Ryman Hospitality Properties Inc (RHP) 2013 Q1 法說會逐字稿

Welcome to the Ryman Hospitality Properties' first 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 33784428. At this time, all participants have been placed on listen-only mode. 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 first quarter 2013 earnings call. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the Company's expected future financial performance. These statements 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 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 today. Let me start by saying that this quarter was no doubt one of the most complex quarters that we have ever dealt with. And Mark and I will do our best to describe the series of events that both positively and negatively affected the quarter, as well as several post-quarter events that influence how we think about the year. Now, the way we are going to deal with the many events is by discussing them one by one and the order that we will do this is as follows. First, the top line and the events that affected it; second, cost synergies and their implications to the first quarter and the rest of the year; third, forward bookings and how the Marriott system is starting to contribute to the future; fourth, we'll talk about tax and the implications of converting to a REIT, as well as the implications of a recently concluded IRS audit; fifth, guidance, and how we see the rest of the year; and sixth, our balance sheet, our share buyback program and then growth. Let me start with the top line of our hospitality business that was negatively impacted by several unusual events. Clearly, the most material was and is the consequence of the political stalemate in Washington and the subsequent sequestration.

Against this backdrop, Gaylord Hotels occupancy in the first quarter of 2013 declined 1.2 percentage points to 67.5% when compared to Q1 of 2012. The decline was primarily driven by an increase in short-term cancellations in the quarter for the quarter and the impact of government-related business in the Washington, D.C., market. Cancellations in the quarter for the quarter were 16,592 group room nights compared to 1,202 -- 1,212 in the first quarter of 2012. In the quarter for the quarter cancellations in the first quarter of 2013 were only 745 room nights less than the first quarter of 2009 at the height of the recession. Now a significant number of these cancellations materialized at Gaylord National, as several large government-related groups canceled on short notice as sequestration took hold. To go deeper, we saw a 9 percentage point decrease in occupancy in the quarter at Gaylord National with nearly five percentage points of this attributable to government cancellations in the quarter for the quarter. This was considerably higher than the rest of the market, mainly because of one short-term piece of business of 6,000 room nights that canceled in Washington. And for your information we had a 1,600 room night short-term cancellation also at the Gaylord Texan.

So the natural question is, what does this mean for the rest of the year and 2014? And in answer, I'm going to share some very important data that we have not historically shared with you before. First and foremost, government business has been historically a relatively small part of Gaylord Hotels' brand. In fact in 2011 and 2012 our total government business represented about 6.9% of our group business. For our Washington hotel that number was a little higher for these years at about 8.8%. But as the congressional budget battles loomed last year, as well as negative publicity surrounding previously held GSA conventions, the amount of business we booked in this segment declined materially. To put this in perspective, as of the end of April of this year, we only had 22,000 total government room nights left on the books for all of Gaylord Hotels for the rest of 2013 compared to approximately 54,000 room nights at the same time last year for 2012. As regards 2014, we only have about 6,500 government room nights booked for all of next year. So we have very little government business left on our books so we do not anticipate the first quarter's issues to be replicated.

Now as we've discussed many times before, attrition and cancellation fee collection does offer us a degree of profitability protection against just this type of occurrence. But to be clear, we recognize these revenues in the quarters in which they are collected. So there is a delay before we see the benefit to our bottom line. Now several other events also had an impact, namely a business mix shift year-over-year from premium corporate and association group business to less lucrative SMERF and transient business. This mix shift is felt primarily in the outside-of-the-room spending as evidenced in our financials. You will notice that while room revenue decreased a little over $2 million, all other non-room revenue decreased by over $14 million. This mix shift was anticipated in our 2013 plan but does make for a difficult comparison when looking at quarter-over-quarter results. As regards to the mix shift for the remainder of 2013, the negatives of the first quarter flip and we see a much stronger book of corporate business for the remainder of 2013 compared to the prior year. Also for us, a group dominant business Easter falling in the first quarter impacted group rooms sold in the quarter. Okay, now that is the end of the negatives.

