Ryman Hospitality Properties Inc (RHP) 2008 Q3 法說會逐字稿

Welcome to the Gaylord Entertainment Company's third 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 1 800 642 1687 and the PIN number is 68135409. At this time all participants have been placed on listen only mode and the floor will be open for 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 third 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 third quarter 2008 earnings release.

Accordingly, actual operations and results may differ materially from the results discussed or projected in the forward looking statements. Gaylord Entertainment undertakes no obligation to update publicly any forward looking statements, whether as a result of new information, future events or otherwise.

I'd also like to remind you that in our call today we will discuss certain 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.

Thank you, Carter. Hello and good morning everyone. Welcome to Gaylord Entertainment's third quarter 2008 conference call. As always I will kick off our time today by providing an overview of our business and our perception of the broader hospitality industry and then our Chief Financial Officer Dave Kloeppel will add additional color on the details of our financial results this quarter and the Company's outlook for the rest of the year. And then we will save time at the end to take questions.

As I have described over the last few quarterly calls we are at a historic point in the US and global economy, which creates some unique challenges for business and management teams. The now certain domestic and global recession, the evaporation of the credit markets, the sub prime mortgage crisis and the consequential huge destruction in home price values have left the economy in shambles and the near term outlook remains miserable.

The impact the broader economy is having on the hospitality industry is substantial. Demand for rooms in North America has fallen and the outlook for the balance of the year and 2009 appear pretty dreary. Multiples on hotel assets have cratered and very few assets are trading. And alas, hotel stocks are trading at or near record lows as the market has priced in low expectations related to the bottoming out of the hospitality cycle and the potential impact of further contraction in consumer demand.

Indeed, Gaylord's own equity has traded at levels none of us ever expected to see. Yet, despite the poor economic conditions and negative momentum of the hospitality sector, Gaylord's group centric business remain pretty solid in the third quarter. While we are certainly not impervious to current economic conditions and I will discuss with you in just a moment how our business is being impacted our model continues to function as designed.

Our model performs particularly well in times like these because we have substantial visibility into the future bookings and earnings. Consequently, we are better equipped to manage our resources according to demand and a much more significant portion of our revenue is protected by customer contracts than you typically see with other hotel companies.

Speaking frankly, I honestly don't believe that there's anyone out there today who can truly predict where the dickens this economy is going or where all of this mess takes us, but what I will tell you with confidence is that our business model has been tested in some very good times and some very bad times and it works.

Our model works better than others certainly in times like these for a whole host of reasons, the specifics of which will become clearer as I take you through some of our results this quarter. So, let's get into some of the details.

You've likely noticed that our CCF results came in as expected. Despite modest increases in our same store total revenue we were able to deliver a nearly 4% increase in same store CCF over the third quarter of last year. You've likely also seen that our RevPAR and Total RevPAR figures aren't growing at the same rates we typically report. Now, while these slower growth rates demonstrate that we're not completely immune to the chaos the economy is currently presenting, the nature of our differentiated business makes RevPAR a rather ineffective measure of our success. Why? Because a very significant portion of our business is made up of large groups that commit to a specific number of room nights and in many cases to food and beverage spending as well.

In recent quarters we have seen an increase in attrition levels. This speaks to the groups that bring a reduced number of guests then they had planned to at an event at one of our properties. As you know we get paid by our guest for their contracted room nights even if they do not use all of them. Yet our revenue results are affected in short term because our accounting specifies that we book these attrition fees when we actually collect them, rather then when we bill them. Additionally, higher attrition levels mean fewer people are showing up to enjoy our out of the room offerings, which is a very profitable source of our revenues. Thus, our Total RevPAR is also negatively impacted.

Now, looking specifically at attrition levels this quarter attrition at our same store properties was up about 1% over the third quarter of last year to approximately 10%. For the first quarter of this year our attrition rate was 11% and then it dropped to 10% in the second quarter. I'm pointing this out to remind you that while the 10% mark is a large number than what we are accustomed to, customer behavior in the third quarter will indicate that things are presently not falling off a cliff as far as the group customers are concerned. So, in addition to attrition fees, what allows us to deliver revenue and CCF improvements despite deteriorating market conditions.

