Earnings Call Transcript - RHP Q2 2023

Operator, Operator

Welcome to Ryman Hospitality Properties Second Quarter 2023 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 Hutchison, 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 800-756-0554 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 conference over to Ms. Jennifer Hutchinson. 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 and exhibit to today's release. I will now turn the call over to Colin.

Colin Reed, Executive Chairman

Thank you, Jennifer, and good morning, everyone. I want to start off this morning's earnings call by somewhat breaking from the tradition of spending time talking about the last quarter. Of course, we're very pleased with the last quarter, but it's the future that really excites us. So let me tell you why. 20 years ago, we decided to build a hospitality brand primarily focused on the group segment. We did this because we discovered that there were tens of thousands of large groups that rotate market-to-market year after year. We built world-class physical assets backed up by a people-focused culture that over time build loyalty among our customers. The consequence was that we gained market share and for those investors who have been with us for this journey, they will know we've expanded and refined most of our hotels over the last decade as we grew demand. Financially, our performance has been substantially different from our peers. In fact, our company has significantly outperformed the FTSE NAREIT Lodging sector index over the last 20 years, and when you look at the average returns of the same index, whether it's on a year-to-date basis or on one-year, three-year, five-year, or ten-year periods, we've substantially outperformed this index in each measurement period. Now this is not by luck. This is because we have a differentiated strategy that enters into contracts with our large group customers and provide really exciting experiences to the leisure customers who, in turn, reward us with their loyalty. The consequence of this has resulted in lower annualized earnings volatility and higher annualized growth than our peers. So we are, after a once-in-a-lifetime pandemic, posting results that are mostly across the board records, and as Mark will describe, bookings and lead volumes that are really quite impressive and revenue on the books for next year and the years following are at levels that exceed historical performance. COVID decimated many firms and created extraordinary damage to humanity, but in some ways, it made us a stronger company. We went out of our way to nurture and care for the meeting planner, evidenced by the tremendous re-bookings we achieved from the canceled room nights. We reengineered our organization and deployed almost $500 million in new capital while others shut up shop. We have emerged from COVID a stronger company as our quarterly earnings illustrate. But what excites me is what we can do with our businesses over the years ahead. Next week, we will be with our Board, and I suspect most of the conversation will be focused on the years ahead of us. Our hotel business has shown strong rate growth as a consequence of the attributes of our products and the strength of demand. Look, forward bookings and lead volumes have us very excited, and we've been sharing with our Board many options we have to grow our business. We're working on room expansions of certain hotels, convention space expansion, replicating SoundWaves in several markets, sports bar expansions, and food and beverage repositioning, all at our existing hotels as we expand and refine supply to accommodate the demand we are building. So as I said, next week, we will preview these opportunities with our Board. Between now and early December, we will be refining pro formas and prioritization, and we will share this plan in some detail at an Investor Day that we plan to hold sometime in mid-first quarter of next year so that we can lay out our growth plans primarily for our hotel business but also give you a glimpse of what we expect to do with our exciting entertainment business. Now right now, we've identified somewhere between 15 and 20 projects that we believe will materially grow profitability, and we estimate that we will acquire about $1 billion of new capital, by the way, that number excludes the plans we are developing for the JW Marriott Hill Country. Unlike most of the hospitality REIT sector, we have a very strong record of creating value for our shareholders, and the plans we are developing and the strategy we have in place leads us to conclude that the future looks extremely exciting. Now for the quarter, as Mark and Jim will discuss, our quarter came in almost exactly as our operating plan called for despite the shocking accident at our Colorado hotel, and we set records in many areas of our business. The quarter was highlighted by the acquisition of the JW Marriott Hill Country, which we're very excited about, and Mark will talk about that in a minute. Candidly, we've tried to buy this hotel several times over the last eight years, and we are pleased that we were able to move quickly to facilitate this purchase. And I'd like to thank the investors and bondholders who came into our company at the time of purchase for having confidence in us. San Antonio is a large city with incredible growth characteristics. In fact, from 2020 to '21, San Antonio experienced the largest population growth in absolute terms of any city in the United States, and during that time, the GDP of San Antonio grew at the fifth-highest rate in the country. There's a lot of upside potential for this hotel, and even though the hotel is performing extremely well, we look forward to really rimanizing this hotel in the coming period. Over the last several days, we've gone under contract to purchase an adjacent 41 acres of real estate that will significantly help us to expand this hotel over time and then introduce this into the rotational offering for our group customers. Patrick and his high-quality team are currently building the growth thesis for this world-class asset, which we'll share with you in a few months. Finally, let me just tell you what excites me about our entertainment business. First of all, the core business continues to get stronger, and if you exclude our new Block 21 assets, which delivered very good results in the second quarter, adjusted EBITDA increased year-over-year by 21% on an 11% increase in revenue. The Old Red brand also delivered record results as did the Grandeur and the Ryman. From a growth perspective, we're making headway in Las Vegas with our all-red that we're building on the Strip. But it looks like the opening will occur in very early 2024, which is a modest shift in the schedule due to a permit delay that we now have completely resolved. We've also announced a long-term branding deal with Luke Combs. Luke is an extraordinary entertainer with international appeal, and we will be converting the Wildhorse into a four-part multifaceted entertainment destination here in Nashville, which when complete will be quite different from the bars you see in this town. So here we are, our consolidated business operating at record levels and a balance sheet that has delivered materially over the last year. For us, the dilemma is not how we grow, but what levers we pull first. And I want to just finish my section here by saying I'm extremely proud of the team we have here at Ryman and their collective professionalism and understanding of our business, and the future looks awfully exciting. So Mark, let's talk about the second quarter.

