News for the Hospitality Executive
NASHVILLE, Tenn.--()--Gaylord Entertainment Co. (NYSE: GET) today reported its financial results for the second quarter of 2012. Highlights include:
Colin V. Reed, chairman and chief executive officer of Gaylord Entertainment, stated, “Our business performed well this quarter, highlighted by our strong bookings results and occupancy levels. We booked over 486,000 net room nights in the second quarter, an increase of over 79 percent from the same period last year. On a gross room night basis, we booked over 592,000 room nights, an over 45 percent increase from the second quarter in 2011. This performance is a promising indication that group bookings are continuing to strengthen, and a testament to the value groups and meeting planners recognize in our unique properties and the experience we provide.
“We achieved an occupancy level of just over 79 percent in the second quarter, a nearly six percentage point increase over the second quarter last year. Along with increases in outside-the-room spending, our occupancy results helped drive solid revenue growth of nearly 7 percent in the second quarter. This translated into a RevPAR increase of 7.5 percent and a Total RevPAR increase of 6.7 percent. As a result of both our revenue growth and our continued efforts to drive efficiencies throughout our business, we delivered solid profitability growth in our hotels and our Gaylord Hotels CCF Margin4 increased 40 basis points.”
Segment Operating Results
Key components of the Company’s hospitality segment performance in the second quarter of 2012 include:
At the property level, Gaylord Opryland generated revenue of $74.2 million in the second quarter of 2012, a 1.5 percent increase compared to the prior-year quarter of $73.1 million, driven by an increase in occupancy. Occupancy for the second quarter of 2012 was up 5.8 percentage points to 81.6 percent compared to the prior-year quarter. Average Daily Rate (“ADR”) during the second quarter of 2012 decreased 1.6 percent to $157.31, compared to $159.83 in the prior-year quarter, driven by an increase in lower-rated SMERF (Social, Military, Educational, Religious, and Fraternal) groups. RevPAR in the second quarter of 2012 increased 6.1 percent to $128.41 compared to $121.08 in the prior-year quarter, as the increase in occupancy offset the decline in ADR. Total RevPAR increased 1.4 percent for the second quarter of 2012 to $282.84 compared to $278.88 in the prior-year quarter, as the increase in occupancy offset a decline in outside-the-room spending that resulted from the business mix shift towards more association and SMERF business and less corporate business in the second quarter of 2012. CCF was $23.5 million for the second quarter of 2012, a 10.5 percent decrease compared to $26.3 million in the prior-year quarter, driven by lower outside-the-room spending and lower-rated group business. Gaylord Opryland’s CCF in the second quarter was negatively impacted by a natural gas explosion on June 19th which resulted in a profitability loss of approximately $1.3 million. The Company is pursuing a business interruption claim related to this explosion. CCF Margin was 31.7 percent in the second quarter of 2012, a 430 basis point decrease over the prior-year quarter.
Gaylord Palms posted revenue of $44.4 million in the second quarter of 2012, a 17.5 percent increase compared to $37.7 million in the prior-year quarter. The increase was driven by the growth in occupancy, ADR, and outside-the-room spending. Occupancy for the second quarter of 2012 increased 12.0 percentage points over the prior-year quarter to 85.8 percent, as occupied group room nights grew across all customer segments for a total increase of approximately 12,600 room nights despite approximately 6,800 being out-of-service for renovations. ADR for the second quarter of 2012 increased 2.1 percent to $168.73, compared to $165.32 in the prior-year quarter. Second quarter 2012 RevPAR increased 18.7 percent to $144.78 compared to $122.02 in the prior-year quarter, driven by the increase in occupancy and ADR. Total RevPAR in the second quarter of 2012 increased 24.1 percent to $366.14 compared to $295.02 in the prior-year quarter driven by the increase in group outside-the-room spending. CCF in the second quarter of 2012 increased 34.9 percent to $13.9 million compared to $10.3 million in the prior-year quarter. This resulted in a CCF Margin for the second quarter of 2012 of 31.3 percent, a 400 basis point increase compared to 27.3 percent in the prior-year quarter.
