Allegiant Travel Company (ALGT) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Sunseeker's Investor Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand your conference over to your speaker today, Ms. Sherry Wilson. Please go ahead.

Thank you, Nita. Welcome to the Sunseeker Resorts Investor Update Call. On the call with me today are Maury Gallagher, the company's Chairman and Chief Executive Officer; John Redmond, the company's President; Greg Anderson, our Executive Vice President and Chief Financial Officer; and Micah Richins, Executive Vice President and Chief Operating Officer of Sunseeker. We will start the call with prepared remarks that will walk through the PowerPoint presentation issued earlier this morning and then open it up to questions. The company's comments today will contain forward-looking statements concerning our future performance and strategic plans. Various risk factors could cause the underlying assumptions of these statements and our actual results to differ materially from those expressed or implied by our forward-looking statements. These risk factors and others are more fully disclosed in our filings with the SEC. Any forward-looking statements are based on information available to us today. We undertake no obligation to update publicly any forward-looking statements, whether as a result of future events, new information or otherwise. The company cautions investors not to place undue reliance on forward-looking statements, which may be based on assumptions and events that do not materialize. To view the PowerPoint slides as well as the rebroadcast of the call, feel free to visit the company's Investor Relations site at ir.allegiantair.com. With that, I'll turn it over to John.

Thank you very much, Sherry, and good morning, everyone. I appreciate taking the time out of your data, understand and learn a lot more about what it is we're doing here and why. I realize that we may not cover everything that you're hoping to. We have about 90 minutes, so we should get a big chunk of it out. But I thought it would take an opportunity and just about every one of these pages to try to explain various points to help you understand the project and why it's built and designed the way it is. So given that, we'll start with the cover page. This resort, unlike any other resort, I believe, in the entire state of Florida, but for sure in Southwest Florida, it's not built that great, meaning it's not built on the ground. It's built 16 feet above the mean high tide line. So you can see that there's a promenade that runs in the front of the resort, and that promenade is a pedestrian promenade like you see in a lot of cities that have waterfronts, beautiful waterfronts. There's about 2,400 lineal feet of waterfront, almost a half mile, where people will [indiscernible] along that waterfront and they have accessible to them along that waterfront, about 18 restaurants will be along the restaurants and bars. So that's why everything underneath the promenade or the cavity below it is parking. So anytime you have storm surges and hurricanes and whatnot, we won't take any of that damage here at the resort. I'll get on to Page 3, again, taking advantage of explaining a little bit about a pretty picture. This one here, you can see an event lawn, it's a very -- it's a good-sized lawn, you can't really tell there. To the left of it, you can see a bar. And that's in front of a steakhouse. I point that out because there's charge points that we've designed all over the resort. And these aren't necessarily factored into the financial projections that you see in this deck. So we didn't try to go through and figure out what every possible opportunity may be. We've identified -- I should say, we've identified where there's opportunities, but we haven't tried to quantify them because we don't have any experience in the market as to what the receptivity will be to these areas. We think that will be significant, but we haven't tried to take a stab as to what that can be. But we make sure we created all these charge points. So this could be used for a corporate function, it could be used for a wedding, it could be used for a family gathering. But this area here can hold upwards of 150 people, if you want to have a wedding. And of course, there is a bar sit right out there to be able to address that, and it could even be served from inside the steakhouse. And there'll be plenty of these types of charge points all over. One that will be very obvious as we go through. There's a rooftop pool and I'll talk about that in greater detail when we get there. With that, I'll turn it over to Greg to go through some of the more important airline data slide that you'll see that kind of help point out as to how we got to where we are that allowed us to do what it is we're going to be doing going forward with the resort. Greg?

Thank you, John, and good morning or afternoon, depending on where you're at, to everybody on the call, and thanks for joining us. Starting here on Slide 5 around Allegiant's resilience throughout the pandemic being unmatched. So since the onset of the pandemic, the airline industry has had a front row seat to be importance of being nimbler in adapting quickly. And our differentiated model is built around the notion of not fighting against change, but learning to maximize the different opportunities change presents. And there are numerous factors inherent to Allegiant, which enhance our ability to adapt and to get better. An example of one is our direct-to-consumer approach. And we saw this during the pandemic's darkest hours. We're interacting directly with our customers, provided valuable feedback around significant interest to travel. These cleanings provided us conviction to keep a wide net selling strategy as feedback suggested our value proposition was very much in play. As such, we decided early on to bring back capacity much more quickly than other airlines I might add. And I think this point is better illustrated on the slide, which compares the change in 2020 departures versus 2019. We, at Allegiant, were represented by the orange line, which shows early on in the pandemic, we led the way in restoring capacity in which that trend continues on to this day, and this wasn't by chance. Again, our data-driven culture, coupled with our directly interface -- coupled with directly interfacing with our customers was the major reason as to why. And now deploying capacity is one thing, but making money on such capacity is another. And as Maury often reminds us around here, there are a few things more expensive than flying around empty airplanes. So if we go on to the next page, Slide 6, I think this helps illustrate that even during the worst year in aviation history, our airline had positive cash flow. Starting with the revenue and EBITDA margin charts on the right, which, by the way, the further to the left on the chart one is the better, and you can see we are in a full position for both. If you compare 2020 to '19, not only did we have the smallest decrease in our annual revenue, we are the only carrier that had positive EBITDA. Simply put, we were the only carrier that brought in more cash than we spent, and I should add that EBITDA margins on this chart exclude any benefit from the CARES Act. So producing such industry-leading margins that isn't new to Allegiant, we had a solid track record of consistently outperforming as further demonstrated by the chart on the left, which compares our EBITDA margin for the industry since the fourth quarter of '16. Prior to the pandemic, we outpaced the industry by an average of nearly 10 percentage points of EBITDA margin by quarter. A major catalyst behind this is our ability to generate incremental revenues, such as our third-party sales. These meaningful earnings lines for us initially started out by selling hotel rooms to our passengers coming into Vegas. It has since evolved into other major areas such as car rentals and our co-branded credit card, and this year should drive more than $5 per passenger or $80 million, most of which flows to the bottom line. And Einstein said, compound interest is the eighth wonder of the world, those that understand it, earn it, those they don't, pay it. Now compound earnings has a similar impact. Reinvesting our outsized profits over the years has not only enhanced our earnings power by maintaining leading margins despite high growth, but has provided additional moats around the airline. In this next page, Page 7, I think these moats and the earnings power of our differentiated model are reflected in the strength of our balance sheet. Our ability to adopt quickly and directly interfacing with our customers to find opportunities to generate revenue allowed us to defend our balance sheet vigorously throughout the pandemic. And as this slide shows, our current cash position has almost tripled since the onset while our net debt position is nearly 4x less. With our balance sheet's unique strength, we are able to turn our focus to reinvesting back into the airline, a much more enviable position than being burdened with expensive debt needing to be paid off.