Mark Fioravanti, CEO

Thanks, Colin. The company had another excellent quarter with a continuation of the great momentum we saw in the first quarter, achieving record performances in a number of areas. In addition, we are excited about the value creation opportunities the JW Marriott Hill Country presents at both the property and portfolio levels. Starting with our hotel business, we continue to see strength in the group segment as we traveled approximately 528,000 group room nights in the quarter, 3.5% more than the comparable period in 2022 and nearly a 98% recovery versus 2019 pre-pandemic levels. Across the board, in both group and transient, we continue to see strong rate performance as group and transient ADR were both up 5% versus the prior year quarter and $16.7 million and 37.9%, respectively, compared to the second quarter of 2019. Both segments set new all-time records for ADR, driving record second-quarter hospitality revenue. Outside room spending this quarter saw continued strength with an increase of over 5% compared to the year-ago period. Despite an uncertain macro environment, we delivered hospitality adjusted EBITDAre of $152.7 million in the quarter, which was the second highest performance in the company's history, just 1.5% behind the year-ago period. While there was a 200 basis point margin decline compared to the same period last year, this quarter's performance was solid as we faced some tough comparisons to the prior year quarter. Coming off the Omicron impacted first quarter, the second quarter of 2022 was the highest EBITDAre and margin quarter on record, driven in part by Omicron-related re-bookings, attrition and cancellation fee collections, and incentive management fee expense timing. Attrition and cancellation fees in the most recent quarter were down by almost one-third or $5 million on a year-over-year basis, illustrating the continued return of the group customer. Likewise, as our portfolio has generated higher levels of profitability, management fee expenses increased commensurately. Our second quarter results included over $4 million more in recognized incentive management fees compared to the year-ago period. While these dynamics have a negative impact on comparable margins, they are favorable signs for the group segment in our business. We anticipate a similarly challenging year-over-year comparison in the third quarter as well and then reaching more favorable comparisons in the fourth. In addition to these year-over-year dynamics, the Gaylord Rockies performance in the quarter was negatively impacted by the tragic May 6 collapse of the HVAC system at the hotel's indoor pool. Guest volumes, primarily in the transient segment, were impacted in the weeks following the incident but have continued to recover. We estimate this incident impacted the Rockies second-quarter profitability by approximately $2 million and we have an ongoing business interruption claim, which we hope to collect by year-end. As we look to the remainder of the year, we're reiterating our hospitality EBITDAre and Entertainment segment EBITDA outlook with the addition of the JW Hill Country for the back half of the year, thus raising our adjusted EBITDAre guidance for the benefit of the new property. Jennifer will detail our outlook shortly. As we look beyond 2023, we continue to see no deterioration in the key leading indicators we track. We're again pleased with group sales production in the quarter as we booked nearly 652,000 gross group room nights, which is up 8.4% compared to the year-ago period. If you exclude Omicron-related re-bookings from the second-quarter production last year, production was up approximately 17% year-over-year. We continue to prioritize ADR in our sales production, leveraging the capital investments we've made in capitalizing on the favorable supply/demand outlook for the group segment. For the second quarter, we achieved an average rate across all new group bookings of $265, an all-time high for any quarter in the company's history, up 8.7% compared to the second quarter of 2022 and 25.2% compared to the second quarter of '19. This ongoing strength in production continues to drive our revenue on the books for future years and supports our confidence to continue investing to enhance our one-of-a-kind hotels to create stronger customer loyalty and build an even greater competitive advantage. As of the end of the second quarter, our rooms revenue on the books for ‘24 and ‘25 are up 9.6% and 9.8%, respectively, compared to the T+1 and T+2 time periods as of the second quarter of 2022. Now turning to the acquisition of the JW Marriott Hill Country, Colin gave you a brief overview of some of the fundamentals of the compelling San Antonio market. Let me add a little bit more color about this hotel and the tremendous opportunity it presents for us. Since closing the acquisition on June 30, our asset management team has been working with Marriott to quickly integrate the property into our portfolio to capitalize on economies of scale, improve contract terms and service levels from key vendors, and leverage our portfolio-wide above-property activities in finance, revenue management, and group sales. In addition, we're working to create an initial introduction of holiday programming to drive incremental transient occupancy and outside-the-room spending for the 2023 holiday season. Due to its lead time, we will implement our full holiday programming, including ICE, in 2024. Looking out further, the expansion potential for this hotel is substantial, while already a destination property at 1,002 rooms. When you compare it to the rest of our portfolio and consider the long-term economic growth of the Greater San Antonio, Austin region, the property represents an enormous opportunity to generate significant shareholder value through future capital investment. To this end, as Colin mentioned, we have signed a purchase agreement to acquire from Marriott 41 undeveloped acres immediately adjacent to the Hill Country property for $10.1 million. The purchase agreement is subject to customary closing conditions, including our due diligence efforts and the approval of Marriott's Investment Committee. We believe this land and the associated development rights will allow us to create a compelling master plan for an expansion of the resort in future years. We anticipate closing this transaction by the end of the third quarter. Our Entertainment Group's performance this quarter was again another great storyline, with our marquee Nashville assets leading the way. The consolidated Entertainment segment delivered $87.1 million of revenue and $29.4 million of adjusted EBITDA, which are both records, up 27.4% and 33.4%, respectively, versus the year-ago period. We also announced this quarter that former Ryman Board member, Patrick Moore, has been appointed Chief Executive Officer of the company's Opry Entertainment Group. Patrick brings decades of experience leading brands through transformative growth, and his addition to our management team is an important step in executing our long-term strategic growth plan. We've worked with Patrick first as a consultant and most recently as our Prime and Board member, and I've known him for more than 16 years. We're excited to have Patrick join us and for the leadership and strategic capabilities he brings. And with that, I'll turn it over to Jennifer to discuss our financial results in greater detail.

