Ryman Hospitality Properties Inc (RHP) 2006 Q4 法說會逐字稿

Welcome to the Gaylord Entertainment Company's fourth quarter 2006 earnings conference call. Hosting the call today from Gaylord Entertainment is Mr. Colin Reed, Chairman and Chief Executive Officer, and Mr. David Kloepel, 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 through digital replay. The number is (973) 341-3080, and the pin number is 835-7500. At this time all participants have been placed on listen-only mode, and the floor will open for your 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'm the General Counsel and Senior Vice President for Gaylord Entertainment Company. Thank you for joining us today on our fourth quarter and year-end 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 fourth quarter and year-end 2006 earnings release. Thus, 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'd also like to remind you that in our call today, we will discuss certain nonGAAP financial measures, and a reconciliation of those nonGAAP 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, and good morning, everyone. Welcome to our fourth quarter conference call. As is customary, over the next few minutes, I'll provide some top line commentary on each of our business, and then Dave Kloepel, our Chief Financial Officer, will discuss the detailed operating and financial performance of the Company and then provide guidance. And then as usual, we will open up the call for questions.

We went into the fourth quarter of 2006 with great momentum, and had a good amount of success this year creating value for our core business and solidifying the Gaylord brand. As we look ahead to 2007, we believe that this year will be our busiest and most productive to-date. The work that we complete this year will provide a strong platform for what is shaping up to be an exciting 2008 and beyond. This year, we will see the final stages of the first carpter of the Gaylord National project, as well as the conclusion of the three-year capital refurbishment program at Gaylord Opryland, including the completion of hotel room renovations, a $30 million food and beverage upgrade, and initial stages of a room and meeting space expansion to accommodate the high demand for that property.

As we told you at the end of the third quarter, we had terminated several conventions totaling 100,000 room nights for future years, mainly out years, which was business that was low rated, which will be replaced with more profitable groups. Notwithstanding this, we still booked over 1.3 million on a same store basis and over 1.7 million room nights including -- when you include Gaylord National. We also entered 2007 with the highest amount of room nights on the books in our Company's history. This year, we will also look for ways to fully unlock the value of our noncore businesses, and will continue exploring ways to leverage our strong relationship with meeting planners to capture even greater share of this profitable market.

The fourth quarter of 2006 was decent. We had a solid consolidated cash flow and pretty high occupancy levels led by Opryland, which posted an occupancy rate for the quarter of over 85%. While we go into more details later on this, I should say upfrost that I was personally a little disappointed with Opryland margins for the quarter, which came in below our internal expectations due to some additional expenses related to starting the extensive Christmas program, as well as accelerated repairs and inventory replenishment. We have fixed the problem and believe Opryland's performance over this coming year will be at the levels we expect. Our ability to perform at high levels year after year underscores the strength of the business and awareness of our brand, and the service proposition we provide.

In 2006, we saw continued success in attracting and retaining loyal, high-valued customers. We also turned away literally millions of room nights at our hotels because of the lack of available space. We are currently in the process of determining how we can best fulfill the unmet demand, and believe that our ability to do so will present a large opportunity for the Company. As part of our efforts in this area, I'm sure most of you saw our announcement yesterday about a proposed expansion at Gaylord Opryland. We are in the planning stages of this project and have a tremendous amount of work to do before we can share additional details, including the financing of this project. Still we continue to see a tremendous amount of demand in Nashville. And such an expansion will enable us to continue to grow what has once again become the cornerstone of our hospitality business.

You are probably tired of hearing me say again what I've said on previous occasions that the business model for our hotel business is very different from almost every other company which operates in a hospitality segment. We have predictability, long-term recurring revenues, with a core group of loyal customers who believe in the service experience that our hotels provide. We believe our model positions us well to further our status as the premiere provider of hospitality, meeting, convention and entertainment offerings, while also limiting our exposure to the typical waxing and waining that is common in the hotel industry. I'm encouraged and excited by the strength in our performance in a number of key areas. Advanced bookings remain robust at each of our locations, and Gaylord National is already outpacing expectations on this front, and customer satisfaction levels continue to be solid.

Now regarding our growth efforts, we are confident that we can deliver the same quality and level of service that we provide every day in our existing markets. There is no other offering that can compete with our properties in Nashville, Dallas or Orlando. We believe that we will be able to have a similar dominant position with our Washington project and at other properties that fall under our umbrella. The National has been receiving an outstanding reception from meeting planners and customers who eagerly await its opening at the beginning of the second quarter of 2008. And as you will see from our release today, our construction plans for Washington now allow us to open the expansion at the same time that the original hotel project will open. We believe this will be very advantages for the first years and subsequent years operations. Advanced bookings for Gaylord National already total nearly 900,000 net definite room nights. Remember, we still have one year and three months until the opening. And just to remind everyone, we opened Gaylord Texan with over 700,000 rooms nights, and Gaylord Palms with a fraction of over 1 million room nights.

