Ryman Hospitality Properties, Inc. (RHP) Q2 2013 Earnings Report, Transcript and Summary

Welcome to Ryman Hospitality Properties Second Quarter 2013 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. Mark Fioravanti, Executive Vice President and Chief Financial Officer; Mr. Patrick Chaffin, Senior Vice President of Asset Management; and Mr. Scott Lynn, Senior Vice President and General Counsel. This call will be available for digital replay. The number is (800) 585-8367, and the conference ID number is 16138229. [Operator Instructions] It is now my pleasure to turn the floor over to Mr. Scott Lynn. Sir, you may begin.

Good morning. Thank you for joining us today for the company's second quarter 2013 earnings call. This call may contain forward-looking statements as defined in the Private Securities Reform Act of 1995, including statements about the company's expected future 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, expects or similar ones 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 earnings release. As a result, the company's actual results may differ materially from the results we discuss or project today. We will not publicly update any forward-looking statements, whether as a result of new information or events, or for any other reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP financial measure in an exhibit to today's earnings release. I will now turn the call over to the company's Chief Executive Officer, President and Chairman, Colin Reed.

Thank you, Scott. Good morning, everyone, and thank you for joining us they. As you will see from our results, the second quarter was challenging from a hotel operations perspective. On the call today, we will delve into the factors impacting our results in the quarter and the actions that we and Marriott are focused on to improve near-term operating results and most importantly, position the company for revenue and profitability growth in 2014 and beyond. I will also provide some perspective on the current trends in the group sector and then touch on the continued refinement of our guidance for the remainder of the year. And then Mark will take you through some of the details of our second quarter financial results. In early June, we shared several emerging trends that we were seeing that we knew were going to adversely impact the second quarter, and particularly, our outlook for the remainder of the year. As a result, we decided it was appropriate at that time to lower our guidance for the year based on the forecast for our business. Now to remind you, the trends included: lower-than-expected, in-the-year, for-the-year group bookings, due to a combination of transitional issues and reluctance of groups to book short-term business; cost synergies within our hotels that were not been realized as quickly as originally anticipated; and declining hotel property level margins due to transition-related disruptions. Now to be perfectly clear with all of you, we're not happy with several elements of our results this quarter, particularly as it relates to the transitional issues, and neither is Marriott. So what are we doing about it? Over the last 60 days, we have worked extensively with Marriott to understand the drivers behind each of these trends, the opportunities for improvement in each of our hotels and how unique the Gaylord Hotels' operating model best fits within the Marriott sales process. We now have an agreed-upon specific set of action plans to arrest and reverse the negative sales and operating margin trends in our business and to do everything possible to contain the impact of these issues to 2014. So what have we done to remedy the group sales issues we discussed in June? Now there are 2 very distinct sales opportunities we have, and let me try and describe them both to you. The first issue relates to the customer group that we refer to as the 10-to-300 room nights at peak. This segment of customers tends to make up the majority of the in-the-year, for-the-year business. Now to remind you, our in-the-year, for-the-year production in the first quarter of this year was pretty stellar. Now that gave us confidence that 2013 will be a decent year. As April and May proceeded, in-the-year, for-the-year production declined from the pace we experienced in the first quarter as production responsibilities shifted to the regional sales offices at Marriott. Consequently, reach group room nights were called down, and that was the major contributor to our early June guidance revision. A problem, though, is that the speed of ramp-up continues to be slower than we want or need, although improvement month-over-month is occurring. As the challenges with the sales office production occurred, we began to experience group trends over the last couple of months that reflected softening in group business. Attrition rates across May and June revealed a steady increase. To give you more data, Q2 in 2012, our attrition rate was 6.7%, which is really at the lower end of our norm. Q1 of '13 was at 8.3%, about the norm, but Q2 climbed to 12.9%. It's difficult to ascertain if there is an economic trend going on, caused by sequestration and by general economic inertia, but it does appear in the short term that companies who have booked meetings are proceeding cautiously. With the group sector under an industry microscope, let me just spend a minute talking about other trends that we are seeing. As some of you have likely heard from other companies, the group sector overall faced headwinds in the second quarter. Through April, group occupancy for the top 25 markets was up about 1/10 of a point and group RevPAR for these markets was up 4.8%. However, starting in May, a different trend began to emerge. The top 25 market saw group RevPAR declined to 2 percentage points year-over-year. And in May, another 3 percentage point decline in June -- 2% in May and another 3% in June. And per Smith Travel Research, through July 27, the top 25 markets have seen this trend continue through this month. This trend was evident in 3 of the markets our hotels operate: Nashville, Orlando and Washington. Group RevPAR declined 10.8% in the Nashville market, 3.7% in the Orlando market and was about flat in Washington, D.C. Dallas benefited from a favorable comparison in '12, when a new large hotel in downtown Dallas was first ramping up from its Q4 2011 opening. As with the overall top 25 markets, this trend continued into July. STARS' running 28-day report indicates that group RevPAR in Nashville, Orlando and Washington all declined. Now these trends have materialized at our hotels in several different ways. And as I mentioned earlier, group attendance levels have softened and meeting planners are struggling to accurately project the attendance of their meetings. For example, one large corporate group that traveled to one of our hotels in late Q2, reduced its program 30 days prior to the arrival, from a 3-week event to a 1-week event, once they realized that the attendance levels