Jennifer Hutcheson, CFO

Thank you, Mark. In the second quarter, the company generated total revenue of $504.8 million and net income to common shareholders of $66.5 million or $1.15 per fully diluted share. Note as usual that our fully diluted share count in the quarter reflects the put rights held by Iteris as part of their Opry Entertainment Group investment. Although those rights are not yet exercisable, and we retain the option to settle any exercise of these rights in cash, any exercise of these put rights would also result in Carroll's 30% ownership in OEG reverting back to Ryman. Additionally, this quarter, we completed a successful oversubscribed equity capital raise in June associated with our acquisition of the JW San Antonio Hill Country property. We issued a total of 4.4 million shares in the quarter, which is reflected in our weighted average shares outstanding for the quarter and year-to-date. Total consolidated adjusted EBITDAre for the second quarter was $174.7 million, which is an all-time record and led by continued strength in both our hospitality and entertainment segments. With the JW Hill Country acquisition occurring on June 30, our second-quarter balance sheet fully reflects the acquisition and the related financing transactions, and future operating results starting next quarter will be fully reflected in our income statement. As Mark mentioned, our businesses are performing well, with strength and momentum moving forward. As such, we are reiterating our full-year guidance for our same-store businesses and updating our consolidated full-year guidance for the addition of the San Antonio Hill Country property in the back half of the year. As a result, we are guiding consolidated adjusted EBITDAre of $659 million to $704 million, an increase of $28 million at the midpoint compared to our previous guidance. We are also increasing our guidance for adjusted funds from operations, or AFFO, for the year to a range of $437 million to $466 million, which is an increase of $12 million at the midpoint. You can see our full guidance changes and reconciliation in the earnings release. Turning to our balance sheet, we ended the quarter with $508.3 million of unrestricted cash on hand, and our $700 million revolver remained undrawn. Opry Entertainment Group's $65 million revolver had a balance of $7 million outstanding, which is unchanged from last quarter. The combined capacity of our revolving credit facilities and cash on hand gives us total liquidity of approximately $1.25 billion after deducting $14 million of outstanding letters of credit. We retained an additional $105.6 million of restricted cash available for our FF&E projects and other maintenance. On a trailing 12-month basis, our net leverage ratio of total consolidated net debt to adjusted EBITDAre stood at about 5.5 times, which is a modest increase from last quarter but includes our recently completed high-yield note offering without including any EBITDA contribution from the JW Hill Country. Adjusting for the EBITDA contribution of JW Hill Country, we are closer to 4 times. We completed meaningful capital markets transactions in the second quarter to fund the acquisition of JW Hill Country as well as to extend the maturity of our credit facility and refinance our Term Loan B. The JW Hill Country acquisition was funded through the equity offering of 4.4 million shares of common stock, par value of $0.01 per share at a public price of $93.23, as well as the private placement of $400 million of aggregate principal amount of 7.250% senior notes, which are due 2028. Both of these transactions were very well received by the market and were upsized in both cases to satisfy strong demand for our securities. On our credit facility refinancing, we successfully extended our revolver maturity to 2027 and Term Loan B maturity to 2030, eliminating the previous mortgage collateral requirements. In addition, we reset our Term Loan B to $500 million, providing us an additional $130 million of liquidity. In terms of interest rate exposure, as of quarter-end, approximately 80% of our outstanding debt was at fixed rates either directly or with the benefit of swaps. As we've discussed previously, we exercised the first of our three one-year extensions on the Gaylord Rockies term loan, pushing out that maturity to July 2, 2024, and we reset our interest rate swap to cover that period. With the further actions we've taken this quarter to finance the JW Hill Country acquisition, as well as manage our debt maturity schedule, our balance sheet and liquidity continue to be in excellent shape to support the capital deployment opportunities available to us, and it remains our intention to pay 100% of our taxable income through dividends.