Regarding management for Washington, we're anticipating making starting announcement for the senior positions in the very near future. We are confident that this hotel, once open, will become the number one convention hotel on the East Coast. As for the West Coast, as you know, a letter of intent was approved by the Unified Port of San Diego Board of Commissioners in the city of Chula Vista, outlining the initial plans for a 1,500 to 2,000 room resort and convention center hotel on the Chula Vista Bayfront just outside of San Diego. We continue to make head way on this project, and we'll update you as necessary.

Now let me offer just a few additional points on the Opryland expansion. As I said before, we are at the very early stages of planning. What we have proposed is a 400 million expansion -- $400 million expansion that will add over 400,000 square feet of convention and meeting space, and a new all-suites hotel adjacent to the current facility that -- the all-suites hotel will have approximately 400 rooms. I realize that the bulk of questions will come around the financing plan for this, and either David or I will be happy to talk more about this when we get into the Q&A. While it is too early to the provide specific details at this point, we have said in the past we will have a number of options to finance all of our expansion plans, including the monitization of noncore assets, accessing undrawn bank lines, [inaudible] with investors who share our strategic objectives, or rotating the capital we already have invested in our very successful hotel business. In Nashville, all of these possibilities are in addition to the economic incentives we have asked the city and the state to provide.

Let me turn to our stars for a second. As a reminder, we call our employees stars, and fundamentally believe that they are the main component to the success of our brand. Guest satisfaction is fundamental to securing routine visits from our convention and transient guests, as well as building long lasting relationships. Our stars are the most important resource to drive guest satisfaction, as they exceed customer expectations each day and deliver the highest standards in service excellence. Each quarter, we monitor our guest satisfaction levels through an externally administered guest satisfaction survey. I'm pleased to report that once again, all three of our properties continued to quite well here, posting an improved performance over last year. We strive to be certain that all of our stars go out of their way for our customers, and we will continue to set the bar high as it relates to customer satisfaction. We are confident that our continued investment in our stars will yield a better overall, long-term performance by our properties.

Now let me just quickly touch on some of the top line financials, and then Dave will get into the details. Gaylord Hotels performed well this quarter as revenues for the hospitality business grew 10% to $180 million on the continued strength of occupancy levels of each of our properties. CCF increased 9.2% to $44 million -- $44.4 million. CCF margins were 24.6%, essentially flat to last year, ininfluenced by the lower CCF margin at Opryland, which I touched on earlier.

Let me just give you one little piece of additional information on the Opryland performance. If you look at the overall 2006 margin performance of this hotel over '05, you will see a very, very good year. Revenues yea- over-year were up approximately 18%. Consolidated cash flow was up 29%, and the CCF margin for the full year expanded by over 200 basis points in 2006. We expect further progress to be made in 2007 over 2006, notwithstanding the completion of the refurbishment program, and we expect 2008 to be a really good year for Gaylord Opryland. A core high quality group customers and leisure customers continue their strong demand for our industry leading convention properties, spending more and more on our food and beverage and entertainment offerings. As a result total, RevPAR for the hospitality segment for the full year increased 11.4% versus the prior year. We continue to receive rave reviews from our customers about our out-of-the-room offerings.

Finally we continue to deliver impressive ADR growth. Our ability to command these rates is a true reflection on how far our brand has come over the past several years. We believe that the investments we've made in renovating rooms, providing first class meeting space, and developing incredible dining and entertainment offerings will continue to drive top line growth. At the same time, we are carefully evaluating our operations so that we can maintain and expand flow through in CCF margins.

Let me turn to ResortQuest. ResortQuest performance came in pretty much as expected. We continue to look at this business carefully to determine how best to maximize the value of this business for our shareholders. Dave will speak on our overall strategy with ResortQuest in a minute. However, as you likely saw, after carefully review of this business, we recorded a $109.9 million in total impairment charges to write down the carrying value of the trade name and Goodwill. This is unfortunate, but the fact is that the business, particularly on the mainland, has been severely impacted by the unprecedent hurricane seasons of 2004 and 2005, and has profoundly influenced customer behavior. As I said previously, we continue to evaluate this business to determine how we will derive the most possible value from ResortQuest for the Company. We will keep you aprised of this process in due course.

Now let me just last touch on the Opryland attractions. Really no new news here. Our attractions business in the Grand Ole Opry performed as we expected. We will continue to pursue additional merchandising opportunities in other ways to leverage the Opry's broadening appeal. Dave will provide you a few top line financial metrics in relation to this part of our business in his section. And without further ado, I would like to turn the call over to David to go through the financials. David?

Thank you, Colin. In my comments this morning, I will review the operating performance of each of our businesses, and highlight key drivers and performance. I then want to spend some time discussing our outlook for '07 and the exciting accomplishments we expect for the year. I'll start with Gaylord Opryland. Opryland generated revenue of $83.5 million in the fourth quarter of '06, a 9.4% increase compared to the prior year. Full year '06 revenues were $281.2 million, and that represented a 17.9% increase over the full year of 2005. Higher revenue in the fourth quarter was largely a result of higher occupancy levels, which rose to 85.2%, a 500 basis point increase versus the prior year quarter. RevPAR grew 11% to $133.89, compared to $120.60 in the same period last year, driven in part by a 4.5% increase in ADR.

