Full Year 2005; Plans 500-Room Expansion of Gaylord National
Hotel Operating Statistics
|NASHVILLE, Tenn. - Feb. 14, 2006 -- Gaylord Entertainment Co. (NYSE:
GET) today reported its financial results for the fourth quarter of 2005.
For the fourth quarter ended December 31, 2005:
"Advance bookings for the Gaylord National continue to surpass expectations, illustrating our success at delivering a wholly differentiated product to the marketplace," Reed continued. "We are delighted to announce our plans to expand Gaylord National by 500 rooms. This expansion should greatly enhance the project's capacity and appeal to our core customers who eagerly await the opening of what we expect will be the best convention hotel on the East Coast. The expansion, which is subject to the approval of additional economic incentives from Prince George's County, will allow Gaylord to capitalize on very strong customer demand, as evidenced by our advance bookings, and will further drive the property's financial returns. Additionally, negotiations continue to proceed in Chula Vista, as we look forward to bringing our brand to the San Diego area."
"In 2005, we took steps to refocus and realign the ResortQuest brand, and to invest in much needed technological improvements such as our new website. During the year, ResortQuest bore the brunt of another year of severe weather conditions," continued Reed. "Moving forward, we have taken steps to alleviate our hurricane risk by modifying our advance deposit policy and introducing a new travel insurance program. These enhancements should create significant value for renters and home owners, and should further differentiate the ResortQuest brand. As a result of these initiatives, we believe we have laid a foundation for growth in 2006."
Segment Operating Results
Key components of the company's hospitality segment performance in the fourth quarter of 2005 include:
At the property level, Gaylord Palms posted a solid performance in the fourth quarter of 2005, increasing revenues by 5.8 percent to $39.8 million compared to $37.6 million in the prior-year quarter. Gaylord Palms achieved solid growth in RevPAR, up 5.7 percent to $117.57, driven by a 5.8 percent increase in ADR and flat occupancy of 68.9 percent compared to the prior-year quarter. Gaylord Palms drove significant gains in transient ADR in the fourth quarter of 2005 compared to the prior-year quarter. Total RevPAR increased 5.8 percent to $307.36, driven by solid growth in outside-the-room revenues and the continued success of the hotel's seasonal entertainment offering, ICE!, now in its third year of production. CCF increased 3.7 percent to $8.5 million in the fourth quarter of 2005, resulting in the hotel's CCF margin decreasing 45 basis points to 21.4 percent. The comparatively lower CCF margin performance in the fourth quarter of 2005 was driven in part by unusually high group cancellation revenues received in the fourth quarter of 2004.
Gaylord Opryland posted a 30.4 percent growth in revenues in the fourth quarter of 2005 compared to the prior-year quarter. RevPAR increased 13.0 percent to $120.60, driven by a 7.4 percentage point occupancy increase and a 2.6 percent increase in ADR. Total RevPAR grew 33.1 percent to $293.66 in the fourth quarter of 2005 compared to $220.71 in the prior-year quarter, driven by overall higher occupancy levels in the quarter which topped 80 percent and strong growth in outside-the-room spending by both group and transient guests. The return of the Radio City Rockettes to Opryland drove increases in transient and local demand in the fourth quarter of 2005 compared to the prior-year quarter. Opryland's operating statistics exclude approximately 5,056 room nights that were out of service in the fourth quarter of 2005 as a result of the hotel's previously announced room renovation program, which will continue through 2007. CCF grew 19.7 percent to $20.2 million versus $16.8 million in the fourth quarter of 2004. CCF in the fourth quarter of 2004 included a $3.1 million accrual of a property tax refund. CCF margin in the fourth quarter of 2005, which declined 236 basis points to 26.4 percent, was adversely affected by higher energy costs and the aforementioned property tax refund.
For the Gaylord Texan, revenues increased 21.6 percent to $46.2 million in the fourth quarter of 2005 compared to $38.0 million in the prior-year quarter. RevPAR increased 19.2 percent to $117.30 from $98.41 in the fourth quarter of 2004, driven by a 12.4 percent increase in ADR and a 3.9 percentage point increase in occupancy. Total RevPAR grew 21.6 percent to $332.01 in the fourth quarter of 2005, from $273.04 in the same period last year. Strong gains in RevPAR and Total RevPAR were driven by an outstanding reception given to the Texan's first annual ICE! celebration, a favorite holiday offering that is already a strong transient and local demand driver at the Palms and Opryland properties. CCF increased 46.5 percent to $11.0 million from $7.5 million in the fourth quarter of 2004, resulting in a CCF margin of 23.8 percent, or a 404 basis point increase over the fourth quarter of 2004, despite the Texan incurring higher energy costs in the fourth quarter of 2005.