Gaylord Texan posted revenue of $44.5 million in the second quarter of 2012, a decrease of 2.7 percent from $45.7 million in the prior-year quarter. The decrease was driven by decreases in occupancy and outside-the-room spending. The late cancellation in April of a large group scheduled to arrive in June contributed to these decreases. Occupancy for the second quarter of 2012 decreased by 4.9 percentage points to 71.3 percent compared to the second quarter of 2011. ADR increased 0.2 percent to $172.53 in the second quarter of 2012 compared to $172.15 in the prior-year quarter. RevPAR in the second quarter of 2012 decreased 6.3 percent to $122.96 compared to $131.24 in the prior-year quarter, driven by the decrease in occupancy. Total RevPAR decreased 3.4 percent in the second quarter of 2012 to $321.11 from $332.29 in the prior-year quarter, driven by the decreases in occupancy and outside-the-room spending. CCF in the second quarter of 2012 decreased 13.2 percent to $12.6 million compared to $14.6 million in the prior-year quarter, resulting in a 28.4 percent CCF Margin, a 350 basis point decrease from 31.9 percent in the prior-year quarter.
Gaylord National generated revenue of $67.0 million in the second quarter of 2012, an 11.9 percent increase compared to the prior-year quarter of $59.9 million, driven by increases in occupancy and outside-the-room spending. Occupancy for the second quarter of 2012 was up 10.6 percentage points to 78.5 percent compared to the prior-year quarter, driven by an increase in group room nights and stronger government, association and SMERF group attendance than in the prior-year quarter. ADR decreased 1.7 percent in the second quarter of 2012 to $207.62 compared to $211.25 in the prior-year quarter due to the shift from corporate to association and SMERF groups. RevPAR in the second quarter of 2012 increased 13.6 percent to $162.94 compared to $143.39 in the prior-year quarter, driven by the increase in occupancy. Total RevPAR increased 11.9 percent to $369.08 in the second quarter of 2012 compared to $329.85 in the prior-year quarter, driven by the increase in occupancy and outside-the-room spending. CCF increased 35.5 percent to $23.4 million in the second quarter of 2012 compared to $17.2 million in the prior-year quarter. CCF Margin increased 600 basis points to 34.8 percent in the second quarter of 2012 compared to 28.8 percent in the prior-year quarter, driven by continued margin management efforts at the property level that drove favorable food costs and reduced labor costs.
Reed continued, “We were pleased with how our properties performed this quarter. The results at Gaylord National were particularly encouraging, as the property posted double-digit percent increases in revenue, occupancy, RevPAR, and Total RevPAR, helping drive a 600 basis point increase in CCF margin. This performance reinforces our confidence that the D.C. group market is continuing to improve. Gaylord Palms had a very strong quarter aided by the full renovation of the hotel’s guest rooms and the addition of the new amenities that were opened earlier this year. Gaylord Palms second quarter performance was highlighted by a Total RevPAR increase of over 24 percent and a CCF margin increase of 400 basis points. Gaylord Opryland also performed well yet again, posting occupancy, RevPAR and Total RevPAR increases despite a difficult comparison against a record second quarter in 2011. Although the results across the board at Gaylord Texan were negatively impacted by the last-minute cancellation of a large 5,000 room night group, the property performed solidly.”
Opry and Attractions
Opry and Attractions segment revenue increased 8.5 percent to $20.2 million in the second quarter of 2012, compared to $18.6 million in the year-ago quarter driven by increased attendance and additional shows at the Grand Ole Opry. The segment’s CCF increased to $6.1 million in the second quarter of 2012 from $5.2 million in the prior-year quarter.
Corporate and Other
Corporate and Other operating loss totaled $19.2 million in the second quarter of 2012 compared to an operating loss of $13.9 million in the same period last year. Corporate and Other CCF in the second quarter of 2012 was a loss of $16.1 million compared to a loss of $10.7 million in the same period last year. Corporate and Other operating loss and CCF for the second quarter 2012 reflects $3.4 million in expenses related to the Company’s process of exploring opportunities to unlock shareholder value.
