Ryman Hospitality Properties Inc (RHP) 2006 Q1 法說會逐字稿

Good morning and welcome to the Gaylord Entertainment Company's first quarter 2006 earnings conference call. First on the call today from Gaylord Entertainment is Mr. Colin Reed, Chairman and Chief Executive Officer, Mr. Dave 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 a digital replay. The number is 973-341-3080 and the pin number is 7268999. (OPERATOR INSTRUCTIONS). 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 Co. Thank you for joining us today on our first quarter 2006 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 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 our first quarter 2006 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 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.

Good morning everyone, and welcome to our first quarter conference call. This was a very strong quarter for Gaylord Entertainment, and a great start to 2006. All of our brands continue to progress in their respective markets. And I'm pleased to say that we delivered a 48.7% growth in consolidated cash flow, all the more impressive when compared to our record first quarter of last year.

Gaylord Hotels was the principal driver of this growth, realizing double-digit RevPAR and total RevPAR growth in the first quarter. Each property continues to exceed expectations, and contribute to our leading network of convention properties. Individual results at our three convention properties were very strong, powered by an excellent performance at Gaylord Opryland, which after four years of product and service enhancements has reemerged as the centerpiece of our network.

We're excited about progress on our current project, The Gaylord National, located in Prince George's County, Maryland. The National has been receiving an outstanding reception from our meeting planners and customers, who eagerly await its opening in early 2008. Additionally, we continue to engage in negotiations with the Unified Port of San Diego on the right to build a world-class hotel and convention center in Chula Vista, just south of San Diego.

ResortQuest, the only national branded vacation property rental management business, had a decent start to 2006, even with the Easter vacation weekend falling in the second quarter. This year ResortQuest CCF increased over 95%, which includes a 5.4 million non-recurring gain related to the collection of a note receivable. Despite the softness in Whistler and in the Florida markets, which continue to be affected by last year's hurricane, initial feedback on our new website is favorable. And we look forward to continued progress on our investments made last year.

Now over the next few minutes I will go into the detail on each of these topics, and then Dave Kloeppel, our Chief Financial Officer, will discuss the operating and financial performance of the Company and provide guidance. And then, as usual, we will open up the call for questions.

I will start with a discussion of our Hospitality business. As I mentioned, the strong performance from Gaylord Hotels illustrates that we have been successful in creating a truly differentiated convention offering in the marketplace, with excellent service, superior amenities and quality entertainment and dining experiences. In the nearly five years that our management team has been with this Company, we have seen the emergence of a national hospitality brand located in some of the country's most popular convention markets.

Our strategy is to target high spending convention and large group customers who take advantage of our hotels' diverse outside-the-room offerings. We encourage these higher value customers to make multiyear bookings and rotate their bookings through our entire network. Our rotational metric continues to demonstrate strength of 46.3%. And remember, this means that 46.3% of our room nights booked over the last 12 months were for more than one location. We watch this metric rather closely because it illustrates that the future prospects of our business are not defined solely by one property, but rather by the entire network.

Our long-term plans to open a property every two or so years are on track, with the ultimate objective of bringing our signature brand hotels to 7 to 10 markets around the country. As we grow our hotels business, we remain focused on bringing the same high standards to each new property. Most importantly, our hard-working, loyal staffs, who you remember we call our employee staffs, remain at the center of our unique offering. They provide the face and soul of our hotels, linking service excellence to the Gaylord Hotel brand.

Unlike other public hotel businesses, over the last three or so years we have shared with you much information about bookings. What we have tried to demonstrate to our shareholders is our business is getting stronger and stronger, because customers by and large are leaving happy and are rebooking. Consequently, the future looks good.

This quarter's results are very solid, but were shaped by our actions last year, the year before, as well as 2003. Sure, like other hospitality companies we're feeling the positive impact of a rising tide, but the driver of our industry-leading RevPAR and total RevPAR growth is due to the superior levels of service we provide to our customers, who are returning to do business with us.

