Ryman Hospitality Properties Inc (RHP) 2015 Q2 法說會逐字稿

Welcome to the Ryman Hospitality Properties second-quarter 2015 earnings conference call.

Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. Mark Fioravanti, 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 77087314. 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. 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 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 financial measure in an exhibit in today's release.

I will now turn the call over to the Company's Chief Executive Officer and Chairman, Colin Reed.

Thank you, Scott, and thanks to everyone for joining the call today. As is customary, I will begin by discussing our results for the quarter before giving some additional color around bookings and how the trends we are seeing in our business shape our thinking regarding the next 18 months. I will then turn it over to Mark to provide more details on our financials for the quarter, as well as the activities around the Capital Markets.

Over the last several weeks, we've experienced some fairly volatile times with regards to equity values for some of our Hospitality REIT and large C corp peers, and this volatility seems to have affected us this morning.

The reason for this I would speculate are twofold: the potential for rising interest rates and misses on RevPAR, which have led to modest revisions to the outlook for the year.

For those businesses who are more heavily reliant on the transient consumer, the analyst and investment community naturally struggles with the question of what do current RevPAR declines mean for the remainder of this year, as well as for 2016? And this inevitably leads to the commonly discussed question of the Hospitality cycle.

Now we at Ryman get asked the question about the cycle quite a lot, and our message over the last year or so has been that our business is in good shape and is not experiencing a systemic slowdown.

Now you will hear that message again this morning as our group-centric model gives us more visibility to and confidence in our future performance than virtually all of our peers.

Now let me say this. At no time over the last decade has our team been as confident about the outlook for our Company as we are today, and here is why. First, our business is operating better than it ever has, generating record revenue and profits in the second quarter.

Second-quarter total revenue for Gaylord hotels brand on a same-store basis exceeded the second-best second quarter, which was 2008's second quarter by 4%. Our second-quarter adjusted EBITDA for Gaylord hotels on a same-store basis has exceeded the second-best Q2, which was Q2 2012, by 7.5%, generating a second-quarter same-store EBITDA margin of 34.5%, the best hotel margin delivered in any quarter, period.

Let me repeat that. The margin of 34.5% in this quarter was the best hotel margin we have ever delivered, period.

Now in addition to the current operating performances, ad group pace for 2016 has never been stronger. So let's talk about bookings.

Now some of the analyst community will probably write the headlines, despite our financial performance that bookings are down for the second quarter, which as a matter of fact is correct, as we booked 530,000 gross group room nights in the second quarter of 2015 for all future years compared to 640,000 same quarter last year.

However, it's important to recognize that we faced a very tough comp last year as the second-quarter production was the very best second quarter we've ever, ever booked and with significantly less inventory available to be booked for 2016.

Now despite this, this year's production exceeded our four-year, five-year and seven-year historical averages. In my mind, however, here should be the headline, and here's what distinguishes us from most of the companies we often get compared to.

As of the end of June, we have approximately 110,000 more group room nights booked for 2016 than we did at this time last year for 2015. And to put that into revenue terms, this translates to almost 11% more rooms revenue on the books for 2016 over the same time last year for 2015.

And from an occupancy perspective, this translates into 43.1% occupancy on the books for 2016 as of the end of June compared to 39.8% occupancy at the end of June -- at the end of June 2014 for 2015.

2016 has been developing into a strong year for some time now, and it continued to strengthen in the second quarter.

Now, since the end of the quarter, sales activity has remained strong. We had a good production month again in July. In fact, we booked about 130,000 gross group room nights for all future years compared to 82,000 last July. Also, our lead volumes, i.e. the pieces of business that our sales folks are pursuing, are up same time last year.

So given our operating momentum and this forward book of business, let's think about the things that could derail progress, and that would normally impact the cycle and three obvious things come to mind. First, the economy crashing and burning, ala 2008/2009. And as we sit here today, we don't see that happening, particularly in the short-term. Two, extraordinary events, ala 9/11. And three, oversupply and emerging threats like Airbnb.

