Ryman Hospitality Properties Inc (RHP) 2005 Q3 法說會逐字稿

Welcome to the Gaylord Entertainment Company third-quarter 2005 earnings conference call. Hosting the call today from Gaylord Entertainment is Mr. Colin Reed, President and Chief Executive Officer, and Mr. David Kloeppel, Chief Financial Officer. They are also joined by Mr. Key Foster, Vice President of Treasury and Investor Relations, and Mr. Carter Todd, Senior Vice President and General Counsel.

This call will be available for replay. The number is 973-341-3080 and the pin number is 6588844. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions following the presentation. It is now my pleasure to turn the floor over to Mr. Carter Todd. Sir, you may begin.

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 third-quarter 2005 earnings call. You should be aware that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements among others regarding Gaylord Entertainment's expected future financial performance. For this purpose, any statements made during this call that are not statements of historical fact 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're 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 third-quarter 2005 earnings release. And consequently, actual operations and results may differ materially from the results discussed or projected in the forward-looking statements. Gaylord Entertainment undertakes no obligation to update publicly any forward-looking statements, whether as 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 Chairman and Chief Executive Officer, Colin Reed.

Thanks, Carter. Good morning, everyone, and welcome to our third-quarter conference call. Over the last several years and particularly at each quarter end, we have been very precise as to what our strategy is and how we are making progress. I would characterize this last quarter as another chapter in the book with no major twists or turns. There were some challenges that we dealt with in this third quarter. But overall, I'm pleased with the results and the performance of the Company.

Once again, our hospitality business continues to thrive as we made great progress in the corporate meetings and travel marketplace, even in what is usually a seasonally weak quarter for us given our meeting's focus. A new National Harbor project has been gaining great momentum, as bookings continue to grow, and we are extremely excited about the reception we are getting from the meeting's marketplace with this property that we have underdevelopment directly outside our nation's capital.

Bookings overall are strong, and I suspect it should be favorably impacted in the month, maybe years to come due to Hurricane Katrina. As expected and as we have discussed, the operating environment for ResortQuest remains challenging in the aftermath of the unprecedented hurricane season we experienced this last summer. However, as we finalize our ResortQuest brand-building endeavors and streamline the business, we believe ResortQuest will emerge as the dominant brand in the vacation rental market.

Over the next few minutes, I will review each of these topics. And then Dave Kloeppel, our Chief Financial Officer, will discuss the operating financial performance of the Company and provide guidance. And as usual, we will open up the calls for questions at that point. Our strategic goal remains on target, as our hospitality consolidated cash flow results were 21.7 million, an increase of 12.7% over last year. Total RevPAR continued to outpace RevPAR for the sixth consecutive quarter. Hospitality RevPAR came in a fraction under $100, up 8.2% over the third quarter of last year, while total RevPAR was $224.95, posting an 11% increase over the prior-year period.

Our ability to leverage our brand's strength was shown by ADR increases of 10.6%, a sizable improvement over the third quarter of last year. We believe the total RevPAR will continue to be the principal driver of our hospitality growth as long as we execute on our strategy of focusing on premium customers, those that have higher value to us, as sales folks target the high-value loyal customers, the principal group which we encourage to visit our hotels. We cater to this group and do everything we can to ensure that their visit is a successful one and that they will return to one of our properties in the future.

Net definite bookings were robust in the third quarter, increasing 22.2% over the third-quarter production levels of 2004. Overall booking production was 353,000 net definite room nights in the quarter, bringing the 2005 year-to-date same-store net definite room nights to just over 800,000 room nights.

Investors who have listened to our calls before will remember that we pay attention to advanced bookings and particular attention to the tentative and prospects currently in our pipeline as a predictor of the strength of the future. Our pipeline of tentatives and prospects grew by 12% over levels achieved in the third quarter last year, reaching 4.2 million room nights at the end of the third quarter.

The fourth quarter remains the most significant quarter for bookings, representing 40% of the year's booking volume. But based on the current pipeline of bookings, the comparisons with 2004 appear very favorable, and Gaylord Hotels should expect to meet our previous bookings guidance of 1.3 to 1.4 million room nights by year end.

The portion of our advanced bookings that are rotational in nature represents another important statistic that reflects the health of our business. And I am very pleased to report that our rotational statistics for the third quarter of 2005 was an impressive 50.5%. In other words, just over 50% of the 353,000 room nights booked in the third quarter were multi-location bookings, the highest it's ever been in our Company. This is quite an endorsement of the power of the Gaylord Hotels' brand, which will only grow stronger as our service standards continue to improve and as additional properties such as the Gaylord National comes online.

In addition to bookings, we spent a lot of time on another key metric that we track with intense focus -- customer satisfaction. Customer satisfaction is a critical measure because it helps predict our prospects for new bookings and allows us to measure the value we deliver to our customers in this competitive environment. I am pleased to report that employees at all of our hotels earned a customer satisfaction bonus because of the levels we attained this last quarter.

