Ryman Hospitality's Bold Move in Phoenix: A Calculated Risk for Long-Term Growth

Ryman Hospitality Properties (NYSE: RHP) has positioned itself as a strategic player in the luxury hospitality sector with its $865 million acquisition of the JW Marriott Phoenix Desert Ridge Resort & Spa. This move, funded through a mix of equity, cash, and debt, represents a pivotal moment for the company’s growth trajectory. While the equity raise introduces near-term dilution risks, the acquisition’s accretive potential and strategic alignment with Ryman’s core strengths make it a compelling opportunity for investors focused on resilient, high-margin assets in a booming market. Here’s why the calculus favors RHP as a buy.

The Strategic Value of the Phoenix Acquisition

Phoenix is a top-10 U.S. meetings market with no new competitive supply on the horizon—a rare combination in today’s hospitality landscape. The Desert Ridge Resort, with its 950 guest rooms, 243,000 sq. ft. of meeting space, and $100 million in recent upgrades, offers Ryman a prime entry into this high-demand corridor.

The resort’s 2024 Adjusted EBITDA of $68.26 million (12.7x multiple) signals a disciplined valuation, and its renovation-driven performance dip in 2025 is temporary. By 2026, the property’s full operational ramp-up should drive accretion to Adjusted Funds from Operations (AFFO) per share, aligning with Ryman’s track record of acquiring underpenetrated assets and unlocking value through operational synergies.

Capital Structure: Balancing Dilution and Flexibility

The acquisition is funded via a $865 million capital stack designed to preserve financial flexibility:
1. Equity: 2.3 million shares (plus an over-allotment option for 345,000 more) were issued, diluting existing shareholders by ~3.8% (based on 59.9 million pre-offering shares).
2. Debt: Borrowings from revolving credit facilities and unsecured debt will cover the remainder, alongside cash reserves.

While dilution is inevitable, the equity raise’s timing—unlinked to the acquisition’s close—reduces execution risk. If the deal falters, proceeds can be redirected to general corporate uses, minimizing downside exposure.

The stock’s resilience amid broader market volatility underscores investor confidence in Ryman’s strategy.

Dilution vs. Accretion: A Long-Term Win

Critics may balk at the equity dilution, but the 2026 AFFO accretion timeline is critical. The resort’s performance will rebound post-renovations, and its Phoenix location—a top meetings market with no new supply—ensures steady demand. Ryman’s existing 11,414-room portfolio (including Gaylord Hotels) and Marriott’s operational expertise provide a tested framework for optimizing the asset.

The acquisition’s 6.9% cap rate (derived from EBITDA/price) is competitive with Ryman’s historical metrics, and the property’s 2025 renovation-related headwinds are already priced into expectations.

Why the Financial Flexibility Matters

Ryman’s debt-to-EBITDA ratio remains manageable, even after the acquisition. With $1.6 billion in liquidity (cash + undrawn credit), the company can handle near-term debt while benefiting from the resort’s cash flows. The use of unsecured debt also avoids over-leveraging the asset itself, preserving flexibility for future moves.

Institutional investors are already voting with their wallets: BlackRock and State Street increased stakes by 60.8% and 32.2%, respectively, in Q1 2025—a strong signal of confidence.

Analyst Sentiment and Valuation Catalysts

Analysts are bullish, with a buy/overperform consensus and a median price target of $121.50. BMO Capital’s $133 price target reflects optimism about the Phoenix asset’s long-term contribution, while Wedbush’s $110 target acknowledges near-term renovation risks but still sees upside.

At 12.7x EBITDA for Desert Ridge, Ryman’s valuation discipline is evident, contrasting with frothy post-pandemic pricing in some sectors.

Conclusion: A Buy for Growth-Oriented Investors

Ryman’s Phoenix acquisition is a masterclass in value-driven expansion. The equity raise’s dilution is offset by the resort’s accretion timeline, strategic fit in a limited-competition market, and Ryman’s proven ability to optimize assets. With institutional support, manageable debt, and a 2026 AFFO inflection point, RHP is a rare blend of growth and stability in today’s volatile hospitality sector.

Action Item: Buy RHP on dips below $100, with a 12–18 month horizon to capture accretion and valuation re-rating. The Phoenix bet isn’t just about one resort—it’s about owning a piece of Ryman’s next phase of growth.

Risks: Delayed renovations, macroeconomic slowdowns, or oversupply in Phoenix could pressure near-term results. Monitor Ryman’s Q3 2025 update for post-renovation performance cues.*