Ryman Hospitality Properties Inc (RHP) 2007 Q3 法說會逐字稿

Welcome to the Gaylord Entertainment Company's third-quarter 2007 earnings conference call. Hosting the call today from Gaylord Entertainment are Mr. Colin Reed, Chairman and Chief Executive Officer and Mr. David Kloeppel, Chief Financial Officer. They are also joined by Mr. Mark Fioravanti, Senior Vice President and Treasurer; and Mr. Carter Todd, Senior Vice President and General Counsel.

This call will be available for digital replay -- the number is 973-341-3080 and the pin number is 934-8185. At this time, all participants have been placed on a listen-only mode and the floor will be 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 am the General Counsel and Senior Vice President for Gaylord Entertainment Company. Thank you for joining us today on our third-quarter 2007 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 the 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 third-quarter 2007 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 the result of new information, future events or otherwise.

I would also like to remind you that in our call today we will discuss certain non-GAAP financial measures and a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures has been provided as an exhibit to our earnings release and is also available on our website under the investor relations section. At this time, I'd like to turn the call over to our Chairman and Chief Executive Officer, Colin Reed.

Thanks, Carter. Good morning everyone. I'm happy to welcome you to our third-quarter 2007 conference call. This morning I will provide you with an overview of our business and then as is usual days Dave Kloeppel, our Chief Financial Officer, will review specifics of the financials and provide guidance. And then we will conclude the call by answering your questions.

At the beginning of the year, we told you that 2007 was going to be an active and important year for providing the foundation for breakout 2008. With 3/4 now under our belt I'm pleased with our performance and enthusiastic about the momentum we have heading into 2008.

Before I begin discussing the quarter, and taking a look at 2008 and even a longer-term view of our Company's prospects, allow me to step back a moment and talk about business model in the context of what occurred on both Wall Street and Main Street across the country over the last six months or so.

Business executives across the nation would have had to have been pretty much asleep not to have noticed the credit issues that started to emerge in early summer starting in the sub prime mortgage arena which quickly spread to the broader credit markets in general. The implications and results are showing up daily across industry sectors. We're seeing that in sharp relief as this quarter's earnings season has progressed particularly in the banking sector.

The questions that are on every CEO's and CFO's mind are how deep do these issues go? What will be the implications to the consumer be they businesses or individuals and what will the Fed due to ensure stability in our capital markets? On a daily basis, Dave and I hear from analysts and investors asking us if we're seeing these issues manifesting themselves somehow in our business.

It is likely that these questions will continue for us and many other public companies across sectors as the landscape shifts continue and then ultimately diminish. So let me talk about our model in the context of the current environment.

What we have consistently told you, our investors, is our strategy is very clear and forthright. We employ the very best folks, treat them well, afford them the opportunities to grow individually and allow them to deliver the very best levels of service to our customers who return to our hotels and convention centers year after year. And guess what happened to three quarters of this year? Our star satisfaction scores -- remember we call our employees stars -- have risen to record levels and our star retention is at an all-time high. Not surprisingly our customer satisfaction scores are also at all-time highs.

So you may say great, your people like you as do your customers. How does this translate into value creation? As we have said so many times in the past you cannot measure the health of our company solely by looking at our current financial statements. Our primary customer, large conventions book literally years in advance so the reservations we book today coupled with last year and the year prior pretty much have laid the foundation as to how our 2008, 2009 and 2010 will perform.

Now hopefully, you've read in our release that we again had a very good quarter in a critical metric [forward] bookings. 2007 is shaping up to be a big year for us in this regard on top of a good 2006 and 2005. The rough translation of all of this is that 2008 will be a strong year for us and Dave will share more information with you on this in a moment.

Now unlike many of the other hospitality companies that operate in this industry, the transient and leisure consumer makes up less than 25% of our business. By far the largest part of our business is the group segment. And remember for each large group with book we sign a contract whereby the customer commits to deliver X amount of room nights and minimum spends on food and beverage. And of course our part of the bargain is to commit convention space and room blocks literally years in advance as well as delivering on a first-class convention experience when the guest ultimately arrives.

As part of the contract the client will agree that if at any time of the convention they show up with less rooms than they bargained for we have the ability under our contract to charge them an attrition fee for effectively holding these rooms for them. Similarly, if fewer delegates translates into less food and beverage spend than the client has guaranteed then we also have the ability to charge for this shortfall.

