Ryman Hospitality Properties Inc (RHP) 2013 Q2 法說會逐字稿

Welcome to Ryman Hospitality Properties' second-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 16138229. 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 second-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. 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 or events or for 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 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. As you will see from our results, the second quarter was challenging from a hotel operations perspective. On the call today, we will delve into the factors impacting our results in the quarter and the actions that we and Marriott are focused on to improve near-term operating results, and most importantly, position the Company for revenue and profitability growth in 2014 and beyond. I will also provide some perspective on the current trends in the group sector, and then touch on the continued refinement of our guidance for the remainder of the year, and then Mark will take you through some of the details of our second-quarter financial results.

In early June, we shared several emerging trends that we were seeing that we knew were going to adversely impact the second quarter, and particularly, our outlook for the remainder of the year. As a result, we decided it was appropriate, at that time, to lower our guidance for the year based on the forecast for our business. Now to remind you, the trends included lower-than-expected in-the-year, for-the-year group bookings, due to a combination of transitional issues and reluctance of groups to book short-term business, cost synergies within our hotels that were not being realized as quickly as originally anticipated, and declining hotel property level margins due to transition-related disruptions. Now, to be perfectly clear with all of you, we are not happy with several elements of our results this quarter, particularly as it relates to the transition issues, and neither is Marriott.

So, what are we doing about it? Over the last 60 days, we have worked extensively with Marriott to understand the drivers behind each of these trends, the opportunities for improvement in each of our hotels, and how unique the Gaylord Hotels' operating model best fits within the Marriott sales process. We now have an agreed upon specific set of action plans to arrest and reverse the negative sales and operating margin trends in our business and to do everything possible to contain the impact of these issues to 2014.

So, what have we done to remedy the group sales issues we discussed in June? Now, there are two very distinct sales opportunities we have, and let me try and describe them both to you. The first issue relates to the customer group that we refer to as the 10-to-300 room nights at peak. This segment of customers tends to make up the majority of the in-the-year, for-the-year business. Now to remind you, our in-the-year, for-the-year production in the first quarter of this year was pretty stellar. Now, that gave us confidence that 2013 would be a decent year.

As April and May proceeded, in-the-year, for-the-year production declined from the pace we experienced in the first quarter, as production responsibilities shifted to the regional sales offices of Marriott. Consequently, reach group room nights were called down, and that was the major contributor to our early June guidance revision. A problem though is that the speed of ramp up continues to be slower than we want or need, although improvement month over month is occurring.

As the challenges with the sales office production occurred, we began to experience group trends over the last couple of months that reflected softening in group business. Attrition rates across May and June revealed a steady increase. To give you more data, Q2 in 2012, our attrition rate was 6.7%, which is really at the low end of our norm; Q1 of '13 was at 8.3%, about the norm; but Q2 climbed to 12.9%. It is difficult to ascertain if there is an economic trend going on caused by sequestration and by general economic inertia, but it does appear in the short term the companies who have booked meetings are proceeding cautiously.

With the group sector under an industry microscope, let me just spend a minute talking about other trends that we are seeing. As some of you have likely heard from other companies, the group sector overall faced headwinds in the second quarter. Through April, group occupancy for the top 25 markets was up about 0.1 points and group RevPAR for these markets was up 4.8%. However, starting in May, a different trend began to emerge. The top 25 markets saw group RevPAR decline 2 percentage points, year over year, and in May, another 3-percentage-point decline in -- 2% in May and another 3% in June. And, per Smith Travel Research, through July 27, the top 25 markets have seen this trend continue through this month.

This trend was evident in three of the markets our hotels operate -- Nashville, Orlando, and Washington. Group RevPAR declined 10.8% in the Nashville market, 3.7% in the Orlando market, and was about flat in Washington DC. Dallas benefited from a favorable comparison in '12 when a new large hotel in downtown Dallas was first ramping up from its Q4 2011 opening. As with the overall top 25 markets, this trend continued into July. STR's running 28-day report indicates that group RevPAR in Nashville, Orlando, and Washington all declined.

Now, these trends have materialized at our hotels in several different ways, and as I mentioned earlier, group attendance levels have softened and meeting planners are struggling to accurately project the attendance of their meetings. For example, one large corporate group that traveled to one of our hotels in late Q2 reduced its program 30 days prior to the arrival from a three-week event to a one-week event, once they realized that the attendance levels could not support the three-week event. Other meeting planners have commented that their attendees are under pressure to minimize their time out of the office, and as a result, we have also seen shorter nights materialize, lower than historical levels, as attendees are arriving later or departing earlier from a specific meeting.

Now, there appears to be no one single explanation behind the short-term softness we are seeing in the group segment. While government sequestration is one of the forces at play, that explanation alone cannot fully explain the decline in the overall segment. Manager has responded by ramping up trends in offers and packages, in order to offset the impact of group decline. They and we have also examined our room nights on the books for 2013 and have scrubbed them more aggressively to account for the softness that we have seen in the last couple of months. Given all of this, Marriott modified its forecast to us for the rest of the year, and this is reflected in our guidance that we described this morning.