Now there were some -- there were many good things that occurred in the first quarter that will drive the future, and let's first talk about leisure. Now the clear benefits from the Marriott transient delivery system are starting to emerge. To remind you, Gaylord Opryland's property management system was not fully integrated until late January and was unable to participate in the Marriott rewards program in an automated way until this transition was complete. But despite this our hotels generated approximately 18,600 more leisure room nights than in the same period last year, and the leisure room nights generated were the best ever in the first quarter. Furthermore, transient ADR jumped $17.05. This is obviously very encouraging. Let's talk about cost synergies. When we met in mid-February we gave you clear guidance as to what we thought would happen at our corporate level. As you'll see from our financials, our run rate for the first quarter is at the savings we predicted. In fact once our corporate accounting systems are fully integrated, that we hope will occur in the third quarter -- actually we're pretty confident will occur in the third quarter, I am hopeful that our costs will reduce a little further. Now let me talk about the hotel level synergies. We also told you at Investor Day a large part of these cost reductions come about when all of the systems that Marriott are bringing to the table are installed and people are fully trained against them. Q1 marked the completion of the system's integration and property level efforts are now focused on training and process compliance. As we sit here today, it is fair to say we continue to expect to harvest the $13 million to $16 million of synergies this year and Marriott has articulated to us a clear plan to accomplish just that.

Now bookings. We wanted to -- we pointed out to you at many times in the past the most important metrics to our model--our advanced room nights booked in the period for all future years, together with group room nights we have on the books in contract form. It is these two metrics that give me a lot of confidence in the future, and I'll explain. In the first quarter of 2011, we booked approximately 360,000 group room nights, then in 2012 we booked 372,000 group room nights. But in 2013, we booked 588,000 room nights. Yes, I said, 588,000 room nights. And this is a record for our hotels. Let me give you the Washington hotel numbers--78,000 in 2011, 135,000 in 2012, and 149,000 in 2013. And out of the 149,000, only 1,000 of those were government related. Also Marriott has modified -- has informed us that it's modified its sales deployment to focus on premium corporate and association business, so we will be further mitigating the rapidly evaporating risk associated with government bookings. And by the way, out of the 588,000 room nights booked in the first quarter, 152,000 of those were for 2013, which is a really good number.

We've also analyzed the source of the room nights, i.e., did they originate from the Gaylord database and the relationships that we had prior to the Marriott relationship or were they sourced through Marriott? What we found was that approximately 17%, one seven percent of our record-setting first quarter production was new business to our hotels and originated from the Marriott system. This is very encouraging. One further detail I want to give you is regarding Gaylord Opryland. Some of you have asked -- some of you asked at our Investor Day in mid-February, what if any impact the new convention center and convention center hotel here in Nashville would have on Gaylord Opryland and we said at the time very little. Now let's put some facts to that opinion. Gaylord Opryland group production in the first quarter of 2013 was a whopping 251,000 room nights. I repeat, 251,000 room nights, up from 143,000 in 2011 and 113,000 in 2012. Also at the end of March, we had roughly 1.9 million group room nights on the books for the property for all future years. Now by contrast, from recent comments from the general manager of the soon-to-be-open convention center, it would seem that it has approximately 840,000 room nights booked and dispersed throughout the city. Furthermore, from recent press release from our friends at Omni, its yet-to-open new convention hotel has approximately 250,000 room nights on the books, some of which I'm sure are included in the convention center numbers.

So clearly, Gaylord Opryland is in a league of its own in this city. And it's booking at a very exciting pace and this bodes well for our Company and the city of Nashville. I've got one more data point as regards forward room bookings that I think is critical to your analysis of our Company. As we look forward to 2014, we had informed you at Investor Day that group bookings were pacing ahead of our four-year historical average. To be more specific, as of the end of the first quarter of 2013, we have approximately 87,000 more group room nights signed up at this same point last year for 2013. This is very encouraging, given the fact that we have almost no government business at all booked in 2014. Now, moving away from bookings, moving on to the tax implications to our financials. In the first quarter, we made two adjustments to our financials. The first as a consequence of us converting to a REIT pertaining to deferred tax and Mark will give you more color on this. And second, we reversed previously accrued liabilities for uncertain tax positions that were settled with the IRS to add benefit late in this first quarter. As regards guidance, Mark will give you more information, but notwithstanding the government cancellations we experienced in the first quarter, we believe given the emerging strength of our group business, the more favorable mix shift as the year progresses, our ongoing corporate cost savings, our confidence in Marriott's commitment to harvesting property level cost synergies, we are reiterating our 2013 guidance save for one modification as regards conversion costs, which Mark will explain.