Colin Reed, Executive Chairman

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

Operator, Operator

Our first question comes from Bill Crow at Raymond James.

William Crow, Analyst

Hey. Good morning. Thanks. Two questions for me, either Colin or Mark. Just curious, Las Vegas has always been a pretty good group market, but Marriott's new deal seems like it might change the landscape and make it even stronger. I'm wondering how you think that might impact the rotational groups and the pace of when they come to your properties?

Mark Fioravanti, CEO

Yeah. I don't know that it really changes the pace of when they come to our properties. As we've looked at research over the years, about half of groups want to go to Vegas and about half don't. I think the opportunity that it really presents for us is that Marriott will now have a substantial presence there from a Bonvoy perspective. And what that essentially does for us is opens up, I think, more opportunities for us to capture those large groups, either in Denver or other hotels as part of our rotational pattern.

Colin Reed, Executive Chairman

The other part of it, Bill, is that Marriott will have access to that massive gaming market leisure customer that actually spends time in other markets other than Las Vegas. And so I think we have an opportunity to get leisure demand into some of our great hotels as well. So I think Mark is right; ultimately, there will be benefits from the group side, but also, I think there is some leisure uplift here as well.

William Crow, Analyst

Thanks. And Colin, you mentioned the potential for $1 billion of capital projects going forward. I'm just thinking about how that might be financed and whether that might be dependent upon monetization of Opry Entertainment Group.

Colin Reed, Executive Chairman

No, it is certainly not. What has happened here, Bill, and Jennifer alluded to this, is that COVID cost our company when you estimate it around numbers, about $1 billion. And leverage levels, like a lot of the other hotel companies that have shut down, went up into the mid-60s, pushing 7s. But because of the strength of our business and our cash flows, our leverage levels have come down significantly. As Jennifer alluded, when you normalize for the Hill Country and you look at the new debt we have, we're trading at about 4 times. And so when we look at, and Mark alluded to 2024, we're looking at group bookings on the books up substantially from historical paces and the same for the year after that. As we lay out our long-range plan, and this is again something we will be showing to our board next week, we can essentially finance these capital projects from our balance sheet. And by the way, this assumes that our dividends over the next two to three to four years are going to have to increase fairly substantially because of our REIT taxable income. So this is a very exciting situation that we've got ourselves into here by literally building a brand that, in the eyes of these group customers and the leisure customers, is differentiated. And so we expect to be able to generate really good quality high-returning growth here over the next three to four years. By the way, our pro formas have indicated that even though we're planning to deploy $1 billion of capital, because of the way our assumptions look on what this capital does to the underlying EBITDA of the business, our leverage levels don't go up through this period of time; they actually decline. So this is a very exciting environment we find ourselves in.

William Crow, Analyst

Yes. And at the midpoint of our guidance, our consolidated adjusted EBITDA has increased almost 34% over 2019. Over the last three years, this is a business that has grown materially?

Colin Reed, Executive Chairman

Yeah. And that includes our entertainment. But to that point, Bill, this is an important thing that Mark has just referenced. You guys sit around and take apart all of these other companies that talk about their earnings. But if you just look at our company, if you take the midpoint of our guidance for this year for total RevPAR, that number is about $443, and this excludes the Hill Country. This reflects growth over '19 of 15% and growth of 9.5% over last year. If you look at the EBITDAre for the same-store guidance for the year, at the midpoint, which again excludes the Hill Country, which is $585 million, this shows growth of 21% over '19, growth in EBITDA of 21% over '19 and 14% over last year. Most of our competitors that you guys write about are sort of flat to down. And because of this strategy we have built and the contracts that we have in place, this is what our business looks like, and we're very, very excited about it.

William Crow, Analyst

Okay. Sounds good. Thank you, both.