could not support the 3-week event. Other meeting planners have commented that their attendees are under pressure to minimize their time out of the office. And as a result, we've also seen shoulder nights materialize lower than historical levels, as attendees are arriving later or departing earlier from a specific meeting. Now there appears to be no one single explanation behind the short-term softness we are seeing in the group segment. While government sequestration is one of the forces at play, that explanation alone cannot fully explain the decline in the overall segment. Our manager has responded by ramping up transient offers and packages in order to offset the impact of group decline. They and we have also examined our room nights on the books for 2013 and have scrubbed them more aggressively to account for the softness that we have seen in the last couple of months. And given all of this, Marriott modified its forecast to us for the rest of the year, and this is reflected in the guidance that we described this morning. So the question is: What have we done about this? Now we are adding back sales resources to our hotels and dedicating resources at their regional sales offices and I have confidence that this will arrest the issue that we have experienced since April. It is important to note that over the past couple months, we have seen lead volumes, save in the 1,000-plus category, which I'll discuss in a minute, rise materially year-over-year. So this gives me confidence that property-focused resources and focused resources in the regional sales offices will improve conversion and fix the problem regarding this category. The other areas of sales where we have had extensive dialogue with Marriott is in the 1,000-plus-at-peak groups, which are absolutely critical for massive hotels like ours. To put the importance of this sector into perspective, about 40% of our total gross group room night production over the past 2 years had been in the 1,000-plus groups. After extensive dialogue with Marriott, they have agreed to create specific sales incentive programs for Gaylord Hotels sales managers for this 1,000-plus room night group, as well as create a team of hunters dedicated solely to the 1,000-meetings sourcing. Now while some of these action plans I just described may not have an instant impact, they should drive positive results in 2014. On the margin management side, our asset management team has conducted a thorough review of all labor management, procurement and forecasting processes with Marriott and the senior leaders of each of the hotels. As I mentioned to you, in June, the integration of these massive hotels is extraordinarily complex and to fundamentally change basically every approach to doing business in our hotels, in a 6-month period of time, was extraordinarily ambitious. Now that being said, the hotel employees and leaders are beginning to overcome the learning curve associated with the new tools and processes that are in place. Our asset management team is working closely with Marriott to better understand cost synergy misses, and particularly, put action plans in place to attain the appropriate synergies. Now challenges aside, there were a number of very positive accomplishments during the quarter that reinforce our confidence that our business is well-positioned for the future. Aided by the affiliation with Marriott Rewards, we continue to see strong room night and ADR increase in the transient segment. During the second quarter, transient room night demand increased 22% or approximately 24,000 room nights. Transient ADR grew by a healthy $4.89 or 2.9%. This is an area where we will continue to focus, particularly given some of the softness that we're seeing in the group markets I've just discussed. Our goals that we set a year ago for our corporate costs have been accomplished. During the quarter, Corporate and Other adjusted EBITDA totaled a loss of $5 million, a $6.4 million improvement versus the same time last year. Overall, for the first half of '13, we have reduced our corporate overhead by $12.5 million over the same period as last year, slightly ahead of where we planned. Now another bright spot is our Opry and Attractions segment, which had reported a record second quarter in both revenue and profitability, with the segment's adjusted EBITDA increasing 27% versus the second quarter of '12. Now, there are several reasons for this, but tours international is really growing, and this will be very good for all of our businesses here in this market. The last second quarter bookings production was lower than the prior year. Year-to-date, we have a solid base of group business on the books for '14. As of June 30, we have approximately 40.7 points of occupancy on the books for '14, compared to 39 points of occupancy on the books in '12 for '13. Now on face value, the year-over-year Q2 decline in rooms booked could look troubling, particularly when you take into consideration my comments about the reluctance of planners to book short-term business. But here's a couple of positive things that I want to just quickly reference. First in -- 1st of July, our gross group production was up almost 50% in July of 2013, versus the same month for '12 to 128,000 room nights, with very good production for in-the-year and for-the-year and for next year. Also, new leads that surfaced for our hotels in July increased by just over 30% from the same period last year and this too is very encouraging. The opportunity is in the converting of this healthy basket of leads and the new sales resources that are in the process of being added to our hotels and dedicated at the regional offices that I referenced earlier in my comments, should result in increased production. Turning to our capital structure. The company successfully refinanced a significant portion of its balance sheet during the quarter, including the private placement of $350 million of 8-year, 5% senior unsecured notes and refinancing and upsizing our credit facility, extending the maturity through April 2017. And now let me shift to guidance. I can assure you that modifying guidance again is very troubling to me and to this team. And those of you that know us and who have followed our company for, over the years, know that this is not what we do. But the reality is, the group sales transition has caused some disruption to short-term bookings and the magnitude of the systems migration caused margin compression, all occurring in a weakening group environment. Now Mark will walk you through the numbers, but suffice it to say while our short-term performance is way below our expectations for this business, our projected AFFO is extremely healthy and well in excess of our current dividend. As regards the future, I'm still very confident that the transition to Marriott management will yield very good long-term value and I can assure you all we are 100% focused on ensuring that this is the case. Mark, why don't you take the folks through the financials?