Practically speaking, this is not a regular occurrence. In fact many conventions turn up with more delegates than they planned. But occasionally customers for multiple reasons will show up for fewer delegates and an attrition fee kicks and in -- boy that was hard to say.

One last point regarding attrition. The analyst community which follows the hospitality industry rightfully focuses on the metric of RevPAR and total RevPAR as a leading indicator of the health of a business in this industry. At Gaylord, we do not book attrition fees into rooms revenue. It is booked into other revenue. And furthermore it is booked when it is collected not necessarily when the attrition occurs.

So there are times when our RevPAR might appear a little weak against expectations but CCF appears to be strong. Well in this third quarter of 2007, we had several groups who underdelivered on their particular committed room block and attrition fees did kick in. One question you may ask is were the groups who underdelivered vulnerable to a tightening economy and is there a longer-term issue going on? From all the analysis we have done it appears that the attrition related clearly to individual circumstances and not any underlying general trend.

So our business model is quite different and affords us good protection from the ever-changing sentiment of the consumer and whichever direction the economy ultimately heads in. The outlook for us looks pretty good. Why? Because our star satisfaction is really good as is our customer satisfaction and our forward contracted room nights get stronger and stronger.

Going into 2008, things look quite strong and I think this is reflected in the guidance which Dave will talk about. Now in terms of the specifics for the quarter, I am encouraged by a solid year-over-year CCF growth demonstrating our ability to manage cost and harness the work we're doing to assure that revenue is flowing through to the bottom line. While occupancy levels were slightly down this quarter, off from a very strong base in the third quarter of last year, we're pleased that bookings on a same-store basis were again strong up 28% over the third quarter of the prior year. Interestingly, on a same-store basis, advanced bookings year-to-date are up approximately 23% over the same period last year.

Now let me touch on how we are expanding our brand. First, I want to focus on Gaylord National. This quarter we booked nearly 70,000 room nights at Gaylord National bringing total room nights booked at this property to approximately 1.1 million. Our tremendous success with advanced bookings at the National and throughout the rest of our business underscores the popularity of Gaylord with meeting planners and corporate groups.

If any of you are passing through Washington in the next few months, you should take a look at this hotel and the surrounding development. It's extraordinary to see what's happening at National Harbor and our hotel is really taking shape. The National remains on track to open in early April 2008.

Broadly speaking, our efforts to expand Gaylord's footprint are focused on increasing distribution of the brand by casting a wider net offering our product to a greater share of the market that travels from one market to the next each year. This effort will come in the form of both organic development of new properties and through the acquisition of existing hotels that we can convert to the Gaylord brand and experience in a cost-effective way and one that provides strong returns on investment. This is something that we have spoken about in the past and remain committed to this dual path approach.

Continuing on the expansion front, throughout the third quarter, we provided updates on the status of our negotiations with the unified port of San Diego of the city of Chula Vista. We continue discussions with stakeholders in this area and will update the investment community as appropriate. Regardless of the outcome, we continue to focus on the western half of the United States for potential expansion opportunities.

During recent months, we have really beefed up our development team at the Company in order for us to handle multiple projects at one time. The expense of these endeavors is reflected in our corporate expense line and we will enhance these efforts more so in the months ahead. We know that we have a model that works and an experience that is truly spectacular and we believe that expansion done in the right way is going to drive shareholder value in significant ways. Regarding enhancement of our current properties, again we made important progress in the third quarter with the opening of three new restaurants at Opryland and the approval from the city of Grapevine to expand the Texan with the addition of more than 500 guest rooms, increased meeting space and leisure amenities including a resort pool.

Now before hand over the call to Dave, let me touch on guidance for '07 from a macro perspective -- guidance for '07 and '08 from a macro perspective. And I will say the following.

Frankly, none of those changed on the outlook we shared with you at our investor day in early April of this year despite a significant change in the credit market and some weakening in the broader economy. Since then things have gone pretty much as anticipated save for adjusting RevPAR and total RevPAR slightly down for '07 for the reasons I've discussed but increasing advanced bookings for the same year. As for 2008, given our advanced bookings and the opening of Washington we're looking at some really good growth both in our same-store and overall companywide CCF.

In summary, the third quarter was another important quarter for Gaylord keeping our strategic goals on target and making certain that our key measures continue to track well. We remain confident that we will continue to produce even stronger results in the quarters ahead and a very excited about 2008 which will be very good year for our Company. With that, I'd like to now turn the call over to David (technical difficulty) our Chief Financial Officer. David?

