Ryman Hospitality Properties Inc

NYSE:RHP

Earnings Call Transcript 2022-Q2

[Operator]

Welcome to Ryman Hospitality Properties Second Quarter 2022 Earnings Conference Call. Hosting the call today for Ryman Hospitality Properties are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. Mark Fioravanti, President; Ms. Jennifer Hutcheson, Chief Financial Officer; Mr. Patrick Chaffin, Chief Operating Officer. This call will be available for digital replay. The number is 800 839-1246 with no conference ID required. At this time, all participants have been placed on a listen-only mode.

It is now my pleasure to turn the floor over to Ms. Jennifer Hutcheson. Ma'am, you may begin.

[Jennifer Hutcheson, CFO]

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 facts may be deemed to be forward-looking statements. Words such as believes or expects 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 today.

We will not update any forward-looking statements, whether as a result of new information, future events or any other reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure in exhibit to today's release.

I'll now turn the call over to Colin

[Colin Reed, Chairman, CEO]

Thank you, Jen and good morning, everyone. The second quarter was another remarkable quarter for our company and the hospitality business in particular. The momentum we generated in our hospitality business during the first quarter has rebounded from the low point of the Omicron wave in January, carry through to several new record performances in the second quarter. And we did some of these in absence for you. Second quarter was our best quarter ever in the history of the Gaylord brand for trend in ADR. At 283, this was an increase of 31% over the second quarter of both '19 and '21. The second quarter was also a record all-time for us for both total revenue and total adjusted EBITDAre for our hospitality segment.

And those records were not by narrow margin. Second quarter adjusted EBITDA was a total of 22 million higher than the next best quarter and our adjusted EBITDAre margin was also an all-time record at 125 basis points above the next best quarter. Regarding our core production, this second quarter saw the higher ADR on new definite booking for all future years of $243. On a monthly basis, we also saw a few records within the quarter. For example, April was the single best most profitable month for adjusted EBITDAre for the Gaylord hotel brand and the second highest margin month one record. And at the individual hotel level, the Gaylord roughly has gained a distinction of serving the single highest occupancy month on record for any Gaylord hotel when it reached 92.4% for the month of June.

From just about every angle you look, our results this quarter were a testament to our capital allocation strategy and the actions that we've taken over the last several years to meet the challenge of the pandemic head on and to position our hotel business to thrive in the eventual recovery. These steps included gaining retaining over 80% of our sales force leaving us the hotels were closed and working hand-in-hand with our core customer and the meeting planner to rebook their business. We also continued critical plan capital investments into expansions, rooms and meeting space upgrades, reconfigure that and be upwards and other amenities. We streamlined our operating models for improved efficiency to better phase what our rising wages and other inflationary costs.

And we reimagined in many respects our approach to leisure programming finding new ways to attracting the claim premium leisure did not around our traditional group business. All this work was manifested in second quarter in these figures that I just shared with you and I couldn't be more pleased with the job that our team and the Marriott teams and our hotels put forth to produce these results. This is a good moment to remind everyone that this indeed was still in essence over recovery quarter for us despite all of these records. We accomplish this performance with five fewer occupancy points in the quarter than in the second quarter of '19 our last pre-pandemic year. This tells us we have more opportunity ahead to build on this success as occupancy planning gets back to pre-pandemic levels and we continue to set outside to new records in the years to come particularly and an environment where new supply growth remains limited and our on the books pace for group rooms revenue in the years ahead exceeds pre-pandemic levels.

Now, I know what some of you folks are thinking about, so let's address ahead on before I go into any more month any more detail about the quarter and our outlook. Now some of you are thinking well these records are nice but that's a few weeks ago and don’t you know there's a big recession coming, inflation is out of control and so on. And I'll think that reflects some misunderstanding around our business and the current backdrop compared to past economic cycles. As I just noted, our hospitality business is still in a recovery period. The desire and the demand to meet amongst the majority of our customers remains high and pent up. Many of our customers have not held their annual meeting, events critical to their mission and even financial help in many cases for literally over two years.

Also very different set of circumstances when we were going into the 2009 period and the great financial crisis was unfolding. What we're hearing from our customers right now and Patrick can go into that a little bit more is that they are proceeding with their plans. Certainly they read the news too and a few have noted that they are keeping an eye on the equity markets and on macroeconomic data. But right now on a net basis, the need and the pressure to resume meetings is winning out. And that is evidence for example in that recent production. In the second quarter, we booked 600,000 group rooms, group room nights, which was only 8% below the second quarter of '19. And as I mentioned at the top of the call, ADR on these new bookings was at an all-time record, 15% higher than the second quarter of '19 and 14% higher than the second quarter of last year.