Thank you, Colin, and good morning, everyone. I'll spend a few minutes this morning reviewing the financial highlights for the quarter, touch on the balance sheet and our refinancing activities, and then, cover the guidance for the year. On a consolidated basis, Ryman Hospitality Properties revenue for the second quarter of 2013 was $245.2 million, a decrease of 2% from the prior year quarter, adjusted for the outsourcing of hospitality retail operations. The revenue decline was driven by decline in both RevPAR and total RevPAR, attributed to the near-term softness in group demand and transition-related disruption in the group sales process. During the quarter, the company generated income from continuing operations of $16.4 million or $0.18 per fully diluted share. On a consolidated basis, the company has generated adjusted EBITDA of $70.9 million, and $48.8 million in adjusted funds from operations, or AFFO per fully diluted share of $0.75. AFFO excluding REIT conversion cost was $51.5 million in the quarter or $0.79 per fully diluted share. It's important to remember that the GAAP fully diluted share calculation do not consider the anti-dilutive effect of the company's purchase call options associated with our convertible notes. As a reminder, the dilution mechanics for the convertible notes, purchase call and sold warrants, is available in the Investor Toolkit section of our website. These mechanics have been updated to reflect our recent purchase of the convertible notes, and an unwinding of a pro rata portion of the note hedge. Turning to the Hospitality segment results. Driven by a 290-basis-point decline in occupancy, RevPAR declined 3.9% to $130.37 in the second quarter of 2013. After adjusting the prior year revenue for outsourcing of retail operations, total RevPAR for the second quarter of 2013 declined 3.2% to $302.29. Gaylord Hotels in-the-year, for-the-year cancellations in the quarter totaled of 21,415 room nights, an increase of 42.8% when compared to 14,997 room nights in the second quarter of 2012. As Colin mentioned, attrition rates in the quarter increased 6.2 percentage points to 12.9% versus the prior year quarter. During the quarter, Gaylord Hotels collected $1.3 million in attrition and cancellation fees. Compared to the prior year quarter, Hospitality segment adjusted EBITDA decreased 13% to $68 million. Hospitality adjusted EBITDA margin decreased 3 percentage points to 30.5%. The Opry and Attractions segment had a record quarter in terms of revenue and profitability. For the quarter, this segment generated revenue of $22.4 million and adjusted EBITDA of $7.9 million. With most of our corporate cost synergies in place, the Corporate and Other segment adjusted EBITDA totaled a loss of $5 million in the second quarter, a $6.4 million improvement when compared to a loss of $11.4 million in the prior year quarter. During the second quarter of 2013, the company incurred $5.4 million of cost associated with the REIT conversion activities. Conversion cost in the quarter were primarily related to systems conversions, professional services and hotel-specific costs. And moving on to the balance sheet. As of June 30, 2013, we had total debt outstanding of $1,154,700,000 and unrestricted cash of $44.4 million. As we mentioned on the last quarter call, the company successfully refinanced its credit facility and completed a private placement of $350 million aggregate principal amount of 5% senior notes due in 2021. During the quarter, the company repurchased and canceled approximately 1 million shares of its common stock for an aggregate purchase price of $44.3 million, which the company funded using cash on hand and borrowings under the revolving credit lines of its credit facility. Subsequent to the end of the quarter, the company announced that it repurchased in private transactions, $54.7 million in principal amount of its 3.75% convertible senior notes due in 2014, which were canceled. It settled another $1.2 million of principal amount of the convertible notes that were converted by a holder. After these transactions, $304.1 million in principal amount of the notes remain outstanding. The repurchases were made for aggregate consideration of $98.6 million, funded by draws under the company's revolving credit facility. The company expects to report a loss on the extinguishment of debt of approximately $3 million in the third quarter related to these purchases. In connection with the repurchase of the notes and settlement of the early conversion, the company proportionally reduced the number of options and warrants underlying the bond hedge transaction related to the convertible notes. In consideration for these adjustments, the counterparties to the bond hedge transaction paid the company 157,886 shares of the company's common stock, which was subsequently canceled. The adjustments to the warrants and options were considered modifications to the terms of the agreement, and the company recognized a noncash charge of $4.9 million in the second quarter, which reduced net income available to common shareholders and earnings per share available to common shareholders. On July 15, 2013, we paid our second quarterly cash dividend of $0.50 per share of common stock to stockholders. We also reiterated our plan to distribute total annual dividends of approximately $2 per share in cash, in equal quarterly payments in April, July, October and January, subject to our board's future determinations as to the amount of quarterly distributions and the timing thereof. Now turning to guidance. As Colin indicated in his remarks, due to lower-than-anticipated actual performance for the Hospitality segment during the second quarter, continued softness in group demand, lower-than-anticipated near-term cost synergies and slower hospitality margin recovery during the second half of 2013, the company is lowering its Hospitality segment RevPAR, total RevPAR and adjusted EBITDA guidance. Full year 2013 Hospitality RevPAR has been reduced to 0 to negative 1.5%. Total RevPAR has been reduced to 0 to negative 2.5% and hospitality adjusted EBITDA has been reduced to a range of $242 million to $250 million. In addition, we have increased the Opry and Attractions adjusted EBITDA guidance to $19 million to $20 million and further refined our range of Corporate and Other segment adjusted EBITDA to a loss of $21 million to $23 million. In total, these revisions reduce the company's consolidated adjusted EBITDA to a range of $250 million to $261 million, and adjusted funds from operations to $187.5 million to $197 million, and AFFO after REIT conversion cost to $168.5 million to $179 million. And with that, I'll turn the call back over to Colin for any closing remarks.

