Ryman Hospitality Properties Inc (RHP) 2003 Q4 法說會逐字稿

Welcome to the Gaylord Entertainment Company's fourth quarter 2003 earnings conference call. Hosting the call today from Gaylord Entertainment is Colin Reed, President and Chief Executive Officer, along with David Kloeppel, Chief Financial Officer. They are joined by Jason Morgan, Vice President of Strategic Planning and Investor Relations, and Carter Todd, Senior Vice President and General Counsel.

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 fourth quarter, 2003 earnings call. With me today are Colin Reed, our President and Chief Executive Officer; David Kloeppel, our Chief Financial Officer and Executive Vice President; and Jason Morgan, our Vice President of Strategic Planning and Investor Relations.

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 may be 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 may be affected by the important factors, among others, set forth in Gaylord Entertainment's filings with the Securities and Exchange Commission and in its fourth quarter 2003 earnings release. 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 a result of new information, future events, or otherwise.

I would 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 would like to turn the call over to our Chief Executive Officer, Colin Reed.

Thanks, Carter. Good morning, everyone, and welcome to Gaylord Entertainment's fourth quarter conference call. As usual, I'll begin the call with a recap of the quarter, followed by a review of our progress in executing the strategies that we have shared with you in the past. We will also discuss the ongoing integration of ResortQuest, highlighting key initiatives for 2004 that will begin the transformation of this business into a powerful brand. Dave Kloeppel, our Chief Financial Officer, will then review the operating and financial performance of the Company, and provide guidance for the first quarter of the year. I will then make a brief closing statement, and we will then open up the call for questions.

We ended the fourth quarter and the year with operating results that were very much in line with our expectations, including RevPAR that exceeded the guidance that we gave on our last earnings call. We have started seeing a recovery of the corporate group segment and trend and demand continues to pick up, as well.

In the quarter, we were able to increase occupancy levels 2.1 percentage points to 69.4 percent. Dave will discuss the results in significantly more detail shortly, but I would like to note that we think this positive occupancy trend will continue as the general economic environment continues to improve.

In fact, across the board, the key indicators of the long-term health of our business are quite positive. The best way to measure the health of our hotel business model is by looking at a couple of key metrics, the first of which is the number of advanced bookings. In the fourth quarter, we booked over 543,000 net definite room nights for future periods, and of the large group bookings in the fourth quarter, 35 percent were rotational. This brings the total net definite bookings for 2003 up to a record level of 1.3 million room nights, surpassing the prior record level set in 2002 by 8 percent.

Again, it is important to stress that our hospitality operation is very much an occupancy-driven business, unlike the broad industry hotel model that is more focused on average daily rate. The reason is pretty simple, in the sense that our product offering is expensive, and we do much more than sleep people. And our customers stay on average between two and three days. This translates into more opportunities to generate revenue. For example, the higher group occupancy levels we saw in the last quarter -- albeit the expense of a slight reduction in ADR -- led to a 3.7 percentage point increase in total RevPAR compared to the prior year. This is due to incremental outside of the room revenue that we're able to capture from the increased number of guests.

Our sustained 2 year positive booking trend reflects not only the quality of our product offering, but also the improved service culture that is now entrenched in our hotel properties. As we see the economic recovery gathering momentum, we expect our bookings to accelerate in 2004, which bodes well for the operating performance of our properties down the line.

Just to put things into perspective, the total room nights available within the Gaylord hotel network, including Texas, is approximately 2.2 million. 1.3 million room nights, the number of advanced bookings we record this year, represents 58 percent of the total available annual room nights in our system. If we're able to maintain annual advance group bookings of 1.3 million room nights, and add our usual annual transient room nights, we will be well-positioned to achieve annual occupancies in excess of 80 percent.

A second (indiscernible) we measure is customer satisfaction, and because of the progress we have made to date on this front, we're very confident that we will continue to attract and retain these large group customers within Gaylord hotels, due to the superior quality of our product and our continual enhancement of the customer experience. For the second quarter in a row, employees at both Gaylord Palms and Gaylord Opryland earned the highest level of customer satisfaction bonus. This is our management team's focus and an area in which we have invested a significant amount of resources. I'm extremely pleased to say that we're now consistently achieving the levels of customer satisfaction that will keep our guests coming back to us time and time again.

Now in two months, the Gaylord Texan hotel will open, adding to our current distribution network. Importantly, this property has been meticulously designed with the meeting planner in mind, benefiting from the proprietary knowledge that we have gained over the past two years at our existing properties, and through the extensive research we have conducted with meeting planners. We are receiving extremely favorable feedback from many meeting planners who have already visited the Texan property. They're not only excited about the stunning design and architecture of the physical property, but they're also enthused about the addition of such a high-quality all-in-one convention hotel, the likes of which does not currently exist anywhere in Northern Texas.

