Ryman Hospitality Properties, Inc.
Q1 2008 Earnings Call Transcript

Published: 1 May 2008

[Operator:]

Welcome to the Gaylord Entertainment Company’s First Quarter 2008 Earnings Conference Call. Hosting the call today from Gaylord Entertainment are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. David Kloeppel, Chief Financial Officer. They are also joined by Mr. Mark Fioravanti, Sr. Vice President and Treasurer and Mr. Carter Todd, Sr. Vice President and General Counsel. This call will be available for digital replay. The number is 800-642-1687 and pin number is 43967668. At this time all participants have been placed on listen-only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to Mr. Carter Todd. Sir you may begin.

[Carter Todd:]

Good morning. My name is Carter Todd and I am the General Counsel and Senior Vice President for Gaylord Entertainment Company. Thank you for joining us today on our first quarter 2008 earnings call. You should be aware that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including statements among others regarding Gaylord Entertainment’s expected future financial performance. For this purpose any statements made during this call that are not statements of historical fact maybe deemed to be forward-looking statements. Without limiting the foregoing words such as "believes" "anticipates" "plans" "expects" and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements maybe affected by the important factors among others set forth in Gaylord Entertainment’s filings with the Securities and Exchange Commission and in our first quarter 2008 earnings release. And consequently actual operations and results may differ materially from the results discussed or projected in the forward-looking statements. Gaylord Entertainment undertakes no obligation to update publicly any forward-looking statements whether as the result of new information, future events or otherwise. I’d also like to remind you that in our call today, we will discuss certain non-GAAP financial measures and a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures has been provided as an exhibit to our earnings release and is also available on our website under the Investor Relations section. At this time, I’d like to turn the call over to our Chairman and Chief Executive Officer, Colin Reed.

[Colin Reed:]