Now let me talk about this quarter and the influence our current performance will have on the future. Hospitality RevPAR came in at 128 -- just over $128, up 16.8%, while total RevPAR was $301.96, up 16.3%. ADR increased 8.3%, reflecting customers' response to our best in class brand and offering. Hospitality consolidated cash flow was 52.3 million in the quarter, an increase of 32.7% over the prior year quarter. While RevPAR slightly moved ahead of total RevPAR, total RevPAR has maintained strong growth of 16.3%, due to strong improvements in customer satisfaction. For the first time total RevPAR was above $300, a significant milestone in the growth of our brand.

Growth in total RevPAR illustrates the strong demand for our outside-the-room offerings and the superior entertainment and dining options that we provide. In short, outside-the-room spend for our brand was about 1.36 times that of our room spend.

Now let me talk about the metric that helps us think about the future. Advance bookings posted solid growth in the first quarter, increasing 37.2% to 225,300 over strong first quarter levels in 2005. For the Hospitality segment, our pipeline grew by 6.7% compared to the first quarter of 2005, reaching a total of 4 million room nights by the end of the first quarter of 2006.

Each of our properties continued to leverage their unique position within our network to attract convention customers, while appealing to the local tastes and customers. The Texan's restaurants and sports bars have proved lastingly popular with the local Dallas population. So much so that we decided to build The Glass Cactus, a multipurpose nighttime events location on the strength of this demand. The Glass Cactus is set to open this summer and will overlook Lake Grapevine.

Now let me talk about hotel growth. Construction on The Gaylord National continues to progress as planned, and we are very excited about this project. Situated on the banks of the Potomac in Prince George's County, Maryland, The Gaylord National is less than 10 miles from downtown Washington DC. Many national hotel chains and retailers have signed on to develop facilities as part of the National Harbor development, which bodes well for the area's long-term growth prospects.

As we progress toward opening, we remain mindful of construction costs in that area. It appears that the construction estimates previously provided are holding steady, and fortunately bookings continue to progress.

For the first quarter of 2006 The National booked an additional 25,000 room nights, and now has a total approaching 600,000 room nights on the books. More importantly, we're negotiating with over 680,000 additional room nights, and interest in The Gaylord National continues to rise. Putting this in perspective, we opened the Texan with just over 700,000 room nights on the books. Meaning that the pace of bookings for The National is well ahead of where we were 23 months from opening of the Texan. As we approach The National's opening, expected at the end of the first quarter of 2008, we feel strongly about this property's ability to generate robust returns for our shareholders.

As we mentioned on our last call, plans to expand The National by 500 rooms and 50,000 square feet of meeting space are contingent on the Company's receiving additional support from Prince George's County. We have asked for an additional 50 million of tax incentives to partly offset the added cost of an expansion. And we expect to receive an answer on this shortly.

Moving to the West Coast, negotiations with the Port Authority of San Diego continue to progress over our proposed development in Chula Vista. We feel this is a real opportunity for the city of Chula Vista to redevelop its waterfront. And we remain excited about the potential for bringing our Gaylord Hotels brand to the West Coast.

ResortQuest had what I would describe as a solid quarter. CCF, which includes 5.4 million non-recurring gain, increased 95% over the first quarter of 2005. We experienced good performance in our Hawaii and ski markets, and softness in our Florida markets and in Whistler. Our strategy has been to focus on our leading markets where we have a sizable market share advantage. We have received encouraging feedback from our new website, and our new travel insurance program which will certainly benefit our homeowners and renters.

To understand weakness in our Florida markets more fully, an e-mail survey was recently sent to over 3,000 previous Florida guests who have typically booked their vacation by now. While 38% say they plan to book, 43% remain undecided about their vacation intentions, and 19% do not plan to book this year. We cannot predict the end result of this undecided group, but clearly high gas prices, together with the residual effects of last year's extraordinary storm season, have caused the consumer to delay bookings. But we remain optimistic that our Florida markets will perform reasonably well for ResortQuest this year.

Dave will talk about the guidance in a minute, but rather than wait for several months to determine precisely what customers will do, we have cut our assumptions for the summer to be prudent at this stage.

Let's turn quickly to our attractions business, in particular, the Grand Ole Opry. Opry and Attractions revenue were at 16.8 million, up 30% versus the prior year quarter, despite the first quarter being a seasonally slow period for this segment. CCF increased marginally over the first quarter of 2005.