As a matter-of-fact, the Gaylord Texan is actually inducing new demand into the Dallas market. This is actually a new statistic that we're going to share with you this morning. Out of the 118 large group bookings recorded for the property thus far, 76 percent, or 90 of those 118 large group bookings, are bookings from groups that have not used the Dallas area as a convention destination in the past three years. This is extremely important, I think, as this new supply induces demand to this area.

We also continue to explore select opportunities for further expansion of our distribution. Our interest in developing a Washington D.C. area project remains high, and we are working with Prince George (ph) accounting officials to increase the public funds available to partially offset our construction costs for the project that we have talked about for so long. We expect to make further progress during the first quarter on this matter, which will allow us to be much more definitive about when we will be able to proceed with this project.

Let me switch gears a bit and talk about how we plan to integrate ResortQuest into our operations. We are very excited to have ResortQuest and their team within the Gaylord family. We're working well together, and although this is only the third month of the process, many of the basic integration issues have largely been addressed. As we move beyond the basics of the integration process, we are focused now on the long-term vision for ResortQuest.

We acquired this business because we are confident that our management team can create a sustainable and profitable brand in the vacation rental market. While ResortQuest is the largest player in the vacation rental market, its brand identity is underdeveloped. We will build a dominant, nationwide brand founded on two principles -- owner trust and consistency of the renter experience. These may sound simple, but they are in fact lofty goals, and we have much hard work ahead of us.

2004 for ResortQuest is going to be all about positioning for the future. We have identified marketable strategic areas for focus and development in order to create a world-class brand. On top of the list is brand research. We are in the process of finalizing an extensive market research study that will help us define the industry. We will come to fully understand items such as, what exactly are the primary drivers of vacation letting (ph)? And what are the common characteristics of second homeowners? The answers to these questions, along with many others, will help us to (indiscernible) all ResortQuest operations and create its future brand identity.

This research will also allow ResortQuest to fully understand the customer -- who they are and what they want for their money. We are also in the process of developing a strategy around the channels by which customers prospectively will find their way to ResortQuest. The growth strategy for the brand is also now being developed using Gaylord resources. We will come to understand how various markets will grow, their relative value, and which markets warrant our absolute focus.

We've already targeted a number of areas for specific operational changes. These initiatives include the creation of a standardized property rating system, as well as a formalized (indiscernible) training and bonus program that will lead to superior levels of service throughout the ResortQuest property network. We've also been hard at work benchmarking all of the various systems that exist today, and setting the plans in place to overhaul these systems and put in place a one-company set of financial and operating systems. This team is focused on developing a set specific best practice standards throughout the Company, and we expect to have this completed by June of this year.

As we improve the product offering and operational efficiency, our major challenges become attracting additional customers to experience our properties, and attracting the best new properties to the ResortQuest brand. As we've previously discussed, we believe there are numerous cross-marketing opportunities between ResortQuest and our existing Gaylord hospitality and attraction businesses. Several million people walk through the doors of our current Gaylord hotels and attractions every year. Each one of these guests is a potential customer for ResortQuest, and we are already actively exploring the most efficient ways to promote the ResortQuest properties to these folks.

In addition, through many distribution channels of our unique Opry content, we reach multiple millions of listeners and viewers each week, and our research shows that these are people with a particular high propensity to rent vacation homes, particularly at the beach. So clearly, we have a tremendous existing customer base from which we can jump start our marketing program.

Also, we will be developing new strategies to increase ResortQuest brand awareness among entirely new demographics. We're taking a practical step to develop the tools necessary to make these efforts a success. For example, we're implementing an expanded and enhanced company-wide single internal marketing database.

Just as we are undertaking to better understand the identity and characteristics of ResortQuest rental customers, we must also develop a full understanding of the key vacation home rental markets. As we increase occupancy at ResortQuest existing units, we will also be instituting a comprehensive unit portfolio analysis aimed at pinpointing our geographical strengths and weaknesses, with the ultimate goal of targeting specific condo rental markets for strategic growth. This expansion will be a very focused effort, entailing am in-depth study of the various condo rental markets to identify where we should focus our company in order to extract the highest possible return for you, our shareholders.

All in all, we expect to make a lot of changes during 2004 with the ResortQuest operations. And at present, we are very focused on the long-term development of this business line.

For those of you shareholders who were originally holders of ResortQuest stock, you know this brand has been neglected, but we intend to expend energy and resources to create a brand that will be widely identified as the nation's clear leader in the vacation rental industry. And as such, our financial projections for the short run are modest because we will invest for the future, but I have no doubt that downstream we will have a brand on our hands that will provide significant returns.

The opening of the Gaylord Texan and the ResortQuest acquisition are landmark achievements for the Company, and all of us here at Gaylord are focused on making both of these assets a huge success.