Now in this regard, we placed -- we pay close attention to new supply, and while it could be an issue for the limited service sector, we do not see this being a midterm threat to us as our particular customer, the large group, simply wants the quality of a resort and the all under one roof experience, and there's very little of this type of product being built in the nation. And as someone who has built a few of these projects, I can tell you that it just takes a long time to birth these projects.

And as regards new entrants like Airbnb, it's pretty difficult to hold a large meeting in someone's home. As a consequence, I think that if you are the owner of a large group or if you are the owner of a large group orientated resorts, these are very good times with healthy demand driving higher occupancies and rate growth and little new group orientated resort supply being built, and that's how we think about our unique positioning and our opportunity.

Now let me provide some additional color on our properties, performance and an update on several hotel-specific initiatives. As regards to Gaylord Opryland, Opryland delivered a strong performance in the second quarter with revenue growing over 9% driven by strong outside of the room spending. Most notably, though, Opryland delivered the best single quarter adjusted EBITDA margin performance in its history of nearly 38%.

Looking to the third quarter at Opryland, we told you earlier this year we are going to renovate approximately 500 rooms this year, and we've accelerated this renovation and are completing all of these rooms within the third quarter, which will have some impact on Opryland's financial performance in the third quarter. But given our projections for the fourth quarter and the way 2016 is shaping up, we felt it essential to undertake this renovation in a compressed and accelerated manner.

The Gaylord National faced a pretty difficult year-over-year comp as Q2 2014 represented the best single quarter revenue performance in the hotel's history. We were impacted by a short-term 4000 room cancellation that was meeting-specific rather than created by any broad economic issues. But despite that, we are generally pleased with the way the hotel has been outperforming the overall DC market for some time now, and we expect that to continue for the remaining parts of the year.

Further, as we announced at the beginning of this quarter and discussed on our last call, we are expanding our outdoor meeting space and adding a new ballroom facility overlooking the Potomac River at the Gaylord National. We expect the ballroom addition will be underway by the fall and open by the summer of 2016, and we believe it will help us further establish this property's position as a premier location for groups on the East Coast.

Just touching on our newest property, the AC at National Harbor, the hotel opened in early April, and while it was still in the ramp-up stage, it is performing as we expected when we acquired it with the hotel contributing about $1 million to adjusted EBITDA in the second quarter.

Now as regards to the Gaylord Texan, it had a tremendous second quarter, delivering 14.6% increase in total revenues and nearly 25% increase in adjusted EBITDA. Simply put, this property has been on fire for the first two quarters of the year, having completed its full room renovation in the third quarter of 2014, and we expect it to continue to perform extremely well for the remainder of 2015. And we are exploring with Marriott and the city of Grapevine ways to further solidify this hotel's market leadership.

Gaylord Texan is on track for a record year, both in terms of revenue and profitability, and we are very pleased with the way things are going in Grapevine.

Now moving to Orlando and the Gaylord Palms, this property continues to perform solidly this quarter in the most competitive market in which we operate with total revenue and profitability both up slightly compared to the prior year quarter. The third quarter will be a little challenging for the Palms, primarily due to how the Jewish holiday dates fall in September. However, the fourth quarter is setting up to be a solid quarter due to an increasing group room nights on the books.

So overall, we are pleased with the state of our hotel business, and we are very excited about its future, and as I said earlier, 2016 is shaping up to be a very good year for Gaylord hotels.

And one more thought regarding advanced group bookings, one of, of course, the critical features of our model. Given July's production that I referenced earlier, we feel we are well on our way to surpassing last year's third quarter's production, despite the fact that we have less inventory to sell into.

In regards to the fourth quarter, as you all know, this is always our strongest quarter of bookings with December being by far the largest month of production. Last fourth quarter we had the second best quarter for production ever.

So this year's Q4 production will face a tough comparison, particularly with less inventory available for 2016, but overall we expect 2015 will be another very good year for the bookings, and we expect total group production for the year to fall between 2.1 million and 2.3 million gross room nights.