Carter, thank you. Good morning. I am happy to welcome everyone to our first quarter's 2008 conference call. As always, I will begin by offering some commentary on our business and the Hospitality Industry and then David Kloeppel, our Chief Financial Officer will provide more color on the specific performance about properties and our outlook moving forward. We will conclude the call by answering any questions that you may have. By now, I am sure you've all seen this morning's earnings release. Well you can see that our results are inline with our expectations and consistent with what we announced a few weeks ago. They only tell half the story, and don’t fully explain how busy we have been during the last few months. We remain happily consumed with many mission critical initiatives. The opening of the Gaylord National outside Washington DC, moving forward on several expansion programs at our existing properties, and our continued efforts to enhance the experience of that customers at each of that properties. And I'll get into these subjects more in a moment. While I would prefer not begin discussion of the first quarter on a low or summary note, I would be remiss, if I didn’t reference the current state of the economy on what we are seeing relative to a business and industry. As we all know consumer confidence across the US is being affected by the daily prognostications in the media that we are in a recession. You can't pick up a news paper without reading about the difficult economic headwinds the economy is facing. This is a direct off shoot from the housing mortgage knockdown that has generated so much pressure on the economy. Most observers believe that the current downturn and fears about spending will negatively impact the hospitality and leisure market place in 2008. While we remain very confident in our strategies and how our unique business model cushions us for being seriously impacted. We are well aware of the fact that Gaylord may not be completely immune to these broader economic conditions. We have seen the pressures weighing on the entire macro environment affect that competition and we are carefully watching how consume spending levels will impact that business over the time. With that said, we had a pretty decent first quarter. And some of you may ask, how is this possible? My answer remains much the same this quarter to what we had described before, namely a unique business model is not waited to the transient and leisure customer. You heard we discuss the benefits and opportunities created by a differentiated strategy and if you will hear to me, I would like to take the time to remind you of them once again to help preamp similar questions that we got three months ago, as to why we are not slashing guidance. Our core business the meetings and convention groups that regularly fills our hotels remained solid. The larger majority of that business comes form these groups, they book years in advance. And when they are on the books in contract for Groups tend to travel, stay in our hotels, utilize our meetings rooms and eat in our restaurants. So why does this difference matter? Catering groups is many benefits, but it's especially advantageous in this economic environment. While other big box hotels are struggling to fill rooms with transient guests, we have already secured the vast majority of our occupancy. As we told you on the last call, we came into the year with approximately 70% of our expected occupied rooms on the books. Advanced bookings in the quarter, a key indicator of the future health of our business were also very strong. In fact on a same store basis, it was the second best first quarterly performance on record, with more than a quarter of a million future room nights booked during the first three months of this year. Moreover advanced bookings at the National improved just over 270% over the first quarter of 2007. Needless to say we are pleased with these performances. So what allows us to perform well despite a deteriorating market conditions? Our relative overall positioning is just better than those with whom we compete. We poses superior product and our service levels are the best in the sector. Gaylord properties and the experiences they offer have several key differentiators that separate us from the other hospitality companies. It all comes down to striving for perfection in every aspect of the guest experience. We build and maintain the greatest properties with world class accommodations and smartly designed meeting friendly layouts and then hire the very best people to complete the package. Each quarter we watch our efforts in these areas translate directly into meeting planners increase loyalty and confidence in our brand. Our customer's satisfaction rates continue to get better and we consistently attract high quality, high margin groups with strong outside-the-room spend. I am also pleased to mention that these groups often exceed the minimums for rooms and food and beverage from their contracts. As we have reported in certain previous quarters occasionally a group or groups may not pick up as expected for varying reasons, but in first quarter pick up was within a normal range. More importantly, Gaylord standing as the leader in this space allows us to command premium rates and maintain strong occupancy levels. With the focus on cost control and prudent property management, we can then translate this revenue into solid CCF performance and on that subject we are quite proud of the substantial increase in CCF this quarter for both the hospitality sector and Gaylord Entrainment Company which Dave will discuss momentarily. Central to our superior customer satisfaction levels are the performance of our STARS. Remember we call our employees STARS. These types of finical result simply would not be possible without our STARS and the service based culture we have. These stellar individuals are each personally responsible for our success as a brand. Thanks to their dedication and consistent hard work, meeting planners know that their guests will be well taking care of during any event. Now we are thrilled to have welcomed approximately 15,000 new STARS for the Gaylord family this quarter with the addition of the Gaylord National to our portfolio. For those of you who haven't yet had the opportunity to tour the facility during a visit or at last weekends grand opening festivities. I invite you to take a trip to Prince George's County as soon as you can. You will be very impressed. We are focused on opening the National for quite a while and we are pleased to welcome our first quests on schedule at the very end of last month. Now I cannot stress how difficult it is to open a hotel as large and as complex as the Gaylord National. In fact casino hotels aside the Gaylord National is the second largest hotel, when you just mention room count, to ever be opened at one-time in the entire nation. But when you take into consideration the size of our convention facility, it is absolutely correct to say that our project is the largest non-gaming hotel convention center and resort ever to be opened at one-time in this country's history. Many of you who follow us know we experienced several unforeseen hiccups at the opening. Nevertheless, overall initial feedback from our customers, have been extremely positive. Unfortunately, the late delivery of rooms caused by tidiness in the construction process created some compression in the installation process and caused in excusable inconvenience to our guest in the first few days of operation. We aggressively engaged with our general contractor to ensure that there is adequate remedy to this situation. Nevertheless, the overall feedback from meeting planners, who have visited the Gaylord National, since the beginning of April has been extremely positive and our performance for the first month of operation is quite encouraging and I think Dave is just going to give us some information on that in a minute. With all that said, our enthusiasm about the long-term prospects for the property have not waned a bit since opening. We are still very confident this property will be known throughout the region as the very best meetings hotels. Again our STARS proved crucial to our success and thanks to their efforts, guest of the National are now enjoying customer service experiences more inline with our exceedingly high standards. We will continue perfecting our operating model over the next few quarters. But let me assure you that the National is already the leading, meeting and convention property in the region. With substantially more meeting space and guest rooms than any other Washington DC area hotel and a facility that is remarkable to say the least, we are confident in the success of this property and the value it will create for our shareholders. Now let me talk about growth, but approaching from slightly different perspective. Over the last 20 year or so I have been fortunate to have be involved with Mike Rose, the Ex-Chairman and CEO of Holiday Cook promise and hires in the conceptionalization and execution of multiple large very successful hotel and gaming brands. The strategy conceptionalization was consistent from brand to brand, that is make sure the sector is deep and growing, know what your customer wants, fill the capabilities, and store people centric culture and execute much better than your competition. Seven years ago at Gaylord this model was introduced and since this time we have created a distinctive brand that our customers distinguish as superior to those with whom we compete. Our strategy is robust and is generating decent growing returns on capital, but just like in the early and late 90's external events crop out, they had to be incorporated into the brand strategies. Now what has happened in the financial markets since December of '07 is extraordinary and unprecedented and my sense is the dislocation is far from down. Experienced tells me that in times like these we must modify the pace of execution of that strategy to ensure a long-term quest becomes a reality. Consequently until the credit markets show some sign of recovery, we are going to be prudent on how we spend our capital. You will hear from Dave in a minute about guidance for the rest of the year. But happily, because of our strategy it will conclude, we feel confident about our cash flows. Also those of you, who follow us, you know that we have very decent bank lines with hundreds of millions of dollars available and further more we have no refinancing needs until 2010. Now having said that a decision regarding La Cantera was a direct result of the reality of the environment we are in. It's not a strategy change or us some how abandoning growth. It’s a temporary suspension that will allow us to play another day and/or deploy some of that capital into the purchase of what we consider to be a very undervalued stock. After our pre earnings announcements in which we discuss the first quarter and our decision regarding La Cantera, I took the time to read most of the analyst reports that were published. To term of those reports were pretty wide from -- it’s a shame about La Cantera, it would have afford a good growth too. I wish this company will concentrate on its balance sheet. The point is you could make a case for the both extremes, but our tactical execution will be somewhere in the middle. We will do the necessary work to get our expansions ready for construction and will start each expansion when we believe the time is right. Also we will be conservative as to where we spend additional capital perusing other development deals over the next 6 to 12 months. We will also be cautious to only spend money on areas that build the future capabilities of the brand, but we will not abandon practices that are critical to the brand. Navigating a sloppy environment is part of the responsibilities of management and experienced tells me that executing well through this period will make us a better business when the environment changes. As we look forward to the rest of 2008 and because we been to able to achieve that targets for this quarter and because we continue to deliver strong results across all of the metrics that define our business. We are confident in our guidance and more importantly confident in how our business will perform over the next several years. With that, I would like to turn the call over to Dave, who will go through the details of our financial results.

