machines or whatever. How much sort of, more sort of corporate group or social group will you book to kind of underpin demand at that property besides just counting on walk-in traffic?
Yeah, private events and buyouts will be tremendous for that asset and that location. We're, you know, just to give you an example, we're opening it early November. We're already having conversations with companies and corporations around special events like the Grand Prix, you know, National Finals Rodeo, the Super Bowl in February. It is a, you know, the product, the location, will be very unique and, you know, we see that at all of our Ole Reds. We do a significant amount of corporate buyouts at our other facilities. It just lends itself to that type of usage.
Let me just. I know we're short on time. I couldn't help but your comment about people could just keep walking by. $45 million. You, Smedes, you know, he and I used to work in that market. We lived in that market. We understand that market. $45 million consumers go to that market. There is not another great country music facility in there. Friends of ours, people who are now doing residences there, like Garth Brooks has just signed his first residency with Caesars completely sold out. Our Ole Red in Nashville, on the strip in Nashville is the most profitable honky-tonk in a 300 yards with 20 others, you know?
I gotta tell you, if you would like a little off market wager on that, these people won't walk past. Our problem in this, I think, is gonna be in Las Vegas. It may be too small, but it is as big as it can be.
Okay.
I think demand will be huge in that place.
All right, we're running into the last minute here. I wanna ask you one quick question on the dividend. You know, had a significant increase. You're annualized at $3 a year now. How should we think about dividend growth going forward at a probably a more measured pace, what do you think the best kind of rule of thumb would be for investors to think about that?
We'll continue to pay a dividend, obviously, that's consistent with, you know, 100% of our REIT taxable income. You know, and to your point, we reinstated it at $0.75 and have signaled $3 this year. You know, as we continue to see strength in the business, I think you'll continue to see, you know, improvements in that dividend. You know, we're just gonna have to see how things perform. We're bullish. We're bullish as it relates to performance and obviously that would translate into dividend growth.
All right, 20 seconds. To STR, is it 6.7% RevPAR growth for 2024 U.S.? What do you think same-store EBITDA can be for the country?
8%, 10%?
Yeah, somewhere there. 8%.
8%? Okay. Buy, sell or build or redevelop for Ryman.
I would tell you, hold and continue to invest.
The next item.
You know.
The next item will begin in five minutes. Okay, the last question. There'll be more or fewer or the same number of public companies in this space a year from now?
It should be fewer, but they'll probably be the same number.
Okay. Thank you.