Now David is going to discuss the fourth quarter operating results and give guidance for the first quarter -- and I misspoke at the outset -- also for the full year, as well. David?

Thanks, Colin. As you all know, we completed the acquisition of ResortQuest on November 20, 2003. As a result, the operating loss from ResortQuest for the period beginning November 20 through the year end 2003 is consolidated into Gaylord's reported fourth quarter and full year 2003 financial results.

For the ResortQuest segment, we recorded revenue of 17.9 million and an operating loss of 2.6 million for the consolidated portion of the fourth quarter. Consolidated revenues from continuing operations for Gaylord Entertainment for the fourth quarter of 2003 were 130 million -- 130.8 million, up 19.8 percent over last year's 109.2 million, due to the inclusion of ResortQuest revenues and outside the room spending and favorable demand for our holiday theme programs at Gaylord hotels that more than offset a modest decline in RevPAR.

Consolidated operating loss for the fourth quarter of 2003 was 11.3 million, compared to an operating loss of 4.3 million in the fourth quarter of 2002. This increased operating loss was due to lower margin out side the room revenues, increased preopening expenses and preparation for the opening of Gaylord Texan, and the aforementioned ResortQuest loss.

Adjusted EBITDA was 10.4 million in the fourth quarter of 2003 compared to 13.1 million in the same quarter of '02. The Company recorded a net loss of $14.8 million, or 41 cents per fully diluted share in the fourth quarter of '03, compared to a net loss of 2.6 million, or 8 cents per fully diluted share for the fourth quarter of '02, largely due to higher interest expense resulting from write-offs of deferred financing costs in connection with our refinancing activities in the quarter.

The full year 2003 consolidated revenues from continuing operations were $448.8 million, an increase of 10.7 percent from 405.3 million in the same period last year. Consolidated operating loss for the year was 15.8 million compared to operating income of 7.1 million. Remember, however, that operating income for 2002 included $30.5 million pre-tax gain related to the sale of our interest in the Opry Mill (ph) shopping center.

Adjusted EBITDA for 2003 was $62.2 million compared to $52.9 million in the same period of 2002, an increase of 17.5 percent. The Company had net income in 2003 of $0.8 million, or two cents per fully diluted share. This compares to net income of $95.1 million, or $2.82 per fully diluted share in 2002.

In the hospitality segment, revenues were 96.8 million in the fourth quarter of 2003, an increase of 3.4 percent from last year's fourth quarter. RevPAR declined modestly 1.3 percent to $98.27, but did exceed the guidance that we gave in our third quarter earnings call. The slight decline was caused by a shift in customer mix that reduced ADR to $141.64 for the quarter, or $6.32 cents lower than year. However, the ADR decline was partially offset by a 2.1 percentage point increase in occupancy levels to 69.4 percent.

The strong occupancy in the quarter also contributed to the rise in segment revenue, with particularly strong outside the room revenues leading to an increase in total revenue per available room of 3.7 percent over the prior year period, increasing (indiscernible) to $29.14 per available room. Hospitality adjusted EBITDA was $20.8 million in the fourth quarter of 2003, a decrease of $200,000 from the fourth quarter of '02.

Adjusted EBITDA margins decreased in the segment, moving from 22.5 percent in the fourth quarter of '02 to 21.5 percent in the fourth quarter of '03. The adjusted EBITDA margin declined due to the decline in ADR described previously, and the marginally less profitable outside the room revenue.

Hospitality operating income was $3.3 million in the fourth quarter of '03 compared to 7 million in the fourth quarter of '02. Preopening expenses were 4.5 million in the fourth quarter of '03 compared to 1 million in the prior year period, and due to straight line lead (indiscernible) amortization on the Gaylord Palms ground lease, non-cash lease expense included in operating income was 1.5 million in the fourth quarter 2003 versus 1.6 million in the prior year period.

Now moving on to our newest asset, ResortQuest. For the period November 20 through December 31st, 2003, ResortQuest contributed revenues of 17.9 million, an operating loss of 2.6 million, and adjusted EBITDA for the abbreviated period of a negative 1.4 million. In order to provide an understanding of the performance of ResortQuest operations over the course of the normal fourth quarter reporting period, the following are ResortQuest operational statistics for the full fourth quarter 2003. Please note, however, that these statistics are not necessarily indicative of ResortQuest performance over the specific time period included in our consolidated fourth quarter financial results.

ResortQuest fourth quarter 2003 occupancy increased 1.8 percentage points to 39.7 percent, and ADR rose to $111.99, up from $107.60 cents in the fourth quarter of 2002. This resulted in RevPAR of $44.43 for the fourth quarter of '03, a 9.1 percent increase over the same period in 2002. These increases were driven by strong performance in ResortQuest's beach and Hawaii regions. Total units under management decreased to 17,746 for the quarter, down from 18,639 in the previous year's fourth quarter. The decline in unit count is primarily attributable to the Company's strategy in 2003 to upgrade its overall inventory quality.