For the last 2 years, we've undertaken a very in-depth star survey -- remember, we call our employees "stars" -- in order to gauge our stars' engagement and satisfaction levels with our Company. We believe that a workforce that is engaged and is trusting of the Company delivers high levels of satisfaction than workforces that are not. During the third quarter, we surveyed our entire business and had a whopping response rate. I'm pleased to report that our levels of employee satisfaction continue to improve and substantially outpace the hospitality industry in general by a factor of two to three times, depending on the specific question asked.

Stars' satisfaction greatly influences customer satisfaction, which in turn dries advanced bookings. Our strategy of differentiation through superior execution can only be accomplished when we excel in all of these three fronts. Well, we are well on our way, I believe, as our brand metrics indicates.

Now let's talk about the specific properties. At the property level, the Gaylord Palms posted a solid performance in the third quarter with higher revenues up 7.2% to 31.2 million and higher CCF up 18.7% to 4.6 million. Both RevPAR and total RevPAR improved 10.6 and 7.2 respectively to $95.79 and $240.85. We talked about attracting the more premium customers, and that's exactly what we have seen at the Palms. Rates have progressively increased as we are factoring through some lower quality business booked years ago.

Gaylord Opryland results need some explanation because occupancy declined modestly, and margins declined several percentage points from the third quarter in 2004. In fact, there were several extraordinary things going on which caused the decline. First, one large customer asked us to allow them to shift their convention to next year, which we agreed to. Second, we had a soft pickup on a couple of groups and soft transient occupancy in the latter part of September, which we suspect was attributable to Katrina. Incidentally, transient occupancy in October is tracking at predicted levels.

From a cost perspective, the quarter was somewhat distorted by an extraordinarily valuable convention that the Gaylord Opryland and the City of Nashville hosted. This last quarter, our property hosted the American Society of Association Executives, in short the nation's top association meeting planner meeting in the country. Our goal was to showcase our Company and our national-based attractions to the leaders, who booked some of the most valuable conventions and meetings across the nation. The bottom line is we pulled out all the stops by hosting welcoming and closing parties and providing 100% flawless service.

The incremental cost to us was significant. But to me, the cost pales in comparison to the opportunity. And I have no doubt that this investment will have substantial long-term value to us. Dave will talk more about the financial details of the Opryland property in a minute.

For the Gaylord Texan, RevPAR and total RevPAR increased significantly in the third quarter as a result of better mix of higher quality groups. RevPAR increased 10.1% to $108.51, and total RevPAR was up 11% to $261.94 in the third quarter of '05. CCF increased 95.6% to 7.5 million in the third quarter of 2005, resulting in a CCF margin of 20.7%, a 900 basis point increase over the third quarter of 2004. Gaylord Texan's third-quarter results reflected leading position in the Dallas-Fort Worth market, not only for our hotel guests but also for local visitors. Food and beverage revenues increased 8.6%, demonstrating our strong service culture and the wide variety of dining and entertainment offerings we have to offer our customers.

During the quarter, we announced an exciting new project to offer even more. We broke ground on a 29,000 square foot restaurant and entertainment complex that will overlook Lake Grapevine and is set to open in the early fourth quarter of 2006.

Construction continues to progress on our newest project, the Gaylord National, with advanced bookings substantially exceeding expectations. Gaylord National booked an additional 135,000 room nights in the third quarter of 2005, bringing the total net definite production for the property to approximately 363,000 room nights on the books at the end of the third quarter.

By a way of comparison, when we opened the Texan, there were 708,000 room nights booked, and we still with Washington have 2.5 years to go. From the construction cost perspective, overseas demand for raw materials escalating all prices and the Katrina effect is causing cost of construction to escalate; we are working through this. But what I do firmly believe is that the demand we're seeing in the room nights and rates should ensure the success of this wonderful development, which will be once completed the finest convention hotel on the East Coast.

As you may have seen in the press, we have been engaged in a dialogue with officials in Chula Vista, a community on the water a few minutes' drive from San Diego. Our customers are telling us that a West Coast location will be very appealing, and we have focused on making this region the next leg of our hospitality growth strategy. Fortunately, our brand is being recognized as a leader in the convention segment, and this has led to preliminary discussions with other potential partners on the West Coast. We intend to pursue all options in order to determine the best course of action for our Company.

One other question that is relevant to the hotel business that I suspect is on investors' minds is our view of the mid-to-long-term impact of Hurricane Katrina will have on our Company. By and large, we are seeing more convention and meeting inquiries from groups that have been booked into New Orleans. Over the last month or so, we've seen about 300,000 room nights communicating with us. Most of this business will be for our fourth quarter this year and the first half of 2006. Our challenge is a good one to have -- namely, availability and matching dates -- because our advanced reservations are strong for the periods that folks are talking to us about. So far, we have been able to accommodate a modest amount of business in '06. But we suspect there will be more groups looking to relocate to other locations across the country as more information becomes available as to when and how New Orleans will be open for business. We will of course monitor this and keep you updated. But the bottom line is that we expect Katrina will be a net positive for the group demand at Gaylord Hotels.