Colin Reed, Executive Chairman

Thank you.

Operator, Operator

Next question comes from Smedes Rose with Citi.

Smedes Rose, Analyst

Hi. Thanks. Just a follow-up on that. I just wanted to be clear. You're talking about investing $1 billion over a three to four year period, and you see your leverage not going above 4 times and in fact, may be declining over that same time frame?

Colin Reed, Executive Chairman

It will be within that 3.5 to 4.5 times through that period, depending upon the cadence.

Jennifer Hutcheson, CFO

Yeah. The time period for the spend is probably closer to five years.

Colin Reed, Executive Chairman

Five years, yeah, but again, it depends on the cadence, right? It depends on how quickly we lay these projects over each other.

Smedes Rose, Analyst

Okay. And then could you talk a little bit about just kind of the scope of investment you might envision at the JW, which sounds like that would be separate and away from what you're planning at your legacy properties?

Colin Reed, Executive Chairman

Yeah, Mark. Do you want to take that?

Mark Fioravanti, CEO

Yeah. I mean I would say that from a Hill Country perspective, initially, our investments are really around where we see opportunities to quickly impact the business there. We're looking at food and beverage, room renovations, and the potential to take commercial space that's currently underutilized and not producing revenue and making it more efficient and delivering more options to the consumers. Longer term, we think there are opportunities to grow rooms, increase meeting space, as well as potentially increase the leisure amenities there. But to be honest with you, Smedes, it's a little bit early for us to really lay out precisely what we think the right mix of that is. We're just really getting into that hotel and understanding its operations and the consumer feedback.

Smedes Rose, Analyst

Do you modify weigh in on that just for a sec?

Mark Fioravanti, CEO

So Smedes, if you look at our Gaylord Texan Hotel, it is by far the most successful convention resort in the State of Texas. When we opened that venue, we hoped that we would get somewhere between $45 million and $50 million of EBITDA. We've expanded that hotel several times now, and that hotel this year is projected to do somewhere around $120 million. We see the San Antonio hotel having the same potential, and that's why we have tried to buy it four or five times over the last eight years.

Smedes Rose, Analyst

Great. And could I just ask you one more thing. First of all, I appreciate you guys breaking out the cancellation fee. I think that's a nice incremental disclosure. It looks like cancellation room nights were up quite a bit in the second quarter. I realize it's down a lot through the six months. But I was just wondering if you could sort of explain that a little bit. It was up 87% and kind of it’s look like cancelation?

Patrick Chaffin, COO

Hey, Smedes. This is Patrick. Yes, it was up a little bit. There were about five or six groups that canceled for future periods, a little larger than normal. But as we looked at the specific conditions around each one of them, there was no cost concern. There was nothing that pointed to macroeconomic trends or anything like that. It was just the lumpiness of our cancellations coming in now and then. So a little bit larger, but we dug into that and don't have any cause for concern based on what we saw.

Smedes Rose, Analyst

Okay. Thank you.

Operator, Operator

Our next question comes from Patrick Scholes, True Securities.

Patrick Scholes, Analyst

Hi. Good morning everyone. If I missed this earlier, but I believe you said you're pacing plus about 9% for 2024 and around 9% for 2025. Looking through the transcript last quarter, I do see that you discussed that. Did those numbers improve since your last earnings call over the last three months or where were they?

Mark Fioravanti, CEO

You want to take it that.

Patrick Chaffin, COO

Patrick, good morning. Our numbers continue to improve. If you look at group revenue pace, total room revenue for 2024, it's actually up 22% over 2019, and that's both on the room nights and the rate as well. And that continues to improve. In fact, we just closed July and had some really solid bookings in a couple of the hotels just for the end-year for the year and the T+1. So that continues to improve and gives us a lot of confidence as we head into 2024. Additionally, on top of that, our mix continues to move in a very positive direction. We have a higher mix of corporate business on the books for 2024, where we stand right now, an improvement over where we are for 2023. So a lot of reasons to feel really good about where we're heading for 2024.

Patrick Scholes, Analyst

Okay. Thank you. And then on your leisure business. Certainly, from other hotel REITs and vacation ownership companies and the like, we're obviously seeing pressure in the summer and backend of the year. I think about, tell me if I'm wrong when I think about leisure for you folks, it's more country music and the holiday ice events, which is probably not something that can easily transfer to going to Europe. So probably not apples-to-apples with lost ski resort or features resort, how do you think about the leisure business as it relates to those pressures?