[David Kloeppel:]

Thank you, Colin. It has been a very busy and exciting quarter for us here at Gaylord Entertainment. We opened the Gaylord National property, brought the La Cantera transaction to a satisfactory conclusion and continue to make good progress on several development projects. Additionally despite the general softer economic environment, we were able to deliver financial results that were inline with our expectations and budget. Solid average daily rate growth and advanced booking levels, locking in more than 70% of our revenues for '08 at the beginning of the year translate into the increases in RevPAR and total RevPAR for the quarter. Overall the first quarter highlights, why Gaylord is unique relative to others in the sector. So our many hospitality businesses have reported a signs of weakening domestic performance, our group meeting and convention business model has continued to perform well. We’ve said time after time that our business will perform -- what proved to be more resilient in economic downturn and this quarter's results have shown that to be true. This quarter we set records for advanced bookings at the Gaylord Opryland property and Gaylord National and our bookings pipeline gives us confident for the full year of 2008 sales will be solid. Also outside-the-room spending levels were robust both in terms of the contractual and discretionary spend of our guests. Banquet and outlet covers increased across the brand as did the average check suggesting the both meeting planners and their attendees are still taking advantage of our extensive outside-the-room offerings. In fact, if you look at spend per occupied room at our properties, it increased by 6.2% in Q1 of ’08 over Q1 of ’07. In addition the systems we have in place to track our group and associations travel behavior, are in place and are working. Our property managers work closely with groups traveling to our hotels in the near future to accurately forecast attendance levels at events and open any excess inventory to transient and leisure guest. While attrition increased approximately 5% this quarter, there was limited financial impact at our yield management practices had anticipated this modest decline in attendance. This is one of the reason we were able to grow transient room nights in the quarter by 11.1%. While these results are encouraging, we remained mindful of the transient business is still a biggest risk for the peak summer and fourth quarter holiday seasons. Before I get into the highlights for each of our properties, let me first provide you with some of our perspective on the economic environment of the hospitality industry. Our analysis of pierce financial performance shows the group business is still growing across the industry albeit at a smaller pace than in 2007. I should note the companies in some specific markets namely Las Vegas, are reporting softness in their group performance. However, from our standpoint with group demand intact and limited new supply coming online, we remained confident with our full year same store guidance for 2008 and continue to have a positive outlook for ’09 and beyond. As we sit here today we have realized or have on the books over 80% of our expected occupancy for all of 2008 and that gives us good comfort with our 2008 guidance. With that let's take some time to discuss the financial highlights from each of our properties. In an effort to save more time for Q&A, I will discuss only the more critical metrics and leave you to read the full financial results on your own. At Opryland an increase in ADR, the continued success of outside-the-room offerings and strong banquet services drove the 14.6% increase in the properties revenue and contributed to 11.9% increase in total RevPAR. Additionally, our continued focus on cost management contributed to a 78% increase in consolidated cash flow during the quarter, which resulted in a 1040 basis point increase in CCF margin. If you eliminate, the effect of the $2.9 million, leased by our cost that impacted the first quarter of last year, the CCF margins for hotel increased by 590 basis points. We should also note that the now complete room renovation program at Opryland took 5,170 room nights out of available inventory in the first quarter. Now turning to the Palms, the decrease in ADR at the Palms is largely the results of the shift in the association business in the quarter and is partially attributable to when the Easter Holiday fell this year. As you all you know, Easter is the time of the year when group travel weakens and trended demand in Orlando picks up. Consequently, during the early week of the month of March we traded normally high rated association business for transient customers. Total RevPAR increased by 3.6% driven by an increase in occupancy and the popularity of our dining and entertainment offerings especially our newly introduced [soda] sushi bar at the palms. First quarter CCF increased to $20 million and CCF margin expanded by 30 basis points to 36.3%. Let me move on to the Texan. RevPAR at the Texan was flat for the quarter, largely due to the increase in ADR being offset by the decrease in occupancy. A shift to lower-spend groups primarily related to the Easter holiday and additional expenses for our outside-the-room offerings contributed to the slight decrease in total RevPAR. CCF declined by 3.6% resulting in a 90 basis points decrease in CCF margin compared to 2007. We do not believe that the first quarter performance of the Texan is an indicator of the performance for the rest of the year of the Texan, I should note. We still consider our previous guidance for same store RevPAR and total RevPAR and CCF to be comfortable guidance. As Colin mentioned earlier, we remained very enthusiastic in regards to both the near-term and long-term performance of a newly opened Gaylord National. With the first month of operation, opening bumps it all behind us, we look forward to showcasing this incredible property to both our customers and our shareholders. We should note that the National rent approximately 70% occupancy for its first month as really now firing on all cylinders. We look forward to hosting many of you participating on this call today at our Annual Investor and Analyst Day, which we intend to hold at the national on June 18th. Now moving onto other development initiatives. As we previously announced, we terminated the agreement to acquire the La Cantera resorts. We believe that this was the right decision and will allow us to focus on the growth initiatives we currently have in place. As such, we took a one time charge of approximately $12 million this quarter. In a current economic environment, we have to commit capital resources to the opportunities that provide for the best risk adjusted returns for our shareholders. And in the final analysis the La Cantera deal simply was not the appropriate investment for us at this time. Preserving that capital allows us to focus our efforts and resources on the investments most attractive to us mainly our expansions and our stock. Now, moving onto guidance for 2008. The solid growth in RevPAR, total RevPAR, ADR along with the continued increases in advance bookings we achieved this quarter gave us the confidence to reaffirm same store guidance levels that we set during our previous conference call. Guidance for the Gaylord National has been trimmed from 50 to $60 million and to 45 to $55 million as a result of a more challenging opening than we had anticipated. With that being said, as Colin has said before and as I have said on this call, we remain extremely bullish about the prospects for the Gaylord National and we think the property is spectacular. As Colin said, with the opening of the National and the completion of the Opryland room renovations, we are close to operating 8000 rooms across our brand. As we approach this milestone, we remain focused on providing the unique industry leading Gaylord experience to every person who comes in the contact with the Gaylord property. With the strategies, we have outlined to pursue avenues of growth, we will continue to enhance our industry leadership and we remain enthusiastic about the prospects for Gaylord through 2008 and beyond. And now, I will turn the call back over to Colin.

