Ryman Hospitality Properties : Q3 2020 Ryman Hospitality Properties Inc. Earnings Call Transcript

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RHP.N - Q3 2020 Ryman Hospitality Properties Inc Earnings Call

EVENT DATE/TIME: NOVEMBER 03, 2020 / 3:00PM GMT

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NOVEMBER 03, 2020 / 3:00PM, RHP.N - Q3 2020 Ryman Hospitality Properties Inc Earnings Call

C O R P O R A T E P A R T I C I P A N T S

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

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

Patrick Chaffin Ryman Hospitality Properties, Inc. - Executive VP & COO

C O N F E R E N C E C A L L P A R T I C I P A N T S

Charles Patrick Scholes Truist Securities, Inc., Research Division - MD of Lodging, Gaming and Leisure Equity Research and Analyst

Shaun Clisby Kelley BofA Merrill Lynch, Research Division - MD

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

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

P R E S E N T A T I O N

Operator

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

This call is available for digital replay. The number is [phone], and the conference ID number is 5678843. (Operator Instructions)

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

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

Thank you, Maria. Good morning, everyone. Thanks for joining us today. We apologize for being a few minutes late. We had some technical challenges with our dial-in, but it is 2020, so I wouldn't expect anything less for this year.

So this call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the company's expected financial performance. Any statements we make today that are not statements of historical fact may be deemed to be forward-looking statements. Words such as believes or expects are intended to identify these statements, which may be affected by many factors, including those listed in the company's SEC filings and in today's release.

The company's actual results may differ materially from the results we discuss or project today. We will not update any forward-looking statements, whether as a result of new information, future events or any other reason.

We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure in exhibit to today's release.

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

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

Thank you, Mark, and good morning, everyone. Well, I never imagined I would start off an earnings call sounding optimistic after a quarter in which we reported $35 million of negative adjusted EBITDAre, but that is just how strange this year has been.

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NOVEMBER 03, 2020 / 3:00PM, RHP.N - Q3 2020 Ryman Hospitality Properties Inc Earnings Call

The third quarter was our first full quarter of operations since reopening 4 of our 5 Gaylord Hotels, and we observed many green shoots and encouraging sequential trends in this business as we move through the last 3 months, and the same can be said for our entertainment business. I'd like to highlight many of these because I believe the data from our third quarter performance provides solid evidence of the strong position our company is in, as we get closer each day to a vaccine and therapeutic resolution to the COVID-19 pandemic.

None of us can say precisely when that day will occur, but if we assume, as most experts do, that a viable vaccine is possible around the end of this year or the beginning of '21, with some additional time to achieve widespread distribution, then we can paint a very good picture for you of how we expect our business to perform over the next 12 to 18 months.

What's more, regardless of the exact timing of that inflection, I can assure you that the longer term, in '22 and beyond, our business is poised to emerge from this period in an even better position than before COVID-19, and I'll discuss the unique attributes of our business and the broader trends in our industry and the economy that gives us the confidence to say just that.

So let's look at the progress we made in the third quarter. For starters, we considerably improved our adjusted EBITDAre sequentially compared to the second quarter of this year when we were essentially fully shut down by, in fact, $30 million.

Our adjusted EBITDAre loss in the quarter of $35.3 million, combined with our average monthly interest expense and debt service of $9.5 million and about $4.4 million in maintenance capital expenditures in the quarter, represents a cash burn of about $22.7 million per month during the quarter. This is below our forecast of $25 million per month, which we provided in early September, which was itself below the $28 million to $30 million range we estimated in our second quarter call in early August. The primary drivers of this steady improvement in cash burn are the positive trends we've seen in our hotels, both from a revenue and expense perspective since we reopened.

For our consolidated hotel segment, third quarter occupancy was 14.6%, with ADR down only 3.8% compared to the third quarter of last year. Now if we exclude the National, which remained closed in the third quarter and our 2 small overflow hotels, the combined occupancy rate from initial reopening through September 30 for just the 4 Gaylord Hotels has been 18.1% at an average daily rate of $184.

This combination of occupancy rate and solid outside of the room spend we have seen is comfortably above the levels necessary to justify the reopening decision and has been primarily driven by the amount of leisure transient demand we've been able to induce throughout the summer and early fall.

And we continue to see this in October, which has performed better than we'd expected, especially in light of the current increases in COVID-19 cases in the news globally. Naturally, this has us optimistic as we head into the holiday season, which is typically our strongest period for leisure transient and in which we believe we have a compelling programming slate this year.

We began with our Halloween program, and now we're moving into our Thanksgiving and Christmas displays, which will be headlined by our first ever I Love Christmas Movies event that will occur around Thanksgiving through year-end. This program replaces the ice exhibit we have typically hosted and instead gives our guests an opportunity to immerse themselves in 13 scenes from classic Warner Bros. Christmas films, such as Elf, Polar Express and Christmas Vacation. We've been selling tickets since October 1 and been pleased with the response, including both ticket and room night packages.