Now let's talk about ResortQuest. As predicted during our second quarter's earnings call, ResortQuest performance during the critical beach season was impacted by Hurricane Dennis and not to mention Katrina, Rita, and now Wilma. Dave will talk about guidance, but we have narrowed the range, as we have more accurately measured the impact. And you should know that we have filed business interruption plans with our carriers to accompany our 2004 Hurricane Ivan claim. We will manage through these challenges, and our brand will be stronger for it.

Dave will probably mention this as well, but our ResortQuest guidance excludes any recovery for the '04 and '05 hurricane-related business interruption plans. So around our hurricane update, it would seem that Wilma had a negligible impact on our properties in Southwest Florida. But time will tell whether this hurricane will influence our customers' behaviors in the long-term. But early indications are that it will have a negligible impact.

Turning now to the brand development initiatives, we have several very excited initiatives in the works, such as the launch of our new website and our new enterprise property management system that will create the foundation for aggressive marketing and growth of this brand. The new website is on track to be rolled out at the end of the year, and the enterprise property management system will commence rollout late first quarter of next year.

In terms of distribution, I have been asked many times by investors and analysts, where do I see ResortQuest out sometime into the future. What I have consistently said is that this brand will probably be the preeminent vacation property manager in 15 to 20 locations that will be growth markets by definition. Instead of having a 3 to 5% market share, we will grow into having 10 to 20%; thus, having by far the largest share of voice, not only in the markets we are in but also the feeder markets to those markets.

Consistent with that strategy, we're exiting nine markets and now have decided to focus on markets that best fit our long-term growth plans. By exiting certain markets, it allows us to focus our resources on higher opportunity markets and initiatives that will enable us to aggressively grow our revenue and build upon our emerging powerhouse brand. These discontinued markets, if included in ResortQuest's continuing operations, would produce an operating loss of about 1.3 million for the full year 2005. In total, 1,559 units will be divested leaving ResortQuest with a total of 16,900 units under exclusive management. More importantly, eliminating these nine locations will save 2 to 4 million in corporate overhead by eliminating some corporate redundancies, which supported this wider footprint. We are in the process of working with potential buyers for these properties in these locations, and we are committed to ensuring a smooth transition for the property owners and the guests that these properties are sold in the coming months.

And finally, our attractions business, which came in where we thought it would, and Dave will discuss the financials. But really there's nothing too startling to add on the attractions side.

Now let me briefly touch on guidance. I know analysts and investors are anxiously awaiting our views about 2006. Here's where we are on this. In the next couple of weeks at our regular fall Board meeting, we will be discussing our 2006 annual plan with our Board. And shortly thereafter, we will submit more detailed guidance to the street. Dave will touch on this, but RevPAR growth looks really healthy, and we expect 2006 to be a good year and a continuation of our growth strategy.

Now let me turn the call over to Dave to talk through the financials.

Thanks, Colin. I'll spend a few minutes describing the major drivers of our financial results for each business. And then, I will provide some guidance for 2006 and the rest of 2005.

As Colin described in his comments, our third-quarter results demonstrated continued strength in our hospitality segment, which generated solid gains over last year's third-quarter results and is seasonally lower group demand period for the business. Led by the Gaylord Texan, which generated strong increase in the revenues, the hospitality segment posted strong growth and RevPAR and even stronger growth in total RevPAR.

With more emphasis placed on the total yield of our hotels, our results for the third quarter continued to demonstrate success in this area, as evidenced by a continued outpacing of total RevPAR growth relative to RevPAR growth in the last six consecutive quarters.

Additionally, our customer satisfaction and customer retention metrics continued to show improvement, which we could consider to be a key leading indicator of this business's future profitability and the ability to drive demand to additional markets.

For the third quarter, hospitality segment revenues were $122.6 million, an increase of 7.8% from the prior-year quarter. Hospitality RevPAR increased 8.2% to $99.66. This increase was primarily a result of ADR-driven increases in room revenues at all of our hotels.

Total RevPAR growth for the third quarter of '05 was 11% due to higher outside-the-room spending, a result of a better mix of higher quality groups at our hotels, as the network continues to attract -- to target and attract premium customers.

Hospitality consolidated cash flows increased 12.7% to $21.7 million compared to $19.2 million in the third quarter of '04. Hospitality margins increased 80 basis points to 17.7% with a particularly strong margin performance from the Gaylord Texan, achieving over 100% flow-through on incremental revenues earned over last year. This strong performance was partially offset by lower flow-through at the Gaylord Opryland, which Colin addressed earlier in his comments.

Gaylord Opryland's revenues increased 6% to $53 million versus 50 million in the third quarter of last year. RevPAR increased 6.2% to $101.01, driven by an ADR increase of 7.3% over the same period last year. Despite an occupancy decline of 0.7 percentage points to 71.9%, Gaylord Opryland generated total RevPAR growth of 12.9% in the quarter at $213.08.