So the question is, what have we done about this? Now, we are adding back sales resources to our hotels and dedicating resources at their regional sales offices, and I have confidence that this will arrest the issue that we have experienced since April. It is important to note that over the past couple of months, we have seen lead volumes, save in the 1,000-plus category which I'll discuss in a minute, rise materially year over year, so this gives me confidence that property-focused resources and focused resources in the regional sales offices will improve conversion and fix the problem regarding this category.

The other areas of sales where we have had extensive dialogue with Marriott is in the 1,000-plus, at-peak groups, which are absolutely critical from massive hotels like ours. Now to put the importance of this sector into perspective, about 40% of our total gross group room-night production over the past two years have been in the 1,000-plus groups. After extensive dialogue with Marriott, they have agreed to create specific sales incentive programs for Gaylord Hotel sales managers for this 1,000-plus room night group as well as create a team of hunters dedicated solely to the 1,000 meetings sourcing. Now, while some of these action plans I just described may not have an instant impact, they should drive positive results for 2014.

On the margin-management side, our asset management team has conducted a thorough review of all labor management, procurement, and forecasting processes with Marriott and the senior leaders of each of the hotels. As I mentioned to you in June, the integration of these massive hotels is extraordinarily complex, and to fundamentally change basically every approach to doing business in our hotels, in a six-month period of time, was extraordinarily ambitious. Now that being said, the hotel employees and leaders are beginning to overcome the learning curve associated with the new tools and processes that are in place. Our asset management team is working closely with Marriott to better understand cost-synergy misses, and particularly put action plans in place to attain the appropriate synergies.

Now challenges aside, there were a number of very positive accomplishments, during the quarter, that reinforce our confidence that our business is well positioned for the future. Aided by the affiliation with Marriott Rewards, we continue to see strong room night and ADR increase in the transient segment. During the second quarter, transient room night demand increased 22%, or approximately 24,000 room nights. Transient ADR grew by a healthy $4.89, or 2.9%. This is an area where we will continue to focus, particularly given some of the softness that we're seeing in the group market, as I've just discussed.

Our goals that we set one year ago for our corporate costs have been accomplished. During the quarter, corporate and other adjusted EBITDA totaled a loss of $5 million, a $6.4 million improvement versus the same time last year. Overall, through the first half of '13, we have reduced our corporate overhead by $12.5 million over the same period as last year, slightly ahead of where we planned. Now, another bright spot is our Opry and Attractions segment, which had recorded a record second quarter in both revenue and profitability, with the segment's adjusted EBITDA increasing 27% versus the second quarter of '12. Now, there are several reasons for this, but tourism internationally is really growing, and this will be very good for all of our businesses, here, in this market.

Though our second-quarter bookings production was lower than the prior year, year to date, we have a solid base of group business on the books for '14. As of June 30, we have approximately 40.7 points of occupancy on the books for '14, compared to 39 points of occupancy on the books in '12 for '13. Now on face value, the year-over-year Q2 decline in rooms booked could look troubling, particularly when you take into consideration my comments about the reluctance of planners to book short-term business, but here is a couple of positive things that I want to just quickly reference.

First, for July, our gross group production was up almost 50% in July of 2013 versus the same month for '12, to 128,000 room nights, with very good production for in-the-year, for-the-year and for next year. Also, new leads that surfaced for our hotels in July increased by just over 30% from the same period last year, and this too, is very encouraging. The opportunity is in the converting of this healthy basket of leads, and the new sales resources that are in the process of being added to our hotels and dedicated at the regional offices, that I referenced earlier in my comments, should result in increased production.

Turning to our capital structure the Company successfully refinanced a significant portion of its balance sheet during the quarter, including the private placement of $350 million of eight-year, 5% senior unsecured notes, and refinancing and upsizing our credit facility, extending the maturity to April 2017.

Now, let me shift to guidance. I can assure you that modifying guidance again is very troubling to me and to this team, and those of you that know us and who have followed our Company for over the years, know this is not what we do. But the reality is, the group sales transition has caused some disruption to short-term bookings, and the magnitude of the systems migration caused margin compression, all incurring in a weakening group environment. Now, Mark will walk you through the numbers, but suffice it to say, while our short-term performance is way below our expectations for this business, our projected AFFO is extremely healthy and well in excess of our current dividend.

As regards to the future, I am still very confident that the transition to Marriott management will yield very good long-term value, and I can assure you all we are 100% focused on ensuring that this is the case. Mark, why don't you take the folks through the financials.

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 recent refinancing activities, and then cover the guidance for the year. On a consolidated basis, Ryman Hospitality Properties revenue for the second quarter of 2013 was $245.2 million, a decrease of 2% from the prior-year quarter, adjusted for the outsourcing of hospitality retail operations. The revenue decline was driven by a decline in both RevPAR and total RevPAR, attributed to near term-softness in group demand and transition-related disruption in the group sales process.

During the quarter, the Company generated income from continuing operations of $16.4 million, or $0.18 per fully diluted share. On a consolidated basis, the Company generated adjusted EBITDA of $70.9 million and $48.8 million in adjusted funds from operation, or AFFO per fully diluted share of $0.75. AFFO, excluding REIT conversion costs, was $51.5 million in the quarter, or $0.79 per fully diluted share.