First, because we strive for perfection in every aspect of the guest experience and we continue to see increased loyalty and confidence across our brand.

Second, we maintained our focus on cost control and prudent management. This is another example of how our model works. Since we have a fairly good visibility into the future occupancy of our properties we can direct and shift our resources appropriately and with reasonable accuracy. Importantly, we do this without sacrificing a single step in terms of customer service and guest satisfaction.

With that, let me answer the next question that I often hear. Given the continued downward spiral of the economy how many guests are going to come and are they booking for future dates? Well, let me first answer the question by reminding you of the most basic tenet of our business. We are not as overly weighted to the transient and leisure customer as other hospitality companies. Of course, as I said we're not completely immune to the current market conditions.

Now, that the first month of the fourth quarter is behind us we have a better sense of how full year metrics are playing out and what that means in terms of our 2008 guidance. What has given us some pause is that as October has unfolded advanced holiday ticket sales for our attractions and transient room reservations are pacing slower than they were at this time last year, though they are still not as bad as one would think given the extraordinary events going on with our economy.

While transient customers represent only a small portion of our annual business, about 20%, the fourth quarter is typically the strongest transient demand period. Because of all of this, we believe that it is prudent to adjust our same store and Gaylord National guidance for the balance of this year. I will let Dave speak to our specific changes in just a minute, but I should add that irrespective of the weakness in transient demand, we remain very confident in our group business for 2009 and beyond. Specifically, same store advance bookings, a key indicator of the future health of our business, are trending well.

On a same store basis, which does not include the National, nearly 295,000 future room nights were booked in the third quarter, an increase of 4.1% over 2007. Additionally, advanced bookings at National were 95,000. The progress we've made in advanced bookings is the result of our continued commitment to customer service which keeps groups coming back to Gaylord year after year.

This is a reality because of the dedication to perfection that every one of our Gaylord team members takes to work with our customers each and every day.

Because groups spend three or four days at our properties, often without actually leaving the Gaylord Complex, every interaction matters. Customer satisfaction scores are truly a critical component of our business, so we monitor these results closely and take our success here very seriously. After a record third quarter in 2007 we're pleased that our loyalty and satisfaction scores were consistently high again this quarter.

While at the Gaylord National Property we remain pleased with the progress the hotel has made over the first few months of operations and believe that we're taking the right steps to improve our financial performance there including bringing on board a new General Manager, Phil Coffey, who has literally decades of experience in the hospitality sector and knows what it takes to successfully run a property of this size.

Additionally, construction is now complete and customers are realizing the full Gaylord service experience without disruptions related to the opening of this hotel. As most of you may know from disclosures we made earlier this year we received substantial surprise claims from the general contractor very late in the game. Presently, we're engaged in closing out the project with our general contractor and all subcontractors. It should be noted that we're currently disputing the total cost of the project with the general contractor and we're negotiating to resolve this dispute to our satisfaction. We will continue to update everyone as to any resolutions we reach on this matter, but suffice it to say we are committed to a resolution that keeps the best interests of our shareholders in the forefront.

As for other forms of growth, some of you may be wondering what this crazy economy means for our expansion plans. We recently told you about our excitement at the possibility of a new Gaylord property in Mesa, Arizona. We also have been continuing to work to bring Chula Vista to reality as well. Nevertheless, given the current state of these markets a modified pace of execution is without question prudent to make sure that we're successful in the long term.

We're still in the very early planning stages for both the Chula Vista and Mesa projects. Let me assure you that before we commit serious capital to anything we will be looking for evidence that the market conditions have improved and that each and every endeavor meets or exceeds the strict financial criteria we have always had in place. As always, we will continue to be very cautious with how we spend money.

One final point, I'm confident that over the months ahead you will hear more stories of companies slashing costs and services in order to stabilize cash flow, particularly those who have been consumed by private equity and are highly leveraged. Customers are not easily fooled and they will be able to identify those companies that are providing high levels of value to them versus those who are underperforming. To me, this period offers our company great opportunity to acquire even more new customers by enhancing, not slashing, our levels of service and this will be our focus over the months to come.