[Colin Reed:]

Thanks Dave. Maybe before we turn over to take questions-and-answers, let me just make an observation. Some of you when Dave was going through the script, he talked about 80% of the business on the books and you may have heard a whisper from our General Counsel who said wasn’t that 70. Let me just be very clear as to what Dave and I said because they were different. What I said is that coming into this year, we had 70 points of occupancy on the books, which is factual and in the case on what Dave said was that as of the end of the first quarter, we had 80% of our total goal for the rest of the year already on the books and it's at a different period of time and that can be explained by the very good first quarter bookings that we had this year. So we are very, very comfortable about the rest of this year. So, let's open up the call for questions.

[Operator:]

Thank you. (Operator Instructions). Our first question is coming from Chris Wanka with Deutsche Bank. Please go ahead.

[Chris Wanka:]

Hey, good morning guys. Couple of questions, one, is could you -- on the National, can you just kind of confirm those issues you had in the first couple of days of not impacted the future booking space there? And then I will come back with another one.

[Colin Reed:]

Yeah Chris, Colin, good morning. Chris on Saturday night, when we did our grand opening on Friday and Saturday, we had about 250 of the nations top meeting planner into the hotel. And also I have during the course of the last two to three weeks spoken with most of the meeting planners that held large conventions in the early part of April. And I will tell you to a person every meeting planner that stayed with us during the first part of April said you know, we are sorry that the rooms compression caused us you know for us to have to walk some people in the first week. The other two issues that were widely described were you know issues that everybody realized were outside of their control. And these meeting planners were very, very, very happy with the overall quality of this hotel, the performance of our people. And most of them have signed to come back to us. And now on Saturday night, I spent a long period of time walking with these meeting planners that came in from all over the country, I can tell you the comments that I got and the e-mails, I have subsequently received are incredibly exciting. These people are saying we have never seen a convention hotel looking like this. There is certainly is nothing like this in Washington or in the Eastern Seaboard. And so all I can tell you is what I am being told by the customer is that these people are going to come and they are going to book and I think you are going to be seeing that through the course of this year with bookings that we expect to secure on this hotel.

