Ryman Hospitality Properties Inc (RHP) 2008 Q2 法說會逐字稿

Welcome to the Gaylord Entertainment Company's second-quarter 2008 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 800-642-1687 and the PIN number is 56536373. At this time all participants have been placed in 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 second-quarter 2008 earnings call.

You should be aware that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Gaylord Entertainment's expected future financial performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Gaylord Entertainment's filings with the Securities and Exchange Commission and in our second-quarter 2008 earnings release and consequently, actual operations and results may differ materially from the results discussed or projected in the forward-looking statements. Gaylord Entertainment undertakes no obligation to update publicly any forward-looking statements, whether as 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, 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, and good morning, everyone. I'm happy to welcome all of you to our second-quarter 2008 conference call. Now as I do every quarter, I'll begin by offering some color on our business and the hospitality industry, before Dave Kloeppel, our Chief Financial Officer, elaborates on the financial results for the quarter and the Company's outlook for the rest of the year. We will then turn over to Q&A and hopefully answer all of your questions at the conclusion.

We've been very busy these last few months and our efforts have translated into meaningful progress for our company. Before Dave and I talk about all of that, though, I'm going to try and preempt some of your questions by giving you my impression of the current market situation and how it is affecting our business. I've been in the hospitality for many years now. During that time I've watched the industry turn upside down on multiple times. That being said, the current pressures on the market are different today than anything I've every seen before, and this year has certainly worse than last.

Because of this, looking at year-over-year comps will have very little meaning. Instead, I believe that it's important to analyze a company by its ability to adapt and adjust quickly, its ability to continue to build on a strategy no matter the market conditions, and its ability to grow profitability even in a poor business environment. If you analyze Gaylord and our financial results this quarter in the context of these categories, you'll find a business that's doing pretty well. More important, you'll find a model that is unlike any other in the industry and a set of assets both tangible and intangible that are very well positioned for long-term growth.

That said, we're certainly not immune to the current issues facing the hospitality industry and the broader economy. This is clear by our RevPAR results for the quarter. However, as I've pointed out to you many, many times before, because of the nature of our business you cannot measure the profitability and health of us by looking at this metric. This quarter's results are a fine example of this.

So much of our business is entered into with large groups who commit through contracts to deliver a specific number of room nights and, in most cases, large chunks of food and beverage revenue, in normal times we tend to see minimal attrition. And for the sake of those of you who are new to our story, attrition is the name we give to the difference between the room block that's contracted for, compared to the number of customers who actually arrive. Over the last several months we've witnessed a modest spike in attrition in some groups, and this would not be good if we did not have contracts. When groups turn up with less folks than they bargained for, several things happen. One, our hotel's RevPAR is negatively affected by this and, also, the folks who did not arrive obviously are not consumers of our wonderful products. So our total RevPAR also is negatively affected by the loss of this gross revenue.

However, there is a partial total RevPAR positive, which is the attrition payment we receive from the groups who underperform. And to confirm what I've told you many times before, we book attrition payments when we actually receive them. It's for this reason our second quarter looks the way it does, with modest growth in RevPAR and total RevPAR, but decent growth in our same-store consolidated cash flow. Dave will go into this in a little bit more detail in a minute.

So the logical question from here would be, what does this mean for the rest of the year? As we described to you at our Investor Day, the risks in our business are in the form of increased attrition and decreased transient business. Since we have no assurance of continued solid transient business, and we expect to see continued attrition levels, we have pulled back our RevPAR and total RevPAR guidance for the year but essentially held our CCS guidance because of the way our model works.

Now over the last couple of years, when times were good, certain analysts have inferred our strategy gives us a disadvantage when so much of our business is pre-booked literally years in advance, in contract form, with pre-agreed-to room rates. Their hypothesis is that when we go into a given year with 50 to 60 points of occupancy already pre-booked and pre-priced, we're somewhat disadvantaged because we cannot re-price those rooms by taking advantage of spikes in demand. Now personally speaking, I like the less volatile nature of our strategy, and I'm hopeful it will become more understood and appreciated as the country navigates this current economic mess.

Again, our model is working the way it is supposed to and, at the end of the day, our bookings remain strong, and meetings and convention groups continue to fill our hotels regularly. As a matter of fact, we have more room nights booked for future years at this time than we did at the same time last year. Additionally, while same-store room night production was down slightly relative to last year at this time, we're still well on pace to reach our guidance for the year of 1.3 million to 1.4 million room nights on a same-store basis. Also, to put this first-half booking performance into greater perspective, this first half's room night production was about 20,000 room nights shy of being our second best first half on record.

Importantly, what also gives me confidence as we look ahead to the rest of the year and into 2009, is that we have record number of tentatives and prospect room nights that we're working with at the end of the second quarter.

