Ryman Hospitality Properties (NYSE: RHP) is a hotel-focused real estate investment trust, or REIT, that focuses on large-scale group-focused hotels and also owns a portfolio of entertainment assets, both real estate and otherwise.
Ryman's stock price has taken a big hit in 2020, and understandably so. After all, the conferences and conventions that are the bread and butter of its hotel business are virtually nonexistent right now, and concerts are likely to remain on hold until the pandemic subsides as well. Even so, Ryman is a unique hotel REIT with an interesting business and could be worth a look for patient long-term investors.
Ryman Hospitality Properties company profile
Ryman is a somewhat unique player in the hotel REIT space because of the types of properties it focuses on. Specifically, it owns large-scale hotels that target group business -- think conventions, conferences, expos, etc.
Ryman's core business consists of five hotel properties, all of which are operated under the Gaylord brand name (Note: Before Ryman was a REIT, the company's name was Gaylord Entertainment.):
- Gaylord Opryland, in Nashville (the company's flagship property).
- Gaylord National Harbor, in the Washington, D.C., area.
- Gaylord Palms, in Central Florida.
- Gaylord Texan, in the Dallas area.
- Gaylord Rockies, in the Denver area, Ryman's newest property.
Just to give you an idea of the size of these properties, consider that the Gaylord Opryland has almost 2,900 rooms, 640,000 square feet of meeting space, 19 food and beverage outlets, a golf course, and numerous retail stores. In fact, Ryman's five Gaylord-branded hotels are all among the top six non-gaming U.S. convention hotels in terms of available meeting space.
In addition to its hotels, the company owns some iconic entertainment venues, particularly the Grand Ole Opry and Ryman Auditorium in Nashville, and the latter is where the company gets its name. It also owns the growing Ole Red dining and entertainment venue chain it developed in partnership with country music star Blake Shelton as well as a streaming service and several other entertainment assets.
The group-focused hotel business has some great economics. Large groups tend to book years in advance and often use the same property year after year. In fact, Ryman has millions of future room nights on its books, even when considering all the 2020 COVID-19-related cancellations. Plus, groups generally spend more money on on-property services like food and beverage as compared to leisure travelers.
Ryman Hospitality Properties news
Ryman Hospitality Properties grows its business through acquisitions as well as development. Most recently, the newly built Gaylord Rockies opened a little over a year ago, and the early results were so successful that the company decided to proceed with an expansion (which has since been put on hold due to the current economic climate).
Since it's still a major issue affecting travel, and is likely to remain so for some time, let's take a look at how the COVID-19 pandemic has affected Ryman's business. The real estate sector has been one of the hardest-hit parts of the stock market in the COVID-19 pandemic, and hotel real estate has understandably been hit harder than most. Travel demand ground to a halt as the outbreak worsened, and it still hasn't recovered to anywhere near pre-coronavirus levels.
As of its second-quarter earnings report, Ryman's cancellations had added up to a staggering 1.4 million net room nights. All concerts and events scheduled at the Ryman Auditorium and Grand Ole Opry were cancelled for the foreseeable future.
Ryman's business got hit so hard when the outbreak began that the company decided it wasn't even worth keeping its hotels open. All five of its hotels were closed in March, and four of them had reopened by the end of July. The Gaylord National Harbor remains closed, as it doesn't have the type of amenities that would appeal to leisure travelers -- at least not to the extent the others in the portfolio do.
It's worth noting that as the pandemic subsides, group hotel business is likely to be slower to return than leisure travel. While many American families have started taking vacations again, conventions and large events aren't likely to resume at anything close to their previous levels until well into 2021. And the same can be said for the concerts that Ryman relies on in its entertainment segment.
To be fair, Ryman has done an excellent job of reducing expenses, rebooking cancelled events, and temporarily pivoting its focus to leisure travel at most of its hotels. In fact, Ryman has re-booked more than 450,000 cancelled room nights and actually has more nights on the books for 2021 and 2022 than it did at this time last year.
Even so, the reality is that the pandemic will have a bigger effect on Ryman's business than on most other major hotel REITs. For example, a REIT like Apple Hospitality REIT (NYSE: APLE) that specializes in midlevel hotels should see its revenue climb as business travel resumes, and a luxury resort REIT like Xenia Hotels & Resorts (NYSE: XHR) could be a big beneficiary as vacation travel ramps up.
Ryman Hospitality Properties is led by CEO Colin Reed and CFO Mark Fioravanti, both of whom have held their jobs for nearly two decades. Both have large ownership stakes in the company and excellent track records of generating strong returns for investors.
Ryman Hospitality Properties stock price and performance
Ryman's businesses have been one of the hardest-hit in the hotel industry during the pandemic, so it shouldn't come as a big surprise that its stock performance has been rather dismal in 2020. As of late August, Ryman is down by 55% for 2020, and that's after a pretty impressive rebound. What's more, Ryman decided to suspend its dividend for at least the rest of the year.
However, prior to the pandemic, Ryman's performance has been impressive. In the 10-year period through 2019, Ryman delivered total returns of 655% to investors (about 22% annualized). Even after the pandemic-induced plunge, investors who bought shares of the company in 2010 are sitting on gains of 249%.
The bottom line on Ryman Hospitality Properties
Ryman Hospitality Properties is in a tough business to be in during a global pandemic. Group events are simply not a thing and are not likely to return in full force until at least mid-2021.
However, Ryman's properties are the best-in-class group-focused hotels, and its entertainment assets are iconic and irreplaceable. I'd expect quite a roller-coaster ride as the full effects of the COVID-19 pandemic continue to play out, but Ryman Hospitality Properties could still have a very bright future ahead of it.