Ryman Hospitality's Desert Ridge Acquisition: A Strategic Bet on EBITDAre Growth and Operational Efficiency in a Fragmented Market

Ryman Hospitality Properties (RHP) has long been a master of capital allocation in the hospitality sector, leveraging its expertise in group-oriented, premium assets to navigate cyclical market shifts. Its recent $865 million acquisition of the JW Marriott Phoenix Desert Ridge Resort & Spa—its first foray into the Southwest—represents a calculated move to capitalize on Phoenix's robust event-driven demand while addressing long-term EBITDAre (Earnings Before Interest, Taxes, Depreciation, and Amortization, adjusted for real estate) growth. As the hospitality industry grapples with oversupply and macroeconomic headwinds, Ryman's integration of Desert Ridge offers a compelling case study in strategic value creation.

The Desert Ridge Acquisition: A Strategic Fit in a High-Potential Market

The Desert Ridge acquisition aligns with Ryman's core thesis of acquiring “irreplaceable” group-focused assets in top-tier markets. Phoenix, a top 10 North American meetings destination, is uniquely positioned to benefit from a packed event calendar, including the 2026 NCAA Women's Final Four and the 2027 NBA All-Star Game. These events are expected to drive occupancy and RevPAR (Revenue Per Available Room) despite broader industry challenges. The resort's 243,000 square feet of meeting space and two championship golf courses further solidify its appeal for conventions and leisure travelers.

However, the acquisition's success hinges on Ryman's ability to navigate near-term disruptions. The resort is undergoing a $100 million renovation of its meeting spaces, which will weigh on 2025 EBITDAre. Ryman anticipates this will be offset by 2026, when the property is expected to become accretive to adjusted FFO (Funds From Operations) per share. The 12.7x EBITDAre multiple paid for the asset, while premium, reflects its strategic value in a market with no new competitive supply under development.

Phoenix's Recovery: A Tale of Two Segments

The Phoenix market's performance in 2025 underscores the bifurcation of the U.S. hospitality sector. While luxury and middle-tier properties are outperforming, economy hotels face declining demand. For Desert Ridge, this is a tailwind: its 950-room portfolio, including 81 suites, is priced to capture premium group and leisure business.

Phoenix's occupancy rates are projected to rise to 68.6% in 2025, albeit below the 2019 baseline of 70%. This is partly due to a 13% increase in hotel inventory since 2019, with another 3.4% expected in 2025. Yet, the resort's location in a submarket with limited new supply—unlike Phoenix Central—positions it to outperform. Scottsdale, for instance, maintains an ADR of $256.83 and RevPAR of $168.69, significantly higher than Phoenix Central's $225 and $119.68. Ryman's ability to leverage Desert Ridge's premium pricing power will be critical to sustaining EBITDAre margins.

Operational Efficiency: Ryman's Secret Sauce

Ryman's track record of enhancing asset performance post-acquisition is a key differentiator. Its Gaylord portfolio, for example, has consistently delivered strong EBITDAre margins through strategic renovations and group business optimization. At the Gaylord Rockies, outlet spend per occupied room increased 30% year-over-year in Q2 2025, while the Gaylord Palms' renovation boosted customer satisfaction scores. These precedents suggest Ryman can unlock value at Desert Ridge through similar initiatives, such as converting 5,000 square feet of office space into event-friendly breakout areas.

The company's operational discipline is also evident in its cost management. Despite rising labor and utility costs, Ryman's same-store Hospitality segment achieved an 8.6% EBITDAre decline in Q2 2025, a modest hit given the Easter holiday timing and construction disruptions. This resilience, coupled with a pro forma net leverage ratio of 4.4x and $1.2 billion in liquidity, underscores its financial flexibility to fund capital expenditures and weather short-term headwinds.

Long-Term Value Creation: Beyond EBITDAre

While EBITDAre is a critical metric, Ryman's integration of Desert Ridge also enhances its geographic diversification and brand equity. The resort's affiliation with Marriott International ensures continued operational expertise, while its location in Phoenix—a market with a 6.4% GDP contribution from tourism—provides a stable demand base. Moreover, the acquisition complements Ryman's 2023 purchase of the JW Marriott San Antonio Hill Country Resort, reinforcing its presence in the Western U.S.

Investors should also consider the company's broader capital deployment strategy. The $600 million senior notes offering and public stock offering demonstrate Ryman's confidence in its ability to fund growth without overleveraging. A credit rating upgrade from S&P following the acquisition further validates its financial prudence.

Investment Implications

Ryman's Desert Ridge acquisition is a high-conviction bet on Phoenix's long-term potential and its own operational prowess. While 2025 EBITDAre will face near-term pressure, the resort's strategic fit, premium pricing power, and Ryman's track record suggest a path to accretion by 2026. For investors, this represents an opportunity to capitalize on a REIT that is not only navigating the current recovery but also positioning itself for sustained growth in a fragmented market.

In a sector where oversupply and macroeconomic uncertainty persist, Ryman's focus on high-EBITDAre-generating assets and disciplined capital allocation makes it a compelling long-term play. The Desert Ridge acquisition, though costly, is a testament to the company's willingness to invest in its future—a trait that has historically rewarded patient investors.