Ryman Hospitality Properties Inc (RHP) 2015 Q3 法說會逐字稿

Welcome to Ryman Hospitality Properties third-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 53603839.

(Operator Instructions)

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 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. The Company's actual results may differ materially from the results we discuss or project. 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 to today's release. I will now turn the call over to the Company's Chief Executive Officer and Chairman, Colin Reed.

Thank, Scott. And thank you, everyone, for joining us on our call today. As usual, I'm going to briefly touch on the quarter and our results before taking the opportunity to discuss bookings and express our excitement about how we are thinking about the future. I will then turn it over to Mark for some more detail on the financials and our capital market activities.

Let me start off by saying that our business for the third quarter came in pretty much in line with where we thought it would, save for a couple of one-off small issues that I will talk about in a minute. In fact, we hit another milestone by setting new highs in terms of third-quarter revenue and profitability which was noteworthy given the fact that our third-quarter results for last year were really strong.

We're particularly proud of the results, given the unusual holiday calendar and the room renovation program we undertook at Opryland. One issue that emerged late in the third quarter was a small spike in overall attrition that was focused on several groups under-performing. But after review it seems the under-performance was related to the shoulder periods of the groups in question and we are comfortable that there is no systemic or discernible trend emerging here.

From a margin perspective we are again pleased with the way our hotels are currently being managed, as we saw margin expansion consistent with the earlier quarters of this year. Notably, our hospitality segment produced same-store hospitality adjusted EBITDA up nearly 8%, and same-store hospitality adjusted EBITDA margin up 180 basis points.

During the quarter, we received $2.4 million in insurance proceeds related to our business interruption claim for the Norovirus incident that occurred during the first quarter of this year. Absent this claim, the hospitality segment profitability would have produced adjusted EBITDA improvement of 5.4% and adjusted EBIT and an adjusted EBITDA margin improvement of 110 basis points. Just to remind you, on a year-to-date basis, our margins are running north of 30% and this is exciting to us particularly as we think about 2016 and beyond.

Last quarter, on our call we told you that our business is in the best position it's ever been in and this remains true today. Nothing that we have seen or heard since then has altered our view of the future, particularly when you look at the forward bookings momentum which I'll discuss in a minute.

One other tidbit of information you may be interested in, specifically cancellations. A spike in cancellations tends to signal concerns in the economy. But as we looked back at canceled group business in the third quarter of this year and compared it to canceled business in the third quarter of the last eight years, what we found was this was the second-lowest cancellation quarter over this period, so no emerging trend here.

Now let's talk bookings and what this means to the future for our Company. As we predicted last quarter, the third quarter was a very strong production period for our sales team, as we booked more than 484,000 gross advance room nights in the quarter, representing a 24.1% year-over-year increase in gross advance group bookings. Also, as of the end of the quarter, we saw an increase of about 10% in leads, as sales teams are pursuing for all future years.

Let's dig a little deeper into what we currently have on the books moving forward. For 2016 our net occupancy points on the books as of the end of September has now climbed to just over 46% occupancy, or said another way, approximately 100,000 more group room nights more than we had at the same time last year.

Notably, these bookings are made up almost 100% by corporate groups, which as we all know, typically translate into higher average rate and better outside-of-the-room spend. Overall, this translates to almost 10% more rooms revenue on the books for 2016 over the same time last year for 2015.

We all know corporate groups tend to book on average 18 to 24 months out. Our sales production in the third quarter of 2015 for 2017 and 2018 was very solid and we are pleased with the way these years are firming up.

When you look at all this data together it tells us something important, which is we think the group sector is the place to be right now and our business is uniquely positioned to reap the rewards from where we are in the cycle. Let me offer some further data to support this statement. The facts are that occupancy levels have climbed over the recent years all around the country. But interestingly very little new supplies emerging in the sector we are in which is unusual this far into a recovery, particularly given the low interest rate environment our country seems to be stuck in.

The group demand that we are seeing at our hotels affords us a unique opportunity because we're able to increase group occupancy on an annualized basis by adding more meeting space. And we're seriously exploring opportunities at several of our hotels. We'll have more to say on this over the next couple of months.