Mark, I think I'm going to skip closing remarks and just open the lines up for questions. Jackie, if you would open the lines up, please, we'll get to Q&A.

[Operator Instructions] The first question comes from the line of Jeff Donnelly with Wells Fargo.

A few questions. Colin, I think you had mentioned that part of your action plan for small and short-term group bookings is to restore the property-level folks, are those folks in place? Are they new to the Gaylord product? Or are they former Gaylord salespeople who are returning?

They are both. We've -- I think 3 of the ADOS's that we agreed a month ago, we were putting back, I think are in place. The last one will be in by August 15, and we're looking at 1 additional individual coming back into each hotel, as well as then refocusing and dedicating resources in these regional sales offices. And that has been a plan shift that is being discussed with the operator over the course of the last 2 to 3 weeks and has been signed off by them.

And how long do you think it takes, in your experience, to have someone like that ramp up, if you will, until they become productive? Is that a quarter? Is that 2 quarters, or is it, you expect it to be much quicker than that, because of...?

I think the reality is it's going to be a quarter. What we -- you cannot imagine, Jeff, the extensive dialogue we've been having over the last month, 1.5 months, with our operator here. And the belief is that the regional sales offices will be ramped by October. And these additional resources that we're putting back into the hotels is an effort to ensure that is absolutely the case. And so, this is, I think, this is a major change for Marriott, and we're pleased that they're doing it.

And just -- I'm not sure you're able to compartmentalize like this, but at the midpoint, you guys have lowered your hotel EBITDA by about $16.5 million, and I know some of that is from the water outage issue, how much of that change do you think is related to just the move of the industry or group trends, versus how much of it is just a worser experience than you expected in [indiscernible]?

Yes, that's a really good question, and one that we've spent a lot of time over the last weeks sort of trying to nail down. The thing that was a little surprising to us, that caught us a little bit by surprise in June and July, was this spike that we had seen in attrition, in just pure attrition. And we're now -- in the June-July attrition rates, are sort of running at where we were running in the latter part of 2008, as the world was starting to fall apart. And that is a little troubling, obviously. So when Marriott came back to us and talked to us over the last couple of weeks, we've actually had 2 major discussions with them about adjusting the back end of the year in terms of scrubbing the group performance in the back end of the year. It's very hard for us to argue with that position given what exactly what the customer is actually doing. So this is a long-winded way -- I would say to you, probably, I would say to you probably 50% of what we're looking at in the back end of the year is this question mark about, is this attrition trend that we've seen in the last 2 months, a trend that's going to be through the rest of the year or is it a blip? I would say 50% of it's that, there's a degree of caution around this attrition spike, and the other 50% of it is just that the cost synergies. June's numbers came in, we don't have July's yet. We have July's revenues, but we don't have July's financials. June numbers, the cost synergies didn't materialize, again, at the forecasted pace, so there's a degree of caution around the back end of the year. But what I will say to you though, is that we now have agreed to plans to deal with these cost issues for the rest of this year and for '14.

And just maybe one last question. Maybe you can, for a little bit of an education, how much ability do you have over influencing attrition, is that just a rate-related issue? Or is it related just more of the content of the meeting, and that's kind of out of your control?

Well, it's pretty much out of our control, as, if you talk to any operator, how groups perform is really down to the individual group. Where you can effect it is which groups you indeed book. There are certain groups that will perform better than other groups. And so, this is something that each of the managers -- I mean, we conditioned the managers, when they were under our direct control, to basically, with their convention services folks, to be basically in touch with every group, a month out, 2 months out, to see what the pickup looks like. So it's very difficult for the operator to influence the performance of the group. And I really don't think it's as simple as going back to the meeting planner and say okay, you're running at 70% of your block, therefore we'll give you a $5 discount, let's see if we can get this to -- it doesn't work that way. And so, Mark, you want to say something?

Well, probably just to say, Jeff, the other way that -- I think Colin's right, it's hard to influence. I think that one of the ways that you manage it is how do you manage your blocks. What you're anticipating is your future attrition, and how aggressively you're overselling the hotel, based on what you believe, how you believe the group will pick up. And so over a longer period of time, you can manage some of that impact. But the challenge is always is you're using historic-looking data to predict what future performance might be, and when you have inflection points and changes, you can get caught flat-footed as it relates to how you've oversold your, or undersold your hotels.

Your next question comes from the line of Chris Woronka with Deutsche Bank.

I wonder if we can get a little bit of color on the attrition that occurred during the quarter. Was that, could you have linked any of that to government, was it incentives business, was it a little bit of everything, is there any trend you see in there?

Chris, this is Patrick Chaffin. Yes, the attrition that we saw was most heavily impacting Gaylord Opryland and Gaylord National. Obviously, you can imagine the National is more a result of the market dynamics in place in that market and it did deepen or worsen throughout the quarter. And Gaylord Opryland is more of just the type of business that they deal with is, given the size of the hotel, more association-type business, and as Colin talked about earlier, you have SMERF business, as we call it, as well. As Colin mentioned earlier, there is no silver bullet, if you will, of what's driving some of these economic trends, but those 2 hotels saw it the most, and they saw it progressively getting worse through the quarter.

Okay. That's great, and then, I mean, is there any specific levers you guys can pull to kind of fight off that attrition? I mean, I would guess, being plugged into Marriott helps with transient. Does that offer maybe some downside protection from here as you move forward?