[Chris Wanka:]

Okay, great. And then second one is, can you just talk a little about the forward pace for the future years that you mentioned the 263,000, I mean obviously, it is still very strong number for the first quarter, but I think some folks are looking at it relative to other quarters. I mean what are the some of the factors that influence that and just maybe kind of give us about 30,000 full overview of how those could play out and what if any issues kind of impacted it this quarter relative to the quarters?

[Colin Reed:]

The room stay, let me just stop this, no one try to over to you. The rooms that we actually signed in contract for -- we signed 262,000 for the same store and we signed about 140,000 for National in this first quarter and the same store was slightly down on the same store of '07, which was the very best first quarter we have ever had in our company’s history. And what we did in this quarter in '08 was the second best quarter we have ever had in our company’s history but in our brands history in the six years and seven years now that this brand is being in operation. But the other part of the equation that we won't spend a lot of time talking about, but we spend a lot of time focused on. The preliminary and tentative buckets of contracts that we are in various forms negotiating on at a point in time and David I think it's fair to say that as of end of the first quarter at preliminary intentitives for every single hotel in the system, you know were extraordinary in terms of total.

[David Kloeppel:]

Yeah that’s right. And Chris, I mean as we sit here today looking at 2009 pace, we are comfortable with 2009 pace, it's running kind of at or above the levels of pace for 2008. So that is a good healthy pace for future periods. As Collin said bookings for this quarter on a same store basis the 262,000 are the second best we have ever recorded, while it looks like a negative comparison, I guess your sense of how strong first quarter of last year was. Because again, this was the second best we have ever done. So we feel comfortable with how the bookings are looking for future periods. And so far only a little bit led the way into the second quarter, but second quarter bookings are good and solid as well.

[Chris Wanka:]

Okay very good. Thanks.

[Collin Reed:]

Thanks very much.

[Operator:]

Thanks you. Your question is coming from David Katz with Oppenheimer. Please go ahead.

[David Katz:]

Hi, good morning gentlemen. Just a question, I noticed that you repurchased some share in the quarter, and if you could walk us through some of the logic to do that rather than let's say pay down some debt. And I know there is probably some dollars and cents analysis and then perhaps market perception just given the way the Street is reacting to leverage in general these days?

[Collin Reed:]

Well, David let me -- I don’t want to sound argument interfere, but you know honestly its nice -- when you say the Street reacts to leverage, you know, there are certain so side analyst they write their report that way, but there are other you know, castigated us to not going ahead with La Cantera. So it's like a tail of two cities. What we have to do as a management team and what we have to do on behalf of the shareholders, is do what we think is right. And I can tell you, I have operated through three major recessions in 20 year in this country, since I lived in America. And I will tell you the same thing happens every time you know, our reports get written, there were what I called shaken shareholders that run through the hills and you see margins in hospitality industry in the six months before secession occurs. Start compressing from 11, 12 ratio -- 11, 12 multiples down into the 8s and that’s exactly what has happened here. But I will tell you six months, nine months after the recession bottoms and starts to pull away you start to see multiples expending again. And I will tell you, I personally believe and I know David feels the same way, our Board feels the same way that there is a very real probability that we won't see these type of valuations for these quality of assets, with these quality a cash flows in the future. And it seems illogical to us when we have very decent predictability as with our cash flows and very decent coverage levels on our debt. So it seems illogical to us to repay debt, they were paying about 4.34 on floating rate. This floating rate debt that we have now effectively fixed to repay debt of 4.3% when we combine equity bag, and these assets are currently you know, somewhere in the -- depending upon which analyst report you read. So charging us somewhere between 8, 9 times historically, it makes no sense to us. So we are going to continue to do this prudently, because we think it's in the long-term best interest of our shareholders.

[David Katz:]

And that’s all fair. And it was not intended to be a leading question, when we are further in Street, it’s a great way to take myself out of the argument. However, one of the -- there certainly is I think it's fair to say an appetite for sort of more growth projects entering your pipeline. And that would certainly bag the discussion of how do we go ahead and fund some of this things or how do we pay for it, right. And so one argument might be reducing debt levels rather than buying back stock might make it easier to go ahead do those things. And the sort of enhancement of your equity either way might be similar? And I don’t know, if that was exactly a question, but more over buddle, but I thinks its an appropriate topic for all us to consider?