Okay. Now let's take a moment to discuss our Nashville entertainment business. This was, once again, a very strong performance quarter, representing the sixth consecutive quarter of double-digit revenue and adjusted EBITDA growth. Revenue increased 13.1% to $28.2 million, and adjusted EBITDA increased $2 million to $11.7 million, a 20.9% increase.

In June we unveiled our Ryman Auditorium expansion and tour experience, and early indications are that the capital we deployed there is doing exactly what we wanted it to do in terms of attracting new guests and further positioning our entertainment sector segment for continued success.

So let's preempt the regular question we get on these earnings calls as to what we intend to do with our entertainment business. First of all, we are working on continuing the growth of the business, exploring more entertainment locations, expanded retail strategies, including eCommerce, the development of new content, as well as pursuing distribution of what we currently have. We have engaged consultants to help us with this, and I think we are a few months away from having the completed roadmap that will drive this business forward.

I know some of you want to know when and how, and until the work is complete, we cannot be more specific about our direction or the timing. This is an exciting business that's continuing to pretty -- to grow pretty rapidly, and we want to make sure we get this right.

So, in summary, we have a very good company on our hands that is growing across the board. Now as is the case at this time of the year, we have reviewed our guidance for the rest of the year and have made a couple of minor modifications to RevPAR and total RevPAR, but feel pretty good about really what matters most, which is the profitability of the business. And Mark will talk about the specifics in a minute.

But given the direction of our profitability and taking into consideration our dividend policy, our board has approved a $0.05 increase to our quarterly dividend to $0.70 per share, which is a 7.7% increase over our quarterly dividend -- over our second-quarter dividend. We plan to pay a total of -- a total 2015 annual dividend of $2.70 per share, representing a nearly 23% increase on an annualized basis to last year. This increase is truly indicative of the health of our business and how we are thinking about the future.

And with that, I'll turn the call over to Mark.

Thank you, Colin. Good morning, everyone. In the second quarter, the Company generated total revenue of $274 million, up 6.3% from the prior year quarter. During the quarter, the Company generated net income available to common shareholders of $41.4 million or $0.80 per fully diluted share. The Company grew profitability in the quarter, generating $91.8 million in adjusted EBITDA, improving the EBITDA margin by 190 basis points. For the quarter, the Company generated $74.8 million of AFFO or $1.45 per fully diluted share.

Turning to the Hospitality segment results, the hotels finished the quarter on a same-store basis with RevPAR growth of 3.1% and total RevPAR increase of 4.5%. On a pro forma basis adjusted for the impact of the USALI accounting changes, comparable same-store total RevPAR increased 5.2%.

During the second quarter, we saw an increase in attrition rates up 220 basis points to 13.4%. The increase in attrition during the quarter was attributable to a couple specific groups, and there's no indication that we are experiencing a systemic issue or trend. Cancellations during the first quarter decreased 33.8% to 6000 group rooms. Attrition and cancellation fees collected during the quarter totaled $2.1 million.

Compared to the prior year quarter, consolidated hospitality segment adjusted EBITDA increased 11.1% to $85 million. Consolidated hospitality adjusted EBITDA margin increased 170 basis points to 34.6%. On a same-store basis, adjusted EBITDA increased 9.7% to $84 million, and hospitality adjusted EBITDA margin increased 160 basis points to 34.5%.

It's worth noting that three of our hotels -- the Gaylord Opryland, Gaylord Texan and Gaylord National -- had adjusted EBITDA margins exceeding 34% for the quarter.

During the second quarter, the entertainment segment revenue increased 12.9% to $28.2 million, and the segment's second-quarter adjusted EBITDA increased 20.4% to $11.7 million. Corporate and other adjusted EBITDA totaled a loss of $5 million in the second quarter of 2015 compared to a loss of $4.7 million in the second quarter of 2014.

Moving to the balance sheet, as of June 30, we had total debt of approximately $1.49 billion and unrestricted cash of $41.3 million, resulting in net debt outstanding of $1.45 billion, including $736.5 million of borrowings drawn under the Company's credit facility, leaving $359.5 million of availability under the facility.