In summary, as we look forward to the rest of 2008 and to the beginning of 2009 we're encouraged by how our business has responded to the severe circumstances thus far and believe that it will continue to perform to our expectations despite the possibility of a short term impact with reduced transient demand in the fourth quarter and perhaps into next year.

We're confident that we're in a good position to continue to acquire new customers and to continue to provide the highest quality of service to our large stable of existing loyal customers who as a result will return to our properties for years to come.

And with that, I'd like to turn the call over to Dave to take us through the detailed financials. Dave?

Thanks, Colin and good morning, everyone. As always, I'll discuss the financial performance during the quarter and then take you through a more detailed review of the results of each of our properties. I'll then provide you with a bit of perspective as to what we are seeing heading into the first quarter of next year.

First, though, let me take a moment to further describe the general health of the business. Over the years we've had numerous conversations with investors and analysts who questioned our model, specifically related to how our business would be expected to perform in both a downturn in the economy and a hospitality cycle. Well, given where the markets are right now and continued strains on the hospitality sector we're pleased that our business has performed as it was designed in the third quarter and through the year to date. While the general health of our group business remains solid, we have some concerns related to our holiday transient business in the fourth quarter which we'll discuss later.

Our group centric business enabled us to deliver a 4% increase in same store CCF this quarter while year to date same store CCF is up 11.7%. At the same time, same store RevPAR was up a nominal 0.4% year to date. The difference can be partially attributed to the 28.8% increase in attrition we've seen in our same store properties this year, which we were able to offset a portion of with a 19% increase in transient room nights.

Outside the room spending, an important part of our business, continued to grow this quarter with food and beverage revenue per occupied room, so therefore the amount of spending per person staying in our hotels was up 2.9% over the same period last year. Banquet spending per occupied room grew a modest 1.2% and discretionary F&B spending in our outlet was up 5.7% as meeting attendees continued to show their intent to spend on our property. The Gaylord National continues to be very strong in outside the room spending having produced $268.95 of other revenue per occupied room, which is the highest across the entire brand.

Similar to last quarter, the increase in same store CCF was largely driven by increases in attrition and cancellation fees, our ability to efficiently manage operational costs according to demand, and favorable outside the room spending. As Colin described, while we've seen an uptick in group attrition versus the same quarter last year because of their contractual agreements with us groups still must pay a fee for those canceled room nights. This quarter attrition in our same store properties was 9.7%, as compared to 8.6% in the third quarter of last year, an increase of 1.1 percentage point. Additionally, attrition collections increased 18% this quarter at the same store properties bringing year to date fee collections to approximately $8.3 million, a 14.8% increase over last year.

With October now complete we saw same store total revenues decrease about 5.2% versus the same period last year due to lower banquet spending. Occupancy for the month was a solid 76% and same store attrition increased from 10% to 13% in the month of October. I should note that while those numbers certainly aren't pleasing to us as compared to our competitive set we're pleased that our RevPAR, which decreased about 4% in the month of October substantially outperformed our costs at RevPAR according to Smith Travel Research decreased about 8.8%. So once again, even in these difficult times, our business model is working and it's different.

Looking ahead, the increase that we've seen in attrition rates for this year and in particular that we've seen this slight uptick in October we expect to continue and we have forecasted and expect to continue in our fourth quarter guidance and in our guidance for 2009 which we'll discuss later.

While we continue to manage the increased attrition we're experiencing, meeting cancellation trends is another facet of our business we continue to watch closely. For the third quarter our cancellations at our same store hotels were up about 11,000 room nights for all future years. That's a roughly 17.9% increase over the prior year quarter. Roughly half of this increased cancellation affected near term bookings, those events scheduled to occur in 2008 or 2009. We were able to offset some of those near term cancellations with both increased transient room nights and a 12.8% increase in new definite room nights booked into 2008 and 2009. Despite the increased attrition and cancellations same store net bookings were still up 4.1% in the quarter.

