Earnings Call Transcript - RHP Q4 2025

Operator, Operator

Good morning, everyone. Welcome to the Ryman Hospitality Properties Fourth Quarter 2025 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Executive Chairman; Mr. Mark Fioravanti, President and Chief Executive Officer; Ms. Jennifer Hutcheson, Chief Financial Officer; Mr. Patrick Chaffin, Chief Operating Officer; and Mr. Patrick Moore, Chief Executive Officer, Opry Entertainment Group. This call will be available for digital replay. The number is 1 (800) 688-9445 with no conference ID required. It is now my pleasure to turn the floor over to Ms. Jennifer Hutcheson. Please go ahead, ma'am.

Jennifer Hutcheson, CFO

Good morning. Thank you all 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' 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 exhibits to today's release. I'll now turn it over to Colin.

Colin Reed, Executive Chairman

Thanks, Jen. Good morning, everyone, and thanks for joining us today. We're pleased to report full-year results above the midpoints of our guidance ranges and for the Entertainment segment as well as AFFO and AFFO per share above the high end of our guidance ranges. The fourth quarter came in ahead of our expectations at the start of the quarter due to strong reception for our holiday programming in our hotel portfolio and better-than-expected volumes in our downtown Nashville entertainment venues. Looking back at how we expected '25 to play out when we first provided guidance a year ago, our results, excluding the JW Desert Ridge acquisition, are almost right on the midpoints of that initial guidance range. To be in the position we sit in today is an incredible accomplishment in what was a challenging year and a testament to both the strength of our business model and the quality of our people. Importantly, we managed last year's volatility while continuing to advance our long-term strategy. Our investments in the portfolio continue to differentiate our platform from our competitors and attract more premium group customers. In our hotel portfolio, we acquired the JW Desert Ridge, an asset that's long been at the top of our acquisition list, which expands our rotational group customer strategy into a new top 10 meetings market and creates opportunity for a second rotational pattern within the JW Marriott brand. Also, we continue to progress our multiyear investment plan for Gaylord Opryland. To date, we've now refreshed about 40% of the hotel's existing carpeting meeting space, and we're nearly halfway through the 100,000 square feet meeting space expansion, which will open next year. Foundry Fieldhouse, the new sports bar development with premium indoor, outdoor reception space, will open in April of this year. Our recently completed investments are generating early returns. Gaylord Palms and Gaylord Rockies, which received meaningful investments in 2024, both delivered record top and bottom line performances in '25. Given the rotational nature of our customer base, these improvements are driving meaningful share gains for the portfolio as a whole. For the trailing 12 months through the end of December, the same-store portfolio achieved the highest RevPAR index to the Marriott-defined competitive set in the portfolio's history, excluding, of course, the COVID-impacted periods. In our entertainment business, we've continued to expand our growth platform, especially in festivals and amphitheaters. This includes our latest win to program and manage the 14,000-seater capacity CCNB amphitheater in Simpsonville, South Carolina. Our partnership with Southern Entertainment, who has been producing the Greenville County music festival at CCNB since 2018, helped us build a strong relationship with the city of Simpsonville, and our combined capabilities and expertise offer a compelling solution. This success, in particular, underscores the strength of our platform model. In addition, we are continuing the expansion of the Category 10 brand with our friend and superstar, Luke Combs, with a Las Vegas location opening in the fourth quarter of '26. And with a third location to be developed at Universal City Walk in Orlando, adjacent to the Islands of Adventure Theme Park. Early returns on our investments behind Opry 100 continue to exceed our expectations. Programming in October, the official birthday month, produced a record number of shows and attendance, resulting in an all-time high monthly revenue and adjusted EBITDAre for the brand. We expect this momentum to continue into '26 and beyond. Now before I hand it over to Mark, a comment or two about what lies ahead. A week ago, I received a monthly report from an outstanding outside organization comparing returns for publicly traded lodging companies. It's worth highlighting that since our REIT conversion announcement in 2012, our stock has generated a nearly 12.5% annualized return, including reinvested dividends. This represents a rate of return of approximately 2.5x greater than that of our next highest REIT peer over the same period. This is quite an incredible difference. And it got me reflecting about the last 13 years and how we're positioned for the future. It would be my view, and I think those of my colleagues that we're certainly better positioned today to create value than we were back in 2013. At our hotel business, we now own seven world-class market-leading hotels, which are in great physical shape, and most of which we plan to enhance and/or expand over the years ahead to make them even more competitive in the markets they are in. Over the years, I've heard some members of the analyst community questioning the underlying strength of the large meetings industry, particularly in economically trying times, and there was some of this during last year's third quarter. But the reality is the large meetings industry is massive here in the United States and the Gaylord Hotels brand has such a small share, but our relationship with the meeting planner is so good, and we believe we can capture more share as our rooms and meeting space grow. Our relative positioning continues to strengthen, supported by our fabulous service levels, and our people-centric culture continues to thrive. From an amenities perspective, we're constantly upgrading, adding sports bars, upgrading restaurants, and expanding falls and other amenities. Yes, our hotel business is awfully well positioned as we look to the future. And then, of course, so is this gem of an asset we own that we refer to as our entertainment business whose growth characteristics are materially better today than back in 2013. It's quite incredible what is happening to the music we call country as its popularity explodes all over the world and creates the desire for folks to come visit Nashville. Live entertainment is a very valuable asset in this day and age, and we're deeply engaged in figuring out the best possible path to create even more value for our shareholders. Now, hopefully, those of you who have followed our company for a while will remember that back a couple of years ago, we laid out a four-year plan to the investment community at our Investor Day in January '24. By the end of '26, we expect to have initiated all major capital projects in the plan with the possible exception of the Gaylord Rockies expansion. We will have meaningfully expanded OEG's growth platform as well. Looking ahead, we continue to feel very comfortable with the targets we outlined then, and we look forward to updating you on our progress as milestones are hit. As we embark on 2026, the period ahead looks awfully exciting for us. And as always, we appreciate your interest and support. Now, with that, let me turn it over to Mark.