The Opry and attractions segment generated revenues of 16.1 million in the fourth quarter of 2003, up 3.6 percent over the prior year period. The Opry and attractions segment broke even at the operating income line in the fourth quarter of 2003, compared to an operating loss of $800,000 in the same period for 2002. Adjusted EBITDA for the segment increased to 1.3 million in the fourth quarter of '03, up from 0.9 million in the fourth quarter of '02.

And corporate and operating loss for the quarter was $12 million compared to 10 million of operating loss in the fourth quarter '02. These operating losses include 1.8 million and 1.7 million of non-cash and non-recurring charges for the fourth quarters of '03 and '02, respectively. These charges account for items such as depreciation, amortization, restructuring charges, and the non-cash portion of the Gaylord Entertainment Center naming rights agreement expense.

As of December 31st, 2003, Gaylord Entertainment had debt outstanding of $548.8 million. Total unrestricted and restricted cash was 158.7 million at the end of the fourth quarter of '03. On November 12, 2003, the Company sold $350 million in aggregate principal amounts of 8 percent senior notes due 2013, and an institutional private placement. The net proceeds were used to repay the Company's subordinated term loan, mezzanine loan, and term loan portion of its 2003 senior secured credit facility, to repay certain indebtedness of ResortQuest, and to pay transaction related fees and expenses.

Also in the quarter, we received a commitment from certain of our bank lenders to provide a revolving credit facility of $65 million, which was subsequently amended and up-sized to $100 million. The new credit facility matures on May 22nd, 2006. And as of December 31st, 2003, there were no borrowings outstanding under this facility. In addition, we plan to exercise the first of the two 1 year extension options on our $199.2 million senior loan, secured by the Gaylord Opryland Nashville hotel, and to extend its maturity beyond the stated maturity date of March 31st, 2004.

And finally, on November 20, we completed the sale of our approximate 76 percent interest in the Oklahoma RedHawks baseball team. The interest was sold to Oklahoma Baseball Club LLC for cash proceeds of approximately $6.8 million.

And now I will give guidance for the first quarter and full year of 2004. The Company does not expect to update guidance until next quarter's earnings release; however, we may update our full business outlook or any portion thereof at any time for any reason.

2004 will be a transitional year for Gaylord as we build for the future. In 2004, we will work through the final occupancy gap at Gaylord Opryland, left by an unfocused sales effort in 2000 and early 2001. Remember, by the way, that our customers have a 3 to 4 year booking window. In 2004 we also expect to benefit from a strengthening economy, booking strong reservations to fill future years. And also in 2004, we will be establishing a very strong foundation upon which ResortQuest will grow. As Colin described, the plan is coming together, and we are focused on investing in the future. We're keeping EBITDA expectations modest so we have the flexibility to build the business in an inappropriate, long-term, focused manner.

And now for the numbers. For the full year 2004, we expect consolidated revenues to be in the range of 700 to $740 million and adjusted EBITDA to be in the $100 million range. Capital expenditures for the year are expected to be between 130 and 135 million, which includes approximately 25 to $30 million in maintenance capital expenditures.

For the first quarter of 2004, we expect consolidated revenues to be around 155 million and adjusted EBITDA to be approximately (indiscernible) million. As I described earlier, we are working through our final occupancy gap in Nashville, so in the first quarter of 2004, Gaylord hotels same-store RevPAR is expected to experience a 10 to 12 percent decline compared to the first quarter of 2003. The second quarter, however, will experience just the opposite trend, of strong favorable RevPAR comparison.

Again, with hotels we expect full year 2004 same-store RevPAR to see growth ranging between zero and 2 percent, and we expect the Gaylord Texan to contribute in the range of $15 million in adjusted EBITDA for the year. And in addition, we are projecting Gaylord hotels advance bookings for the year to be approximately 1.3 to 1.4 million reservations. Looking further ahead for the 2005 through 2007 period, we expect Gaylord hotels to achieve high single digit same-store RevPAR growth each of those years.

Now as for ResortQuest, we continue to be focused on the integration of this business into ours, and expect to position it for the future in 2004. And we expect it to achieve approximately $20 million in adjusted EBITDA for the full year.

And now I would like to turn the call back over to Colin.

Thanks, Dave. All in all, I would say I'm pretty satisfied with the progress we have made over the last year. Our financial results showed good improvement over 2002. Our customer satisfaction levels are up substantially, and this translated into greater volume of advanced bookings. Our capital structure is also in great shape as a result of the refinancings we undertook last year.

Our Texas project is almost complete, and this beautiful hotel will make her debut during the first week of April, and we have high expectations for her success. The meeting planner research we undertook last year has helped us understand our customers much better than at any time in our history, and this will allow us to do a better job for them.