Finally, same store transit room nights occupied increased 19% this quarter over the same period last year, while corresponding transient room revenues were up approximately 14%. The difference in the occupancy and revenue growth is due to some discounting of transient room rates in order to stimulate demand.

While transient guests only account for about 20% of our total business they account for a third of all room nights in November and December. And as such, we have been watching carefully to see how the current economic conditions will impact transient business in the holiday season and early indicators suggest that we think are a cautious approach for the balance of the year.

As of the end of October, advance ticket sales to our Christmas and holiday shows fell behind historical pace and that occurred during the month of October. While we've seen a modest increase in transient room nights on the books for November and December, we still want to be cautious in our outlook for the balance of the year especially given all the negative financial headlines we've seen over the past five or six weeks. Therefore, we've reduced full year guidance at our same store hotels from $197 million to $202 million to $190 million to $193 million. I should note, however, that much of our seasonal transient holiday business is drive in business and with the recent decline in gas prices we may see an uptick in transient drive in volume just booking with a shorter booking cycle then we've seen in the past. We have discounted the potential benefit of this and it is therefore not included in the forecast we've provided for you.

Before I describe our initial outlook into 2009 let's review this year's property level performance beginning with Opryland. Opryland saw a modest increase in revenue for the third quarter to $64.2 million. A 1.9% increase in ADR helped to offset the effects of lower occupancy levels of the property. Our continued cost management efforts contributed to a CCF increase of 8.2% with margins of 25.4% for the quarter, up 200 basis points. As a reminder operating specifics from 2007 reflect approximately 15,000 room nights out of service due to the now complete room renovation projects.

Turning now to the Palms in Florida ADR at the Palms decreased about 3% due to a decrease in transient ADR. However, by selling transient rooms at these discounted rates we were able to partially offset a decrease in corporate room nights this quarter. Lower occupancy levels contributed to a decrease in revenue of about 4.6%, a 6.6% decrease in RevPAR and a decrease in Total RevPAR of approximately 4.6%. Consequently, CCF for the property fell to $5.8 million for the quarter with margins at 16.7% as compared to 21.5% in the third quarter of last year.

As for the Texan, third quarter financial results showed consistent growth across the major metrics. A 7.6% increase in revenue led the solid RevPAR growth to $122.28. Strong banquet spending and a 20% increase in average banquet check drove a 7.6% increase in total RevPAR. Additionally, CCF increased 20.4% to $12.9 million, with CCF margins reaching 27.5%, a 290 basis point increase over last year.

And now moving to the National, the property continues to make progress and already has established a solid reputation within the meetings and convention industry. Revenue for the quarter was $55.7 million and RevPAR and Total RevPAR were $125.80 and $303.34 respectively. CCF fell below expectations at $10.7 million, while we were able to achieve a solid CCF margin of 19.2%. Lower than anticipated transient room night sales and lower group and transient ADR drove the shortfall. We continue to refine our transient strategy at the National and expect to continue to make progress in this area in 2009. Due to the weakened transient sales particularly as we move into the fourth quarter as well as lower short term local social catering activities in the fourth quarter we're reducing our 2008 full year guidance for CCF at the National from $45 million to $55 million to approximately $34 million to $37 million.

That having been said we remain confident that the National will perform to our expectations in 2009 and will continue to gain positive momentum and stabilize in 2010. In fact, as of the end of October the National had already booked 58.7 points of occupancy for 2009 and net room night bookings continued to be solid. By comparison, as of this time last year, we had about 46.5 points of occupancy on the books. So, sitting here today we're sitting here with almost 13 more points of occupancy already on the books for the National for 2009 than we had for 2008. Given the positive reviews and popularity of this property with our guests, we expect group business to be especially strong as word of mouth continues to spread through our network of planners and across the meetings industry.

While penetrating the local and regional transient market has been slower than we initially anticipated, we're optimistic about our success at Gaylord National in 2009 based on the scheduled completion of National Harbor and our ongoing efforts to make headway in this transient market. We currently anticipate CCF at the property of $65 million to $75 million next year.

