Ryman Hospitality Properties (RHP): A Hospitality REIT Delivering Consistent Growth

Published on November 17, 2024 | Ticker: RHP

Ryman Hospitality Properties, Inc. (RHP) is a leading real estate investment trust (REIT) that specializes in group-oriented, destination hotel assets in urban and resort markets. The company's portfolio includes a network of five upscale, meetings-focused resorts totaling 9,920 rooms that are managed by Marriott International under the Gaylord Hotels brand. Additionally, Ryman owns a controlling stake in the Opry Entertainment Group, which comprises iconic entertainment assets such as the Grand Ole Opry, Ryman Auditorium, and various Ole Red venues.

Business Overview and History

Ryman Hospitality Properties was founded in 1977 as Opryland USA, a subsidiary of Gaylord Entertainment Company. The company initially focused on the development and operation of the Gaylord Opryland Resort & Convention Center in Nashville, Tennessee. In 2012, Gaylord Entertainment Company restructured, separating its hotel and entertainment assets into two publicly traded companies - Ryman Hospitality Properties and Ryman Entertainment.

As a REIT, Ryman Hospitality Properties specializes in group-oriented, destination hotel assets. The company's portfolio of Gaylord Hotels properties incorporate large meeting and convention spaces, signature guest rooms, food and beverage offerings, fitness and spa facilities, and other attractions within a single, self-contained property. This strategy has allowed Ryman to establish its Gaylord Hotels as leading convention hotels in the United States.

Over the years, Ryman expanded its portfolio to include properties in Orlando, Florida, Dallas, Texas, Washington D.C., and Denver, Colorado. The company also owns the Inn at Opryland, an overflow hotel adjacent to the Gaylord Opryland resort, and the AC Hotel at National Harbor in Washington D.C., which serves as an overflow hotel for the Gaylord National resort.

In 2020, Ryman faced significant challenges due to the COVID-19 pandemic, which led to temporary closures and reduced demand across its properties. However, the company implemented cost-saving measures and focused on strengthening its balance sheet to navigate this difficult period. By 2023, Ryman's hospitality segment had largely recovered, with strong group demand and improved operating performance.

In 2023, Ryman expanded its hospitality portfolio with the acquisition of the JW Marriott San Antonio Hill Country Resort & Spa, further strengthening its presence in the group meetings market. The company's entertainment segment, Opry Entertainment Group, has also continued to grow, with the recent opening of the Category 10 entertainment venue in downtown Nashville.

Business Segments

Ryman Hospitality Properties operates in two main business segments: Hospitality and Entertainment.

The Hospitality segment includes Ryman's network of upscale, meetings-focused resort properties managed by Marriott under the Gaylord Hotels brand. These five resort properties are the Gaylord Opryland Resort & Convention Center in Nashville, Tennessee, the Gaylord Palms Resort & Convention Center near Orlando, Florida, the Gaylord Texan Resort & Convention Center near Dallas, Texas, the Gaylord National Resort & Convention Center near Washington D.C., and the Gaylord Rockies Resort & Convention Center near Denver, Colorado. The segment also includes the Inn at Opryland, an overflow hotel adjacent to Gaylord Opryland, the AC Hotel at National Harbor which is an overflow hotel adjacent to Gaylord National, and the JW Marriott San Antonio Hill Country Resort & Spa which Ryman acquired on June 30, 2023.

The Hospitality segment generates revenue primarily from room rentals, food and beverage sales, and other hotel revenue. Key performance metrics for this segment include occupancy rates, average daily rates (ADR), revenue per available room (RevPAR), and total revenue per available room (Total RevPAR).

The Entertainment segment includes a number of entertainment and media assets owned and operated by Ryman's Opry Entertainment Group (OEG) subsidiary. Key assets in this segment include the Grand Ole Opry, the Ryman Auditorium, WSM-AM radio, Ole Red branded venues, Category 10 (a Luke Combs-themed entertainment venue that opened in November 2024), and the Block 21 mixed-use entertainment, lodging, office, and retail complex in Austin, Texas.

The Entertainment segment generates revenue primarily from admission tickets, food and beverage sales, retail, and other revenue.

Financial Performance and Ratios

Over the past three years, Ryman Hospitality Properties has demonstrated consistent financial growth. In 2023, the company reported annual revenue of $2.16 billion, a 19.3% increase from 2022. Net income for the year reached $311.22 million, compared to $128.99 million in 2022. Operating cash flow (OCF) for 2023 was $557.06 million, with free cash flow (FCF) of $350.28 million.

In the third quarter of 2024, Ryman reported record quarterly revenue of $549.96 million, a 4.1% increase year-over-year. Net income for the quarter was $60.40 million, up 48.1% from the same period in 2023. OCF and FCF for Q3 2024 both reached $218.08 million, representing a 17.1% increase year-over-year.

