Operator: Welcome to Ryman Hospitality Properties Fourth Quarter 2023 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Executive Chairman, Mr. Mark Fioravanti, President and Chief Executive Officer, Ms. Jennifer Hutcheson, Chief Financial Officer; Mr. Patrick Chaffin, Chief Operating Officer and Mr. Patrick Moore, Chief Executive Officer of Opry Entertainment Group. This call will be available for digital replay. The number is 800-753-9197 with no conference ID is required. At this time, all participants have been placed on listen-only. It is now my pleasure to turn the floor over to Ms. Jennifer Hutcheson. Ma’am, you may begin.
Jennifer
Hutcheson: Good morning, and thank you for joining us
today. This call may contain forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995, including statements about
the company’s expected financial performance. Any statements we make today that
are not statements of historical fact may be deemed to be forward-looking
statements. Words such as believes 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,
further events or any other reason.
Colin
Reed: Thank you, Jen, and good morning, everyone. We
had a very busy start to the year here. So I thought I’d start off our call
today on some of those developments. In mid-January, we opened our newest and
much anticipated Old Red in Las Vegas to a very encouraging early start. Super
Bowl weekend generated strong results, including an impromptu visit and
performance on stage by Blake and Gwen. Our operations continue to ramp there,
and we will host our official grand opening celebration in April, and this will
be a very hot ticket. At the end of last month, we hosted many of you at our
Investor Day here in Nashville, where we also announced the name of our new
brand partnership with Luke Combs, Category 10. The response from Luke’s fans
and the country music community has been extremely positive, and we look
forward to reopening that venue in stages later this year.
Both
Mark and Jen will get into the earnings discussion in a minute, but I thought
I’d revisit some of the more salient points from our Investor Day to help frame
how we think about our fourth quarter results, the 2024 outlook and why we’re
so excited as we look forward to the years 2025 and beyond. For 20 years, our
management team has executed a unique strategy built on our employee-centric
model that delivers long-term customer satisfaction with a particular focus on
the group customer. We’ve built and continue to enhance an industry-leading
portfolio of hotels to serve that customer, and our service model continues to
drive high customer retention, rotation and loyalty. Furthermore, group demand
has surpassed prior peak levels and is very robust, especially against the
backdrop of limited new supply under construction and structural constraints to
new ground-up development.
As
a result, we have significant visibility into the future, a meaningful
reoccurring revenue stream, strong pricing power and ample high-return
investment opportunities to sustain our growth trajectory. This has been our
formula for industry-leading shareholder returns that I think speak for
themselves. Through building great relationships with our customers, we’ve
built loyalty and the byproduct being retention that drives overall demand.
This, in turn, allows us to expand our product restaurants, hotel rooms,
convention space, pool complexes, et cetera. This is an awfully efficient way
to generate very high return on investments that drive our superior shareholder
returns. And as the team explained in great detail at our Investor Day, the
demand we’re building in the out years will lead to some very exciting new projects
at our existing hotels, thus stimulating further growth in our company.
On
top of all of that, we have an incredibly valuable entertainment business built
on some of the most iconic brands in the music industry. And recent events,
such as Luke Combs performance with Tracy Chapman at the Grammy Awards and
Beyonce recently released country singles continue to highlight the growing
popularity of the country music and lifestyle category. For those of you who
are fortunate to be at the Investor Day dinner that we hosted on the stage of
the Grand Ole Opry, I hope you were as strong as I was to get to see Luke up
close previewing the incredible Grammys performance of Bhasker. He’s an
exceptional artist and friend and someone we are proud to be in business with.
Both of our businesses have generated sector-leading returns for our
shareholders and we think this will continue to be the case going forward.
I’ve
said this many times before, our business is not based on hope — hope that
citywides return to a particular market, hope that a particular city cleans up
its image. Our strategy is grounded in the things we know well and can control,
extensive knowledge of our customers and delivering what our customers want and
thus driving loyalty. And with that, let me turn it over to Mark to review our
fourth quarter results and 2024 outlook in more detail, Mark?
Mark
Fioravanti: Thanks, Colin. Good morning,
everyone. Our record fourth quarter results were in line with the preliminary
results we reported in mid-January. So for today’s call, I’ll simply highlight
a few key metrics that drove our financial performance in the quarter. In the
fourth quarter, led by the strength of the group segment, our same-store
hospitality portfolio generated a record ADR of $260, up 2% compared to last
year. Banquet revenue increased 13.5%, driven primarily by higher contribution
per group room night, evidence of our continued success with attracting
higher-quality groups. Gaylord National and Gaylord Palms achieved particularly
strong results in October with the national setting a brand record for monthly
banquet revenue and The Palms achieving record monthly banquet revenue for the
property.
Our
proprietary holiday programming continued to induce leisure demand during the
seasonally low period for groups. In the fourth quarter, ICE admissions equaled
last year’s record levels, while higher per caps yielded revenues above last
year’s high watermark with particularly strong results at Gaylord Opryland and
Gaylord Texan. The success of our holiday programming initiatives, combined
with the strength of banqueting results I just mentioned, resulted in record
quarterly same-store total revenue in the fourth quarter. Furthermore, for the
month of December, Gaylord Opryland set an all-time monthly brand record for
total revenue and Gaylord Texan set an all-time monthly brand record for total
RevPAR. Early results from our initial holiday programming at the JW Hill
Country were encouraging, and we look forward to activating the full slate of
ICE programming there this year.