Before we move on, let me give you just one more fact pertaining to attrition. As I said, attrition is up compared to what we are accustomed to seeing. At this time last year attrition rates were about 8%. However, it is still in a reasonable range this quarter at 10% and our cancellation rates also remain relatively low.

Let me comment on the transient business. Because of some of the new programs we've implemented during this last year, we've seen an uptick in transient business, which I'm sure is quite different from what you're likely hearing from other hotel companies. You should keep in mind, however, that this segment represents only a small portion of our business, and though it was a solid performer this quarter, it's not something that's overly critical to our overall strategy.

Now what else helps us achieve strong profitability metrics in this market? While others in the industry are scrambling to fill enormous hotels with leisure guests with short-term booking cycles, catering to group business that books years in advance provides us with an incredible window into the near-term future occupancy of our hotels. This visibility is critical to our efforts to run efficient operations. We're able to accurately project the appropriate resources and staffing levels we need to operate our hotels, without ever compromising the superior service we promise to our guests. Over the last several years we've constantly referenced the introduction of systems that help us manage costs, and this is paying off. This contributed to the CCF margin growth you saw this quarter, and we're quite pleased with the success of our efforts here.

Now this brings me to my next point. Many people in this industry think hotel brands are all about physical buildings and the amenities that are added. The problem with this approach is that most physical things in this industry get copied sooner or later. And in fact, brands who operate like this are constantly reacting to what their competitors are doing. This is not bad in good times, but, alas, it's pretty bad in bad times. Brands who do well irrespective of the environment tend to possess several attributes. In most cases they tend to be the employer of choice. In other words, they employ the best people, as well as have a strong internal culture that is focused to the customer.

While we at Gaylord can talk about how we can put together the right contracts and how we can track and assign our resources according to demand, none of this works unless you can build a culture that strives to achieve perfection with every event and every guest interaction. This is the culture that we've built at Gaylord and it's special. And if you attach a valuation to our company that's based solely on the value of our bricks and mortar assets, then I believe you're selling us short.

So why do I tell you this? In times like these, brands whose strategy is based on product, which is then copied by competitors, have no defense when their competitors start slashing prices. It's my belief customers tend to be more loyal to businesses who sustainably deliver more value to them. And again, we've said this on many occasions in the past, value is not price. When our convention customers stay with us for three or more days, every single interaction that our people have with their customers determine the outcome of the visit. And our unique culture makes it highly likely our customers leave happy and are anxious to return. That's why we are constantly able to attract high quality, high margin groups and we are constantly turning down room nights across our network.

But of course, our exceptional facilities do play a role in this. I know many of you joined us at the Gaylord National in June for our annual analyst event. Walking the halls, I couldn't help but feel a great deal of pride, knowing that Gaylord National has so quickly become the leading convention hotel on the East Coast. The 1.5 million room nights already on the books certainly backs that up.

Now before I turn over to Dave, let me just speak briefly about how we're looking at growth. In this respect let me quickly touch on two points, the first being capital. Hopefully by now you will have read our release of last week, when we announced our new bank facility, which essentially extended maturity out to 2012 for a modest increase in pricing. This speaks volumes for the relationships we have with our banks, and is a stark contrast from other announcements made recently from companies who are struggling to secure capital in these very difficult times.

Second, we continue to work on our expansion plans, but are being very careful in overly committing serious capital until we see evidence that things are moving back towards a more normalized business environment. And of course, any capital-intensive projects will need to meet or exceed the high hurdle rates we have put in place in order for these deals to move forward.

In closing, it continues to be the responsibility of this management team to get us through this messy market environment, and we believe that we have the right model and the right pieces in place to do just that.

So that said, Dave, I believe we're ready for you to take us through the financial results for the quarter.

Thanks, Colin. As is customary on our quarterly calls, I'm going to review the financial performance of our business in each of the Gaylord properties. But before I jump into those numbers, let me provide some additional detail on key trends in our businesses that Colin touched on and were referenced in our press release issued earlier this morning.

It's been a busy first half of the year for Gaylord. We opened the Gaylord National and the property has very quickly settled in to being the best convention hotel on the Eastern Seaboard. Additionally, we refinanced our bank debt through a new bank facility announced last week. We believe our ability to replace our existing facility and extend our maturity date in this kind of a credit market is quite an endorsement by our lenders as to the strength of our business model from their perspective.

At the same time, we continued to deliver positive bottom line results in an increasingly difficult environment for hospitality. Same-store CCF increased 8.2% this quarter over the same period last year, while same-store revenues increased by 2%. So we were successful in expanding margins 190 basis points, and delivering profits in line with our expectations and above the guidance we provided six weeks ago at our Investor Day, despite modest RevPAR growth of only 0.3%.