It is important to remember that the GAAP fully diluted share calculations do not consider the anti-dilutive effects of the Company's purchased call options associated with our convertible notes. As a reminder, the dilution mechanics for the convertible notes, purchased call, and sold warrants is available in the Investor Toolkit section of our website. These mechanics have been updated to reflect our recent purchases of the convertible notes and an unwinding of a pro rata portion of the note hedge.

Turning to the hospitality segment results, driven by a 290-basis-point decline in occupancy, RevPAR declined 3.9% to $130.37 in the second quarter of 2013. After adjusting the prior-year revenue for outsourcing of retail operations, total RevPAR for the second quarter of 2013 declined 3.2% to $302.29. Gaylord Hotels in-the-year, for-the-year cancellations in the quarter totaled 21,415 room nights, an increase of 42.8% when compared to 14,997 room nights in the second quarter of 2012. As Colin mentioned, attrition rates in the quarter increased 6.2 percentage points to 12.9%, versus the prior year quarter. During the quarter, Gaylord Hotels collected $1.3 million in attrition and cancellation fees.

Compared to the prior-year quarter, hospitality segment adjusted EBITDA decreased 13% to $68 million. Hospitality adjusted EBITDA margin decreased 3 percentage points to 30.5%. The Opry and Attractions segment had a record quarter in terms of revenue and profitability. For the quarter, the segment generated revenue of $22.4 million and adjusted EBITDA of $7.9 million. With most of our corporate-cost synergies in place, the corporate and other segment adjusted EBITDA totaled a loss of $5 million in the second quarter, a $6.4 million improvement when compared to a loss of $11.4 million in the prior-year quarter. During the second quarter of 2013, the Company incurred $5.4 million of costs associated with the REIT conversion activities. Conversion costs in the quarter were primarily related to systems conversions, professional services, and hotel-specific costs.

Moving on to the balance sheet, as of June 30, 2013, we had total debt outstanding of $1.1547 billion and unrestricted cash of $44.4 million. As we mentioned on the last quarter call, the Company successfully refinanced its credit facility and completed a private placement of $350 million aggregate principal amount of 5% senior notes due in 2021. During the quarter, the Company repurchased and cancelled approximately 1 million shares of its common stock for an aggregate purchase price of $44.3 million, which the Company funded using cash on hand and borrowings under the revolving credit line of its credit facility.

Subsequent to the end of the quarter, the Company announced that it repurchased in private transactions $54.7 million in principal amount of its 3.75% convertible senior notes due in 2014, which were cancelled, and settled another $1.2 million of principal amount of the convertible notes that were convert by a holder. After these transactions, $304.1 million in principal amount of the notes remains outstanding. The repurchases were made for aggregate consideration of $98.6 million funded by draws under the Company's revolving credit facility. The Company expects to report a loss on the extinguishment of debt of approximately $3 million in the third quarter related to these purchases.

In connection with the repurchase of the notes, in settlement of the early conversion, the Company proportionately reduced the number of options and warrants underlying the bond hedge transaction related to the convertible notes. In consideration for these adjustments, the counterparties to the bond hedge transactions paid the Company 157,886 shares of the Company's common stock, which was subsequently cancelled. The adjustments to the warrants and options were considered modifications to the terms of the agreement, and the Company recognized a non-cash charge of $4.9 million in the second quarter, which reduced net income available to common shareholders and earnings per share available to common shareholders.

On July 15, 2013, we paid our second quarterly cash dividend of $0.50 per share of common stock to stockholders. We also reiterated our plan to distribute total annual dividends of approximately $2 per share in cash in equal quarterly payments in April, July, October, and January, subject to our Board's future determinations as to the amount of quarterly distributions and the timing thereof.

Now, turning to guidance. As Colin indicated in his remarks, due to lower-than-anticipated actual performance for the hospitality segment during the second quarter, continued softness in group demand, lower-than-anticipated near-term cost synergies, and slower hospitality margin recovery during the second half of 2013, the Company is lowering its hospitality segment RevPAR, total RevPAR, and adjusted EBITDA guidance. Full-year 2013 hospitality RevPAR has been reduced to 0% to negative 1.5%, total RevPAR has been reduced to 0% to negative 2.5%, and hospitality adjusted EBITDA has been reduced to a range of $242 million to $250 million.

In addition, we have increased the Opry and Attractions adjusted EBITDA guidance to $19 million to $20 million, and further refined our range of corporate and other segment adjusted EBITDA to a loss of $21 million to $23 million. In total, these revisions reduce the Company's consolidated adjusted EBITDA to a range of $250 million to $261 million, and adjusted funds from operations to $187.5 million to $197 million, and AFFO after REIT conversion costs to $168.5 million to $179 million.

With that, I will turn the call back over to Colin for any closing remarks.

Mark, I think I'm going to skip closing remarks and just open the lines up for questions. Jackie, if you would open the lines up, please, we'll get to the Q&A.

(Operator Instructions)

Jeff Donnelly, Wells Fargo.