Well, we're protect in a couple of ways. We're protected in our contracts. So if groups perform, like the group I illustrated in my script, the group that went from a 3-week to a 1-week program, that group will owe us fairly healthy attrition payments. So that's the way we're protected. And remember, when we get attrition, we book attrition. We book the income that we get from attrition when we actually get the money. So there's a lag to the financial benefits of our contract. There's a lag to actually when we get it from when it's supposedly due. And then the other part of it is, that we have witnessed with our transition to Marriott management, is that their marketing department has the ability to, as we see blocks of weakness, has the ability to turn on their spigot and put incentives in place to drive the leisure customer, and we've seen that. We changed some things from a marketing perspective in July and we saw, I think it was 15,000 more leisure room nights in July, than we booked in July last year. So those are the things that we can do now that we are within the -- under the Marriott umbrella. And Patrick?

Yes, the only thing I'd add to that, just to complement what Colin's already said is, as these regional sales offices that Marriott uses fully ramp up over the next few months, that will increase our ability, 60, 90 to 120 days out, to respond to attrition or call-downs that we're getting from groups, because these regional sales offices have increased our exposure to small group business in the 10-to-300 peak room nights. So that will increase our ability, once they are ramped up, to respond effectively, as we are seeing some of the large groups move with economic trends.

Yes, that's right.

Okay, that's great. Can you guys -- kind of a modeling question, but can you guys maybe share with us the level of cancellation and attrition fees that you're owed right now, that you would hope to collect at some future point?

Chris, we have the data. It's not something we simply share, but I can -- we can pull it up, and I can give you a follow-up just to give you some of that data. It's not tremendously higher than we would normally see. A lot of that -- because a lot of these groups have been performing at attrition levels that, where they don't incur significant fees, but we've had a lot of groups incurring attrition. So it's not single groups incurring a lot of fees as opposed to just across-the-board, a lot of folks pulling back, so -- but I'll give you a follow-up to provide some of the data to you.

Yes, but the outstanding attrition and cancellation fees are not a couple of hundred thousand dollars. It's a large sum of money, but we'll get that to you.

Got you. And then just finally, how should we think about -- or how does the relationship work when you think about Marriott selling a 1,000-room group into Orlando and there is your Palms and there is, close to World Center, how does that relationship work? And is there anything that you guys think needs change? Or would want to change? Are they incentivized in any way to go one way or the other?

This is a very complicated -- you've asked a very simple question. It sounds a simple question, but it's a very complicated answer. And here's the issue: The way Marriott sort of currently are configured, by and large, is that they manage accounts. They manage large companies. They manage accounts, and so when that account has a meeting, be it a meeting of 50 people or 5,000 people, they manage the account. What we have done, historically in our company, is we believe that the way to be configured is to have a group of hunters that are just purely going after these big annual meetings. And so, what we're doing is we're putting together this group of people. And I think if you read Arnie Sorenson's earnings script from last week, he referenced that they are making changes to the way they go about sourcing big meetings. And a lot of that is because of the dialogue that we've been having with his organization over the last couple 3 months. Here's the good thing. There are probably only 8 to 10 hotels in the Marriott system that can take 1,000, 2,000 room, at peak, groups. And if you look at the rest of the industry, Hyatt has a couple and Starwood have a couple, but the opportunity here is to get this, what I would call SEAL [ph] team that focuses on these big meetings. There's a lot of big meetings that we need to be all over, and I believe it will be good for the World Center in Orlando, because the World Center will be one of those 8 to 10 big hotels, I believe it will be good for the World Center, as it will be good for their hotel in San Antonio, because these customers, by and large, 80% of these 1,000-room-pluses, want to rotate their business, hotel by hotel, year by year. And we believe that this will be a modification, it will actually be good for the Marriott system, as well as good for the Gaylord system. So we're pleased about this and excited that we're moving in this direction, and there's going to be a little bit more refinement over the next month. But we're pleased with this direction, and we think it's going to be good for our business.

Yes, and just to add to that, that group of hunters that Colin referenced, it's there to ensure that we get the look, that we get the lead, the opportunity to look at the business and to sell to that customer. Then it becomes the responsibility of the on-property folks to make sure that they've put on a great presentation of what we can do for that specific group once we get the look. So we have folks in place, known as destination sales executives, who work that group and make sure that they have a great experience, and that they can envision their meeting inside of our property. What we find is that if we can get them on property, to go through and spend time with that DSE [ph], the likelihood of closure on that meeting goes up exponentially.

And to engage with them before the RFP goes out.

That's right.

So you're shaping the RFP. This is -- look, we -- this is one of the things that I think our company, before we moved from a C corp to a REIT, this is one of the things that I think we did very well and was one of the reasons why we operated very high RevPAR, total RevPAR premiums in the markets that we do business in. And I think we have now, by this very good dialogue we've been having with Marriott, I think they have come to the conclusion that this is in fact a very good refinement to their business model. And so we're excited about this.

Your next question comes from the line of Kevin Milota with JPMorgan. Kevin Milota - JP Morgan Chase & Co, Research Division: I was hoping to talk about your forward occupancy levels. I appreciate the update on '14, with the 40.7%, but hopefully you could give us a look on 2015 and 2016 occupancy as it stands right now on the books?

Have we done that before, Patrick?