You should know that Opryland's operating statistics exclude approximately 16,000 room nights that were taken out of service in the third quarter due to a multi-year room renovation program that is underway at the property. This room renovation program will continue through 2007. Opryland CCFs decreased to $9 million compared to 10.9 million in the prior-year quarter, which represented a CCF margin of 17%, a 480 basis point decline versus last year.

As described by Colin, the impact of increased operating expenses tied to the marketing and servicing of the ASAE convention was responsible for a large portion of the profitability shortfall. Additionally, certain non-recurring expenses related to the opening of our new spa, Relache Spa, and an additional investment in a new seasonal entertainment initiative that we call "SummerFest" also contributed to the lower flow-through in the quarter.

The Gaylord Palms' revenues increased 7.2% to 31.2 million from $29.1 million at the prior-year period. Occupancy declined slightly to 61% from 62.6% in the third quarter of last year. The Palms also experienced strong ADR-driven RevPAR growth of 10.6% to end the third quarter at $95.79. Total RevPAR of $240.85 increased 7.2% from the prior-year period, and CCF for the Palms was 4.6 million compared to 3.9 million in the third quarter of last year.

CCF margin increased by 140 basis points due in part to ADR-driven increases and higher margin room revenues and a solid increase in outside-the-room spending, which grew by 5% over the third quarter last year.

Gaylord Texan revenues and CCF grew by a sizable margin from the levels produced in third quarter of '04, and the property continues to mature and produce impressive results. Revenues increased by 11% to $36.4 million, while CCF increased 95.6% to $7.5 million in the third quarter of '05. The flow-through on incremental revenues earned over 2004 levels was in excess of 100%, which provides evidence of the maturing of the property and the operational efficiencies that John Imaizumi and his team have achieved at the Texan over the course of a year.

And now for our ResortQuest segment. ResortQuest revenues increased 12.2% to $66 million compared to 58.8 million in the third quarter of '04. Third-quarter '05 occupancy was approximately flat to the same period last year, while increased 2.8% to $187.63, resulting in a 2.2% RevPAR increase. This resulted in occupied room nights increasing from approximately 705,000 to approximately 763,000 room nights at the third quarter of '05. The statistics frankly are not comparable this year, given that they exclude units taken out of service from hurricanes in both 2004 and 2005. So I wouldn't put too much weight into RevPAR increases or decreases reported in the 2005 third quarter.

Total units under exclusive management, which exclude those units that Colin described in markets that we're exiting, decreased to 16,900 units for the third quarter of '05. ResortQuest CCF decreased to 9.2 million for the period versus 10.5 million in the third quarter of '04. We should also note that all operating statistics and financials exclude units out of service, including those due to hurricanes as well as those in markets we intend to exit.

About our second-quarter earnings call, we discussed what we knew at the time about our 2005 hurricane season and its anticipated impact on third-quarter results as well as the unprecedented timing of Hurricane Dennis. Hurricane Dennis made landfall in Northwest Florida in early July, severely disrupting travel to the Southeast during a peak demand period, July 4th weekend, and resulting in a large number of cancellations for our business. As we had already ramped up staffing levels in preparation for this high-traffic period, we experienced a decline in our overall profitability. We continue to evaluate the full impact of the storm in our operations and have filed a business interruption claim with our insurers, as Colin mentioned earlier. We believe that our comprehensive insurance coverage will be sufficient to cover the losses incurred by the storm. And additionally, we anticipate achieving resolution in the coming months of our business instruction claim related to the loss of business caused by the 2004 hurricane season, which was caused by Hurricane Ivan. None of these amounts that I just described are included in the guidance that I will provide later.

And if this Dennis, Katrina and Rita weren't enough, Hurricane Wilma came ashore in Southwest Florida earlier this week. At this point, information about the extent of the damage to our units is somewhat limited. The commentary on the impact of the storm would be somewhat premature. We are fortunate that the storm hit in a seasonal low point for the year. However, we will continue to assess the forward-looking impact on our first quarter '06 business, which is the peak season for the area. Moreover to the extent that we have experienced losses due to this hurricane, we will once again vigorously pursue a business interruption claim based on the impact of Hurricane Wilma.

Now moving to the operating attractions segment. Operating attractions revenues were $19.7 million in the third quarter of '05 compared to 18.4 million in the third quarter of '04. Operating income was 1.6 million in the third quarter of '05 compared to 1 million in the same period last year. The segment reported CCF of $3 million, a 30.6% increase over the same period last year, driven primarily by a strong performance from the Grand Ole Opry.

The corporate and other segment produced an operating loss of $9 million for the third quarter of '05 compared to an opening loss of 9.5 million in the third quarter of '04. Segment CCF was negative $7.3 million in the quarter, which was in line with the prior-year quarter.