Colin Reed, Executive Chairman

Let me start, Patrick. I just want to do the 50,000-foot peak part of this. One of the things that we did years ago was that when we built these hotels and added to these hotels, we put in really world-class leisure facilities into these assets. And we've continued to embellish the leisure attributes of these hotels over the last three or four years. Yes, country music and the demands that we're seeing here in Nashville affects Opryland, but country music really doesn't impact when you look at Texan, Aurora, Washington, and the Palms. But when you have a quality asset, it simply performs well, and putting things like SoundWaves in Nashville has had an enormous impact on leisure. We do a lot of programming here, too, Patrick. Patrick Chaffin, why don't you just talk about the demand that we induced because of the specialized programs that we put in place for leisure.

Patrick Chaffin, COO

Yeah, absolutely. Just to build on what Colin is already saying, and Patrick, to your point: because I think you're anticipating this, our fourth quarter holiday traveler is really more of a local regional traveler. We absolutely saw a little bit of summer softening in the leisure business. I would say a lot of that, though, was tied into the pool complex incident at Gaylord Rockies, which obviously put a damper on the transient production into that hotel. We agree that there has been some international travel that's gone out of the states, but we aren't seeing the same level coming back into the states. So that impacted the summer, but as we move towards the holidays, folks are looking for a local regional solution for families to get together. And as we've talked about many times, the programs we've put in place, especially with ICE coming back last year and returning again this year, provides that solution. We're hopeful that the summer softening we saw will not continue into the fourth quarter and that the local regional traveler will still be very strong for the fourth quarter of this year.

Colin Reed, Executive Chairman

And Patrick, you're correct. The structural trip occasion is different for our hotels versus going to Europe or going somewhere for a week or two weeks. These are short regional stays, family vacation trips. They're really not substitutable with a trip to Europe.

Patrick Scholes, Analyst

Yeah. Understood. Maybe you have said this in the past, but for your acquisition in Texas, are you planning to put in the holiday events like ICE at that hotel?

Mark Fioravanti, CEO

Yes. We're going to do it in a phased approach. Because we acquired the property on June 30, we do not believe there's time for us to get the property completely ready for an ICE-type programming offering, but we are going to be offering some holiday programming and step up as we move from '23 into '24. We anticipate that by holiday of 2024, we'll have ICE and the tent and everything all set up. So we're going to give them a little taste of what we're going to be bringing in ‘24 this year and then in ‘24 the full complement.

Patrick Scholes, Analyst

Okay. And then any other of the entertainment segment programs that you would introduce at that hotel besides ICE?

Colin Reed, Executive Chairman

That's back to Mark's point earlier. That is something that we're studying and looking at and trying to understand what fits best in that market and then that hotel, given the customer base and the opportunities around it.

Patrick Scholes, Analyst

Okay. Got you. Thank you for your color.

Colin Reed, Executive Chairman

Thanks, Patrick.

Operator, Operator

Our next question comes from Chris Woronka, Deutsche Bank.

Chris Woronka, Analyst

Good morning, everyone. I appreciate the details shared so far. Colin, in your introductory remarks, you mentioned the concept of rimanizing the JW, which I think is an excellent term. Perhaps you should consider trademarking it. My question is, if we were to categorize this at a high level, how much of this involves attracting a different group versus implementing operational changes, efficiencies, and exploring new revenue streams? I understand this encompasses many aspects, but could you provide some general insights into the difficulty level of bringing this to a process level?

Colin Reed, Executive Chairman

The short answer is yes, all of the above. Patrick, do you want to just some of the process stuff that we've been working with Marriott on, which is all good, and then how we think about the inducing of new demand into that market.

Patrick Chaffin, COO

Absolutely. Mark kind of touched on this already. The initial focus right now is on getting new vendor contracts in there so we can really take advantage of a very similar portfolio and get the economies of scale into whether it be parking contracts, retail contracts, whatever it might be, Wi-Fi, audiovisual contracts, etc. As we just talked about with Patrick a moment ago, we will also be introducing the holiday programming this year and stepping it up in 2024. Mark alluded to converting space into more revenue-generating or getting higher yield out of the spaces that are there today. We think there's sizable ADR opportunities. But to your question specifically, once we get beyond those initial six to 18 months of short-term opportunities, it's really studying the property and asking ourselves to what level do we want to rimanize or bring it towards a Gaylord? The property has tremendous leisure capabilities, and we want to continue to respect that because it drives a tremendous amount of leisure business, but we believe that with the acquisition of this 41 acres, we do believe there are some opportunities for us to look at growing the pool additionally from where it is today as well as potentially some meeting space and additional rooms. We already had architects visiting the property, and my team is digging in with the property to start asking ourselves to what level do we think it would make sense to potentially grow this property long-term. So that will be ongoing, and we'll be talking about that more in the future. But a lot of short-term things that we're going after, and then longer-term figuring out how to maintain the integrity of what this JW has been able to do but also bring some strength to it from what we know how to do on the group side.