Typically, we don't go beyond 1 year out. Kevin Milota - JP Morgan Chase & Co, Research Division: We had 30 points for '15 as of the last call?

Yes, I mean, we are -- I would say that '15, '16 and '17 are within the range that is appropriate for those years right now. As we get into November, we'll probably give you a lot more clarity around where '15 stands currently. But it is within the range of where you see...

Like it most likely does.

That's correct. Kevin Milota - JP Morgan Chase & Co, Research Division: So we're not seeing declines or attrition or cancelation activity happening in the outer years?

I mean, we see a little bit of -- we always do, we always see a little bit of cancelation, because groups change their mind or want to change the date, but there's nothing untoward going on here. Kevin Milota - JP Morgan Chase & Co, Research Division: Okay, then as it relates -- I'm sorry, Patrick?

No. I was just going to say what we're doing right now with the 1,000-leads and greater, of getting that team of hunters in place, is to make sure that we start impacting '15, '16 and '17 and beyond in a positive way, to make sure that the transition disruption that we've seen in our sales team does not spill over outside of 2013. Kevin Milota - JP Morgan Chase & Co, Research Division: Okay. And then for the 1,000-plus groups, 40% of gross production, how are those groups trending for '14 and '15?

Yes, '14, I don't have the actual detail at hand, in terms of the room nights on the books, for the 1,000-room. But there's no disconnect. The issue that's caused us to engage with the operator about this particular subject is as we dissect our lead volume and we break it down between the 10 to 300. And then, the 300 to 600, and the 600 to 1,000, and 1,000 and plus, what we have seen over the course of the last 3 months is our lead volume overall is up materially, but the segment that it is behind historical rates is in the 1,000-room plus. And that has caused us to say, "Boys, we've got to go about this in a different way." But overall, lead volume is up materially over last year. But we want to refine the sourcing of leads over 1,000 rooms by a different operating structure, which Marriott has agreed to.

And just to give additional color there, our leads for '15, year-to-date, are up about 7%, and we've seen that ramping up as we move through the year and move through some of the transition disruption. In the month of July, our leads for '15 are up 33%. Our leads in the month of July for 2016 are up 103%. Year-to-date, they're up about 7%. So we're moving in the right direction, and we're deploying the additional resources and working with Marriott to supercharge that and get it to where we feel it needs to be to get growth moving in our company again. Kevin Milota - JP Morgan Chase & Co, Research Division: Okay. Then lastly on guidance, since June, you've seen an EBITDA cut of $33.5 million at the midpoint, how comfortable are you with your current guidance? And how dependent is that guidance range on short-term in-the-year, for-the-year bookings?

That's a question we've asked ourselves. And forgive me, laughing, saying, because it's not a funny subject, but it's something that we have spent a long amount of time talking about. The amount of, we've had, first of all, we had decent in-the-year, for-the-year gross production in July, which is 17,000, 18,000 room nights in July for this year. The amount of net reach that we've got to, I think, accomplish for the rest of this year, Patrick, is 30?

Yes, between 30,000 and 35,000 roughly.

Yes, and historical trends, historically, I mean, we are...

Yes, I mean, if you go back to before there was any talk of a transition here, go back to 2011, we did about 37,000 room nights in-the-year, for-the-year for the remainder of this year. So that was our net reach at that time, and we had more room nights on the books at that period, so there was less availability. So we feel pretty comfortable with where we're at. Like we've talked about already, we've scrubbed the room nights down based on the attrition that we've been seeing. We've scrubbed the room nights, the reach that we have to achieve, based on what we've seen out of the sales offices. But like Colin said, we are expecting some stabilization there in the next quarter or so. So we've been as conservative as we feel is appropriate and come to that number and are pretty confident that where we stand is the right position for us.

And Patrick, the only piece of data that we'll give here is that the new leads that we, we received in July for this year, just in-the-year, for-the-year leads, numbered about 280,000 room nights in July. So -- and that's up, by the way, from '12, where we did about 210,000 in July of 12 when our salespeople were basically off the reservation. And in '11, we sourced about 147,000 new room nights in '11. So we're up a lot in '13, of new leads for this year and so these resources that we talked about, the dedication and the resources, will help on the conversion. And we've got to convert between now and the year about 35,000 -- 30,000 to 35,000 of those. So I think Mark and I have sort of come to the conclusion that we're comfortable about this and notwithstanding the attrition spike that we have seen.

Your next question comes from the line of Andrew Didora with Bank of America Merrill Lynch.

A few questions here. I guess, first, just when I think about the rest of 2013, Marriott cited on their conference call that they're seeing a pickup in 4Q after the weaker 3Q that you guys mentioned in your release. And I was just curious if you guys are seeing the same type of trends for 4Q. And I guess, specifically, what kind of business is driving that?

Our Q4 looks pretty good. Our group Q4 looks decent. The lead volume for the rest of this year, as I just articulated, looks decent. The leisure production should be decent. I think, I mean, that's the way I would describe.

Yes. Our Q4 is a little bit -- right, it's a unique quarter for us versus the other 3 because we are so heavily transient dependent with the holiday season. So group is a -- is a smaller component of Q4 for us, and certainly, given the success we've had on the transient side, should help drive Q4.

I guess, just other groups that you have on the books for the back half of the year, are you able to break that out between corporate, association, SMERF?

