Ryman Hospitality Properties Inc (RHP) 2007 Q4 法說會逐字稿

Welcome to the Gaylord Entertainment Company's fourth quarter 2007 earnings conference call. Hosting the call today from Gaylord Entertainment are Mr. Colin Reed, Chairman and Chief Executive Officer; 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 800-642-1687 and the PIN number is 31652513. 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'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 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 be forward-looking statements. Without limiting the forgoing, 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 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'd also like to remind you that in our call today we will discuss certain non-GAAP financial measures. 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. Well, 2007 was quite a year for the economy and the Hospitality sector. And it's amazing to me how much investor's sentiment changed as the year unfolded and the financial dysfunction that our country experienced took hold and spread like wildfire.

In this same time period, the tone of questions from investors and analysts shifted from growth to survival, and just like each previous economic downturn that I've witnessed over the last 20 years, hotel multiples cratered, but this time around at a much more rapid rate than I remember seeing in previous cycles. So how do I think about this? And how would I describe where we are today as a company? And what does the next year or so have in store for us?

Now before I get to this, let me be a pain and remind each of you about our differentiated strategy, and why this is so important in times like this and why this positions us well for the future. As most of you know, every year we run our system between 75 and 80 occupancy points. About 80% of that occupancy is group business. The vast majority of this group business is booked literally years in advance of the customer's arrival. And as a reminder, we have contracts for each group which guarantees both room and food and beverage minimums. Consequently, as we go into each fiscal year, by and large, our year's occupancy has already pretty much been determined.

Because of the incredible size of our convention centers, we book so much more group business than our competitors. Thus, as we enter any given year, we have disproportionately less rooms to fill than typical large box chain hotels that tend to compete with us. So what does all this mean? It's simply that the success of our financial performance in 2008 and 2009 was pretty much determined on how well we booked business for the years 2004, '05, '06 and '07. And it's for this reason we give you, on a quarterly basis, how many room nights we're booking for future years.

Now, as a result of our brand's performance and superior image with the meeting planning community, our forward bookings have been really strong over the last few years, particularly in 2007. So, as we enter 2008, we have a high degree of confidence that this will be a good year for our Company.

Confidence in our brand does not just stem from the basket of bookings we have in our inventory; to the contrary. All the basket of bookings measures is where we stand today. To me, the more important metrics are our STAR satisfaction. Remember, we call our employees stars and our customer satisfaction levels. STAR and customer satisfaction are the leading indicator of customer retention. And it's because of these metrics, I have enormous confidence for the prospects of our brand over the next few years. Simply put, as we enter this year, we have industry-leading STAR SAT levels, remarkably low turnover, and record high levels of customer satisfaction.

Our reservoir of tentative and prospect bookings, i.e., customers with whom we are in various stages of negotiation, are extremely good. Furthermore, the work we have completed this last year on areas such as procurement and labor management will ensure our margin management will be first rate. Economic conditions aside, our fundamentals are strong. And partially for this reason, we announced this morning a stock buyback for up to $80 million.

So now let me talk about some of the material elements that influence our business. First, let me touch on group attrition. To remind you, attrition is when a group turns up with fewer delegates than they booked. When this happens -- and it happens from time to time for multiple reasons -- we book the shortfall, i.e., the actual room nights delivered versus the guaranteed block, into other income. Thus, this revenue does not influence room revenue nor RevPAR. Now, we told you at the end of the third quarter we had encountered more group attrition in the quarter than we normally see. And for this reason, RevPAR was a little soft. However, profitability was fine.

This level of detail caused multiple questions about the trends pertaining to attrition. And what we told you was that the modest spike in attrition was more about the specific nature of the groups booked in the third quarter than some underlying broad economic trend. Well, you should know group attrition in the fourth quarter came back to normal levels. And thus, going forward, we will only provide you with attrition trending data when we believe the numbers are outside of typical ranges.

Now, let me switch gears and talk about the Gaylord National. As you know, we are really looking forward to the opening late next month of what will be the very best convention hotel on the East Coast. Just like when Steve Wynn's Mirage opened in Las Vegas and fundamentally changed the casino experience and landscape in that market, our hotel, once open, will set a new benchmark in the large convention resort experience in what is one of the most important markets in the country.

We've been hard at work on our pre-opening processes. This last week we interviewed and/or screened over 15,000 people who want to work at this awesome resort. We made offers to over 1,300 people, and during the next month, intensive training and workshops will take place to indoctrinate these folks into our people-centric culture.

As you will have seen from the year-end release, meeting planners are voting in droves. In fact, in the fourth quarter, we booked almost 200,000 room nights for this hotel, bringing the year's production to over 400,000 room nights. And as we near this opening, we have a whopping 1.3 million room nights on the books. This is going to be quite some place and one that will create a lot of value.

Now, as we reported a couple of weeks ago, we were recently informed by the general contractor for this project that due to, amongst other things, escalation in man hours -- the escalation in man hours costs, the cost to complete this project could escalate by between $50 million and $80 million; higher than our previously reported budget. Now, you can imagine our surprise at the magnitude of this number so late in the game. And we're taking this apart right now to determine its accuracy and what we do about it. However, our primary focus has to be to get this hotel open and that's exactly what we're doing. We'll keep you informed on the costs and particularly, our strategy to deal with this.