Another unique benefit to our model is how we can utilize the transient side of our business. Transient allows us to augment the core group segment, and in that regard the Marriott Rewards Program continues to be highly valuable to us. We simply did not have a delivery system of this type in the past and we've really seen the benefits of this materialize. Notably we're seeing very nice rate increases on the transient side throughout this past year, and as we go into the fourth quarter we would expect this trend to continue.

In terms of the broader economic outlook and its impact on our business, while the economy may not be growing at levels we've seen during some points in previous cycles, it is still nevertheless decent. Obviously, there could always be a one-time event that can disrupt the normal pattern. But given the levels of room nights we already have on the books for the next couple of years and the protection that our contracts provide in the form of attrition and cancellation fees, even if the macro environment does take a downward turn, we believe we are very well positioned just like we were in 2009, where we materially outperformed the industry.

So before we talk about 2016, let me start by giving you a peek into what happened in October at our business, because it's extremely relevant to the way we think about our Company. For October, our big resorts and the two overflow hotels have what can only be described as a tremendous month, and produced almost $100 million in revenue which is by far the best October we've ever had.

We knew this would be the case because of the group business we had on the books and the quality of that business. RevPAR looks to be coming in at up 16% across the hotels. Of course this was driven by an exceptionally strong book of corporate business. We expect total revenue to be in and around 13% up.

The overall consolidated occupancy levels for these big hotels came in just over 85%. And it's going to be interesting to see the margins on this performance which we'll have in a couple of weeks.

Now let me turn back to some third-quarter updates, specifically at the hotel level. This quarter, we continued to be pleased by the performance of the Gaylord Texan which posted double-digit RevPAR and total RevPAR growth and solid increases in profitability. This property has had an outstanding year and we expect that to continue into the fourth quarter and 2016.

This hotel is also a leading candidate for more meeting space given the strong demand we're seeing. We also will be expanding our pool complex in Texas further over the next six months given the unfulfilled demand we saw this last summer. In addition, Gaylord National had a very solid quarter and we remain encouraged by how this property will benefit from the increasing momentum of National Harbor, particularly as we near the opening of the MGM Casino in late 2016 and early 2017, or early 2017, which I believe will be very successful.

Here in Nashville, the trajectory of Gaylord Opryland is terrific. The small third-quarter decline in profitability is a little misleading given the fact that the third quarter of 2014 was tremendous.

But this third quarter we essentially started and completed a 480-room refurbishment within that quarter, that caused some minor disruption given the speed at which we undertook the project. But it's all completed now. The group demand for this hotel is very encouraging and 2016 is shaping up to be another record year in Opryland's history, notwithstanding the continuation of the room refurbishment program.

In terms of the Gaylord Palms in Orlando, as we mentioned on our last call, we knew going in that this quarter would be challenging due to how the holidays fell in September. And that indeed was the case; however the fourth quarter is setting up very nicely for this hotel based on the group business we have on the books, our October performance, and expect it to perform very solidly.

Taking a moment to provide an update on our newest property, the AC Hotel at National Harbor, we're very pleased on how this hotel has been performing and how it is appreciated by guests. It is currently the top performer out of 82 AC Hotels across the globe in terms of overall guest satisfaction. And its financial performance is right in line with where we projected it to be.

Turning to the entertainment segment. This business continues to perform well, posting a solid 8% revenue gain compared to the third quarter last year. Recently Trip Advisor conducted a study that reveals Nashville saw a 38% increase in interest from international travelers in the past year. In fact, this was the greatest increase amongst major US cities in the study.

As I've been saying for some time now, people from all across the world are discovering what this unique city has to offer. And our entertainment assets are a large part of this growth and popularity.

Some of you may have noticed that our adjusted EBITDA for this segment was negatively impacted by a roughly $1 million one-off cost this period. In terms of what these costs represent, this is related to our continuing work with strategy consultants and advisors to really insure that we're thinking about all the optimal opportunities for developing this business. As I mentioned last quarter, this includes exploring more entertainment locations, expanded retail strategies including e-commerce, the development of new content as well as pursuing distribution of what we currently control.

So we're investing in the future and we're taking the time to get it right. We know that many of you are anxious for us to show you more of our hand here but more to come when we're through this strategy work.