We continue to be impressed by the recent strength of the Opry. And to this end we have aggressively pursued partnerships that extend the reach and power of this brand, teaming up with other great brands to distribute merchandise and increase media exposure. In March sales of Hee Haw DVDs reached over 1 million. Time Life began distributing Hee Haw DVDs in November of 2003. And last year Hee Haw was Time Life's best-selling DVD collection.

Now with that update, what I would like to do is hand over to Dave, who will walk through the financials.

Let me spend a few minutes describing the major drivers of our financial results for each business unit for the quarter.

As we have described in the past, Gaylord Hotels' unique business model is based on advance bookings that are signed in contract form, which gives us significant visibility into future periods. As we enter the first quarter of this year, we knew we had a very attractive advance bookings. And the key for us was going to be maximizing yield from these bookings, both in terms of revenue and cash flow. In this regard our operating team did a terrific job in the first quarter. RevPAR growth was driven by a good balance between rate and occupancy, as our average daily rate increased 8.3%, and occupancy increased by 5.8 percentage points. Our CCF margin increased by 395 basis points.

Gaylord Opryland and the Gaylord Texan were the major contributors to these strong results. Higher food and beverage spending at the Opryland drove total RevPAR growth of 32.5% to $254.71. Opryland ADR increased 15.1% to $142.78. And occupancy was also up 7.5 percentage points to 77.6%, for a combined 27.3% increase in RevPAR. CCF margin in Opryland increased by 665 basis points to 26.3%.

I should note that the Opryland's room renovation program was put on hold during this high occupancy period, and will resume in June with another 428 rooms expected to be taken out of service at various times until October. For 2006 we expect to have approximately 25,300 room nights out of service.

Just as a reminder for those of you on the call, the room renovation program will continue into 2007 as we renovate an additional 1,300 rooms. And we expect to have approximately 80,000 room nights out of circulation at various times through 2007.

For the Gaylord Texan RevPAR and total RevPAR increased significantly in the first quarter due to the hotels' continuing appeal among groups, transient and local customers. RevPAR in the quarter increased 19.6% to $140.27. And total RevPAR was up 15.9% to $344.77. CCF increased 51.8% to 15.8 million in the first quarter, resulting in CCF margin of 32.7%, a 797 basis point increase over the first quarter of 2005.

The Texan has now completed its second year of operation, and we are very pleased with the results. According to Smith Travel Research when compared to other hotels in Texas, the Texan dominates that market, with a RevPAR index of 135. And the Texan is number one in the state for occupancy ADR and RevPAR.

The Palms posted a very strong performance in a typically very strong first quarter, with revenue up slightly to $50.8 million. RevPAR improved 2.6% to $164.23. And total RevPAR was up 0.8% to $401.58, above the $400 mark for the first time since the hotel's opening in 2002.

Incidentally it should be noted that the Palms had a very tough quarterly comparison to the first quarter of last year, when the property ran in excess of 90% occupancy. CCF was flat for the quarter at $18.8 million, still the highest CCF production of any individual property in our system. And we certainly expect the Palms to continue to drive CCF for our properties going forward. We expect the Palms to continue to have solid performance for the rest of 2006, which will be in the context of more favorable year-on-year comparisons.

Gaylord Hotels posted a very solid 32.7% growth in CCF for the first quarter of 2006. Good revenue growth and a focus on cost controls allowed this business to drive CCF margins by 395 basis points. Despite across the board utility increases, we have been able to enforce greater cost discipline and negate margin erosion, in most cases across all of our properties.

Finally moving on to bookings, as Colin mentioned, we had a solid quarter through bookings at Gaylord Hotels. Excluding The National, we booked 225,300 room nights for all future periods. And this is clearly indicative that Gaylord Hotels brand continues to strengthen and that our rotational booking strategy continues to set us apart from our competition.

Moving on to ResortQuest. CCF for the segment increased by 95% to 10.9 million for the first quarter of '06 compared to 5.6 million in the prior year quarter. Revenues increased 2.3% to 59.8 million for the first quarter of '06, as a result of ADR increasing by 8.7% and occupancy declining by 3.4%. And the occupancy decline is in part due to the shift of the Easter holidays from the first quarter where it fell last year to the second quarter where it falls this year.