Now let me return to some of our other growth initiatives. As regards Chula Vista, we continue to make progress in our discussions with the Port Authority and the City, and are moving towards a decent agreement that will allow us to start the complex permitting process. At Gaylord Opryland, we're in the layout and design phase for our announced rooms and convention center expansion. And things are going according to plan. At the Gaylord Texan, we're also making progress and are nearly complete on the final project scope and layout. We have made the necessary applications to the Corp. of Engineers, which is required at this location, and we are confident that we will be able to build an openness expansion by late 2010, in time for the January 2011 Super Bowl, which will be held a few miles from the hotel. And I hope it's as exciting as last week's Super Bowl.

Now let me talk about La Cantera, the hotel in San Antonio that we announced the acquisition of in early November of last year. Frankly, as the brand focused on the large meetings business, we love the San Antonio market. Why? Because meeting planners want to go there. About a year ago, we had identified La Cantera as an asset that had enormous potential, and had engaged in discussions with the owners at that time. We've concluded by the beginning of the fourth quarter of last year that this hotel had tremendous characteristics, including its proximity to the airport, its infrastructure, the availability to grow this asset without huge disruption to the existing facility, and that the city of San Antonio is business-friendly and tourist-focused. And furthermore, located in one of the top 10 convention markets in this country.

So we negotiated a deal that we felt to be reasonable and one that would give us decent returns. We announced the transaction in late November. Now, most of us who have invested in this industry know what then transpired in the capital and equity markets, with the result that hospitality stocks went into cardiac arrest. From the middle of November to the end of January, our market cap declined by over $800 million, as multiples for our industry contracted dramatically.

Now, as a side note, what's interesting to me is that similar multiple contractions were evident in the months preceding the '91 recession and the November 2001 recession. But it's also interesting how hospitality's stocks so dramatically disconnect from the Dow Jones industrial index and the S&P 500 index at the time of a perceived recession.

As a management team, we have always tried very hard to do what's best for our shareholders. And that led us to preannounce on January 22 of this year that we had decided to gain an extension in the closing of La Cantera to April 30 in order for us to find a significant partner. This decision allowed us to utilize this freed up capital to, among other things, buy back up to $80 million worth of stock, which we announced this morning. Frankly, we can't think of any better investment that will yield more attractive returns than our equity.

Now, we're trading well below ten-year average multiple levels that our industry normally attracts, and well below our asset replacement cost that we believe -- and we believe this decision to buy this stock back to be a very prudent move. Furthermore, our confidence in our business strategy and the fundamentals we see in our hospitality brand lead us to the conclusion that this is a wise investment.

As regards La Cantera, two months of capital and equity market turmoil has not changed our perception of this high-quality asset. What we know today is that meeting planners are very desirous of booking La Cantera as soon as a deal has been completed. As the next few months play out, we will obviously update you as we make progress towards finding a major capital partner. I'm sure there will be some questions at the end here on that process.

Now, last week, Dave and I were visiting several investors in New York City. And one of them asked me, how do I feel about our Company's position going into 2008 versus the same time last year, when our stock was trading in the $50 range? My answer was this -- all of the internal fundamentals of our Company are stronger; STAR satisfaction, customer satisfaction, and room nights booked. We have better cost control systems in place; no ResortQuest; BassPro is monetized; we have a new credit agreement with longer maturities and lower rates; and we negotiated and announced expansion plans with large incentives for both Texas and Opryland.

We have completed a three year major capital renovation program at Gaylord Opryland that will allow us to elevate the rate structure at this hotel. And of course, Washington, which has record forward bookings, opens in a few weeks. And last but not least, our overall operating plan for 2008 is stronger than our results for this last year, and this is reflected in our guidance. 2008 will be a decent year for us, save some further major deterioration in our economy.

Now let me turn the call over to Dave, who will go through the details of the financials and also touch on the guidance section. David?

Thanks, Colin. As Colin said, 2007 was a busy and exciting year for Gaylord. And the successes that we've had to date continue to set a good foundation for 2008 and beyond. The work that we are doing to build and strengthen our brand is in direct response to the stronger demand we continue to see across our network of hotels. Our advance bookings, the strength of our group business, and our ability to command increasingly higher rates certainly represent our customer's positive response to our unique hospitality offerings.

Given the increasing demand we are experiencing for our business, we will continue to focus on expanding our network, offering additional out-of-room services and driving even higher levels of customer satisfaction, all with the design of maximizing profitability for you, our shareholders.

Now, before I provide an overview of the financial performance of each of our hotels, I want to address what I expect many of you participating on the call today are eager to better understand. That is, how a potential economic slowdown, particularly a slowdown in consumer spending, might affect our business, both in the near and long-term.

Let me describe a few attributes of our business that should frame this discussion and provide some insight into how we are thinking about our expected performance in 2008.