During the quarter, we completed a private placement of $400 million of eight-year 5% senior unsecured notes due in 2023, and the Company used proceeds from the offering to repay our outstanding $300 million term loan and a portion of the amounts outstanding under the revolver. We also recast our credit facility expanding the maturity for an additional two years. Through this process, we were able to favorably modify certain covenants and improve overall pricing. With these activities complete, the Company has no debt maturities until 2019 and has significantly reduced its exposure to floating-rate debt.

The Company paid its second-quarter 2015 cash dividend of $0.65 per share on July 15 to stockholders of record on June 30, and as Colin mentioned in his opening remarks, the Company has increased its quarterly dividend by $0.05 to $0.70 per share of common stock, which is a 7.7% increase over the previous quarterly dividend. The Company's current plan to distribute total annual dividend for approximately $2.70 per share for 2015, with the remaining quarterly payments occurring in October and January. Any future dividend is subject to the board's determination as to the amount and timing of the quarterly distributions.

Now turning to our guidance and outlook for the remainder of the year, we have trimmed our RevPAR and tightened our total RevPAR guidance providing the midpoint 100 basis points and 25 basis points respectively. While the second half is setting up for continuous strong performance, a more challenging than anticipated Jewish holiday pattern, particularly at the Palms, and acceleration of the Opryland rooms refurbishment are impacting our third-quarter metrics, and we are adjusting them accordingly. We anticipate our third-quarter revenue performance will be flat to up slightly.

As we indicated on previous calls, our fourth quarter is shaping up to be our strongest quarter of the year, and at the end of the second quarter, we had approximately 39,000 more group room nights on the books for the fourth quarter versus the same time last year for the fourth quarter of 2014. Given the strength of our margin performance year-to-date and our outlook, we are not modifying our adjusted EBITDA or AFFO expectations.

Let me close by saying that this quarter was very solid for our Company, particularly as some of our hotels surpassed previous records in terms of revenue and profitability. We remain bullish on the group segment as we look out over the second half of 2015 and into 2016 our businesses are well-positioned, our balance sheet is in great shape, and we continue to grow the dividend.

And with that, I'll turn it over to Colin for any closing remarks.

I'm going to skip closing remarks. Jackie, if we could open the lines for questions, please.

(Operator Instructions). Jeff Donnelly, Wells Fargo.

Good morning, guys. My apologies, Colin, I missed a piece of your remarks on the entertainment segment just to start off, so I wanted to circle back for a moment. Did you say you were hiring -- hired an advisor to explore options to separate that business, or should I assume a separation is not a foregone conclusion?

No, what I said was, Jeff, if you had been on the call, I said we've got consultants helping us build the long-range plan for this business. Because we have just got so many different opportunities to grow this business, and we've got folks helping us with how do we distribute the content. We've got folks helping us with broad aspects of the plan. And you -- I think it was a major leap to say that we've hired someone to explore whether we spin the business. We are building this long-range plan, we are doing things on adding more resources to the people front, and as soon as this plan is built, then we will make the determination do we spin or do we hold?

Thanks for clarifying. And then just switching to bookings, are there any discernible shifts you are seeing in, I guess, call it booking activity in the market? Is the window lengthening your view, do you think there's more sort of itty-bitty business to be had, or are you seeing meeting planners maybe spend more per attendee or per event?

Yes. Let me sort of go at 30,000 feet on this, and I'm going to pass this over to Patrick who is sort of like every hour in the weeds on this.

What we have been seeing over the last I suppose year and a half really, if you go back and you look at our Q2 over last year, we had I think it was the best Q2 we've ever had in bookings, and fourth quarter last year it was the second-best year, second-best fourth quarter we've ever had in bookings. We have been booking a lot of business into this Company, and we've been booking a lot of corporate business.

