Ryman Hospitality Properties (RHP) Colin Reed, Executive Chairman & Mark Fioravanti, President & CEO

Thank you. We're happy to be here. And we both had different meetings in New York City. He's been loving on the REIT Mafia and I had other meetings, so you get two for the price of one this morning.

You want me to start? Okay, I'll start. So you, Justin, very accurately described the physical assets of our business. And the way I sort of think about it is if you look at it as a target, in the middle the bullseye is these irreplaceable assets that we have. The Grand Ole Opry last year celebrated its 100th anniversary. And what it's been able to do as a business and as an incredible place over this 100 years is build this incredible relationship with the artist community. And if you go back and track what has happened in the city of Nashville, Music City, essentially the Opry was the focal point that brought all of these artists from all across America to the city of Nashville to live there. And then you have the Ryman, which is the mother church of country music, about 135 years old. And what we've been able to do is build out from that these different physical assets, whether it be brands with Luke or brands with Blake, whether it's being in the amphitheater business, whether it's in the fairs and festivals business, what we have in Austin with Austin City Limits. The idea here is to create a connection with both the artists where we pick artists up in their very early stage of their career and rotate them through these physical assets, this farm system that we have created. The other part of this strategy is the consumer, the customer, the country lifestyle consumer. We estimate there's about 150 million of them in the United States. And we're picking these customers up in these different points, bringing them into our solar system, into our CRM, and then being able to cross-market these customers to our other businesses. The other thing that has happened is with iPhones and iPads, technology has changed the way consumers consume music. 15 years ago, there was no such thing as iTunes, Spotify, these types of streaming services. And they now exist and it's really created this appetite for country music, not just domestically, but internationally. What is happening with country on the international arena is extraordinary. Luke Combs, as an example, at the end of July this year will go and play in front of 85,000 people in Dublin. Same thing in Scotland. He's filling Wembley Stadium three nights, 250,000 people in London listening to the music that this young man has written. So the other thing that's happened since COVID is I think as a human race we love to get out more. We don't like to be confined to our basement and live entertainment is just blowing up. So it's a combination of we have these very exclusive assets, we have this great relationship with the artists in this community, and we see a lot of growth ahead of us for this particular business. What have I missed?

And retail. And we've really reached that point where this business is now reaching that point where we can benefit from scale.

Yeah, the stronger our brand becomes, the stronger the connection between OEG and developers as an example or cities as an example. We're having cities now reach out to us and say, 'Hey, we would like to build an amphitheater in our market and we would like to consider doing it with you.' Fairs and festivals, that business is very fragmented and there's an opportunity to roll that business up. We just announced about three or four weeks ago with the Indianapolis Pacers, Ole Red in Indianapolis. These folks came at us and they said, 'Hey, we're building all of this infrastructure in downtown Indianapolis. We would really love to do something that's fun in the country music ecosystem.' And that happened about six months ago, and that led to us developing a fairly capital-light opportunity in a city that just loves country music.

You want to do it?

The other thing that we have is explicit knowledge of how popular the individual artists are in those markets. So, as an example, Indianapolis, we knew that it was one of the big markets that Blake Shelton sells records in. We know that Blake has been to that market multiple times. He's played the national anthem at both the Super Bowl in the stadium and the Indianapolis 500. And so, that led us to thinking about he was probably the best fit for that market. And the Pacers absolutely embraced that.

I would suspect that if we're sitting here a year from now, I'm not going to get into how many and where, obviously this thing is being streamed, so we got to be careful of what we say. But I suspect that if we're sitting here a year from now, we will be talking about more deals that have materialized between now and then.

Yeah, I don't know what you think, Mark, but my view on this is that I think it would be a natural progression. When I think about it, it was nine years ago that you and I met Luke Combs for the first time. The kid never had a record deal. He hadn't had a number one. And we spent a couple of days with him and fast forward to today, he's had 21 number ones, 19 of which he's written. And that catalog that he owns is worth hundreds of millions of dollars. And I think about that and then I think about this Next Stage program that we have where we sit with management companies, not the biggies, but management companies and identify young artists that we listen to, we watch, we observe, maybe hasn't had a number one. And we sign these folks up and then we power them through our social media. We bring them onto the platform of the Opry. We stream the Opry and we help build their career. So for me, I think it's a natural progression that sometime in the future with these young emerging great young artists, and we look over the last five, six years, we've had a hell of a good hit rate on this. Some of the artists that we have tucked under our wing have really made it in country music.

You want to take that one?

And when you mention Mark Sky in the UK, given the tremendous growth in popularity of country, we take a lot of these historical performances and bundle them and use those in the content distribution part of it. But it's a very interesting time for this particular genre of music.

Oh, I think we're going to be seeing more and more of it, but at this stage, that's not what we do. We're alive and I don't believe that there will ever be a time, certainly not in the next 10 to 15 years, where people will have more desire to see AI-generated artists than the real thing. And we're very much focused on the real thing. But it's very interesting. I was talking to an artist two or three weeks ago, and he was telling me that some of the emerging AI capabilities are actually helping him. He's a great songwriter, this individual, it wasn't Luke, it was another artist that's a member of the Grand Ole Opry. And what they're able to do now, he has an idea on a song, he'll formulate the song and then plug it into technology and that will help literally build the format of that song rather than spend two days in a recording studio where the artist would have to pay $2,000 or $3,000 a day to get an hour or two in a recording studio. I think recording studios over the course of the next 5 to 10 years are probably going to see a downturn in their usage because of what AI is doing. But if you speak to the artists, particularly those that are the songwriters, they're saying that this technology is actually helping them.