And by the way, our production for July again showed a pretty strong second -- petty strong segment at play. So, we are seeing solid interest from our customers. And our core book of business as a result remains in excellent shape. As of June 30, we had 43.9 points of net occupancy, net group occupancy on the books for 2023. This is 1.2 points higher than we had at the same time last year looking ahead to '22, I mean only 0.07 points less than we had in '18 for '19. And that is despite 3% more rooms' inventory than the Gaylord Palms expansion in the denominator today compared to this point in 2018. But more importantly, we must factor in the rate growth we've seen over the last couple of years in that production. Our net group ADR on the books for next year is 3.8% higher than our T1 position at this time last year and 10% higher than our T1 position in '18.

In total, we had on June 30, 6.6% more group revenue on the books for next year compared to this time in '21, and an 11.5% more than we have at the midpoint of '18 looking into '19. So, bottom-line, we feel great about where we stand right now and about our business and the fundamentals behind it regardless of the economic backdrop that we can't control. And perhaps this is a good time to note that we also collected 15 million in cancellation -- $15 million I should say in cancellation attrition fees in the second quarter putting our running total to over $110 million mark since the start of the pandemic. Now of course, we would like to see that this number trended down month-to-month in the quarter as we move further away from the Omicron impact. And we'd like to see this continue downwards as the group recovery continues.

But these fees are an important feature of how we design our business to weather top times. I want to remind you of it as long as I'm addressing concerns about recession recessionary risks. And Mark will discuss some additional color by each property and suffice to need to say we were very pleased with our hospitality business this quarter and it almost makes you forget that it was only six months ago where we were 32 points at occupancy for the month of January. We're hearing now even after the bite that the Omicron wave took out of our first quarter, giving full-year guidance of adjusted guidance and for EBITDAre to this segment that is still in par with 2019 levels which I'll let Jennifer walkthrough in more detail.

Turning to entertainment, the most exciting news was the execution of the acquisition of Block 21 in the quarter and the subsequent placing of our strategic investment with Atairos and NBCUniversal which valued the new combined Opry entertainment group on Block 21 and just over $1.4 million. On a segment basis, our entertainment business delivered $22 million of adjusted EBITDAre in the second quarter which while it ended up being towards the lower end of our guidance with nevertheless a record quarter for this segment as well both as reported and on a same store basis. Compared to on our initial expectations, a few factors contributed to the result not being an even bigger record and one is the slight delay in closing Block 21 versus our original timetable which not only improves the contributions at Block 21 for the second quarter but also means we will get a bit later start on the many growth initiatives we have planned for this asset some of which are will now be felt more in '23 instead of later this year as we originally had planned for.

Turning to our Grand Ole Opry business, we've seen a slight recovery than expected in the customer segment that we call tour and travel or what is more easily described as organized bus service [to buy tickets] as part of the package itineraries. Also at the Opry, we've experienced some reduced availability of top drawing artists in Nashville during the summer as many of them have accelerated their pent up national and international touring activity due to the faster recovery at June during June 2 the fast recover from Omicron so I'm reading too quickly here. While that's certainly great news to the artists and the millions of the country lifestyle consumers visiting their shows, it does take away some availability for us to showcase them at home as often we would like here in Nashville.

And finally, this' been widespread softness right now in the advertising market which is down from topline revenue and several joint venture. Even in Circle ratings and shared nice increases around our original content and benches cost has been following the plan that we had in place. This complements the fact that's why we brought our guidance for this segment down a bit to reflect their impact for the full-year but is still expecting a record year for profitability for this business. And when you compare what we've achieved in the second quarter to the same time in 2019 on a same store basis, our core entertainment portfolio delivered no less than a 35% adjusted EBITDAre growth compared to pre-pandemic levels.

Now, our focus is solidly on getting to work implementing exciting plans for Block 21 and the ACL Live Theater under our ownership. We are also clear to commence construction on a whole level Las Vegas location right in the heart of the strip which we expect to complete in the early fall of next year. And we now actively engage with our partners of the Atairos and NBCUniversal, on a roadmap and strategic initiatives across the business on which we look forward to share and more as we move forward together. I'll pause here to hand over to Mark for getting to a little bit detailed information on the hotel business and then to Jennifer to update our balance sheet. Mark Fioravanti.

