Ryman Hospitality Properties, Inc. (RHP) Q1 2014 Earnings Report, Transcript and Summary

Welcome to Ryman Hospitality Properties First Quarter 2014 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 25122491. [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. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act, 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, 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 financial measure in an exhibit in today's earnings release. I will now turn the call over to the company's Chief Executive Officer, President and Chairman, Colin Reed.

Thanks, Scott, and thanks to everyone for joining us today. I will start by discussing our first quarter results, which are encouraging. Then I'll give you a sense of how we are trending for the second quarter before discussing our expectations for the full year. So we saw some significant progress in our hotel performance right across the board this quarter. Notably, we reported a 6.5% increase in RevPAR, a 10.8% increase in total RevPAR and a strong 28% increase in hospitality-adjusted EBITDA. In addition, we saw the margins of our hotel business improve by 400 basis points over the last year's first quarter to over 30%. Now these are levels of margins that we expect to see in our hotels. And I believe we're making strides along with our manager to sustain this level of performance. Furthermore, our attrition levels are still improving quarter-over-quarter, and we saw in the year for-the-year cancellations decrease compared to the first quarter last year, down nearly 23,000 room nights. We will be the first to remind you that during the first quarter of last year, we were at the front end of our transitional challenges at the hotel level and our results suffered for it. However, it's important to note that our performance this quarter stacks up quite well, historically, even when you look at the -- our pre-transition first quarters of '12 and '11. In fact, our hospitality-adjusted EBITDA of nearly $70 million, it was a record for our brand in the first quarter. And this performance is in spite of 10,600 room nights out of service for renovation this quarter at the Gaylord Texan. I just wanted to make it clear that this isn't a case of our results simply looking good against a weak comp. Now in terms of what drove our performance this quarter, there are number of factors that I'd like to highlight. First, we continue to see our group mix trending positively towards more premium corporate business. In this regard, several analysts have questioned our guidance for total RevPAR that we issued in February because it reflected greater growth than RevPAR. This higher percentage of corporate groups is responsible for driving the substantial growth in outside-of-the-room spending, and we are pleased with this. We anticipate continued growth in outside-of-the-room spend throughout the remainder this year, albeit at a slower rate than we experienced in first quarter. As I mentioned earlier, another driver of this quarter was better margin management. As you all know, margins and synergy have been a major focus by our company and our manager over the last 12 months, and last year's performance was unsatisfactory to us both. As we discussed last quarter, it's been an ongoing collaborative process to realize the synergies from our REIT transition. And while there certainly have been bumps along the way and differences of opinion, we've been able to agree upon a path and progress has been made, as you can see, in our profitability performance this quarter. In particular, the National has come along way. And particularly operationally and delivered solid results, which we are obviously very pleased to see. The D.C. market, as a whole, continues to be challenged and continues to be negatively impacted by the softness in government groups. But our view is that Gaylord National has a number of unique attributes that should help it stand out in this market in the coming years, such as the continued build out of the National Harbor development, and its proximity to other attractions such as the soon to be built casino operations later to open some time in 2016. Offerings such as these should help differentiate the National hotel product from other properties in the D.C. market. Now another factor I'll mention in terms of our hotel results is the Transient segment. This has been a bright spot for us, nearly every quarter since the transition, and we benefited from Marriott's strength in this area. And while transient room nights this quarter were flat from a year ago, the properties were able to drive rate. At the outset of the year, this is what we anticipated for transient. And this bodes well for the rest of 2014. Again, this is in spite of the rooms out for the renovation of the Texan. Speaking of which, we now anticipate the renovation will be complete by August of '14, which is sooner than expected. And this should be a positive factor for transient in the fourth quarter and beyond. Now let's talk about sales production. We booked 372,000 gross room nights in the first quarter. Even though this was less than what we booked in the first quarter last year, in actuality, this production level was slightly higher than we experienced in '11 and '12. It's important to note that the first quarter of '13 was a record for forward group bookings, as we had a short-term incentive program in place to keep the departing sales members focused on finishing strong. So it was certainly a unique challenging comp for us. In addition, we'll remind you, in the fourth quarter of '13, we booked more than 772,000 room nights, which was our best fourth quarter performance since 2010. And just again to remind you, as we've discussed with you many times in the past, there is typically a pattern to our sales cycle as prospects are depleted following an exceptional booking production quarter like the one we had in the fourth quarter of '13, in turn making it more challenging for our sales team in the subsequent quarter. Now one additional snippet of information I will give you. We've just cleared April group production and indeed, our sales team production was very, very good. Over 100,000 group room nights, which is almost twice what we produced in April of '13. Now aside from room night production, I'd also like to highlight what we're seeing in terms of rate for the room nights we did book in the first quarter. The ADR associated with the gross room night production reflects a 5.9% growth over Q1 '13, and was the highest ADR booked since Q1 for 2008. In addition, we are encouraged that the ADR growth was the strongest at our Gaylord National and Gaylord Texan properties, which are 2 hotels that faced unique challenges in '13 with government sequestration and cancellations. Now, in a couple of minutes, I'll provide more color