We have continued to perfect our human resource systems that enable us to be the very best employers of talent in our industry, and this is clearly paying dividends to our customers. We've made huge strides to distribute the Grand Ole Opry across the country, and this is helping us extract more value from this brand, and at the same time promoting our other business.

And finally, for all of the above reasons, I believe we have made progress in recapturing the trust of our owners -- you, the shareholders. 2004 should be an exciting year and one where we are focused on growth and not cleaning house.

We now have three businesses that we can leverage each other's brand recognition and existing customer base, and we will continue to look for the right opportunities to add synergistic assets that will increase the value to our shareholders.

I would like to again thank you for taking the time for joining us this morning, and we will now open up the lines for any questions that you may have.

(OPERATOR INSTRUCTIONS). Nap Overton, Morgan Keegan.

I was wondering if you could give us an update at all on any additional monetization? Are there any remaining noncore asset sales? Could you also update us on potential other monetization of assets, including the joint ventures with the hotels that have been contemplated, and also the Bass Pro asset -- the outlook there?

This is Colin. There are many pieces to that question. I will do my best to answer them. And Dave, jump in here, because I may miss a few. First, the remaining assets -- remaining smaller assets that we are looking at. Well, we have this big 100 acre parcel of real estate on Briley (ph) Parkway. We don't envision us selling that asset for at least one or two years, simply because of the amount of work that is being done on the roadway system here. We believe that asset will have fairly significant value downstream as the highway gets completed here. We are continuing to prosecute the sale of our interest in the predators. I think we have been fully explicit in terms of the dispute we have with the predators on the put rights that we believe we have. We will continue to prosecute the sale of that asset.

In terms out terms of the hotel real estate, the key for us is if we are going to sell those assets, there are 2 dilemmas that we're faced with here -- what do we do with our capital when we sell any of those assets? And two, what is the optimum time to indeed sell those assets? One of the things that Dave has guided on, again, this morning -- we talked about it in our bond show when we did the roadshow -- is that we believe that we're going to see high single digit RevPAR growth in '05, '06, 07. We want to make sure that as we look at selling any of those assets that we get paid for that, because we have put in a lot of hard work to build assets here that now have great customer satisfaction, a lot of advance reservations that will translate into much higher levels of profitability. And we want to make sure that when and if we monetize those assets, that we actually get paid for that. So all of those things we are focused on. In terms of the Bas Pro investments, you have heard me articulates many times I believe this asset is a category killer. One of their competitors, I think again, (indiscernible) filed this week for an IPO. This business with Bass Pro is a business that has got a pretty steep growth curve to it. It's developing between five and six stores a year. These stores are all very profitable. And we are, frankly, looking at ways in which we can give a much higher level of transparency to that business to our shareholders. Currently we own 19.9 percent of that business, which we do not equity account for it. We're looking for ways in which we can move it across the line and give higher levers of transparency for our shareholders, so our shareholders can see the embedded value here. We don't believe that will entail -- we believe we can do that without investing any significant dollars into the Bass Pro business. But that is sort of a recap of the assets. Dave, did I miss anything?

No, I think you got it all.

Just one other question. Can you give us any -- a little additional detail behind the Texas asset projection for 15 million in EBITDA for the year? That is a very large investment for the Company, and we'll be watching that. Can you tell us what kind of occupancy levels -- any kind of detail behind that projection?

It's David. Good morning to you. I'm getting a little bit of feedback, so I hope you can hear me okay. We expect the occupancy in the hotel to be in mid to high 60s of occupancy. The ADR we expect to look a lot like the Nashville rate structure for the first year or so of the business, and a good ratio of outside the room to inside the room revenues, much like we do at Nashville. Kind of a one-to-one or maybe a little bit more than one-to-one ratio of outside the room to inside the room revenues. We have been fairly cautious with the cost structure to make sure that we can provide the right level of service in this first year of operations for the hotel. And as a result, we're driving toward a $15 million EBITDA number. We hope to do better than that, but we think that at this point, we're very comfortable with the 15 million range.

This is Colin. Here is the dilemma we have with this business. And I hate -- we really are trying to focus very much on the front windshield now and not looking over our shoulders at the rear windshield. But as you know, when we got to the Company -- this new management team got to the Company back in 2001, prior to September 11th, this hotel was under construction without capital (technical difficulty). And quite frankly, it was being built without -- it was being built without detailed design documentation. September 11th occurred. What we effectively did was shut the project down for about a 6, 7 month period of time. So we didn't get back in earnest to announcing to the world here's the definitive table when we're going to open this magnificent hotel, until midway through 2002. And as you know, the window for corporate and association business is anywhere from two to four years.