First, the fundamentals of our business remain strong, as Colin said. We entered 2008 with 70% of our room revenues for the year already contracted, along with additional minimum guaranteed catering spends. Let me repeat that -- we entered 2008 with 70% of our room revenues already on the books. We continue to see average daily rates increase as we book additional room nights. Improved demand for our properties continues to exceed our available inventory over many patterns, and meeting planners are providing only limited anecdotal comments about reductions in budgets or spending based on their economic outlook. If you add to this the Gaylord National is expected to open to a 70% plus occupancy and solid flow-through in its first month of operation, and it becomes clear that our underlying business remains strong and provides a solid basis for our outlook into 2008.

Now, second, our leading performance indicators do not suggest an imminent slowdown based on a changing consumer behavior. As Colin mentioned earlier, we saw record advance bookings this past year, suggesting that meeting planners continue to make long-term commitments despite any economic concerns they may have. While smaller, short-term bookings could be at risk of not materializing during a recessionary period, the fourth quarter of last year showed little sign of this, with us booking 133,000 room nights in the fourth quarter for 2008 arrival versus the prior year's 107,000 room nights booked in the fourth quarter of '06 before 2007 arrival. That's about a 20% increase in room nights booked in the fourth quarter of the prior year for stays in the next year.

Our pipeline of tentative and perspective bookings remains at very high levels, providing us the ability to fill many booking gaps that exist. And additionally, while we saw an increase in attrition during the third quarter of '07, attrition levels in the fourth quarter stabilized in line with historic averages. And I should also comment that January cancellations and attrition levels looked very similar to the levels that we saw in 2007, in January of 2007.

Lastly, discretionary spending levels for both meeting planners and guests at our properties remains strong, with increased sales volume and pricing being realized across the brand. And again, I should comment, you've seen the fourth quarter results, but I'll also comment that January revenue per available room -- outside the room spend, I should say -- grew at an over 5% pace versus the 2007 period.

The third point I want to make is that the broader economic environment for the hospitality industry remains favorable for continued growth. Hospitality demand continues to be strong across the industry with limited new supply opening in the next couple of years, including the markets in which our properties are located.

Now, while a consumer-driven recession could depress leisure transient occupancy and spending, we've yet to identify a definitive trend that would suggest that non-group business will underperform our expectations. Absent a geopolitical event, our exposure for the balance of this year is limited to two things -- the potential disruption because by a substantial and extended reduction in consumer demand, and a drop in -- a substantial drop in the year for the year net bookings. In other words, from higher cancellation and attrition rates and lower short-term group demand.

While we've seen limited impact from such a change in our performance in the fourth quarter, recall that earlier in my comments, I noted that short-term demand as measured by room demand for the coming year booked in the fourth quarter was up almost 20% over the same period in 2006. And Colin also mentioned that attrition had returned to normal levels.

So while we haven't seen a significant impact in the short-term in our fundamentals, our good management and judgment requires that we do take a prudent approach and try to reset expectations to account for a slowdown, which many analysts are expecting. And as such, we've adjusted our guidance for the full year, which I will review with you after describing the 2007 results.

So now, on to the results. Our hotel business continued to perform in the fourth quarter as expected, with fourth quarter CCF up 16% for our hotel business and more than 11% for the Company. For the year, CCF was up 7% in our hotel business and up 5% on a consolidated business. RevPAR and total RevPAR grew 2.9% and 4.9% for the quarter, and 3.5% and 5.1% for the year, respectively.

Opryland's successful new food and beverage outlets and improved ICE attraction, along with higher ADR, drove the property's revenues to increase 4.4% to $87.2 million in the fourth quarter compared to the prior year, and 1.7% for the full year 2007. RevPAR increased just under 1% and 3% for the quarter and full year, respectively. Total RevPAR growth of 5.7% in the fourth quarter and 4.6% for the full year was driven by strong outside-the-room spending and a 3.5% increase in ADR. An 18.2% increase in CCF during the fourth quarter led to a 310 basis point increase in CCF margin at the property, largely a result of continued focus on cost management at the property. For the full year, CCF increased 1.6% to $71.9 million, but remember that the full year results include a $2.9 million charge that the property took to terminate a lease. We don't expect that to reoccur in 2008.

Please note that the operating statistics for the fourth quarter of 2007 reflect 12,712 room nights out of available inventory compared to 9,610 in the year-ago quarter. And for the full year, we had 48,752 room nights out of service because of our room renovation program at Opryland.

At the Palms, we had a good performance, with revenue up to $46.5 million compared to $43.3 million in the prior year quarter; an increase of 7.5%. For the year, revenue increased 2.9% to $181.8 million from $176.6 million in '06. Occupancy growth in the quarter of nearly 7 points offset a slight decrease in ADR and led to an 8.5% increase in RevPAR to $129.35. The Palms did a terrific job in adjusting its strategy over the last couple of years to grow group occupancy in seasonally weak periods. You see the benefit of that in this quarter. For the full year, RevPAR increased 2.8%, and total RevPAR increased by 7.5% to $359.45 for the fourth quarter, driven by increased traffic to our dining and entertainment offerings. Fourth quarter CCF increased to $11.8 million and the margin at the Palms expanded 390 basis points to 25.4%; really a terrific performance by the Palms team in the fourth quarter. For the full year, CCF increased 5.9% to $52.8 million with a CCF margin increase of 80 basis points to 29%.