More specifically, the drivers of this quarter's same-store CCF results were three-fold. First, attrition and cancellation fee collections were up about $1.6 million over the prior year quarter. This increase in fee collection is the expected byproduct of the increased attrition we've been experiencing year to date. And as you all know, and as we discussed at length at the Investor Day, we only book attrition revenues at the time they're collected.

The second driver of this quarter's performance was a 5.4% increase in same-store ADR and an approximately 19.4% increase in transient room nights. These more than offset a 3.8 point drop in occupancy.

And third, our near-term visibility into group occupancy, along with the systems we've put in place over the past 12 months, better enable us to manage our properties efficiently, insuring lean operations and the appropriate staffing levels according to current demand.

Bottom line is that the large group-centric model we built, which is far different from any other in the hospitality industry, is functioning the way it's supposed to. On-the-books group revenue may be at risk from time to time from attrition, but profitability does not have that same level of risk thanks to the contractual agreements we have in place with our group customers.

When we discussed our outlook on the balance of the year at Investor Day, we described three areas of risk for the business -- attrition and cancellation levels, in-the-year booking trends, and transient business. So let me provide some color on each one of these items that we discussed just a few weeks ago.

As you know, the majority of our occupancy is booked years in advance, with contracts guaranteeing that we receive a portion of our anticipated revenue through attrition payments. And as we discussed at the Investor Day, we have experienced some material increase in attrition rates in the first half of this year. Because of the way we account for attrition and cancellation fees, higher attrition levels will impact RevPAR results, since fewer guests than expected are occupying our rooms. But we still receive attrition and cancellation fees, which are accounted for in other revenue. This means that RevPAR and CCF are not impacted in the same way. This is why RevPAR, while an important metric for other hotel companies in the industry, doesn't fully gauge our success, especially in a market where we're seeing attrition rates above recent historical levels.

Attrition at our same-store properties this quarter was about 10%, as compared to 8% in the second quarter of last year. For the first half of 2008, attrition was about 11%, compared to 7% in the first half of last year. Groups are reducing their room blocks in advance of their travel dates, as they are anticipating lower attendance for their events. These reductions in room nights impacted occupancy and revenues in the quarter, while the associated attrition and cancellation fees, which are recognized when collected, typically are not realized in that same quarter.

We also discussed in June how increased attrition is affecting our in-the-year gross versus net bookings. Over the past couple of years, the impact of all the various adjustments to in-the-year gross bookings has resulted in net bookings being higher than gross bookings. This year, however, given the current trend in attrition, in-the-year bookings are now lower than gross bookings. For the quarter, same-store gross bookings were up 31%. In other words, we signed contracts for 31% more room nights this year than we did last year. However, net bookings have decreased 18%. That's caused by a change in the attrition levels. In other words, we're having lots of success signing contracts with our customers; however, attrition rates are limiting this positive impact.

Finally, at our Investor Day we identified transient business as another risk factor for the balance of 2008, though in contrast to what you're hearing from other lodging companies, we experienced an 8.9% growth in our same-store transient room revenue in this quarter. July continues this trend, with transient revenues up about 25% versus the same month last year. We have devoted a portion of our resources to building up this piece of our business and these efforts paid off by offsetting some of the group business lost through attrition. While we're encouraged by these results, we remain cautious about the outlook for the remainder of the summer and the fourth quarter holiday season, our highest transient periods of the year.

I'll discuss the impact these trends are expected to have on our balance of the year guidance in my closing remarks. But first, let's review the quarter's property-level performance, beginning with Opryland. At Opryland a shift toward more corporate group business pushed our ADR up 6.5%, which led to a 3% increase in revenue to $73.5 million. The increased ADR helped to offset the decrease in occupancy that drove RevPAR down for the quarter. However, thanks to our cost control initiatives and incoming revenue from attrition and resort fees, CCF increased 8.5%, with margins of 31.4% for the quarter, up approximately 160 basis points.

It should be noted that the operating statistics from last year reflect 12,574 room nights being out of service. This year obviously we had no room nights being out of service because our room renovation is complete.

Moving now to Florida for the Palms, the Palms had a very solid quarter, with growth across all key metrics. The property's ADR increased due to additional transient guests, which helped support the 3.6% revenue growth and the 8.3% increase in RevPAR for the quarter. Based on a favorable shift in mix for groups, ADR also was up for the quarter. CCF increased 12.4% for a 260 basis point increase in CCF margin.

Now looking at the Texan, revenue was down slightly at the Texan for the quarter. RevPAR was up about 1%, largely due to an increase in ADR that was offset by a decrease in occupancy. Total RevPAR decreased by less than 1% and, due to increased attrition and cancellation fees, and lower commission business, CCF increased 4% to about $16 million. CCF margin was 33.1% and increased 160 basis points over last year.