Mark Fioravanti, President and CEO

Thanks, Colin, and good morning, everyone. I will review our fourth-quarter results and also provide some color on how we're thinking about 2026. I'll start with our hospitality business. Our same-store hospitality segment delivered the highest total revenue of any quarter and the highest adjusted EBITDAre of any fourth quarter, driven by strong demand from holiday programming and higher leisure volumes across the portfolio. ICE! ticket sales increased more than 14% to a record 1.5 million tickets. The Gaylord National had its best season since 2010, and Opryland and the Rockies had their best seasons ever. In its second year, ICE! at the JW Hill Country achieved the highest guest satisfaction ratings for holiday attractions across the portfolio. Leisure performance at Opryland was a bright spot in the quarter. Both leisure demand and leisure ADR increased year-over-year, and record ICE! volumes contributed to strong flow-through. Our group business also performed well. Same-store attrition trends improved year-over-year and sequentially from the third quarter, and same-store banquet and AV revenues were up nearly 5% despite lower corporate group volumes compared to last year. Same-store banquet and AV contribution per group room night, a proxy for catering spend per group guest, increased more than 10% year-over-year, indicating that once on property, groups continue to spend at healthy levels. In the fourth quarter, the same-store portfolio booked more than 1.2 million gross group room nights for all future years. Notably, meeting planner sentiment improved as the quarter progressed, leading to record room night revenue and ADR bookings production for all future years during the month of December. ADR on those December bookings was up more than 10% compared to what was booked in December of 2024. As a result, at the end of December, same-store group rooms revenue, room nights, and ADR on the books for all future years were at all-time highs. Looking ahead, our same-store group pace for 2026 and 2027 remains healthy. For 2026, same-store group rooms revenue on the books is up approximately 6% compared to the same time last year for 2025. And as expected, we entered the year with approximately 50 points of occupancy on the books. For 2027, same-store group rooms revenue on the books is up approximately 5% compared to the same time last year, and ADR on the books continues to pace up in the mid-single digits range. The number of new leads and late-stage opportunities also remain near record levels. Let me make a few comments on the JW Marriott Desert Ridge before moving on to entertainment. The fourth-quarter results were in line with our expectations. Transient demand increased nearly 10% year-over-year, supported by expanded holiday programming, which we view as an encouraging indicator ahead of introducing ICE! in 2026. The more that we learn about this property, the more bullish we are on its long-term potential under our ownership. Now turning to our Entertainment business. The Entertainment segment delivered fourth-quarter revenue growth of nearly 12% and adjusted EBITDAre growth of nearly 13%. As Colin mentioned earlier, the Opry delivered a record quarter behind strong October birthday month programming and attendance. In addition, a strong show calendar at the Ryman and improved volume in our downtown Nashville venues contributed to the growth. Before I turn it over to Jennifer, let me provide some color on our initial guidance ranges for 2026. For our same-store hospitality business, at the midpoint, RevPAR growth of 2.5% implies modest assumptions for growth in group rooms revenue and flattish leisure performance. As I mentioned earlier, groups room revenue on the books for 2026 is up approximately 6% compared to the same time last year. The difference between our pace entering the year and our RevPAR growth guidance range includes assumptions for in-the-year group bookings, attrition, cancellations, and transient leisure performance. Historically, it's typical for RevPAR growth to actualize lower than the group pace at the beginning of the year. Same-store total RevPAR growth, also 2.5% at the midpoint reflects growth in banquet and AV revenue behind stronger corporate mix and contributions from the new sports bar at Gaylord Opryland beginning in the second quarter. The midpoint of guidance range for same-store hospitality adjusted EBITDAre implies approximately 2.5% operating expense growth or 10 basis points of margin expansion as we continue to work with Marriott to improve efficiencies. The level of macroeconomic uncertainty and its impact on meeting volumes and meeting planner sentiment will be the primary driver of how our actual full-year results compare to this initial guidance range. Given the current political and economic environment here and abroad, we believe a measured view of demand is prudent. For the JW Marriott Desert Ridge, the midpoint of guidance range for adjusted EBITDAre reflects our first full year of contribution. The meeting space conversion currently under construction remains on track to open in April of 2026, and we have assumed some modest marketing investment behind the launch of our ICE! holiday programming at the property. And finally, for our Entertainment business, the midpoint of the guidance range for adjusted EBITDAre reflects nearly 10% growth year-over-year on increases in our existing businesses as well as contributions from our recently announced projects coming online in 2026. Note that 2026 seasonality will be more heavily weighted towards the second quarter compared to 2025. The first quarter of 2025 is a challenging comparison for both business segments, and the recent winter storm was a modest drag on January results. For the same-store hospitality business, we expect first-quarter RevPAR and total RevPAR to be roughly flat, and adjusted EBITDAre margin to decline approximately 100 basis points. In the Entertainment business, we expect first-quarter adjusted EBITDAre to decline by several million dollars. With that, now I'll turn it over to Jennifer to run you through our financial position and cash flow expectations for 2026.