A few questions. Colin, I think you had mentioned part of your action plan for small and short-term group bookings is to restore the property level folks. Are those folks in place, are they new to the Gaylord product, or are they former Gaylord salespeople who are returning?

They are both. I think three of the 80 OS's that we agreed a month ago we were putting back, I think are in place. The last one will be in by August 15, and we are looking at one additional individual coming back into each hotel, as well as then refocusing and dedicating resources in these regional sales offices. That has been a planned shift that has been discussed with the operator over the course of the last two to three weeks and has been signed off by them.

How long do you think it takes, in your experience, to have someone like that ramp up, if you will, until they become productive? Is that one quarter, is that two quarters, or is it -- do you expect it to be much quicker than that because of --?

I think the reality is, it is going to be one quarter. You cannot imagine, Jeff, the extensive dialogue we've been having over the last month, 1.5 months, with our operator here. And, the belief is that the regional sales offices will be ramped by October, and these additional resources that we're putting back into the hotels is an effort to ensure that is absolutely the case. This is -- I think this is a major change for Marriott, and we are pleased that they are doing it.

I'm not sure you're able to compartmentalize like this, but at the midpoint, you had lowered your hotel EBITDA by about $16.5 million, and I know some of that's in the water outage issue. How much of that change do you think is related to just the move of the industry or group trends, versus how much of it is a worse experience than you expected in --?

Yes, that's a really good question and one that we've spent a lot of time over the last week sort of trying to nail down. The thing that was a little surprising to us, that caught us a little bit by surprise in June and July, was this spike that we have seen in attrition -- in just pure attrition. We are now in the June-July attrition rates are sort of running at where we were running in the latter part of 2008 as the world was starting to fall apart, and that is a little troubling, obviously. So, when Marriott came back to us and talked to us over the last couple of weeks, we have actually had two major discussions with them about adjusting the back end of the year, in terms of scrubbing the group performance in the back end of the year.

It's very hard for us to argue with that position, given what the customer is actually doing, so this is a long-winded way, I would say to you probably -- I would say to you probably 50% of what we're looking at in the back end of the year is this question mark about -- is this attrition trend that we have seen in the last two months a trend that's going to be through the rest of the year or is it a blip? I would say 50% of it is that, there's a degree of caution around this attrition spike, and the other 50% of it is that the cost synergies -- June's numbers came in, we don't have July's yet. We have July's revenues, but we don't have July's financials. June numbers, the cost synergies didn't materialize again at the forecasted pace, so there's a degree of caution around the back end of the year. What I would say to you, though, is that we now have agreed to plans to deal with these cost issues for the rest of this year and for '14.

One last question, maybe you can give us a little bit of an education -- how much ability do you have over influencing attrition? Is that a rate-related issue, or is it related more to the content of the meeting, and thus of out of your control?

It's pretty much out of our control. As, if you talk to any operator, how groups perform is really down to the individual group. Where you can effect it is which groups you indeed book. There are certain groups that will perform better than other groups. So, this is something that each of the managers -- we conditioned the managers, when they were under our direct control, to basically, with their convention services folks, to be basically in touch with every group one month out, two months out to see what the pickup looks like.

It is very difficult for the operator to influence the performance of the group. And, I really don't think it's as simple as going back to the meeting planner and say -- okay, you're running at 70% of your block, therefore, we'll give you a $5 discount and let's see if we can get this to -- it doesn't work that way. Mark, you wanted to say something?

I was going to say, Jeff, the other way that -- I think Colin is right, it's hard to influence. I think that one of the ways that you manage it is how you manage your blocks, what you're anticipating as your future attrition, and so how aggressively you're overselling the hotel based on how you believe the group will pick up. So, over a longer period of time, you can manage some of that impact. The challenge always is you are using historic-looking data to predict what future performance might be, and when you have inflection points and changes you can get caught flat footed, as it relates to how you oversold your -- or undersold your hotel.

Thanks, guys. I'll jump back in the queue.

Chris Woronka, Deutsche Bank.

Wonder if we could get a little bit of color on the attrition that occurred during the quarter, was that -- could you link any of that to government? Was it incentives business? Was it a little bit of everything? Is there any trend you see in there?

Chris, this is Patrick Chaffin. Thanks for the question. Yes, the attrition that we saw was most heavily impacting Gaylord Opryland and Gaylord National. Obviously, you can imagine that the National is more of a result of the market dynamics in place in that market, and it did deepen or worsen throughout the quarter. Gaylord Opryland is more of -- the type of business that they deal with is, given the size of the hotel, more association-type business. And as Colin talked about earlier -- yes, SMERF business, as we call it, as well. As Colin mentioned earlier, there is no silver bullet, if you will, of what's driving some of these economic trends, but those two hotels saw it the most, and they saw it progressively getting worse through the quarter.

Okay, that's great. And then, is there any specific leverage you can pull to fight off that attrition? I would guess being plugged into Marriott helps with transient. Does that offer some downside protection from here as you move forward?

We protect it in a couple ways. We protect it in our contracts, so if groups perform, like the group I illustrated in my script, the group that went from a three-week to one-week program, that group will owe us fairly healthy attrition payments, so that's the way we protect it. And remember, when we get attrition, we book attrition, we book the income that we get from attrition when we actually get the money, so there's a lag to -- the financial benefits of our contract, there's a lag to actually when we get it from when it's supposedly due.