As for our stake in Bass Pro Shop, Gaylord's equity income from this investment was approximately $2 million in the third quarter of '05. At the end of third quarter of '05, the Company had long-term debt outstanding, including a current portion of $581.7 million as well as unrestricted and restricted cash in short-term investments of $71.7 million. The Company has a $600 million credit facility, which remains undrawn at this point with the exception of $13.5 million of letters of credit that are currently outstanding under the facility.

Now for comments on our guidance. We believe Gaylord Hotels' operating performance will remain strong through the balance of 2005, as we continue to attract high-value customers and drive total RevPAR. We also expect to continue to post strong advanced bookings through the end of the year based on the strength of our tentative and prospect customer pipeline. And we reiterate our previous guidance for advanced bookings of 1.3 to 1.4 million room nights. We will continue to watch our transient customers, which comprise approximately 20% of our total room nights, to monitor any potential softening in demand that may occur as a result of increasing energy costs or declining consumer sentiment. But at this time, we do not see signs of any of that weakness.

In the fourth quarter, we expect to experience increasing energy costs, but we do have mitigation plans in place that should allow us to produce solid flow-through. That said, we remain confident in our existing hospitality segment guidance for 2005 of 7 to 9% RevPAR growth, 9 to 11% total RevPAR growth, and CCF of 135 to $142 million.

As we mentioned last quarter, we continue to invest significantly in improving ResortQuest's operating infrastructure, and we're making good progress on our technology and marketing initiatives. While our exiting certain non-strategic markets will not materially impact future property level CCF due to the scale and profitability of those operations, looking forward, we do expect to reduce ResortQuest's corporate expense by approximately 2 to $4 million on an annualized basis. ResortQuest continued to be pressured by hurricane activity in the Florida region, most recently as we just mentioned by Hurricane Wilma in Southwest Florida. As with our Gaylord Hotels business, we will continue to watch for changes in consumer demands and any signs of weakening due to increased costs of gasoline, increased energy costs, or decreasing consumer sentiments.

Given all of the above and the additional information we now have since our second-quarter earnings release regarding the impact of the 2005 hurricanes season including Wilma, we are tightening our segment CCF guidance to 10 to $12 million of CCFs. It's important to note that these figures do not include any benefit from the business interaction claims that we have filed in connection with the 2004 and 2005 hurricane season. Capital expenditures for the Company are expected to be between 170 and $175 million for the full year of '05, which include approximately 65 to 70 million for Gaylord National.

In looking forward to 2006 on a preliminary basis, visibility of our future business remains characteristically strong. But we do continue to expect to achieve high single digit RevPAR growth in 2006. From a margin perspective preliminary, we expect to see margins expand anywhere between 100 and 200 basis points over levels that we expect to achieve in 2005. And as Colin mentioned, we expect to provide more complete guidance by business segment later in 2005.

And with that, I would like to turn the call back over to Colin.

Okay, David. I have nothing else to add. Anthony, if we can open the line for questions, please.

(OPERATOR INSTRUCTIONS). Nap Overton, Morgan Keegan.

Could you clarify whether the expected 100 to 200 basis point improvement in consolidated cash flow margins is for the hotel segment or for the Company on a consolidated basis?

That is for hotels only, Nap.

That is for hotels only?

Yes.

And could you comment on just briefly on where in general what regions of the country those markets are that you exited with ResortQuest?

There is one in the Pacific Northwest. There are a couple in the mountains of Colorado. There are two in the desert Southwest. And there's one in the Smoky Mountains in Tennessee.

And could you tell us what the -- you bought I believe two businesses earlier this year for ResortQuest -- made two acquisitions. What did they contribute to consolidated cash flow on the quarter?

I don't have that off the top of my head, Nap. I would have to look into that for you.

And then is -- is 16,000 room nights out of service for a quarter a reasonable modeling assumption for Opryland going forward?

You should see -- what we're trying to do is stage most of the renovation activity during the second and third quarters. So you should expect to see probably that number in the second and third quarters of 2006 with a much smaller number in the first quarter and the fourth quarter. Then, we will take more room nights out of service in '07 than we did in '06 and than we did in '05. So the number should ramp up from now through 2007.

But that's a function of the demand, Nap, that we have for '06.

And then just one last thing on ResortQuest, is the timing of the website and the property management technology pushed back a bit? Or is that still in line with what you guys have been expecting?

Nap, it's Key. We have pushed back the website just a fraction. But the enterprise property management system is -- we pushed that back a couple of months. And the reason we have done that is because we -- it's not the completion of the system, it's the amount of effort and work that we are putting into the re-branding and retraining of all the processes in this business. And we want to make sure over the years, Nap as you now from our past lives, we rolled out a few of these large systems. And the fallibility of systems cannot be in the way the system functions, it tends to be in the way you train the people and you redesign the processes. And we are putting an extraordinary amount of effort and detail into this in order to fundamentally change and shift the culture of this business and change the process of this business to operate as one company and one brand. And that's the reason we have done this. We have got a lot of help that we have employed to put the training systems in place and the transformation of this culture, and that is what we are up to.

And then just lastly, would it still be accurate to characterize your optimism about ResortQuest's eventual profitability or potential as being equal to or better than your expectations when you made the acquisition?