[Mark Fioravanti, President]

Thanks, Colin. Good morning, everyone. As Colin has noted this was an excellent quarter for our hotel business with several all-time records achieved, and let me just take a moment to comment the profit level on some of this specific drivers of the performance. While Gaylord Rockies led the brand in occupancy for the quarter at 76.6%, Opryland, the Palms and the Texan all had similarly strong performances with occupancies of about 74%. The Palms and Texan finished with and two different points of second quarter 2019 levels. And I would note that the Palms occupancy performance includes 300 additional rooms a 21% increase in that properties available rooms.

The Rockies occupancy was up 8 points with 2019 was its first skew of operation and the hotel has not been stabilized. And our Opryland trail at 2019 performance by six points, it's important to note that Opryland had a tough comp as occupancy in the second quarter 2019 is seen at 81%. All four hotels had excellent ADR growth over the second quarter of 2019 ranging from 15.6% for Rockies up at 22% at the Texan which in each case was notably led by the transient segment. First of the second quarter of 2019, the Rockies transient ADR grew 46.5%, the Palms 39.9%, and Opryland is 37% and the Texan at 36.5%. Group ADR also performed well going on average an 11.5% across the four hotels. All four hotels delivered a very good outside the room stand for groups in-house with other RevPAR at the Texan at 9.3%, the Palms 22.5%, Rockies 26.7%, while compared to the second quarter of 2019.

Opry inline delivered another RevPAR up 1.2% as a mixture from corporate to association room nights led to more margin throughout in outside the room standing. In addition, Opryland was the only property to experience a decline in attrition and cancellation revenue as Opryland received several large cancellations peak in the second quarter of 2019 to well above historic norms. The combination of strong leisure ADR both outside the room group revenue including attrition and cancellation fees fall on top of our operation improvements share with strong flow through an incremental revenue at the Palms, Rockies, and Texan, leading a 49.7% of Palms, to 65.3% at the Texan when compared to 2019.

Opryland margin and flow through versus 2019 was challenged by the group mix and the declining fee collections. If I will want to comment on the national because what we saw on the financial performance there was quite encouraging to us as the D.C. market continues to recover. And in effect this hotels overall margin flow through we're clearly seeing a positive impacts of our capital investment in the operational improvements we have undertaken during a good tick extended COVID shutdown. While the National's occupancy trail this second quarter of 2019 by 17 points, I would note that like Opryland, the hotel faced some very tough 2019 comp of 81.4% occupancy. And despite this reduction in occupancy, the National's adjusted EBITDAre margin was only down 2% compared to the same period.

In fact, if you exclude the interest we receive on our Gaylord National bond, margins at the hotel level were in fact comparable to 2019 levels down only 60 basis points despite 17 fewer points of occupancy. This tells us the new staffing model and investments we've made in F&B re-concepting are beginning to pay dividends. Specifically food and beverage was $2.5 million lower in the second quarter of 2019 due to the reduced occupancy while our food and beverage profit was up $1 million. This is really good news entirely it's much of the hard work that we ended addressing the challenges at the National over the last two years. In terms of what we're seeing in the labor market and staffing levels, we did see year-over-year rate inflation in the quarter an average of 19% across the portfolio.

These increases have been offset by rate in pricing increases improvements in hours per occupied room and efficiencies in our property leadership structure. We feel comfortable with our current staffing levels and also to our targets, and was our practice prior to the pandemic where we have difficulty filling roles with the line contract labor. So, overall we feel good about our ability to continue to navigate any pressures in the labor market while remaining a prudent player in creating a culture to retain the best people and by giving sell to have a great value to our guests so they return time-and-time again.

Now, let me turn it over to Jennifer to provide the balance sheet and liquidity update as well as our period guidance.

[Jennifer Hutcheson, CFO]

Thank you, Mark. In second quarter, the Company generated total revenue a $470.2 million and net income to common shareholders a $50.3 million, and $0.91 for fully diluted share. The Company closed its acquisition of Block 21 for $255 million in the quarter, including contract price adjustments and the assumption of a $136 million of CMBS. Subsequently we are seeing appropriate of $296 million on the sale, 30% of our Opry Entertainment Group to the care. As well as the recapitalization of OEG with a new $300 million term loan. We do see proceeds to retire our $300 million Term Loan A and other borrowings under our corporate and volume credit facility. We've left the Company with an undrawn revolver, a new undrawn $65 million revolver at OEG and a $179 million of unrestricted cash at quarter end for total liquidity of $934 million excluding $10 million of lines of credit.