Construction continues to progress on Gaylord's newest project, the Gaylord National, with fourth quarter bookings growing by 63.4 percent compared to the fourth quarter of 2004. The National booked an additional 184,000 room nights in the fourth quarter of 2005, bringing the cumulative net definite production for the property to approximately 547,000 room nights. Having taken bookings for only the last five quarters, the National continues to set production records for Gaylord Hotels with more than two years until its opening in the first quarter of 2008.
Construction costs remain volatile and, as previously described by the company, have increased since the original estimate in 2004. While construction costs have increased, so too have the property's advance bookings and average daily rate. Due to this strong demand, Gaylord announces its intentions to expand the project by 500 rooms and 25,000 to 30,000 sq. ft. of meeting space, subject to approval by Prince George's County of additional economic incentives for the project. The net increase of the construction costs, expansion costs, and economic incentives, excluding pre-opening costs and capitalized interest expense, is expected to be $235 million to $285 million. Returns for the overall project are expected to exceed the Company's targeted 12.0 percent un-levered, after-tax return.
"Given the tremendous customer response we have had to the Gaylord National, we have decided to increase the scope of the project by adding 500 rooms," said Reed. "We are, however, mindful of the escalating construction costs that have recently occurred nationwide and will continue to balance this issue in an effort to maintain high returns for our shareholders."
In 2005, Gaylord incurred $56.7 million in capital expenditures related to the construction of the Gaylord National.
ResortQuest fourth quarter 2005 revenues increased 23.0 percent to $41.4 million, compared to $33.6 million in the fourth quarter of 2004. Fourth quarter 2005 RevPAR increased to $53.68 or 1.2 percent over the prior-year quarter. ADR increased 7.1 percent to $129.35 from $120.77 in the fourth quarter of 2004, while occupancy decreased 2.4 percentage points to 41.5 percent compared to 43.9 percent in the prior-year quarter. Fourth quarter 2005 operating loss was $13.2 million compared to an operating loss of $9.6 million in the fourth quarter of 2004. ResortQuest CCF was a loss of $7.5 million for the period versus a loss of $7.0 million in the fourth quarter of 2004.
The principal driver of CCF variance in the fourth quarter of 2005 versus 2004 was off-season operating losses at businesses that were acquired in 2005, including Whistler, Hilton Head and Aspen, as well as a decline in closed real estate brokerage transactions. CCF in the fourth quarter of 2005 included $2.3 million from Gaylord's share of proceeds related to the sale of the Mauka Tower, a 72-room hotel adjacent to the Aston Waikiki Beach Hotel in Honolulu, Hawaii that was purchased in 2005 along with the Waikiki Beach Hotel by a joint venture between Gaylord and Deutsche Bank's Real Estate Opportunities Group.
In the fourth quarter of 2005, ResortQuest had 16,353 units under exclusive management, excluding units reflected in discontinued operations. ResortQuest operating statistics for all periods presented exclude units in discontinued markets and units out of service, which include units damaged by hurricanes. Operating results for ResortQuest's non-core markets that are being exited are reflected in Gaylord's consolidated financial results as discontinued operations, net of taxes, for all periods presented.
"The fourth quarter continued to be a restructuring and rebuilding time for ResortQuest," said Reed. "We further streamlined our properties to focus on markets where ResortQuest is a leader and has significant market share opportunity. In addition, we are beginning to see the first results of our efforts in branding and technology, most recently demonstrated by the launch of our consumer friendly website. We look forward to ResortQuest emerging as a brand that has an engaging affinity with our customers, similar to Gaylord Hotels."
Opry and Attractions
Opry and Attractions segment revenues decreased to $15.8 million in the fourth quarter of 2005, compared to $18.8 million in the fourth quarter of 2004. Opry and Attractions reported operating income of $0.3 million for the period, compared to an operating income of $2.3 million in the fourth quarter of 2004. CCF decreased to $1.7 million in the fourth quarter 2005 from $3.6 million in the prior-year quarter. Segment performance in the fourth quarter was negatively affected by event cancellations affecting Corporate Magic, Gaylord's event planning and production business.