Jennifer Hutcheson, CFO

Thanks, Mark. Starting off with liquidity. We ended the fourth quarter with $471 million of unrestricted cash on hand and our revolving credit facilities undrawn. Total available liquidity was nearly $1.3 billion. We've retained an additional $29 million of restricted cash available for FF&E and other maintenance projects. Turning to the balance sheet. At the end of the quarter, our pro forma net leverage ratio based on total consolidated net debt to adjusted EBITDAre, assuming a full year contribution of adjusted EBITDAre from the JW Marriott Desert Ridge, was 4.3x. In December, Fitch upgraded our corporate family rating to BB from BB-, which in turn lowered the applicable interest rate margin on SOFR for our corporate Term Loan B from 200 basis points to 175 basis points. In January of 2026, we successfully refinanced our corporate revolving credit facility, increasing the size from $700 million to $850 million and extending that maturity from May 2027 to January 2030. Pricing and other terms of that agreement are largely similar to our previous credit facility agreement. Pro forma for this transaction, total available liquidity increased to approximately $1.4 billion. And finally, let me comment on our anticipated major cash outflows for the year. Regarding our outlook for capital expenditures in 2026, we expect to invest between $350 million to $450 million, primarily in our hospitality business. Our earnings release provides more detail on our capital plans and expected project-level costs. Regarding our dividend, we are pleased to announce the declaration of our first-quarter dividend of $1.20 payable on April 15, 2026, to shareholders of record as of March 31, 2026. It remains our intention to continue to pay 100% of our REIT taxable income through dividends. And with that, let's open it up for questions.

Operator, Operator

We'll start this morning with Cooper Clark from Wells Fargo.

Cooper Clark, Analyst

Curious if you can provide an update on your group business mix for the year and how that's impacting your spread between the RevPAR and RevPAR assumed in guidance?

Colin Reed, Executive Chairman

Patrick, do you want to...

Patrick Chaffin, COO

Sure. Yes. Yes, we are in a position as we entered the year with a higher level of corporate mix on the books. It's about 3 points higher than last year, decline in our other segments in SMERF Association as a result. So that positions us well for outside-the-room spend as we head into this year.

Cooper Clark, Analyst

Great. And then I appreciate some of the earlier comments in the prepared remarks on the RevPAR guide, but hoping you could provide some additional details on the puts and takes as we think about the 2.5% midpoint within the context of the 6% group pace for the year. Just trying to think about some of the headwinds potentially embedded in guide as we contemplate last year's higher initial RevPAR guidance on lower group pace.

Colin Reed, Executive Chairman

Mark, do you want to take that?

Mark Fioravanti, President and CEO

Yes. Typically, when you enter the year and consider the year-over-year factors along with attrition and cancellations in our leisure business, you usually end up finishing the year with lower average RevPAR growth. Our focus is on a mix of in-the-year bookings along with attrition and cancellations. Our guidance does not anticipate any significant change in current trends. It reflects a stable leisure business. Overall, it shows our uncertainty regarding the economy's impact. Last year's events, including Liberation Day and fluctuating tariffs, alongside ongoing political issues, have created ambiguity regarding meeting planner sentiments and trends. Therefore, we've taken a cautious stance on demand for the year, and we will provide updates as the year progresses on our performance.

Operator, Operator

We go next now to Patrick Scholes of Truist Securities.

Patrick Scholes, Analyst

Two questions. One, can you share any additional or latest thoughts about possible development or expansion at the Rockies? That's the first one. I'll start with that.

Colin Reed, Executive Chairman

Yes. Mark, do you want to take that one?

Mark Fioravanti, President and CEO

Sure. So we continue to work on expansion, as you know, that's an asset that pre-COVID, we were prepared to expand. That business, as you know, has performed extremely well. We're very, very bullish on that market and the long-term potential of that market. As we've said on previous calls, we're working through a number of issues at the local level in terms of property taxes, etc. That work will ultimately determine how we expand and when we expand. But I think we'll have more to say on that over the next few quarters.

Colin Reed, Executive Chairman

Yes. I think if I may, that hotel this year, I think it's right, Patrick, has the highest occupancy and the demand for group in that hotel is as strong as it's ever been. I think we're a lot nearer pulling the trigger on an expansion in that hotel today than we were a year ago. I think as Mark said, I think you just got to be a little bit patient with us over the next one or two quarters, but we really do like the trajectory of this hotel.

Mark Fioravanti, President and CEO

The other comment I'd make is just to remind everyone, the investments that we made over the last couple of years, the new food and beverage and some of the new meeting space, that all those investments were made to accommodate an expansion. So from a food and beverage capacity and meeting space capacity, we're prepared to receive additional rooms there.

Colin Reed, Executive Chairman

And those investments are really paying off right now. They're doing extremely well. Two questions, Patrick.

Patrick Scholes, Analyst

Yes. Second one, just a little bit more backward looking here. You did have a sizable year-over-year increase in the year-for-the-year cancellations in the quarter. Now granted it was only 5,000 room nights, but what drove that? Was it government cancellation, anything else or not government, but the government shutdown related cancellations?

Colin Reed, Executive Chairman

Patrick?

Patrick Chaffin, COO

Yes, great question. Thanks, Patrick. This is Patrick Chaffin. Yes, to your point, cancellations were up about 3,000 room nights, but they were down significantly versus Q3, which is when we saw a lot of the impact of the tariff situation. They were in line with levels that we saw both in 2016, 2017, 2018, and 2019 before COVID. So we're not concerned in any way. If you look at the nature of the cancellations, to your point, they were all company-specific. There were no macroeconomic concerns or reasons given. Mostly, it was CEOs or C-suite turnover as the primary reason for the cancellation. So not macroeconomically driven and in line with what we saw prior to COVID. So we were not concerned.