Chris Woronka, Analyst

It's a very successful hotel. Pat, you may want to touch as well on our thoughts about the overhauling of food and beverage in that hotel as well because we think there's great potential there as well?

Patrick Chaffin, COO

Yeah. I mean you've heard us talking about this over the past 18 to 24 months in the Gaylord Hotels brand. We see food and beverage as an area that continues to emerge as more and more of a differentiator. We want our attendees and leisure guests to be leaving the hotel saying they had a culinary experience, not just that they got fed. We're continuing to refine what we're doing on the banqueting side. Like the Gaylords, we think the JW Hill Country has some potential upside in the type of offerings they have on the food and beverage restaurant perspective, the number of seats they have, and just the innovation and creativity around those concepts. We're going to be digging into that. We think there's substantial opportunity there.

Chris Woronka, Analyst

Okay. Very helpful. Appreciate all the color there. And then as a follow-up, a lot of talk about expansion, right? And I think a lot of people first go to Rockies and then they think about the JW now. But I was hoping to kind of go back to Nashville, and it may seem like a silly question because you've got 2,900 rooms and more if we include the inn across the street. But I know at one time you had talked about doing a different kind of hotel for family-oriented or up-luxury hotels, something like that. So any thoughts on just the Opryland itself? I mean, is that possible for expansion at some point?

Patrick Chaffin, COO

The answer to the question is yes. And again, here's the reason why we don't expand: because we wake up one day and say we want to expand. We expand because we induce demand. And when we cannot fulfill that demand, that's what triggers it. We were ready to pull the plug on an expansion, which was going to be in rooms expansion and meeting space expansion back in 2019, as we were looking into '20 before COVID, this hotel, as you quite rightly say, almost 3,000 rooms was our pro formas for that year for '20 had us operating over 80% in occupancy. So it is very efficient deployment of capital to generate really, really good returns. Now as our business is building back, another thing to consider is the halo of the city is getting stronger and stronger. The group segment overall in Nashville is growing, but leisure is also really growing. So the answer to your question is yes, we're looking at this. We're looking at a complete re-overhaul on food and beverage in this hotel and major investments on food and beverage, a major investment on potentially a big sports bar here. We're also looking at potentially expanding both rooms and group space.

Colin Reed, Executive Chairman

Chris, if you look across our portfolio, we're extremely fortunate in that we are in markets where those markets are continuing to grow economically. These are business-friendly markets, whether it’s Texas, Nashville, Orlando, or Denver. These are all markets that appear to be very strong long-term group and leisure markets.

Mark Fioravanti, CEO

Let me just put a fine point on Opryland, Chris, because we are very excited about what we can do there. Opryland’s coming upon 50 years here pretty soon as far as how long it's existed. When Opryland was built and the first few expansions that went through, the focus and needs of the customer were more towards exhibit halls. Opryland has done a phenomenal job with the space that they have, but they've been at somewhat of a disadvantage in terms of premium carpeted space per guest room available to the meeting planner. As we look at the opportunities, we think there's an opportunity to rebalance the type of groups going into this hotel by adding potentially more carpeted space, giving Opryland a little bit more of a level playing field with Sister Hotels, and we think that creates substantial upside for the hotel.

Chris Woronka, Analyst

Okay. Outstanding, very helpful. Thanks, guys.

Colin Reed, Executive Chairman

Thanks, Chris.

Operator, Operator

Our next question comes from Dori Kesten, Wells Fargo.

Dori Kesten, Analyst

Thanks. Good morning. Can you talk about the Q2 bookings that you have at $650 million? Is there anything notable between corporate association, MRF, either on demand or rate?

Patrick Chaffin, COO

Hi, Dori. It's Patrick. Good to hear from you. Yeah. The Q2 bookings, there are a couple of things that stand out to me. Number one, to your point, the rate, we saw really, really strong bookings in terms of rate. Again, like I was alluding to earlier, we saw really, really strong growth on the corporate sector. One of the most encouraging things to me is over the past 18 months or so, we've been talking a lot about the growth in the funnel and the lead volume funnel for the current in-the-year, for-the-year business as well as T1, T2, and T3. We are starting to see substantial growth in the funnel for T plus 4 and beyond. The reason that's encouraging to us is we were definitely meeting our short-term needs, but because of the amount of re-bookings that we did, we had concern that maybe we had skipped a booking cycle with some of the association groups that book out further. We're now seeing that longer-range booking window fill back up from a funnel perspective. We're really pleased with the bookings that we had, the rate, and the mix of business, but we're even more excited that the funnel is filling back up for that long-term business, and it just gives us more confidence that as we talk about these CapEx investments, we're getting more visibility and opportunities to really fill up the book of business for the future.

Dori Kesten, Analyst

Okay. And then I guess one more thing on ICE, and I apologize if I missed this. Historically, have you found that your ICE guest is a repeat guest from the summer?