The fourth quarter of the Texan was a solid performance, posting $52.2 million in revenue compared to $51.3 million in the fourth quarter of 2006. RevPAR growth of 2.4% for the quarter and 4.9% for the full year was largely a result of a 3.1% and 4.2% increase in ADR for the quarter and the full year, respectively. Total RevPAR grew 1.7% in the quarter and 7.9% for the full year, largely a result of the continued success of our outside-the-room offerings at the Texan. CCF saw another quarter of growth with a 7.7% increase and a 17.3% increase for the full year, resulting in a 230 basis point jump in CCF margin compared to 2006.

Now to some detail on the Gaylord National, our soon-to-be-completed convention hotel on the banks of the Potomac. As we look to open in the coming months, Gaylord National's occupancy is projected to be between 72% and 75% for 2008. We expect CCF of between $50 million and $60 million. In the fourth quarter, the property booked nearly 200,000 room nights of additional room nights, which brought the cumulative number of net definite room nights for the property to approximately 1.3 million, bolstering our confidence that this property will perform well out of the gate. We spent an additional $91.4 million on the property during the fourth quarter for a cost to date total of about $721.7 million. And we remain on track to open in time for the arrival of our first guests on March 28.

Turning our attention to other growth matters, as Colin mentioned earlier, we are in discussions at La Cantera with a variety of capital partners and will update the market as we progress in those discussions.

And finally, our development team continues to have dialogue in other markets about expanding the Gaylord Hotels brand as the enormous economic impact that our properties creates continues to be attractive in a variety of locations. We will update you, our shareholders, as those discussions warrant.

Moving on to the Opryland attractions business, revenue in that business increased 11.5% to $20.7 million, and 1.6% to $77.8 million for the fourth quarter and full year, respectively, compared to 2006. CCF decreased 14.4% to the prior year quarter and increased 14.1% to $12.4 million for the full year 2007.

We are excited about our prospects for the Company for 2008. And for the first time, we will have a fully renovated Opryland hotel and a newly constructed and open Gaylord National. The full year hotel segment guidance we supplied on our last earnings call was 5.5% to 7.5% growth in RevPAR, and 5% to 7% growth in total RevPAR.

We're not seeing any changes in our operating fundamentals that would lead us to need to reduce guidance, as we described earlier in this call. However, with the drum beat of a recession in the distance, we think it's prudent to reduce our full year guidance to 4.05% to 7% RevPAR growth, and to 4% to 6% total RevPAR growth. We still anticipate booking 1.3 million to 1.4 million net room nights on a same-store basis in 2008. And we are affirming that Gaylord National CCF is expected to come in between $50 million and $60 million in 2008.

Excluding the national, hospitality CCF guidance is now $197 million to $207 million for '08, and the Opryland attraction CCF is projected to be in the range of $13 million to $14 million. Finally, Corporate and Other CCF guidance is expected to be a loss of $49 million to $46 million.

And with that, I'll turn the call back over to Colin.

Thanks, Dave. Rather than repeat what we've been saying here for about the last 30 minutes, Nelson, why don't we just open up the call for questions, please.

(OPERATOR INSTRUCTIONS). David Katz, Oppenheimer.

I wanted to sort of address the guidance issue just a little bit. And if we could talk about your degree of confidence -- not that we profess to know what the depth of the recession will be, but what is your degree of confidence that we won't have to come back and perhaps trim the guidance some more? How do we -- help us pencil out particularly that other RevPAR aspect of your business that, I think Dave mentioned, is potentially an exposure. How deep a recession have you factored into this new guidance that you have?

David, good morning. This is Colin. Dave Kloeppel can chime in on this. What we have done is, we've looked back at what happened to the group business in periods like 2002; the year right after 9/11, when people -- an event unprecedented in the history of this country, okay? And we looked at the group behavior in that business. And frankly, to remind you and everyone else on the phone, in 2002, our Opryland hotel had positive RevPAR growth of 4% over the previous year; whereas the industry was off 2%, 3% right across the board.

So we've looked to the group behavior historically to the last cataclysmic event and we're pretty confident that this group -- the groups are going to turn up. And obviously, as we pointed out -- and we point this every quarter, I know it's a pain in the neck -- but we have contracts for almost 60 points of occupancy we have on the books this year. So that's the first thing.

The second thing is we look at the current trends around transient. We look at the current trends around leisure. We look at what happened in 2002 to the Opry hotel -- Opryland hotel, and that's how we build our model.

And look, there's one other thing that's going on here, that we keep talking about recession and we keep talking about transient business could fall off a cliff. But unlike 2002, the U.S. dollar wasn't trading at a low point against every single European currency. And the reason why I think the big Hospitality companies that happened to be positioned in gateway cities like New York are doing well is because tourism is flooding into this country. And we happen to have a hotel in Orlando; we're opening a hotel in the nation's capital in Washington, and that gives us some degree of comfort.