I'm going to interject for a second because this slide helps kind of give a backdrop to what it is we are facing with -- face with when we are out looking for financing. So obviously, when you look at this, no one could have ever predicted this outlook at any time during 2020. And if they could, the lending environment would have been much different. The outlook was much more dire and therefore, more difficult to borrow with potential rates and terms commensurate with the perceived risk. In that environment, third-party equity capital had no interest at any level. The debt equity deals done in the airline space speak volumes on this environment. As we moved into '21, vaccinations and declining COVID levels opened the door to more reasonable debt conversations. I should also point out that no one has ever approached us about an equity opportunity for all the reasons I just mentioned. Greg?

If we go to the next slide, Slide 8. This is just another look or a different look at our balance sheet, but we wanted to show this view as well because it shows '22 ending balances and helps to frame the pro forma impact Sunseeker is expected to have. And so the charts on this page highlights the actual and expected cadence of cash, total debt and net debt. The punchline really is that we expect to meaningfully grow our cash balances and further reduce our net debt, even as we complete construction of the resort. We are showing the entire $350 million of remaining capital needed to complete Sunseeker assuming that this financing will have been drawn and spent by the end of year 2022. That might not be the exact timing, but regardless, I think the point holds true that our balance sheet should continue to strengthen. And by the way, the ending balances here in 2022, they're not meant to be precise forecast, but just rather to show directionally where we believe we are headed. And with that, if we go to the next page, which should be around fleet. And the point we wanted to get across on this page to is just -- one point is that the strength of our balance sheet is just a major catalyst to drive our airline growth. Our #1 priority is growing the airline at the appropriate base. And as noted on our previous earnings call, we continue to see terrific opportunities around aircraft. Last week, we talked about having signed up all the aircraft needed to save one to reach our ending 2022 target of 127 aircraf. An interesting point on this slide is it outlines our fleet plan pre-pandemic versus current. As you may notice, we expect to have 2 more aircraft than we are planning for the pandemic by next year's end. And of these 127 aircraft, we expect to own more than 85% of them. I might just add that '23 and '24, those are more illustrative, just assuming a 10% growth rate, including placeholder aircraft, we're not -- we don't have commitments or anything going out that far at this point. But the flexibility we have built around our fleet does provide us the optionality to pace our growth at the levels we deem best suited to support the demand environment and our operational needs. And as a gentle reminder, we often refer to our true north of restoring $6 million of EBITDA -- of annual EBITDA for aircraft and well on our way to do this. The last point on fleet, I just want to mention is that the restart and completion of Sunseeker does not and will not impact the pace of growth or capital reinvested back into the airline. So if we move on to the next slide, Slide 10. This is just a highlight. This page just highlights the profile of the stand-alone Sunseeker Resort. Just a couple of points. I won't go through all of them here. But Phase 1 and 2 together comprise the $510 million budget, John will speak to momentarily. The remaining site includes 13 available acres of land gives us even enhanced optionality down the road. We believe Sunseeker will be another differentiator for Allegiant. It's similar direct-to-consumer approach should complement our ecosystem of travel nicely. And particularly with the added power of the asset-light component Sunseeker will bring, such as an enhanced loyalty program, hotel management contracts and F&B branding opportunities should be pretty powerful. With that, I think -- okay. I can take this slide too, John. Slide 12, just over what we've done over the past 18 months. As John mentioned, we have numerous conversations with various counterparties around restarting Sunseeker. And ultimately, where we -- these conversations were centered around what's the best path forward for the resort given that we suspended this construction early on during the pandemic with it around 1/3 of the way built. And after much discussion and consideration, we concluded the right move is to complete the resort. And under a debt structure, its completion will provide us with more optionality and greater value. As previewed on our earnings call last week, we have clear line of sight on efficient debt financing for completion of the project. The structure of this financing is around being secured in a Sunseeker subsidiary and by Sunseeker assets only, however, with the corporate guarantee. Also worth noting our financing -- the financing is expected to fully fund the remaining build of the project with no additional equity contributions from Allegiant expected, and our financing deal to put this into perspective, pre-pandemic, the financing deal had us contributing around $325 million in equity capital, whereas the current deal -- under this current deal, our equity capital has been reduced to $160 million, $160 million we've already spent. So the significantly lower interest rates, flexibility and greater advanced amounts simply far outweigh the benefits in our view of nonrecourse debt. And on this page, I want to highlight an added bonus for us completing the project are the significant tax savings to Allegiant Travel. Given bonus depreciation for federal taxes, we will see a reduction in cash taxes paid of the $30 million in the year of the resort opening. This tax benefit of $30 million would not otherwise been available to us how we spot or sold the project 1/3 of the way built.