Thanks, Colin. Let me first give you a quick snapshot of the financial performance across our hotel network, then beginning with Gaylord Opryland I'll highlight the operating performance of each of our businesses and properties and review the key drivers from the quarter. I will then give you an update on guidance for '07 and provide full-year guidance for '08.

As Colin mentioned our third-quarter performance was highlighted by solid increases in ADR and profitability. However, due to a few groups not realizing their total agreed-upon room nights, revenue came in slightly below our expectations yet our unique business model allows us to withstand these minor inflections in group occupancy and still realize our expected profitability as can be seen by the 13% increase in consolidated cash flow this quarter.

I also think it's important that I point out that we do not believe that this past quarters business volume is an indication of a slowdown in group business. Let me explain further. Many of our leading indicators including advanced bookings and outside the room spending levels are at or near record levels. Our review of this past quarter's performance found that unlimited number of larger groups to outperform to either their or our expectations and the reasons for this underperformance have more to do with issues unique to each group than with factors influenced by the current economic environment.

While we do have some lingering concerns about our discretionary spending of our transient business in the fourth quarter, we expect group business activity to return to normal levels and our long-term same-store growth to meet the guidance we provided this past spring. Now let me move onto each property.

At Opryland, Opryland's revenue decreased 1.5% to $64.1 million in the third quarter of '07 compared to the prior year. Decreased revenue in the third quarter was largely a result of declines in group occupancy and a fall-off in transient business over the two holiday weekends which occurred in the quarter. As a result, RevPAR decreased 2.1% to $112.18. However, strength in outside the room spending driven by the popularity of our leisure and entertainment offerings at the property drove total RevPAR to an increase of 0.8% to $256.52. Lower occupancy led to a 2.6% decrease in CCF to $15 million resulting in a margin of 23.4%. That's roughly equivalent to the margin we produced in the prior year quarter.

Please note that the operating statistics for the third quarter of '07 reflect 15,131 room nights out of available inventory compared to only 8941 rooms out of service in the year ago quarter. As we've discussed in previous quarters we anticipate a total of about 48,000 room nights to be out of service in 2007 to complete our our renovation program at Opryland.

Now moving onto the Palms, the Palms posted a 2.3% revenue decline to $36.6 million in the third quarter of 2007 compared to $37.5 million in the same quarter last year. The property experienced flat occupancy in the quarter which was enhanced by a 0.8% increase in ADR. Orlando convention demand is of course not at its peak during the height and heat of the summer and performance this quarter was in line with previous third quarter trends compared to $111.86 in Q3 of '06 this quarter's RevPAR increased slightly to $112.82 and total RevPAR decreased by 2.3% to $283.19.

CCF increased to $7.9 million compared to the prior year quarter and CCF margin expanded 170 basis points to 21.5%. The Texan had quite an impressive third quarter where the attrition experienced at the Opryland and Palms were not as evident.

Revenues increased 16% to $43.5 million in the third quarter of '07. RevPAR increased 5.4% to $119.52 driven by a 5.2% increase in ADR. Total RevPAR grew 16% driven by generally strong outside the room spending and specifically solid performance at the Glass Cactus nightclub. CCF shot up 56% in the quarter to $10.7 million resulting in a 24.6% CCF margin.

And now onto the progress of the Gaylord National. In the third quarter we booked an additional 68,505 room nights with the cumulative of net definite room nights for the property at just under $1.1 million. We spent approximately $142.2 million on the property during the third quarter with a total cost to date for the property of about $630.3 million. As Colin said the National is on track to open on time in April of 2008.

Now turning to our operating attraction segment, the operating attraction segment produced revenues of $20.3 million in the quarter and that represents a 5.2% decrease compared to the prior year. This was expected as our Corporate Magic business had an extremely strong quarter in 2006 which we did not expect to repeat in the third quarter of 2007. Thus the segments consolidated cash flow decreased $300,000 compared to the prior year quarter.

Talking about guidance for the rest of 2007, increases in ADR, total RevPAR and CCF for the quarter demonstrate the opportunities for profitability and growth of our Gaylord leading us to reaffirm our 2007 advanced bookings and CCF guidance. As we discussed however the performance of several large convention groups and our continued concerns regarding transient activity in the fourth quarter will negatively affect our 2007 RevPAR and total RevPAR performance.

Our new full year hotel segment guidance is 4% to 6% growth in RevPAR and 5% to 7% growth in total RevPAR. That said, our ability to protect cash flow in the event of unexpected drops in group performance through attrition penalties and through our ability to grow outside the room spending means we will leave CCF guidance unchanged.