Moving to the balance sheet we have also made a number of moves to enhance our capital structure and after our quarter closed. First of all we refinanced our bank debt that allowed us to increase our total bank line to $1 billion. Not only did we give ourselves more flexibility but we did so at a lower cost. We also completed a senior notes offering. We repurchased approximately $56 million of stock or 1.3 million shares during the short period of time our window was open against the $100 million repurchase plan we have in place. We also announced a strong 2013 dividend payout of approximately $2 per share or $0.50 per quarter, which gives us one of the best dividend yields in the hospitality REIT sector. Last but not least, growth. During the first quarter, we had several potential acquisitions that came our way but, frankly, nothing of real interest. As we explained to you at our Investor Day, given how we are thinking about our Company for this and next year, we prefer to invest our capital into our own stock, to give us -- particularly given our current valuation and our belief about the future. With that, I'll turn the call over to Mark so he can handle the discussions and further details on other bits and pieces. Mark?

Thank you Colin. 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 our guidance for the year. On a consolidated basis Ryman Hospitality Properties' revenue for the first quarter of 2013 was $222.1 million, a decrease of 6.2% from the prior-year quarter adjusted for the outsourcing of hospitality retail operations. The revenue decline was driven by a decline in occupancy attributed to decreased group and government business and a decrease in outside the REIT spending, primarily in banquets due to an unfavorable business mix versus the prior-year quarter. During the quarter the Company generated income from continuing operations of $53.8 million or $0.81 per fully polluted share. Net income in the quarter includes $15 million in pre-tax expenses related to the Company's conversion to a real estate investment trust as well as a $66.3 million benefit for income taxes. The tax benefit is primarily due to the reversal of $137.4 million in net deferred tax liabilities associated with accelerated tax deductions taken on our real estate assets prior to our conversion to a REIT, partially offset by a valuation allowance of $76.1 million related to the net deferred tax asset of the TRS, primarily due to the book versus tax timing differences in the recognition of income related to the gain on sale of the management contract to Marriott. In addition, we reported a $6.7 million tax benefit related primarily to the reversal of liabilities associated with uncertain tax positions from the 2008, 2009 and 2010 tax years that were settled in the quarter.

On a consolidated basis the Company generated adjusted EBITDA of $50.6 million and $23.5 million in adjusted funds from operations or AFFO per fully diluted share of $0.35. AFFO, excluding reconversions costs was $34.9 million in the quarter, or $0.52 per fully diluted shares. It is important to remember that the GAAP fully diluted share calculations do not consider the anti-dilutive effect of the Company's purchase call options associated with our convertible note. 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. Turning to the hospitality segment, driven by 120 basis point decline in occupancy RevPAR declined 1.2% to $117.33 in the first quarter of 2013. After adjusting the prior-year revenue for the outsourcing of retail operations, total RevPAR for the first quarter of 2013 declined 5.3% to $287.56. Gaylord Hotels in the year for the year cancellations in the quarter totaled 30,100 room nights compared to 8,817 room nights in the first quarter of 2012. As Colin mentioned, this increase was partially attributable to the significant government-related group cancellations in the Washington, D.C., market. Attrition in the quarter increased 3.8 percentage points to 8.3% versus the prior-year quarter. During the quarter, Gaylord hotels collected $1.8 million in attrition and cancellation fees.