And, as you know, the corporate customer tends to book in the sort of 12- to 24-month window. And as Mark said, for the fourth quarter, we've got approximately 40,000 more room nights on the books. It's a good solid book of corporate business, more than we had this time last year for the fourth quarter. And next year right now when you add in the July performance, Patrick, I gave the numbers to June where we are up about 110,000. But when you add the July numbers in, I think we are near 130,000 more room nights on the books. But a very solid book of corporate business.

And, you know, we are seeing good performance in outside of the room spend, and we saw that again actually in the second quarter of this year in the performance that we just laid out.

Patrick, you want to just talk about meeting planners and what we are seeing there?

This is Patrick. Just to add a little bit on to what Colin has already said, the corporate segment continues to be where we see a lot of growth. To give you a little additional color on his comments, we currently stand with about 145,000 more corporate room nights on the books for 2016 than where we stood this time last year for 2015. So that segment has seen tremendous growth.

The booking windows overall really haven't changed dramatically, but we continue to see groups -- once they get on property increase their outside the room spend, which given the amount of outside the room offerings that we have at our hotels, this continues to bode well for us, and you see that as evidenced in the second quarter.

We are pleasantly surprised that we continue to see groups like pharma groups booking last-minute. And so with hotels of our size, we normally don't get large pieces of business in the year for the year at this point of the year. But we are continuing to see a number of pharmaceutical groups take a look at us with only weeks to spare before they have their meeting.

So the corporate segment continues to be the area of growth. That's not to say that Association hasn't on its own shown some good indications, but corporate is where the real strong growth is happening.

Thanks. Maybe one last question on just RevPAR in the back half of the year, the second-quarter RevPAR and total RevPAR was a little bit softer than our expectation and trailed behind the two-year growth base that we had seen in the first quarter. Since Q2 was arguably your easiest year-over-year comp of this year and seasonally strong from Ryman, are you able to give a little confidence about the revenue on the books that you have today for Q3 and Q4? Because that's where I think your comps are getting more difficult, and I think that is where people will look for a little more confidence that you can hit your RevPAR objectives.

First of all, Q2 last year we had very strong RevPAR growth.

Yes, it was Q2 last year, it was (multiple speakers) 4.6% was total RevPAR. Now it's 3.4% RevPAR last year.

But in terms of the third and fourth quarter, I think we believe third quarter is going to be flat simply because of what we're doing at Opryland and what Mark talked about at the Palms. But the fourth quarter, where we have 40,000 more group room nights on the books, fourth quarter is going to be a very good year -- a very good quarter for us.

That's really the driver of the fourth quarter, Jeff. You are correct. Q3 of last year and Q4 last year were very strong RevPAR and total RevPAR performances. But as we look ahead, we have such a strong book of group business on the books for Q4, we feel really good about where that is headed.

As typical for us, Q4 has a significant amount of transient business to be booked at this point for the year. But as we are going into the quarter with that kind of group business, it gives us a lot of confidence in that last quarter.

And, you know, we can't underscore enough what we are seeing on 2016, Jeff. This is -- where we are for 2016, we haven't seen this type of lift before. And with the end of June 3.5 points of occupancy more on the books at the end of July, almost 4 points of occupancy more on the books, and Patrick talked about the quality of that business with about 140,000-ish more group, more corporate room nights on the books in 2016. 2016 is shaping up to be a very strong year for our Company.

Thanks, guys. I'll yield the floor.

Chris Woronka, Deutsche Bank.

Good morning, guys. Just a quick follow-up on the 2016 bookings. Can you give us maybe a sense for where the rate on that is and whether you expect that the out of room spend will be greater next year than this year?

Pat, you want to give that a go?

Sure. The rate shows a modest increase. We are seeing a lot of rate growth in some of the further years out. But outside the room and we were just starting into our budget process with Marriott, but I would tell you that we expect that with the amount of corporate room nights on the books and some high-rated association, we do expect that outside the room spend will be healthy next year.

Okay. Very good. And then have you guys kind of, I guess, scrubbed your bookings, what's on the books kind of top to bottom for any energy? Some of the issues you saw in the quarter, was this related to energy accounts?