Hotel segment CCF guidance remains at 182 to $190 million for '07. In addition, we still expect to book between 1.35 and 1.45 million room nights on a same-store basis in '07. Our expectations for the operating attraction segment remain in the range of 11 ti $12 million and CCF and our corporate and other CCF guidance remains also unchanged at an expense of 40 to $43 million.

In turning our attention to 2008, as Colin said, we remain quite excited about the prospects for 2008 where we expect to see strong growth in revenues and profitability and the completion of Opryland's room and food and beverage renovations. We've built a lot of momentum in Gaylord hotels over the past few years and maximizing our opportunities to grow the room base of our brand is a significant initiative for '08. We have supplemented our development team and are increasing our efforts to drive unit growth. And in 2008 we expect to break ground late in the year on our two approved expansions and we are intent on accelerating the growth brand.

As for specific guidance, we expect CCF and Gaylord hotels excluding the National to be in the range of 200 to $210 million. We expect the National to produce CCF of between 50 and $60 million and we expect 13 to $14 million to be produced from the operating attraction segment. Corporate and other CCF, we expect a loss of about 46 to $49 million and same-store advanced bookings for the year should be in the range of 1.3 to 1.4 million.

Hotel segment same-store RevPAR is projected to increase 5.5 to 7.5% with total RevPAR increasing between 5 and 7%. As a reminder these growth rates are in line with the guidance we provided this past April during our analysts meeting in Washington DC. There we guided a three-year average RevPAR and total RevPAR growth rate of between 5 and 7% and an average CCF growth rate of between 9 and 12%. And our '08 guidance reaffirms our positive outlook for the next few years.

With that I'll turn the call back over to Colin.

Okay David, thank you. Rather than repeat what we have already said, let Richard -- if we could open the call up for questions and hear what our shareholders have to say. Thank you.

(OPERATOR INSTRUCTIONS) David Katz, CIBC World Markets.

A couple of questions. Firstly, the Texan that you mentioned and expansion there. Do we have timing and budget and is that -- I assume that it's kind of a done deal but do we have a timing and a budget for that expansion yet?

David, the general guidance we have given on the budget is around $300 million. We're still in design and so timing of breaking ground etcetera is not final. We anticipate breaking ground -- our hopes are we can break ground by the end of 2008. But we do have one final approval to go through before that is final and that's with the core of engineers.

Although I would say that they have given us verbal approval of how we want to do this expansion both with the convention expansion which would go into some core land and also the pool area too. But we expect to have these approvals in the next -- what David, three, five months?

Yes.

From the core end, we are in the process now of doing conceptual designs of this building which than we will put out to bid and then we will give you very hard numbers. But all we have done is we have looked at the current cost of construction that we are incurring in a market like Washington. We've adjusted it for the Texas area. And then what we've done this we've added in contingencies. That really sort of gets us to the $300 million number. But we're hopeful that we can manage that number down a bit.

If you get in the ground in the end of '08 -- and I realize that is still an assumption --so when does that come online?

We want to have it done -- not we want to have it done. We will have it done by the time of -- the Super Bowl is just been awarded to the Cowboys in Texas for their new stadium which is in I believe January of 2011. So we want to have this expansion completed by the end of the third quarter of 2010.

Q3 2010. Got it. Dave, if you could give me some little bit of help what would be a good CapEx number to think about using for you for '08 -- or a range?

The general direction would be take about half of what it was for '07 which should put you in the 250 to 270 range for next year and that may shift a little bit depending upon when we begin construction on Opryland's expansion or Texan's expansion.

Right. Last one, I know we've talked before about sort of this is smaller box strategy or growth strategy or rolling out your brand. Any updates there? Help us gauge our expectation, when we might actually see something.

David, I think it will be unlikely that we will be making any positive announcements on hotel acquisitions in the next two to three months. The reason for it is we have had -- we have been negotiating on a couple of deals that frankly haven't panned out the way we would've liked and so we are off to the next ones now. And so I think it will be another couple of months before you hear something on that.

Will Marks, GMP Securities.

Thanks, a couple of questions. One, on the spending for the National you mentioned $630 million I guess to date. Can you just confirm what the final amount you need to spend is?

We're still targeting the 870 of total. That's our current expectation and current budget.

Can you just kind of give me some idea by quarter what that the would be? I imagine that would go through first-half or even third quarter of next year?

Yes (multiple speakers)

More likely through the half.