I think you know the answer to that question, Nap, because I think I have been pretty consistent over the last 1.4 year. And that is that we see an extraordinary opportunity with this business. And my excitement around this business is no different today than it was a year ago. If anything, it's a little bit more optimistic, I think. There is so much new development that's going on across the nation looking for proper management. The problem with this brand is, we have been very candid with you all before -- with you, Nap, and the rest of the investor and analyst community before -- is that it has really had quite a -- I would describe as a third-rate marketing system because of its inferior technology. And I am very excited about what's just about to occur here. And I think this business in '06 and '07 and '08 will have the opportunity for rapid growth, and we are looking forward to that.

Samir Jain, Jefferies.

On ResortQuest, could you give us how much you have filed in terms of the insurance claims? How much have you filed for? And how much do you actually expect to get back?

Sorry, we were just discussing who was going to answer the questions, Samir. Sorry for this delay; this is David. We don't want to be too public about the filing of the amounts of the claims. Because these claims are always subject to negotiation and debate with your insurers. Suffice to say we feel comfortable, very comfortable that we are fully covered. The amounts that we are talking about and from both of the claims combined is in excess of $10 million, so I don't want to go any -- I don't want to narrow the ranged anymore than that. So that is kind of where the status is today. We are pushing forward aggressively with our insurers on the Hurricane Ivan claim that we think we will have settled shortly. And we think the Dennis claim would settle soon thereafter.

We are being aggressive in our communication with our carriers because carriers tend to be aggressive with us -- to the company that they underwrite. And we expect to prevail. But we do know that this is going to be a painful process; it just is of negotiation. But as David said, each claim for those 2 years for multimillions of dollars -- and we are prosecuting this with vigor.

And then one more question about ResortQuest. How much is the revised inventories of post the pull-out of these markets that you are not interested in will be in the Florida region, more specifically South Florida areas that could be impacted by future hurricanes?

I would say, I have to calculate that, but I would say that it's probably in the Northwest Florida and Southwest Florida, there is probably 5,000 key --

It's about right, yes.

5,000 units. But obviously, the implication of your question is the hurricane bull’s-eye zone. And obviously, we are mindful of that as we think about growth. But we've got a lot of product in the Hilton Head, St. Simons Island, Delaware. We have got a lot of product in the mountains, where fortunately we don't see hurricanes. And so, our growth strategy I suppose has been -- we've drawn a breath on our growth strategies because of what we've seen this last 12 months. Obviously, the hurricane season has not escaped us as we thought about growth. But you know, folks are still going to go on vacation to Florida.

Just another question on the guidance, the CCF guidance, for the hospitality segment. You had mentioned that you guys are getting some inquiries about the displaced New Orleans business, and I imagine some of it is sticking. But the guidance is unchanged from what it was previously before Katrina hit. So how should we think about that? Does that push us to the higher end of the range? Or do you think it actually could be above the high end of the range, but you're still trying to get definitive bookings? Any help there would --

Samir, let me give a stab at this, and Dave you jump in if you have got any thoughts. Here is the dilemma. The dilemma is whenever we look at a future year for instance 2006 right now, we always estimate that we're going to do in the year, for the year business, notwithstanding things like Katrina. And we do; we pick up tens of thousands of room nights in the group business in the year, for the year. So when we're able to plug a couple of holes in the first quarter of next year, it is difficult to know whether at this stage, whether that would have been purely incremental. Because we would have done in the year, for the year business in that prime period of time with those little holes that we have.

Now what we do know is that the vast majority of the inquiries were for the first half of next year and the last part of this year, and we do know there's a lot of folks contemplating whether they should think about moving their late '06 business out of that city. And those are the folks that we haven't yet started to communicate with and nor has the rest of the industry. But as we do communicate with them, I think we have tried to be very transparent with the street. And we talk about our occupancies and what we expect to have happened because we believe our business has much higher levels of predictability.

So right at this stage, we're holding our guidance, and we believe it to be very accurate. And we believe that our in the year, for the year bookings that we need to do in order to meet that guidance is very, very realistic. And as circumstances change, as consumers start to reevaluate New Orleans, we will update that guidance and we will give you much greater direction. But at this stage, it's a little bit of a crapshoot.

And then just finally, would it be correct -- would my thinking be correct if I were to say that well if 20% of the bookings go to transient, which I guess is less desirable business, does that give you flexibility when these conventions -- these displaced conventions from New Orleans approach you because you can always use that inventory to sell to them?

Samir, that is logically correct. But in reality, the decisions can be much more difficult than that kind of simple example. The primary driver is meeting space, as you might imagine. So if we are 80% full with group business, and somebody comes to us and says, we want to take the other 20% of the hotel, we may or may not have the meeting space available to satisfy that piece of group demand. And that's where transient works so nicely for us because it filters right on top.

So to answer your question, in some cases, the answer is yes. We can displace the transient because we know we have the meeting space available. And in other instances, the answer is no because we do expect to run pretty high occupancies next year.