Real Estate Investment Trust (REIT) Conversion
On May 31, 2012, the Company announced that it had agreed to sell the Gaylord Hotels brand and the rights to manage its four resort hotels to Marriott International, Inc. for $210 million in cash. Following consummation of the sale, Gaylord will continue to own its hotel properties and other businesses and will reorganize and elect to be treated as a real estate investment trust (REIT) effective January 1, 2013. The Company will be the only lodging REIT focused primarily on group-oriented destination hotels in urban and resort markets. The Company intends to hold a special meeting of shareholders on September 19, 2012 to approve proposals that will facilitate the REIT conversion.
The transaction is the result of a comprehensive review of strategic options to maximize long-term value for shareholders. In concluding to pursue this option, the Board of Directors and management team focused on three elements: the cash received in connection with the sale of the brand and management rights, the opportunity to realize substantial cost savings and revenue enhancements due to Marriott’s scale and reach in the hospitality market, and the Company’s positioning as a well-capitalized REIT focused on group-oriented destination hotels in urban and resort markets.
Reed stated, “Following our months-long review of various options to unlock shareholder value, our board of directors and management are confident that the REIT structure represents the best pathway to realize the long-term value of our business and to position our company for future growth. We are also thrilled to be to be partnering with Marriott, an organization that consistently receives the industry’s highest praise among group customers and meeting planners and shares our commitment to provide a distinctive guest experience. The collaboration with Marriott is going extremely well and the conversion process is progressing according to our previously announced timeline. As such, we remain on schedule to complete the anticipated management transfer in October of 2012.”
As a REIT, the Company will no longer view large scale development of resort and convention center hotels as a means for growth. As a result, the Company will not proceed with its previously announced development projects in the form previously anticipated. Gaylord is reexamining how previously announced projects could be completed with minimal financial commitment through the development phase. This examination will be undertaken with investor expectations at the forefront, and management will keep investors informed as the process evolves.
As of June 30, 2012, the Company had long-term debt outstanding, including current portion, of $1,035.2 million and unrestricted cash of $29.5 million. At June 30, 2012, $370.0 million of borrowings were undrawn under the Company’s $925.0 million credit facility, and the lending banks had issued $8.0 million in letters of credit, which left $362.0 million of availability under the credit facility.
The following business performance outlook is based on current information as of August 7, 2012. The Company does not expect to update the guidance provided below before next quarter’s earnings release. However, the Company may update its full business outlook or any portion thereof at any time for any reason.
Reed concluded, “With our announcement of our planned REIT conversion this quarter, our focus remains on delivering solid results at our properties while ensuring a smooth transition to Marriott and a successful reorganization as a REIT. The profitability performance of our properties and our solid advance group bookings production in the second quarter reinforces our confidence that our business is well positioned as we move through 2012. Our guidance for Gaylord Hotels RevPAR remains as an increase of 3 percent to 6 percent, and a Total RevPAR increase of 3 percent to 6 percent year-over-year. We are reaffirming our Gaylord Hotels CCF guidance as a range of $274 million to $286 million. We are also reaffirming our expectations for the Opry and Attractions segment as a CCF range of $15 million to $17 million. In the first quarter of 2012, we incurred $3.1 million of expense as part of our effort to explore opportunities to unlock shareholder value, and we have incurred an additional $3.4 million as a result of that same process during the second quarter. As we stated last quarter, we are not including the expense we incurred in the second quarter or the expenses we will incur in the second half of the year as a result of this process in our Corporate and Other CCF guidance. Therefore, we reaffirm our Corporate and Other segment expectations as a CCF loss range of $54 million to $51 million. On a consolidated basis, total Company CCF expectations remain as a range of $235 million to $252 million in 2012.”
Note: The guidance above assumes 9,529 room nights out of service in 2012 due to the renovation of rooms at Gaylord Palms and a revised room count at Gaylord Opryland of 2,882 for 2012. The guidance above includes $3.1 million of expense incurred in the first quarter of 2012 as part of our effort to explore opportunities to unlock shareholder value, but excludes the $3.4 million of expense incurred in the second quarter of 2012 and any additional expenses that may be incurred in the third and fourth quarter of 2012 as part of this process. The guidance above does not include the potential impact on fourth quarter results from Marriott management fees, Marriott centralized/shared service fees or revenue and expense synergies that may be actualized once Marriott begins managing the resorts on October 1, 2012.