The company's strong financial performance is reflected in its key financial ratios:

Debt-to-Equity Ratio: 6.11 as of 2023-12-31

Current Ratio: 1.76 as of 2023-12-31
Quick Ratio: 1.76 as of 2023-12-31
Return on Assets: 6.63% as of 2023-12-31
Return on Equity: 62.34% as of 2023-12-31

Ryman's robust financial position and steadily improving profitability have enabled the company to maintain a consistent dividend policy, with a current quarterly dividend of $1.15 per share, representing a 4.2% yield as of the most recent quarter.

Quarterly Performance and Guidance

In the third quarter of 2024, Ryman Hospitality Properties' Hospitality segment reported total revenues of $467.04 million, an increase of 4.7% compared to the prior year period. Operating income for the segment was $102.78 million, up 12.1% year-over-year. The company's same-store hospitality segment delivered strong results, with a 2.1% year-over-year increase in RevPAR and a 4.2% increase in total RevPAR. Average daily rate (ADR) for the same-store hospitality segment reached a third-quarter record of $245, up 6.2% year-over-year.

The Entertainment segment reported total revenues of $82.92 million in Q3 2024, a 0.7% increase compared to the prior year period. Operating income for the segment was $13.92 million, down 32.7% year-over-year. The segment's adjusted EBITDAre was $22 million, driven by the continued strong performance of the recently opened Ole Red Las Vegas venue.

For the full year 2024, Ryman has revised its guidance, narrowing the range for same-store hospitality RevPAR growth to 0.5% to 3.0% (previously 1.0% to 4.0%) and same-store hospitality total RevPAR growth to 3.0% to 5.0% (previously 4.0% to 6.0%). The company has also tightened its full-year adjusted EBITDAre guidance to a range of $770 million to $780 million (previously $765 million to $785 million), representing an 11.5% increase over the prior year and a record performance.

This revised guidance takes into account several factors, including continued leisure softness in Orlando and Nashville, incremental construction disruption at the Gaylord Palms, and lost business related to Hurricane Milton. For the JW Hill Country property, Ryman is raising the midpoint and tightening the range of their full-year 2024 adjusted EBITDA guidance. However, for the Entertainment segment, the company is lowering the midpoint and tightening the range of their full-year 2024 adjusted EBITDA guidance to account for incremental disruption at the W Austin Hotel.

Ryman is also raising the midpoint and tightening the range of their full-year 2024 guidance ranges for adjusted funds from operations (AFFO) and AFFO per diluted share, as lower interest expense is expected to more than offset the downward revision to adjusted EBITDAre. The company expects to invest capital of approximately $400 million to $450 million for the full year 2024, as their major capital projects in both the hospitality and entertainment businesses are nearing completion.

Liquidity and Capital Structure

As of Q3 2024, Ryman Hospitality Properties maintained a strong liquidity position with $534.93 million in cash and $759.70 million available under its credit facilities. The company's debt-to-equity ratio stood at 6.11, while its current ratio and quick ratio were both 1.76, indicating a healthy short-term financial position.

Industry Trends and Outlook

The group-oriented hotel and entertainment industries have seen a strong recovery following the COVID-19 pandemic, with increasing demand for conferences, events, and leisure travel. Ryman's compound annual growth rate (CAGR) in revenue and adjusted EBITDA from 2020 to 2023 were 49.1% and 115.5%, respectively, reflecting the company's ability to capitalize on these trends.

Looking ahead, Ryman's strategic investments in its hospitality and entertainment segments, such as the repositioning of underutilized spaces at Gaylord Opryland and the opening of the Category 10 venue in Nashville, are expected to drive future growth and enhance the value proposition for its customers. Additionally, the company's plans for the 100th anniversary of the Grand Ole Opry in 2025 present an exciting opportunity to further strengthen its entertainment brand and reach new audiences.

Risks and Challenges

Ryman Hospitality Properties faces some potential risks, including ongoing challenges in the leisure travel market, particularly in the Orlando and Nashville regions, as well as the potential for disruption related to renovations and construction projects at its properties. The company has also noted incremental construction disruption at the Gaylord Palms and lost business related to Hurricane Milton as factors affecting its revised guidance.

Conclusion

Ryman Hospitality Properties has established itself as a leading player in the group-oriented, destination hotel segment, leveraging its Gaylord Hotels brand and diversified entertainment assets to deliver consistent financial performance and shareholder value. The company's strategic investments, strong balance sheet, and proven management team position it well to continue capitalizing on the recovery in the hospitality and entertainment industries, making Ryman Hospitality Properties an intriguing investment opportunity for those seeking exposure to the REIT and leisure sectors.

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