I would expect of the 240 that's remaining to be spent you are probably going to see 100 of that in the fourth quarter of this year probably 80 to 100 in the first quarter of next year and the remainder to kind of spill over into Q2 and Q3.

There will be retentions but they won't be sizable.

My other question is you mentioned some transient weakness in the fourth quarter. Can you comment on is it business or leisure and how you are projecting that? What are you seeing right now in the market?

You know it's interesting. What we've said if you recall at the end of -- when we did our -- at the end of the second quarter when we did our -- this same event in late July, early August, we said that we were being a little cautious about the fourth quarter and the reason for it was at that time was that we were seeing this emerging fallout in the credit markets and we were sitting there saying to ourselves wow, how will this affect our business in this fourth quarter? Well now we're three months further on and what we're seeing is pretty strong bookings on our Christmas programs. We're not seeing major consumer fallout here.

So what we have done is we have basically kept the same view of the fourth quarter that we had three months ago but I'm hopeful that the consumer is going to be here. A lot of this stuff is stuff that happens a week out. It just does. I know our bus bookings for Opryland are pretty strong. I know that our advanced bookings for the shows that we have, these big Christmas shows where we book 1000 people at a time are very strong. Our advanced bookings on our ice expedition -- we have The Grinch ice expedition here in town. They are all very strong.

So I'm hopeful that are bookings pace this fourth quarter is going to be consistent with last year. I know that there have been some times when I've been trying to -- people have called me to try to book rooms at Opryland over the Christmas period and I know that there are periods of time where we can't get people in.

This is not based -- our concerns that we have expressed at the end of the second quarter were not based on facts. They were based more on intuition of how the consumer is feeling right now. You read stuff like we did yesterday about consumer sentiment which is at a two-year low. The question we have is will that show up in our short booked transient business? And the fact of the matter is at this stage we're not seeing that but you know who knows? So we're just being cautious here and that is the absolute truth.

Just remember, we are accustomed to having an enormous amount of visibility into the next few months because on our group business unless we have company changing events that affect one of our clients that are announced in the moment and can't be foreseen we have a really good sense of what that occupancy is going to look like. In the fourth quarter as we get into the transient business, a lot of that outside room spend, which we have visibility to on the group side we don't have that visibility on the transient side.

And there is a fair amount of walk-up and spontaneous purchase element of that fourth quarter outside the room revenue and that's why we've been fairly cautious. We just don't know what is going to happen as mortgages get repriced and the economy continues to trickle along.

Just to be repetitive one more time. But what we do know is how many buses we've booked this time compared to last year, how many room nights we have booked and things look pretty good. They look pretty good.

Nap Overton, Morgan Keegan.

Good morning. Could you comment on what you believe the impact on your ability to make and complete acquisitions with financing terms that you consider reasonable and favorable is from the credit market turbulence that you began your discussion with in your prepared remarks?

You know I wish I had a crystal ball because I don't even know how to begin to describe the present environment which seems to sort of change almost daily. And you compare where we are today to where we were a month ago -- it is just very choppy and very frothy. Here is the issue. We believe that any deal we do will have a very good return on investment and we know that there are folks that want to partner with us. We have banks that are telling us that they are prepared to extend our credit if we have good deals. And I think we are pretty confident that we will be able to finance any acquisition we want to do.

The good news is if we don't do another acquisition, if we don't do an acquisition or another deal with the expansions that we have and the completion of Texas, our credit ratios fall dramatically here over the next two to three years and we have extremely high growth levels in our consolidated cash flow. So whatever happens here our Company's growth is going to be very strong and we can do that on our balance sheet. And I believe that if we have compelling deals we will be able to access the credit to be able to do those deals. I mean, do you have any perspectives on that?

I would agree with you. I think number one, the credit markets seem to be improving week by week. From the dark days of late July it's like a new dawn in terms of where credit availability stands for all companies particularly for companies like ours. But we have a group of banks who know our business well. They like our assets, they like our strategy and they have been very willing to lend us capital in times as bad as October 2001. So if they are prepared to lend us money back then they are still standing behind us prepared to lend us money now.

Has your outlook or long-term financial outlook strategy and potential to monetize some of your current assets changed in light of what has occurred, transpired in the market?

No, our view on that has really always been we don't see any need to change the structure of the Company until there is some very significant use of capital that we need to fund.

I mean the other part of that -- Dave, excuse me for interrupting you -- as we have said consistently over the last three to four years that we don't believe in moving these assets off our by balance sheet until they are mature. We don't believe these assets are mature but any stretch of the imagination. We're going to expand them, we're going to grow them. And so -- when we one, have the need to the capital and two, we believe these assets are mature that will I think trigger a different structure to our balance sheet.