Now there is also what I would call a hybrid opportunity. So I don't know whether you're familiar with this product in the east end of London called ABBA Voyage. And it essentially is Avatar meets ABBA where the ABBA catalog is brought back alive through AI because two of the band I think are now deceased and the band does not exist anymore. So I think there's an opportunity particularly for an organization like us that owns this relationship in the 40s, the 50s, the 60s with the likes of the Cashes, the George Jones, these iconic artists that are no longer with us. Is there an opportunity to bring these folks back and their music back and put it in front of the consumer in a very compelling way? So I think AI can play a very productive role if it's done in a disciplined way.

Undermonetized aspect of the fan journey in terms of... Hmm. This may be a crazy response to your answer, but I think of Amazon, right? Amazon picked up a bunch of consumers and then they constantly widened the product that they put before these very loyal consumers. And I think there may be other businesses that we plug into to be able to, other businesses that the consumer that we have a relationship with today deal with. And so I think by building more of what we have, we can monetize the consumer more so, but also looking at other things that the consumer does, those consumers that we have the relationship with, that we can then plug into this business. This is very interesting because unlike Amazon, Amazon's whole thesis is the consumer and giving the consumer what they want instantly. And with us, we have two very valuable relationships: the consumer but also the artist. So the other thing is figuring out what we can do more so with the artists. So this is a very interesting time for us. I hope that wasn't a crazy answer.

Want to go?

So, I'll start here. And maybe what I'm about to say will sound a little arrogant. But I believe out of all of the hospitality REITs, we're the only one with a true stat strategy. What most of our competitors do is they go to a market and they buy a hotel and then they hope like hell that market does well. When the market does well, they do well. When the market doesn't do well like what's happened in the last two or three years in San Francisco, there are a whole bunch of REITs that are heavily invested in that market that have been suffering. We are customer focused, we're not city focused. So what we have done is we built these magnificent large convention resorts in great cities and we've built this relationship with the consumer with the large group. And what we found 15, 18, 20 years ago when we built this strategy was that there was a whole bunch of groups, about just over 20,000 of them, that rotate from market to market year by year that are 500 people or more when they turn up at a market. And we build a relationship with these people and that is the strategy. And then we also have a great leisure strategy too. And our business, if you look at the returns that we've been generating for our shareholders, we're sort of two and three times what our competitors have done over the last 5 years, 10 years, 15 years. And it's because of this strategy. The other thing that we've been able to do as we build demand into a market through this rotational strategy, we're able to add product. We're able to go out and put another 300 rooms on the hotel at a very high rate of return. We like to look at a minimum of a 12% unlevered IRR on our hotel capital that we put into our hotel business. And so as we sit here today, this business that when Mark and I joined the company generated about $40 million, this year we're going to do just shy of $800 million in EBITDA for these 78 magnificent hotels that we now have. The forward book of business looks really exciting. We're very transparent when we talk to our shareholders about what we have on the books for next year, what we have on the books for the year after. When we go into 2027, we'll go in with 50 points of occupancy on the books. And the glide slope as we sit here today looks really exciting. We have a lot of capital that we're spending right now. You want to reference some of that, Mark?

It amazes me when I think about our hotel in Nashville. We have 2,880 rooms. We're in the middle of a capital program that is probably over the next three years going to be about $500 million. We're building about 100,000 square feet or more meeting space. Of all the convention hotels in the United States, it has by far the non-gaming, by far the largest convention space, but we're adding another 100,000 square feet. That hotel this year will do $200 million in EBITDA. There's not another convention resort anywhere in this country, including the marquee down the street, that comes close to that. And it's quite remarkable. These businesses are doing really well.

I think the only hotel that would be a challenge for us to expand simply because of the footprint and the real estate will be our hotel in Washington. And it's probably the least attractive in terms of current performance because of what has been going on in that market. But every other, all the rest of our hotels, we have land. And at the right time when we build sufficient demand, we have the ability to expand basically the rest of them, every one of them. And I think we're pretty close to pulling the trigger in Colorado. That hotel that we opened just before COVID has now established itself as probably the most successful convention resort in the Midwest. I mean, it's doing incredibly well and we probably will add 400ish rooms there and maybe a big water facility to double down on the leisure side. But the great thing about this is when you build out the footprint, you're deploying capital at really healthy rates of return and that is what has differentiated us in this environment in this segment that we're in. Whereas our competitors, they don't do that, they go out and buy a hotel at a 5 or 6 cap rate and the IRR is probably 9 or 10 max. And that is why we've demonstratively created more shareholder value over this last decade than our competitors.

Well, thank you, Gabelli. Mario's been a big supporter of ours from day one since Mark and I got to the company and we wish him well and we wish Gabelli well. So, thank you. Thanks, Jesse.