Before discussing the results from the Gaylord National, I wanted to make one more comment about trends within our existing hotels. Outside-the-room spending growth in the first quarter, on an occupied-room basis, in other words, how much each occupant was spending, was up 6.4%. And that statistic has been growing at about 7% per year over the last couple of years. This past quarter outside-the-room spending growth slowed to about a 4.2% per-occupied-room growth rate. Now given the current challenging economic environment, we're pleased to be able to continue to drive 4.2% per-occupied-room growth. That said, we'll be watching that statistic closely for continued signs, or additional signs, of belt tightening across our businesses.

Now let's move to the National. As Colin mentioned earlier, we were extremely pleased to host so many of you at the National in June. As those of you who attended saw, the property is truly a spectacular example of the superiority of the Gaylord properties. We continue to be extremely pleased with the success of this property, particularly the outside-the-room performance. Revenue for the quarter was $61.8 million and RevPAR and total RevPAR were $143.19 and $359.02, respectively.

Now let me put this in perspective for you. In its first quarter of operations, one that we have publicly said we thought was not perfect from our perspective, the National was very nearly the brand leader in RevPAR and total RevPAR. And looking at other measures of comparison to our other properties, you should note that the National produced more banquet revenue per group room than each of the other properties in our existing network. And the National also ran a 10%, 17%, and 44% premium in total revenue per occupied room to our other three properties, the Texan, Palms, and Opryland, respectively. Now that's a spectacular performance for a first quarter of operations.

In addition, CCF was very solid, with a 22.7% CCF margin. And as we continue to operate the hotel, we expect we will continue to get better from a margin management perspective. Advance bookings at the property continue to grow and have reached approximately 1.5 million room nights. Obviously, we're very proud of the accomplishments at the National in the quarter.

And now, on to the outlook for the remainder of '08. Based on the continuing trends in attrition and its impact on 2008 bookings, and our continued cautiousness related to the transient business during the fourth quarter holiday period, and some softening in outside-the-room spending levels, we're adjusting our same-store RevPAR and total RevPAR guidance to 1% growth to 3% growth. Additionally, we're adjusting -- excuse me, I should have said also total RevPAR we're adjusting down to 1% growth to 3% growth as well.

Now interestingly, and as we said earlier, our business model is operating the way that we would expect it to, so from a CCF perspective we believe that with the protections that our business model offers that our CCF will be more protected than one might think, given a reduction in RevPAR and total RevPAR guidance. So we are simply reducing the top end of our CCF guidance from $207 million to $202 million.

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

All right, Dave. Thanks a lot. So Pam, let's open up the lines for questions, please.

Thank you, sir. (OPERATOR INSTRUCTIONS.) Jeff Donnelly; Wachovia Securities.

A few questions -- what costs remain to complete Gaylord National? And where do things stand with Perini?

Jeff, good morning, Colin. I'm going to have to get Dave to answer the first part of the question. And where we stand with Perini, we're in the middle of, should I say, serious debate in terms of the close-out. And we probably will be pounding the drums a little harder here with this company over the course of the next two to three months, because we're unhappy with certain things that were not done in the completion of this hotel and unhappy with some of the billings that we have subsequently received from them. All within what we've told you about, in terms of total cost, but as we dive into this we believe that there are some opportunities to remediate some of these questionable billings to us. That's all I think I can say on that, and our lawyers will probably hit me for saying as much as I've said. David, in terms of total cost, where do we stand right now?

Jeff, we're at $937 million of spend to date. The range that we have out there as of about two quarters ago was bout $960 million. We're in the process of going through and closing out the project and closing out subcontractors. Our anticipated close-out, we're still targeting that kind of a range, the $960 million. We anticipate that Perini will continue to say that they think that the project would be more expensive and we are going to say that we think the project should be less expensive. So we're going to be in a debate for some time and a discussion with Perini for some time. But for right now that neighborhood of the $960 million range, plus or minus, is probably the right target for us to focus on.

And Jeff, let me just give you one more piece of information. We've got some of the finest construction attorneys and construction consultants working on this close-out reconciliation with Perini. And we believe our claims against some of the potential over-billing to us are pretty sound. And we intend to vigorously prosecute this. But we believe that the costs are capped as David just indicated.

And just to be clear, is the $960 million, the estimate, what you guys think it should cost or is it what you've actually spent and what they think it should be costing?

Well, we've spent $937 million. We think it should cost $960 million. And obviously we're in a fight with someone, so we're going to say the number's really low and they're going to say the number's really high and we're going to fight over what the real number should be. And we might have a judge help us figure that out.