RevPAR increased by 2.8% to $89.74 versus $87.30 in the prior year quarter. As we described in our last earnings call, unit count dropped by 558 units in the quarter, due to the termination of certain unprofitable management agreements in northwest Florida, and other [region] markets, as well as the settlement of a legal dispute.

Moving on to the Opry and Attractions segment, revenues were $16.8 million in the first quarter of 2006 compared to $12.9 million in the first quarter of '05. Operating loss was $1.4 million in the first quarter compared with a loss of $2.2 million in the same period last year. This segment reported CCF of about $100,000 compared to a CCF loss of $900,000 in the prior year quarters. Major drivers of these increases was primarily stronger performance from the Grand Ole Opry and other national-based attractions.

The corporate segment produced an operating loss of 12.4 million for the first quarter of '06 compared to 9.8 million in the first quarter of '05. The primary driver of the increase was the recognition of stock option expenses as a result of FAS 123R and operating income. The segment CCF was a negative 9.4 million compared to a negative 7.9 million in the prior year quarter.

Turning to Bass Pro Shops, as you know, we will continue to account for our stake in Bass Pro using the equity method of accounting. And for the first quarter our equity income from this investment was $2.6 million.

And now for comments on our guidance, the prospects for Gaylord Hotels' operating performance continues to be quite strong, as the brand increasingly resonates among meeting planners, and we continue to attract high-value customers who drive total RevPAR growth. Therefore we're increasing our full year RevPAR and total RevPAR guidance to 8% to 10% growth in 2006. We expect to generate approximately $163 to $168 million in CCF.

Our advanced bookings target remains at the prior levels at 1.3 to 1.4 million room nights for all future years. And these bookings exclude those that are for stays at The Gaylord National. Note, the Gaylord Hotels' 2006 guidance reflects approximately 25,300 room nights out of service due to room renovations at the Opryland Hotel.

Turning to ResortQuest. In most markets ResortQuest performed well this quarter, and for the balance of the year the business is booked solid in those markets. That said, we are seeing some uncertainty in our Florida markets for the rest of 2006. As we described in our last earnings release, one risk to the performance of the business in 2006 is any long-lasting impact the past two seasons of hurricane activity may have had on the attractiveness of the Gulf Coast of Florida as a destination.

At this time, based on our experience, any information we have gathered from local CVDs, travelers have been reluctant to book summer holidays. That said, according to our research, customers are saying that they will book their vacation in coming months. Therefore at this time we have limited visibility in both the second and third quarter for bookings and real estate closings. We will continue to review bookings pace over the coming months, but based on our limited visibility at this point in time, we are reducing our full year guidance for ResortQuest to $16 to $21 million. This range includes the non-recurring gain from the previously mentioned note receivable.

To review the remainder of our guidance briefly, consolidated revenue guidance we have previously published of 924 to 961 million remains unchanged. And full year CCF guidance changes to 152 million to 165 million to reflect the changes in Hospitality and ResortQuest segment guidance described above.

With that, I will turn the call back over to Colin.

That is the end of the prepared comments. What we would like to do, if we could now, is open up the call for any questions.

(OPERATOR INSTRUCTIONS). Will Marks from JMP Securities.

I have a couple of questions. One, on Bass Pro, the last two quarters -- I think the fourth quarter your income was 0.3 million, this quarter 2.6. I assume these are the two weakest quarters of the year. Any comment on that would be helpful, and any further guidance, which I assume you can't give, but whatever you can say.

This is Dave. The fourth quarter guidance excludes the month of December which tends to be a -- because we tend to record one month in arrears for Bass Pro Shops. So fourth quarter excluded the December month. The first quarter includes December, but obviously January and February are soft months as well. So on a seasonal basis, the fourth and first, you're correct, are not the strongest quarters for Bass Pro. We gave guidance in our last call that we thought our share of net income for Bass Pro would be $9 to $11 million. And we're still comfortable with that range for the year.

Great. Second, on the winding down your tax liability, any comment there? Or just can you just refresh me on where we stand and the exact time when that is owed?