I know we have it. I'm not sure if we have it with us. So I might just need to give you a follow-up on that one, Andrew. But let me look around here for a moment. If you want to proceed with another question, if I've got it, I'll answer it now, if not, we'll follow up with you.

Okay. Yes. I guess just another question. You mentioned the occupancy in your books for '14, I think it was pretty close to 41%. I think you guys quoted a high 30% number on your last quarter call. Just curious, can you help us bridge how you get to that kind of 50% on the books number by the end of the year for '14? Specifically, what percentage of your next year bookings, maybe typically comes in the back half?

Yes, you've followed our company when we were responsible for running it day by day, and you know that our fourth quarter group room night production tends to be the biggest month. The month of December tends to be the biggest month of the year. So let me say this to you. We're up, as we articulated to you, 1.7%, 1.7 occupancy points as of the end of June. We've added to that in July. When I referenced that we booked almost 130,000, 128,000 room nights, a good part of that was, in fact, for next year, and some of it, some of that was also for this year, too. So we've added to the 1.7% in July. Now the other thing that's going to happen here is that we've got favorable comps year-over-year for the next 5 months. Last year, when our salespeople were off the reservation, our production was historically low in the 5 months of last year. We expect the production, given the amount of leads we have, to be very good over the course of the next 5 months. Next year as well, we do not anticipate the same volume of cancelations because we've got very little government business on the books. Patrick, remind Andrew how much government business we have on the books? We'll look at up, and then we'll get to that.

I've got it right here. Yes, for the remainder of the year, we've got about 20,000 government or government-related group room nights on the books, which is only about 2.9% of our remainder of year group rooms. And for '14, we've got about 31,000 government or government-related groups on the books. That's about 2.6% of our room nights on the books for the brand.

So very little government on the books for this year. And for next year, relative to what we have historically trended to. Then the other thing for next year, of course, is that we're going to have favorable mid-year group production year-over-year because we've -- we're in the process of correcting this problem that we've had from April, May, June, July, in terms of the regional sales offices. We're putting in place this 1,000-plus hunter group. That should be positive, and then we've got, we've had tremendous production this year through transient. And so I know I'm not answering your question directly in the sense of how do we get to 50 points of occupancy, but I really believe that 2014 is going to look a lot different to 2013, for the reasons I've just articulated. So we expect, good back end of the year group production for both, for both next year and future years. And typically, we book in the July through December, somewhere between 1 million and 1.2 million room nights. Last year, we booked about 900,000 because of the issue with our sales team. And given the amount of leads we've got on the books right now, I believe that the, returning to historical levels, we'll be able to do that.

That's very helpful. And just one last one for me, just on the corporate overhead, the number was a little bit better than we were expecting in the quarter. We're you able to cut more costs than you initially expected, and do you think the current run rate, I believe, it's about $5 million, do you think that's a reasonable run rate for the rest of the year?

I do, and we are looking at other ways to continue to cut it. We're looking at, probably going to send shock waves through the workforce here, what little we got left, but we're looking at reducing our building here and doing things like that to continue to eliminate cost and but we feel very good about where the cost is at the moment, and we're going to try like Dickens to reduce it even further.

Your next question comes from the line of Bill Crow with Raymond James. William A. Crow - Raymond James & Associates, Inc., Research Division: Just 2 questions. Colin, can you kind of comment on the sustainability of the dividend? I know you alluded to it a little bit in your prepared remarks, but as you look at '14 getting better, it seems like we just need to get through '13 at this point, at this level to sustain that going forward, is that fair?

That's the way I look at it, Bill. Absolutely. I think, look, do I like where we are? Absolutely not. We turned this company upside down in the last 6 months, and we all want the world to be nice and smooth and linear and everything else, but what's been going on here has been as a consequence of this massive transition. The good news is that the operator and the owner are aligned on the plans of action to deal with these issues. And I believe that and the reason why when Andrew asked the question about the rest of this year and getting into 50 points of occupancy going into the year, the reason I articulated my view of '14 is because I think '14 is setting up to be a very good year for our company. And I asked myself the question back in February -- I keep asking myself the question back in February, when we had the analyst meeting and I talked glowingly about '14, do I think about '14 in a different light than today than I did back in February? The answer is, on the revenue side, no. I think the issue is, we've talked about having $20 million of cost savings next year, the issue, is it $20 million, is it $15 million? But it's not going to be -- it's not material to the overall profitability of this company next year. And what we're working through with Marriott is how quickly do we get the procurement site ramped up. What do we do about the health and benefits part of the business? How do we deal with labor management? Those are the types of issues that we are engaged with them on, day by day. And I think we have a common understanding of the issues that we need to deal with, and are dealing with, and I think '14 will be a good year.

And Bill, just at the bottom of the new guidance range, we're at about a 60% payout and a $2 dividend. So we don't have any concerns around that dividend. William A. Crow - Raymond James & Associates, Inc., Research Division: No, that's important. One other question, which is if you go back to the reopening of the Opryland property, and I was fortunate to be there, there were about 800 meeting planners, as I recall, that were there. And I think that the loyalty and the respect that they have for the Gaylord operation at the time was pretty amazing and obvious. And I think that even that event spurred tremendous demand and advanced bookings. Do you think that this transition has harmed the relationship maybe temporarily with those meeting planners? And can you get it back to the level it was at a couple years ago?