Drilling down a little bit, our occupancy levels have been led by the Gaylord Texan, which achieved over 27 points in the third quarter, that is an average of 486 rooms sold per day. And included in that, we were pleased to host almost 8,100 group room nights in the quarter at the Texan as well. In fact, the Texan turned in an operating profit in the third quarter, with a positive adjusted EBITDAre of $345,000, and that figure is after $2.4 million of expenses that were quite clearly devoted specifically to COVID-19 mitigation, which includes severance, furlough benefits and specific material supplies. The Texas -- the Texan was followed by the Gaylord Rockies, which achieved only 19 -- which achieved over 19 points of occupancy in the third quarter. The Rockies had a modest loss in terms of adjusted EBITDAre, but if you also exclude the approximate $1.5 million of similar direct COVID-19-related expenses, this property would have also been in the black by about $200,000.

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NOVEMBER 03, 2020 / 3:00PM, RHP.N - Q3 2020 Ryman Hospitality Properties Inc Earnings Call

Another way to look at this performance is this, after excluding COVID-19 costs, our hotels portfolio generated a pro forma operating loss of only $3 million per month on an occupancy of just 15% during the third quarter. Now this is really a remarkable achievement for the operating and asset management teams of our company, both in terms of scaling our expenses quickly in response to the sudden demand shock as well as on the revenue side quickly pivoting to optimize drive to leisure demand in the absence of meaningful group business. It really confirms that reopening these 4 hotels was absolutely the correct decision, and we plan to continue to build on this momentum.

I should add that we are accumulating valuable lessons from this experience that we will carry forward with us, well after this pandemic is over.

Another bright spot for our hotels was with regard to cancellation and attrition fees, where we were able to collect close to $7 million in the third quarter. This is an area of our business where we've been very conservative in setting our expectations, and I've often emphasized how we are prioritizing rebookings and preserving customer relationships over immediate collection of full contractual fees now that we're open. What we've been able to do in many of our customer conversations is to strike a great balance between collecting some partial cancellation fees upfront in exchange for a rebooking, and that has been a win-win for us and for the customer.

Now this brings me to yet another green shoot in our hotel business, and that is our sales activity and the on-the-books pace for the short and long term. In the third quarter, our gross new bookings totaled 669,000 room nights, which was a decline from the third quarter of last year of only a little over 22,000 room nights. Now, of course, a substantial amount, about 77% of these new room nights, were those rebookings of COVID-related cancellations, which I just mentioned. But nevertheless, these are real downstream bookings. In fact, as of October 30, we've rebooked now over 54% of COVID-related cancellations to date. Frankly, I do not know of another company in our space with this type of performance, and is above our aspirational goal of 50%, which we set at the outside -- at the outset of the pandemic back in mid-March.

Back to our third quarter sales. What is remarkable is that the flip side of that 77% means that 23%, almost 1/4, of our sales activity in the last 3 months were entirely new future bookings. Meeting planners right now are experiencing something they have never experienced in their careers. With essentially every city convention center closed and every large group canceled in the near future, these folks are so distracted, and I find it remarkable that we have their attention to the extent that we do.

So while certainly the pace of new bookings have slowed as meeting planners not surprisingly await more clarity on the next 12 months or so, there remains an encouraging level of activity in some of the outer years, that is '22 and beyond, where planners and customers feel they have more visibility and still comfortable making longer-term plans.

The net-net bottom line of our cancellation, rebookings and new bookings is that, as of September 30, we still have over 38 points of occupancy on our books for next year 2021. Of course, this is below where we would typically be standing, with 2 months left to go before the start of the new year, which is normally in the range of 45 to 50 points or so, but under the current circumstances, this is a substantial book of business, which is mostly concentrated in the second through the fourth quarters of next year.

We believe this bodes quite well should a vaccine arrive by the year-end-- by the end of this year, with potential for widespread distribution to be achieved by the midpoint of next year. In a best case scenario, with a timely vaccine approval and distribution that hastens people's sense have returned to normal, our current book would imply that the second half of next year could look pretty close to normal.

Again, I'll emphasize that this is under a timely vaccine scenario, which, of course, is out of our control, but appears to be one reasonable possibility according to the experts.

Furthermore, if you look past next year, we have 39.7 points of net occupancy on the books for 2022, which is, in fact, slightly ahead of last year's pace when we had 39.2% points of occupancy on the books for T plus 2 or '21 -- or 2021 at that time. This means that, today, when we look past the next 14 months, we are still looking at a healthy normal book of business in the long term as long as this environment does not drag on for another year or so.

Now this is the point where you're probably wondering what about the future. Won't your industry be permanently changed as a result of COVID-19? We've had many conversations with investors recently and meeting planners. And obviously, this is the question that needs very clear clarification.

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