Ryman Hospitality Properties, Inc. annual report, FY2023

Business Context and Reporting Period

Ryman Hospitality Properties, Inc. filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The company operates as a self-advised REIT focused on group-oriented destination hotels and entertainment assets. Hospitality generated approximately 85% of 2023 revenue and Entertainment approximately 15%.

Hospitality includes five Gaylord resorts, JW Marriott San Antonio Hill Country, the Inn at Opryland and AC Hotel National Harbor. Marriott manages the properties.
Entertainment is conducted through the 70%-owned Opry Entertainment Group and includes the Grand Ole Opry, Ryman Auditorium, Ole Red, Block 21, W Austin, WSM-AM and other attractions.
The filing provides annual comparisons; it does not provide a separate fourth-quarter-only financial statement in the supplied text.

Key Financial Metrics

Metric	2023	2022	Change
Total revenue	$2.158 billion	$1.806 billion	+19.5%
Operating income	$453.7 million	$327.2 million	+38.7%
Operating margin	21.0%	18.1%	+2.9 percentage points
Net income	$341.8 million	$134.9 million	+153.3%
Net income available to common stockholders	$311.2 million	$129.0 million	+141.3%
Diluted EPS	$5.36	$2.33	+130.0%
Cash flow from operations	$557.1 million	$419.9 million	+32.7%
Adjusted EBITDA_re, excluding noncontrolling interest	$660.9 million	$540.5 million	+22.3%
Adjusted FFO available to common stockholders and unit holders	$473.1 million	$363.5 million	+30.2%

Revenue growth was led by Hospitality revenue of $1.833 billion, up 19.2%, and Entertainment revenue of $324.7 million, up 21.1%. Hospitality operating income increased to $421.3 million from $310.9 million, while Entertainment operating income increased to $77.4 million from $61.0 million.

Hospitality occupancy was 71.6%, up 5.4 points; ADR was $245.74, up 3.7%; RevPAR was $175.96, up 12.3%; and Total RevPAR was $460.12, up 13.7%.
Same-store occupancy was 71.9%, up 5.7 points, and same-store ADR was $243.19, up 2.7%.
Net definite group room nights booked increased 31.2% to 2.37 million.
Interest expense increased 42.4% to $211.4 million. The weighted-average borrowing rate, including swaps, increased to 6.6% from 5.0%.
The company recorded a $93.7 million income tax benefit, primarily from releasing $112.5 million of valuation allowance related to deferred tax assets. This was a significant contributor to reported net income growth.

Liquidity, Debt and Capital Allocation

Unrestricted cash was $591.8 million at December 31, 2023; restricted cash was $108.6 million.
Total debt and finance lease obligations were $3.377 billion, compared with $2.863 billion at year-end 2022.
Aggregate borrowing availability under the revolving credit facility and OEG revolving facility was $745.4 million, including $685.4 million available under the primary revolver after letters of credit.
The primary credit agreement provides for a $700 million revolver maturing in 2027, a $500 million Term Loan B maturing in 2030 and an accordion feature of up to $475 million. The Term Loan B had $496.3 million outstanding at year-end.
Other principal debt includes $800 million secured Gaylord Rockies debt, $296.3 million of OEG term debt, $131.9 million of Block 21 CMBS debt, $700 million of 4.75% senior notes due 2027, $400 million of 7.25% senior notes due 2028 and $600 million of 4.50% senior notes due 2029.
The Gaylord Rockies loan matures in July 2024 but has extension options; management stated that it expects to refinance debt before maturity. No debt covenant defaults existed at December 31, 2023.
Operating cash flow was $557.1 million. Investing cash outflows were $1.013 billion, including $791.5 million for JW Marriott Hill Country and $206.8 million of capital expenditures.
The company paid $176.0 million of cash distributions in 2023 and declared dividends and distributions totaling $3.85 per common share/OP Unit for the year.