on what we expect to see overall in Q2 in terms of sales production. But before that, allow me to shift for a moment to an area that those of you who have been on our last few calls or met with us on the road know we're excited about, namely our Attractions business here in Nashville. This quarter, the business again posted strong revenue growth, with an increase of nearly 14% and adjusted EBITDA growth of 50% -- of just over 50%. As you've heard me say before, what is happening in the city of Nashville is really quite extraordinary. The appeal of country music continues to grow across the globe and Nashville is at the heart of this phenomenon. In fact, in April, the New York Times ran a story on this very topic, headlined, Young, Rich and Ruling Radio, Country Walks a Broader Line. The story, essentially, labels Nashville a music superpower, and really underscores how country music, and subsequently the city, are appealing to a whole new demographic, as the explosion of mobile technology is translating into new consumers discovering this content daily. Of course, as the article cites, some of this is attributable to the widespread success of the Nashville TV show, which prominently features our Attractions business. All of this bodes well for tourism in Nashville, Nashville both from domestic and international travelers, and our business is in an excellent position to benefit from this demand. We also took a number of steps this quarter that exemplify our commitment to providing shareholder value. On April 15, we paid out a dividend of $0.55 a share, which is a 10% increase over the quarterly dividend we paid out in 2013, and we remain focused on having one of the highest dividends in the hospitality sector. We also completed, in April, the repurchase of $56.3 million of aggregate principal amount of our convertible debt to reduce potential shareholder dilution moving forward, which Mark will discuss in a second, I think in a little bit more detail. Now moving beyond the first quarter, I'd like to do something a little different to what we've done previously, based on what we've heard from many of you over the past few months. We're going to provide a little more detail than normal, in terms of what we are seeing so far in the second quarter and how this plays out into our expectations for the year. Now from a booking perspective, we are optimistic about what our production will look like in the second quarter. As of the end of April, the numbers of prospects in the funnel is higher than at the same point last year. So based on our historical conversion rates, we would expect our sales team to drive a better booking quarter than we saw in the second quarter in 2013 and, clearly, given the April numbers that I just discussed, the quarter is off to a flying start. Historically, the second and fourth quarters are the strongest booking quarters of the year, and we expect this pattern to play out in 2014. As I mentioned, while we expect the numbers of transient and leisure rooms we secure in the quarter to stay largely flat as compared to '13, we anticipate they will be at a higher rate than in the past. Now in terms of what we are forecasting for hotel performance in the second quarter, we're trending towards growth in terms of both revenue and profitability compared to the same quarter last year. However, we expect bottom line growth to outpace top line growth as we continue to improve margins. That said, we do not believe that we'll see the same outside improvements that we saw in the first quarter for a number of reasons, including weaker results from last year's first quarter. Given our advanced book of business, we expect the third quarter to be strong, both from a top and bottom line perspective year-over-year, with revenue growth actually approaching what we saw in the first quarter with a more modest bottom line increase. And then in the fourth quarter, we are forecasting performance, more along the lines of how we're thinking about the second quarter. Revenue and profitability growth with bottom line outpacing the top. So what does this all mean for guidance? We're raising the ranges for full year RevPAR performance from an increase of 4% to 6% to an increase of 5% to 7%. We're also raising full year hotel total RevPAR expectations from an increase of 5% to 7% to 6% to 8%. In terms of bottom line, we are raising the range of our adjusted EBITDA, adjusted Hospitality EBITDA results from $265 million to $281 million to the new range of $273 million to $289 million. Our projections on the corporate level and the Attractions business will remain unchanged, bringing a total adjusted EBITDA expectations from the previous range of $262 million to $282 million to the new range of $270 million to $290 million. In closing, we're pleased with our performance in the first quarter and are cautiously optimistic about the direction our business is trending as we look to the rest of the year. While we have made substantial progress from where we were a year ago, there is still much work to be done and we're only part way down the path of regularly delivering on the full potential of these assets and our partnership with Marriott. We're continuing to work with our operator to drive synergies across the board, and also continuing to push on some of the booking elements that we introduced over the last few quarters to maximize the output of our sales team. We also remain focused on constantly evaluating how we can best return value to the shareholders and prudently manage our balance sheet. Now before I hand over to Mark, let me just say the following, if I may. We, both us and our operator, were deeply disappointed with the transition issues of last year. There were times that we at Ryman expressed a lot of frustration with the slow pace of progress and the financial consequences that resulted. But the fact was we had faith that both parties knew what it took to fix the issues and take our business to a place we aspired for it to go. I think the results this last quarter illustrate that the ship is now heading squarely in the right direction. But the fact remains, there is more room for improvement ahead of us. We, both us and Marriott, are still not satisfied with the regional sales office production. We believe transient pricing is an opportunity. The 1,000 room night dedicated resources are just getting started. And also, there's an opportunity to improve cost further. The fact is, these hotels that we own can produce substantial growth in cash flow, as the right occupancy materializes in costs to manage and we believe, this will be the story over the periods to come. And it is with this backdrop that we've raised guidance and started to deal with our outstanding convertible notes in cash. And with that, let me hand over to Mark. And then, once Mark's done, we'll get into the Q&A. Mark?