If we thought for a moment that there was risk in our guidance, real risk in our guidance, we would have trended further. But what we have been pointing out over the last five years, six years, as we've been painfully going through this quarter by quarter, conference call with all the analysts and the investors, is that our business model is a little different to the rest of the industry in the sense that we have so much of our business contracted for. And that's what gives us confidence.

David, if you had anything to add to that?

Yes, I would add to that, David, we obviously knew that 2008 was going to be a significant point of discussion on the conference call and kind of how we feel about 2008. And I would echo Colin's comments that we've done an enormous deep dive of what we have seen historically in terms of cancellations and attrition; what we have seen historically in terms of additional group bookings. And for one of our hotels, we have data that goes back a significant period of time, and for the other two hotels, a shorter period of time. But it takes us through some pretty deep recessions. And I think we feel very good from a group perspective where we have kind of come out on guidance for 2008.

Remember, as Colin said, we come into the year with nearly 60 points of occupancy already on our books. If you look at cancellation experience that we've had over the years, there's not a huge amount of variability between our 2002 and our 2006. And if you look at attrition levels, there's not, again, a huge amount of variability between 2002 and 2006. So, we feel comfortable, very comfortable on the Group side of the business.

And on top of that, as we come into this year, we know we have some more favorable characteristics at our existing hotels around availability of attractive patterns that groups would like to book into. Normally, when we come into a year and we're thinking we're going to run in the high 70s of occupancy, most of the stuff we're trying to fill in is holiday periods or lower demand periods.

This year, because of the way our booking patterns work and because of the way our yield system works, we have focused on holding back better patterns. So, as we've come into '08, we're going to benefit from that because we have some really good high demand periods remaining to be booked this year. So we feel very good about the group business.

On the transient side, that's the piece we don't have visibility to, obviously, just like anybody else. But we have made some positive changes in the past two, three, four months in staffing up our transient sales force and sales process, and by putting new programs in place to help drive that transient demand. So, we feel pretty comfortable with the 4.5% to 7% RevPAR growth.

The other, I think, material thing that Colin, I think, referenced but I'll repeat is, remember, we also have a measure of protection with our group business that a lot of other folks don't. With 80% of our business coming from group business and it's in contract form, if we do see significant attrition, we do have a measure of protection on the downside from a profitability perspective. So, I think we're confident about the RevPAR. I'd say we're very confident about the CCF.

So, just to make sure we're characterizing this right, the guidance that we have today is really using a similar assumption set to post 9/11 period. And your degree of confidence in what you have here is very high, right? And it'd be fair to call it a worst-case scenario?

No, because you have to tell us what on earth happens to this economy over the next 12 months. It's not a worst-case scenario, because we have no -- I mean, we really don't understand, frankly, what is going to happen to this economy. I mean, you can't even get an economist to agree on this, David.

What we have done is we looked to the bookings that we had on the books going into 2002, which were, frankly, nowhere near as good as the bookings that we have on the books today. And we looked at the group behavior during that period of time. And that's one form of screening.

The other form of screening that we do is we look at all of our tentatives and prospects; the contracts that we've got out. How much of that is short term? We look at, as David said, we look at the patterns of availability. We've been spending, over the last 12 months, we've spent so much time focusing on what we, internally, we call need day. These are these periods of time which historically have always had much lower group occupancy to them. And you know, we've had some very strong success, particularly in the short-term.

So, I'm not going to use words like this is a worst-case scenario. It is a scenario based upon how we perceive the economy right now and how we perceive the strength of our business. But back in October last year, nobody could perceive or -- should I say, the middle of last year -- nobody could have perceived what happened to the credit markets in this country. Nobody could have perceived that this subprime thing was going to spread virally through construction lending and other parts of the banking system. So, we have no sense of what -- we have opinions, but we don't know what's going to happen here. But we believe our business is in very good shape right now to weather what comes at us. And our systems for managing costs are very, very good.

Right. One more quick one and then I promise we'll give someone else a chance. With respect to the share repurchase that is out there now, how did you think about deciding to do that versus, let's say, leaving your debt levels where they are, even trying to focusing on reducing them? Just from the context that there appears to be a fair amount of concern generally in our sector about companies' level of debt at this stage.

Yes, well, again, I -- obviously, a very good question. But, again, this is the way, in our simplistic minds, we think about this. We're going to -- we have a good sense of what our cash flow is going to be this year and a good sense of what our cash flows are going to be next year. And we don't need to go back and articulate the answer to your last question about the level of confidence we have in the growth of our cash flows, both this year and next year.

And then when we step back and we look at the multiples that have been afforded to the hospitality sector over the last 18 years since the last recession, and we look at the behavior of the investment community as there is this perception of recession taking place, and multiples getting sized down into the 8 times forward cash flow -- 8.5, 9 times forward cash flow -- we think that buying back stock that is trading at, frankly, historically low multiples of what we perceive our cash flows to be, to be a very good, prudent thing. And so our levels of debt are very manageable. Our coverage ratios are very manageable and we think this is a good thing to do.

And let's not forget, David, that a nearly $1 billion investment that we've been making for the past four years comes online this year. And that's something that gives us a significant opportunity to deploy some of that cash that that's going to generate and return that back to shareholders through a share repurchase, and also helps us delever at the same time.