During this earnings season clearly everyone is eagerly awaiting each company's outlook for 2009 and as you know our group focus model is unique and we've closely examined several trends driven by the current economic climate in calculating our forecast for same store metrics in '09. After carefully reviewing the 57 points of occupancy we currently have booked for '09 at our three same store hotels and after accounting for higher cancellation and attrition rates than we were experiencing in 2008 that we expect to continue through 2009, we expect same store RevPAR gross to be in the range of negative 3% to flat and Total RevPAR to be negative 2% to flat. Same store CCF we expect to come in at $185 million to $197 million.

Now, I'm sure many of you have been listening closely to the results and expectations of other hospitality companies recently and you'll notice the contrast this represents what the industry consensus for RevPAR contraction in excess of 5% in most North American upper upscale hotels. The stability of the Gaylord model is further highlighted when you hear others discussing recent transient demand while group business continues to be resilient across other hospitality brands. While Gaylord is not impervious to the downturn in both the broader economy and the hospitality industry we remain optimistic that 2009 will prove to be another successful year for Gaylord Hotels.

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

Okay, David. Thank you. A lot of information there to digest. Christie, we'll now open up the phone lines for questions. Thank you.

(Operator Instructions) Your first question comes from the line of Chris Woronka with Deutsche Bank.

Hey, good morning guys. Can we just get a little more color on kind of what happened at the National during the quarter in terms of your expectations relative to back in July and maybe just kind of frame for us how much of that business is transient. And then on the margin side, if you can maybe delineate a little bit from there as to what comes from transient versus your groups. And then if you still have confidence that you ultimately kind of get that high 20s, 30% stabilized margin there. Thanks.

Hey, Chris, it's Dave. When we came into the year and set expectations we anticipated far more transient occupancy there then we had then we see at our other three hotels. The summertime is a transient is a time where transient is more prominent at all of our hotels and we expected that to occur at the National as well. At that time, the developer was supposed to have completed National Harbor by the beginning of April when we opened, which didn't occur until actually just a couple weeks ago. We also when we set guidance at the end of last year didn't certainly anticipate the kind of economy we were going into in the summer of this year. So, the mix on the transient side was about 75% or 80% of the mix from our expectations.

The group side of the business has continued to be strong. Bookings there year to date have continued to be better than bookings that we saw prior year and that really applies to all booking periods in the year to year T plus one, T plus two and they continue to book the group business and the groups continue to spend. As evidenced by the comments I made in our script that if you look at outside the room spend at the National it was higher than all of the other hotels. So, it really set the standard for outside the room spend.

So, from our perspective the National is on track from a group perspective. We think next year is going to be a good strong year because as we said today we've got almost 59 points of occupancy on the books versus about 46 that we had this time last year for 2008. So, we're running with 13 points of occupancy kind of in our pockets. And it's up to us to begin to market the destination from transient perspective more effectively and now that National Harbor is complete and we have a more mature management team and marketing focus there we think we can achieve those objectives.

Okay. Great. Thanks.

You're next question comes the line of Bill Crow with Raymond James.

Good morning, guys. A couple of quick questions. The Dallas expansion. Any plans to halt that?

Phil, this is Colin. Good morning. I think what we want to do is repeat what we said I'm sorry, I'm sorry. I misheard you. I thought you said Phil; it's Bill. My hearing is not what it should be.

Let me re amplify what we've said in, I think it was early August. I look at all these expansions a little bit like one of these space shuttles going to the moon. We're on the launch pad right now and we're watching the weather. And the good news is that we don't expect to make any decisions about go/no go until end of the first quarter, some time into the second quarter of next year and the go/no go will be based upon capital markets, financing markets. It will be based upon how this economy is performing. So, right now I would say that we're on hold watching the weather.

Let's transition to the capital markets and financial markets. In the past you've talked about exploring strategic alternatives, selling several or all of your assets, et cetera. Any update on how those discussions are going or whether you've had discussions in that vain?

Well, look, right at this stage I would say we're not optimistic that in the next three to six months anything material is going to happen. One, because the multiples at which this industry is currently trading and two, the capital markets right now are just as you know gonzo. Look at what those MGM bonds were sold at a week ago. And so, we are not going to do anything silly here to bring new capital into this company. Our free cash flow next year will be fairly substantial and we are not in any rush to do anything that's going to put stress on our Company's balance sheet.

