Renovations And Marriott Measures Will Shape Hospitality Amid Uncertainties

Key Takeaways

• Anticipated growth in group bookings and future renovations could enhance revenues, ADR, and asset values, boosting overall profitability.
  
• Expansion into entertainment and diverse customer base offer revenue diversification and stabilization, safeguarding against economic uncertainties.
  
• Economic uncertainty and aggressive competition threaten revenue growth, while potential tariff impacts and cost-cutting measures pressure profit margins and capital expenditures.

Catalysts

Ryman Hospitality Properties, Inc. (NYSE: RHP) is a leading lodging and hospitality real estate investment trust that specializes in upscale convention center resorts and entertainment experiences.

• Ryman Hospitality Properties anticipates growth in group room nights, with bookings for 2026 and beyond up double digits year-over-year, indicating a potential increase in future revenues and average daily rate (ADR).
  
• The company's proactive margin management and operating cost efficiency measures, enacted with Marriott, suggest potential improvements in net margins and resilience in earnings.
  
• Recent capital investments back online are contributing to revenue growth, and planned renovations are expected to drive future profitability, impacting both earnings and asset value positively.
  
• Expansion initiatives in the entertainment segment, including new projects and a 10-year contract for managing a venue, are set to contribute to diversified revenue streams and bolster earnings.
  
• The diverse customer base, especially the association group business, offers downside protection during economic uncertainties, which could help stabilize revenues and maintain profitability.

Ryman Hospitality Properties Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Ryman Hospitality Properties's revenue will grow by 3.8% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 12.2% today to 11.8% in 3 years time.
• Analysts expect earnings to reach $318.0 million (and earnings per share of $4.32) by about May 2028, up from $291.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $378.5 million in earnings, and the most bearish expecting $284.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.2x on those 2028 earnings, up from 19.1x today. This future PE is greater than the current PE for the US Hotel and Resort REITs industry at 23.0x.
• Analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.9%, as per the Simply Wall St company report.

Ryman Hospitality Properties Future Earnings Per Share Growth

Risks

• The uncertain economic environment caused by government trade objectives is leading to a more cautious outlook from meeting planners, potentially impacting group room bookings and, consequently, revenue and occupancy rates in the near term.
  
• Lower governmental and corporate group demand due to federal cost-cutting initiatives and increased uncertainty might lead to decreased revenue from these segments, affecting overall hospitality revenue.
  
• An increase in attrition and cancellations observed for meetings in the coming quarters may negatively impact the company’s net margins and cash flow if cancellation fees do not fully offset lost revenues.
  
• Aggressive market competition may cause the company to either lower rates to maintain bookings or lose customers, putting pressure on ADR (average daily rate) growth, revenues, and profit margins.
  
• The possibility of increased tariffs and supply chain issues related to ongoing projects may lead to higher than anticipated capital expenditures, affecting the company's earnings and cost management efforts.

Valuation

• The analysts have a consensus price target of $114.917 for Ryman Hospitality Properties based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $131.0, and the most bearish reporting a price target of just $99.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $318.0 million, and it would be trading on a PE ratio of 27.2x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of $94.0, the analyst price target of $114.92 is 18.2% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.