Thank you, Colin. Good morning, everyone. For the first quarter, Ryman Hospitality Properties' total revenue increased 11% to $246.5 million compared to the prior year quarter. Total revenue performance during the quarter represented the first quarter record, exceeding the previous first quarter peak in 2012. Adjusted EBITDA during the first quarter of 2014 grew 31.3% to $66.5 million, also a first quarter record. During the quarter, the company generated net income of $20.7 million, or $0.32 per fully diluted share, and $44.9 million in adjusted funds from operations or AFFO per fully diluted share of $0.70. It's important to remember the GAAP fully diluted share calculation does not include the anti-dilutive effects of the company's purchase call options associated with our convertible notes. As a reminder, the dilution mechanics for the convertible notes and call spread updated for our recent repurchase activity, is available in the Investor Toolkit section of our website. Turning to the Hospitality segment results. Driven by increased group occupancy, a favorable group mix shift from SMERF to higher rated corporate and association business and solid transient rate growth, RevPAR during the quarter increased 6.5% to $124.97. Total RevPAR increased 10.8% to $318.60 compared to the first quarter of last year. As Colin mentioned during his opening remarks, we continue to see encouraging trends in group cancellation and attrition rates during the quarter. Gaylord Hotels in the year for-the-year cancellations totaled 7,400 room nights, down 75.5% compared to the first quarter of last year, which was significantly impacted by government-related group cancellations. Attrition rates continue to decline, falling 50 basis points to 10.2% from the fourth quarter of 2013. Attrition and cancellation fees collected during the quarter totaled $2.3 million, up $500,000 from the same period last year. And driven by continued improvement in property level margin management initiatives, Hospitality segment adjusted EBITDA increased 28% to $69.9 million. Hospitality adjusted EBITDA margin increased 400 basis points to 30.1%, representing an approximate 68% flow-through of incremental revenue. The Opry and Attractions segment revenue rose to $14.2 million in the quarter, up 13.7% from the prior year quarter, and adjusted EBITDA increased 53.3% to $2.1 million, representing a 380 basis point improvement in margin. The Corporate and Other segment adjusted EBITDA totaled a loss of $5.6 million, representing a modest increase compared to the prior year quarter. Moving onto the balance sheet. As of March 31, the company had long-term debt outstanding of approximately $1,154,000,000, and unrestricted cash of $55.4 million. As of the end of the quarter, $506 million of borrowings were drawn under the company's $1 billion credit facility and the lending banks had issued $6 million in letters of credit, which left $488 million of availability for borrowing under the credit facility. Subsequent to the end of the quarter, the company announced that it had repurchased in private transactions $56.3 million in principal amount of its convertible senior notes, which were canceled, and is in the process of settling $15.3 million in principal amount of the convertible notes that were converted by a holder. After these transactions, $232.2 million in principal amount of the notes will remain outstanding. The repurchases were made for aggregate consideration of $120.2 million, funded by cash on hand and draws under the company's revolving credit facility. In connection with the repurchase and early conversion, the company proportionately reduced the number of options and warrants underlying the bond-hedged transaction related to the convertible notes. In consideration for these adjustments, the counter party to the bond-hedged transactions paid the company approximately $9.2 million. As a result of these transactions, the number of shares of the company stock underlying the warrants was reduced to $11.8 million. Since we began the reconversion process 2 years ago, we've consistently believed and communicated that the combination of our unique assets and the Marriott operating platform would yield significant benefits in terms of revenue and profitability through increased group sales, transient revenue growth and economies of scale. While the manifestation of these benefits has taken a bit longer than we originally anticipated, our first quarter results begin to demonstrate the opportunity in front of us. This continued improvement in our hotel operations combined with the strengthening group segment, limited supply increases in the addition of Gaming and National Harbor, bode well for our future operating results, and therefore, our equity value. Over the last 18 months, we repurchased shares, convertible notes and warrants as an opportunity to minimize the dilution associated with the outstanding notes and the associated call spread projection. At our current equity value, we continue to believe that this is a prudent use of our liquidity. During the quarter, the company paid its first quarter cash dividend of $0.55 per share of common stock on April 14. Today, the company declared its second quarter 2014 cash dividend of $0.55 per share of common stock payable on July 15 to stockholders of record on June 27. It is the company's current plan to distribute total annual dividend of approximately $2.20 per share in cash, in equal quarterly payments in April, July, October and January, subject to our board's future determination and the timing thereof. And with that, I'll turn it back over to Colin for any closing remarks.

Thanks, Mark. And so Laurie, let's open up the lines for questions and hear what folks -- hear what's on folks minds.

[Operator Instructions] Your first question comes the line of Bill Crow -- I'm sorry, Andrew Didora of Bank of America.

Colin, can you help us understand a bit more the mix shift that you're seeing in your occupancy in 2014 relative to this time last year for 2013, and maybe if you can give us any guidance in terms of how that ADR stacks up on a growth basis versus last year?

Right. Pat, have you've got those corporate numbers handy?