Well, hold on a second. When you say issues in the quarter, what issues are you referring to? Because we had a record quarter. We've never produced a second quarter like this. So what are we talking about, the issues?

Fair enough. I was looking at the attrition number that was up a little bit year over year. I was thinking maybe that might (multiple speakers)

That was not related to energy in any way. That was really just one group that did not see the performance that they initially anticipated. Quite honestly, I think they got a little ahead of themselves, and any underperformance by groups, while we saw outperformance from some groups, there were some groups that underperformed. It was not related to energy. It really wasn't related to any kind of macroeconomic issues.

Okay. Helpful. And just wanted to ask about the renovation at Opryland. Is that -- you guys did a terrific job with the Texan, and you're seeing very strong results kind of post-renovation there. Do you expect a bit of a rate lift coming out of the Opryland renovation as well, or is that more kind of maintenance-related?

Well, let's be clear. At Opryland, this is really more maintenance-related, but we are getting a ton of demand for Opryland for groups wanting to come to Nashville and go to Opryland. And, in fact, next year I think the number is we've got nearly somewhere between 50,000 and 60,000 more group room nights, more group room nights on the books for Opryland next year than we did -- than we have for this year.

So we are getting a lot of demand for Opryland right now, and we've got I suppose over the next two years probably 1,500 rooms to do. And just part of the cycle of renovation.

And so what we are trying to do is manage this renovation in very short, sharp bursts where we can do 400, 500 rooms over the space of about three or four weeks.

So we are not doing this to extrapolate more rate next year. We have to refurbish these rooms and satisfy the demand from the customer that we are seeing month by month that want to come to this hotel next year, the year after, and the year after.

To your point, if you look historically at renovation (multiple speakers) in terms of Palms, we get very nice rate lift post these renovations because we sell into these renovated rooms prior to their completion to groups. And groups like the new product, and it brings rate and occupancy to the hotels.

Okay. Got it. Very good. Thanks, guys.

Bill Crow, Raymond James.

Good morning, guys. On the Opryland renovation, did you turn away any groups in the third quarter so that you could create that space to do the renovations?

What we really did was we looked at August and saw there's an opportunity for us to go ahead and squeeze as much of the renovation in August as possible.

Now as we get into booking some of the smallest groups that we help fill in the remaining gaps, yes. There's groups that are going to essentially be shut out as a result of the renovation. But the reality is we are taking the best opportunity throughout the year to get it squeezed in.

And what we did was we accelerated it into the third quarter and made sure it was not impacting the fourth quarter simply because October was stacking up as such a good month from a group perspective that we didn't want to have any remaining impact from the renovation.

So you're always going to have the impact of displacing some groups, but what we tried to do and have done in the past is do it over the periods of the year when we're going to minimize that impact. And August is that month for us.

All right. Colin, you tempered enthusiasm for 4Q bookings, which I understand given the greater occupancy heading into 2015. If you go back a year to the fourth quarter of 2014, what percentage of those bookings were done for 2015 versus all future periods? In other words, is it really higher occupancy that's going to hurt you going into the fourth quarter this year, or how do we think about all future periods?

No, look, my comment was more this. Forgive me sounding critical of the sell side here, but the headline -- the headlines that get written at times don't tell the story. The headlines are we are down on bookings this quarter versus last year when you have had a tremendous last year. We had in Q2 of 2014, we had a tremendous second quarter of bookings. It was the best second-quarter bookings we've ever had.

And all I'm saying to you is -- all I'm saying to the investment community is that we booked almost 900,000 room nights in the fourth quarter of last year, and that's one of the reasons why 2016 is shaping up to be good and 2015 is a record year for us. And all I'm saying is we cannot promise the same level of bookings at this stage. But every indication looks really good because lead volumes are up over this time last year. And that's all I'm saying. And we try and be very transparent about what's going on on the forward bookings part because it's so critical to our model.