With total net debt a $2.68 billion and trailing 12 month adjusted EBITDAre, a $408 million. This puts our current net leverage at approximately 6.6 time. And based on the midpoint of our guidance range which I'll cover next, we would expect to end here at approximately five time, which is close to the upper end of our preferred range. Based on strong performance of our hotel portfolio in the second quarter and the item impacting our entertainment business that Colin described, we have to provide our full-year guidance and are also now issuing third quarter guidance. To this third quarter 2022, we expect our hospitality business to deliver between a $125 million to a $130 million of adjusted EBITDAre and our consolidated company to produce a $137 million to a $146 million of adjusted EBITDAre.

For the full-year 2022, we expect our hospitality segment to deliver $475 million to $490 million of adjusted EBITDAre. I will point out that this represented increase of $32 million of the midpoint compared to the $15 million of which the second quarter exceeded our previous guidance. And perhaps most notable at the midpoint in $482.5 million, this was our hospitality segment right at 2019 performance. Which is remarkable when you recall what Omicron did to the first quarter of this year just a few months ago. For the entertainment segment, we expect full-years adjusted EBITDAre includes a Block 21 to be in the range of $72 million to $80 million. Within the reduction of $8 million, while the midpoint reflecting the factors that Colin described earlier.

Lastly, for our corporate segment we expect a full-year adjusted EBITDAre last to be in the range of $32 million to $33 million, and just the midpoint is $5 million more than our prior guidance. This change is primarily due to the traffic corners of our hotel segment moving up their crew for higher and benefiting compensation this year. The net chain on a consolidated basis is to increase the midpoint of our full-year adjusted EBITDAre guidance by $19 million up to a range of $514 million to $538 million and close to $16 million and of our consolidated 2019 results at the midpoint.

With that, I'll turn it back over to Colin.

[Colin Reed, Chairman, CEO]

Thanks, Jen. Cathy, let's -- Katie, sorry, let's open up the lines for questions and please.

[Operator]

Thank you, Sir. [Operator Instructions] Our first question will come from Dori Kesten with Wells Fargo. Your line is now open.

[Dori Kesten, Wells Fargo]

Thanks. Good morning, everyone. I have a few questions on the outlook. How much is assumed in Q3 and Q4 for cancellation and attrition fees?

[Patrick Chaffin, COO]

Hey Dori, it's Patrick. We would expect to see a decline in the second half of the year and our attrition cancellation fees somewhere in the $10 million and $20 million range for the second half of the year is probably where we're going to end up.

[Dori Kesten, Wells Fargo]

Okay. And was the reduction in the entertainment outlook, was that solely due to the later-than-expected closing of Block 21 and adjust the plans that you had, I guess we're not able to put in place or was there anything else that was driving that?

[Mark Fioravanti, President]

Well, the delay in Block 21 and its integration is a portion of that. As the business has revamped from COVID, we've seen some impact from the tour and travel business as Colin mentioned, it's impacting Opry's tenants as well as our day time tour business at the Opry and the Ryman. Colin also mentioned is a script that available of artists with the artist touring post-pandemic that increased schedule has reduced availability for some of the A-list artists at the Opry House. And then we've seen some softness particularly in Orlando as it relates to our Ole Red there and that or that is located near the convention center, convention traffic there is running a bit below pre-pandemic levels.

So, that combined with and the tragedy that occurred in Icon Park a few months ago is having some implications for that location because we are located in Icon Park as well. And so, all of those issues are really contributing to how we view the entertainment business for the rest of the year. I would say though that that business has performed extremely well and as Colin shared on the call in the first half and as you look at the second half, if you look at the acquired second half EBITDA growth versus '19 at the midpoint, we are projecting 55% growth over 2019 levels in terms of profitability for that business in second half. So, it's a terrific, that business was having a terrific year.

[Colin Reed, Chairman, CEO]

And let me add to this, Mark. But we tried always to be extremely transparent with new folks being analysts and the investors. And you all know we went through this process last year where we sat down with 10 interested companies that wanted to partner with us on this business. And we built layer one to the time to be build, we built the plan based upon the way we felt 2022 was good to play out. And what has basically happened is the Omicron wave that hit us in the middle of the winter December, January, February, was not frankly something that we planned for them and it had a marginal impact on consumer behavior. This is a timing issue. This is not a fundamental change in the business trajectory, this is a timing issue.