Compared to the prior-year quarter, hospitality segment adjusted EBITDA decreased 26% to $54.7 million. Hospitality adjusted EBITDA margin decreased 6.6 percentage points to 26.1%. The operated attraction segment generated revenue of $12.5 million and adjusted EBITDA of $1.4 million. And with most of our corporate cost synergies in place, the corporate and other segment adjusted EBITDA totaled a loss of $5.4 million in the first quarter, a $6.1 million improvement when compared to a loss of $11.5 million in the prior-year quarter. During the first quarter of 2013, the Company incurred $15 million of costs associated with REIT conversion activities. Conversion costs in the quarter were primarily employment and severance related to additional employees leaving the Company. Based on the current forecast, we are increasing our 2013 pre-tax REIT conversion cost estimate to $24 million to $25 million versus our previous estimate of $18 million to $20 million. This increase is driven primarily by higher-than-expected property level employee equity compensation and pension settlement costs associated with the conversion to a REIT.

Moving on to the balance sheet as of March 21, 2013, we had total debt outstanding of $1,092.1 billion dollars and unrestricted cash of $44.8 million. On January 17 we redeemed our remaining 6.75% senior notes at par at a cost of $152.2 million. Also during the quarter, the Company repurchased and canceled approximately 1.3 million shares of its common stock for an aggregate purchase price of $55.7 million. Since the end of the first quarter, we completed the successful refinancing of our $925 million credit facility that was scheduled to mature in August of 2015. The increase in extended $1 billion credit facility will mature in April 2017 and it is comprised of a $700 million revolving credit line, $154 million of which was drawn at close and a fully funded $300 million term loan. We were able to secure favorable pricing on the facility with initial pricing set at LIBOR plus 1.75%. We also completed the private placement of $350 million of 5% senior unsecured notes due 2021, with aggregate net proceeds of approximately $342 million after deducting the initial purchasers' discounts and commissions and estimated operating expenses. Our year-to-date refinancing activities have improved our maturity schedule and provided balance sheet capacity and flexibility at attractive rates.

On April 12, 2013, we paid our first quarterly cash dividend of $0.50 per share of common stock. We also announced our plan to distribute total annual dividends of $2 per share in cash in equal quarterly payments in July -- in April, July, October and January, subject to the Board's future determinations as to the amount of the quarterly distributions and the timing thereof. Now turning to guidance. As Colin indicated, the Company is reiterating its 2013 full-year RevPAR, total RevPAR, adjusted EBITDA and AFFO guidance. Please note that with the successful settlement of our uncertain tax positions in prior years, our adjusted EBITDA and AFFO guidance now contemplates an increased benefit for income taxes, which is offset by increased interest expense associated with our refinancing and share repurchase activities. Based on our current forecast of reconversion costs, we are reducing our guidance for AFFO after REIT conversion costs by approximately $6 million to $193 million to $207 million. And to account for our recent share repurchase activity, we have reduced the share count used in our AFFO per basic share and AFFO per basic share after reconversion cost guidance ranges. With that I'll turn the call back over to Colin for any closing remarks.

Mark, no, I think what we'll do is we'll open up the call for questions. Jackie, if you could do that please? And we will take questions.

(Operator Instructions)

Bill Crow with Raymond James.

Couple of questions, Colin. The maintenance of the RevPAR, total RevPAR guidance for the year implies either the first quarter was in line with your expectations or you are more optimistic about the balance of the year. Which one is it?

Well, the thing that caught us a little bit by surprise, Bill, in the first quarter was the government cancellations. The mix was something that of course we knew something about and was embedded within our plan. We've got about 50,000 more corporate room nights on the books for the rest of this year than we had at this time last year for this year and -- for last year, sorry. But here's the thing also that we are delighted with this level of activity that we have seen in the first quarter from our friends from Marriott and our existing sales people that stayed with the Company. If we continue to see the level of production that we have seen in the first quarter through the rest of the year, the year is going to be a decent year. We are also very pleased with what we have seen in the first quarter from leisure production. And then the other thing that you've got to remember, Bill, is that once we told the world come June of last year -- end of May last year that we are going to sell our hotel brand to Marriott and Marriott was going to be the manager, essentially, as we've discussed multiple times, our sales people basically went into hibernation. And you saw our sales production in the last part of the second quarter, third quarter, fourth quarter of last year. We don't obviously expect that to happen this year. So we -- it's a combination of a decent book of business and the momentum we have in bookings as we look at the...