[Collin Reed:]

Yeah, what we do is we do literally every -- Mark Fioravanti is sitting here, who is Treasurer and heads our planning. And we do -- we predict our cash flows, we do all of this every you know, two to three weeks, we believe we are really on top their cash flows on our business. And we believe we can do this -- the two expansions that we have announced and do this, stop buyback. Unless the financing market seriously change, we couldn’t have done all of that and La Cantera and expand La Cantera. And because La Cantera would have only really worked for us, once we get expanded that property. So we are working very, very hard behind the scenes to figuring out a capital structure that will grow this business in the way we believe this brand has now afforded that's the opportunity to grow and because we are getting calls from people, cities to come build one of these incredible businesses in their backyard and we are trying to figure out how the appropriate capital structure to do this. But I can tell you, our stock trading at 8.5 or whatever you can read your analyst report and you can see the valuation that this company is trading at as a multiple of cash flow, it's just seen and we don’t like that and we are trying to -- we are going to work hard to fix that problem as well. And this is not a -- there is no single bullet here, we got to figure it out, how the long term capitalization of this company and how we can take advantage of these growth opportunities, but the stock price at this time is crazy.

[David Kloeppel:]

And David directly to your question or to your re-val I suppose about people like to see more growth $20 million of repurchasing stock is not going to change whether or not we can build Chula Vista. So the way we are managing the capital structure, the company and managing the investing of the company's capital resources is, number one, we have a lot of confidence in what our cash flows will be in '08 and '09 and beyond because we have a different business model than others. That affords us a comfort level that maybe others don’t have, with a slightly higher levels than others are comfortable with. So consequently, we have a different way of thinking about our debt versus other people thinking about their debt. As we look at our capital resources, number one, do we have enough liquidity? Yes, we have enough liquidity to handle the two announced expansions. Those expansions will begin spend in '09 and beyond, not during 2008. Once we look at us having sufficient liquidity for those expansions, which are high return investment projects, the question is what other investment alternatives are there available to us currently that are attractive, and the most attractive one of those currently is our stock and we are $20 million buyback or frankly the current authorization of an $80 million buyback again doesn't change whether or not we are going to able to do something like Chula Vista.

[David Katz:]

Great. Thanks very much.

[David Kloeppel:]

Sure.

[Operator:]

Thank you. Your next question is coming from Bill Crow with Raymond James. Please go ahead.

[Bill Crow:]

Good morning guys. I have a couple of questions, but since you just mentioned Chula Vista, I'll give you a chance to give us an update on where that might stand?

[Colin Reed:]

Bill, Colin. Good morning

[Bill Crow:]

Good morning

[Colin Reed:]

Thank you for being on the phone. We've made a lot of good progress with the port authority in the city in terms of our agreements and we are having, how should I say it, discussions with both non-union and union branches to try and resolve really I think the only remaining issue of substance subject to the permitting process in that market, which is how we deal with the organized labor in Southern California. And it's probably prudent for us not to go too deep into where we are in those negotiations because I just think it doesn’t serve the process very well to try and sort of publicly negotiate.

[Bill Crow:]

Alright

[Colin Reed:]

Those discussion, but we are having -- we are not in a intrenched, no one is talking to either side. No, we are not in that mode, we are communicating. And I am still optimistic at the end of the day.

[David Kloeppel:]

And, Bill just to make clear, make sure everybody understands timetable on that. The next milestone really should be a filing by the port authority and the city of Chula Vista that begins the environmental approval process and we would expect that to be sometime in the summer time, maybe early third quarter. And from there, the coastal commission fix it up and starts to do its approval process. So just to make sure you understand timing that’s the next milestone and that begins the clock ticking on the entitlement process.

[Bill Crow:]

Alright, terrific. Going back to the pace in the 260,000 rooms you did in the first quarter and that relates the 1.3 to 1.4 million room guidance that you often changes, is that correct?

[David Kloeppel:]

That's correct.

[Bill Crow:]

So how should we think about the pick up in that given the economic environment? I mean, is there some seasonality to what we should expect, are you anticipating that things are going to pick up as the economy starts to stabilize later in the year. What is your thinking there?

[Colin Reed:]

Bill one thing you need to understand is the – it’s the way the meeting planner tends to book. What typically meeting planners do and associations do, particularly large associations and as you know quite a large chunk of our business gets done with large associations, they tend to typical work on a calendar year. So as you get towards the end of the year, the associations tend to be completing their project, completing their agreements as to where they are going to be going four years, five years from now. And so, consistently every year you will see with us that we book in the fourth quarter probably twice as much as we book in the first quarter. It's just the way our business works and every year we tend to book somewhere between 500 and 600,000 room nights in that fourth quarter. And so, we are able to look at the pace, January pace, the February pace, and March pace, how we are doing in April compared to how we have historically done in April, how many tentatives we are working with, how many prospects we have working, and there is nothing at this stage that would indicate that our pace of bookings are stressing in any way shape or form. We feel pretty confident that that 1.3 to 1.4 will be delivered this year.