And if you want to answer -- if you want to answer the question more like sort of like on an average, the other reality is that we tend to have more meeting space than any other large hotel group outside of Las Vegas. And so on average, we should have a greater chance for accommodating folks. But it doesn't work on average because our businesses looks pretty robust the next year. As Dave said, it is convention space that determines whether folks will stay with us.

Will Marks, JMP Securities.

A couple questions on -- and maybe you mentioned this but the 1,559 units that you are exiting, are there any cash proceeds from that? Are you selling the contract?

Yes, we are. The cash proceeds will be modest.

And then looking ahead, what does the unit growth look like at this point? Are you in discussions to buy portfolios, to buy contracts?

All of the above. We've got a lot of interest for -- also conduct developers and stuff like that. There is a lot of growth opportunities. What we're trying to do here, Will, and this is a little bit of a juggling act is that this -- if you heard Nap's question and our answer on Nap's question about the rollout of our new technology platforms, this is a cultural transformation of the business. What we have tried not to do is get the copy for ports (ph). In other words, get -- cram down a lot of new development as we're trying to culturally change this business.

And so, we are only going to do deals over the course of the next 6 to 9 months that are extraordinarily compelling, that could get away from us if we don't do them. But there is a lot of opportunity in this sector right now, a lot of opportunity. And we are being -- we're applying some science as to which ones we do and where we do it. So I think that's all I want to say on that question right now.

I know you're not giving specific guidance for '06. How should we look at the technology changes in the Web and the property management system? Is that something that could impact things pretty quickly? Or do you think that will be more '07? I don't have a clue on -- modeling '06, should we be looking at where we were on '05 before the hurricanes?

What I think I tried to say a few minutes ago is that we will give a broader guidance for '06 in a couple of weeks. What I don't want to do, what I think is inappropriate is to be guiding more specifically today when I have a Board meeting 2 weeks from now in which management is going to be sitting with our Board and talking about our plan for '06. We talked with our Board back in July on our long-range planning process; we go through that. And I think it's appropriate to get Board clearance on our plan and then give you more information in a couple of weeks; we will do that.

So if you can sort of hold for a couple of weeks, we would be back with you. But we see pretty good growth in ResortQuest next year.

Let me change this subject quickly, one other question. On construction costs, this seems to be one of the big issues of the day and for good reason. Now we are seeing it all over the board, construction costs going up. I know you're probably not going to give me a -- quantify the answer for the National, but you're talking a $500 million project. Can you give us any idea of where costs are going up and how much?

Let me answer this question in a little bit of a different way if I could at this stage. And I want you to sort of -- you can think through exactly what I'm trying to say. And we have always tried to be very direct and straightforward and not evasive with the investment community.

There is a sharp contrast between the type of units we build and the rest of the hospitality business. When we build what we build, we tend to have very high visibility very early because the groups book 2, 4 years ahead of time, right? When we did this deal, we told the world -- we told you and the rest of the analyst community that we were going to generate a greater than a 12% after-tax unleveraged IRR. We have seen costs going up. But the other side of this is that the bookings and the rates that we are booking the bookings at are substantially ahead of where we thought they would be. And frankly, I've personally been a little surprised as to the reaction -- the meeting planning community has given this asset in Washington.

So if we did nothing today in terms of trying to mitigate costs, I do believe that we will still have a project that will generate north of 12% on an after-tax, unlevered IRR. But there are three things that we're doing. First, we're looking at ways in which we can engineer the building. Second, we're looking at whether there's other forms of incentives to help mitigate the cost increases with both the county and the state. And the third -- and this is probably going to seem a little bizarre to you but in the spirit of being very straightforward and direct -- because of the unprecedented demand that we are getting here from people who want to book our facility, we are also looking at whether 1,500 rooms in this market is enough.

And we are also understanding that if we were to build more rooms in this market, what are the incentives that we could get to defray costs here. Now we're doing all of those things right now. I cannot be more precise at this stage because of the work that is ongoing.

But I will say to you this. From my perspective, I am very, very excited about this project. And I think this project is going to generate very high levels of demand for our Company. I think it is going to be a huge platform for us to go to other markets across the country.

That is perfect. I will just add another 500 rooms to my model. Thanks.

David Katz, CIBC.

Just on ResortQuest, two things -- one, I thought that the scheduled rollout on the website and the other infrastructure was some time between November and January/February? I thought I heard you say earlier that that is being pushed back. Can you give me some detail as to when -- do I have that right? Can you give me some detail there?

Yes. You have interpreted the message right. The website, we're probably going to slip our website by a couple of weeks. The reason is, we were aiming to do our website first/second week of December. As we have looked at trying to launch this 2 weeks before the holiday season, there is some operational challenges with it. So right now, if we can't get it done in early December properly, effectively, we will push that to -- it will be January 1.