On the quality of the bookings or the composition of the groups that are in there, can you reassure us that the advanced bookings that were put on the books in the first quarter are going to be that corporate and association business? And then you made a comment about Marriott shifting its focus to the premium group and association business and I was trying to figure out where they were before they made that shift that your prepared remarks alluded to?

Yes, maybe those words weren't entirely well thought through. We had a very large meeting last Monday in Bethesda and -- with our friends from Marriott. And there were -- probably they brought 15 to 20 folks to the table, and we talked in detail about the activity that they have -- that they are applying to both the corporate market and also the small meetings market. And I think we all, Mark, Patrick and I, came away from that meeting feeling that they were focusing on that sector with a lot of diligence. And we heard probably a stronger emphasis on that sector in that meeting than we have historically heard. I think that is the way I would describe it. Mark, you got any comments for Patrick?

The only thing I would add just to Colin's comments back to one part of your question as far as what are we seeing, what was booked in the first quarter for the back half of the year. Just to lend additional credence to that, we booked about 84,000 corporate room nights of what we booked in the first quarter. So in the year for the year there was a high mix of corporate bookings that were captured in that first quarter which is very encouraging to us because, as you know, corporate groups tend to spend more outside the room and for our model that is definitely the type of room mix we want to be capturing.

Finally for me guys, we have heard from others of course about the negatives in D.C. But we have also seen the first quarter benefited from the inauguration, not as much as four years ago perhaps. I know you were a big part of it four years ago. Did you not receive a similar benefit this year from the inauguration?

Bill, that is a good question. We did receive benefit. It was all in the form of rate because it falls over a period that we can drive group business in house. And so the benefit for us is on the rate side. So if you look at the National, there was a rate lift in January for that hotel. But that really is the only true impact that we had.

Kevin Milota with JPMorgan.

I had a question as it regards to the percent of budgeted room nights that you have on the books. So the 588,000 advanced group room nights, how does that breakdown for 2013, 2014, and 2015?

The production. Do you have those notes, Patrick, handy?

The production? Yes. Just one second. Okay so the production that we did in the first quarter, the 558,000, Kevin, about 143,000 and I'm talking in terms of gross, about 144,000 fell into this year, about 78,000 are falling into 2014, 103,000 went into 2015, about 44,000 into 2016, and then beyond 2016 there is about 190,000 room nights that were booked.

In terms of -- I know this is a stat that you've provided in the past but as the percent of revenue booked for the upcoming years, do you have that similar stat as it stands now?

Yes, right now for 2014, Kevin, we've got about 39 points of occupancy on the books for 2014. That is about three percentage points ahead of where we were last year. And when you look at the rate that those rooms are on the books at compared to where we finished 2012, we are high single digits above that average rate.

And, Kevin, remember, we pointed out as well, we've only -- out of all of those room nights the almost 40 points of occupancy, only 6,000, 6,500 of those room nights are government related. So that is all good news.

In the first quarter we saw a lot of really good production into 2015. 2015 is just under about 30 points of occupancy, and we are heading into the corporate booking window now for that period of time. So we'll be looking to our sales team and the Marriott folks to really start driving into 2015 as well and pushing it up as well.

So those are the 2014 to 2015 numbers. For 2013 do you have a similar stat?

How many room nights have we got on the books?

Just occupancy on the books at this point.

For 2013, give me just one second if you could and I'll find that for you.

No worries, thank you.

Is that the end of your question, Kevin?

Yes. And the last one just relates to the 22,000 rooms that you have from government. At this point, do you think there is substantial risk to those groups showing up or have we hit a point with the federal issues that you think you have pretty good clarity in terms of if those rooms will actually show-up at the National?