So, if you look at kind of where we are from an interest coverage perspective, we are in a very comfortable position by the end of 2008 and we get more comfortable by the end up 2009, clearly. And we have a lot of confidence in what the business is going to do in 2008 and, frankly, in 2009. So we think it's the right thing to do.

And the other thing is, David -- Kloeppel and also David Katz -- is that the way these expansions, which is really the next two blocks of capital that we need to spend work, will be that through most of this year, we will be in the detail design process. And therefore, we won't be spending large amounts of capital on these two expansions. God forbid if the world goes crazy here over the next 12 months, we will just give consideration to the timing of those expansions. But we've got a lot of flexibility in our capital structure here. We don't have any debt coming due for, what, three years, David?

2010.

Yes.

Thanks very much. Appreciate it.

Bill Crow, Raymond James.

Good morning, guys. Just a couple of questions; three or four questions, actually, surrounding the La Cantera resort property.

First of all, could you kind of talk about the interest of joint venture, potential capital partners in the project as you've gone out and had discussions? How many people are interested? What is the interest level? That sort of thing.

You know, really what we don't want to do is sort of create the perception, Bill, of sort of a public auction here. So, I mean, put it like this -- we're enthusiastic about the number of people that have raised their hand, that have come to us unsolicited. And also we're enthusiastic about the quality of that basket.

And so I think we have a bunch of confidentialities out right now. And we are actively working on the most appropriate potential partner. And as we've said, the way our agreements work, if at the end of the day, there isn't an acceptable deal to us, we have the ability to walk from this location with a total walk-away deposit of $10 million plus the costs we've spent to date, which are relatively minor.

It sounds like just acquiring the asset on balance sheet in its entirety is no longer really a viable option, is that fair?

Yes, I think that would be a fair comment.

Okay. And then has there been any interest expressed either by yourselves or by the potential partners as to including an existing property with the San Antonio asset?

The answer to that question is, we haven't tried to complicate the San Antonio process with that notion. That notion is a notion that we obviously find attractive anyway. And I don't think the San Antonio debate and the issue that you inferred are obviously exclusive.

Okay. And then --

In other words, we don't do one without the other.

Right.

But I don't think we're going to be complicating putting them together.

Right, right. Okay. It sounded like maybe you're slightly more optimistic towards Chula Vista and that getting started? Does that have any role in the decision to seek a capital partner in San Antonio? Are they related at all?

No, no, don't read into that. Look, we are making decent progress with both the Port Authority, but we never anticipated not to. I mean, these are decent people that have shared the same goals and aspirations that we have as do the city of Chula Vista. The wrinkle here has been with organized labor and we continue to communicate. And we'll see where that leads us. But we have very clear views as to how we should ultimately do Chula Vista. And we don't believe it should be a closed shop process here. So, we're working through the process, but the San Antonio decision has no bearing whatsoever.

Okay. And then one final question. The reaction by the Street to the San Antonio announcement in part, I guess, gave you an opportunity to repurchase some stock. Does that sway at all your view of growth through acquisition in the future? Or is that just kind of an isolated event and maybe a big bite given the economy and the balance sheet?

No, we absolutely think that the La Cantera deal is a very good deal. And if we were operating a year ago with unlimited credit and people trying to throw money at quality hotel assets, it would have been -- we would have done the deal. But what happened here was frankly unprecedented. With the meltdown in the credit markets and the fact that our stock went from trading at the mid to high 40s to mid-20s, you know, just -- we said, this is crazy. We have to preserve capital and use some of that to buy our stock back. This is an opportunity; a moment in time that we can't let pass.

Good decision and good call. Thanks, guys.

[Kevin Milloto], Bear, Stearns.

Hey, guys, hoping you could provide some commentary, some relative commentary, by property in terms of RevPAR guidance for '08? Where you see the different hotels coming in versus your total hotel RevPAR of 4.5% to 7%?

Dave?

Sure. For '08, Opryland should be toward the higher end of the range on both RevPAR and total RevPAR. Palms should be mid part of the range -- mid to high part of the range. And Texan should be kind of middle of the range.

Okay, appreciate it, guys. Thank you.

Will Marks, JMP Securities.

Thanks. Good morning, Colin. Good morning, Dave. I had a few quick questions, hopefully. On San Diego, at this point, if you were to move forward, approximate timing of opening?

I hate to do this to you, Will. You tell me how long the California Coastal Commission is going to take and I'll give you some good sense. And then also whether we're on side with the unions or off side with them. And if we're offside with them, there's a high probability we're going to hear it through the legal process. So, honestly, I -- it's just right now it's one step at a time, one foot in front of the other. And as we go through each step, we'll be able to articulate as to what should take place with the next step. I'm sorry to do that do you.

That's fine. I'll just pencil in 2020.

I think that if we haven't been able to -- for what we need by the end of '09, beginning of -- yes, the end of '09, we will be -- you'll be hearing about other deals, I'm sure, before then, anyway.