Okay. So this takes us onto the budget. I should point out that before this pandemic ever happened, we, of course, were on time and on budget. We had at the time -- we started out, as you may recall, with a $470 million budget. We added to that, call it, Phase 2, which allowed us to build out the waterfront, which was the additional $30 million bringing it to $500 million. And with the passage of time, roughly 18 months during the pandemic, we adjusted it to $510 million to account for carrying costs and some additional dollars but we don't have a final budget yet. By that, I mean, all of us know that there's been supply chain disruptions in just about everything throughout the world, everything from microchips to food and beverage to God knows what. And the construction trades have not been immune to that either. So a lot of it is starting to return to normal, but there's still some unknowns and uncertainty out there. We all are -- we're reading about lumber prices going to the roof. And of course, they come back and believe or not, a resort like this doesn't use much lumber anyway. But everything from sheet metal to you name it, it's all had some sort of a price effect. So we're working fast and furious to understand it more. But right now, we are working with a $510 million budget. And I would -- I believe I'll be in a position come the Q3 earnings call to let you know what we think the final budget will be that we will be working with. If I had to pick today, is it closer to $510 million or $550 million, it would be much closer to $510 million. But again, it's early on. We've been working fast and furious on this, and we'll stay tuned on this. But this is still where we stand, again, $160 million in, borrowing everything else, that's the $510 million. Timing, which is the next slide, I'll wait for that to catch up. There's a -- call it, a spool up time frame, which is what we're doing now. We're out there visiting with all the various subcontractors trying to figure everything out again, starting to bring staff back on the construction site and doing everything it needs to spool back up. Now you can see why we made that decision smartly, not to take the cranes down, if we did, not only would there be a significant expense assertion with taking them down, but putting them back up and the lost timing would have been significant. So that clearly was the right decision, and we did that realizing that we were probably 18 months out. So keeping that in mind, we expect to be pretty much full bore come September 1. And hoping to be finalized, and this is a big hope right now trying to figure out the supply chain by the end of '22. So opening possibly as early as late '22. But where we sit today without completely understanding the supply chain, I think we're safer to assume that it's an early or Q1 '23 opening date. So opening the hotel or operating the hotel, I should say. I'll let Greg tackle these first few slides.

On Slide 17, Southwest Florida outperformed the industry. Really the takeaway on this slide is just that Southwest Florida has been one of the most resilient areas in the country. And this part of Florida, specifically, has always shared an affinity with our customers in the Midwest region of the country. Prior to our service down into these areas. Previously, they were taking I-75 down there. And now we've been able to get these folks down there more often with convenient non-stop flights. As shown through the lens of TSA throughput versus 2019, Punta Gorda, if you take a at the chart on the left there, you can see that it's held up exceptionally strong throughout the summer and fall of 2020. And then if you look at Sarasota and Fort Myers, those 2 locations have both significantly surpassed pre-pandemic levels. And then on this next page, page -- I think it's Slide 18. This just shows how the hotel is stacked up during the pandemic. Really, Florida and areas of Florida outperformed other areas in the country. And then on the right, that shows the RevPAR percentage change by location, looking at a resort versus some of the other different type of locations that you can see a resort outperforming the rest just showing that Sunseeker is in a good spot.

So on to Slide 19. Of course, the previous 2 slides and this slide together really demonstrate how Florida is clearly the tourist destination of choice and Southwest Florida is the epicenter of that. So the capacity change in Southwest Florida has more significance than any other market. While I've had a chance to confirm, if I not had chance to confirm this, I would assume the same or similar growth has taken place in the drive market as well. That happened in a major way on the Interstate 15 from California to Vegas. That's just been off the charts, and it's still continues like that. So I'd imagine Florida is much the same. While you may have been aware or heard about the growth given everyone chasing domestic tourists, these increases in these markets are an eye-opener, that's unbelievable to see how well the Southwest Florida markets are doing. Slide 20. So these are pro forma financial projections. Some of you -- they've been in materials we've had out there. But these are somewhere between 18 months and 2 years old. And we don't plan on putting out any updates because we're not that far out. But I figure I'd provide as much color as I could to use these as a starting point for any further analysis that you may want to be -- may want to do. So the market has gotten even stronger down there, as you can imagine, from a demand standpoint and therefore, ADR or rate. I will have Micah, our EVP and COO, give you further insight on this demand issue. Micah?

Thank you, John. I couldn't agree more with everything that we're seeing in terms of the way Southwest Florida is on fire, having the opportunity to live here in Sarasota for the past 2 years. I've been -- had a front row seat to watching what's taking place in the Southwest coast of Florida. A couple of things, some of this anecdotal and some of it data-driven. I did a couple of searches just this morning to get an idea of what is happening in the market with the properties that we look at in terms of their competitive set. So the 2 different days or actually stays August 23 through the 29th and then also for a week and also September 13 through the 19th. I just looked at the properties that we key on. Interestingly, the rates, the average rate for a week at those properties is running right around $286, and rates in September, believe it or not, which is normally the most challenging month of the year in this area are running around $339. Also interesting to add that JW Marriott, a property that we key on was sold out for both of these searches. I think that bodes really, really well for how quickly this market has recovered and has accelerated. Anecdotally, when I get the opportunity to talk to business operations in Punta Gorda and Charlotte Harbor, it's interesting, the feedback that I get from them, those that are running food and beverage operations, hospitality or tour activities, for example. They report that since March, they are running record breaking volumes in literally every one of their disciplines. So we're pretty excited about what we see, John, and I think it's indicative of the confidence we have in the way the resort is going to perform. Back to you.