Colin Reed, Executive Chairman

Let me remind you and everyone else that we have really good contracts. So when cancellations occur close in, we tend to collect the profitability loss. Our business model is very different from most of the other hotels that you follow.

Operator, Operator

We go next now to Smedes Rose with Citi.

Bennett Rose, Analyst

I wanted to ask you, you mentioned in your opening remarks, significantly better holiday programming results. I was just wondering, do you think you just went into the quarter being conservative given what had happened in '24, where I think it was sort of disappointing results? Or are you sort of marketing or ticketing differently? Kind of what maybe did you learn this year that maybe can work going forward?

Colin Reed, Executive Chairman

It's multiple things. Do you want to give it a shot, Patrick?

Patrick Chaffin, COO

Sure. Smedes, this is Patrick. Good question. We did a lot of research in September to try and understand the mindset of the consumer going into this holiday season. It was very clear that there was a very cost-conscious attitude and really focused on value as we were entering the season. So we shifted a lot of our marketing to buy early and bundling opportunities, and that started the volume of demand on the books early and we really built from there. Once we saw the consumer get on property, they were hesitant. We feel that we made the right decision in getting them to book early through bundling and special offers. But as you can see, it still generated really, really solid revenue for us. So getting folks on property and getting them exposed to our food and beverage opportunities and other outside-the-room spend really paid off for us. I would tell you that until we see a dramatic shift from a macroeconomic perspective, we're probably going to maintain that same strategy of getting folks in early, booking early, and giving them bundling opportunities to do so that they see the value. We were very, very proud of where we performed this year and have some exciting news that we'll be talking through in July as far as themes for next year that we think will drive even more demand.

Bennett Rose, Analyst

Great. And then can I just ask you, you mentioned in your release $23 million of EBITDA disruption in '25. Does your outlook incorporate a certain amount of construction disruption this year as well?

Jennifer Hutcheson, CFO

Smedes, it's Jennifer. Yes, it does. We have those projects that are outlined in the release that are continuing on into 2026, largely at Opryland and of course, the rooms renovation wrapping up at the Gaylord Texan as well as a rooms renovation in the Hill Country, JW, that will kick off midyear or post-April after the Valero open. So those will have some impact on the results and our expectations for 2026. And we would not expect those to be meaningfully different from what we saw in '25.

Operator, Operator

We'll go next now to David Katz with Jefferies.

David Katz, Analyst

I wanted to focus on the entertainment business. Mark, I think you mentioned in your prepared remarks that the entertainment segment should see a decline in the first quarter. Could you repeat that and provide some insights on the timeline for the year regarding the entertainment business and the factors influencing that timeline?

Mark Fioravanti, President and CEO

Yes. In terms of the cadence for the year, would you like me to address that?

Patrick Moore, CEO, Opry Entertainment Group

Yes, this is Patrick Moore. In Q1, we experienced the launch of Opry 100 last year, which created a temporary spike in March. However, what you're seeing in Q1 compared to the rest of the year is primarily due to shifts in concert counts across our portfolio, which is much larger, with a significant concentration in amphitheaters and festivals during the Q2 and Q3 periods. These are some of the reasons for that shift.

David Katz, Analyst

Okay. Okay. And if we could just get an updated view while we have you on sort of how you see the earnings power of this looking out years, a couple of years into the future, where should we be setting our sights on what this business can do as you see it today?

Colin Reed, Executive Chairman

You want me to take that?

Patrick Moore, CEO, Opry Entertainment Group

Yes, please.

Colin Reed, Executive Chairman

So David, Colin. This business, in our opinion, is awfully valuable. Live entertainment is such a sought-after commodity in this day and age. We see a lot of growth in this business over the next 3, 4, 5 years. The folks in this room, Patrick Moore and Mark and myself, we spend more of our time fielding inbound opportunities on this business than we do certainly on our hotel business. The opportunity for growth in this business, I think, over the next 2 to 3 years is extraordinary. We believe that we will plug in more amphitheaters. We believe that we'll do more Category 10s, more Ole Reds. There is opportunity here in Nashville for us to take all of our undeveloped land around the Opry House. We have, I don't know, 12, 15 acres of undeveloped land there to do something fairly spectacular for our business in the city of Nashville to accommodate the amount of people that are just pouring into Nashville now wanting to experience country music in its real authentic form. We're not going to give you numbers for '27, '28, '29. Our Board last week reviewed our long-range plan for this business, and it is very attractive. We like what we have on our hands here, and we're trying to figure out how we create even more value for our shareholders than we have over the last few years. I know that's a bit waffly, but we've got a lot of things we're working on here, David, and this is an outstanding business.

Operator, Operator

We'll go next now to Duane Pfennigwerth with Evercore.

Duane Pfennigwerth, Analyst

I appreciate the commentary about acknowledging what you don't know about how the macro will play out this year. But I wonder if you could comment on what your business is telling you. If we play back what you saw in the fourth quarter from a group demand perspective for future bookings, are you seeing any changes in booking patterns versus what you'd normally expect for a fourth quarter? Any particular types of customers or industries that stood out positively or negatively?