A strong increase in outside-the-room revenue drove total RevPAR to increase 11.3% for the year to $326.82 -- excuse me, that's in the fourth quarter of '06. For the full year '06, RevPAR and total RevPAR increased 12.3% and 16.8% respectively. Clearly the Opryland had a great performance in 2006. In the fourth quarter of '06, however, CCF decreased slightly to $20 million, resulting in a CCF margin of 23.9%, a 249 basis point decrease versus the prior year quarter. Full year '06, CCF increased 29% to $70.8 million, compared to $54.9 million in the prior year, which resulted in a 216 basis point increase in the hotel CCF margin.

As Colin mentioned, while the hotels generated strong growth and occupancy in ADR and outside-the-room spending, we generated less profitability than we would have liked. In pursuit of higher customer satisfaction and an extremely busy holiday season, we spent more on labor costs, inventory, and maintenance than we probably should have. We do not feel this is a systemic issue for the hotel, and we continue to maintain a very high expectation for Opryland's performance and profitabiliy going forward. The high level of customer demand we've seen for this hotel gives us a great deal of confidence that we will generate significant returns and the capital we already have invested in the hotel's room renovation program, the F&B recontacting of the property, and the room and meetings space expansion that was announced yesterday. Please note that the fourth quarter of 2006 operating statistics reflect 9,600 room nights out of available inventory, compared to 5,240 room nights out of available inventory in the prior year quarter. The full year statistics reflect 20,000 room nights out of service in 2006, compared to 29,500 room nights out of service in 2005. And as we've said in the past, we anticipate taking out about 48,000 room nights out of service in 2007 to complete our room renovation program.

The Palms posted revenues of $43.3 million in the fourth quarter of 2006, an increase of 8.8% compared to $39.8 million in the prior year quarter. Full year 2006 revenues for the hotel increased 6.7% to $176.6 million. The Palms experience a 2.1 percentage point decrease in occupancy in the fourth quarter of 2006, which was entirely offset by a 4.7% increase in ADR compared to the prior year quarter. This drove the hotel's RevPAR to increase marginally to $119.22, compared to $117.57 in the same period last year. For the full year '06, RevPAR increased 7.2% to $135.42, and total RevPAR increased 6.7% to $344.19. CCF increased to $9.3 million, compared to $8.5 million in the prior year quarter, resulting in a CCF margin of 21.5%; essentially flat to last year. The hotel's profitability in the fourth quarter of '06 was somewhat adversely affected by an increased investment in the hotel's holiday attractions. While the properties overall profitability in the fourth quarter of '06 was affected by these investments, we believe that judging by the strong success of our holiday attractions in the Orlando market, these investments should deliver very solid returns for us in the months to come.

The Texan's revenues increased 11.2% to $51.3 million in the fourth quarter of '06, compared to $46.2 million in the prior year quarter. For the full year of 2006, the hotel's revenue increased 8.3% to $178.6 million, compared to $165 million in 2005. RevPAR in the fourth quarter increased 6.1% to $124.48, driven by a 2.9 percentage point increase in occupancy, and a 2% increase in ADR, compared to the same time last year. For the full year '06, RevPAR and total RevPAR increased 6.3% and 8.3% respectively. CCF increased 26.9% to $13.9 million in the fourth quarter of '06, resulting in a 27.1% CCF margin. The 334 basis point increase in the hotel CCF margin compared to the prior year quarter was driven by strong profitability in all operating departments.

For the full year, CC F increased 19.3%, resulting in a 246 basis point increase in the hotel's CCF margin. The total RevPAR increases for both the year and quarter are the result of our customers spending more in outside-the-room venues like the Glass Cactus. The Glass Cactus has become a favorite of locals and attendees alike, and we look for it to continue contributing to the hotel's total RevPAR growth in the quarters to come. The Texan has been a great example of how we can successfully transplant our model into other destinations. In a short period of time, the Texan has become the optimal destination for convention customers and meeting planners in the region, and no other hotel or convention center in the Texas market can offer the same kind of experience.

Now let me transition to our development activities. The Gaylord National continues to bring in great results, and bookings continue to come in at a fast pace. An additional 167,000 room nights were booked in the fourth quarter, bringing the cumulative number of net definite room nights for the property to 894,000. During the fourth quarter, we spent approximately $88.3 million on the property, bringing our total expenditures to-date for the property to $262 million. We adjusted the project's construction schedule this past quarter, and to-date approximately 95% of the general contractors scope of work, including construction materials, has been bought and is now under contract. We also revised our estimate for the cost of the National to approximately $870 million, which includes capitalized interest and preopening expenses, to reflect the higher cost of construction in the marketplace due in large part to a very competitive labor market and the acceleration of the construction of the 500 room expansion.