[Bill Crow:]

Okay, fair enough. Then one final question from me just so I can get a better picture on what's going on on the real estate front. Could you talk about the joint venture pursuit for La Cantera? In the end, what was the deciding factor? Was it lack of access to debt by the venture or was it just some return hurdles that couldn't be met, what was it there that ended that transaction?

[Colin Reed:]

Dave, you want – you spent a couple of months on that.

[David Kloeppel:]

Yeah, Bill, let me take you through that. I would characterize it as following. We had a lot of discussions with a lot of interested parties. And in terms of equity capital, there was adequate available equity capital to execute on a transaction. There also was adequate debt capital to execute on the purchase transaction. Ultimately where we got uncomfortable in large part was that we weren't comfortable that the debt capital will be there for the expansion because there was some time that was going to have to pass before the plans were drawn and we were going go seek that financing. So we kind of boiled it down to, look, is this a project that we want to take a risk on where we could end up operating our 500-room hotel for a significant period of time because that expansion financing isn't available to us and we decided that in this environment that level of risk and that level of distraction wasn't appropriate for us.

[Colin Reed:]

Yeah, and it’s a 500 room hotel with very little convention space and that core competency is around the convention customer.

[Bill Crow:]

Fair enough. Thank you guys. I appreciate your time.

[Colin Reed:]

Thank you.

[Operator:]

Thank you. Your next question is coming from Kevin Milota with Bear Stearns. Please go ahead.

[Kevin Milota:]

Hey guys. I just have a question on development side. I was wondering if you can give me a timing update on the projects at the Texas and the Opryland, and kind of where you are with design and when you expect to start breaking ground there?

[Colin Reed:]

Yeah, Kevin, thanks. And let me do them differently. Opryland, we have basically completed all of the work necessary to know how we are laying out this project. We know where the room tower expansion is going to go. We know where the -- how we are going to do the convention expansion. It’s a difficult at Opryland because there is a risk that if we don't do Opryland right, we could create a little bit more disruption in that hotel than we are prepared to deal with. So we've been a little more deliberate. It's not as obvious at Opryland because of the multitude of opportunities to do this there. But we have now figured out that and we have now figured out how it all happens. Our people are in the – our architects are in the detail design, early part of the detail design side of that. We should have pretty much most of that done towards the end part of this year and we will get aggressively bidding this thing I would think sometime in the fourth quarter for early next year construction. Texas is a lot more straightforward. It's where we build the expansion is obvious, where we build the hotel tower is obvious, very little disruption at that place. We have actually I think, Dave, we are just about starting the parking garage expansion. The actual construction of that is sort of like this month in the next two to three weeks. We are in the design phase there. The only thing that we are wrestling with is how we lay out, where we lay out a new pool complex that we are going put into this hotel and we are debating whether it goes in one location or another, but we should have all of that thrashed through. That's the core of engineers debate that we are having. But I would hope that the timeline for Texas would be no worse than the timeline I just laid out for Opryland. I would hope that we could maybe in some parts of that building be under construction late this year, maybe early part of next year, the latest.

[Kevin Milota:]

And the expectation is to have that finished by 2011?

[Colin Reed:]

We have the 2011 Superbowl.

[Kevin Milota:]

Right.

[Colin Reed:]

I think it's 11, was it 12?

[David Kloeppel:]

11

[Colin Reed:]

11 Superbowl. Yeah, what we have said to the city we want the rooms all done for sure and the convention space we have been having some conversations with the NFL. We would like to get the convention space done, so that’s in our plans and so we will probably put our foot on the gas on that one.

[Kevin Milota:]

Okay. In late 2010 for the Opryland as well?

[Colin Reed.:]

No.

[Kevin Milota:]

Is that going to be pushed?

[Colin Reed:]

No, Opryland is a little bit more complex. We have to stage Opryland because of the disruption issues. And so, Opryland will probably be more I would think middle of '11 when we are done there.

[Kevin Milota:]

Okay. And also just on a relative basis by property if you have derived some sort of guidance or say how the different properties are going to come in between the 4.5 to 7% RevPAR guidance for the year?

[David Kloeppel:]

Yeah Kevin I'll take that and I will give you a sense on kind of directionally, quarterly as well. Let's see, Opryland should end up middle to high end of the range. Palms should end up in kind of the middle to lower end of the range and Texan probably about the middle of the range. That’s on RevPAR and total RevPar. And generally directionally in terms of quarterly, second quarter should probably look a reasonably similar to the first quarter, third and fourth quarter look like they will be a little bit stronger than first and second quarter were.

