Ryman Hospitality Properties, Inc. (NYSE:RHP) Q4 2023 Earnings Call Transcript
Ryman Hospitality Properties, Inc. (NYSE:RHP) Q4 2023 Earnings Call Transcript February 23, 2024
Ryman Hospitality Properties, Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
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.
We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most directly comparable GAAP measure in exhibits to today's release. I will now turn the call over to Colin.
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.
It remains our intention to continue to pay 100% of our retaxable income through dividends. With that, we can open it up for questions.
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