Yes, absolutely. Our first quarter -- Andrew, this is Patrick. Our first quarter was weighted towards a large increase in corporate, and we're expecting to see a large increase in corporate in the fourth quarter. We are seeing some high-rated association in the second quarter growth coming from that level. And then in the third quarter, it's really just overall group growth, not necessarily weighted more towards one segment over the other. That is translated into higher rates for us because we're getting higher-quality groups in-house in all segments, not just bringing corporate in, but bringing in higher quality corporate, higher quality association, et cetera.

Pat, the other -- I know this is a little bit of a digression from the question, but some of the data you shared with me yesterday regarding the lead volume, and what we're seeing in the lead volume, particularly in April. Maybe, you could give that information to the investment community here in which also, I think, underscores the question that Andrew just asked.

Absolutely. Yes, to Colin's point, we are seeing some acceleration in the lead volumes as we moved from the end of December to where we stand essentially at the beginning of May. Our overall lead volumes are up about 17%, this is led by corporate lead volumes in the month of April that we're up about 34%. We are seeing growth -- quite a bit of growth coming from our 1,000 to 2,000 group segments, which is, if you recall, an area where we really wanted to deploy additional resources and we're seeing some of those, some of those efforts start to bear out results for us. So we are encouraged by the acceleration we're seeing in lead volumes.

And then my second question just focuses on margins. When we think about your future margin growth, do you still expect to get additional lift from working with Marriott and synergies there? Or will margin growth from here on out be mostly driven by the mix shift you just discussed and then just a pure growth within the cycle?

I think the way I would answer the question, and Mark, you may want to jump in on this, we have got an extraordinary level of focus on the cost side, we being us here at Ryman and Marriott. And I know from the conversations we're having week by week, day by day, whether it's allocations, whether it's general expenses in the business, we're looking for ways in which we can improve cost structure of these hotels. And I believe we are far from done on cost improvements. And I would expect to see, over the course of this 12 months, the next remaining part of this year, over the next 9 months, improvement in the margins as we go forward. Mark, have you've got anything you want to add to that?

Yes. Andrew, there are continuing to be opportunities in the property level for margin improvement. As we've talked about in the past, we're continuing to work with Marriott on allocation processes and understanding those to ensure that they are appropriate for the business model. And then in addition, when you look at our first quarter, we produced about 70 points of occupancy. So that's significantly below where we've peaked in the past. And so as we see occupancy come in to the hotels, obviously, the flow-through is much stronger, the efficiency is much stronger. And so there's margin improvement there, not to mention the fact that there's real rate compression opportunity for us. And we've driven our rate, strictly by -- through mix shift and pricing in the Transient and Corporate business that we've -- share we've been able to gain. And now as group continues to strengthen, there's a real opportunity for us to drive not only occupancy, but additional rate growth through compression as we move through the year or in the future years.

And just add to that, we're driving a lot of rate on the transient side just by getting smarter. Obviously, we have access now to Marriott's distribution channels on the transient side, but we're getting smarter in how we're pricing. We're doing less discounting, we're pushing upgrades within the hotels, we're pushing opportunities to drive rate as opposed to discounting and just trying to pull people into the hotels overall. So it's just getting smarter now that we have access to this Marriott distribution channels.

Got it, understood. And just finally, touching upon the synergies. Is it fair to say that all the synergies that you originally expected have been realized thus far? Or is there still a little bit more room to go there?

I would answer the question by saying we're getting there, but we're not finally there. I mean, we still have a little bit of runway to go, but we're materially further along that road than we were 6, 9 months ago.

The next question comes the line of Jeff Donnelly of Wells Fargo.

A couple of questions. Actually, Mark, I'll start with you. Can you talk about your plans for addressing the remaining convertible debt? Specifically, do you anticipate for purchasing more prior to maturity? I'm just thinking from a structuring standpoint how you ultimately expect to refinance that.

Yes. The way that the converts and the hedge is structured, essentially the dilution associated with the notes themselves is covered by the call that we purchased. So there's no dilution as it relates to the notes. Where the dilution exists is in the warrant, which has a strike price of about $25.01. And so what we're looking at currently, and as I talked about in my remarks, we're looking at how we manage that, how we manage that dilution as we move through the year. And we think that, given where our equity is priced right now, that we'll continue to repurchase those warrants for cash and look for ways to minimize the dilution associated with the warrants.

That's helpful. And Colin, or maybe this is for Mark -- for you as well. I got on a little late. Do you guys give a quantification of, I guess, weather impact that you might have had in your Q1 EBITDA results?

No, we didn't.

I mean, it was largely immaterial for us. There were some continued weather events. But actually, it benefited us in D.C. We had some groups in-house that couldn't leave. And so as a result, they ended up staying over longer. They ended up doing more banqueted events, and eating in our outlets. So what was a lemon was turn into lemonade from that standpoint.

Without wishing to patronize, Jeff, we think the analyst community is a little weary about the weather -- the weather excuses. So we consciously decided we wouldn't talk about the weather this first quarter.