Now let me take a moment and talk about the outlook for the remainder of the year, given that we now only have a couple of months left and the variables have narrowed materially. As I mentioned earlier, our hospitality segment remains on pace to have by far its best year ever in terms of revenue and profitability. We remain encouraged by the strength of our business as we enter the fourth quarter, particularly given what I just shared with you about October.

As you all know, November and December are months when we generate significantly more leisure business than group. As such, a lot of that business is yet to book. We're modestly narrowing the top end of our RevPAR, total RevPAR and hotels adjusted EBITDA guidance, and very slightly adjusting our overall total EBITDA guidance. Overall adjustments to the mid point of our consolidated adjusted EBITDA amounts to a reduction of $1.5 million which is less than one half of 1%.

So before I hand you over to Mark, let me leave you with this. 2015 will be the very best year the Company has ever had. And given the room nights we have on the books for 2016, barring an unforeseen macro event, it's very likely 2016 will be even better than 2015. So Mark, let's hear what you have to say.

Thanks, Colin. Good morning, everyone. In the third quarter, the Company generated total revenue of $252.8 million, up 3.2% from the prior-year quarter. During the quarter the Company generated net income available to common shareholders of $26.7 million, or $0.52 per fully diluted share.

Net income in the quarter includes a non-cash settlement charge of $1.6 million for the Company's qualified retirement plan, which was the result of increased lump sum distributions from the plan in 2015. The Company grew profitability in the quarter, generating $71.2 million in adjusted EBITDA, improving the EBITDA margin by 150 basis points. For the quarter the Company generated $59.4 million in AFFO, or $1.15 per fully-diluted share.

Turning to the hospitality segment results, the hotel finished the quarter on a same-store basis with a RevPAR decline of 1.8% and an increase in total RevPAR of 1.5%. On a pro forma basis, adjusted for the impact of the USALI accounting changes, comparable same-store total RevPAR increased 2.2%.

During the third quarter we saw an increase in our group attrition rates of 13.7%. The increase in attrition during the quarter was attributable to a few specific large groups and we see no indication that the industry's experiencing a systemic issue.

Third-quarter cancellations were our second-best third-quarter result, at approximately 9,200 group rooms. Attrition and cancellation fees collected during the quarter totaled $1.2 million.

We continue to see solid operating performance and margin expansion in our hotels with consolidated hospitality segment adjusted EBITDA increasing 9.2% to $67.1 million. Consolidated hospitality adjusted EBITDA margin increased 190 basis points to 29.9%.

On a same-store basis, hospitality adjusted EBITDA increased 7.8% to $66.2 million and hospitality adjusted EBITDA margin increased 180 basis points to 29.8%. During the quarter Gaylord Opryland received the remaining $2.4 million in insurance proceeds from the first-quarter business interruption claim.

During the quarter, the entertainment segment revenue increased 8% to $28 million and the segment's third-quarter adjusted EBITDA increased 3.4% to $9.2 million. As Colin mentioned in his opening remarks, this segment incurred approximately $1 million during the quarter in advisory costs. Corporate and other adjusted EBITDA totaled a loss of $5.1 million in the third quarter compared to a loss of $5.6 million in the third quarter of 2015.

Moving on to the balance sheet, as of September 30, we had total debt of approximately $1.47 billion and unrestricted cash of $40.3 million, resulting in net debt outstanding of $1.43 billion including $712.9 million of borrowings drawn under the Company's credit facility, leaving $382.1 million of availability under that facility.

In August, our Board of Directors authorized a $100 million share repurchase program which extends until December 31, 2016. To date the Company has not repurchased any shares under the authorization.

Given the volatility we've seen in the equity markets, we believe there may be moments in time where there's a significant disconnect between the intrinsic value of our Company and our equity price. This authorization positions us to take advantage of those opportunities. We'll be disciplined in our approach to repurchases and weigh potential returns or repurchasing shares against returns of other uses of capital, such as accretive acquisitions, EBITDA-enhancing capital projects or increases to our dividend.