Well, thank you very much, Micah. Of course, given Micah's thoughts and insight and then looking at these projections, I look at these years as more like scenarios. Like it's a matter of what scenario you want to predict given the rate environment. It's all -- the resort business is primarily driven by rate. And so this is why looking at these now, it's just a matter of seeing what's been happening in Florida, realizing that these are upwards of 2 years old. That's why I say, just pick your favorite scenario. So which year or scenario do you think is viable year 1? I mean I know it's what I would take, but I think when you continue to do your homework and continue to inquire from us and inquire from others, I think you'll be able to settle on one of those years as being the scenario you think as most viable. But let me give you -- I'll provide a little bit more color and then you can do your own further research or check back with us from time to time, regarding Southwest Florida market conditions. So when you look at this, the total property ADR is, of course, a blended ADR of standard rooms and suites. The difference here is the suite mix for us is 24% of the total, which skews that total ADR much higher than the market in comp set rooms, you will see in the deck in the appendix. That's a very important data point. As a result, when comparing a resort blended ADR to any market data such as STR, Smith Travel Research or comp set data, the resort ADR will skew much higher due to this higher suite mix. The market or STR, again Smith Travel Research ADR is understated due to OTAs like Expedia, Travelocity, et cetera. Most hotels and especially branded hotels like Marriott and Hilton sell a significant number of their rooms through these distribution channels. When they report their room revenue and occupancy data to Smith Travel Research, they report what they receive, which is net of the revenue share the OTA gets. Unbranded hotels can pay north of 20% of the revenue coming through the OTA channels. So branded hotels were changed with leverage dealing with the OTAs will pay around 15%. If you assume 1/3 of the hotel's room nights are through these OTA channels, the margin impact is somewhere between 5% and 7%, depending on the revenue share. A significant percentage of resort expenses are variable. It's a huge data point. So the largest expense is payroll, and approximately 70% of payroll is variable. Other expenses like cost of sales, laundry and linen are examples of other expenses that are variable as well. So keep in mind, when looking at EBITDA margins, Sunseeker will not use any third parties like OTAs and will operate all food and beverage outlets, no middleman. This approach, of course, is consistent with Allegiant. We don't operate with any middleman. And furthermore, when you start leveraging the airlines marketing capacity and other margin accretive opportunities we have, they all speak to why we believe that we can operate with much higher margins, and it's no different than when you look at the airline margin, EBITDA margin compared to the rest of the industry. They also run significantly higher due to following similar practices. Now someone suggested -- when you look at this, it's interesting, someone suggested that full year 2023 total revenue would be $20 million and full year 2024 total revenue would be $50 million. You can see what we're showing. So these numbers kind of caught my attention. So using this table, you would have to cut the occupancy and the $126 ADR -- I'm sorry, I'm going to go to the next page. It's more highlighted there. Let's go to Slide 21. So when you use this particular -- what's good about this, this is a sensitivity study on what happens when the ADR is lower or higher. And it's pretty self-explanatory at our assumed ADR, $252, which is in the previous page, we're looking at scenario 1 or year 1 EBITDA of $35 million. Now coming back to the suggestion I was saying or someone suggested that full year '23 total revenue would be $20 million and full year '24 total revenue would be $50 million. If you look at this schedule and it's kind of alarming how you get that. So when you use this table, you would have to cut the occupancy and the $126 ADR in half to 42% and $83 respectively to get to $23 million -- or $20 million. I don't know how you do that. And then to get to $50 million, you'd have to cut the occupancy roughly in half to 40%, 42% at $126 ADR. Now these assumptions with the absolute best resort in all the Southwest order, I don't know how you can possibly make those. So for those of you who take the time to tour the resort next week, you will understand just how absurd these assumptions are. You can reach the same conclusion by doing some research from home. There is an independent market study done on the resort, and we would be happy to share that with anyone who wants it. All you have to do is reach out to Sherry, and we'll get you that independent market study as well, which you will see will corroborate the data that we are providing here. So next slide, 22. So this is an interesting slide. It gives some historical mix that you see between transient, group and other type of business. Transient, of course, with all the leisure travel, we all fly, everyone seems to be flying right now. The group business is a lot of the business that has gone away. Some of it is slowly starting to come back. But what's interesting data point here, Vegas, I know is always a great example of this, Orlando is another one. A lot of you who may have called trying to book a hotel in the past. A lot of times, when you try to go somewhere, those hotel rooms are full. And one of the reasons why they're full is because they're being taken up by group business. A lot of that group business is booked a year, 2 years, sometimes as many as 3 years in advance. So by the time you make a decision to travel on a particular weekend, that hotel is full because there's not much opportunity for a leisure customer to book when you're talking about upwards of 1/3 of those room nights being taken by group business. Well, now all that group business is gone, a lot of these hotels are able to accommodate a lot more, call it, transient or tour and travel type business because that chunk of the rooms is gone. Now when does it come back and how quickly it comes back is anyone's guess. It seems to be slowly coming back and more so in a market like Florida that doesn't have things like mass mandates and everything else. So we are in the right market for it to come back, but we also are very well suited having a dedicated OTA like the airline to the extent it takes slower to come back. Next slide. So I thought, we wanted to point out a lot of the synergies between, of course, the airline and the resort. So -- we run year round, I don't want to read off the schedule verbatim, so I'll let you spend some time with it. And again, we can always answer questions at any point in time. But when you look at the year-round load factor in Punta Gorda, it runs around 84%. That's what it was in '19, and I'm sure if we went back in prior years, it runs around the same. For the potential to increase that load factor, just because of the further demand at the resort is significant. The same thing that happens with Orlando and Las Vegas when you test having properties added or capacity added at those resorts or areas, the load factors would increase. And then, of course, following that, there'd be more lift into the market. So for us to be able to grow that 84% to something beyond is we like our chances there. And that's one of the reasons why you want to have a larger resort, not a 200-room resort and you want the ability to potentially expand that resort. So that's a huge upside possibility. And, of course, bundling. Bundling, we see just -- when you see us bundling ancillary products, people like the idea of bundling and the perception of greater value when you can bundle components. So whether you're bundling air, hotel, food and beverage, fishing excursions, whatever you want to name your favorite point of entertainment, all of those types of bundling opportunities are present. So we're very excited by that. When you look at the customer database, we have 12.5 million roughly active e-mails in our database. These are one, of course, associated with the origin city. Out of that number, about 7.5 million are potential Sunseeker customers, meaning that they're in those cities, those 54 cities that we currently fly from. So our ability to reach these people is incredible and second to none. And there's a slide in here. We'll go through a little bit in greater detail. But out of those, those number, those folks that we did talk about, there is 149,000 people who have gone out to the Allegiant -- to the Sunseeker database and provided us significantly more information about themselves that's helping us to make more decisions regarding resort operations and opportunities. Then, of course, the loyalty program, and I'll talk about that in a little bit more detail. But the loyalty program has over -- our credit card program has over 235,000 cardholders which, of course, they'll be earning and burning points at Sunseeker unlike everything else in the company, everywhere else on the booking channel. So very excited about these synergies, and I'll talk in a little bit more detail as we get to that. Next slide, Slide 24. This is a pretty amazing slide. It shows -- on the left, it shows all those dots represents a point of origin where a customer came from. And of course, that slide on the right shows where the 3 airports that we fly where they're going to. So between PIE, Sarasota and Punta Gorda, that's where they all end up at. So again, it just kind of demonstrates the strength of the distribution we have into the Punta Gorda area. And PIE, when you look at that, for those of you who are not that familiar, that's only about a 90-minute drive down to Punta Gorda and Sarasota is about 40-, 45-minute drive to the resort as well. This next slide, what's very interesting about this kind of data is we're able to track people who have the Allegiant app open on their phone. So given that capability, we're able to see where you are checking in, at what hotel you are going to even though you may not have booked that on your itinerary. So these are itineraries, if you will, that have booked to all these other hotels in the market area that we're talking about, and at the construct of properties that Micah has referred to and I have touched on as well. So sometimes people who don't really understand an Allegiant customer think that they're at hotels other than needs and it couldn't