It's not so much about excuses as, I guess, I'm just trying to be sure that when we look forward to future years, we're sort growing off the correct numbers. And actually, in that regard, your first quarter convene [ph] and other hotel revenues bear a striking resemblance to, I think you touched on this, what you guys did in the first quarter of 2012, on a top line basis and on a margin basis. As we look forward to the quarters this year, particularly maybe the second quarter, do you think second quarter 2012 is sort of a better bar to measure you guys again than last year, given the integration noise of Marriott?

I would probably say so.

Do you think that sort of dissipates as the year goes on, or you think that sort of holds true maybe for even a few more quarters?

Well, I think, what we're seeing is a mix shift into our hotels. And so if we continue -- as Patrick, you may, I don't know whether you heard Patrick talk about a question that Andrew Didora asked, or in response to Andrew's question, about the quality of what we're seeing in lead volumes and also the shift towards corporate. The key for us over the next 12 to 24 months will be to continue to book this better quality short-term business that, we believe, will be very helpful in driving profitability. In '12, we had a little bit of the '09, '10 hangover. And so, we're seeing this improvement that we think should come through in profitability through over the next 12 to 24 months.

Hey, Jeff, this is Patrick. Just to give you some insight, we -- to your question. Every discussion around performance here internally, starts with here's how we performed against '13 and here's how we performed against the average for '11 and '12. So we're spending a lot of time doing that same comparison because '13, due to the transition, is pretty tough to use as a comp.

Yes. I think the one thing I'd point out, Jeff, is the second quarter of '12 is our -- from a same-store perspective, our prior peak in terms of RevPAR, and we're approaching that currently with our first quarter results. The interesting thing is that we've done it on 9 points less of occupancy. So when you look at -- our rate has improved. Our total RevPAR was actually, I think, better during in the first quarter than it was in the second quarter of last year. And it's really an opportunity now for us to continue to drive occupancy in these hotels to improve that total RevPAR and also improve margins.

Yes. We had 79% system occupancy.

79.3%. Yes.

Your next question comes the line of Amitabh Kapoor of Gabelli & Company.

Patrick, I guess you alluded to this. The strength in the ADR growth at the transient -- in the transient segment outpaces the ADR growth across the properties but more than 2x. Can you guys talk more about -- in addition to the Marriott distribution, what is driving that? I mean, Patrick, you talked about just being smarter about booking and using -- leveraging the distribution segment. But what are the other aspects that you're focusing on. And then I have a separate question.

Yes. I mean, number one, Amit, it's driven by a better book of business on the group side, right. So we're using transient lift to fill in holes, and using transient just to add on and drive occupancy up to full-house levels. And so, by doing so, we can drive rate significantly. We are, as I mentioned earlier, getting smarter about making sure that when we sell transient that we're upgrading them to suites, we're upgrading them atrium views et cetera. And just making sure that we shut down the discounting segment, unless we really need to drive volume. And as I said, with a better book of business, we don't need to drive volume quite as much. Third quarter, I think, will prove that out a little bit more for us as in the third quarter of '13, we had to rely more on the transient segment to drive occupancy. We have a better book of business going into the third quarter. And so we're going to be relying on that less and you should see it was driving a pretty good growth in transient in that quarter as a result.

All right. I'll ask a rhetorical question. Do you guys think the transient business and the strength of this segment -- this relatively smaller segment is understood, is completely appreciated at this point? Or the -- we should continue to see it being bigger traction within the 4 properties going forward?

Well, I would say to you that the investment community is so heavily focused on the group. They sort of look at our hotels as, which to a large extent, they are group hotels. But because our hotels are so massive, we generate about 550,000 room nights on the leisure side. We generate a lot of leisure business. And the opportunity for us is to put another 3, 5 points of leisure business into these hotels, increased rate an extra $10. And these hotels -- this money just cascades to the bottom line, so I think the investment community is rightfully focused on the group side. And I would say, some of the investment community understands their potential on the leisure side, particularly because how attractive our hotels are. These aren't Embassy Suites, and higher places. These are magnificent resorts. And so we believe, over time, we should be able to put more leisure business into -- transient business, leisure business into these hotels.

And then just switching gears, can you talk about, please, the strength of the Opry segment and the strength around the city itself, and what does this translates into financially for future prospects for the segment?

Thanks. I know you and your company leader have a great deal of focus on our Attractions business, as do we, and we share the same view about their potential. The interesting thing is as this music becomes ubiquitous across the planet, we have the opportunity of extending some strategic arms of this business. We are now looking at doing this, as you've seen before, this musical in New York City, with Hee Haw, we're looking at expanding our whole retailing strategy. We're looking at our digital strategy. We're also looking at potential enhancements to 1 or 2 of the attractions in this market. And the reason for all of this is that there is just a monstrous appetite for the unique entertainment that Nashville, Tennessee has to offer. And we're -- we've got so many initiatives that we're looking at on this Attractions business, and we believe it will continue to grow because I think we're at the front end of this curve in terms of growth in popularity of the music that comes out of the city. So a lot of interesting things. And as we nail down the components of the strategy, we'll talk more about it publicly. And as you well know, you asked me the question, I think, back in the fourth quarter conference call about this Attractions business. We continue to look at whether this is a business that should stand on its own merits. But with all of the strategic things we're working on, we believe that we need to complete that -- those strategic initiatives. And -- but we're continuing to look at that issue of whether this business stands alone or whether it's still embodied within the parent company. But the great thing is it's growing and it's exciting.