And then just a couple of practical questions. The rooms renovation at Opryland that's been ongoing now does that get completed in 2007? That's the first question and then secondly do you expect any meaningful disruptions from the expansions at either the Texan or the Opryland expansion?

Two very good questions. The first question -- I think we -- the 48,000, 50,000 room nights that will have a lot of action this year will just about complete that renovation. And that will be wonderful for us because we don't really talk about that in those Opryland numbers this year where we're going to produce about same level of cash flow that we did last year but substantial less rooms available.

But that's one of the reasons we're very optimistic about next year for Opryland because we don't have those rooms out of order and we've got a bunch of conventions that are coming in -- growth in room night demanded in our business. So we expect to see very good improvements in Opryland next year.

The second part of the question is that in terms of -- we have had I don't know how many meetings over the last two to three months looking at the way in which we are planning these expansions to absolutely mitigate any form of disruption. And we are hopeful that the disruption in both Texas and Opryland that if it occurs it will be in 2009 and half of 2010 that, that will be minimal. And the way this thing is being planned it's to make sure that we really do keep the existing asset pretty much intact through that process and mitigate it for the consumer. We're spending a lot of time figuring that through.

That's a very good question and something that is consuming us to make sure we don't do that. It's not in our best interest not obviously from a financial perspective but also from the customer's perspective we do not want to tick off loyal groups that have entrusted us with their conventions. So this is the big issue for us that we're working through.

Last thing. Would you be willing to quantify what those attrition fees were in the quarter?

Dave, you want to give that a stab? Dave, why don't you just give Nap -- I know he hasn't asked his question this question but I am sure a few of the analysts will subsequent. Give the guys some idea, a couple of the examples of what happened with a couple of the groups because they are very distinctly different and not economically driven and then what the fee issues were.

That's a good suggestion. Let me just address some of the attrition for the quarter. As we went back and did the analysis on attrition and kind of looked at what was driving it and we looked at the number of groups that had attrition associated with them and the magnitude of the attrition there was a slight uptick in the number of groups that had attrition. The uptick was larger at Opryland and Palms than it was anywhere else. So we dug into those two properties pretty deeply to try to understand what was driving those.

When you start to really -- just to backup one step, attrition is part of our business each and every quarter. We don't usually talk about it because usually if attrition is up in one hotel it's down another. They kind of wash each other out. Or if one group is up another group is down and they kind of wash each other out. In this quarter we had a couple of unusual kind of company specific events that -- I can describe a couple of those -- that really led us to believe that this clearly is not a systematic slowdown in overall group activity.

It is what we deal with regularly with groups when some company changes occurred and it's causing the meeting to change. In some cases those events are a new CEO comes to the company, the new CEO says we're not going to have the meetings, whatever was planned for the next six months I've got to get my ship in order. Or if it's a big sales meeting, there's a new head of sales and marketing and those kinds of things, they may change the way the group looks at the meeting.

In this particular quarter, we had a few more of those and the ones that occurred were of larger magnitude. One of the example of what happened is one of our larger groups the meeting planner who books the meeting for that group quit a couple of months before the meeting. The head of the company decided he was going to try to run the meeting on his own and market the meeting to his attendees and to his customers and just wasn't as good as the meeting planner was obviously. So pickup was soft as a result.

And another case, a the division of a company was sold. That division obviously wasn't going to have the meetings because the new buyer did not want to have the meeting. In another case there was a health-care group and the government changed their reimbursement program for government employees attending this association and this was the first year that attendees from the government weren't getting reimbursed for their stay at this particular health-care association group and so the attendance suffered as a result. Those are some of the examples of kind of what happens in the group business that may affect the performance of that group in a particular quarter.

In the third-quarter this year, we collected about 1 million 6 in attrition revenues and that is about a little over $0.5 million more than we collected in the same quarter of 2006. Obviously as Colin mentioned in his script we don't always collect the attrition in the same quarter that it occurs. It tends to be collected within two quarters of the time that the attrition occurs. So we would expect to continue to collect some attrition in Q4 and perhaps some does spill over into Q1 of next year as well.

Not wishing to get into too much detail, the reason for that is because if it is a one off meeting invariably that meeting planner will come back to us and try and negotiate that particular attrition fee. If it is a regular customer of ours they may come back and try and negotiate that attrition into their next big block of business they put with us.