As we mentioned last quarter, we continue to see some pressure in labor costs as demands for works customers for government construction projects and the stadium project may result in increased wages. Despite the increase in construction costs, the returns we anticipate for the nNtional are still well in excess of our internal return thresholds. We continue to make progress on Chula Vista as well, and have had some fantastic feedback from meeting planners about the prospect of bringing one of our properties to the West Coast. We believe that a property there will complement our other assets and bring in additional bookings from customers unfamiliar with the Gaylord brand. As far as next steps go, we continue our negotiations with the Port of San Diego and the city of Chula Vista, and expect that we won't have many updates for you on that front until the second or even third quarter of this year. We began very preliminary work with an architect on the design of the property and are also working towards securing regulatory and land use approvals. As we've said before, if all goes according to plan, we should receive those approvals either late this year or early next year. We will certainly keep you apprised of our progress as it is made.

Before I provide details on our other nonhotel businesses, I'd like to remind you that we continue to look closely at all of our assets and make certain that we are maximizing the value for our shareholders, and to fund the expansion and growth of our core convention and hotel business. As we enter 2007, we continue to evaluate such opportunities.

ResortQuest results for the fourth quarter came in largely as expected. While the Hawaiian ski markets performed relatively well, the business continues to suffer from the cyclical downturn in the real estate market and the reticence for travellers to travel to the Florida and Gulf Coast markets that were hit by hurricanes in 2004 and 2005. ResortQuest revenue from continuing operations was $40.2 million in the fourth quarter of 2006, a decrease of 1.1% compared to the prior year quarter. For the full year of 2006, the segments revenue increased 1.6% to $225.7 million compared to the prior year. ResortQuest CCF loss was $8.1 million in the fourth quarter of '06, a 2.7% increase over the prior years CCF loss of $7.9 million. For the full year of 2006, ResortQuest CCF increased 91.8% to $17.4 million compared to the prior year, primarily due to the $4.9 million received in connection with the settlement of our business interruption claim, and a $5.4 million gain on the collection of a note receivable that we previously had considered to be uncollectible.

In the fourth quarter of 2006, ResortQuest RevPAR increased 6.1% to $56.98, compared to $53.68 in the prior year quarter, driven entirely by a 13.7% increase in ADR across the net earning. In the fourth quarter of '06, ResortQuest had approximate the 14,500 units under exclusive management. As Colin mentioned, in accordance with FAS 142 and 144, we recorded a $109.9 million impairment charge to write down the carrying value of the trade name Goodwill and certain other assets related to our ResortQuest business for the fair value of these assets.

Now let me turn to our operating attractions business. The operating attractions segment performed quite nicely in the fourth quarter. Segment revenues increased 17.1% to $18.5 million in the fourth quarter of 2006. For the full year of '06, revenues increased 14.1% to $76.6 million. The segment CCF increased 92.4% to $3.3 million in the fourth quarter of '06, from $1.7 in the prior year quarter. CCF for the full year of 2006 increased 54.6% to $10.9 million compared to $7 million in 2005.

The Opry continues to show its strengths as an iconic brand, and it's extremely valuable to us in terms of its continuing contribution to country music and its broad appeal in many different audiences. We continue to pursue additional merchandising opportunities with the Opryland and the related content in order to capitalize on the widespread appeal of the brand. Finally, as relates to Bass Pro shops, our equity income for the quarter was approximately $2.8 million, bringing our equity income we recognize for the full year to approximately $12.3 million.

Now let's look forward to 2007. 2007 will be a year of significant transformation for Gaylord Entertainment. We will complete the rejuvenation of a once glorious Opryland. We will complete the best resort on the East Coast, while shedding unwanted financial complexity, and we intend to execute on plans to capitalize on the significant growth opportunities in front of us. Opryland's room renovation wraps up this year with the completion of approximately 1,200 rooms, and we will also reinvent the food and beverage outlets on the property, completing the re-establishment of Opryland as the premiere large hotel in the United States. Completing the best resort on the East Coast obviously refers to the National. In 2007, we expect to spend approximately $460 million on construction of the National, and again that excludes capitalized interest and preopening, and as we described, we expect to open all 2,000 rooms concurrently at the end of the first quarter of 2008.

The shedding of financial complexity refers to the maturity of the secured foreign exchange contract on our Viacom and CBS stock. This complex transaction matures in May and will result in a simpler balance sheet and income statement. The cash impact of the maturity of the contract is the elimination of dividends paid by CBS to Gaylord. These amounts have been approximately $3 million, and have historically been reflected as income to the corporate and other segment. The other cash impact of this maturity is an approximately $80 million cash tax payment, which we described at length previously.

Finally, executing on our growth opportunities in front of us, we have built a very strong brand, and meeting planners are telling us it's hard not to do business with us. As a result, we are turning away millions of room nights of demand, and it's now up to us to develop and execute on plans to monetize on this excess demand. Our expansion plans at Oprylands are an example of such growth plans. From a capital perspective, we are comfortable that as we develop these plans, we can fund them through the sale of noncore assets, the substantial public incentives we seek, operating cash flow, or additional indebtedness. In addition, there exists numerous opportunities to recycle capital from existing lower return investments into higher returning new investments. And as we've said before, we anticipate funding our growth without issuing common equity.