Regarding our dividend, as we mentioned during our last earnings call, we increased our quarterly cash dividend by $0.05 to $0.70 per share of common stock. On October 15 the Company paid a third-quarter cash dividend of $0.70 of the Company's current plan to distribute total annual dividends of approximately $2.70 per share for 2015 with the remaining quarterly payment occurring in January. Any future dividend is subject to the Board's future determinations as to the amount and timing of those distributions.

Now let me close by saying that we are extremely well positioned for the transient-oriented holiday season. And we remain bullish on the group segment and our competitive position within that segment. Our business is performing extremely well from a margin perspective and we're very optimistic about our potential in 2016 and beyond. And with that, I'll turn it back over to Colin for any closing remarks.

Thanks, Mark. I can't help myself, I want to go off script just for a second before, Jackie, we open it up for questions. One of the problems of being a public Company in a sector like ours is that you get an issue or two with one or two competitors and the industry characterizes the world as the sky is falling in. Several weeks ago we witnessed tremendous volatility in REIT equity for fear of rising interest rates and the impending end of the cycle.

But the big picture as far as we're concerned, as we look at our business, this is the thing that we focus on every single day, our Board focuses on the same thing, is that the assets that we own in this Company are extraordinary. They have tremendous revenue-generating capabilities. We're seeing very, very little new supply that will affect these assets.

We're seeing very strong group demand that's in evidence by our bookings that we've reported to you again this morning and the lead volumes that we've reported to you this morning and the tremendous forward book of business that's setting 2016 up to be a record year for us. This year is a record year for us and I'm pretty confident that absent a macro event, 2016 will be a record year as well.

We've got a strong balance sheet, one of the highest dividends in this sector. And we have the ability because of the real estate we own to further grow our world-class assets by adding more capacity as demand continues to grow. And we can add these spaces and generate very high returns on capital and we've got an entertainment business which owns legacy assets and is extraordinary. So from our perspective, things have never looked better and we're very, very excited as a team and as a Company about the future. So Jackie let's open up for questions.

(Operator Instructions)

Our first question comes from the line of Chris Woronka with Deutsche Bank.

Hey, good morning, guys. Wanted to ask you, we hear from some of your competitors that they've been able to yield out some of their, what they call, lower-rated group business. Wondering if you're seeing any pick-up from that and if that in turn allows you guys to become a little bit more selective in terms of what you're taking?

Well, Pat, you may want to give that question from Chris. Chris, Colin, good morning to you. Let me say this, that all of these room nights that we -- all of the additional room nights that we've got on the books for 2016, 100% of those room nights -- actually I think it's more like 110% of those room nights -- are indeed corporate room nights offset by a decline, I think, Pat in SMERF-slash area.

So our manager, Marriott, and our salespeople, are doing this. We literally, our asset management team, are engaged with the sales team of Marriott, engaged with the leadership of Marriott on a daily basis, making sure that we are culling the less profitable groups and installing groups that are more profitable to us. Pat, do you want to add to that?

Yes, Chris this is Patrick, it's good to hear from you. Just to add a little bit to what Colin has already said, we have much greater strength in our transient sector as being a part of Marriott. So our need for some of the lowest-rated groups is not as high as it was in past.

Having said that, we will always look across our calendars and if there are periods that we need to fill, need periods that are not high group demand, we will always consider groups that may be a little bit lower-rated. We haven't seen a large influx of low-rated groups as a result of what other competitors are doing.

Again, we're just looking across our calendar and making the right decisions for our hotels based on what our needs are. But again, because of our strength in transient, it's a little bit less need for us and we can rely more on the transient side.

And Chris, this is one of the reasons why this morning we mentioned that we're probably going to spend about $5 million adding to the pool complex in Texas, simply because that is very quality business in the summertime. That simply, last year we just didn't have enough space, enough pools to accommodate the demand. So that's an illustration of things that we're doing.

We're also looking at a potentially much larger complex of that type here in Nashville because of the massive surge in leisure business coming to this market. We're constantly pulling the levers of accelerating leisure where it's economically feasible, deaccelerating the lower-rated business and really focusing on the higher-quality corporate business which generates very high outside-of-the-room spend.

Sure, that's great color. Wanted to ask you, Colin, more of a theoretical question. As Nashville continues to evolve and grow and you're obviously the hallmark property in the market. Even though it's almost 2,900 rooms now, is it conceivable you at some point down the road think about adding rooms there?