It's very helpful. By the way, the New York Times article you mentioned was a terrific overview of what's going on in Nashville and how country music is getting traction.

Yes. It's amazing.

The next question is comes from the line of Bill Crow of Raymond James. William A. Crow - Raymond James & Associates, Inc., Research Division: I wanted to touch on Nashville as well and then another question. With transient up 22% in National, I think that reflects kind of the dynamic environment in the market. But it was down, I guess, in at least 2 of the 3 other hotels. So I guess my question is, twofold, a, are you seeing rotation in the groups out of the other 3 hotels into Nashville as it's kind of the place to be these days? And b, or the second part of the question is, is the Marriott brand driving transient to the extent that you thought it would?

Yes. In terms of rotation into Nashville, we're seeing a lot of group demand in Nashville. Both the downtown convention center is seeing a ton of demand, and we are seeing a ton of demand. Our lead volumes are very healthfully ahead here for Nashville. We're seeing a lot of interesting groups show up. Big farmers wanting to book in this market. And I think, the more this market -- more of the Nashville market, how do I say this? The halo of Nashville continues to evolve. I think that will only bode well for our particular hotel here. So I think we feel very, very good about Nashville and about our hotels positioned in this market. And look, one of the questions that sort of has been perennially asked over the last 2 years about supply increases in Washington and Nashville. I mean, we've been booking against this stuff for 2 to 3 years, and our lead volumes just continue to get stronger and stronger. So there is no new competitive supply that didn't exist a year ago that we were booking against a year ago emerging in any of our markets. And that is tremendous. In terms of Marriott delivering great transient leisure room nights into our hotels, we continue to work with them to figure out, do we have the right magic source in terms of leisure attributes in the hotels? We are happy with the current level of volume, but I think we believe that the runway is pretty clear in front of us. And we have the opportunity to grow this segment of the business. William A. Crow - Raymond James & Associates, Inc., Research Division: Colin, sorry, I was going to ask you if you were surprised that the Nashville asset was the laggard in RevPAR growth in the first quarter? I mean, it was still good results. But it feels like that market did better than what you reported. Is that just the lagged impact of the groups that you have booked previously or is there anything there that...

No, that's -- you've got it. That's what it is. We've put some massive association business in this market. But I can tell you, the subject of ADR in this town, with us to our operator is -- how do we say this, Patrick? You probably spent -- have spent more time on that subject than any other subject over the course, over the last couple of months.

Yes. We continue to target that as a major opportunity for us going forward. And Bill, just to add to what Colin has already told you and backing it up, but year-to-date, Opryland's lead volume is up greater than any of the other markets that we operate in currently or the other hotels. So we're seeing some strength there. And then to the first quarter, I mean, January was the only month for Opryland that didn't -- wasn't a showstopper. And as we move into '15, we're working to make sure that every month in the first quarter is filled up. But we see additional opportunity for us to perform better in January of '15. William A. Crow - Raymond James & Associates, Inc., Research Division: That's helpful.

[indiscernible] last year. William A. Crow - Raymond James & Associates, Inc., Research Division: Yes, yes. The comp was tougher. Colin, final one for me. Strategically, over the last couple of years, you've really been solely and necessarily focused on the 4 core properties. And it seems like there are fewer opportunities, and you can correct me on this, but to kind of trick them up using sports bars, resort pools, et cetera. So are you at the point now that things are running better, that margins have come back, group is back, spend is back, that you're starting to consider external growth, or are we too deep into the cycle? And maybe we should just think about the remainder of the cycle as Ryman with 4 large hotels, the Attractions business, small hotel, et cetera. What are you thinking from that perspective?

Right. Well, this is not a question that one can answer in 30 seconds. And there are all sorts of reasons for that. You and I have had this discussion many times before. I believe, the old historical way of thinking about "the cycle" is no longer applicable. These events that we witnessed in late '08 can take a cycle out in a heartbeat. The interesting thing that we're seeing right now is if you go back in history, cycle bars were busted by oversupply. That's not what's going on in the upper upscale, and the leisure and the luxury side of this industry. We're not seeing supply increases. So if we see a gradual improvement in the economy over the next 3 to 4 years, this industry as sector, is extremely well positioned to take advantage of that. And it's -- with that in mind, Mark made a comment, we've thrown out a few you little subtle comments here this morning. Mark made the comment, the results in the first quarter with the profitability that we generated was off 70 points of occupancy. Get these hotels to 75 points of occupancy and the profitability of these businesses look very, very different. So our view is, we are going to move down that path. Our view is that our equity is still cheap. Our view is that, with our the equity cheap, the best thing to do is to keep focused on returning money to the shareholders through great dividends, and also through ensuring that we don't have a dilution, as Mark articulated, around these converts. And that's where we are focused at this moment. And when we get our multiple to a point that we believe we can go and make world-class acquisitions that are accretive to the shareholder, we will do that. But at this moment in time, these world-class hotels, we believe investing in these world-class hotels by bringing in the amount of equity overhang is the right strategy for the company. So that's where we are. There's no change in that. But if the stock goes up 20% in the next whatever, pick a period of time, how we'll look at it, will be a little bit different. And that's just the dynamic of where we sit. We're going to be very disciplined about this. William A. Crow - Raymond James & Associates, Inc., Research Division: I appreciate that. I think that focus is correct. Colin, as an aside, have you seen any assets trade over the last year or 2 that you say, had our cost of capital been different, we would've been bidding on that or is just nothing that's come down the pipe that you would say...