Webcast and Replay
Gaylord Entertainment will hold a conference call to discuss this release today at 10:00 a.m. ET. Investors can listen to the conference call over the Internet at www.gaylordentertainment.com. To listen to the live call, please go to the Investor Relations section of the website (Investor Relations/Presentations, Earnings, and Webcasts) at least 15 minutes prior to the call to register, download and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will run for at least 30 days.
About Gaylord Entertainment
Gaylord Entertainment, a leading hospitality and entertainment company based in Nashville, Tenn., owns and operates Gaylord Hotels (www.gaylordhotels.com), its network of upscale, meetings-focused resorts, and the Grand Ole Opry (www.opry.com), the weekly showcase of country music’s finest performers for more than 80 consecutive years. The Company's entertainment brands and properties include the Radisson Hotel Opryland, Ryman Auditorium, General Jackson Showboat, Gaylord Springs Golf Links, Wildhorse Saloon, and WSM-AM. For more information about the Company, visit www.GaylordEntertainment.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains statements as to the Company’s beliefs and expectations of the outcome of future events that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Examples of these statements include, but are not limited to, statements regarding the Marriott sale transaction, the Company’s expectation to elect REIT status, the timing and effect of that election, the amount of conversion or other costs relating to the transactions, and other business or operational issues. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These include the risks and uncertainties associated with refinancing our indebtedness prior to its various maturities, economic conditions affecting the hospitality business generally, rising labor and benefits costs, the geographic concentration of the Company’s hotel properties, business levels at the Company’s hotels, the Company’s ability to successfully operate its hotels, the failure to receive on a timely basis or otherwise the required approvals of the Company’s stockholders, the Company’s ability to elect and qualify for REIT status and the timing and effect(s) of that election, the Company’s ability to remain qualified as a REIT, the timing and amount of the special distribution of the Company’s accumulated earnings and profits and receipt of a private letter ruling from the Internal Revenue Service with respect thereto, the Company’s and Marriott’s ability to consummate the Marriott sale transaction, operating costs and business disruption may be greater than expected, and the Company’s ability to realize cost savings and revenue enhancements from the proposed REIT conversion and the Marriott sale transaction. Other factors that could cause operating and financial results to differ are described in the filings made from time to time by the Company with the U.S. Securities and Exchange Commission (SEC) and include the risk factors described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2012. The Company does not undertake any obligation to release publicly any revisions to forward-looking statements made by it to reflect events or circumstances occurring after the date hereof or the occurrence of unanticipated events.
Additional Information and Where to Find It
This press release does not constitute an offer to sell or the solicitation of an offer to buy securities or a solicitation of any vote or approval. Granite Hotel Properties, Inc. (“Granite”) and Gaylord Entertainment Company (“Gaylord”) filed a registration statement on Form S-4 containing a preliminary proxy statement/prospectus which describes our plans to qualify as a REIT for federal income tax purposes following the consummation of our transaction with Marriott International, Inc., and the contemplated merger of Gaylord with and into Granite to facilitate the REIT election. The registration statement has not yet become effective. Notice of a special meeting and a definitive proxy statement/prospectus will be mailed to stockholders of Gaylord who hold shares of Gaylord common stock on the record date to be determined by the Company. INVESTORS ARE URGED TO READ THE FORM S-4 AND PROXY STATEMENT (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND REIT CONVERSION. You may obtain copies of all documents filed with the SEC concerning the proposed transaction, free of charge, at the SEC’s website at www.sec.gov or our website at www.gaylordentertainment.com. In addition, stockholders may obtain free copies of the documents by sending a written request to Gaylord’s Secretary at Gaylord Entertainment Company, One Gaylord Drive, Nashville, Tennessee 37214, or by calling the Secretary at (615) 316-6000.