So our 2004 business, group business, is not at the levels that we expect our 2005 and 2006 business to be, and so we have taken a cautious view on the transient side of the business for 2004 and that equals the numbers that David articulated to you. But what we have said to the world, again, in the (indiscernible) roadshow, is that we expect that when this asset gets normalized -- and we expect that to be in the third year -- our goal is to move this asset towards a $45 million EBITDA range. And we think we can do that. We are very excited about the prospects of this happening to this asset because of the reception this asset is getting from these meeting planners who are indeed seeing this asset for the first time. And that statistic that I shared with everybody on the phone -- that the approximate 120 large groups that have been booked to date, approximately 90 of those have not been to Dallas for the last 3 years -- is an exciting statistic to us, because what it's saying to us is this project, because of its unique physical attributes -- and I would think that there is belief in our ability to deliver great service in this asset -- people are prepared to say, you know what, I don't normally go to this market but I will for this asset. Because it's close to DFW, and we can have fun at this asset. So this all bodes well for the future. But what we don't want to do is be overly speculative about lofty occupancy goals for '05 here. But I think -- let us get this hotel open, let us get through the second quarter, and I think we can honestly then be a lot more explicit about 2004 and 2005, as we see the ramp up in this asset. And sorry, that is a long answer to the question, but it is a complicated question.

Will Marks, JMP Securities.

I have two questions. Starting with the presentation of your release (indiscernible) -- looking ahead, looks like depreciation and amortization you're going to put on one line, is that correct?

Yes.

And then on ResortQuest, did you present that the way you will going forward where you will not break out expenses in the actual income statement?

Yes, that is correct.

Okay. In terms of so we can model, can you tell us what the fourth quarter RevPAR -- I'm sorry -- the EBITDA was for the full quarter?

For ResortQuest?

For ResortQuest. Yes.

That is a difficult question to answer. It sounds like a simple question, but it is a difficult answer, unfortunately. Because when you combine the books, there is a lot of changing of the balance sheet items that ends up happening between November 19th and November 22nd. And I guess the best way to explain it to the investment community is, the guidance for ResortQuest for the year was around about $18 million worth of EBITDA, and they ended up producing for the year around $18 million of EBITDA. So they basically hit the guidance number. Unfortunately, I wish I could give you a better answer than that, but hitting guidance is the best way to describe it.

And while we are still on ResortQuest, I feel like the $20 million guidance is a little bit of a lower number than we all would have thought, or at least I would have thought. And I think Colin explained it pretty well -- it sounds like it's just getting the business back in shape, ramping up, and you're making some sacrifices in '04 to get to better numbers in '05. Can you give us an idea of '05? Can you get close to 30 million of EBITDA?

We will have a -- we're going to have an analyst conference, David is going to be -- I think -- we published any dates on that yet, Dave We are going to do that late May, and we will be able to give you a lot more information then. We're not trying to punt on this very explicit question, but the issue for 2004 that I don't yet quite know the answer to -- and I always try and be very, very direct when you ask a very direct question -- is that we will be having collated here all of the brand research complete here in the next two to three weeks that we have been very aggressively working on. It is a major piece of research; it's costing us a bunch of money. But it is very, very explicit, and, I think, the first time research of this magnitude has been done on this industry. And what we have done for 2004 is we have said that -- we baked into the numbers a couple of million dollars of additional cost to really put our foot on the accelerator from a brand identity perspective. And that is why you see that number. And as we get through this research, we'll be able to know whether the foot is right down to the bottom of the accelerator or whether it is halfway down. But the research will give us very clear understanding of the perception of the -- in fact, the multiple brands that ResortQuest operate under. They operate (indiscernible) in Hawaii, and they operate at Abbot down in Destin. And one thing I will tell you is that by the end of this year we'll have a single brand for the business. And depending upon the direction we go as what the brand will be, which brand will ultimately prevail here, we'll determine how much money we spend on accelerating the brand image in 2004. And we have been conservative in the EBITDA line and pretty aggressive on the cost line, because we feel we need to get this brand dealt with now and invest for the future, not do to this brand what has been done for the last three or four years, which is starve it for marketing and identity dollars.

That is very helpful. Let me ask you a couple of other questions. Actually, David, can you restate the CapEx numbers for the year?

For '04?

For '04.

About 135 million, ballpark. That includes 25 to 30 of maintenance CapEx.

So do we assume then that you have roughly 100 -- a little over 100 million to spend on excess?

Including preopening, it's 109.

109. Okay, great. On the Gaylord Palms, the RevPAR index came down pretty significantly in the fourth quarter.

Right.

Can you explain that?

We are a convention hotel and the fourth quarter is a leisure market. And December (indiscernible) basically Thanksgiving through to New Years, it's a very heavily transient kind of a marketplace. And so we tend not to, on a RevPAR index basis, do as well against the Disney property, for instance.

If you would have tracked it for '02, we had the same phenomenon take place. But for nine months of the year, we're the number one convention hotel in this market against the peer group. And in the last quarter, as David said, we have this blip because it becomes more of a transient market than it is -- a transient leisure market than it is a convention market.