There's 1 or 2. But as you know Bill, again, we've had this conversation in many discussions that we've had in these investor conferences. We want to make sure that we do not pollute the quality of these assets by doing what a lot of other REITs do and that is go and buy middle market, 500 room hotels that look like any other hotel in that sector. We believe the quality of the assets that we own are world class, and in all probability, we'll not get replicated. And we're going to be disciplined about the quality of the assets that we add to this portfolio.

The next question comes on line of Chris Woronka of Deutsche Bank.

Maybe you could talk a little about how much visibility you have on that out-of-room spend. I know you have contractual minimums, and it sounds as if the groups are certainly spending above that again, which hasn't been the case in last couple of years. But maybe just how much visibility you have on that going forward versus the typical room revenues?

Hey, Chris, this is Patrick. Good question. To your point, all we really know as factual is the minimums that they've agreed to, and those are in line with historical norms. But we talked about on our last call, that even though the fourth quarter had some challenges to it, we're very encouraged by the outside-of-the-room spend behavior that we were seeing from groups in October and the first half of November. We've ticked up in January and saw those trends continue with groups picking up well against their blocks and doing a great job outside-the-room, both doing a lot of banqueted events, high-value banquet events, and then also what we call the double dip, where while they're having banqueted events, some of their attendees are also using our outlets. And so we're getting revenue from both sources. Those trends have continued to strengthen, and we really haven't seen any indication that meeting planners need to pull back. So while the facts are that we have the minimums on the books, the trends are indicating to us that things should continue. Now to Colin's point earlier, we don't necessarily expect that to be at the same level as we saw in the first quarter because, again, that is the quarter when we had the highest mix of corporate business. But we do expect it to continue to be positive.

Yes. The way this business works is when we sign a contract for like, 2 years, 3 years from now, we'll put the minimums in there. But the reality is, the nearer you get to the date, our conference services folks are engaged with the client, and putting together the actual array of food and beverage offerings that are going to occur during a particular stay. So I was up in Washington 2 -- a week ago, a week and a half ago. And the folks in Washington were talking to me about a record that they had in one of the days in April, in terms of outside-of-the-room spend. But they knew about it a month before because the client was ordering the different breakfasts, lunches and dinners and parties. And so even though we have the minimums, the nearer we get to the date of arrival, we have visibility into this thing, because it doesn't work that the clients sort of coming to us at 9:00 on a Monday morning and saying, "Hey, by the way, I want to do a lunch today." It doesn't work that way. So our rhetoric around outside-of-the-room spend is 1, based on minimums but, 2, based upon what we're hearing from the hotels in terms of client's desire to actually spend more than the minimum.

And the history that we have...

And historical patterns -- the history we have. And that's one of the good things about our business. We see so many customers that we have seen in previous years.

Okay. Very good. And then are we at the stage of the cycle where you're starting to see the windows, the booking windows lengthening a bit? And it sounds like that would be kind of incremental opportunity to, again, push the rates a bit. Is that happening in a big way?

We're seeing encouraging things on the rate, and we're seeing encouraging things on lead volume. And I don't think we're seeing any material shift in length of advanced bookings. But invariably, the early warning signs are growth in lead volume and client's receptivity to pay more than they did last year. And invariably, that stimulates the client to say, "You know what, I'd better book my 2017 date now because if I don't, a year from now, it's going to cost a lot more." So I think we're going to see that, that phenomenon over the next 6 months to 1 year.

Especially when you've got increases in corporate occurring, right, because they have a shorter booking window that some of the Association and SMERF business that we'd put on to the books. So we're seeing good growth in the corporate. And so that gives you the illusion that booking windows are actually contracting a bit, but it's just because you're seeing a resurgence in that segment.

Okay. Got you. And then just finally for me, you guys have talked a lot about the transient opportunity with Marriott, and it's looks like you've made good progress with more to go. Is it possible -- maybe you don't have an exact answer, but -- and I won't use the baseball analogy. But yes, how much -- where are you -- are we very early in that evolution? What's possible to kind of get from that relationship?

Well, I don't know whether we want to get into third innings or fifth innings, but I would say we still got ways to go.

Next question comes line of Patrick Scholes of SunTrust.

I may have missed it, but did you say percentage-wise, let's say, over the past year, what did transient represent as your business mix? And then, where would you expect those percentages to go over the next year?

What's it, 550,000 on our...

580 divided by...

25%.