Now EPMS, the issue of rolling out a complete new property management system that has accounting connotations, SOX-404 connotations -- I mean this thing is very complex that we're doing. And trying to install this new fundamentally different system -- different way of business into markets that are in their peak season, i.e. ski markets, is a little challenging. So as we got into the training schedules and as we got into the operating schedules, we decided we will start rolling enterprise property management system out somewhere in the third, fourth week of March, early April. And that will be then a 4-month rollout as we go through each of these businesses. And we are trying to time these rollouts, so we are not putting them in sort of a month before a big season starts.

So that is what we're doing. There is no message here about -- oh dear, we are 6 months late or anything like that. It's really because we have taken a very, very aggressive, let's fundamentally change the whole operating process of this business and that --

I'm sorry I did not mean to cut you off.

No, that's okay. Sorry. I have a habit of being a little long-winded on the --

So is 3 months a good number?

For enterprise EPMS, I think it's more like 2 months. But Web is like a couple weeks.

And just quickly, following the press in San Diego or Chula Vista, the RFP process I think was over as of October 1. Can you give us a little more detail about where that process stands?

Well, I can give you a very explicit answer. I think about 3:00 this afternoon. Because this morning, there is a gathering of the clans in San Diego. I think that's right, this morning, David isn't it? The meetings for --

November 1.

Oh, we have meetings with the Port Authority --

Yes, we have Tuesday.

-- today, but there are meetings today -- been covered today. 1 week -- David is right -- 1 week, we will be able to tell you what is going to happen here. But we are optimistic that when the powers to be out there review each of the proposals, there's -- in my mind, there's no question as to who they should dance with. And we expect that to be the case.

(multiple speakers) David, just to add on to that. We are trying to be sure that we as a Company from a growth perspective aren't a one-trick pony. So we have other options that we have been surfacing over the past several months and certainly think that those are viable options should San Diego not work in the way we hope it might. So just to be clear that San Diego is not the only option that we have available to us.

If I can just get one more clarification on ResortQuest. Going back a few quarters, I think the goal in terms of units was to sort of double those over the next 2 to 3 years. I don't want to revise history or anything like that. Is that accurate? Is that still the plan?

I would say the plan is to double units in a 3-year timeframe. We may be pushing back 6 months on the actual -- when we will have that completed. And this is a function of getting this transformation of this business done from a technology perspective. But the growth -- you'll start seeing growth, real growth next year and the year after big time.

(OPERATOR INSTRUCTIONS). Jeff Donnelly, Wachovia Securities.

I apologize if I missed some of these responses in jumping back and forth between calls today. Colin, regardless of whether or not you win in San Diego, I guess I just want to understand -- are you looking at development opportunities beyond San Diego? And would you expect additional location announcement maybe in 2006? I'm just curious how many of these projects you can handle at one time.

Jeff, you obviously were off the phone when Dave was referencing that. Dave said we are having discussions. We are not a one-trick pony. We are having discussions in other areas on the West Coast particularly. We see somewhere between seven to ten of these locations, big locations, in our horizon. And obviously as we have said before, we are not going to get into discussions publicly about where because we don't want to tip off our competition. But that's what we see.

And then staying on San Diego, John Moore's (ph) proposal at Agahote (ph), it addresses the entire site there in Chula Vista. Whereas, I think the interaction you guys have had thus far really just pressures of component. Do you think to be more competitive, you guys need to be part of a larger plan for that side, or is it not necessary?

We do not think it's necessary. We think our plan stands on its own merit. There's been lots of proposals over the years about development of Chula Vista, but none of them come to reality. And when we say we are going to do something, we have a track record of doing it. And I think that the local community understands that, and I think the Port Authority understands that. I think that that will become self evident here over the next couple of weeks. You know what, if it doesn't, we will move on to the next one.

But the good news is, our business when we put these facilities into market, this business induces a lot of demand into these markets. And a lot of communities understand that. So we are very excited about the future of our hotel business.

Just two last questions. One, I was curious, would you guys expect to seek to monetize any of the hotel assets for the next year or so?

I think we sort of parentally answer that question on every quarter earnings call, someone answers it. And the answer is, we will probably do that when the time is right. But we see still a lot of growth in each of these hotels. And we will absolutely look at that at the appropriate time.

And lastly, just on Bass Pro Shops, else where we had just seen like retailers like Cabela's and the like have just been seeing considerable weakness in their same-store sales. And I wasn't sure if you guys might be able to share with us any data points that you're seeing out of Bass Pro?

No, we don't. Because once you start to open the box, the Pandora's box, you know just more and more information flows out, and our partner is a very private individual. That's why it is a private Company. But I will say to you this that Bass Pro is not experiencing the same type of weakness as you see with the likes of the Gander Mountains and Cabela's. In fact, same-store basis on a year to date is positive, and their growth opportunities are tremendous. We are very excited about the future of Bass Pro.

I think, Anthony, I think we will curtail questions here. We have been at this over an hour now. What I would say is that if anyone has any other explicit questions to call either David, Key or me. Thanks for listening and look forward to speaking with all of you further.

Thank you. That does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day.