Okay. So that should be standard going forward?

Yes. And one thing we took away from the Palms performance for the quarter was it did have significant increases there -- two or three percent increase in RevPAR. But more importantly, in total RevPAR, we had an 18 percent increase in total RevPAR, which is the right direction for that business to be heading.

And by the way, when you say it's going to be usual going forward, we're not saying that. We are saying that as the image of this business continues to just improve dramatically, and the service levels continue to improve, we expect to have strong business in that November/December time frame. Our ICE! expedition that we put on this year, which was -- we (indiscernible) it out of Nashville -- was very fruitful, very profitable for our business. And we expect to do other things like that in Orlando to continue to stimulate demand for that product in that November/December time frame.

One last question. Back to the Texan. Can you give us estimates on the preopening costs that will be on the income statement in the next two quarters?

They'll end as of the date of opening, and we open April 2nd. So there shouldn't really be any (indiscernible) the second quarter, maybe a couple of dollars. And the preopening number is about 13 for the first quarter.

Brad (indiscernible), Performance Capital.

It's actually Brian Warner (ph). I have a couple of questions. can you talk a little bit about -- obviously, as you commented on you're still getting a lot of information on ResortQuest -- but can you talk a little bit about a broad overview in terms of what you think the target market is, and maybe a little bit of insight as to what the price points might be? And how broad and deep do you think this industry is? And a second question. Can you comment, handicap, or critique any possibility of gaming in the Maryland market?

Firstly, when you are talking about the target market, you're talking about the target market for (indiscernible) for ResortQuest, right?

Correct.

Let's give that a stab first and foremost. These are some statistics that we absolutely know. For start, today, we estimate that 600,000 second homes that are being currently rented across the USA. Indeed, I have (technical difficulty) down in Key Largo. And we know that ResortQuest, by and large, has just less than 4 percent of that share, bit it is two to three times bigger than the next biggest competitor. So there is a monumental, huge inventory that is out there that ResortQuest can get its sticky little fingers on if it does a couple of things.

Number one, that it provides a relative economic advantage for the owner, to align their asset with them versus the mom-and-pop operators. And that's why we're going to spend a lot of time around image, around delivery systems, around explaining the relative economics of why the ResortQuest brand versus the mom-and-pop operations that are out there. We believe the upside of this business, as we have said so many times in the last few months, is pretty substantial. If you go back two years and you look at ResortQuest, two years ago they operated somewhere between 18 and 20,000 units, which is about (indiscernible) thereabouts what they have today, because they have not been in an acquisitive mode. They generated $30 million of EBITDA. On an occupancy level, (indiscernible) from memory it was about 55 percent the -- right now, the occupancy level of the brand last year was about 48 -- 47, 48 percent. So minor increases in occupancy level have huge consequences to profitability. So it is our belief that we can -- number one, increase occupancy level; but two, consolidate the industry. And we believe that economically it will be a double whammy for the business. And our development strategy will define which markets we will focus our efforts on. We will also do things like understand aligning with major condo developers, both low-rise and high-rise developers across the country, how we can explore things like minor joint ventures where we put more effort than dollars in pre-marketing to people who may be condo buyers, and own (indiscernible) but then manage them product -- the 200, 300 high-rise product -- for the next 15 to 20 years. We believe the upside of this is extraordinary, and that is why we bought the business and that is why we are focused on building the brand.

The price point here, we don't want to get into that at this stage, because there may very well be a strategy here to upgrade the quality of the units that we have under our control. As we understand the profile of the consumer who buy these units, what we want to be able to do is understand the sweet spot here from a financial perspective, and that will be applied (indiscernible) to the research that we're currently undertaking.

I know that is a long-winded answer, but it's a complicated question again. We are excited about this business, and we think we can make a lot of money for our shareholders. Now in terms of the G word in Maryland, let me be very clear here. We have been working on this hotel here for four years. Our business -- we are in the convention hotel business, we are not in the gaming business. But the prospects of gaming in Maryland have a consequence to our company if we go forward with the Washington project, because the way the bill the government has drafted has identified gaming can occur on I-95, and the current bill that is being -- that came out about a week, week and a half, ago -- has the prospects of two sites in Prince Georges County. The issue for us that we have been monitoring and we have spoken to the county officials about is how does gaming in Maryland affect us? If somebody is going to do it three miles away from our Washington project and build a 1000 room hotel, that has a consequence to us. And so we have been, obviously, monitoring this issue. It is, frankly, something that I know a little bit about, and some of the management team at this company knows a little bit about. And we will see.