So that's just the nature of this business. The good news though is that we do have this insurance policy which is a contract. Whatever individual circumstance prevails we are pretty anesthetized and that's was the reason why after that catastrophic event on 9-11, three, four months after 9-11 we have positive RevPAR growth because these folks they come and if they don't we have a contract.

Probably too much detail -- (multiple speakers)

Jeff Donnelly, Wachovia Securities.

You know I asked Dave -- if I dare follow-up on that discussion. Can you disclose for us maybe on a quarterly basis what attrition fees have been for the last few quarters and maybe what you expect going forward?

Attrition fees kind of bounce around between $850,000 and $1.2 million and that's fairly consistent over the past several quarters. Sometimes it gets higher, sometimes it gets lower. In this period it was about $1.6 million as I said. We probably won't project that. That's not part of one of the revenue items that we tend to project in a meaningful way. So, you know we tend to give you RevPAR and total RevPAR and profitability and we think that is a good way to look at the business.

And then I'm sorry if I missed this in your comments but I guess I had expected your RevPAR guidance for '08 to be higher given that you've got more room nights in service at Opryland than you had in '07 and if you had backedout Gaylord National from your CCF guidance just -- the implication seem to be that much of the upside that you're seeing in your CCF in '08 must either be only from Opryland or you're maybe being fairly cautious overall. Am I correct in that assumption? Or is there something I'm just not seeing?

That we are being fairly cautious?

That or maybe you're not seeing as much upside out of the other two assets aside from Opryland because I would have expected the Opryland to provide some added lift if you will to overall numbers.

Jeff, as we look at the three hotels, Opryland -- the RevPAR gets a little bit messy because we are adding 50,000 room nights back into the denominator of available rooms. So, if you look at revenue increase it's going to be higher than RevPAR increase for Opryland for instance. That being said if you kind of look at our 5.5 to 7.5% RevPAR increase for next year we expect Opryland to be at the top end of that and perhaps above it. We expect Texan probably to be toward the top end of it and the Palms to be toward the bottom end of it.

To last questions. Dave, have you guys completely paid off the Viacom tax and is there any remaining to be paid?

We have paid 75% of it and the remainder will be paid by the end of this year.

What was the total CapEx stand spend in the quarter? And I guess was there any capitalized interest in the quarter as well?

This quarter, third quarter?

Yes.

Total CapEx was $161 million and I have to flip to another page to get you [CapI] so give me a minute.

Sure. What was the -- if you can answer while you are flipping -- was that $161 million include the moneys for expenditures on National?

Yes and $140 million of that was National. And so [CapI] was $27 million if I have this -- making sure I don't have year to date here.

David, if you're not sure you've got the (multiple speakers) get back to Jeff separately.

We can follow-up later.

I'll get you the quarter on the follow-up.

Chris Woronka, Deutsche Bank.

Just wanted to follow-up one more time on the third-quarter group issue. Is it fair to say that those were lower quality groups because that would to me seem to explain why total RevPAR was substantially higher than RevPAR? And second part of the question is what was the variance between kind of what you budgeted for those guys and then how much you recovered in the cancellation fees? Did you get 80% of what you thought you were going to get or something like that? Any detail would be great.

On the first question I hope the group meeting planners are not listening into this call with my response. But what we tend to find is that the third quarter is the lowest price period of the year for group business. It is not what we call A and B and C room nights. And we base our room nights -- we base the quality of these room nights on the sort of the aggregated demand that we see. So we know middle of January, February, March all very very strong periods of time.

So what you tend to find are the more cost-conscious groups going into this third quarter. We're putting more groups in because of the amount of demand we are growing. But your assumption is basically correct. In terms of the second part of your question Dave, do you want to deal with that?

Let me just rather than kind of saying what we budget versus what we collect let me just try to walk you through a brief example of kind of how the attrition works and what the collection was versus what we would normally expect to make. If you look a Q3 of '06 we reduced guidance by a point for the full year, right? So one could extrapolate that we might have missed third quarter by two or three percentage points of growth on the revenue line to have a full year effect of one point.

So just taking that is an example that means kind of the revenue miss from our perspective Q3 of '06 was about $5 million, take it 3 or 4%, times times $140 million. We tend to make about a 35% margin on that which gets you to around $2 million dollars for profitability and we collect at about $1.6 million of attrition fees in the quarter. Does that make sense, Chris?