Sure. That contract matures in May of next year. The current thinking is that we will go-ahead and let it mature at that time. The tax liability net of the NOLs that we have built up in the Company should end up being a net of about $90 million, which is payable in the second or third quarter next year.

This is Colin. We look forward to not discussing it ever again after that period.

At least I haven't been calling you on ResortQuest yet. I will let someone else do that. I will leave the floor open now. Thanks.

David Katz of CIBC World Markets.

Firstly, on D.C., obviously the room night or the unit volume appears to be quite strong, and that is good. The quarter over quarter bookings look to be a little bit lumpy. If you could I guess help us gauge our expectations a little bit there? And talk about what kind of sort of rates you're seeing in a general sense. How much are you leaving on the table to book early, etc., and what kind of rate strength that you're seeing. Then I have a follow-up on ResortQuest.

Okay. I'm not going to get into explicits on the actual numbers and the pricing right now for Washington. But the way to think about it is the first sort of one or two quarters of bookings, we took bookings that were at rates that we certainly wouldn't be booking at today. And I think it is fair to say over the last six-ish months we have effectively changed our pricing up there, to my knowledge twice. We yield every single day and every single month with a different pricing grid. It is just the way we do it. We know the very strong periods, the strong weeks, the strong months. And we are saying seeing overall rates that we are booking today north of our pro forma on this business. And we're very happy with it, and this is one of the reasons why we have made the decision to go ahead and expand right now. The demand that we continue to see from customers that are coming to us wanting to book is tremendous. We are very, very excited about that.

You know, the other interesting thing that may have slipped through the cracks that you probably may not have seen, about a week and a half, two weeks ago, our development partner, Norm Peterson of the Peterson Company has announced four other hotel developments on the site. These are pretty big companies that are doing this. They are all in the 200 to 350 room size hotels. They are hotels that -- we have communicated with him -- we are very happy about. Because the reality is that we are booking a lot of conventions that we can't accommodate fully in this wonderful facility that is under construction. So we're very excited about the future. We remain optimistic that we're going to get our TIF financing from Prince George's County. And we will continue to update you as our rates continue to move north, and this market continues to strengthen, which we see.

If we could just move on to ResortQuest for a moment, the guidance has been -- I don't think I'm overstating it by suggesting it has been a bit of a bumpy ride so far. Can you help us think about other ways that we might be able to measure your progress, or talk about how we can keep our finger on the pulse of how things are going there, aside from just the guidance?

Yes, I think what you said is extremely fair. It has been -- the guidance has been lumpy. And frankly, I am pretty fed up that we can't seem to as a company give you guidance and hold that guidance. As I have thought about it, unfortunately we're not in control of some of these external forces that we're having to deal with.

I noticed this morning one other major Florida-based company, St. Joe, guided down for the rest of this year, citing weakness in their real estate business in Florida. The problem that we have here right now is that by and large, as Dave said, our ResortQuest business is making progress. Our Hawaii operations are doing very well. Our Eastern Seaboard businesses are shaping up pretty well for the summer. We had a pretty good period right away through the mountains. The only mountain market that was a little lumpy for us this year was Whistler. And that was a function of poor snow on that range up there. And there's nothing we can do about that.

The issue for us with ResortQuest is Florida. And there's really I suppose three things that are going on there. One, real estate sales is clearly being affected by rising interest rates. And the fact of the matter is that the Florida market is just seeing huge increases in prices over the last two to three years. And gas prices are affecting these drive-in markets. And Florida is still emotionally recovering from these hurricanes.

As we sit here today, we're still booking lots of business into Florida. Last week we booked over -- approximately 2,200 reservations for Northwest Florida. But it is not quite at the same pace we would like it to be. And frankly, it was my call to reduce this guidance for Florida around real estate sales and a development project that we have ongoing there. We're building some condos down in Destin. And we just said, look, in all probability the sales will slip into 2007. So it was my call to reduce real estate sales and to put a little bit of a governor on the rental side of this. Because frankly, I don't want to have to be here talking to you three months from now, saying we missed -- we have missed the quarter and guidance, we're bringing it down. So we said, look, let's just deal with the reality that we see in Florida right now, reduce guidance for the rest of the year. And frankly we may have a shot at making our original guidance, but at this stage we just don't know.