[Kevin Milota:]

Okay. Thanks a lot guys.

[Colin Reed:]

Okay.

[Operator:]

Thank you. Your next question is coming from William Truelove with UBS. Please go ahead.

[William Truelove:]

Hi guys. In terms of the comments about the share repurchases versus some of the other development activities. As you mentioned, you feel like the share valuation is I guess, what it was ridiculous as well as that is going to mean any near-term phenomenon. So has there been discussions about being much more aggressive near term and say the share repurchases and increasing authorization relative to maybe slowing down other CapEx expenditures such as the expansion of Opryland, which could have disruptions and what not? Can you give us a sense for how you are looking at those two options? Thanks.

[Colin Reed:]

That’s a remarkably good question and it's something that we are in dialog with. We have our board meeting next week in Washington, Monday, Tuesday. We are going to be talking to our board about equity values and growth opportunities. And I think I just want to leave it at that right now, but it's top of mind for us and what we are trying to do is figure out how we take advantage of this moment in time but at the same time do not do anything to jeopardize the long term growth of this company.

[David Kloeppel:]

And well, it should be noted that we have a limitation imposed upon us by our high yield bonds that limits the amount of a share buyback that we can do. And the current authorization is an appropriate level given the limitations under the bonds. That limitation grows over time, but for the short term the current authorization is appropriate given the bond limitations.

[William Truelove:]

Okay, great. Thanks.

[Colin Reed:]

Thank you.

[Operator:]

Thank you. Your next question is coming from Will Marks with JMP Securities. Please go ahead.

[Colin Reed:]

Melissa, I think we will do one more after Will and call it a day. And then if anyone else has questions, we can take them after this call and you know how to get hold of David, Mark or myself.

[Will Marks:]

Thanks for that Colin and Dave and Mark. Couple of questions. One is, should we assume that the strategy of buying smaller hotels like La Cantera is on hold for now given the incredible value of your stock price?

[Colin Reed:]

Yeah, I think you got that right and what's amazing to me is how few hotel transactions you see being done right through the whole entire country. I mean the pace of buying and selling hotels at last year I think in the first quarter there was almost 200 down, this year it's like 30 down. The world has changed almost here and I think we would be in denial if we didn’t believed it had.

[Will Marks:]

Okay, great. And second just a question on, I don’t think it's been brought up at the cancellations and had there been any and do you expect that that's usually something to ask?

[Colin Reed:]

Yeah, our cancellations are always baked into the room numbers that we show that net numbers. I mean we always eliminate cancellations from the bookings that we share with you and I don’t, David I look at these every month and my sense is that these cancellations are not tracking in any abnormal pace just because of this environment. I just think it's tough we are seeing. Yeah, I mean cancellations actually are running a little bit lower than they were this time last year. So there is nothing that they are saying that economic environment is stopping us to steal lots and lots of additional cancellations

[Will Marks:]

Okay, great. Thanks guys.

[Colin Reed:]

Thank you.

[Operator:]

Thank you. Our final question is coming from Nap Overton with Morgan Keegan. Please go ahead.

[Nap Overton:]

Good morning. Most of the questions I had have been answered, but I was just wondering if you could comment on have you seen over the past six to nine months any increase in resistance to pricing for bookings to years out and what does that price increase look like or was it feeling like for 2009?

[Colin Reed:]

Our sales people would tell us that they have resistance on pricing with that single contract, it's just the right is. But as you know Nap, we have this internal system called RedMax and everyone of that contracts are priced against the system that we have, the specific days that a customer is coming we have a specific pricing grade in this RedMax system and I don’t think we are seeing too much of a deterioration, David, to what we are actually contracting contracts at to what that set in RedMax. But to me this is really about making sure that our customers sat level stay up and customers leave happy because those customers are customers that don’t tend to want to fight over nickel and a dime. So long answer Nap, we are not seeing any compression in our long term pricing.

[Nap Overton:]

Thank you.

[Colin Reed:]

And Nap, did you enjoy the hotel?

[Nap Overton:]

A bit.

[Colin Reed.:]

Excellent. Alright. Melissa, I think then that’s the final question. Nap, did you have another question? He is gone. Okay, Melissa, I think that’s the end of the call. Again, thank you everyone who has been on the call and any other questions you may have, you know how to get hold of David, Mark and myself. And good day to all of you. Thank you.

[Operator:]

Thank you. This does conclude today's Gaylord Entertainment Company's first quarter 2008 earnings conference call. You may now disconnect.