Now for specific guidance on 2007, our full year CCF guidance for the hotel segment RevPAR and total RevPAR guidance for full year remains consistent with previously issued guidance of 5% to 7% growth in RevPAR and 7% to 9% growth in total RevPAR. This RevPAR growth will be stronger in Q2 and Q3 compared to 2006, where comparison to 2006 are not quite as challenging in Q1 and Q4. Our hotel segment CCF guidance will remain at previously issued levels of $182 million to $190 million for 2007. In addition, we expect to book between 1.3 and 1.4 million room nights on a same store basis in 2007. We issued new guidance for operating attractions segment, which we expect to be in a range of $11 to $12 million of CCF for 2007, and our corporate and other CCF guidance for the full year will be in the range of a CCF loss of $40 to $43 million for 2007. We announced earlier today that we will suspend issuing guidance for Resort Quest until a conclusion of our review of options to maximize the value from this investment for our shareholders. And now I would like to turn the call back over to Colin.

Thanks everyone for taking the time to listen into this. Elsa, what we'd like to do now is hand over and take questions from folks on the phone. Thank you.

[OPERATOR INSTRUCTIONS]. Our first question is coming from Jeff Donnelly with Wachovia. Please go ahead.

Good morning, guys. Actually a handful of questions, if I could. On ResortQuest, Dave, I want to make sure we are looking at the potential value there correctly and the implication, the impairment. What is now the standing book value of ResortQuest after the write down, and how did you arrive at that magnitude of a dollar amount?

The book basis in ResortQuest carrying value as of [inaudible] is about $160 million. And the way that you determine the carrying value of an asset in these situations is you have to assess the fair value of that business based on a variety of different indicators, the most widely accepted of those is discounted cash flow basis. So that's how we arrived at the value that we carrying ResortQuest at.

Okay. And I thought maybe if you could just straighten me out on land parcel to make sure I'm not confusing something. And that is, you are looking, I believe, to change the zoning on roughly 100-acre land parcel, which, I think, is north of McGavock Pike and east of the Pennington Bend area, but I think you're also looking to separate maybe an equivalently sized parcel on which the Opry building sits into smaller parcels? Am I correct in that?

Yes, that's correct.

I'm curious at least for the, I think it's about 100 acres, 130-acre parcel where the Opry amongst some other stuff sits. What's the catalyst for splitting that up into I guess, it's still your ownership but separate parcels?

You're referring to around the hotel?

Yes, yes.

Some of it is housekeeping. Candidly, the splitting off of the Opry businesses into separate classes to apply that real estate to the Opry subsidiaries whereas it was previously held elsewhere. The remainder of it is to help facilitate the expansion proposal that we made yesterday.

Concerning that particular expansion, are you guys concerned at all that Nashville has the necessary air list to support the incremental demand from that expansion?

Jeff, morning. Colin. The answer to that question is yes, and it continues to grow.

Actually, Colin, while I've got you, concerning expansion if we were to look two to three years out, what are the odds that you capitalize upon the increasing demand for your product by exploring and expansion of other properties, such as the Palms and the Texan as well.

The answer to that question is I think we touched on that either in the last call or the call before, and that is because of the tremendous demands that we have now built, this unmet demand that we have built for the whole brand, remembering that approximately 50% of our bookings are rotational bookings from one location to another, and we expect as we introduce new clients into Washington, that's only going to continue to grow in absolute number of room nights, we believe we have opportunities in each of our hotels, and we are going to continue to prosecute that aggressively. But what we want to make sure happens here, Jeff, is that as we bring this tremendous economic benefits to each of these communities, we have the communities be prepared to invest with us because of the incredible benefits that these communities derive. And we've been discussing the Nashville deal that we announced yesterday for probably outwards of two years with the leadership of this town.

And this wasn't something that we dreamed up about two or three months ago. We've been discussing this for a couple of years. What really got us moving on Nashville was two things. One, the proposal for the downtown convention center was the way this thing with increasing room taxes, being proposed increases in room taxes and harvesting those room taxes to pay for it. We felt that it was in our best interests and our shareholders best interest to try and access that. But the other thing that has occurred that really has got us very, very excited was really the overall performance of Gaylord Opryland. If you look at where Gaylord Opryland now is, if you look at the Smith Travel Report for its peer group, it has now gone from like number five, number six in its peer group to number one in its peer group. It has substantial improvements in its revenue and profitability last year, and the overall appeal for Opryland as we continue to perfect the service side and the quality of the physical side continues to grow, so it's a combination of getting our sticky little fingers on some of the tax benefits here, and bringing this huge economic benefit to the city of Nashville. But we are looking at these other locations, and we believe it's going to give us a great opportunity.

Last question on Gaylord National, we are a year away from opening, and I'm curious what you think the return on cost is on that project in its first 12 months of operations?