We have obviously analyzed the living daylights out of these particular groups. And I think it is fair to say that we have taken a little bit of a haircut on those groups as we've done our forecast for the rest of this year. I think that's correct. Patrick, do you have that number.

Yes, I do, Kevin.

Or do you want to get back to him?

No, I have got it here with me. Thanks forgiving me just a minute to pull it up. As you know we had about 500,000 room nights travelled during the first quarter. So for the rest of the year, we currently have about 1.1 million room nights on the books, so that is definitely in keeping with what we would expect at this point in the year.

And with a more favorable corporate mix.

Andrew Didora with Bank of America.

Colin, maybe could you speak a little bit more broadly about the visibility you have in your business model, maybe with a particular focus on National? I guess my question is how much of the 9% occupancy decline at the property was actually contemplated in your budget? And how much of that came as a surprise to you guys?

The part that came as a little bit of a surprise to us was the two or three in the quarter, late in the quarter group government bookings that we had canceled. We also had an attrition rate that was running a little higher than we had contemplated in our plan. But we knew in our plan that there was a mix shift that was going to negatively affect the first quarter, and so that will be the commentary I would make on this.

And I know -- I think one of your responses to an earlier question was that you haircutted some of this government business for the rest of year. If governments continue to cancel at this pace, what is your confidence that you are able to replace this business as the year goes on?

We only have 20-odd thousand room nights for the whole Company in government business booked for the rest of this year. We -- our leisure room nights we produced in the first quarter 18,000 more in the first quarter than we did this time last year. We don't think with the limited amount of exposure the Company has, for the rest of this year, we don't think this is material to us.

And to that point we have redeployed a lot of the sales team that is focused on the Gaylord National. They are focusing more on short-term business that we know is not government related, whether that be pharmaceuticals or financial services. And so we've got that team focused on looking elsewhere to drive additional room nights in the year and for 2014 and beyond.

And then my final question, I just wanted to touch on the balance sheet. Colin, you went through a little over a half of your buyback authorization pretty quickly in 1Q. Given where you price your credit facility and your recent senior notes offering, what is your view of adding some leverage here in order to buy back more stock?

Well, we'll see where things go. What we have told you all, and what we have told the rating agencies and we've told our bank, we don't think it's appropriate to push our leverage much beyond four and a half times. And our pro forma has us for our 2013 plan, it has us operating less than that, healthily less than that. So we'll see what happens here. But I think we have been pretty consistent that we like our equity. We like the -- we think our -- the future of this Company looks extremely bright, and we believe we are trading at a material discount and we'll see where things go here over the next month to two months. But-- and we'll be having these conversations with our Board. But I don't think we're going to be done here at $100 million. We are going to continue to look at what evolves.

Okay great. Thank you.

That was a long-winded punt. (laughter)

Will Marks with JMP Securities.

I wanted to ask just on the miss or the weakness in the first quarter, when you guys gave guidance, it was right when we enjoyed Valentine's Day with you all. And that was mid quarter so the big cancellations, which I think were responsible for what you say is the miss, were at that point. Can you just talk about -- or were sometime after that point -- can you talk about how this is accounted for in terms of I imagine you got some nice cancellation fees out of it. Do they come all in the first quarter and the second quarter?

Well, look. Let's be clear. We didn't give you quarter-by-quarter guidance. We gave you guidance for the year. We have missed against your extrapolation of what you thought we were going to do. And, yes, we've got -- we had three or so cancellations in the first quarter that negatively affected our business, but we've been pretty clear. The leisure side of our business is operating at a level that frankly is a little ahead of where we thought it was going to be. And we also, if you recall, on that February 15 meeting, when we got pressed about, well, where do you think Marriott's going to be in terms of group production? We said we are going to take a pass on that right now. We believe, over time, that their group delivery model will, because of the amount of people they have dedicated to this and the amount of corporate customers they have, the 130-odd thousand customers that we talked about, we believe over time that will be material. Well what has actually happened is we have taken apart this first quarter and 17% of this 550,000-ish room nights have been produced through the Marriott system, so we are happy about what is going on here. So I know that is a long-winded way of saying we have missed against your expectations, we have a plan that knew there was going to be a mix shift. And we as we sit here today are comfortable with our guidance.