Patrick Chaffin, COO

Sure. This is Patrick Chaffin. Let me hit a couple of things here. First, I'd start with bookings. As far as what we saw in the fourth quarter, I would say the most important thing was we saw an easing in the tensions that had been created by the tariff situation back in April of 2025. Recall that our leads were down about 4% in the third quarter, and we were messaging on that third-quarter call that there could be some hesitancy on the part of meeting planners as we move through the fourth quarter regarding forward bookings because of the macro situation. October and November really followed that trend where we saw leads down and production down. But then December, which is the most important bookings month of the entire year for us, came roaring back. We saw meeting planners relax in their hesitation. Our sales team came through really, really strong with the very best December production in terms of room nights that we've ever seen in the company's history and ADR continued to be strong. So that's a clear indication that we weren't just selling room nights to get room nights out the door, but we were doing it at a growing rate, what ended up being a record for the company. We were encouraged by what we saw develop as we went through the fourth quarter in bookings because it did indicate that the tension around tariffs was starting to ease. We've talked a little bit about leisure. Let me hit that side of the business. We're talking about flattish, but the reality is if you dig into that, leisure is flattish because of the renovations that are going on at Texan and Hill Country and the fact that we have more group room nights on the books. Some of that group is blocking out some of the transient opportunities. When you consider that and you look at the hotels that don't have renovations, they either have more group business on the books or they actually see an improvement in leisure year-over-year. So Group business is moving in a good direction. Leisure looks very, very strong. As we look at spring break, everything is coming in as we expect thus far. We're still early in that process or in that timeline, but we see nothing that gives us concerns. Government is the last thing and I'll hit. There's been a lot of concern around government business. We've been pivoting away from it, and it composes less than 0.4% of what's on the books for us. We feel like we're in the right group business right now given everything that's going on, and our leisure business remains strong. So fourth quarter for us gave us a lot of confidence that we're in a good spot going into this year.

Colin Reed, Executive Chairman

And just talk a little bit about Chardonnay.

Patrick Chaffin, COO

In terms of performance?

Colin Reed, Executive Chairman

And just in terms of the mood of the meeting planner because this is what Duane is asking.

Patrick Chaffin, COO

Yes. I mean, the mood of the meeting planner has remained resilient, I guess, I would say. We went into the month would tell you that winter storm fern obviously had an impact on us, but we were pacing ahead as we started January until we got to that winter storm, and meeting planner sentiment remains very resilient and interested in booking forward. So our funnel remains strong, and we feel good about where forward bookings are heading.

Mark Fioravanti, President and CEO

Leads are good. attrition and cancellations, really no issues. On-property spending is still very good. So the early indicators that we look for, we're not seeing anything flashing yellow or flashing red. It's really just a recognition of the fact that when you look at what's happened over the last 12 months environmentally, it's very difficult to predict where we're going to be tonight after the state of the union, let alone six months from now.

Colin Reed, Executive Chairman

Yes. And look, the other point I want to make, and I sort of tried to make it in my prepared remarks, is that the folks sitting around this table that have been looking after and building this hotel business, we've been doing this for 20 years. Over this period of time, we have dealt so many times with the mood of the meeting planner shifting. Yet our returns and our business and our performance, we sail through that because our relative positioning is so strong compared to those folks that we compete with. Yes, the meeting planners may shift negatively like it did in the third quarter of last year, but our business will be just fine.

Operator, Operator

We'll go next now to Chris Woronka at Deutsche Bank.

Chris Woronka, Analyst

I was hoping to get a little bit more color on kind of how you expect the pavilion, new sports bar, patio complex at Opryland, how that's going to kind of unfold over the next couple of years? And the question really is, is it meant to draw a little bit more leisure in shoulder periods and weekends in addition to being obviously a big amenity for groups? Or just kind of thoughts on whether that helps leisure in addition to group at Opryland.

Patrick Chaffin, COO

Yes, Chris, this is Patrick. It's great to hear from you. The sports bar is focused on maximizing seat count. Gaylord Opryland currently lacks the capacity to meet the demand for food and beverage, as there aren't enough outlets in the hotel. We are building the sports bar by applying insights we've gained from Texan, Palms, and Rockies, focusing on its size and capacity, and incorporating a 12,000 square foot events lawn adjacent to it for both indoor and outdoor use. It will offer significant flexibility; you can sell a section or the entire restaurant. Strategically, it's situated right outside the convention center, as we recognize that attendees often want to gather with their groups after spending the day at the convention, to enjoy a drink or watch a show together. We see this as a leisure opportunity during the off-season, but mainly as a chance to capture more group demand, allowing us to increase seating and accommodate the high demand within Opryland.

Colin Reed, Executive Chairman

What I was going to say, Patrick, is that when we have done this before, this is not our first rodeo. We've done this before in other hotels and the returns on investment have been spectacular. It's just that we haven't had one of these at this particular hotel, which is really, candidly, the most successful convention resort in the United States of America. This year, that hotel will push $200 million of EBITDA out of it. I know we don't break it down in our guidance, but there is not another hotel like this in America. We believe because of the volume of consumers in this hotel, both group and leisure, these returns on investment will be very encouraging.

Mark Fioravanti, President and CEO

And Chris, this is the first outlet of a multiyear kind of food and beverage refresh and expansion at Opryland. It's to Patrick's point, it's to increase the seat count to capture demand that is there that we are not monetizing. It’s also to raise the level of food and beverage experience in that hotel as we attract more and more premium corporate customers to that property.

Patrick Chaffin, COO

I would tell you that both with what's happening in the meeting space renovations and the new expansion as well as the sports bar, site visits to this property are revealing a lot of excitement from meeting planners who are starting to lay eyes on this. It's all been a rendering and a promise for the past couple of years, and now they're seeing it come to fruition, and there's a lot of excitement and a lot of energy to get booked into these spaces.