Jeff, we haven't put a number out for first 12 months, and we plan to do that a little bit later in the year. We had previously said that we thought it was about a 17% cash on cash return. That was on our 840 of cost. Now the cost is 870, which would change your return to about -- that didn't work, hang on a second -- cash on cash was EBITDA versus cost. Hang on one second, Jeff.

Sure.

It's about 14.5% based on the slightly higher cost that we talked about earlier today.

Thanks, guys.

The good thing about this Washington project, Jeff, is this market is an extremely dynamic mark. There's not a lot of new supply being built in this market, and the projects, the competitive projects have been announced historically don't seem to be moving much, and we believe we have fairly strong pricing power in that market because the asset that we are bringing into that market is so different from anything you see. So I think the first 12 months as we build, as we get this thing open, get this hotel open, it's really attractive now that we can open the whole hotel in one fell swoop. We get this hotel open, I believe that the probability of upside is greater than downside in this hotel.

Our next question is coming from Will Marks with JMP. Please go ahead

Thank you. Hello Colin and Dave. I wanted to ask about a couple things. One, just, I don't want to ask much about ResortQuest, but I think I may have misunderstood, $160 million is after the write down of the book value?

That's correct.

Okay. And as far as -- you've given me before a call today a figure on demand for convention planners outside of, those planners that don't want to be in Vegas, specifically. Can you remind me of that figure?

The way to think about it out of the 24,000 groups that we tends to target, this is the 600 to 2,000 a peak, approximately it's 4,852, but the way to think about simplistically is about 50/50; 50% of those meeting planners absolutely want to go to Vegas, the other 50% never want to go to Vegas. There's 12,000 meetings that never want to go to the Vegas. And the ones that do want to go to Vegas don't always want to go to Vegas. Remember, 80% of these 24,000 rotate year by year by year. They like to move from market to market. So think about it this way now. In our three hotels today, we probably do 250, maybe 225 to 250 of those groups. When we open Washington, we will be, you can sort of figure it out somewhere like about 325, something like that, 325 out of 24,000. So we have less than 2% share. So we can be enormously successful and never, ever go to Las Vegas, but at some point in time, we will try and figure that out.

Great. Looking at your Texas hotel and the full year CCF is $47.3 million, you spent roughly $500 million to build that, is that correct? And are you achieving the type of return that you expected? I know you said that DC because of the higher rate you can charge can lead to a higher return. Is that still accurate?

The difference in DC, Will, is that we got, we are getting $160 million of incentive. We got -- this deal was already set in stone when this management team got here. We got very little incentives in the Texas, in the original Texas deal, and this is why you hear us being very emphatic about having the communities contribute to enormous economic benefit we are bringing to each of these deals. If we expand Texas, we will look to get incentives in that market to do that. And we believe that's right, and we believe that's appropriate. So, but 47 -- you can do the math, 47 to 500 is about a 10% cash on cash, but we believe we've got very good upside to continue to grow the Texas hotel.

You may recall, Will, when we got to the company and really I think about the time you picked up research, we were doing equity offerings that sell the Gaylord family shares, and we were very much down-playing our expectation on the Texan because frankly we just weren't sure at that time if a hotel in Dallas could do a 10% cash on cash return. I think we said that we hoped we would get to that number by the ends of the third year of operation.

We said 45 we hoped.

We said 45 by the end of the third year of operations. We are now two and a half years into it, and we did 47.5 this year and the property should grow substantially next year. I think we have outpaced the returns we anticipated once we got to the company. As Colin said, we probably would have done that deal differently had we had the chance to.

And just to remind you, the deal that we will -- if we can complete all of the development processes for Chula Vista, we will get substantial incentive to build in Chula Vista.

Great. Okay. Thank you, very helpful.

[Technical difficulties.] with RBC World Markets. Please go ahead.

Good morning. A couple questions. Firstly, with respect to the Opryland expansion from last night, how did you arrive at suites and not rooms? I, presumably you are targeting a different clientele, is it smaller groups, if you could share a couple thoughts on that?

As you know, good morning, David, as you know we have 2,880 rooms in that hotel, of which about 2,600 look the same or thereabouts. They are very high quality, but they all look the same. When you are literally pushing in groups of between 2,000 and 3,000 at a time, there is a big demand for a different type of room configurations. And the other thing is that we found from some of our meeting planners and some of our customers that some of these folks would like to bring in a family, be at the convention for two, three days, and stay an extra day or two days in Nashville. So having rooms that are versatile enough -- we are not going to build 160% in feet, square feet of the existing room size. These are going to be configured in a way where you have a small bedroom, a bathroom, a decent bathroom, and living room that will be, you can double down and have a sofa bed in there. That's the way this will be configured, and we believe it will command a premium in rate, and will command a -- more demand from the customer that wants a little bit of a differentiation of product.

Another point, David, is that if you look at our demand, we have historically been very good at attacking the large groups of 600 to 2,000 people on the peak night of their stay. But if you think about other types of groups, groups that are 200 to 600 people on the peak night, we service a lot of those groups as well, and we have a lot of meeting planners who have very large meetings who would like to have a Gaylord experience for their smaller meetings. Having the separate hotel, having it be a slightly different room product allows to us sell a meeting planner a different shade of experience than the smaller group. But they don't feel like they are going to be in the middle of a 3,000 room hotel, they are going to be in a separate 400 room hotel, and they can be in an approximate to the meeting space. So it gives us a slightly new offering to sell to the meeting planner that services a different need than they have for their very large meetings.