Material Changes Versus 2022

On June 30, 2023, Ryman acquired JW Marriott San Antonio Hill Country for approximately $800 million. The property contributed $92.8 million of revenue and $13.2 million of operating income for the partial year.
The acquisition was funded with approximately $395 million of common equity, approximately $393 million of net proceeds from $400 million of 7.25% senior notes and cash on hand.
Ryman refinanced its credit facility in May 2023, extending the revolver to 2027 and increasing the Term Loan B to $500 million.
Hospitality benefited from stronger group demand, higher occupancy, higher ADR, increased outside-the-room spending and lower cancellations and attrition. Attrition and cancellation fee collections nevertheless declined by $13.5 million to $43.8 million.
Entertainment revenue increased primarily because Block 21 contributed a full year of results and other OEG businesses reported higher attendance or volume.
The company’s stock count increased to 59.7 million shares outstanding at year-end from 55.2 million at year-end 2022, reflecting the equity offering.
Ryman decided to wind down its Circle television network joint venture, which ceased operations on December 31, 2023. The company recorded approximately $10.5 million of related loss, including a $3.5 million commitment to fund remaining obligations.

Guidance, Outlook, Commentary and Risks

Management expects 2024 capital expenditures of approximately $360 million to $440 million. Planned projects include a new Gaylord Rockies events pavilion and other enhancements, Gaylord Opryland meeting-space improvements, renovations at Gaylord Palms and W Austin, Block 21 enhancements, completion of Ole Red Las Vegas and conversion of the Wildhorse Saloon to the Luke Combs-themed Category 10 concept.

Management stated that cash on hand, operating cash flow and available revolver capacity should fund operating expenses, interest, lease obligations, declared dividends and planned capital expenditures.
Management cited continued favorable occupancy, ADR, outside-the-room spending and Entertainment business levels, but expects inflation, wages, insurance, food and beverage costs and interest rates to remain pressures.
Approximately 80% of outstanding debt was fixed-rate or hedged at year-end. A 100-basis-point increase in SOFR would increase annual interest expense by approximately $5.0 million on the unhedged portion of the Term Loan B and approximately $2.0 million on the unhedged portion of the OEG Term Loan.
Key business risks include concentration in the group-oriented lodging sector and selected geographic markets, reliance on Marriott for property management, labor and wage pressures, inflation, capital requirements, refinancing risk, restrictive debt covenants, cybersecurity incidents, natural disasters, pandemics and REIT qualification requirements.
At December 31, 2023, Gaylord National bonds had a $61.8 million carrying value net of a $38.0 million credit loss reserve; the Series B bond was fully reserved. The valuation depends on long-term projections of hotel and property tax revenues through 2037.
Management and the auditors concluded that internal control over financial reporting was effective, but JW Marriott Hill Country was excluded from the company’s year-end control assessment because it was acquired in June 2023. The property represented 16.4% of total assets and 4.3% of total revenue for 2023.

Important Facts for Investors to Verify

Verify the sustainability of Hospitality demand, group bookings, occupancy, ADR and Total RevPAR after the post-pandemic recovery period.
Assess whether JW Marriott Hill Country achieves expected operating performance and whether integration, renovation and capital requirements remain within plan.
Review the July 2024 Gaylord Rockies maturity, available extension options and refinancing progress.
Reconcile reported net income and EPS with recurring performance, given the $112.5 million deferred-tax valuation allowance release.
Evaluate leverage, interest-rate exposure, covenant headroom and the company’s ability to fund $360 million to $440 million of planned 2024 capital expenditures while maintaining dividends.
Review the terms and potential future cash or stock obligations associated with Atairos’s OEG put rights and other governance rights.
Monitor the $38.0 million credit loss reserve on the Gaylord National bonds and the assumptions supporting projected tax revenues.
Confirm the timing and cost of the Gaylord Rockies enhancements, Category 10 conversion, Ole Red Las Vegas completion and other announced projects.