Interests of Participants
Gaylord and its directors and executive officers may be deemed to be participants in the solicitation of proxies from Gaylord’s stockholders in connection with the proposed merger and REIT conversion. Information regarding Gaylord’s directors and executive officers is set forth in Gaylord’s proxy statement for its 2012 annual meeting of stockholders and its Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which were filed with the SEC on April 3, 2012 and February 24, 2012, respectively. Additional information regarding persons who may be deemed to be participants in the solicitation of proxies in respect of the proposed merger and REIT conversion is contained in the proxy statement/prospectus filed with the SEC.
1The Company calculates revenue per available room (“RevPAR”) for its hotels by dividing room sales by room nights available to guests for the period.
2The Company calculates total revenue per available room (“Total RevPAR”) for its hotels by dividing the sum of room sales, food & beverage, and other ancillary services revenue by room nights available to guests for the period.
3 Adjusted EBITDA (defined as earnings before interest, taxes, depreciation, amortization, as well as certain unusual items) is a non-GAAP financial measure which is used herein because we believe it allows for a more complete analysis of operating performance by presenting an analysis of operations separate from the earnings impact of capital transactions and without certain items that do not impact our ongoing operations such as gains on the sale of assets. In accordance with generally accepted accounting principles, these items are not included in determining our operating income. The information presented should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States (such as operating income, net income, or cash from operations), nor should it be considered as an indicator of overall financial performance. Adjusted EBITDA does not fully consider the impact of investing or financing transactions, as it specifically excludes depreciation and interest charges, which should also be considered in the overall evaluation of our results of operations. Our method of calculating Adjusted EBITDA may be different from the method used by other companies and therefore comparability may be limited. A reconciliation of Adjusted EBITDA to net income is presented in the Supplemental Financial Results contained in this press release.
4As discussed in footnote 3 above, Adjusted EBITDA is used herein as essentially operating income/(loss) plus depreciation and amortization. Consolidated Cash Flow (which is used in this release as that term is defined in the Indentures governing the Company’s 6.75 percent senior notes) is a non-GAAP financial measure which also excludes the impact of preopening costs, the non-cash portion of the Florida ground lease expense, stock option expense, the non-cash gains and losses on the disposal of certain fixed assets, and adds (subtracts) other gains (losses). The Consolidated Cash Flow measure is one of the principal tools used by management in evaluating the operating performance of the Company’s business and represents the method by which the Indentures calculate whether or not the Company can incur additional indebtedness (for instance in order to incur certain additional indebtedness, Consolidated Cash Flow for the most recent four fiscal quarters as a ratio to debt service must be at least 2 to 1). The calculation of these amounts as well as a reconciliation of those amounts to net income (loss) or segment operating income (loss) is included as part of the Supplemental Financial Results contained in this press release. CCF Margin is defined as CCF divided by revenue.
Entertainment Reports 1st Qtr 2012 Net Income of $6 million Compared to
Loss of $2 million in the Year-ago Quarter; RevPAR Increased 3.8% /
Hotel Operating Statistics / May 2012
Entertainment Reports 4th Qtr 2011 Net Income of $5.1 million Compared
to Loss of $32.5 million in the Year-ago Quarter; RevPAR Increased
10.4% / Hotel Operating Statistics / February 2012
Entertainment Reports a Loss for the 3rd Qtr 2011 of $1.7 million
Compared to Loss of $31.8 million in the Year-ago Quarter; RevPAR
Increased 2.1% / Hotel Operating Statistics / November 2011
Entertainment Reports a Net Income for the 2nd Qtr 2011 of $8.6 million
Compared to Net Loss of $22.7 million in the Year-ago Quarter; RevPAR
Decreased 0.5% / Hotel Operating Statistics / Aug 2011
Entertainment Reports a Net Loss for the 1st Qtr 2011 of $2 million
Compared to Net Loss of $1.85 million in the Year-ago Quarter; RevPAR
Increased 0.5% / Hotel Operating Statistics / May 2011
Entertainment Reports a Net Loss for the 1st Qtr 2010 of $1.85 million
Compared to Net Income of $3.52 million in the Year-ago Quarter; RevPAR
Decreased 0.6% / Hotel Operating Statistics / May 2010
Gaylord Opryland Resort, Which Sits
Adjacent to the Cumberland River, Suffers Severe Flood Damage; the
Hotel Likely to be Closed for Several Months / May 2010