Two quick housekeeping ones and then I want to get off and give somebody else a chance. But the gain that is included in the guidance of 5.4 million, that had not -- and Dave sort of blanked out while he was talking on my phone -- had that been included in prior guidance?

No, it hadn't.

As far as the condos that Colin spoke of, of the sort of guidance change --.

That was in there. What we tend to do, and we don't like -- I know from some 20 years being in a public company, one of the things I don't like doing is guiding the Street one way and having an internal plan that is different. What we guided for ResortQuest was our internal plan for 2006. That included real estate gains and this development that we're doing and what we're doing is we're being cautious on it.

But look, I know this sounds a little cavalier when I say this. What is happening in ResortQuest is important, but it frankly is inconsequential to what is going on in the rest of this hotel business. This hotel business is on fire. And we have spent four years building a world-class brand here that is really starting to show tremendous returns for our shareholders. We will get this ResortQuest business right. But unfortunately it is very hard to do it when you have unprecedented storms and things going on that are affecting the consumers' psychology. This business will produce decent profits for the Company this year, and next year it will be even stronger.

And I don't want to -- the reason we are pulling it back, I just don't want to be in the situation of having these conference calls dominated by a business that frankly pales in comparison to the underlying hospitality business that is showing returns that have consistently beaten the rest of the hotel industry.

Me, too. Thanks. That is helpful.

Nat Overton of Morgan Keegan.

Could you give us some color on the contribution of transient business strength, which you said I believe was good, strong in the quarter to the overall improvements in RevPAR? Can you add a little bit of color to that?

I'm going to do this by memory, and I think this is right, David. I think we booked about 20,000 transient room nights a month, up from about where we thought about sort of 17,000-ish room nights a month. We had an improvement of -- I don't know, David, in the quarter, how many thousand room nights over what we thought we were going to do?

The specifics are the transient business represented about 25% of the growth in the number of room nights occupied quarter over quarter. And typically the first quarter is not our strongest transient period. Usually we kind of always say we have a 20/80 kind of a mix on transient. Most of our transient, as you know, comes in the summer and in the Christmas season. So for transient in terms of 25% of the growth in our occupied room nights year-over-year, we had a real strong transient growth.

Yes, because it is really the last 5, 6% that is getting filled. The thing is the first quarter, as you well now, is such a strong convention period for us. We did -- we're over 80% occupancy. It is that last 4 or 5% of transient business that really helps. And frankly it helps with the margin, which frankly is tremendous. The margin improvements that we've seen in this business for this first quarter is tremendous.

Right. And the strength of the RevPAR numbers was what made me ask that question. Secondly, you mentioned that previously suggested construction costs for The National project were holding steady, I believe. Can you remind us what that estimate is presently with the construction costs where they are?

Sure. It is Dave again. The construction costs -- the way we talked about it in the past is net of the economic incentives. So the construction cost is right now in a range 640 million to 690 million. The economic incentives that we have, we have 95 already granted to us, and we are seeking another 50. That is -- the growth range of 790 to 840 for the 2,000 room project.

Now Colin and I have been to the project very recently and spent a good bit of time with our construction managers and our general contractors. And we believe that we certainly have hit the high watermark on overall construction cost. And we have reason for optimism that we're going to bring the number in inside of certainly the high end of the range, and hopefully inside the low end of the range we have given.

I just want to remind everybody, given the pace of bookings and the waits which David asked about, we're very optimistic that this project is going to generate a north of 12% after-tax unleveraged IRR.

And then one last question, and I will make room for others. The pattern on the Opryland renovation, are we going to see this for the remainder of that renovation, where you will not be doing renovations in the first half of year, and then do the room renovations in the third and fourth quarter in both '06 and '07?

Again, the beauty of our business -- I'm sorry to be too long-winded about this -- is that we have high levels of visibility to when we're going to be full. We know the big conventions that we booked for '07 and '08. And therefore it allows us to deal with the room renovations around those big occupancy periods. And so the problem that we got this year is that by and large we're pretty full for most of the year. It is going to be a very good year for Opryland. We know that. We have the same types of issues in '07 and '08, but we know the sooner we get this refurbishment done, the more we can charge for our rooms. And so we're going to try and fit it in as best we can around big periods of occupancy.