Finally,
we continue to command strong pricing power, evident both in the fourth quarter
ADR as well as in our group revenue pace. At the beginning of 2024, group rooms
revenue on the books for 2024 is pacing up 8% compared to the same time last
year for the T+0 period and booking trends through January have remained on
pace. This underscores the demand we continue to see in the group meeting
segment for the quality meeting experiences like we provide. Demand for live
entertainment and country music continues to drive growth in our entertainment
business. In the fourth quarter, driven by strong show calendars and higher per
caps across the portfolio, revenue grew 4.1% and adjusted EBITDAre grew 15.8%,
translating into margin expansion of 340 basis points compared to last year.
Taken
together, the momentum we’re seeing in both our business segments supports our
confidence to continue to invest in our assets and as we laid out in our
Investor Day presentation, we have ample opportunities to pull capital into
high-return projects. In our hospitality business for 2024, we expect to invest
approximately $290 million to $360 million in several major projects, including
the repositioning of the Grand Lodge and a new group pavilion at Gaylord Rockies,
which are already underway and expected to open in phases beginning this
summer. Transformation of the Governors and Presidential Ballrooms and
pre-function spaces at Gaylord Opryland, and renovation of the lobby and the
remaining 1,416 rooms at the Gaylord Palms. Additionally, we’re analyzing and
designing a rooms at SoundWaves expansion at Gaylord Rockies.
A
meeting space expansion, a new sports bar and a wet lawn [ph] at Gaylord
Opryland, and a rooms renovation at the JW Hill Country and Gaylord Texan. We
look forward to being able to give you more details on these rollouts later in
the year. In our Entertainment business in 2024, we expect to spend
approximately $70 million to $80 million on the major projects already
underway, including the opening of Ole Red Las Vegas, the renovation of the W
Austin Hotel, and other enhancements of Block 21, and the redevelopment of the
Wildhorse Saloon into Category 10 at Downtown Nashville. Now, turning to our
outlook for 2024. We are reiterating the full year guidance ranges we presented
at our Investor Day, including same-store hospitality RevPAR growth of 3.5% to
5.5%, which reflects approximately 215 basis points of disruption from 2024
capital project.
Same-store
hospitality total RevPAR growth of 3.25% to 5.25%, which reflects approximately
160 basis points of disruption. And consolidated adjusted EBITDAre of $740.5
million to $785 million, which reflects $10 million to $11 million of
disruption within the same-store hospitality portfolio, $8 million to $10
million of disruption within the Entertainment business. Below the line, we
expect to generate adjusted funds from operations, or AFFO, of $484.3 million
to $527 million, an AFFO per diluted share of $7.60 to $8.20. Let me provide
some color on how we expect the quarterly cadence to play out, which will be a
little bit different than what we saw in 2023, but largely in line with our
historical trends. In this first quarter, we expect same-store hospitality
RevPAR and total RevPAR to decline low single-digits compared to last year, due
primarily to the timing of Easter, which falls on March 31 this year compared
to April 9 last year, shifting group business out of the first quarter and into
the second.
We
expect same-store hospitality adjusted EBITDAre margin in the first quarter to
decline 150 to 200 basis points year-over-year, due primarily to the Easter
shift and the continued normalization of attrition and cancellation fees. As a
reminder, the first quarter of 2023 was the highest first quarter adjusted
EBITDAre and adjusted EBITDAre margin on record. We expect the remaining three
quarters to show positive same-store RevPAR and total RevPAR growth and
adjusted EBITDAre margin expansion with high single-digit RevPAR and total
RevPAR growth in the second and third quarters, followed by low to
mid-single-digit growth in the fourth quarter. In our entertainment business,
we expect first quarter revenue growth to be tempered modestly by the severe
winter weather we experienced in Nashville in January.
Consistent
with historical trends, we expect the strongest growth in the second and fourth
quarters. The third quarter will be heavily impacted by construction
disruption. As Colin discussed at the outset, we are incredibly well
positioned. We have significant visibility into future bookings. We have a
meaningful recurring revenue stream, strong pricing power and ample high-return
investment opportunities. These investments that we’re making, though
disruptive in 2024 will sustain our long-term growth trajectory. And
importantly, we can fund this growth plus our dividend from our balance sheet
and free cash flow generation. And to that end, I’ll turn it over to Jennifer
to discuss our balance sheet, liquidity, free cash flow and dividend.
Jennifer
Hutcheson: Thanks Mark. We ended the year with $592
million of unrestricted cash on hand and our $700 million revolving credit
facility remained undrawn. OEG’s $65 million revolving credit facility had a
balance of $5 million outstanding. Taken together, our total available
liquidity was approximately $1.3 billion, net of approximately $15 million of
outstanding letters of credit. We retained an additional $109 million of
restricted cash available for FF&E and other maintenance projects. Our net
leverage ratio based on total consolidated net debt to adjusted EBITDAre was
4.1 times below where we ended the year in 2019 and at the low end of our
targeted range of 4 to 4.5 times. On a pro forma basis, assuming a full year
contribution of adjusted EBITDA EBITDAre from the JW Hill Country, our net
leverage ratio was 3.9 times.
In
2024, we expect to generate free cash flow before payment of dividends and
capital expenditures of between $500 million to $550 million, which, together
with our unrestricted cash balance of $592 million at year-end, and funds
available in our FF&E escrow accounts will be more than sufficient to fund
the dividend and the capital investment priorities that Mark outlined. At the
end of 2024, we expect our total available liquidity to remain above $1 billion
and our net leverage ratio to remain well within our target range. As our
projections demonstrate our balance sheet and liquidity position continue to be
in excellent shape to support the capital deployment opportunities available to
us and the continued growth of our businesses. Finally, we are pleased to
announce the declaration of our first quarter dividend from $1.10, payable to
shareholders of record as of March 29, 2024.
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