Well, if you'd have asked me that question probably about eight years ago, nine years ago, I would have said you were raving mad. But what is happening here, frankly, I've never seen it in the almost 30 years I've been in America, the transformation of a market that is taking place here in Nashville.

Last month, the Nashville hotel had, I think, ran 90 points of occupancy. I really do think that as leisure demand continues to grow and we're seeing really strong group demand in this market, I think that there's a possibility that we would look at more rooms here. But I think if we did it, we will probably do it not as an extension or an expansion to make Opryland more complex to walk around. I think it will be a stand-alone overflow hotels that would sit contiguous to this hotel.

Just to add to what Colin already said, the reasoning behind that is further supported by the fact that if we were to bring in a stand-alone brand, it would have its own source of demand through its own distribution channel. It could serve as an overflow facility to Opryland if we so choose to move forward in that direction, but it would also have its stand-alone revenue source or demand generator without Opryland when maybe Opryland is in a lower demand period.

Okay, very helpful. Thanks, guys.

Thanks, Chris, thank you very much.

Our next question comes from the line of Shaun Kelley with Bank of America.

Hi, good morning, guys, thanks for taking my questions. So Colin, just wanted to go back to -- I know that it's like a small, relatively small number, but I just wanted to go back to the attrition issue because it was called out in the prepared remarks related to the reduction in your full-year forecast.

Could you give us a little bit more color on exactly what that was? Because it does seem like -- what I'm trying to understand is the characterization. It seems like on the one hand it was higher than you anticipated but on the other hand it's small in absolute numbers. Is that what we should take away from the comment?

Yes, you've just summarized it in your last statement. One of the things, Shaun, we try and do is to be very, very transparent in terms of what we're seeing in this sector. We tend not to give surprises in this sector. We tend to be very open and transparent, probably too much so. We probably share too much data.

So one of the things -- we have a set of things that we focus on weekly, monthly in this business that we are constantly looking at. Things like cancellations in our business, attrition rates in our business, because they tend to lead us to --it tends to be an early warning signal.

We saw this occur in 2008 and so we observe and look at this stuff. Where we see attrition in a group or groups, multiple groups, speaking, we dig into those groups and understand is this group specific. Or is the group basically saying Oh, my God the world's falling in we've got to tighten our belts, and that potentially could spread to other groups. So we do this as a general back drop. Pat, why don't you give Shaun a little bit of color on what exactly we discovered here?

Sure. Hey, Shaun, this is Patrick. To Colin's point, we always go into a quarter anticipating a certain level of attrition. Based on our history we know that's just how the group business functions.

Some attrition that we saw in the third quarter occurred after our early August conference call with you all. So we looked into the reasons behind that and I'd really put it into the three categories.

The first would be group-specific issues. These were corporate and association groups that either had a meeting that they were conducting that was competing with another industry event or they had introduced a new format to their meeting or they had just seen some attendance declines over the past few years specific to the group. So we had a few groups that fell into that category.

The other category I would call out is lack of historical data. Where this is some association, corporate or even SMERF groups that we really didn't have a solid history on. The meeting planner had either created the meeting or it was the first time they were staying with us and a lot more guessing and estimation going on. So some of the groups fell into that lack of historical data.

And then the other one that we really dug into to understand the best was those that saw attrition on shoulder periods. These are groups that for whatever reason, some of their attendees left early or didn't arrive as early as we thought they would.

When we dug into this real deeply, what we learned was that some of it was just the date they had selected on which to hold their meeting. For instance, there was a large group that historically met over Labor Day, instead they met a week later. As a result, because there was no holiday, some of their attendees couldn't stay an extra day, so they departed early. There were a few groups that fell into that shoulder period category.

But overall, as Colin's already talked about, we looked across the three categories, shoulder periods, group-specific and the lack of historical data and walked away and said, look, there's no real discernible pattern here. These are more issues that are really specific to the groups. While it was a little bit of elevated attrition, we feel comfortable that there's not necessarily a trend developing that we need to worry about right now.

And one of the reasons why I shared with the group here this morning, Shaun, what we were seeing in cancellations. Back when we mapped what actually took place in 2008, towards the end of 20008, early 2009, what we saw was attrition rates for organizations that were traveling was climbing, but cancellation rates were climbing at the same time.