be further from the truth. There is a lot of people flying the planes coming down here, that are staying at all the best and most well-known hotel product down here. So now when you look at the next slide, Greg touched on this in detail, but it's always good to stress that this property is worth basically nothing unless it's completed. We have no choice but to complete this. We reached that decision some time ago, but we also realize that we need to make sure our balance sheet was at a position before we can execute on that realization. So we're there now. Greg went through all the obvious. But once you get to this point, I mean, we have all kinds of options. We've talked about having optionalities being the absolute key for everything we do as a company, but especially this resort. So once we complete this resort, we can do any of these bullet points. I'm sure there's other people come up with, the obvious is we can own and operate the resort that goes without saying, we can sell and manage the resort if we chose to. Now obviously, trying to sell a resort right now, there is 0 interest. But if you sell a resort when it's done, it's completed, it's operating, it's performing anywhere near these financial projections that are in here, there would be no shortage of people lining up to buy the resort. There's a lot of buyers out there for hotel assets, especially some of the most successful ones in the U.S. We can obviously find a partner. There could be very compelling partners out there who add a lot of value by virtue of the relationship you could have. So whether it's a 10% partner or a 90% partner, all of those are options anywhere up and down that percentage interest. Without doing this, we would never be able to launch the asset-light business. So as we get into some of these slides, I'll explain that a little bit more, but asset light isn't just limited to the Sunseeker brand. And what we may be able to do with that, whether it's franchise managed, et cetera, but there's other opportunities from an asset-light standpoint that will present themselves. It's always been our intention once we finish the resort to put a mortgage on the property. It's the best form of financing. It's always the cheapest. The likelihood or the timeframe for doing something like that is typically a year after operating. Most lenders of this type want to see results after a year. So you're somewhere like 3 years out, from us being able to put a mortgage on the property, but the interest savings alone on such a transaction would be significant. Obviously, you can divest it completely. There's no shortage of REITs and buyers out there that present all different ways of being able to divest the property, but that's always an option as well. And maybe they're not so obvious, but obvious to some is you can always -- if we chose to sell the suite towers as condos and monetize those as well. All of these units, every single one of those suites, all 189 of them have full-blown kitchens, they all have stand-alone capability. So they very, very easily could be sold off as a condo if we chose to ever do something like that. And then of course, one of the most exciting things about the resort when you finish it, is the value of the remaining 13 acres. Now that, of course, has 0 value without completing the resort. But once you complete the resort, the value of that 13 acres is unbelievable. And especially when you look at the stampede of people, opportunity, development, et cetera, going on in Florida right now is nothing short of amazing. So once you finish off the resort, you have all this excitement, you have all these restaurants and bars and entertainment and what have you, there would be no shortage of developers who would want to approach us about being able to buy that land to do exciting things given the proximate location of all that entertainment, if you will, that we would have on property. Okay. So the next slide here talks about the not so obvious asset-light opportunities I was talking about. So every one of these food and beverage brands that we created at the resort, we own them. There we have no tenants coming in, we've developed all these brands, we brought on the expertise to do this, we talked about some of these individuals in the past. Micah, of course, spoke on the phone already. Jason Shkorupa, you've met him in the previous Investor Days. These were all people as well as myself who have been around brand development, restaurant brand development, and we've developed 19 of them. One of the examples I thought I would point out is the Allegiant Stadium. I think all of you are probably aware that Allegiant have -- we have the naming rights on the Raiders stadium here in Las Vegas. But unlike everyone else who has naming rights, we actually own this name. So we were one of the only ones, I think the only one who went out and block that name before anyone else could. And now it's our brand, and we can go use it anywhere. And the first place we're going to use it is at the resort, and we're going to use it as the Allegiant Stadium Sports Park. So an incredible opportunity to put that brand on both coasts, and we're excited about doing that. But that's a brand, of course, we could take it anywhere you can stick in an airport, you could stick in any city, it's not Raiders specific. It's a very generic brand. It's just Allegiant Stadium. So we love it. We love the opportunities it presents. Someone can come to us and Philadelphia and say, "Hey, I want to put Allegiant Stadium on my sports bar, how much of a royalty you want to charge me?" So those are the kind of asset-light opportunities that would never present themselves if we didn't finish off this resort. Next slide. So this slide is intended to show what this remaining acreage looks like. You can see the remaining acreage is actually -- it may not be properly depicted here, but it's actually larger than what the acreage that's going to be used will occupy. So anything adjacent to a waterfront like that, anything with views of the waterfront, which that entire set does, and anything -- that having the walkability to all these amenities at the resort is incredible. And of course, for us to do deals with any developer if we chose to go that route, which allows occupants or owners to be able to use pools and spas and gyms and restaurants. That's just sweetens any opportunity, which makes this site that much more valuable. Keep in mind, we paid something like $30 million for the entire 24 acres. I'd imagine that remaining site is probably worth at least double that, but just my guess, no homework on that. Next page. This is the one I was mentioning that I would go into a little bit greater detail about these 149,000 people. So we had -- before we stop due to the pandemic, we had something like 800,000 people, we already have 800,000 e-mail addresses. These are people who opted in, clicked on something because they want to be part of the Sunseeker story. Out of those 800,000 people who opted in, 149,000 actually clicked on a registration button. And the top half of this schedule, that's the data that they provided us. They told us how long they wanted to stay. They told us their age. They told us whether they are retired, semi-retired, et cetera. When they do travel, what season they want to travel in. In some cases, they are willing to travel in every season, which is why that doesn't add up in some people's minds. And of course, they even told us how many people they would typically travel in their party. So what's amazing when you look at the top half of the schedule and see that there's over 2,000 people that want to stay more than 6 months. It's just amazing, but the demographic data supports that. These are people who are largely retired, a semiretired. I think that what you have to look at this long-stay product, this is an alternative that's never been in a market to a second home, to Airbnb, to timeshare, right? So anyone who's ever doing Airbnb, you might be able to do research on the home you're going to stay in, but it's hard to figure out whether your neighbor has a dog gapping in the backyard, what time the garbage truck comes and delivers garbage, makes all this kind of noise, does all that kind of stuff and the walkability to get anywhere can be a challenge. At least you can research it before you go, but it can be a challenge. Everything about this product is known. There is -- anyone who has a second home, being able to stay here for 6 months is far cheaper than owning a second house. And anyone who's dealt with timeshare, this is a far better option. So I think there's been a realization on at least 2,000 of these people, and I'm sure you can go up that ladder to even people want to stay 3 to 6 months. These are people who are looking at this as a viable option to staying at all these what had traditionally been the only other alternatives in Florida. So when you add up -- and of course, when we calculated the hypothetical information below, it was just assuming people on average would stay at the midpoint of the time frame that they selected. So when you add all that up, there's something this group of people, this 149,000 people represent upwards of 2 million room nights, potential, 2 million potential room nights. And depending on what capture percentage you want to assume, that shows you how many room nights we could generate just off these 149,000 people, forgetting about the other 650,000 names in the database. So in Vegas, for instance, we run close to a 15% capture. That's with all these competing distribution channels. And if we generated 290,000 room nights just off this segment of the people, we would sell out the resort and then some, we would have to find additional products for these people to stay. We don't have that many room nights. Now keep in mind, once we start -- well, now that we're starting this project back up, that 800,000 will continue to grow, that 149,000 will continue to grow. So we will continue with these efforts of tracking this type of details. We'll get into the appendix. I won't spend a lot of time here. That's why it's an appendix, but I just wanted to point out a couple of important points, that will help you understand this information. And again, whether it's in this meeting, if you had a chance to look at or in a subsequent one-on-one or call, we're happy to spend more time on any of this. So when you look at the comp set of properties, one of the things that really sticks out to anyone who looks at is the age of these properties. The age of these properties is very old. There's only one property less than 10 years old on this list. There's only one property