In terms of your other question, Will, we collected $1.8 million in the quarter in terms of fees. We've got about another $1.2 million of receivables on fees that we'll collect when those travel dates actually occur and those fees are due. And then in addition to that, we had a number of cancellations re-booked either for later years or for multiple years in the future. So that's kind of how the cancellation fees worked through in the first quarter.

And to give you a feel for how that built over the quarter, our occupancy, we actually finished January ahead year-over-year in occupancy about 3.7 points. But then February and March we were down 2.9 points in occupancy and 4.7 points, respectively. So as we stood at the end of January.

Against our plan.

This is actually against year-over-year. So as we stood at Investor Day, there was still a lot of noise coming in the quarter that we really hadn't seen materialize at that point. But to Colin's point, the mix shift was definitely something we had already anticipated.

Okay, that makes sense. Just one follow-up to that is when someone cancels on fairly short notice like that, what is it? 100% of the room rate? Three quarters of the food and beverage minimum or can you just remind us approximately how that works?

Typically, it is a portion of the room rate and the food and beverage minimum to keep us whole in terms of profitability. And to your point, Will, as you get closer into the travel date and when you are in the quarter for the quarter typically their full fees are due to us. One of the challenges though with this quarter from a fee perspective and the reason why fees weren't as strong as one might anticipate is, is that one of the other challenges with government businesses is that they typically will not agree to cancellation fees or they will require significantly reduced cancellations.

And there is a reason for that and that is that this is short-term business. Typically government books within a 12-month window. So they come to you and they say, look, I want to come next September, do you have the whole? The answer is yes. And they say, well -- there is a different type of negotiation that goes on with government. But look, government is becoming an insignificant part of our forward book of business. And I don't think it's going to be material to us prospectively.

(Operator instructions)

Carlo Santarelli with Deutsche Bank.

Just really quickly on the Easter shift and obviously how that would have impacted your business. I know Marriott gave some statistics on a monthly basis. Could you guys talk a little bit about how things changed post of 1Q in April once you adjust for that holiday?

Impact of Easter.

Okay, yes, I'm not sure. (multiple speakers)

In terms of if it rolls from March to April, how it impacts April.

Yes, let me see if I've got that here.

Carlo, I think what we'll do is we'll give you -- Patrick will get back to you on that question. I think our April numbers have not been, I mean I think. Let's get back to you because we're waffling and I don't want to give you incorrect data. And if you don't mind on that question --

No that is perfectly fine.

about the impact of group business shifting from the March period to the April period, because Easter was in March. We'll give you that information. But we'll have to get back to you on it.

Then if I could just one follow-up. With respect to the margins, obviously a lot of moving parts. But some of the margins in the quarter looks like there was significant swings on a year-over-year basis. Are you guys seeing any unaccounted for pressures today relative to when you outlined your guidance? Or are there any things on the cost side that might have crept up that was unforeseen?

Go on, Mark.

No, I don't know that they were -- nothing has crept up systemically that I would say was unforeseen. We had talked about early in the year the fact that we had a change in union benefits that was going to impact margins as well as property tax increases. Obviously, we now have management fees that roll through the P&L at the property level. I think that the issue for us from a margin perspective is the continued ramp up of property level cost synergies. Those synergies are to come, as Colin outlined on his call -- on the call with all the systems now in place. So you should -- we should see those margins continue to expand as we move through the years and synergies are realized at the property level.

Nikhil Bhalla with FBR. Nikhil, your line is open.

Maybe we go for one more, Jackie, and then we'll wind the call down and let -- if anyone has any subsequent questions they know how to get hold of us here at the Company.

We have no further questions.

Okay. Excellent. Well thank you, everyone, for coming. Complicated quarter, and -- but I think the rest of the year and next year look very good for the Company. So appreciate your time this morning and look forward to seeing you all at the upcoming conferences that we will be attending. Thank you very much indeed.

Thank you. This concludes today's conference call. You may now disconnect.