But we're just not seeing that. This was the second-lowest quarter in eight years -- second-lowest third quarter in eight years on cancellations. And lead volumes have jumped; lead volumes are up 10%. Our bookings, meeting planners are absolutely committing meetings in contract form. Our conclusion on this is that it was circumstantial to the these groups, period.

Really helpful, and I appreciate the deep dive. So two more small things. The first one is, we've gotten a question over and over again from investors about pure group exposure from energy-related companies at the Texan. If you could just provide us the thought across the portfolio as well, directional would be great if you have that?

We have very, very little energy-related business on the books, but Texan's having by far its best year. I suspect the Texan will have a very good fourth quarter next year. The Texan will have, again I think, a record year. I really do not -- energy is not consequential to us.

And the question came up on the last call, we went back and looked, it is less than 5% of our mix of group business. It is not something we worry about. And then we've looked at the Dallas market specifically and we continue to see strength across the Dallas market. Despite some of the challenges that are going on in the energy sector, we are very bullish on the Dallas market because of the performance that we've seen at our Gaylord Texan property this past year.

Great, and my last one, I apologize for hogging the floor, was just Colin, you gave some really interesting data about October. That's always like, super-appreciated given some of the volatility we're hearing about October from your competitors. My question is, I just wanted to be clear. You said, if I caught it correctly, was it 16% RevPAR growth in October across the portfolio and then 13% in total RevPAR? Were those the numbers?

Yes, you heard it right. And just north of 85 points of consolidated occupancy. It was an absolutely tremendous month, but we knew we were going to have it because of the tremendous book of group business we had on the books for October.

And you're still bringing down the full-year outlook despite those numbers. So it does imply some pretty meaningful deceleration in November and December, is that correct?

Well, let me be clear. I asked Mark last night to go back and remind me what our guidance was at the beginning of the year, what occurred through the year and where we are today. In fact, our total consolidated EBITDA guidance that we issued in February, we increased it in May because of the strong second quarter we were having. And we knew that we were going to have a strong fourth quarter. I think actually, guys, we said that publicly, we said that.

Correct.

And when you look at total consolidated EBITDA with this minor adjustment to the mid point, we're actually a couple million dollars up on where we were in February of this year. Our business is so predictable. It's the small things like a spike in attrition and forcing a 500-room room refurb start to finish in a three-month period, that has led us to the conclusion that we should talk about the very insignificant impact that these things have on the overall profitability. So that's where we are.

And let me just add a little bit of additional color for you on the fourth quarter. Colin already talked about really great strength that we saw in October and we don't -- it's not that we expect November and December to be weak. If you go back and look, last year RevPAR November was 14.6% year-over-year growth. In December it was 17.1%.

So there's really two things at work. Number one, we have extremely tough comps because we had so much growth in both group and really solid transient performance last year. So bumping up against that we still expect good growth but not necessarily to the level that we saw last year.

And then second, because of the attrition we saw in the third quarter, we think it's prudent to go ahead and make sure that we've planned appropriately for the fourth quarter from an attrition perspective. So if attrition comes in lighter than what we planned for, then that could be some upside for us. But right now we're just being prudent.

Thank you very much.

Last December, we had -- it was the best month we ever had in the Company's history.

Correct.

$103 million of revenue, from my memory. Anyway next, Jackie, sorry.

(Operator Instructions)

Our next question comes from the line of Bill Crow with Raymond James.

Good morning, guys. Colin, I wanted to take a big picture look at the group business, not necessarily specific to your hotels, but the Company's unique strategy and the rotational model allows you to track the same groups year offer year. I think Patrick alluded to that, the history of the groups in one of his prior answers.

One of my questions is if you do indeed track same-group dynamics, what's going on with attendance overall at these groups, spending trends? Are you hosting more groups with fewer attendees? Fewer groups with more attendees? Let's start there.

Well, I don't have at my finger tips the empirical data to be explicit about more groups or less groups. But I would say to you, given the way our group book of business is growing and looking at where the majority of our business is being booked, I think what we're seeing is a lot more groups in that 300 to 600 peak and a lot more corporate business at peak.