Patrick Chaffin, COO

From a summertime perspective, I would say yes because you have a great example. A lot of the guests that are coming to Opryland to go to SoundWaves are then returning to come back and do the holiday programming in ICE around Christmas time. The regional traveler is more of a one-time-a-year type tradition for them because there's just not a whole lot of options for them at the holidays. So I would say the local traveler is a repeat customer. The regional traveler is more of a one-time visit, bringing the whole family for the holidays.

Dori Kesten, Analyst

Okay. Thank you.

Patrick Chaffin, COO

All right, Travis. One more question, please.

Operator, Operator

Yes, sir. Our final question comes from Shaun Kelley, Bank of America.

Shaun Kelley, Analyst

Hi. Good morning, everyone. Thanks for putting me on here. So Colin, Patrick, just maybe first off, as we think about the development plans, or the CapEx side and the $1 billion that you laid out, Colin. Do we have any more precision around kind of ground breaks, particularly the Rockies? Just trying to think through the timing here and the cadence because I know those have been on the radar screen for a while. Is now the right time to start to get there given where the portfolio is at in its recovery? Is that something we're going to get more explicit color on at some point in the near or medium term?

Colin Reed, Executive Chairman

Yeah. Good question. The answer is we're going through that process with our Board first, which Mark and I, as I said, he and I will be starting that process next Thursday morning with our Board of Directors. Patrick and his team have been working their tails off over the last six months, literally looking at, as I said, somewhere between 15 and 20 projects. By the way, this does not include the regular scheduled room refurbishments. The $1 billion is really a rough number of magnitude for new projects that we're looking at. But the process is the way we want to go through this is over the next two or three months to refine that plan with our Board, get confidence with each of the markets that we're going to deploy capital in and build the cadence of that. Mark and Jen have been figuring out a time for us to do a really high-quality Investor Day in Nashville. We had thought we would try to get it done before the holidays, but with everything we've got scheduled, that’s going to be impossible. But I think Jen and Mark are thinking late January or early February. What we would be doing then, I think, Shaun, is laying out these are the projects that we really like. These are the markets that we will be deploying capital in, and this will be the order of play.

Patrick Chaffin, COO

Yes. Just to your question, we continue to be very interested in the long-term plans for expansion at Rockies. I would remind you that we're in the midst of some pretty substantial investment right now. The Grand Lodge or what you'd call an Atrium in one of our other hotels is currently under full renovation. It's going to completely transform that area into really the hub of the hotel, as well as the addition of a new group Pavilion outside. So from a cadence perspective, I really can't get going on the expansion until we get some of these other projects done. We remain very interested in that, but we're just trying to make sure that we go about it in an appropriate process.

Colin Reed, Executive Chairman

Yeah. I think you talked about the Rockies, Shaun, but I think, Mark, our appetite at that hotel has only strengthened over the last year or two; it hasn't waned at all. COVID hasn't given us any thoughts of should we deemphasize room expansions. We're very excited about the Rockies.

Shaun Kelley, Analyst

When you look at the rebooking characteristics of that coming out of COVID – with the strongest in the brand.

Mark Fioravanti, CEO

Yeah. About 75%, right, that's very good. Shaun, any other questions?

Shaun Kelley, Analyst

Yeah. Just one more, Mark, sorry, I didn't mean to leave your name out of there on my first list. But just big picture, and this is not meant to sound greedy or unthankful because I actually think the JW Country asset is a fantastic addition. But sort of your very high-level question to maybe wrap up would be, are there more Hill countries out there? I mean, clearly, this is something you've underwritten on time and again, but yet for probably many of us in the investment community, it's always still a little bit of like an aha moment, like it's kind of hidden in plain sight. Without naming names, because obviously, you do not want to disclose that. But do you think there are more opportunities of similar scope and scale, $500 million-plus big assets that could be impactful to the portfolio that look or feel like this because it does seem to be at least absolutely spot on for probably what you're looking to do for the portfolio?

Mark Fioravanti, CEO

Yeah. I think the general answer to the question is yes, but it is a short list. To your point, our focus around acquisitions has been we want to buy things that check every box for us. We have a very specific focused strategy, as Colin outlined at the beginning of the call. Any hotels that we bring into our portfolio, we want them to be consistent with that strategy and ultimately be able to drive value not only at that property level, but also be able to drive value across the portfolio. That's the critical thing for us.

Shaun Kelley, Analyst

Thank you very much.

Colin Reed, Executive Chairman

Thanks, Shaun. Okay, Travis, thank you. And for the investors that have been on this morning, thank you for your time and effort. If you have any other questions, you know how to get hold of us here and upward and onward. We've got an exciting company on our hands, and we expect to create tons of value here over the years ahead. So thank you, everyone.

Operator, Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time.