If I looked at your room nights booked for the year of 2006, and compared it with the room nights you booked in 2005 and even '04, could you give us a relative sense of what the rate growth is in those bookings year-over-year?

It's -- it's a difficult comparison, frankly, because you're -- you end up comparing slightly different room booking patterns because remember every day is not a value day. March 1st is valued differently than March 20.

And we're also not booking all room nights in 2007 in 2006, or all room nights in 2006 in 2008. It can be all different years.

Just trying to get the sense for what the ramp is in the future.

We can give you more color on that. We have some varied detailed analysis that might be a bit complex to go through on this broad of a telephone call, but we'd be happy to share that and talk you though it, so you can educate the investment community on it.

I think, as you know, David, we are going to do an analyst conference, David, toward early in April, and this whole -- the science around that room booking the way we do this is something that we want to go into fairly lengthy detail about to give you an sense of why we can differentiate in this respect. But I will tell you this, just as a one liner. We are very confident about our room pricings for '07 for '06, for '08 over '07, and so on. Because we just have been pricing, we are continuing to get expanded pricing in our business for certainly the premium days each year, and it looks very healthy, and unlike -- this is the reason why we get a little attitude when people say what about the hotel cycle, are we at the top of a cycle, is this going to be a problem for you. It's a minor problem for us if the cycle turns on us because we book so many rooms nights for approaching years at guaranteed rates that show good increase over this year and last year and the year before.

Okay. Right. Presumably, if we can address it offline, we can back out the DC bookings because obviously, the expectation is that will haul the average up, and we can make a fair comparison for what you've booked for the three existing hotels versus the prior year, and it sounds to me like you are suggesting that it is directionally up going forward?

Yes. [Technical difficulties.] -- basis, and yes, it is up. I just don't happen to have it with me.

Fair enough. One last quick one, and then I'll get out of the way. With San Diego, when can we have a little clearer picture on scale and cost and scope of all that?

I think what we've got to do is we've got to get through the Port Authority and Coastal Commission -- not Port Authority, the Coastal Commission process here which we should get some indication of in the May/June/July time frame, somewhere in there. We are not in control of that process, the Coastal Commission is, and at that point in time, we will spend a bunch more money nailing down the final design on this thing, and obviously, a bunch more money because the final design will drive the final cost. But we don't want to expend too much money on this until we get real strong comfort that the Coastal Commission process is going to go the way we would hope it to go.

Got it. Thanks so much.

Thank you.

[OPERATOR INSTRUCTIONS]. Our next question is coming from Nap Overton with Morgan Keegan. Please go ahead.

Good morning. Would you say for the Texas, the Texan and the Palms, that there is much upside beyond, say, the mid 50s range in annual EBITDA from where we are with both properties operating as well as they are?

Nap, let me be clear on the time frame you're talking about. Are you talking in '07 time frame, or '08 time frame, what are you talking about?

I'm talking about with the existing physical facilities, no expansions contemplated within the next couple of years.

Yes, we think there is upside above the mid 50s on both of those properties because we believe we can continue to grow demand for those properties, grow rate for those properties, and expands the margins of those businesses?

Okay. And then, are there any assets considered to be noncore other than ResortQuest and Bass Pro?

I think the material value on our balance sheet you've just described that will be defined as noncore. We maybe have some knits and gnats sitting around, but it's probably not worth the debate at this stage.

Okay. And then what are your financing needs to complete the National right now versus what you have in place, that you need to put in place prior to completing that project?

David?

Yes, Nap, we are in the process -- can you hear me okay? We are in the process of expanding our credit facility as a source of capital to ensure that whether or not we are successful in selling noncore assets between now and the conclusion of the construction of National, that the funding is there. And the general order of magnitude is in the $200 to $250 million range. That's kind of the need. We will expand our facility perhaps more than that just to make sure we have excess capacity, but that's the direction we are headed right now.

And that $250, David, is X. monetizing noncore assets.

Right. Okay. Thanks very much.

Thanks, Nap.

Thank you. Our next question is coming from George Smith with Davenport. Please go ahead.

Good morning. In keeping with your discussion of visibility moving into this year and 2008, could you update us as to how many rooms are spoken for, how much business is on the books for this year and next as a percent of available room nights?

I can answer for '07. I can answer you specifically for '07, and more generally for '08. For '07, we came into 2007 with about 64 points of occupancy on the books. But we generally add to what we come into the year is a little bit of additional group business that's very short term in nature, and then obviously, the transient business because that's not on the books coming into the year.

And one, let me add to that, David, and one other statistic, George, that you should understand is that we tend to, as David said, we tend to book some group business in the year for the year, and the reach to the -- the actual room nights that we have to book in the year for the year to make our total group plan for this year is below the historical averages that we have booked in previous years. So we are very comfortable with our '07 group targets, which we obviously haven't published or talked about. But we moved -- we entered this year, as David said, in very, very good shape.