Okay. David, just to I guess use your words, where do things stand with maybe Gaylord's desire to "re-equitize" its platform, whether that's selling assets or what have you? Is there any update there?

Jeff, this is Colin. Let me answer that question. There are two answers to the question. What we said at our Investor Day is that we want to strengthen our balance sheet. And we said we want to do that in two parts. Number one, we were relooking at our bank lines, and we've announced that. And we feel that that is a substantial achievement in this market.

And the second thing that we said to you is that we think it's -- as an organization we are committed to sell part of all of our real estate to help fund future growth. But we only want to do this at prices that we think are appropriate for the assets of our quality.

And I just want to touch on one thing and I'll get to the conclusion of the answer in a second. When David talked about 1.5 million room nights on Gaylord National, think about the valuation of that. Think about 1.5 million room nights. You can take any ADR you like between $200 and $250 and then add -- typically what we get, 1.25 to 1.50 times. We ran 1.5 times room dollars outside of the room for every dollar inside the room. We have in contract form somewhere -- I'm not going to get into the specifics here, but somewhere between $700 million and $850 million of worth of future revenues. And so when we are in debate about valuations, we need to take into consideration the incredible value that these hotels have the ability to harness in the future.

So we are working actively on this, and we will continue to work actively on this. We are committed to this. But we are only committed to doing it at prices that we think are fair and reasonable.

And just one last question, Colin -- considering the attrition, anything that we should we draw from, I guess, the sequential decline in attrition from Q1 to Q2? And is there any theme to, I guess maybe industry exposure, where you've seen attrition rates kick up?

Jeff, the answer is attrition is going to shift a little bit quarter by quarter. And to increase your possible confusion about attrition, attrition in July was 12%. Now it was 12% this time in July for last year as well. So attrition obviously changes seasonally, based on the types of groups that are in the house. And it changes kind of on a day-by-day basis, again based on the types of groups in the house. We don't believe at this point that that decrease in attrition from first quarter to second quarter is something that we should believe is a trend that will be a net positive for us for the balance of the year. So we're not assuming that attrition gets better. We're in fact, assuming attrition kind of stays at the level that it has been for the balance of the year. So we'll continue to take a look at third-quarter attrition, see how that plays into the equation. If we start to see a trend where we are narrowing the gap to last year's level of attrition, that might be an indicator of a trend. But at this point we're not ready to commit to that.

Okay. Thank you, guys.

Chris Woronka; Deutsche Bank.

Just to kind of take Jeff's question in a different angle, Colin, you've talked before about not only possibly selling assets, but also finding some kind of venture where you could grow. And I'm kind of wondering -- in a perfect world maybe that's the same entity that you partner with, but is it really mutually exclusive? And can you give us a little bit of color on where you are on the growth side of things, especially given the uncertain economic environment? Thanks.

Thanks, Chris. Well on the growth side, we have negotiated these expansions of both Opryland and Texas fully, and we are in the process of doing detailed design work. And that will go through to probably February and March of next year. It just takes for these big projects a long time to actually do the detailed design work on this. So we effectively have this period between now and then to assess, is there a material change in demand for these markets? And once we've got the detailed design documentation done in February/March of next year, then we will be in the situation of bidding the project, and then effectively letting the contract, if we're comfortable that the world hasn't materially changed here.

On the Palms, I think we're before the City Council this week in Osceola County to secure the incentives that we have talked to them about. And then we will be in the same scenario about a year of just doing the detailed design work, conceptual work, detailed design work, before we have to press any button on the big part of the capital, the construction side of it.

So we feel that we've got a pretty decent period of time here to assess this mess that we find ourselves in here in this country, and in fact that's sort of virally spreading to other parts of the world. And we're very mindful that we have to just continue to assess this demand that we're seeing from meeting planners and make sure that it's still the same as we thought it was six, nine months ago from a long-term perspective.

The other thing is that we are working, as you know, on Chula Vista. We continue to make progress there. I think this week the final review with the California Coastal Commission -- I think that that review is up this week. We've had more discussions with organized labor. I'm not privileged to say, because of confidentialities we have with organized labor, where we sit with that, but the bottom line is I'm optimistic that will not be an impediment to the future. And things are moving forward there. But, again, we're sitting on top of that market. We're looking at that market, understanding what this environment means to that market.

And we have other development deals that we've been working on that are, in our opinion, equally as attractive to the West Coast operation, that we are assessing.

So we don't feel that we are in any need to go do a fire sale on our assets tomorrow morning. We've got a reasonable period of time here to assess this market, to assess the demand characteristics of this market, and then make whatever business judgments we need to make to determine how we grow value to our shareholders. But we think all of these assets, long term, in a normalized environment, can create lots and lots of value for us. And we have to find the right capital structure to do that, that generates the highest return for our shareholders.