So I've had a couple of analysts ask me the question, how do I feel about the transition? If we could do it all over again, would we do it? And the question that you just asked is one of the central, I think, components to the broader question about is the decision the right decision. And how I think about it, I think about it sort of 2 ways. From a personal perspective and also what's right for the business perspective. And on a personal perspective, you were there at that deal, when we reopened Opryland, as was I. And there was a lot of pride that we had, I personally had, in putting my arms around those meeting planners, and them saying great things about the company and how well, how they revered the brand. And that was all very great, all very good stuff. And personally, operationally, it's struggling for me when I've been one of these executives that if I see an issue, I want to fix it and fix it immediately. Now we have a management agreement between me and the operations of this business in between Mark and the team and the business. So it's conditioning differently, but as I think about the transition and what's right for the business, it's clear to me that we're seeing low overhead cost at corporate. The reasons we did this was to eliminate a bunch of cost in the business. We did this deal to drive transient business into these hotels. And also, to make ourselves available to the 130-plus thousand corporate accounts that Marriott have on the group side. And maybe 1 or 2 meeting planners don't feel quite the love that they felt maybe 2 to 3 years ago, but I can honestly say to you that the leads we're seeing is very encouraging, and the transient business we're seeing is very encouraging. There's the 9,000 people that work in our hotels, would they like to probably -- would some of them like to go back to the way it was? Of course. People don't like change. But I think from a shareholder's perspective, I think what we've done is right for the business, even though we've had these snafus around cost and this issue around the regional sales offices. But the good news is, we've built this brand. This team built this brand and we understand it and we have engaged with Marriott because we understand this brand. And we found a receptive manager to some of these issues. And I believe that over the course of the next few months, these issues will be eliminated from our business, and our business will be a stronger business as a consequence. So that's how I feel about it.

And just, Bill, to add to that. That's actually an issue that we have been watching very carefully, and the way that we've been watching it is, we have normal cancelation for future periods, but what we've done is look at as cancelations have come in for future years, what are the reasons for that cancellation, trying to make sure that it's just normal reasons and not something that has to do with the transition. And then I would remind you, our on-property folks, the team that provide that level of services that folks have been pleased with, a lot of those folks haven't changed and they have done a herculean job of maintaining the service levels to the best of their ability through this transition. And we've seen guest satisfaction levels continue to rise as the transition starts to become less of an issue, to the forward-facing stars and the folks that are dealing with the guests. So yes, that is improving. There are some transition issues that we did see, we went out and made it right with those customers and we're not seeing groups canceled for reasons that would cause concern as a result of this transition. So we are watching it very, very carefully. And at this point, we haven't anything that really causes us great concern.

So Bill, if you have any other -- we've had 2, 4, 5 folks ask questions. And I think what we need to do is I'll have one more question, we'll shut it down, and then we'll all be available through the course of the day to answer more questions. I know we've given you lengthy answers to your questions, but I think, given our release this morning, I think we need to spend more time communicating with you. And so can we move up, Bill, one more, one more? William A. Crow - Raymond James & Associates, Inc., Research Division: No, I'm done.

So one more question, Jackie, and then we'll shut it down.

Your final question comes from the line of Whitney Stevenson with JMP Securities.

I may have missed it or been confused, but I think you mentioned that 40% of total room night production over the last 2 years has been in the 1,000-room-plus segment. And I was wondering if you can give us an idea of what percentage of your production this year has been in that segment?

We will -- if you just hold on Whitney, we'll get you that.

Okay, and maybe while you're looking for the number, can you just give us an idea of the difference in lead time and the booking windows for the 1,000-plus room groups compared to the smaller groups?

Yes. The 1,000-plus room group is really -- the reason we've been focused on that is because the issue for us as a company is that we've got to have, by and large, '16, '15, '16 and '17 in really good shape in the course of the next 12 to 24 months. It's just because these big groups tend to book 2.5 to 4 years before they actually turn up. So it's not an issue for 2013, or an issue for 2014, but it's something that we need to deal with. As we saw this lead volume drop back over the last couple 3 months, it's an issue that we have been focused on with Marriott. So do you have that data?

It's about 39%. So in line with what we historically...

39%, Whitney, of the business we booked year-to-date. Is that right, Patrick, is 1,000-room-plus?

Okay, great. So this year is basically on track with the prior 2 years, and there's nothing short of unforeseen cancelations from the 1,000-plus segment that could threaten volumes at this point for '13, correct?

Yes. I mean, obviously, we're not going to be booking a tremendous amount of 1,000-room-plus groups for the remainder of this year, so that really -- you're correct, it shouldn't have that much impact on this year. And again, the first quarter, we benefited from a lot of the sales team that have gone away now were still in place. And so we had tremendously strong production there. Our second quarter production was down. A lot of that was our in-the-year, for-the-year. But our concern really on the 1,000-plus is in the lead category, and that's starting to recover some, as Colin talked about, as far as July, but what we're really focused is on the out years, of making sure that the funnel continues to fill with 1,000-plus leads. We haven't necessarily seen a detrimental impact to the production thus far.

Okay, Whitney, thank you. Everybody, again, thank you for joining us this quarter. It was a little longer than usual, but it needed to. And we're all here today. We are going through our quarterly board meeting tomorrow, which we're holding at our hotel in Texas. So if there are any questions, you know where to get hold of us, and we look forward to hearing from you. Thank you very much.

This concludes today's Ryman Hospitality Properties Second Quarter 2013 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.