Chris Woronka, Analyst

Okay. A lot of great color there. I appreciate that. Just as a follow-up, and this goes back to the entertainment, the OEG, which I agree you guys have done a great job of building over the years. Maybe, Colin, a strategic question or remark, I mean, are there any impediments to franchising potentially one of those brands, Category 1. I understand the REIT framework, but I think you probably have some room within that if this was something you wanted to do. So any thoughts on whether that's being considered?

Colin Reed, Executive Chairman

Well, it's very interesting you raised that question. The music of this city, when you look at what is happening in markets like the United Kingdom, you look at throughout Northern Europe, France, Holland, Belgium, Luke Combs will go over and play Wembley Stadium in July, 3 nights sell out Wembley Stadium, 80,000 people a night. You go to Ireland and play Slane Castle, 80,000 people there; goes to Murrayfield in Scotland, plays that stadium, sold out already. That will happen in July. The demand for this music overseas is very, very, very high and strong. Our view is that the opportunity to expand the brands that we have built with these iconic artists is really, really good. If we do it overseas, we would want to find a partner that does it on our behalf so we don't have to set up shop in these countries. The answer is yes. It's a big opportunity and a bigger opportunity because of the popularity of what is happening to the product of this city on a global basis.

Operator, Operator

We'll go next now to Aryeh Klein with BMO Capital Markets.

Aryeh Klein, Analyst

I was hoping to get a little bit more color on the total RevPAR guide for '26. It looks like in '25, RevPAR and total RevPAR kind of grew similarly. In '26, you have the benefit of a higher corporate group mix component. Why wouldn't we expect total RevPAR growth to outperform RevPAR growth this year?

Jennifer Hutcheson, CFO

Yes. Some of that is just the law of numbers, Aryeh, with a bigger base on TRevPAR than it is to RevPAR. Patrick Chaffin mentioned earlier that it's about a 3-point swing. Corporate mix does tend to, as you know, outperform outside the room, but we also can get good performance from premium association and non-corporate groups as well, and we saw that did play out favorably in the fourth quarter of '25 as well. These are the factors to think about regarding the relative room RevPAR to TRevPAR outlook for '26.

Aryeh Klein, Analyst

Okay. And then, Colin, you mentioned the potential rotational benefits with JWDR in a new market. Recognizing that it's still fairly early, what are some of the early trends you've been seeing on that front?

Mark Fioravanti, President and CEO

Could you repeat the first part of the question?

Patrick Chaffin, COO

Yes. With Desert Ridge and Hill Country now part of our portfolio, we've hired a couple of positions specifically to focus on the multiyear rotational business, moving staff between the JWs and from JW to the Gaylords. Although we've only had these positions for one quarter, we’ve successfully booked about 22,000 multiyear room nights due to the collaboration between the two hotels and their ability to shuttle guests to the Gaylords. We still see potential for growth in this area and will continue to actively pursue it.

Colin Reed, Executive Chairman

And Patrick, de facto in what you said, we've aligned the sales organization. So just talk a little bit about that, will you?

Patrick Chaffin, COO

Yes. We have a really strong sales team in the Gaylord side of the house, and we have added resources to ensure that there's more communication and more synergy between the JWs and the Gaylords and that we're taking all the learnings from creating multiyear rotational business across the Gaylords and applying that to the JWs. That is what we're starting to see gain some traction.

Operator, Operator

We'll go next now to Dan Politzer with JPMorgan.

Daniel Politzer, Analyst

First, I want to touch on leisure. Obviously, your guidance reflects a flattish outlook there. Can you maybe talk about what you're seeing across your portfolio, specifically what's embedded in your outlook for Nashville, just given that was a bit of a headwind in 2025 on the leisure side?

Patrick Chaffin, COO

Yes. Regarding Nashville, Gaylord Opryland has a strong booking position for this year, better than last year. We are experiencing a stable demand as some group bookings are limiting leisure opportunities. The market has seen a significant increase in supply, but we have managed to maintain our position and improve our RevPAR penetration, and we anticipate this trend continuing into 2026.

Colin Reed, Executive Chairman

Yes. That's exactly right.

Mark Fioravanti, President and CEO

Yes.

Daniel Politzer, Analyst

Got it. And then just for my follow-up, I think it was you, Colin, that mentioned the 2027 guidance that you laid out back in January 2024. It sounds like you feel very comfortable with the target there. We'll get an update later in the year. But just to clarify, when you talk about the level of comfort there, does that now include Desert Ridge, which obviously you've acquired?

Mark Fioravanti, President and CEO

Yes. There are some nuances in our assumptions. We did not consider Desert Ridge when we made our projections for 2024, but we did plan for the opening of our room addition in the Rockies. If you replace one property with the other, we still fit within the guidance range. Whether you include Desert Ridge or not, you're within that range; it’s just a matter of your position within it.

Operator, Operator

We'll go next now to Rich Hightower with Barclays.

Richard Hightower, Analyst

As we consider the factors within the guidance parameters, to reach the high end of EBITDA or FFO from our current position, will that be driven by revenue or expenses? I understand there’s an expected expense growth of about 2.5%. Could you outline the different factors that could influence our position?