Great. That's very helpful. And just -- not to put any bounds on you or anything, but is it safe to say that if you were to go forward with Chula Vista or some other development, that it really kind of has to be with a strategic capital partner. I mean, without even going into too much detail, is that just directionally where growth is going to come from on new builds?

I think that would be a fair way to describe it, Chris. Because look, for the last five years we pushed our balance sheet a little to get these four big assets refurbed and built and done. And we've managed that well. And I know the [shorts] have had a field day these last nine months because they felt that this company was overleveraged. But we knew that we had wonderful relationships with our banks. Our banks see the value in this company. The banks -- we've opened the kimono to the banks and they've looked at all of our advanced bookings. And they're very comfortable with the trajectory of this organization.

But we are in the process this next 12 months of deleveraging, and we've got a balance sheet that is very, very manageable. And so prospectively we will push leverage, but we won't overly push it because we're not going to stress the organization. That's just the way we're going to run it.

Okay. Very good. Thanks.

Bill Crow; Raymond James.

Three follow-up questions -- first of all, you mentioned in your opening statement that you were seeing pressures on the industry like none you've seen before. What is it exactly that's differentiating the cycle?

Well, it's -- look, we've seen spikes in oil prices before, but whether you like it or not, this country in the last 50 years since the Great Depression, has not seen declines in the value of home prices up to 20%. We haven't seen every major bank since the Great Depression recapitalizing its balance sheet and basically freezing capital. We haven't seen escalation in airline prices the likes -- and supply coming out. You go to Las Vegas and speak to these folks in Las Vegas -- I was in the gaming business for 15 years and we all believed in gaming, but downturns in the economy, gaming was resistant to that. But this is vastly different.

And does the reduced air lift impact your market at this point?

It's not appeared -- no it hasn't. We've looked at the air lift changes market by market, and we haven't seen that. But this is different. And what we've got to be -- every single business has got to be nimble on its toes to understand these changes that we're seeing that historically this country -- I've lived here for 20 years. I haven't seen the magnitude of the type of disruption that we're seeing. We've seen it in isolation. We've seen a spike in oil prices and we've seen the S&L crisis back in the early 90's. But here there's a multiple of things going on here, and we've got to be on our toes. And we believe our business is so wonderfully positioned to blast through this, because so much of our business is in contract form.

Colin, you mentioned the Palms and the fact that your incentive for the expansion is going to vote shortly. Living down here, I can tell you how stretched the local governments are. Any chance that that has trouble getting passed?

Look, I don't honestly, Bill, have the answer to that question, only that the politicians are saying, look, we in Osceola County like the idea of having a major, major convention presence in Osceola County, rather than Orange County. And what they're saying to us is we have, through the rooms tax, we have a lot of revenue that we've already collected that we haven't spent. And we have a lot of revenue that we will collect that isn't earmarked presently. And by the way we would love you guys to continue to do what you're doing. And so we're before them this week and I can't imagine that they're representing that this money will be available and then saying no, it won't be. I mean, we believe it will be there.

Fair enough. And then, finally, somebody's going to ask it, I would imagine, so I'll go ahead and do it. Any discussions with Robert Rowling since his announcement that he's accumulated [the good] position?

Bill, you've been in this business a long time, right? And you know that companies like us cannot make public comments on communication between its shareholders and the Company, because if some of our big shareholders like Barron Capital sat down with us and had ideas and thoughts and you were to ask what are those ideas and thoughts that one of our big, long-time shareholders had, I mean it would be inappropriate for us to discuss that stuff publicly. And so I suggest that if you want to know the answer to that question you go call Mr. Rowling.

Okay.

By the way, I do believe Mr. Rowling has made one of the best investments of his business career by buying just under 15% of our company.

I think where he bought it, I think that's right. All right. Thank you.

Kevin Milota; JP Morgan.

I'm hoping you could comment on the out-of-room spend and where specifically you're seeing some of the softness. Is it food, beverage, or banqueting?

Yes. Generally it's kind of across the board. We saw it initially in kind of late May, early June, primarily in outlets and as we got into mid-June and July we saw it a bit more so on the banquet side.

Okay. And secondly, could you guys [break it down] and give kind of a relative RevPAR for each property versus the 1% to 3% guidance that you all gave?

I'm sorry. Ask that question again, Kevin?

It's to sort -- I don't know what it is. I think the question was could we break down the 3% for the year between the properties rather than just do it on a global basis.