Another question. On the revised guidance, can you give any indication if that has to do -- if 80% of your business is group, does the revised guidance assume some cancellations and lower spending? Or is it all on the transient side?

Well, I mean, when we kind of bracketed the range of 4.5% to 7%, we clearly took into consideration what could happen to group activity and what has happened to group activity in prior periods -- or prior cycles where we have been in the same part of the cycle. So I would say the 4.5% to 7% assumes on the low end of the range that we experience negative effects of the recession on group activity as well as on transient activity.

Okay. And then on the group, in the past, have you seen spending slow considerably? And what should we look at in a slower economy? I guess I can understand the RevPAR but maybe not the total RevPAR.

It is somewhat challenging to compare the outside-the-room piece in '02 to what it is today. Because we are a lot better today than we were in '02. We have a much better internal sales function to sell the outside-the-room activities that we sell. We deliver such a better product than we did in '02. And we have so much better customer satisfaction than we did in '02.

All that being said, the '02 experience was -- we saw a fairly consistent level of outside-the-room spend in '02 that we had seen in '01. So 2000 was the peak, I would say, just from memory, in Opryland in terms of outside-the-room spending. And it decelerated somewhat into 2001, but 2002 showed those same kind of levels.

Our view for our business today is that, as I said, we are a lot better at working with groups today than we were in the past and creating appropriate programs for them than we were in the past. Again, on the bottom end of the range, we are assuming that group activity will be affected to some extent both inside-the-room and outside-the-room based on slower economic activity.

Okay. And just one final question. Is most of the -- or maybe you can apply a percentage -- of the outside-the-room spend part of the contract that includes the room rate?

It's group by group. Some groups have very high outside minimums. Some groups have medium outside-the-room minimums. It really is very group specific. But I would say the vast majority of groups have contractive -- where they contract for banquets and lunches and dinners and organized events, there is always a minimum.

Nap Overton, Morgan Keegan.

A couple of things. First, Dave, could you share with us what your capital budget is for 2008?

For '08, I think it is about $350 million. It's going to be between about $350 million and $375 million. And that depends on how quickly we get through design and when we kick off construction on the expansions. That number I just gave you assumes that we kick off construction late this year, but that's not a necessity to meet the opening dates that we've set for ourselves for the Texan in late 2010 and Nashville in early 2011.

And that also includes the total of the $50 million to $80 million of surprise that we got from our general contractor last month related to Gaylord National.

Okay. And so that would -- about $220 million of that is Gaylord National, is that correct? Remaining?

Roughly.

Okay. And then secondly, chiming in on the survival theme that you said questions had transferred to, just quick math, I think you had $420 million, 410 point or $420 million left on your credit facility at the end of the year. $220 million of that will go to the National -- finish the National project. If you were to complete the $80 million share repurchase and invest $25 million in equity at La Cantera, that would leave you with about $100 million in availability left, is that math correct in the way you think about your liquidity situation?

Not quite, because you haven't factored in any operating cash flow for the year. So, it's more like $200 million. Minor point.

Okay. It's a significant point. Okay. And then no rooms are out of service for the Opryland hotel for '08? Is that correct?

They're done.

They're done.

I mean, we're going to be doing five of the big suites over the next 24 months, but we won't take them all out because we fill them with meeting planners and people with aspirations to stay in big suites. But that's about it, right, David?

Right.

Okay. And then just a lone last little point of clarification. Dave, you said those attrition fees don't end up in RevPAR. They don't end up in the total RevPAR numbers either; they're just not in hotel revenues at all, is that correct?

No, they show up in other revenues. So they're part of total RevPAR.

Keep it going, Nelson. We'll do two more; the next question and then we'll do one other.

Jeff Donnelly, Wachovia Securities.

David, you've always been known to give us a rule of thumb that you've got about 60% occupancy on the books for any forward 12 month period. But generally speaking, are you able to give us that rule of thumb around how definite your actual CCF looks? Whether it's three, six or 12 months forward?

I'm not sure I understand the question.

Well, I guess I'm wondering if at any point in time, I know you guys don't give quarterly guidance, but are you able to look at your next forward quarter, for example, now, looking at your Q2, and say, well, at least I'll make X in CCF and at best I'll do Y. Because if your bookings are effectively there and they have cancellation fees, you would -- I guess I'm thinking that whether it's three months forward or 12 months forward, you probably have some visibility that 80% of your CCF is -- or pick a number -- is somewhat contractual. That even if it all didn't show up, you would still get the fees from it.

Yes. I would agree with your logic. I can't just say that I've done that analysis and can't tell you exactly what that number looks like for the next two or three quarters, no.

Well, I'll be sure to harp on you on that in the future. And, I guess, Colin, as it relates to San Antonio, I'm just curious. When you guys have discussions with perspective capital partners, private equity partners, for an interest in a property that I guess you're trying to get them to sign on to your underwriting at 13, 15 times EBITDA, are they in turn broadening the discussion back to you, regardless of what your intentions are, and instead asking about Gaylord as an entity at 7 to 8 times EBITDA?

We obviously don't go there on calls like this. And you know that. We're not going to have any conversations like that.

I'm just curious if they're asking.