that has more than 500 rooms. So this is, call it, the comp set that we have to -- we're competing with. So you got to like your chances when you're looking at this. Now all of these properties were built that great. So if you're looking at someone even you take the Marriott that's been here for 41 years, I mean, how many storm surges and mold and asbestos and everything else you can imagine, have they taken over 41 years is anyone's guess. But when we opened, we've had 0 and we won't have any going forward because we're 16 feet off the water. If these properties ever had to try to upgrade to try to compete against us, they have all kinds of issues, not the least of which is code compliance. So if you're 40 years old, you don't comply with any existing codes. And depending on how extensive of a renovation you did, you would have to upgrade to all those existing codes. And that's on top of cleaning out mole and all those other kind of issues you might have. So from that standpoint, it will be very difficult for anyone to react to the product we're going to bring into the market by trying to upgrade their own without a significant expenditure. And none of these have a long-stay product. So not one of these hotels that we're showing here at comps have product or a long-stay product that we have with the full-blown built-in kitchens. Put it this way, they couldn't sell whatever it is they have as a condo. Mean there's no market whatever type of product they're offering because it doesn't have all the amenities you would need. And of course, no one -- none of these properties does -- has anywhere near the food and beverage and entertainment that we have. It's such a what I would call a category killer when you open up with that much entertainment and fun things to do, that would be very, very difficult, if not impossible, for anyone to compete, nor could you ever go find 24 acres on the water front. There's various scenarios. Again, you can read through that we kind of look at on how to reach -- we have 85% occupancy model. This kind of helps people understand how viable is that for us to get 85% occupancy. So this explains the various scenarios that we presented here that help you understand the different ways that help you get your arms wrapped around how we could get to 85%. If you go to Slide 34, what this -- I just wanted to point out here is that when I talk about running 85% on an annual basis, it obviously doesn't require that you have to run that every month. So this shows you what the comp set, those properties that we showed in previous pages, what their monthly occupancy is? So obviously, there's a lot of variability in that occupancy. And it shows -- and you can, of course, see the seasonality. But in the subsequent slides, it also shows that what we would be doing to get to an 85% occupancy realizing the variability given the various months. Just a couple of things to point out on Slide 35. When you look at these itineraries on here, these, of course, are Allegiant itineraries. These are round trip itineraries. I wanted to point that out because we use the round trip itineraries only to be able to calculate the length of stay. During this same time frame, there's something like 135,000 one-way itineraries we had as well during that same time frame. Of course, you probably ask why would someone book a one-way itinerary? When you see 2,000 people want to stay 6 months, I'd imagine a lot of those people who stay for a long period of time, they book the front end of that stay and leave the back end open until they figure out when they want to go home. So it all strings together. But it's a very healthy data point to realize that when we're talking about take rates and stuff like that, we're only talking about those on these round trip itineraries. We're not even factoring in the 134,000 one-way itineraries that are also out there. And again, I wanted to point out that the Vegas take rate, when you look at a schedule like this, we're running closer to 15%. It's definitely in the, call it, that 12% to 15% range. But right here, we're looking at to get to 85% on this schedule. We look on average, 11% take rate. And again, without belaboring the point, in Vegas, when we have a take rate like that, they have competitive distribution channels, Expedia, going direct to hotels, et cetera. We won't have any of that, either come through the airline or you come direct to Sunseeker. And I think the last slide, I'll just take you to maybe Slide 38. So when you look at this slide here, you can see that the difference in what we've modeled on a monthly basis is what we think are -- what's in our model to get to a $252 ADR. Keeping in mind that, again, that's that blended suite and hotel ADR, suite and yes, standard hotel room ADR to get to $252. It shows what the comp set ADRs were in the same year, 2019 versus what we are showing for, let's call it, 2023. And that difference is, of course, going to grow over the years because Micah gave you updated data there that these rates for the comp set are actually running much higher. But just using what we are going to put out there for '23 against what they had for '19, we are significantly priced below, at least on average, over that time frame, 27%. And with -- that's closer to 30% to 32% when you keep in mind that these ADR rates are understated, as I pointed out earlier, by virtue of the netting effect of the OTA fees. So that -- we are actually significantly lower than the 27%, but it's a good starting point. But that's one of the reasons why not only the power of the airline, but we intend to price below comp set to be able to drive that higher occupancy. And of course, for us, you get better than 85% occupancy, which we think is doable in the out years, especially. It requires an outperformance in what's traditionally the slow time frames. So right now, when you look at the schedule, we're showing -- we've modeled a 49% occupancy in the month of September. I mean I like our chances to do better than 49% as we open this resort and move out. So that's where the upside is beyond the 85% occupancy is when you can do better in these traditionally slower months. And then on the last page, Page 39. What I wanted to point out here is just the take rate. So this schedule -- this just takes the assumption that when we open, we just get our fair share. Even though we have the best product in the entire market with most amenities in the entire market, if all we got was our fair share, what type of the take rate would we need? And what this shows is there's no month where you need a take rate above 5.2%. And on average, you need a take rate of 3.6% to be able to get to an 85% occupancy. So this is a pretty compelling page to be able to demonstrate why we think the 85% is not a finest guide, but it's a doable realistic number, especially when you have the degree of amenities and you have the pricing that we're looking at pricing the product at. So I'm going to give you just a little bit more information and then I'll open it up for Q&A. I think this will -- you'll find this helpful. So this is -- so a significant part of the resort thesis was the synergy around the Allegiant vacation travel or focused business model, everyone getting on the plane is going on vacation. Sunseeker already has, as I pointed out, 800,000 e-mails in the database, and that number is expected to grow to over 1 million by opening day. Of those 800,000, as I mentioned, 140,000 took that further step and gave us all that additional data. The room demand, as I pointed out, is significant and supports the decision to build the suite product we did when you look in particular at those people who want to stay longer than 30 days. And then when you look at, of course, the 134,000 one-way itineraries, that's also consistent with this long-stay mindset. I will book the return when I decide to come home. Allegiant is a dedicated OTA for Sunseeker. No hotel in the world has a dedicated OTA, and no OTA has the leverage of an airline database. Allegiant sends out 40 million e-mails a week currently offering nothing but a seat on a plane, sniping that offer with a Sunseeker ad is not only a no-brainer but free. These e-mail offers will begin at least 1 year from opening when we officially put the resort inventory on sale. Selling in experience or experiential marketing is more powerful than transactional marketing. The richness and variety of the e-mail content will grow as we get closer to opening. The recently announced loyalty program, the combination of a loyalty program covering the airline and resort complemented by a very successful credit card is synergy at its finest. Earning and burning on a 100% of vacation is unmatched and upselling the credit card along the journey is at a marketing dream. The number and variety of BOGO transactions, for instance, the buy one get ones that we use for finding credit card people. Think golf, spa treatment, food and beverage, et cetera, at a resort are endless and create a sign-up appeal like no other. Who wouldn't want a credit card given the total vacation spend, especially for a long-stay guests. So from a financing standpoint, as I mentioned in the earnings call, we have signed a nonbinding term sheet for $350 million. We have started reviewing loan docs and expect to finalize that transaction in the next 30 to 45 days. When finalized, the agreement will be filed with an 8-K, so you'll have complete visibility. Since finalizing loan docs is still in negotiation of various deal points, it would be premature to further comment, so we won't. But again, you'll see the final docs shortly in 30 to 45 days. I want to touch base quickly on financial reporting since we've had this gap in time, so no change to our approach here. We will continue to separately report resort CapEx and pre-open expenses along with guidance prior to opening. That, of course, will begin with Q3. We are continuing to update budget numbers as we further understand any and all supply chain disruptions, so I've no updated information in that regard today but will in the Q3 call. Not only are we trying to understand numbers, but any possible schedule impacts. While we believe the Q4 '22 is a possibility, Q1 '23 is a time frame we are thinking of at this very preliminary stage. This time frame will be updated as well in the Q3 earnings call. As a reminder, when we shut down the project, we are on time and on budget for an April '21 opening at a total cost of $500 million, inclusive of everything like preopening. Then maybe I'll ask Greg to quickly comment on the write-down that we took earlier and the cap interest that will start up again. Greg?