And then, the other part of it is that we have witnessed with our transition to the Marriott management is that their marketing department has the ability to, as we see blocks of weakness, has the ability to turn on their spigot and put incentives in place to drive the leisure customer, and we've seen that. We changed some things, from a marketing perspective, in July, and we saw, I think it was 15,000 leisure -- more leisure room nights in July than we booked in July last year. So, those are the things that we can do now that we are within the -- under the Marriott umbrella. Patrick?

Yes, the only thing I'd add to that, just to complement what Colin has already said, is as these regional sales offices that Marriott uses fully ramp up over the next few months, that will increase our ability 60, 90 to 120 days out to respond to attrition or call downs that we're getting from groups because these regional sales offices have increased our exposure to small group business in the 10-to-300 peak room nights. So, that will increase our ability once they are ramped up to respond effectively as we are seeing some of the large groups move with economic trends.

Yes, that's a good point.

Okay, that's great. Can you guys -- kind of a modeling question, but can you share with us the level of cancellation and attrition fees that you're owed right now that you would hope to collect at some future point?

Chris, we have the data. It's not something we typically share, but we can pull it up and I can give you a follow up just to give you some of that data. It's not tremendously higher than what we would normally see. A lot of that because a lot of the groups have been performing at attrition levels where they don't incur significant fees, but we've had a lot of groups incurring attrition. So, it's not single groups incurring a lot of fees as opposed to just across the board, a lot of folks pulling back some. I'll give you follow up to provide some of that data to you.

Yes, but the outstanding attrition cancellation fees are not $200,000, they're -- it's a large sum of money, but we'll get that to you.

Got you. And then, finally, how should we think about -- or how does the relationship work when you think about Marriott selling, say 1,000 room group into Orlando, and there's your Palms and there's host World Center -- how does that relationship work? And, is there anything that you think needs change or would want to change? Are they incentivized in any way to go one way or the other?

This is a very complicated -- you've asked a very simple question. It sounds a simple question, but it's a very complicated answer. Here is the issue, the way Marriott currently are configured, by and large, is that they manage accounts. They manage large companies. They manage accounts. So, when that account has a meeting, be it a meeting of 50 people or 5,000 people, they manage the account.

What we have done, historically, in our Company is, we believe that the way to be configured is to have a group of hunters that are just purely going after these big annual meetings. What we're doing is we're putting together this group of people, and I think if you read Arne Sorenson's earnings script from last week, he referenced they are making changes to the way they go about sourcing big meetings, and a lot of that is because of the dialogue we've been having with this organization over the last couple, or three months.

Here is the good thing, there are probably only 8 to 10 hotels in the Marriott system that can take the 1,000, 2,000 room at-peak groups, and if you look at the rest of the industry, Hyatt has a couple and Starwood has a couple, but the opportunity here is to get this, what I would call, [field] team that focuses on these big meetings. There's a lot of big meetings that we need to be all over, and I believe it will be good for the World Center in Orlando, because the World Center will be one of those 8 to 10 big hotels. I believe it will be good for the World Center, as it will be good for their hotel in San Antonio, because these customers, by and large, 80% of these 1,000-room pluses, want to rotate their business, hotel by hotel, year by year.

We believe that this will be a modification that will actually be good for the Marriott system, as well as good for the Gaylord system, so we're pleased about this and excited that we're moving in this direction. There's going to be a little bit more refinement over the next month, but we are pleased with this direction, and we think it's going to be good for our business.

Yes, and to add to that, that group of hunters that Colin referenced is there to ensure that we get the look, that we get the lead, the opportunity to look at the business and to sell to that customer. Then, it becomes the responsibility of the on-property folks to make sure that they put on a great presentation of what we can do for that specific group once we get the look. So, we have folks in place, known as destination sales executives, who work that group and make sure that they have a great experience and that they can envision their meeting inside of our property. What we find is that if we can get them on property to go through and spend time with that DSE, the likelihood of closure on that meeting goes up exponentially.

And to engage with them before the RFP goes out --

That's right --

So, you're shaping the RFP. This is one of the things that I think our Company, before we moved from a C-Corp to a REIT, this is one of the things that I think we did very well and was one of the reasons why we operated very high RevPAR -- total RevPAR premiums in the markets that we do business in. I think we have now, by this very good dialogue we have been having with Marriott, I think they have come to the conclusion that this is in fact a very good refinement to their business model, and so we're excited about this.

Okay, very good. Thanks, guys.

Kevin Milota, JPMorgan.

I was hoping to talk about your forward occupancy levels. I appreciate the update on '14 with the 40.7%; but hopefully, you could give us a look on 2015 and 2016 occupancy, as it stands right now, in the books?

Have we done that before, Patrick?

We typically don't go beyond one year out.

We had 30 points for '15 as of the last call.

Yes, we are -- I would say that '15, '16 and '17 are within the range that (inaudible) is appropriate for those years right now. As we get into November, we'll probably give you a lot more clarity around where '15 stands currently, but it is within the range where it needs to be.