In November, Gaylord signed a multi-year deal with television network Great American Country ("GAC"), extending GAC's broadcast rights for their highest rated show, Grand Ole Opry Live. The agreement provides GAC broadcast rights for an increased number of new Grand Ole Opry Live shows, and outlines plans to develop several new Opry-related programs going forward. According to Nielsen Media Research, GAC is one of the fastest growing networks in the U.S.
"We are excited about our affiliation with Great American Country," said Reed. "GAC is an excellent distribution outlet and partner for the Opry brand, as it expands the Opry's audience and gives country music a coast-to-coast showcase. The Opry also reached new audiences through two special shows with GAC's sister channel, the Shop at Home Network, which offered viewers the ability to purchase special Opry merchandise. We will continue to pursue additional partnerships to broaden the reach and merchandising opportunity of the Opry."
Corporate and Other
Corporate and Other operating loss totaled $12.3 million for the fourth quarter of 2005, compared to an operating loss of $11.4 million in the same period last year. Corporate and Other operating losses in the fourth quarter of 2005 and 2004 included non-cash charges of $1.0 and $1.2 million, respectively. Non-cash charges include items such as depreciation and amortization, and the non-cash portion of the Naming Rights Agreement expense in the fourth quarter of 2004. Corporate and Other CCF for the fourth quarter of 2005 increased to a loss of $10.5 million compared to a loss of $9.7 million in the prior-year quarter.
Bass Pro Shops
For the quarter ended December 31 , 2005, Gaylord's equity income from its investment in Bass Pro was $0.3 million.
On December 14, 2005, the shareholders of Bass Pro, Inc. contributed their stock in Bass Pro, Inc. to Bass Pro Group, LLC, a newly-formed Delaware limited liability company. The majority owner of Bass Pro, Inc. also contributed (simultaneously with the contributions of the Bass Pro, Inc. stock) equity interests in Tracker Marine, LLC, Big Cedar LLC and certain related assets to Bass Pro Group, LLC. Following these contributions, Gaylord's stake in Bass Pro Group, LLC (the new parent company of Bass Pro, Inc., Tracker Marine and Big Cedar) is 13.0 percent, down from a 26.6 percent ownership interest in Bass Pro, Inc. The transaction is expected to be accretive to Gaylord. The restructuring of Bass Pro did not impact recognition of Bass Pro, Inc. equity income by Gaylord in 2005, since Gaylord accounts for its share of Bass Pro, Inc. equity income one month in arrears. Gaylord will continue to account for its stake in Bass Pro Group, LLC using the equity method of accounting.
At December 31, 2005, the company had long-term debt outstanding, including current portion, of $600.3 million and unrestricted and restricted cash and short term investments of $84.0 million. $566.5 million of the company's $600.0 million credit facility remains undrawn at the end of the fourth quarter of 2005, which included $13.5 million in letters of credit.
Gaylord is currently evaluating financing alternatives to fund Gaylord National's planned expansion costs and increased construction costs. Alternatives may include the issuance of debt or equity, the sale of assets, or a combination thereof.
The following outlook is based on current information as of February
14, 2006. The company does not expect to update guidance until next quarter's
earnings release. However, the company may update its full business outlook
or any portion thereof at any time for any reason.
Gaylord's 2006 outlook reflects approximately 25,000 room nights out
of service due to room renovation at Gaylord's Opryland Hotel.
In the first quarter of 2006, the company launched its new website,
ResortQuest.com. The company also expects to reduce its inventory by approximately
750 units due to the termination of unprofitable management agreements
in Northwest Florida and other eastern markets, as well as the settlement
of a legal dispute.
About Gaylord Entertainment
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. 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 economic conditions affecting the hospitality business generally, the timing of the opening of new facilities, increased costs associated with building and developing new hotel facilities, business levels at the company's hotels, risks associated with ResortQuest's business, the company's ability to successfully integrate and achieve operating efficiencies at ResortQuest, and the ability to obtain financing for new developments. The company's ability to achieve forecasted results for its ResortQuest business depends upon levels of occupancy at ResortQuest units under management, returning damaged units to service on a timely basis and the successful roll-out of new ResortQuest technology initiatives. 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 Securities and Exchange Commission. 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.
|Also See:||Gaylord Entertainment Co. Narrows 4th Qtr Loss to $8.9 million from $14.5 million a Year Ago; Solid Performance from Both the Gaylord Palms and Gaylord Texan / Hotel Operating Statistics / February 2005|
|The 1,500 room Gaylord National Resort & Convention Center on the Potomac to Open in March 2008, Will Be Largest Largest Hotel and Convention Center in the Washington DC Area / September 2004|