Sure. Thanks. Happy to, John. In terms of the write-down, it's probably what, 16 months ago, and I think we reported this to our stakeholders at the -- early on in the pandemic, it just brought such uncertainty around the project is that the right and appropriate thing for us to do is take an impairment charge on the project. And that impairment charge, I think, was roughly $130 million. So it excluded the land, which John mentioned, about $30 million of value in land. So that was written off, and that's taken off the book, today where we sit, we have about $30 million on the books for the project. And then in terms of cap interest, the way I think about it is just a cap interest is the cost of borrowing to construct a long-term asset. We'll capitalize that. And depending on the pace of construction spend, I would think just this year, it will probably be nominal, roughly about $1 million or so through 2021 in terms of cap interest. But next year, you probably see around $10 million or so in cap interest. So we'll provide more detailed guidance next quarter in our updated earnings call.

Well, thank you, Greg. It's great. I got one last thing to cover and then we're going to open this thing up, and I just want to last but not least touch base on the management team. So when it comes to management team, we have assembled a dream team. These are the very best in the business, and this talent does not exist in Florida. By way of example, [indiscernible] opening a 785 key resort, as you know, which could be a daunting task for most. We recently just bought back on Paul Berry, who's our VP of Hotel Operations. He's opened 5 hotels in his career, each with more than 3,000 rooms. Most of you already are familiar with, of course, Micah, who was talking earlier and Jason Shkorupa, so no need to rehash their background. But goes without saying the talented people attract talented people. The very best want to work for the very best. You have similar examples in the airline space, such as Andrew Levy, who is a former Allegiant guy. He had no problem attracting talent and capital. And I'm sure if Scott Sheldon wanted to start an airline, he would be able to do the same thing. Please don't Scott. The very best to eliminate execution risk and have a track record of success. And with that, we'll turn it over for questions.