No, we tend not to do that. But generally, directionally, I'll go by quarter and by property and give you general high end of the range and low end of the range. Third quarter for Opryland should be toward the high end of the range and fourth quarter should be toward the low end of the range. Palms, again directionally, should be a little bit bottom of the range on RevPAR and total RevPAR and fourth quarter should be the middle of the range, toward the high end of the range. And then Texan third quarter, fourth quarter -- third quarter should be, on a total RevPAR basis, toward the higher end of the range and fourth quarter should be toward the lower end of the range.

Okay. Thanks a lot, guys.

Will Marks; JMP Securities.

I have a question on the transient. Can you confirm you said second quarter transient was up 8.9 and what was the July figure?

19.4%.

I'm sorry -- 19.4?

Yes, you heard that correctly.

What was same-store?

On the same-store basis, that's right.

Yes, but David, finish the statement.

Yes. I was going to say, you have to understand in part how transient works for us. Because we're a group house, group comes first, transient tends to come second. When you have attrition that occurs you tend to learn about that attrition in a relatively short period. So rebooking those rooms that have [attrited] with meetings generally doesn't happen, so generally you're trying to resell those rooms for transient rooms. So one reason transient's up is that we're better at transient, but another reason that transient is up is because we have more availability to sell to transients.

So, I just mentioned a few minutes ago to, I think it was Jeff Donnelly, that attrition in July was about 12%. Attrition last July was also 12%. But when you have 12% attrition, it gives you more space available to sell to transients.

We're just doing a better job at that.

That's right. We're just doing a better job. So, again, as I said to Jeff, we're not projecting that because we're narrowing the gap in attrition sequentially first quarter, second quarter, and now July to last year, we're not assuming that's a trend that continues. And we're also not assuming that transient continues to grow at 8, 9, 10% year over year as it has year to date, in the guidance we gave you earlier.

Okay. Great. And next question -- on looking at the National, you gave 2010 guidance a year and a half ago and I don't know if you'd like to confirm that? But more importantly, I'm curious about 2009 and if we can expect it to be half way there? I guess we're talking about full year in '08. But any comments on '09 from the National would be helpful.

Will, I'll tell you what I'd like to do on that and this is not -- I'm not punting. But we have a Board Meeting tomorrow afternoon and Thursday, when David and I will be presenting to our Board our long-range plan for '09, '10, and '11 and '12. And what I would like to do would be hold off making any predictions about '09 and '10 until we've spoken with our Board on this. Because I don't like talking about directional information that we haven't previewed with our Board.

But I think it's fair to say that our views of the world, given the bookings that we have on the books, and the current pace of tentatives and prospects, our view of the world in '09 and '010 is generally not too different to our view of the world a year ago when we did it at that point in time.

Thank you. Okay. And no comment on share repurchase, I believe. And as per your Analyst Investor Day, can we assume a lack of share repurchases is due to a major strategic [financing] or -- I don't want to quote you incorrectly, but any comments there, please?

Well, what we said to you at the Investor Day -- we didn't say it overly directly, but maybe we did -- was that the lack of share repurchase isn't an issue of capital availability. It is based on our lawyers' advice as to whether we can or cannot be in the market now doing this, when we are doing other things that we haven't sort of publicly disclosed. So you can take that comment and digest it as you will.

Okay. And just one final thing -- and this is kind of beating a dead horse, but the change in guidance from basically the Analyst Day until now, your attrition went up slightly June to July, I guess from 10 to 12%. It appears that outside-the-room spend has dropped a little bit. Transient's replacing some of it. Anything you want to fill in there?

Well, let me say it this way. David, you might want to jump in. The difference between early May to now is that in early May we had a lot more confidence about our ability to fill our group rooms in the year, for the year. And where we are right now, two-and-a-half months later, with this attrition level continuing, we are being cautious about our ability to fill the rooms that we thought we could fill back towards the middle, end of May.

However, the other side of that is that we really do believe that these contracts give us a lot more --a lot of protection. And, given the way our margins are performing, we do not expect that that attrition issue, that we've now projected through the rest of this year, to have a material impact on profitability in our business.

Right. And, Will, I would add that, just to clarify that point on our confidence on booking business in the year for this year, the confidence isn't an issue with respect to actually booking the business. The confidence issue is related to what happens to attrition. And I think --

The net.

Yes, it's the net. And as I said in my comments, we're up 30% in gross bookings in the year, for the year, but we're down 18% in terms of net. And net is gross minus attrition, basically. So that attrition number has continued to track at a level that is higher than we thought in early June, which was the basis upon which we were starting to put together our thoughts for the Investor Day. We pointed out all those various different risk factors, and the one that's related to attrition has been the one that has not had a change in direction. And that's the one that's been most significant.

We also, as Colin said, are being very cautious with respect to transient business. We have a lot of eggs in the transient basket for November through the end of December. And while we've had positive transient trends so far year to date, we can't assume that that continues and base our guidance to the street on those kinds of estimates. So we have continued to assume that they -- not as positive a comp on the transient as you've seen year to date.