I mean, we're not even going to comment on that, Jeff, and you know we can't. So, let's just leave it at that.

But remember, we keep talking about -- the wise analyst community keeps saying we bought this at 15 times. But do remember, we have 800 acres of some of the finest real estate in the south of the Hill country, about 12 miles or 10 to 12 miles from the airport. So, you can look at the cash flows and extrapolate the multiple, but there is an incredible investment opportunity and a growth opportunity here.

Just a few last questions. I guess, Colin, I've always thought of your hotels as hosting mainly domestic organizations. What, if any, of your demand comes from actual foreign events or travelers?

There's a lot of international -- we do a lot of domestic companies that have international presence and operations. We are -- I know next week we have a convention here in Nashville where we've got just a lot of foreign folks coming in. But we're not focused right now on international companies' conventions coming into the U.S. But it's something that, frankly, if this dollar continues to trade where it's trading -- we had a Board meeting two days ago and we talked at length. Because we just brought a new Board member on, a woman, a lady called Maria Sastre, who runs World Caribbean's South American operations. And we were talking about the whole notion of international tourism into America and how we as a company tap into that. So this is something that -- you raise a good point -- it's something that we've really got to get focused on. But to me, that's all upside.

And just two last question actually on the National. Dave, what was CapEx in Q4 excluding National? And when do you receive your subsidies? When does that all play out?

CapEx in Q4, excluding National, was about $10 million. Actually, excuse me, $17 million, I did the math wrong. And the subsidy, the first $95 million of bonds are in escrow right now and have been accruing interest for about the last two years. And those will be released to us out of escrow when we open the [B Tranche], which is $50 million, will be issued to us when we open. So all $145 million gets issued to us upon opening. And we will begin accruing interest and collecting interest on those once we open.

And do they consider that opening to be -- what was it, late March? March 28?

Yes. Correct.

Okay. Great. Thank you, guys.

Thank you. And by the way, for the analysts that are on the phone that cover us, we obviously will be sending invites to the opening so you can come see this magnificent hotel. It is quite different.

One more question, Nelson, and then we will terminate the call. And if there are other questions, they can contact either David, myself or Mark separately.

We should put a limit on the number of parts to the question because Jeff Donnelly set a new record with six parts to his question.

Most of which we couldn't answer.

Chris Woronka, Deutsche Bank.

I'll try to keep to two but no guarantee on the parts. First was just interesting data point that 70% of your room revenue for '08 is on the books heading into the year. Can you tell us roughly what that was last year? Is it similar?

It's a little bit better this year than it was last year.

Okay. And then, just related to that, is more of the revenue that you have on the books this year, is more of that contractually protected this year versus, say, '02 or even '06?

Chris, repeat that question, please. I'm sorry. David and I were having a sidebar conversation.

Sure. Is more of that -- how much ever of the revenue is contractually protected right now for '08? Is that similar to what it was in '02 or '06? Or do you, over time, are you getting more of that contractually locked in?

It's a higher occupancy percentage locked in at the commencement of '08 than we had at the commencement of '02; simply because we're running about 10 points higher occupancy in Opryland in '08 than we ran back in '02 because of just the bookings on the books. But it is proportionately higher.

We also have a better, tighter contract than we had in 2002. One of the big things that Carter, our General Counsel, brought to us when we brought him on -- I'm pandering to Carter, if you're sitting here in the room -- but he really brought a focus on those contracts. Our Legal department had been outsourced prior to Colin's and my and Carter's arrival at the Company. And consequently, contracts weren't getting quite the attention that they would having someone on staff. And so Carter and his team have done a great job of tightening those contracts up, bringing up the level of protection for our revenue.

And they are, for all intents and purposes, 100% consistent.

Okay. Very good. And then final one is just if Chula Vista moves forward, how should we think about financing, just in terms of A, do you think with where we are in the world, that you might look for a partner there? And B, is there any chance that you look for more incentive or maybe less incentive, given what some of the local economies are? I mean, just how should we think about big picture stuff on that? Thanks.

They're good questions. Chris, I think that we've consistently said we negotiated a deal on the incentives. The incentives are really a by-product of how much local taxes we're generating. I think it would be one, impossible to get more incentive. And I think we honorably, as an honorable company, I don't think we would attempt to do that. The key, though, is what happens to the financing markets. We've got probably a good year of permitting processes here. So we've got a year to see how these markets emerge.

My sense is I know that there's been huge dysfunction here, but my sense is some parts of the capital markets will come back. And we will determine the best way to finance this thing when this project gets 12 months from now and -- or however long the permitting processes take. But will we seek a partner on it, if that was the solution to the problem at the time? Of course.

Okay. Very good. Thanks, guys.

All right. Nelson, I think what we'll do is we'll terminate the call. And as I said a couple of minutes ago, anybody that has any further questions can contact David or me or Mark Fioravanti at the Company. And thank you for joining us this morning. And we live in interesting times but our Company is well positioned to navigate through this dysfunction. Thank you very much indeed for joining us.

Thank you. This does conclude today's Gaylord Entertainment Company's fourth quarter 2007 earnings conference call. You may now disconnect and have a wonderful day.