And then to help us get a better feel for the potential value of ResortQuest, should that business ever be sold? Could you give us a feel for the level of corporate in that business?

I think what David implied -- I am sure this is what he implied, when he talked about the carrying value of the business, we believe that to be the value of the business.

Okay. You talked about margin pressures abating, specifically Opryland. What has been done already to give you confidence if that's going to be the case going into Q1 and Q2?

Look, the reason I said what I said in my little text is that Opryland had a wonderful '06. It grew its margins by 200 basis points, and it increased its CCF almost 30%. It had a wonderful '06. The problem is that the management of these individual properties hear it from me basically every day about customer satisfaction. And we anticipated huge volumes of business in that December time frame, end of November-December time frame in that hotel. We just did because of the Christmas programs we have in there. And the management staffed up in anticipation of these huge volumes. Unfortunately, they over-staffed a little. But we recognized that. We stopped it. And I'm confident that the first quarter, second quarter, the margins are going to be fine. They just are. We have very good systems in place to control the costs of these businesses, but the management of that hotel -- we give our management freedom and latitude to operate these businesses in affording great customer satisfaction. They spent money on some repairs and renewals that needed to be done, and they expanded the inventory carry knowing their volumes this year and next year are going to be strong. So that was the issue. It wasn't that the controls broke down. It was a conscious decision to improve customer satisfaction. So we expect decent margins in '07 over '06.

George, you is specifically referenced Q1 and Q. and I just want to make sure that we appropriately manage the investment community, as I said on my comments, on the call. We expect stronger performance in Q2 and Q3 than Q1 and Q4, and that's largely because if you look at Opryland, for instance, Q1 of '06 we did a 15% -- I'm sorry, we did a 20-ish% total RevPAR, and total RevPAR growth in the first quarter of last year as we had a very difficult comparison. So I just want to make sure that as we talk about the year, we tend to talk about the year in twelve-month increments, and we tend not to give a lot of quarterly specifics, but just so we don't get the investment community ahead of where we expect first quarter to be, we don't expect first quarter to be a plus 20% RevPAR growth and a plus 200 basis point margin quarter.

Okay. Last thing, could you comment on your ability to use the National to yield up the rest of the portfolio, and have you seen any benefit from the National yet, i.e. pushing new customers to any of the other properties in subsequent years?

We are starting to see customers -- we are starting to pick customers up in that Washington market that we are now building relationships with, and are moving them into, booking them into these other facilities. But the real proof of the pudding, the traction will occur once we open that hotel. When people see it, feel it and get a differentiated experience from the historical experience they've gotten in that market, that's when we will start to see the top spin here big time. But as our brand continues to get stronger and stronger, and our demand continues to grow for room nights, we have the ability to continue to expand pricing. We just do because we offer a superior experience.

Let's look at it differently. How many of those advanced nights are brand new customers versus those that have been in the property before?

About a little over 40% of those customers are rotational customers, and the remainder are new customers.

Thanks. Have a good day.

Okay, Elsa, we will take one more question, and then we will terminate the call.

Our next question is and final question will be from Jeff Donnelly with Wachovia. Please go ahead.

Hi, guys. Hopefully you will indulge me on just two more. Dave, did I hear you correctly that you expect the payment to settle on the taxes for the Viacom shares to be $80 million? I frankly thought it was going to be around $150 million or so.

The original bill when we got here was expected to be $150. Over the last four years, we've been meticulously working away at a number of tax planning strategies to make available losses within Gaylord that had previously been unavailable. So we believe that the net payment as it stands today is going to be about $80 million, actually slightly less than that.

So you've actually reduced it, you haven't necessarily deferred it even further.

No, we reduced it.

Okay. And then on top of the monetizing assets, I recognize the National Radisson may be something of an overflow hotel of sorts for you guys. Any plan there to sell an asset like that in this environment, and I guess in that regard, I know you guys don't control Big Cedar Lodge, but do you know as Bass Pro, maybe thinking about monetizing an asset like that as well?

Hi, Jeff, it will be inappropriate for us to get into speculation about what Bass Pro is doing. We are a minority partner in that business, and that would be wrong for us to do that. But you can imagine that one of the things that we are very much focused on is how do we derive the most value from our minority investment in this business, and so we are obviously keeping the management of Bass Pro up to date on the opportunities and trends in the hospitality business. As regards to Radisson, the Radisson, you're quiet right, the Radisson is an overflow hotel. It gets a lot of business. We generate a decent return from that, and if in the future that strategy changes, we will of course, let you know.

Thanks, guys.

Okay, Elsa, well, thank you everyone for being on this call. If you have any additional questions, please feel free to contact either David, Key, or me, and we look forward to speaking with you and hosting our investor conference. Key, have we circulated the dates on that yet?

In the next week or two.

Okay, great. You will be hearing from us on that and the location as well. Thank you very much indeed.

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