[Operator Instructions] And your first question comes from the line of Conor Cunningham with MKM Partners.

On the EBITDA margin guidance for the resort, you're over 30%. I think the airline was at a similar rate in 2019. So in terms of the bundling opportunity between the 2, which leg of travel would you be willing to scale back on margin to drive potential incremental margin on the other side? Does that make sense?

Yes. So when you package anything, there -- you still have to comply with GAAP, right? So when you have -- when you -- let's say you package up a hotel room with an airfare purchase, regardless of what you charge, you have to allocate revenue in the same proportion as their retail values, right? So if, call it, the air was $100 and the room was $400, so it was $500 retail value and you charge $400, and that since you gave a 20% discount, it would be discounting each one on a relative basis. So we have to comply with GAAP when it calls -- when it comes to how you allocate revenue. So if we got into personalized marketing, for instance, and offered we're willing to offer a 10% discount, but we presented it to one customer as free golf, another customer is free airfare, but the net effect is a 10% discount, you still have to allocate it in a proper way. You just chose to present it in a different form, and that's called personalized marketing and any business that has multiple business lines faces that same issue. So we'd be no different and we have to follow GAAP accounting. So no one is, call it, sacrifice to the benefit of another, you're equally impacted by whatever discount you choose.

Okay. Okay. And then I was a little confused with what you were talking about. So are you still looking to partner with someone once the resort is up and ready? You mentioned potentially licensing it or putting it up for sale. Can you just clarify what you mean there?

Yes. What I was making sure that people understood is that we're willing to do anything. But beyond willing to do anything, we have a fiduciary responsibility to listen to anything people may approach us about. So we can't or I can't sit here today and say, hey, if some compelling partner came to us and wanted to buy half the resort, not only would we listen to them, we would have to listen to them, right, because of that fiduciary responsibility we have. If it was something that made sense because of just the value that they bring to the table, we would most assuredly look at it and would be willing to execute on such a transaction, if it was in the best interest of shareholders. So that's always a caveat. Whatever is in the best interest of shareholders, including selling the resort, we would entertain that, and we would be obligated to entertain that.

Your next question comes from the line of Catherine O'Brien with Goldman Sachs.

So maybe one, first is kind of on seasonality and any potential impact the hotel may not have. So just -- obviously, you guys have a flexible schedule, kind of like backbone of the company. What's the typical seasonality on your flying to Southwest Florida? It looks like maybe kind of your classic summer, June-July versus a Jan-Feb, which I imagine will be a little bit more peak. What's the typical change between those 2 periods? And could that change as you try to market [ once you ] go into the open?

Catie, it's Greg. I'll kick it off. And Drew Wells would've loved to have been here, but he had the honor of having twins earlier in the week. So unfortunately, Drew is not here who would give you a much better answer.

Congrats to him.

Certainly congrats to Drew. So -- but no, I think the typical seasonality pattern in the area. There's a slide that John provided, I think it's Slide 22 in the deck, the right side, which kind of shows Allegiant where we peak up and down early on in February, down there, that's a nice seasonal time into March and then also in the summer. But yes, if you just reference that Slide 22, I think that, that's a good starting point. And what I would take away is that we're going to -- we'll fly the airline on the pattern where the demand makes sense. Nothing will change in that regard.

I think the other point you can look to, Catie, as well, is Page 35, that shows the Punta Gorda round trip itineraries. So it stands to reason those items will track the same seasonality that you're talking about. That's on Page 35.

Okay. Great. And then maybe one more for you, Greg. Just as we're thinking about -- which I appreciate you guys are going to start reporting the non-airline again, that will be really helpful. As those start to come back to the business, how do we think about the ramp up there? I know it was very minimal by at the end of '19. But as we get closer to open over the course of the next 18 months, how should we think about that ramping up? I think end of '19, you're at about $0.003 non-airline. I know a big part of that was [ GeForce ] and Teesnap, which are no longer part of the business. Just trying to get a rough sense of how we should think about the non-airline operating costs ramping up over the next 18 months?