But no smoking guns.

Correct.

So, we are not seeing declines or attrition or cancellation activity happening in the outer years?

We see a little bit -- we always do. We always see a little bit of cancellations as groups change their mind or want to change the date, but there's nothing on toward going on here.

Okay. And then, as it relates -- I'm sorry, Patrick?

I was just going to say, what we're doing right now with the 1,000 leads and greater of getting that team of hunters in place, is to make sure that we start impacting '15, '16, and '17, and beyond in a positive way to make sure that the transition disruption that we have seen in our sales team does not spill over outside of 2013.

Okay. And then, for the 1,000-plus groups, 40% of gross production, how are those groups trending for '14 and '15?

I don't have the actual detail of how much of the room nights on the books of 1,000 room, but there's no disconnect. The issue that's caused us to engage with the operator about this particular subject is, as we dissect our lead volume and we break it down between the 10-to-300, and then the 300-to-600, and 600-to-1,000, and 1,000-room plus, what we have seen over the course of the last three months is our lead volume overall is up materially, but the segment that it is behind historical rates is in the 1,000-room plus. And, that has caused us to say -- boys, we've got to go about this in a different way. But, overall, lead volume is up materially over last year, but we want to refine the sourcing of leads over 1,000 rooms by a different operating structure, which Marriott has agreed to.

And just to give additional color there, our leads for '15 year to date are up about 7%, but we've seen that ramping up as we move through the year and move through some of this transition disruption. In the month of July, our leads for '15 are up 33%. Our leads in the month of July for 2016 are up 103%. Year to date, they are up about 7%. So, we are moving in the right direction, and we are deploying the additional resources and working with Marriott to supercharge that and get it to where we feel it needs to be to get growth moving in our Company again.

Okay. And then, lastly on guidance, since June, seen an EBITDA cut of $33.5 million at the midpoint. How comfortable are you with your current guidance? And, how dependent is that guidance range on short-term, in-the-year, for-the-year bookings?

That's a question we've asked ourselves, and forgive me laughing -- because it's not a funny subject, but it's something that we have spent a [long] amount of time talking about. The amount of -- we've had -- first of all, we had decent in-the-year, for-the-year gross production in July. We produced 17,000, 18,000 room nights in July for this year. The amount of net reach that we've got to, I think, accomplish for the rest of this year, Patrick, is 30 --?

Yes, it's between 30,000 and 35,000 roughly, and just --

Historical trends -- historically, we are --

If you go back to, before there was any talk of a transition here, go back to 2011, we did about 37,000 room nights in-the-year, for-the-year for the remainder of this year. So, that was our net reach at that time, and we had more room nights on the books at that period, so there was less availability.

We feel pretty comfortable with where we're at. Like we've talked about already, we've scrubbed the room nights down based on the attrition we've been seeing, we've scrubbed the room nights down the reach that we have to achieve based on what we seen out of the sales offices, but like Colin said, we are expecting some stabilization there in the next quarter or so. We have been as conservative as we feel is appropriate and come to that number and are pretty confident that where we stand is the right position for the rest of the year --

And Patrick, the other piece of data that we'll give, here, is that the new leads that we received in July for this year -- just in-the-year, for-the-year leads, numbered about 280,000 room nights in July. That's up, by the way, from '12 where we did about 210,000 in July of '12, when our salespeople were basically off the reservation. And in '11, we sourced about 147,000 new room nights in '11. So, we're up a lot in '13 of new leads for this year, and so these resources that we talked about -- the dedication and the resources will help on the conversion, and we've got to convert between now and the year at about 30,000 to 35,000 of those. I think -- Mark and I have come to the conclusion that we're comfortable about this, and notwithstanding the attrition spike that we have seen.

Okay. Thanks, guys.

Andrew Didora, Bank of America Merrill Lynch.

A few questions here. I guess, first, when I think about the rest of 2013, Marriott cited on their conference call that they are seeing a pickup in 4Q, after the weaker 3Q that you mentioned in your release. I was curious if you are seeing the same type of trend for 4Q, and I guess, specifically, what kind of business is driving that?

Our Q4 looks pretty good. Our group Q4 looks decent. The lead volume for the rest of this year, as I have just articulated, looks decent. The leisure production should be decent. I think -- that's the way I would describe it.

Yes, our Q4 is a little bit -- it's a unique quarter for us, versus the other three, because we are so heavily transient dependent with the holiday season. Group is a smaller component of Q4 for us, and certainly, given the success we've had on the transient side should help drive Q4.

I guess, of the groups that you have on the books for the back half of the year, are you able to break that out between corporate, association, SMERF?

Let me see. I know we have it. I'm not sure if we have it with us, so I may need to give you a follow up on that one, Andrew, but let me look around here for a moment if you want to proceed with another question. And if I've got it, I'll answer it now; if not, we'll follow up with you.

Okay, yes -- I guess, another question. You mentioned the occupancy on your books for '14, I think, was pretty close to 41%. I think you quoted a high-30% number on your last quarter call. Just curious, can you help us bridge how you get to that 50% on-the-books number by the end of the year for '14? I guess, specifically, what percentage of your next-year bookings typically come in the back half?