Pat Scholes of J.P.Morgan.

There is discussion of a new downtown convention center to be built in Nashville. What are your thoughts on this? And is it something that you could see -- that you see that could expand the city's overall convention business, or would you look at it more as a competitive threat?

That is an interesting and a good question. Let me pounce on the answer please, because we are -- what we have said publicly within this community, we are obviously headquartered here. We have more than sort of a passing interest in this whole debate. And we're also trying to determine how it affects the way we look at the growth of our existing business. And I really don't want to get into specific thoughts about that at this stage of the game, because there are some things that we're looking at that we just don't want to discuss publicly at this stage.

But the good thing is, is that what we tend to believe is that local convention centers and these big all-in-one place facilities that we operate, are like night and day. When we talk to meeting planners, meeting planners would prefer to be all under one roof where they don't have to worry about bussing people around and organizing 3,000 people that go to different restaurants to feed them.

The issue for us is the implication, does this afford us an opportunity or is this a threat, and we're working through that right now. And we have thoughts on this, and we will be engaging with the political forces in this town at the appropriate time. But by and large, local convention centers don't compete with us. I think it is fair to say that the local convention centers will believe that we compete with them, but the reality is I don't think we do, because the customer base is a little different.

[Jen Gancy] of Gabelli & Co.

I just had a -- was wondering if you could give us a little more color on what is going on with Bass Pro in terms of a potential public offering or something along those lines?

You crackled after you said a little more color on Bass Pro.

I'm sorry. Is this better?

That is a little better, yes. Thank you.

I was just wondering to the extent you can give us a little more color on any sort of liquidity event regarding Bass Pro.

A little more color on its future? I mean look, the business is growing like no tomorrow. It is an extremely attractive business to communities. It has lots of businesses that are under development, and lots of businesses that they have announced. It is growing very, very well. It continues to be sought after by customers right across the country, in my considered opinion. And I think the operators and the primary owners of Bass Pro, is clearly the best outdoor hunting, fishing company in the country.

If the question is a question of, is it a business that will be a public company at some point in time, or will it be a business that gets sold? Will it be a business that discontinues to do what it will do? We own 13% of the company. We don't own 100% of it. And when decisions are taken that affect the economics of our company we will report on that. But it would be wrong of us to speculate on the future.

One thing though is for sure, the business will have a lot of opportunity to do whatever it wants to do, because it is a powerhouse in the niche that it is in. That is one of the reasons why we have anxiously retained this investment, because we believe that at a point in time in the future it will build -- it will be very valuable in terms of -- it will show tremendous value for our shareholders. And we like that. Hopefully, Mr. Gabelli likes that too.

I think he does. Just another quick question. For your increase in guidance for the Hospitality portion, can you just go a little bit more into -- more into where those increases are coming from?

The reality is most of it -- a lot of it is coming from just the overall first quarter. We continue to be surprised by the quality in which we manage our revenues in Texas, as an example. We're managing our revenues very well, and it is cascading to the bottom line. We know that our occupancies for all of our businesses this year are going to be pretty strong. And it is just the overall predictability of our business that we can see today for the rest of this year.

Now I will tell you that this guidance -- we have been reasonably cautious about transient for the rest of the year. So you can read into that as you will. I think we feel good about our guidance based upon sort of current levels of bookings that we have, and reasonably modest levels of transient growth over last year. We feel very good about this hotel business. And we hope as we go through the course of this year that it will become more evident to our shareholders that we've got something very exciting on our hands here.

At this time I will turn the floor back over to management for any closing remarks.

Well, thank you everyone for listening in today. I hope everyone sort of focuses in on the quality of this Gaylord Hotels brand that we have spent four, five years really nurturing and growing. We feel very excited about the future of Gaylord Entertainment. And the ResortQuest business at some point in time will be, I hope, satisfying to all of our shareholders.

Thank you very much, and thanks for listening. If you have any more questions, call either David or myself or Key Foster.

Thank you, this does conclude today's Gaylord Entertainment quarter one 2006 earnings conference call. You may now disconnect, and have a wonderful day.