There is going to be, I think, one of three things happening in Maryland over the course of the next month to month and a half. The first thing is, gaming in some way, shape or form will get approved; or two, the budget deficit that is projected to be somewhere between -- I don't now, I read different numbers in different newspapers -- anywhere from 700 to $1 billion -- that will either have to get cut by services being cut or new taxes will be raised. And I think that there is a desire by the Governor to put in some form of discretionary taxation, and that is why he has been very aggressive on the gaming front. And we will see what happens. But as to our position, we're going to have to monitor this. We are not active in it. We're looking at it, we're monitoring it, and we will do what we think is in the best interest of our shareholders as this whole debate unfolds.

Will Marks.

A couple of quick things. I don't know if I heard it clearly, but did you really -- did you make any comment on when you plan to announce anything with Maryland, in terms of just the hotel?

I did in my -- what I said -- we believe that we will have much more to say at the end of the first quarter here, because we are working very aggressively with the County, who have been very supportive of this magnificent development that sits on the Beltway right on the Potomac. It is a wonderful site. And meeting planners -- the research that we have done, it is very, very positive stuff. We like it a lot. And we are working to secure more incentives. There is a timeline, David, that I think has the incentive package that we been talking to the County about, sort of being reviewed by mid-April. And running through the approval process we hope by mid-April. And if that happens and nothing untoward of negative consequence happens vis-a-vis gaming, I think we are going to be ready to communicate publicly about this asset. And the good news is, because of the progress we have made as a company in the last one to two years, I think we can almost finance this from internal resources, and meet the leverage ratio thresholds that we articulated when we did our bond offering, which is a far cry from where we were a year and a half ago.

Okay. A couple of other quick things. On the corporate EBITDA, should we look at a run rate as something absent the 1.8 million of onetime charges, to more like 8.5 million loss for the quarter?

The 1.8 million is an annual, non-cash expense, primarily related to the naming rights for the naming rights on the Gaylord Entertainment Center. The run rate for the year for '04 should be similar to what it was in '03, which is 36, 37 million. I think that is what we guided in our reconciliation on the back of our earnings release.

Great. Two other quick questions. You mentioned, Colin, that the 1.3 million of bookings -- and you have 2.2 million, I guess, room nights -- how do you get the 80 percent occupancy? Because if you're booking out for several years, how do you get to that number? Do you understand what I'm asking?

Yes. Well, if you think about the way we book, if you book 1.3 million room nights year-in-year-out, the booking pattern in our business doesn't change a whole lot; it may change from an average booking window of 3 years to 2.8 years, but it doesn't change dramatically. So if you're booking 1.3 year-in-year-out, we end up having booked call it roughly 60 percent of our occupancy -- going into every year we have 60 percent on the books of group business. And then you add transient on top of that, which we typically run an 80 percent group 20 percent transient mix. So if you layer in that transient on top of that, gets you to -- call it 450,000 or so room nights for transient, that gets you in that 80 percent kind of range on occupancy.

So we should look at -- probably not in '04 -- but looking ahead 1 or 2 years. That is when you get there, right?

We booked 1.2 million in '02, we booked 1.3 million in '03. We think we are going to be in the 1.3 million range, 1.4 million range in '04. With that average kind of 3 year booking window, you can start to do the math to figure out when we think we are going to be in that 80 percent-plus range.

I suppose -- again, you're asking a direct question. The direct answer is the -- the other guidance we've sort of hinted at here, or been pretty explicit at, is that we have said that we believe we are going to have high single RevPAR growth '05, '06, '07. And the reason for it is is when we look at the amount of advance bookings that we have reached those years today, compared to where we were two, three years ago, for this year and next year, we are obviously very encouraged with the pace of bookings that we have. And I think this is a pretty bold statement, and we believe we can do that.

One final question. Any change in the Viacom derivative, or how you would like to discuss that?

Not at this point. It's something that we are constantly reviewing, particularly in connection with Viacom trades and so forth. So no new news today, but that doesn't mean that we're not continuing to work on it.

I think we have time for one more question. If there are any other questions, maybe the askers of those questions could communicate with either David or Jason or me.

I am showing a follow-up question coming from (technical difficulty).

Just a quick question. I see the big box sports retailers have gone bonkers in carrying off the multiples. I am wondering how the Bass business is doing, and if you're able to shed any light on (indiscernible) thoughts with it?

You know, I don't want to go there at this stage. The Bass -- there are some discussions going on in Bass that I think could cause us to communicate about our interest in that company going forward -- all positive stuff, and (indiscernible).

Just a follow-up if you're able to say anything -- how about marketing ResortQuest through there? I think Blue Green (ph) is in there, but is there a way to do that?

We believe there is. And -- perceptive. We believe this customer is a (indiscernible) for ResortQuest beach vacations. Not believe, no.

I think that -- if we could -- because we have other things to get to and other interviews to give. If we could call halt. I would like to thank everyone for being on the call this morning. And again, any follow-up questions, please contact David, Jason, or me. Thanks very much.

Thank you. This does conclude today's teleconference.