Jennifer Hutcheson, CFO

Yes. On the top line, I think we've said it in various ways, but it's going to come down to where kind of group lands and all the components that Mark mentioned in his prepared remarks and in some of the Q&A. We've referenced how do attrition and cancellations play out, how do meeting volumes respond to meeting planner sentiment in response to what policy changes may come out of Washington and how that affects the macro. So it's largely on the group side, I think, where we can see driving a lot of where we land within the range of outcomes, particularly on that RevPAR range. From an expense standpoint, the midpoint of our guide assumes that we're a little shy of 3% in terms of operating expense growth. That feels pretty manageable at this point. I don't think that there are big drivers, on the operating expense side, that are going to move it. It's going to be demand driven.

Richard Hightower, Analyst

Okay. Very helpful. And then I guess maybe a slightly bigger picture question, but you did Desert Ridge last year. It sounds like that's folding into the portfolio successfully. As you think about the transaction market more broadly, there might be one or two assets on the market coming to market this year. It’s not a lot, but there might be something in there that might fit within what you guys are trying to do. Talk about maybe your appetite for doing another deal in line with maybe the size of a Desert Ridge, balance sheet capacity, how much could we do there? And what's the appetite, if any?

Mark Fioravanti, President and CEO

Yes, we definitely have the ability to pursue a transaction. Currently, we are focusing on renovations and enhancements at Hill Country while also integrating Desert Ridge. If an asset comes available that meets our strategic criteria in terms of quality, market, group orientation, leisure components, and appropriate pricing, we would certainly consider it and have the resources to proceed. However, when we evaluate our existing portfolio and the potential to reinvest additional capital at exceptionally high returns, that is very appealing to us. For us to add a hotel, it must be an ideal fit; we are not interested in marginal deals.

Colin Reed, Executive Chairman

Yes. So Rich, just to give you a little bit more color, these two hotels that we've acquired over the last two years are hotels that we had earmarked to purchase, I want to say, 8, 10 years ago. We've been looking at these hotels every single year. I don't think that there is another hotel that we have the same appetite for as those two. So as Mark said, it would have to be something extraordinarily special. The great news for us is we have tremendous opportunity to grow. We can grow the ones that we own. Six of the seven that we own, we would consider expanding. We have an entertainment business that's growing like a weed. The growth characteristics of our company are great. We don't have to go to the market and buy some fancy hotel in a market that won’t create the value that the existing portfolio will.

Operator, Operator

We'll go next now to Shaun Kelley with Bank of America.

Shaun Kelley, Analyst

For Colin or the appropriate person, I believe there is a proposal for a potential sphere or a smaller version of it near the National Harbor complex. I am curious if you have looked into that or could discuss it a bit, especially considering how transformative it has been for some nearby hotels in Las Vegas.

Colin Reed, Executive Chairman

Well, there's been some chatter in the market about the developer of National Harbor, the Peterson Company. I read this partnering with the Sphere organization to do something like that, and if it did, it would be great for National Harbor. We would encourage them, the Peterson Company, to do it. The reality is that the spheres are very expensive. You can't build one of these things probably under $1 billion unless it's a real small sphere. For us, we like projects that generate 12%, 14%, 15% rates of return. We would be a cheerleader in Washington.

Patrick Chaffin, COO

Yes, in about 2 to 3 years, we would consider collaborating with that organization to develop packages and opportunities for our hotel and the Sphere to work together, encouraging overnight stays at our hotel.

Operator, Operator

Got it. Great. And then back in the prepared remarks, there was a mention around working with Marriott on efficiency. Obviously, I think that was in the context of the margin profile that you're looking for, for this year's guide. Could you just talk a little bit more broadly about initiatives there, what you've been able to accomplish, and sort of anything that they're doing on the charge-out rates kind of following the credit card transactions that they're working on and how your fee structure with them is evolving?

Patrick Chaffin, COO

Yes, our focus has primarily been on working with them for about 6 to 7 months in 2025 regarding procurement and third-party vendor contracts. We have been reviewing some of our largest third-party contracts, seeking alternative vendor options, and striving to secure the most competitive and efficient contracts. This also applies to procurement, where we've seen some updates with Avendra and other external vendors that Marriott utilizes. We are very pleased with the outcomes. Regarding the credit card, we've been informed that we may stand to gain from it, although Marriott doesn't share much detail on this aspect due to the management agreement, which they keep more confidential. However, we recognize that it is a positive for the system, and we are looking forward to understanding its implications.

Operator, Operator

We'll go next now to John DeCree of CBRE.

John DeCree, Analyst

I think most have been answered, but I think I heard a comment about government business. I wanted to circle back to if I heard correctly, was it 4% or 0.4% of your bookings for this year so far? And then the follow-up, are there any other sectors that your group business might be indexed to? A lot of us are focusing on the technology sector, etc. Is there anything that you would call out that you'd have more exposure to than another sector?

Patrick Chaffin, COO

Yes. The comment I made earlier was if you look at the same-store, what we booked in the fourth quarter, government accounted for just about 0.4% of the production. Similarly, on the books, government room nights as of January 1 stood at about 0.4% of our total group room nights on the books. So very small exposure there as we have tried to pivot away from that given some of the challenges we've seen over the past year or so. Again, as a reminder, we have less than 5% of our business in any one sector. We're very well diversified in terms of sources of our group business. We have been leaning into West Coast tech and fintech to try and grow that business that we see opportunity there, limiting where we see some contraction on the government side, and focusing on and trying to grow our West Coast and fintech exposure.

Operator, Operator

We'll go next now to Jay Kornreich of Cantor Fitzgerald.

Jay Kornreich, Analyst

Just one for me. You mentioned seeing positive momentum from the meeting planners recently, and I was just curious, as you look at the out years such as 2027 and 2028, which have more of the benefit from completed CapEx projects, can you comment just as to how room rate and overall bookings are trending at this point?