The buzzing business will be back. The group large city wide convention business in the Orlando market will be back. The artists that are out there, that have been locked out for two years, those folks they're going to take it briefly and come back to Nashville. The other part of all of this that I'd really love with all of these artists all over the country and internationally playing is that they had created new fans that we can then turn around and bring back to Nashville. So, this is a timing issue. We the fundamental change to our hotel business is so exciting because what we've essentially done here is we have re-weighted the hotel industry our part of the hotel business here over the last one to two years. This is why we are seeing we believed in leisure rate, people are now prepared to pay the rate that we are putting before them for the fabulous array of stuff that we put into our hotels.

And our group side is just getting stronger-and-stronger by the day. And had July group room night production was very healthy and about a 110 million a 110,000 room nights produced and Patrick what was that rate going for over '19?

[Patrick Chaffin, COO]

Over '190, our July production was up about $58 or about 29.8%.

[Colin Reed, Chairman, CEO]

So, the entertainment business, this issue is a timing issue. And Block 21 we look really forward to getting the hotel rate down, sitting down and planning the movie theater renovation what we will do. This is a timing issue but we're very excited about the underlying trajectory of this company. And that was a long winded answer to a very short question but I felt like I had to give it to you.

[Dori Kesten, Wells Fargo]

And that's fine. Is it fair to say then that you summarize all that that as compared to three months ago your outlook for the hospitality business next year. And I guess your internal outlook has improved and perhaps the entertainment outlook is unchanged, again for next year not '22 whether it's perhaps time issues.

[Colin Reed, Chairman, CEO]

I think our view of the entertainment business next year hasn’t changed and hasn’t changed for next year given some of this delay and in the recovery. I think our business next year is going to be very good and we're having many different discussions. We have our friends from Atairos here Wednesday evening and Thursday and we got many interesting ideas on how to improve this business and drive further. So, I'm pretty excited about it for the 2023.

[Dori Kesten, Wells Fargo]

Okay. Thank you.

[Colin Reed, Chairman, CEO]

Thanks, Dori.

[Operator]

Thank you. Our next question will come from Smedes Rose with Citi. Your line is now open.

[Smedes Rose, Citi]

Hi, thanks. I had a couple of questions but the first one maybe just kind of as we think about the outlook for the rest of the year. Can you just help to think about what sort of the effective tax rate would be, at least while it's up to our forecast for the tax really higher in the quarter. Have you just kind of trying to think about that going forward?

[Jennifer Hutcheson, CFO]

Hi Smedes, this is Jennifer.

[Smedes Rose, Citi]

Hi.

[Jennifer Hutcheson, CFO]

We didn’t have a reconciliation for adjusted EBITDA and then supplemental schedules or earnings release in that that shows you on line for kind of that combined total tax provision for what we're projecting for the year just kind of the reconciliation for full-year guidance. And as you noticed, it sounds like that number is a little bit higher than what we're typically seeing in the past. And I guess one unfortunate byproduct is having your hotel business do so well and higher income tax bill that kind of comes with that. So, the other thing that impacted that estimate has come to the both timing and the rapid lap of this recovery kind of limit your ability to maybe manage your taxes within a particular given year.

We have had a fair amount of NOLs that have built up over the years and we've been steadily utilizing those and those will start to wind down and then and fortunately did as well is and we've created new NOLs and have been in recent tax well as then have been an active that the room that we are now that goes at all well that you've move moving around being created that you can apply and they're getting near. Although they can carry forward indefinitely now to the upside to that to yes that's a little bit of a timing issue with as well. So, a little bit of an anomaly in 2022, we may continue in the future to speak relative to historical periods where we will believe lies more of our NOL higher than this pre-pandemic level taxes.

But probably a little more stabilized level than what you're seeing more than they did previously with us back in 2019, pre-pandemic, from a mix perspective, we think 2023 is going to be more favorable than 2022. We’re continuing to watch that. Obviously, we have a lot to book here in the next six months. And so we’ll be watching that closely with our sales team. But from a leisure perspective, the accounts point, I would guess I would note, just what we did in the past seven days, our ADR on the leisure transient side was an all time high, at $305, across the brand over the past seven days. So we continue each week to see either as solid as the week prior or setting new records.