But we have been adding to 2016 now for a year and a half, and 2016, as we keep saying, is shaping up to be a gangbuster year for us. But we will -- we hope -- we don't hope, we believe we are going to book between 2.1 million and 2.3 million group room nights this year, which is tremendous production, so we will see when we get to the fourth quarter.

The only other thing I would add to that is the simple reality is we have less available inventory. Because as the corporate growth burst was really occurring in the third and fourth quarter of last year, we took advantage of it. And we secured a lot of really good corporate room nights for the booking window they were looking at at good rates, and as we head into the fourth quarter of this year, we have less available inventory.

But now as we are moving more into the 2017 and the early part of 2018 in that booking window, we have the available inventory and can start putting some corporate in there. So we have less available inventory for 2016, and that's a good problem to have. But that's really what's impacting how we sort of balance what our expectation is for the fourth quarter this year.

And the less inventory, Patrick, let's just give one more snapshot of information. That increase in corporate -- that increase in room nights that we have on the books for 2016 basically falls first, second and third quarter.

That's correct.

That's the way it stacks up. It's not third and fourth quarter. The investment community won't have to wait until the end of next year to see the benefits of this additional room nights on the books.

So the great thing about in the fourth quarter is corporate corporations tend to be booking in that 12- to 24-month range where we hopefully -- we can accommodate them. But this is a nice problem to have that we are facing now, which is this building inventory of group room nights on the books.

Appreciate the color. One kind of 30,000 foot question on Nashville, which has kind of been historically a one trick pony, it's a heck of a pony right now, and it's driving great business. But is there anything that city leaders are considering in order to broaden the appeal of Nashville as a destination market?

Firstly this week, we have a mayoral election, the first round, and it will be a runoff -- two candidates will be in that runoff, which will take place in about three weeks from now. And I think the sort of folks that are leaders in the clubhouse, I would say the top three or four are all pro-growth, I think, candidates. And I think all of them have agendas to deal with things like infrastructure transportation to improve moving people around in the city. The problem the city is having is that the city is creating a ton of demand, and more and more people want to come here. And the issue is making sure that the city has got the infrastructure and the people to service the people who are coming here for a fun time, a convention time.

So I am pretty optimistic that the city leadership will deal with what I will call the growing pains of too much demand, or not too much demand, of very good demand. And -- but I don't think you're going to see things done by the elected officials in this town that will be detrimental to growth.

Thank you.

Shaun Kelley, Bank of America.

Good morning, guys. Thank you for taking my question. First question was really on 3Q, you guys were pretty clear that the bulk of the issues that you're seeing around Orlando and the Palms and the calendar shift. But I'm curious a couple of our companies have talked about weaker citywides in Washington DC, and granted that might be in the urban center and you guys sort of have your own unique orbit out at National Harbor. But I'm curious are you guys seeing any impact, or is there any impact expected in your guidance for weakness in DC in 3Q?

This is Patrick. Just to address that question, we are not seeing any kind of weakness at Gaylord National. We have heard rumblings that the market is struggling a bit on citywides, but the National has secured a good book of business, and we expect Q3 -- to your point, we have talked about the Palms and some of the challenges with the Jewish holidays and the renovation at Opryland, but we do expect the National to have actually a pretty good third quarter. So we are not seeing that.

Where these citywides affect us that it creates compression in the market, and then tourists who want to go to the market will move to locations like the National moved to locations like Opryland if downtown Nashville is full up. So citywides are important, but not directly. They are indirectly important.

Thanks for that. My second question is just I think it's sort of been asked in a different way, but the obligatory oil and gas question. But overall in terms of group or corporate business, just kind of overall across your properties, how much does the energy sector sort of make up of your overall general book of business? Is there kind of a directional number you guys can give us?

We work really hard to make sure that no single industry or segment makes up a significant portion of our business. I would tell you that it's going to be much less than 5%. So whether folks are saying, well, banking is challenging or pharmaceutical is now challenging, whatever segment might be, we do a really good of making sure that we have a very diversified portfolio of large groups to pull from. And so when we see weakness in one segment ,it doesn't give us true alarm.