Patrick Chaffin, COO

Yes. We've talked about '26 being in a great position, '27 being in a good position. As you look out beyond, we're very encouraged by what the sales team has been able to do. We've pivoted our value proposition with all these investments, and the sales team has been able to deliver on the rate side. Rate is more sticky; it stays with us once it's booked. As we look out into the future years, we continue to see really solid growth as far as what we already have on the books, and rate is the major driver of that.

Colin Reed, Executive Chairman

Yes, '28 rate and beyond is up over 5%.

Patrick Chaffin, COO

Yes. We're kind of holding in that mid-single-digit rate growth for '28, '29, etc.

Operator, Operator

We'll go next now to Chris Darling of Green Street.

Chris Darling, Analyst

Colin, in the prepared remarks, I think you mentioned that the same-store hospitality portfolio RevPAR index share is effectively at the highest point it's ever been. I'm curious if you could share what that figure looks like. As you look out forward, and it probably speaks to some of the prior questions, but what's your level of confidence in being able to take further share over time? I always wonder if there's a sort of natural upper bound in your ability to push price relative to your comp set.

Colin Reed, Executive Chairman

Let me provide an overview, and then Patrick will give you the specifics. Over the years, we have aimed to build a hotel business that is relatively sustainable compared to our competitors. We achieve this through several key areas. First, the physical quality of the hotels must be world-class. Our commitment to enhancing the quality of our assets in each portfolio has been evident over the years. The second focus is on service levels. We are performing well in customer satisfaction at Marriott, actively engaging with meeting planners to understand their expectations for service execution, and we continue to grow in this area. Thirdly, convention attendees prefer markets where they can enjoy themselves during their stay. We are continually enhancing the enjoyable aspects of their experience, investing in amenities like pool complexes, sports bars, and improving our restaurants and entertainment offerings. Understanding the needs of the meeting planners is also crucial. It’s this combination of factors that reinforces our sustainable business model, allowing us to capture an increasing share of the market, which I strongly believe in. We navigate through fluctuations, such as when meeting planners become less active or during economic downturns followed by growth periods. With our modest share of the industry, we consistently focus on attracting the right customers, specifically those that are higher-rated, and building a sustainable business, as reflected in our RevPAR indexes. Now, Patrick, you can take it from here.

Patrick Chaffin, COO

To Colin's point, fourth quarter, we delivered an average RevPAR index on the same-store side of 143% versus the comp set. That's a 1,200 basis point improvement year-over-year. So really, solid performance by the hotels in stealing share. Full year, our RevPAR for the same-store against the comp set finished at 127%. That's an increase of 610 bps year-over-year and even an increase of 410 bps versus 2023. To Colin’s point, we continue to invest to enhance the value proposition. We increase our distribution, allowing us to capture more multiyear rotational business and a greater share of each individual meeting planner's total book of meetings business, and that's how we'll continue to steal share.

Mark Fioravanti, President and CEO

That's why there's no upper bound because the product continues to evolve, and we continue to change the value proposition. We don’t view it that there's an upper bound on this. We can continue to drive more and more share and take share away from others who aren’t investing.

Operator, Operator

We'll go next now to Stephen Grambling of Morgan Stanley.

Stephen Grambling, Analyst

This may be a broad question, but how do you perceive the influence of AI on the hospitality industry, particularly regarding demand drivers and the nature of meetings, as well as any operational opportunities you are currently identifying for potential margin improvement?

Colin Reed, Executive Chairman

Yes. Stephen, this is a question that we've spent a lot of time as a company asking ourselves and asking Marriott and frankly, discussing with our Board. We had a long conversation about this last week at our Board level. So Patrick, do you want to just give Stephen a broad outline of the engagement that we have made with Marriott and the areas that we see AI really helping in terms of efficiency.

Patrick Chaffin, COO

Yes. I would say that our primary three areas of focus are on enhancing sales transactions and efficiency related to them. Second, we are concentrating on revenue management through dynamic pricing and understanding the competition to improve our capabilities in this area. Finally, and this might be overlooked, labor constitutes over 60% of our total costs. We are committed to transitioning from Microsoft Excel spreadsheets to more modern, AI-capable labor management tools, moving away from outdated systems in light of the AI revolution. We are, like all owners, putting significant pressure on Marriott. They are working to understand the timing and pace of their investments and progress in these areas. This is an ongoing discussion, but those are the three areas we are concentrating on.

Mark Fioravanti, President and CEO

The interesting thing about our business, both the hotel business and the entertainment business, the live entertainment business is that they are almost kind of an anti-AI play in that we're going to reach a point where unless you’re in the room with someone, you don’t know whether it’s real or AI-generated. The pandemic became a tailwind for both of our businesses. I think AI may ultimately be a tailwind as well because people will have more time; they will value being face-to-face with other human beings in the same room.

Colin Reed, Executive Chairman

Yes. I agree with that, Mark, 100%. Anyway, Stephen, hopefully, that helps you understand that it is a major focus for us as a company, and we are going to continue to work with our friends at Marriott to make sure that we are an early adopter and that the efficiency of the company just improves here over the next 1 to 2 years. Thank you. I think that's everybody in the queue. We'd like to thank everyone for their participation this morning and upward and onward. If you have any further questions, you know how to get hold of us here at Ryman. Thank you very much indeed for your time.

Operator, Operator

Thank you very much, Mr. Reed. Ladies and gentlemen, that will conclude today's Ryman Hospitality Properties Fourth Quarter Earnings Conference Call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.