And so from a leisure perspective, we’re very encouraged. Obviously, it won’t last forever, but we are making sure that we continue to make improvements and enhancements in the hotels so that we’re continuing to improve the value proposition long term so that even as rates may start to slow from a growth perspective, we have reasons to continue moving our pricing, or at least hold.

[Smedes Rose, Citi]

Great color. Thanks for that, Patrick, and then just as the follow up, so for thinking about this level of demand into next year. Can you help us think about the cost environment? So Mark gave some detail on this in his prepared remarks, but just help us think about the bridge of sort of how much cumulative inflation we should be thinking about. So it’s a fancy way of saying, are margin sustainable as we think about kind of the remaining two quarters this quarter, and the remaining two quarters of this year heading into next? Or do we need to be thinking about pressures there as it relates to the inflation side as a partial offset to the growth you’re seeing on the top line?

[Colin Reed, Chairman, CEO]

Yes. Obviously stuff that we spend a lot of time thinking about, and certainly in our hotel business, having very extensive discussions with our friends from Marriott, we took an initiative last year, basically with Marriott to say, we’ve got to re-engineer the organization of these massive hotels that employ anywhere from 1,250 to 1,750 people. And we’ve been able to do that and particularly on the labor side. And Mark, you want to talk a little bit about what we’ve been able to accomplish on the labor side and what we believe the impacts of that would be for next year.

[Mark Fioravanti, President]

Yes. I mean, we, as Colin said, we work with Marriott to restructure leadership, which is really supervisors above and where we’re currently tracking in the second quarter, our total leadership headcount across the portfolio is down a couple 100, about 15%. So there’s some efficiencies created there and also creates opportunities for those leaders to have an increased span of control. So as you think about leaders growing their career, and developing their skills, it creates awe think a higher quality leaders that move up through the ranks. So we have a decline in management costs. If you look at the second quarter, our hours per occupied room was down about 10%. So we’re seeing some more efficiency there.

And then, as I mentioned in the remarks, our wage rate is up about 90%. And when you look at the wage margin, second quarter, it actually improved 50 basis points. So all of these efficiencies coupled with some of the pricing strengthened we’ve seen certainly we think that the margins that we’re seeing are sustainable. And in fact we’ll expand as we move through this year, and next year.

[Operator]

Thank you. Our next question comes from Jay Kornreich with SMBC. Your line is now open.

[Jay Kornreich, SMBC]

Thanks. Good morning. Congrats on the quarter. So the leads are transient segment is clearly been quite strong for you with the record ADRs as talked about and perhaps may want to retain a greater exposure to the segment coming forward than the 20% of demand historically. But as we’re facing some macro headwinds and fears of recession, which will give some commentary on do you think trying to lean more into the future of group bookings, which may be more sticky or the thought to continue to push the leader demand kind of as much as you can while you can.

[Colin Reed, Chairman, CEO]

Yes, another very good question. Another question that we spend a lot time thinking about. So, first of all, on the group side. When you think about this core group of consumers that we really focus on, which is the 600 plus, at peak, we have such a short small market share of these groups. And if we can generate 80 to 100 of those groups per hotel per year, these hotels run at about 80 points of occupancy, and our goal is to absolutely generate that level of sustainable group demand into these hotels. That’s why over COVID, we have sat with our friends at Marriott and said, we want to increase the quality and the quantity of group sales bodies that are focused exclusively to our particular brand. And we’ve done that.

And that’s one of the reasons you’re seeing production levels where they are. And we’ve also been I think, looking after these hotels the way we have, the refurbishment of these hotels, we’re able to get this jump in rate that we’ve seen here over the last 12 to 24 months. Now, on the other hand, the leisure side of the business, we’d become a lot more excited about because we have been able to change the rate structure over the last 24 months by about $50, $60 per room sold. And we’ve also tested the thesis through COVID some waves, and what that has done, what the amount of rooms is generated outside of the room spent. So I will tell you this that we spent a lot of time over the last few months, thinking about the next things that we do to stimulate the leisure side of this business, because we’re not satisfied as a company running these hotels at 80 points of occupancy, 75 to 80 points of occupancy. We want to push that occupancy up and improve the profitability of these hotels.

So I don’t think you’re going to see a major change in the percentage of leisure business that we’re doing. But I think you’re going to continue to see us adding amenities upping rate, improving profitability. And I think we may put more resources to the group side. Because our sense is that way we have treated the meeting planner through COVID, the meeting planning community likes what we were doing. And so I know that’s again, a long winded answer to a very, it sounds a simple question, but it’s a very complex question. And I really do think that we can gain share in group. But I think at the same time by increase improving the amenities grow leisure room nights, too.

