SCOTTSDALE, Arizona—Group-business hotels are the target segment for newly-formed Ryman Hospitality Properties, according to the company’s Executive VP and CFO Mark Fioravanti.
Executives of the public real-estate investment trust formerly known as Gaylord Entertainment, expect to grow the company’s five-property portfolio by acquiring hotels targeted toward groups or “overflow” hotels with repositioning opportunities, Fioravanti said Thursday during a presentation at the Deutsche Bank 20th Annual Leveraged Finance Conference in Scottsdale, Arizona.
Ryman has four Gaylord properties in its portfolio, all of which have been built or undergone renovations within the last four years and are operated by Marriott International. Additionally, the company owns the Inn at Opryland, an independent property in Nashville, Tennessee, that Marriott will assume management of on 1 December.
“As a REIT, we will no longer pursue ground-up development,” he said.
There is ample existing supply Ryman can work with to build its portfolio, Fioravanti added. Approximately 400 hotels in the United States fit the criteria the company’s executives are looking for, he said.
“We can now potentially buy and maintain another brand’s flag,” he said.
For now, however, the immediate priority in the next three months to six months will be completing the conversion process, Fioravanti said. Making sure the relationship with Marriott is running smoothly before aggressively seeking acquisition opportunities is crucial, he said.
An understanding of group-oriented hotels
As the company continues its conversion into a REIT, Fioravanti said Ryman has an advantage over other players in the group-oriented, destination asset space.
“Our management team, being a management team that built the Gaylord Hotels brand and spent the last 11 years in the meetings business (segment), have a deep understanding of what the meetings segment’s needs are,” he said.
Gaylord Hotels’ revenue mix is made up of 22% transient and 78% group. That group business breaks out into approximately 50% corporate, 35% association and the remaining 15% as other groups.
A unique characteristic of having this kind of revenue mix is the non-room revenue the company generates, Fioravanti said. Gaylord hotels generate approximately 60% of their revenue outside room rates, including banquets, food-and-beverage outlets and parking fees, among other opportunities.
Another benefit of the group-focused business, he said, is that the average booking window is a little more than three years. “We get a significant amount of visibility a few years out,” which gives the company ample time to fill any holes.
For example, Ryman’s contractual model with its group bookings helped offset declines in revenue per available room during the recession. “Attrition and cancellation fee collections for our hotel brand peaked in 2009,” Fioravanti said.
In 2008, Gaylord reported 72% occupancy and brought in $14.6 million in attrition and cancellation fees. When the downturn hit in 2009, occupancy went down to 66%, but the company collected $27.7 million in fees from cancellations.
Moving forward, Ryman’s executives are anticipating the relationship with third-party manager Marriott will improve the quality of the group/transient business mix and possibly will even grow the transient segment.
While Fioravanti declined to provide performance results for the company’s third quarter as its earnings call is scheduled for 6 November, he said during the second quarter Gaylord properties saw increases in outside-room spending and occupancy. “Profitability continued to improve quarter over quarter.”
“We have very high-quality, group-oriented, frankly irreplaceable assets,” he said. “The group-oriented business model provides for … reliable cash flow, which we think is very attractive for a dividend-paying stock.”