Perfect. Thank you very much.

All right. I think we'll do two more questions, because I think we've only spoken with six analysts, six of our big analysts. We'll do two more and then any that we miss we'll deal with off line.

Nap Overton; Morgan Keegan.

Couple of things -- one, could you quantify the attrition fees collected and the impact on the second quarter versus first quarter and/or last year?

We were up $1.6 million in attrition fee collections 2Q this year over 2Q last year. And obviously those are all profit.

Okay. And then, David, what insights from just redoing your entire credit facility there? I mean, you've got an awful lot of insights right now about the overall availability of capital to the lodging sector. Any color you'd care to share about that versus -- to put that in perspective?

Yes. I would say that capital is still available in the lodging sector to companies who have a strong, well defined strategy, who have maintained good relations with their banks, and who continue to manage their businesses in an effective and efficient fashion. Redoing our credit facility obviously was more expensive than it was when we put it in place in February of 2007. That being said, a 100 basis point spread is relatively immaterial considering the concern that investors had placed on our maturity issue. I think we have a very supportive bank group. I think the bank market continues to be open to lodging companies and for us that was the most attractive market, given the relative cost of it.

Let me just add two things. Nap, a couple of things -- number one, most of the major banks are trying to shrink their balance sheet because of the stress and strains that they're under. And what I heard from three or four of the big banks that I talked to, David, was that what they are really doing is prioritizing those companies that they want to do business with. Because they can't do it the way they've historically done it, which is basically lend every company as much money as they had historically wanted. So there's some discipline as to whom they're lending money to, and the amount of money is also being shrunk because these banks are trying to bring the size of their balance sheets down.

Okay. Thank you.

One more question, Pam, and then we will conclude it.

David Katz; Oppenheimer.

If you've already covered this, apologize, but one of the things I'd like to get into or get a little better understanding of is the profitability level on attrition fees. Right? One of the things we look at with the other hotel companies is we can get to a RevPAR growth number, where profitability tips and margins start to go down. And in some cases it's 2, 3, 4% growth or something like that. In your case it's a little trickier, because of the prospect of those attrition fees. I presume that they are extremely high margin, those fees -- correct?

If 98 or 100% is high, then yes.

That's pretty high.

The only cost to attrition fees is to the extent we've booked that business through a third-party channel, then there may be a commission payable on that attrition fee, which can be up to 10% of the attrition fee. Otherwise, there really is no cost to the attrition fee.

So how do we think about a RevPAR growth number or a RevPAR level where your profitability tips and starts to go down?

I'm not sure --

Or is that not possible inclusive of the attrition fees?

Well, it depends on where the RevPAR decline is coming from. If the RevPAR decline is coming from group business that is under contract to us, then providing these companies are solid, or associations are solid, it doesn't work the way you sort of implied it works, because we will always collect an attrition payment, which is effectively our profitability. And by that I mean the contracted rooms and foot and beverage revenue less the estimated cost on that contracted revenue. By and large if the -- well attrition always works within the year. That equals the attrition payment we tend to collect. That's the way it works in our business.

And this is the frustrating thing, that we read so many times in these reports that get published how critical RevPAR is to our business and we sit and have this conversation it seems like every quarter. And our business is very different. Our business is a bit like being in the apartment renting business. If somebody decides they're going to leave early, they still have to pay for the next year. And that's the sort of business that we're in here. And the only way -- when RevPAR declines and it hits us from a profitability perspective is if that RevPAR decline is caused by a complete migration of our transient business. But as we've been painful in our pointing out, our transient business in fact is growing, not declining.

All right. Agreed and perhaps it's better, since we're past the hour, it's a better discussion to have off line. But there must be a point at which, if we look at the Opryland, where total RevPAR is down 1.8% but EBITDA margins or CCF margins look like they're up 160 basis points, there must be a point at which that RevPAR number becomes negative enough where you still collect the fees and the profitability is flat. And it's obviously quite a bit lower than most of the other hotel companies that we look at. And I wonder if that's perhaps a calculation that you've thought about.

Well, I think --

But, again, we could do it off line.

Yes, let's do that. Let's talk it off line and I appreciate your question, David.

Okay. Thanks.

Thank you. All right, Pam, thank you. We're well after time here. There's been lots of questions, and appreciate everyone's engagement. And, again, if there's any questions that you have in addition to the ones that have been asked, please feel free to call either David, myself, or Mark Fioravanti. And, again, thank you for your time this morning.

Thank you. And this concludes today's Gaylord Entertainment Company's second-quarter 2008 earnings conference call. You may now disconnect your lines and have a pleasant day.