Ryman Hospitality's Strategic Leverage Play: Is the $865M Desert Ridge Acquisition a Buy Signal?

Ryman Hospitality Properties (RHP) has placed a bold bet on long-term growth with its $865 million acquisition of the JW Marriott Phoenix Desert Ridge Resort & Spa. The deal, which hinges on post-renovation accretion to Funds from Operations (FFO) per share starting in 2026, presents a compelling but nuanced opportunity for investors. With a 4.65% dividend yield and robust insider/institutional buying trends, the stock appears tempting—yet near-term headwinds and valuation concerns demand scrutiny. Let’s dissect whether RHP’s strategic leverage play justifies a buy now or warrants caution.

The Accretion Case: FFO Growth and the 12.7x EBITDA Multiple

Ryman’s Q1 2025 results underscore its operational strength, with Adjusted FFO per share surging 27.6% to $2.08, driven by record hospitality and entertainment revenues. However, the Desert Ridge acquisition’s accretion timeline is critical. While the property’s 2024 Adjusted EBITDA of $68.3 million supports a 12.7x multiple (6.9% cap rate), its 2025 performance will be suppressed by renovations through Q3. The payoff arrives in 2026, when the resort’s expanded meeting spaces and upgraded amenities should drive FFO accretion.

The key question: Does the 12.7x EBITDA multiple reflect fair value? While cap rates in the lodging sector typically range between 5-7%, the 6.9% implied here suggests RHP is banking on outsized post-renovation returns. Peers like Host Hotels (HST) and Marriott Vacations (VOC) trade at lower EBITDA multiples (10-12x), raising concerns about overvaluation. Investors must decide if Desert Ridge’s strategic fit in Phoenix—a top-10 U.S. meetings market with no new supply—justifies this premium.

Institutional and Insider Buying: A Vote of Confidence?

The acquisition has sparked notable investor interest. BlackRock, State Street, and Daiwa Securities collectively added over 500 million in holdings in early 2025, signaling institutional optimism about RHP’s long-term strategy. Even as some funds exited (e.g., Wellington Management’s 38% reduction), net institutional buying remains robust.

Insider activity further reinforces conviction: Colin V. Reed, RHP’s Executive Chairman, purchased 8,231 shares worth $800k in recent months—a stark contrast to smaller-scale insider sales. This aligns with RHP’s “buy-hold-enhance” playbook, which has historically delivered value through strategic capital upgrades (e.g., the $100M renovation at Desert Ridge).

Near-Term Risks: 2025 Earnings Headwinds and Dividend Sustainability

The construction disruptions through Q3 2025 pose a clear near-term risk. While RHP reaffirmed its full-year 2025 FFO outlook, revenue growth guidance was lowered, citing macroeconomic uncertainty. With Desert Ridge’s 2025 results likely to drag on earnings, investors must brace for volatility in Q2/Q3 financials.

Meanwhile, the 4.65% dividend yield—among the highest in the lodging REIT sector—could face pressure if FFO growth stalls. RHP’s dividend coverage ratio (FFO per share divided by dividends) has averaged 1.5x over the past three years, but a prolonged earnings slump could test this buffer.

Valuation and the Overvaluation Debate

At a forward P/FFO of 15.2x (vs. its five-year average of 13.5x), RHP trades at a premium to its historical range. Bulls argue this reflects the Desert Ridge acquisition’s long-term potential, while bears counter that the 12.7x EBITDA multiple overpays for a property still in transition. The stock’s 10-year annualized return of 12% suggests a track record of value creation, but investors must weigh whether current valuations leave room for error.

The Bottom Line: Buy the Dip, or Wait for Clarity?

Ryman’s Desert Ridge acquisition is a high-stakes bet on long-term FFO growth, supported by strong insider/institutional buying and a compelling dividend. However, the near-term earnings headwinds and elevated valuation introduce execution risk.

For income investors, the 4.65% yield and RHP’s defensive group-booking model may justify a position, especially if the stock dips on Q2/Q3 results. For growth-focused buyers, patience is warranted until post-renovation accretion materializes in 2026.

Final Call: Hold for now. While RHP’s long-term thesis is intact, the short-term pain of construction disruptions and high valuation make this a “wait for a pullback” play. Monitor Q3 2025 results for signs of stabilization and accretion readiness before pulling the trigger.

This analysis synthesizes Ryman’s operational metrics, institutional dynamics, and valuation risks. Investors should evaluate their risk tolerance and time horizon before acting.