But we can pull that data and try and get a little bit more granular for you. I think our salespeople are very comfortable with the quality of business that we are booking and the performance of these groups. Pat, do you want to add to this?

Sure. To Colin's point, he's correct. This has been a dynamic that's been in place for the past six years or so, that we are hosting more groups with fewer attendees. Now we've seen some growth in attendance numbers and you've seen that played out in our attrition numbers over the past couple of years.

But to your question specifically as far as how groups are performing, I would tell you that as always, it depends on the group. But I would tell you even in the third quarter, we saw some groups set some new records for their own spend levels. I can't name the specific groups, but they are groups that are brand customers, have been rotating through our business for a number of years.

And then the third quarter a few of them set outside-the-room spending levels that we have never seen from them before. There are some really great things to point to that are encouraging, that some of these groups are still feeling very good and spending at very high levels.

Patrick, have you seen on the margin the industry categories change as the economy has evolved over the last year or two? You said not much exposure to energy, so maybe we'll leave that aside. But any changes to tech or pharma or manufacturing or anything that stands out?

Yes, Bill, yes. You've seen that in some of these corporate room nights that we've been booking so well over the past two years. Pharma has been a great source of last-minute bookings if we have an opening that they can book into. Financial, tech have both been very strong as well.

So they've modestly grown, because that's where the opportunity is right now. But we haven't become overly dependent on them. I guess I would just clarify that.

And it's hard for us to truly understand. Is the increase that we're seeing in pharma, financial services, technology, is the increase due to just the underlying vibrancy of the sector versus Marriott's long-term relationships that they have, these corporate relationships? Because of the scale of this business that was so different to the corporate relationships that we had when we were a stand-alone Gaylord brand. But I do know the result, whether it's vibrancy of the sector or whether it's the relationship, we're seeing a lot more business.

And finally for me, Colin, is there any change in the relationship between the amount of meeting space booked and the corresponding number of rooms booked? I ask you that because obviously everybody's focus seems to be focused on AirBnB and events like Comic Con have come out. I know the last time you hosted Wall Street for an event there was a similar event going on. Do you see fewer rooms relative to meeting space?

I still have pictures of you, by the way, at that. (laughter) The answer to the question is we are migrating to corporate quality business away from space hogs. I think overall, Patrick, I don't think we're seeing a major change in meeting space per attendee.

But one thing that we do believe, as we get these hotels operating towards 80 points of occupancy, which if we hold where we are through the rest of this year, we're going to be pushing somewhere in that 78, Pat, 78, 79 points of occupancy next year. We're going to be doing just north of 60 points of group occupancy in these hotels, 64% group occupancy in these hotels. The problem is -- and this is something that is hard for probably most of you and your brethren to get your arms around -- but the problem is our space drives room nights. It's not room nights drives space.

And so the issue for us is if we have another 50,000 or 100,000 feet of flexible meeting space in one or two of these hotels, we can drive occupancy. What we're focused on is the quality of these groups, the meeting space that they basically take and how we can layer on more groups by having 50,000 or 60,000 of net meeting space in one or two of these hotels.

And Bill, the reality is, if anything, meeting planners want more space. They always want more space; they continue to ask for more space. And it's our job to make sure that we get the right ratio in place so that we have additional space to sell more rooms. We have been working with Marriott over the past 12 months specifically on a couple of initiatives to drive greater efficiency and utilization in our space.

Whether we're trying to claw back space from groups to make sure they're using the space efficiently so that we have additional space to sell to more groups, or whether it's just tracking and making sure we understand how our space is being occupied and how its being utilized. Our initiative is under way to drive our utilization more efficient but meeting planners continue to ask for more and more space.

Great. Thanks for the time.

Thanks, Bill.

That was our final question. I'd now like to turn the floor back over to Colin Reed for any additional or closing remarks.

Jackie, thank you and thank you everyone that was on the call this morning. Really appreciate you taking the time. I know Mark and I will be doing the REIT World Conference in Vegas, Mark, in a couple three weeks, whatever it is. And then we're planning a trip to New York. So we look forward to being with our investors and answering more of your questions and helping you understand the tremendous future that we think our Company has. Thank you very much indeed, everyone.

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