I suppose the only hotel that you could say has minuscule exposure to the energy would be our Texas hotel, which right now is strong. With Opryland, our strongest hotel. So we're just not seeing -- we don't have much business in the oil sector in that hotel.

And just to build on that, Houston has seen the impact of the Dallas market at least from the perspective of where we are operating has not felt as much of an impact of that, and as you can see to Colin's point, the Texan has literally been on fire this year with its performance.

Even more impressive given all the flooding that was happening down there. So my third question and last would just be you talked a little bit about 2016 already, the 145,000, I think if I called it correct, corporate nights that are up. Can you help us translate, I think you said that 3.5% to 4% growth in nights probably on a corporate base. But can you help us translate that into more like a pace number if your inclusive of rate for the whole year?

Just let Patrick get out his data.

So as far as 2016, just to clarify what we have on the books at the end of the second quarter represented about 9.4% increase in room nights on the books or about 10.7% increase in the revenue. And then to Colin's point, July was a good month for us, and we just closed out, and that translated into we are now standing with 2016 being up 10.7% in room nights and about 12% up in revenue. So is there a more specific question beyond that that you want understand?

No, I think that's it, Patrick. That's exactly what I was looking for. I guess the last piece of it then would be as you work through your sort of typical yield curve, you may be booking some earlier rather than later. So would you expect those numbers to decelerate as you get into third and fourth quarter just because you got as much as you can get on the books, or do you think that kind of magnitude can hold?

We will always historically normally see some deceleration or erosion in that number. And so what we are working real hard to do as we go into our budget season is understand how much to expect, and so we will give you an update in November where we stand.

But again, to Colin's point, the first three quarters of 2016 look very good, and there's still some additional available inventory in the fourth quarter. So we will kind of watch this and see how much it decelerates. We don't think it will be -- it won't fall apart on us by any stretch, but there will be some deceleration.

Thank you very much.

(Operator Instructions). Patrick Scholes, SunTrust.

Good morning here. I wonder if you can flush out a little bit more, you talked in the press release -- talked about a few corporate groups underperforming and then in your commentary talked about these groups getting ahead of themselves. What exactly does that mean? I'm not completely following when you said got ahead of themselves.

So we had a couple of groups that canceled short-term because of specific -- I can't go into it because I don't want to reveal who the group is, but specific issues related just to the group themselves. We had some groups underperform. We had one group -- when we talk about getting ahead of themselves, we had one group where it was two organizations that were merging together. And so there was no real history for that meeting planner to understand how many folks would actually turn out for their meeting. And so they made a more bullish estimate, and it turned out to be a little bit overreaching. And so it wasn't economic-related. It was just, hey, we've got two new groups coming together, and we don't really have a history on them. And so they made a stab in the dark as far as how many would show up, and it didn't come together the way they thought.

And then we just had some groups that were trying to understand where the current trends in the past six months would play out as far as how the group would perform. They -- some of the groups actually put more bullish numbers out there and then we cut them back and scrubbed them back some. So there was some underperformance there. But again, it is a mixed bag of really group-specific issues.

Thank you for the color. And then on the renovation project, Gaylord, Opryland, I apologize if you had given these statistics before. How many rooms is that, what is the expected cost, and what, again, is the timing or finishing for that completion of that?

About 480 rooms? (multiple speakers)

Just under 500. That's right. It essentially puts about 18,000 room nights out of order, which is also included in the release as far as the detail. It should be finished by sometime in September, it won't bleed over into October, and then from a cost perspective, Colin --

It's about 20,000 key.

Patrick, that's all captured within our FF&E reserve.

Very good. Thank you for the detail.

There appear to be no further questions at this time. I would like to turn the floor back over to Colin Reed for any additional or closing remarks.

Thank you, Jackie, and thanks, everyone, for being on the phone this morning, and we believe these are very good results, and the Company is in great shape and we are looking forward to next year. So if you have any additional follow-up questions, you know how to get hold of us, and we look forward to seeing you all and enjoy the rest of the summer. Thank you.

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