[Mark Fioravanti, President]

When you look at the second quarter, our mix was essentially 75% growth 25% transient. So it’s pretty consistent with our historic mix. And when we look at transient room nights, quarter-over-quarter, ‘19 versus ‘22 they’re essentially flat. So it’s we are through investment, we are driving better rates on transient, but we’re not. We haven’t kind of artificially needed a transient drive to drive occupancy. It’s really our business coming back to its kind of post-pandemic, or pre-pandemic form. But we’ve been able to re-price the business.

[Colin Reed, Chairman, CEO]

Yes and I would say that for the full year just further expand the Mark’s point, we would expect to be about 70% group 30% transient. So to both their points, we’re really just trying to grow the overall pie, not shift the mix between the two segments.

[Mark Fioravanti, President]

We keep pushing on the living daylights out of right.

[Jay Kornreich, SMBC]

That’s all really helpful color. And then it gets just specifically on the Gaylord national. I mean can you give some commentary on that been a bit of a lag group but did have a nice pick up to 64% occupancy in the second quarter. Just any thought you can provide in terms of how you see that trending in the second half of the year and into next year.

[Colin Reed, Chairman, CEO]

Yes. We’re really pleased with how national was close to an additional 16 to 18 months longer than the remainder of the brand. And so a little bit more challenged as far as recovering in the DC market has shown some challenges and recovering, but we’re very pleased with where it’s heading. Obviously, that hotel relies little bit more on the group side. But what we’ve been able to accomplish during the shutdown period, and since it’s been reopened is to increase the flexibility and operations to refresh the product both in rooms and food and beverage to upgrade the quality of our management team and to really recast the culture there. So we expect to see Gaylord National continuing to recover.

And I would say 2023 our expectations is that will be a very favorable year, and that hotels should be catching back up to it’s 2019 levels and potentially exceeding them similar to what the rest of the brand has done already this year.

[Operator]

Our last question will come from Bill Crows with Raymond James. Your line is now open.

[Bill Crows, Raymond James]

Apologize, I have a couple of questions, feel free to give us short answers. Just clarification with the cancellation inefficiencies. Are they recognized when they’re actually paid, or are they when that occurs in the actual quarter, I’m trying to see what sort of lag we’re dealing with. And kind of the anticipation for the third quarter.

[Colin Reed, Chairman, CEO]

Yes we only recognize the revenue once it’s actually received that may correspond to when the room nights were supposed to travel, and they are not. But we only recognize the revenue once it’s received.

[Bill Crows, Raymond James]

So it’s possible you could double book right, you could double that and resell the rooms. Is there some of that what goes on?

[Colin Reed, Chairman, CEO]

Yes, there is. Some groups include rebook clauses so that if we do book additional rooms, or groups into the pattern that they’ve left open with their cancellation, they get some credit for that. Some groups do not include that in their contract. So there are opportunities to potentially double dip at times.

[Bill Crows, Raymond James]

Patrick, I’m going to stay with you. Just to help me understand whether we should be really excited about the fact that 601,000 rooms that were booked in the second quarter is terrific. And the headline 15% up from ‘19 sounds terrific. But if these rooms are all booked for 2024, 2025, I don’t know that that 15% keeps up with inflation. So help us understand about how we feel about that act?

[Patrick Chaffin, COO]

Yes, that’s a great question. And the reality is, we’re not to the level that we need to be yet. We are ramping. The sales team is incentivized this year to start pushing group rate and they started moving in that direction. And we’ve seen great results. But to your point, we still have a ways to go. So if you think about it as a C-130, trying to get off the runway, we’ve got them mobilized. We’ve got them focused. They are getting great results, but there’s still a lot of runway to get down before we get the plane fully up in the air. So we would expect to see group rate continue to grow.

And then we’ll see whether or not we actually end up in a better position, maybe if a recession does occur, which is not a good thing. But it could slow down the inflationary environment. And we end up with a group rate much higher on the books than what actually materializes post recession.

[Colin Reed, Chairman, CEO]

It’s important also to note Bill that when you consider in the year for the year group, transient business and outside the room spending, the vast majority of our revenue is actually transacted in the year. So we do have the opportunity to move pricing in those areas and combat inflation if it continues to run a high level.