Yes, you've followed our Company when we were responsible for running it day by day, and you know that our fourth-quarter group room-night production tends to be the biggest month -- the month of December tends to be the biggest month of the year. Let me say this to you, we're up, as we've articulated to you, 1.7% -- 1.7 occupancy points as of the end of June. We've added to that in July. When I reference that we booked almost 130,000, 128,000 room nights, a good part of that was, in fact, for our next year, and some of that was also for this year too, so we've added to the 1.7% in July.

Now, the other thing that's going to happen here is that we've got favorable comps, year over year, for the next five months. Last year, when our salespeople were off the reservation, our production was historically low in the five months of last year. We expect the production, given the amount of leads we have, to be very good over the course of the next five months. Next year, as well, we do not anticipate the same volume of cancellations because we've got very little government business on the books. Patrick, remind Andrew how much government business we have on the books, or look it up and then we'll get to that.

I've got it right here. For the remainder of the year, we've got about 20,000 government or government-related group room nights on the books. This is only about 2.9% of our remainder of year group rooms. And for '14, we've got about 31,000 government or government-related groups on the books. That's about 2.6% of our room nights on the books for the brand.

So, very little government on the books for this year and for next year, relative to what we have historically trended to. Then the other thing for next year, of course, is that we're going to have favorable mid-year group production, year over year, because we are in the process of correcting this problem that we've had from April, May, June, July, in terms of the regional sales offices. We're putting in place this 1,000-plus hunter group, that should be positive, and then we've got -- we've had tremendous production this year through transient.

So, my -- I know I'm not answering your question directly in the sense of how do we get to 50 points of occupancy, but I really believe that 2014 is going to look a lot different to 2013 for the reasons I've just articulated. We expect good back end of the year group production for both next year and future years. And typically, we book in the July through December, somewhere between 1 million and 1.2 million room nights. Last year, we booked about 900,000 because of the issue with our sales team. Given the amount of leads we've got on the books right now, I believe that the returning to historical levels will be able to do that.

That's very helpful. One last one for me. On the corporate overhead, the number was a little bit better than we were expecting in the quarter. Were you able to cut more costs than you initially expected? And, do you think the current run rate -- I believe it's about $5 million -- do you think that's a reasonable run rate for the rest of the year?

I do, and we are looking at other ways to continue to cut it. We're looking at -- probably going to send shock waves through the workforce here, what little we've got left, but we're looking at leasing our building here and doing things like that to continue to eliminate cost. But, we feel very good about where the cost is at the moment, and we are going to try like dickens to reduce it even further.

Okay. Thanks, guys.

Bill Crow, Raymond James.

Just two questions. Colin, can you comment on the sustainability of the dividend? I know you alluded to it a little bit in your prepared remarks, but as you look at '14 getting better, it seems like we need to get through '13 at this point at this level to sustain it going forward, is that fair?

That's the way I look at it, Bill, absolutely. I think -- look, do I like where we are? Absolutely not. We've turned this company upside down in the last six months. We all want the world to be nice and smooth and linear and everything else, but what's been going on here has been as a consequence of this massive transition. The good news is that the operator and the owner are aligned on the plans of action to deal with these issues. And I believe that -- this is the reason why when Andrew asked the question about the rest of this year and getting into 50 points of occupancy going into the year -- the reason I articulated my view of '14 is because I think '14 is setting up to be a very good year for our Company.

I asked myself the question back in February -- I keep asking myself the question back in February, when we had the Analyst meeting and I talked glowingly about '14 -- do I think about '14 in a different light than, today, than I did back in February? And, the answer is, on the revenue side, no. I think the issue is -- we've talked about having $20 million of cost savings next year. The issue is, is it $20 million, is it $15 million, but it's not going to be -- it's not material to the overall profitability of this Company next year.

What we're working through with Marriott is, how quickly do we get the procurement side ramped up? What do we do about the health and benefits part of the business? How do we deal with labor management? Those are the types of issues that we are engaged with them on day by day, and I think we have a common understanding of the issues that we need to deal with, and are dealing with, and I think '14 will be a good year.

Bill, at the bottom of the new guidance range, we're at about a 60% AL and a $2 dividend, so we don't have any concerns around that dividend.

Great. That's important, thank you. One other question, which is if you go back to the reopening of the Opryland property -- and I was fortunate to be there. There were about 800 meeting planners, as I recall, that were there, and I think the loyalty and the respect that they had for the Gaylord operation at the time was pretty amazing and obvious. And, I think even that event spurred tremendous demand and advance bookings. Do you think this transition has harmed the relationship, maybe temporarily, with those meeting planners? And, can you get it back to the level it was at a couple years ago?

I've had a couple of analysts ask me the question, how do I feel about the transition? If we could do it all over again, would we do it? The question that you have just asked is one of the central, I think, components to the broader question about, is the decision the right decision? How I think about it -- I think about it two ways -- from a personal perspective, and also, what's right for the business perspective.