That's very helpful. Just kind of a side question on that. In terms of how you reimburse in those contracts is it more -- did you get more of the room revenue -- do you get closer to 100% of the room revenue that you thought or closer to the 100% of the out of room spend? My sense is you probably lose a little bit more of the out of room spend. Is that right?

You say your thought is that we probably lose a little bit more of the out of spend?

Yes. Overall if you have a group and let's say you expected to make this much in the room and this much out of the room are the guarantees -- is the minimum guarantee they have to pay you closer to what you thought on the room or is it closer to what you had planned on the out of room?

We generally are better protected on the room side than the out of room side if that answers your question.

Yes, thanks.

To Jeff Donnelly's question if he's still listening [CapI] for the quarter was about $12 (technical difficulty) million.

William Truelove, UBS.

Just one other question about the number of people who come versus expected. What is the typical percentage in the contract of a discount from the expected before you would get the make-up fee? And what has been the trend in that percentage? Because if meeting planners were getting more nervous wouldn't they be asking for a lower or bigger and bigger discount to the expected amount before they start having to pay the fee? What is the trend in that figure?

We tend to cut from the -- if the meeting planner says they're going to bring 1000 people we tend to sign the contract for 900. And that number doesn't change a whole lot based on where the economy is going or any of that. That's kind of our standard policy.

Amit Kapoor, Gabelli & Co.

Can you comment on the Chula Vista situation and what is the posture of I guess the union or other players there?

Good morning to you. What we're trying to do here, what we're trying to be not -- negotiate -- we're trying hard to negotiate our deal with any negotiations we're having with the trade unions. We're trying hard not to negotiate this publicly because all we do is sort of inflame the fire if we say that we're a little bit [touchy] about the union movement. We're trying to be dignified about this.

I would say to you that things certainly are not worse than the public discussions that occurred about three months ago. There have been several back channel discussions going on here and at the end of the day this project -- I'm an optimist on this project. It's a wonderful project for Southern California and the community. The broad community is 100% behind this and we have to deal with a small faction which are the organized electrical and some of the other small unions in Southern Cal.

And we will continue to try and progress this. And at the end of the day if were not able to do it we have to make an economic decision about can we do this in a way that will generate real high returns for our shareholders and do it where we're not going to be faced with five years of disruption. But I'm an optimist that we will find a way through here. But I think it will be inappropriate for us to give you specifics of the discussions that we're having.

(OPERATOR INSTRUCTIONS)

Rich, I tell you what. It's now almost top of the hour. If there is one more question we will take it and if there isn't I would like to thank everybody for joining us this morning.

Gary Lehnhoff, Ironworks Capital.

Good morning, thanks. Could you just review for make the Opryland $400 million expansion? Did you say that you expect that to occur during in the second half of '09 into 2010?

Practically the way this will work is this. We have basically all the approvals from metro government and state government that we require at the stage. Carter I think I'm right in that. So what we're doing is the detailed design, how this thing -- where we're going to lay out the new convention area, parking, new hotel.

We've internally candidly Gary we've probably looked at 10 different iterations. We're nailing it down to a couple that we really do like. We're working on the disruption elements here, how each of these affect the current existing operation.

I am hopeful that we will break ground sometime towards the latter half of next year. Frankly the reason it's going to take us that long is it's just going to take that much time to do all the detailed design.

We're not going to design this thing and be building it at the same time. That's a recipe for disaster. We want to design it, we want to bid it, we want to get the lowest possible prices on this and we want to be in the ground and right at towards the end of '08. Then I suspect it will take as a good year and 3/4 to build this and we're hopeful that by the end of sometime towards the end of 2010, early 2011 for Opryland we will have this facility up and running.

Just refresh my memory. That's how many rooms in the expansion you're looking at now?

It's going to be about 400 net. As we think about connecting the new hotel to the existing hotels we may have to take a half-dozen rooms out. It will be about a 400 room expansion net and approximately 400,000 additional feet of meeting space which is about 1 million feet of meeting space and to put that in perspective that's about the same size as the Boston Convention Center.

And so, Dave your CapEx number for '08 of 250 to 270 did not really include any meaningful amount for Opryland at this point?

There's not a meaningful amount; that's correct.

It will have a few million (multiple speakers) design work but the reel will be really rocking and rolling in '09.

Thank you -- well, look that's -- Rich, thank you. Thanks everyone for joining us this morning and if you have any further questions please feel free to contact either David or myself or Mark Fioravanti. On that note, thank you.

Thank you. This concludes today's Gaylord Entertainment third-quarter 2007 earnings conference call. You may now disconnect.