[Bill Crows, Raymond James]

I appreciate that. And Colin, maybe for you. My last question, just on the entertainment side. Tours are normalizing I guess. I don’t remember in all the years that we’ve covered you. You’ve talked about touring impacting your ticket sales at the Opry and I’m just this is something new, at least that I am hearing them. And I’m just curious whether there’s maybe so many downtown options that also has impacted demand.

[Mark Fioravanti, President]

Yes. So what happens in a non-pandemic environment is that artists will do, the big artists will do a stadium tour every other year. The not so big artist will do arena tour every other year and that’s just the way the cycle works. And so there is always a few artists that are not out on the road. What has happened here is nobody’s been out on the road for the last two years. And so everybody now is out on the road. I mean, that’s just what is going on here. And it’s just a little bit more of a challenge. And but it’s not something that is going to be with us for a long time. I mean, it just is.

[Colin Reed, Chairman, CEO]

Yes and the other thing I will be able to add is the hotel seeing the same thing. We have a lot of tour and travel business comes through in the fourth quarter that comes to see both the Opry as well as the holiday program in the hotel. It is a little bit older demographic. And so they’ve been a little bit more hesitant to get back out on the road and travel around. These are the buses that have a little bit older demographic on them. And so we expect to see them come back, but it’ll probably be 2023, before that segment fully recovers. So we’ve seen it consistently, both of the hotels as well as we’ve seen at the opera.

[Mark Fioravanti, President]

Yes, so many of these bus operators had a terrible time through the pandemic. I mean these older folks are not out of out driving around America. It’s in the process of recovery. And but look, the point that Mark made Bill in his comments a few minutes ago, our businesses are tremendously over pre-pandemic levels. And this business is going to be really good next year and really good the year after, and we just got a little bit of a timing issue around the edges. It’s the opposite of what’s going on in our hotel business.

[Operator]

Next question will be from Chris Woronka with Deutsche Bank. Your line is now open.

[Chris Woronka, Deutsche Bank]

Hi, guys, really appreciate you squeezing me in at the end there. Colin this is more of a I guess a hypothetical question. I mean, two years ago, we were thinking about what group business is going to look like in the future. And here we are. You’re getting good rates. But the question is, has behavior groups, as you see a change at all? Maybe it’s a geographic question. Maybe it’s a type of group kind of question. Are you seeing any changes? Or want to utilize the group meeting space?

[Colin Reed, Chairman, CEO]

The answer to the question is there are so many groups that absolutely want to get back to meeting people have recognized that being locked up in a basement is not ideal for long term health and viability of businesses. And we’re seeing a lot of groups wanting to meet and that’s just, it’s what we’re doing on. Patrick you were at a big sales meeting a couple of weeks ago. You want to just.

[Mark Fioravanti, President]

Yes, absolutely. Hey Chris it’s good to talk to you. I will tell you, we talked about meeting planners or sales teams talk to a lot of folks. In fact, there’s a huge event going on here in Nashville right now with 2022. And there’s been a very consistent message back from meeting planners. And that is yes, we understand there are recessionary fears, we understand the volatility that we’ve seen in the second quarter. But until that materializes, and we absolutely have to take different action, we’re going to continue to meet because we are way-way behind and backlogged in getting our groups together, and it is hurting our businesses. And so we’ve got to get folks face to face again. And I will tell you, I mean, it kind of proves itself out and what we saw in the second quarter and think about the amount of volatility in the market, the amount of uncertainty and economic fears out there in the second quarter.

And yet our groups picked up much better than we were expecting and what we had washed them down to. So they materialized in greater numbers. They materialized with better outside the room span really anticipated, even in the midst of all the volatility and uncertainty that was going on in the second quarter. So what they’re saying to us is very clear, we’re going to continue moving forward and try to cut down on that backlog of meetings.

And if we have to take action, we’ll take it at the appropriate time. But I think one of the messages I’ve heard over and over again, is we’ve seen the value of meeting face to face, and we need to make sure that that doesn’t disappear from our horizon at any point in the future.

[Chris Woronka, Deutsche Bank]

Very helpful. Appreciate the details, guys. Thanks again.

[Colin Reed, Chairman, CEO]

I think Katie, we’re done. Appreciate everyone being on the call this morning. If you have any follow up questions you know how to get a hold of us. So appreciate everything. Thank you. Have a good day.

[Operator]

Thank you ladies and gentlemen, this concludes today’s event, you may now disconnect.