Yes, 25%, 26%. The net favorability.

That's trailing over the last year. And where would you expect, given what you're seeing right now, that to be, let's say, a year from now? That transient mix?

Higher than where it is.

I mean, Patrick, I think it's more transient room nights and more group room nights. How it translates into a percentage, I guess, is anyone's guess. But the opportunity here is not to drive more transient at the expense of group, but is to drive both group and transient. But if you look back at the first quarter, on any given night, or on an average night, we had 2,100 rooms that were unoccupied. So even though our results were quite good in the first quarter, their tremendous opportunity for us to continue to sell to both group and transient guests, and that's -- so that really needs to be the focus is driving the overall occupancy to maximize the profitability.

I guess in that regard, as far as opportunity, what -- I guess over the past year, what has your weekend occupancy been running, say, compared to the midweek occupancy?

I mean, it's -- that's going to be difficult to say in our model, given the fact that you got a lot of group patterns, depending on the month that are going to be -- in the month of May, you're going to have a lot of group patterns that are filling up both weekends and weekdays. As you get into the third quarter, really a part of that, you're going to have a lot of transient coming in to some of that up. So it's difficult to just sort of stick a number on it.

Yes. I mean, if you look historically at our hotels, we had between 50 and 60 days a year that we consider need-based around holidays when group's don't travel. So there's a percentage of low occupancy days at around 50, 60 days a year. The other days, we're running -- whether it's weekday or weekend, and we're running fairly consistent occupancy levels. And to the mix question you asked, if you look back I guess kind of a prior cycle, we ran about 80% group and about a 20% transient when we were really kind of peaking our group business. And I think that the opportunity for us is to get back to those peak group levels, which were quite in the mid-60s to 70%.

Let's just say, mid-60s.

And then how much of that transient business can we layer on top to drive those higher occupancy rates, is really the opportunity.

Right. But that transient business back then, we were so dependent on the intermediaries. It was quite a different scenario.

Sure. There's a rate opportunity.

Okay. I'll leave it at that for that question. And just a 1 last sort of larger question here. You talked about strategic review for the Attractions segment. I'm just curious if have you received any indications of interest for that segment? And then I think the bigger question, curious to gauge your appetite today. If you were to receive an attractive offer to sell one or more of the hotels, what would be your appetite to do so? I know in the past that there's been times where you didn't -- you had no interest in selling if offer came in, and there are at other times where you would welcome an offer. Where do you stand today with that?

Patrick, our business model is very different to the typical traditional box standard other REITs. Remember, our strategy and Marriott has embraced it, is this rotational strategy from 1 hotel to another hotel. So to break the asset base out, there is some practical -- there were some impractical issues to that, because so much of our business comes from rotational business. The attractive thing is if we can find 1 or 2 other hotels that are similar to our hotels, in markets that our customers want to go to, that would be the attractive extension of the brand, we believe. But the other practical limitation is that when you sell an asset after you've converted to a real estate investment trust, you've got a 10-year period of time where you are not immune from the taxes that would ordinarily arise if you were a sequel. So there is some practical limitations to that. So if you we were to sell an asset that had a high basis and limited tax, that's one thing. But 3 of that 4 hotels have got a very low basis.

Next question comes the line of Harry Curtis from Nomura.

Laurie, I just looked at my watch. We're having so much fun here. We'll do one more question from Harry and if anybody else is -- has questions, you know how to get hold of Patrick and Mark and me here at the company. So Harry, good morning to you.

I'll make it quick. First, you guys had talked about larger increases in corporate and high-rated association business. As far as the high-rated associated business, is that business that's really been on the books for a while? They do tend to book earlier or has that been new, and surprisingly incremental demand?

I can see your point, you're actually right. That's business that we book much further out, because it has a large booking window. So that's been on the books for a while.

Okay. And then my last question is, you guys talked about your future advanced group bookings. Can you put a little finer point on that and talk about your bookings for 2014, not only as they speak to the year-over-year increase, but what sort of rate are you seeing on average in your future bookings, particularly for 2015?

So I don't want to give specifics around the rate. But I will tell you that what we've booked most recently for '15, since you've asked about that one, has been encouraging. We've seen some rate lift. So both in our -- in the year, for the year, T plus 1, which is 15 and T plus 2, which is 16, we've seen some rate improvements. So we seem to be moving in the right direction from a rate perspective on group. And we'll continue to watch that and believe that the lead volume is a good indication that will continue.

Is there any -- can you at least give us a range? I mean, is it sort of mid single-digits?

Yes. I mean, depending on the year you're looking at, it's in the single-digit range. Some mid single-digits, some upper single-digits.

Thanks. So we'll see you at your conference.

At this time, there are no further questions. I will now turn the call to Colin Reed for any additional or closing remarks.

Laurie, thank you. I have no other additional comments to make other than if folks have questions, you know where we are and look forward to engaging in the many investor conferences, Mark, that we've got coming up here over the next couple of months. So look forward to seeing you all and we're moving in the right direction. Thank you very much.

Thank you for participating in the Ryman Hospitality Properties first quarter 2014 earnings conference call. You may now disconnect.