On a personal perspective, you were there at that deal when we reopened Opryland, as was I, and there was a lot of pride that we had, I personally had, in putting my arms around those meeting planners, and them saying great things about the Company, and how well how they revered the brand, and that was all very great, all very good stuff. And personally, operationally, it's struggling for me when I've been one of these executives that if I see an issue, I want to fix it and fix it immediately, and now we have a management agreement between me and the operations of this business and between Mark and the team and the business. So, it's conditioning differently, but as I think about the transition and what's right for the business, it's clear to me that we are seeing low overhead cost at corporate. The reasons we did this was to eliminate a bunch of cost in the business.

We did this deal to drive transient business into these hotels, and also to make ourselves available to the 130,000-plus corporate accounts that Marriott have on the group side. And, maybe one or two meeting planners don't feel quite the love that they felt, maybe two to three years ago, but I can honestly say to you that the leads we are seeing is very encouraging, and the transient business we are seeing is very encouraging. Does the 9,000 people that work in our hotels -- would they like to probably -- would some of them like to go back to the way it was? Of course, people don't like change. But I think from a shareholder's perspective, I think what we've done is right for the business, even though we've had these snafus around cost and this issue around the regional sales offices.

The good news is, we've built this brand -- this team built this brand, and we understand it. And, we have engaged with Marriott because we understand this brand, and we've found a receptive manager to some of these issues. I believe that over the course of the next few months, these issues will be eliminated from our business, and our business will be a stronger business as a consequence, so that's how I feel about it.

Thank you --

Bill, to add to that, that's actually an issue that we have been watching very carefully. The way we've been watching it is, we have normal cancellation for future periods, but what we've done is look at -- as cancellations have come in for future years, what are the reasons for that cancellation, trying to make sure that it's just normal reasons and not something that has to do with the transition. And then, I would remind you, our on-property folks -- the teams that provide that level of service that folks have been so pleased with -- a lot of those folks haven't changed, and they have done a herculean job of maintaining the service levels to the best of their ability through this transition.

We have seen guest satisfaction levels continue to rise as the transition starts to become less of an issue to the forward-facing STARS and the folks that are dealing with the guests. So, guest sat is improving. There are some transition issues that we did see. We went out and made it right with those customers. And, we're not seeing groups cancel for reasons that would cause concern as a result of this transition. We are watching it very carefully; and at this point, we haven't seen anything that really causes us great concern.

Bill, if you have any -- we have had two, four, five folks ask questions, and I think what we need to do is have one more question, we'll shut it down, and then we'll all be available through the course of the day to answer more questions. I know we've given you lengthy answers to your questions, but I think, given our release this morning, I think we need to spend more time communicating with you. So, can we move up, Bill, one more --?

I'm done. Thanks, Colin.

Okay, good. One more question, Jackie, and then we'll shut it down.

Whitney Stevenson, JMP Securities.

I may have missed this or been confused, but I think you mentioned that 40% of total room night production over the last two years has been in the 1,000-plus room segment, and I was wondering if you can give us an idea of what percentage of your production, this year, has been in that segment?

If you just hold on Whitney, we'll get you that.

Okay, and maybe while you're looking for the number, can you give us an idea of the difference in lead time and the booking windows for the 1,000-room-plus groups compared to the smaller groups?

Yes, the 1,000-plus room group is really -- the reason we have been focused on that is because the issue for us, as a company, is that we've got to have, by and large, '16 -- '15, '16 and '17 in really good shape in the course of the next 12 to 24 months because these big groups tend to book 2.5 to 4 years before they actually turn up. It's not an issue for 2013, or an issue for 2014, but it's something that we need to deal with, as we saw this lead volume drop back over the last two or three months, it's an issue we have been focused on with Marriott. Do you have that data yet?

It's about 39%, so in line with what we historically [reported] --

39%, Whitney, of the business we book year to date -- is that right, Patrick -- is 1,000-room plus.

Okay, great. So, this year is basically on track with the prior two years, and there's nothing, short of unforeseen cancellations, from the 1,000-plus segment that could threaten guidance at this point for '13, correct?

Yes. Obviously, we're not going to be booking a tremendous amount of 1,000-room-plus groups for the remainder of this year, so that really -- you're correct, it shouldn't have that much impact on this year. And again, the first quarter, we benefited from a lot of the -- the sales team that have gone away now, were still in place, so we had tremendously strong production there. Our second-quarter production was down. A lot of that was our in-the-year, for-the-year.

Our concern, really, on the 1,000-plus is in the lead category, and that's starting to recover some, as Colin talked about, as far as July. But, what we're really focused is, on the out years of making sure that the funnel continues to fill with 1,000-plus leads. We haven't necessarily seen a detrimental impact to the production thus far.

Okay. Whitney, thank you.

Thank you.

Everybody, again, thank you for joining us this quarter, it's gone a little longer than usual, but it needed to. We are all here today. We're going to our Annual [Stockholder] Board meeting tomorrow, which we're holding at our hotel in Texas. So, if there are any questions, you know where to get a hold of us, and we look forward to hearing from you. Thank you, very much.

This concludes today's Ryman Hospitality Properties second-quarter 2013 earnings conference call. Please disconnect your lines at this time, and have a wonderful day.