Right. And then finally, you're suggesting that RevPAR could be down 3% next year. Under that scenario what is your expectation for the cancellation fee recapture? Do you have a ballpark number?

Generally, Bill, we're anticipating that attrition and cancellation levels will be a little bit higher than we've seen this year year to date. Year to date we've collected about $8.5 million worth of cancellation and attrition fees. That number will probably grow to north of $10 million or so by the end of next year sorry, by the end of this year. So, you should anticipate that those collections will be $10 million to $12 million for 2009.

Okay. Thank you. Appreciate it.

Thank you.

Your next question comes from the line of Kevin Milota with JP Morgan.

I was hoping you guys presumably with the commentary that you gave on Chula Vista and Mesa that the programs with the Texan and the Opryland will be pushed out as well. With that said, what are your expectations for CapEx in '09?

David, do you want to take that?

Yes, sure. Kevin, the maintenance CapEx for us is about $45 million to $50 million a year and that's kind of the current plan at this point. We don't have any commitments to initiate any other construction projects at this point. We'll spend a few million dollars to complete some design that is under way, as Colin said, to get us through to the spring of next year. So, I think $45 million to $50 million is a reasonable number for right now until we make an announcement that we're initiating some larger expansion project.

Okay. I guess that would mean that the current business environment would you guys are still monitoring and would make a decision in the spring?

Yes.

Okay. Thank you very much.

Thank you.

Our next question comes from the line of Will Marks with JMP Securities.

Thanks. Hello, David. Hello, Colin. I had a question in terms of RevPAR and Total RevPAR. It seemed to be running at about the same pace and I think the guidance is for the same pace. I guess I would assume that the Total RevPAR figure would take more of a hit. Can you maybe walk me through that?

Let me try to rephrase the question to see if I got it right. Your supposition was that if booking pace is on or about the same pace but attrition is a little bit higher you would expect for Total RevPAR to be hit more than RevPAR?

Actually, no. Maybe my question should be that the average are you seeing any change in spending from the average guest because your guidance would imply that the guests are spending about the same? In fact, for next year even the Total RevPAR is even better than the RevPAR figure.

Right. Part of the change in growth rate is kind of the law of small numbers or the law of big numbers. You've got a bigger denominator on Total RevPAR than on RevPAR. But to answer your question more directly about outside of room spend we are still seeing increases in per occupied room spend even into the third quarter where the financial news got worse and worse every day from a headline perspective. We saw about a 3% increase in spending per occupied room. That's outside the room spending, not just inside the room spending. So, that's not quite as robust as it was in 2007 or 2006 from a growth rate perspective, but it still shows that we're able to drive average check and average ticket price, if you will, even in a difficult environment.

Okay. Great. Another question. Colin had mentioned strong cash flows for '09. You gave guidance on the CCF figure. Can you take that down a step more? You touched a little bit on CapEx, but what we should be looking at an absolute free cash flow figure for 2009?

Maybe, Dave, do it assume we do know capital things, just maintenance capital.

Sure. If you take stuff with a midpoint guidance which I think is around $220 million, we should be in the neighborhood of $90 million of interest expense next year. Our cash taxes should be in the neighborhood of $10 million to $20 million. And then our maintenance capital should be in the neighborhood of $45 million to $50 million. So, that should get you to around about $100 million of free cash.

Great. And my final question. Change in management at National. Can you discuss that? I may have missed that in your comments.

Well, the gentleman that we've brought in, Phil Coffey, prior to working for us and coming to our Company his previous job was the head of the Marriott World Center in Orlando. This guy is an awesome General Manager, someone that we have watched and competed with for many years and a man that has the same sort of beliefs in the way a business should be run as we do. He believes in the people side of the business and the customer service side of the business with great respect in the meeting planning community.

And I think we told the world about four months ago that we had the General Manager that opened the hotel for us left us and I don't think we should get in and discuss that in any way, shape or form. We had our Palms General Manager, Kemp Gallineau, managing the National for a three month period as we were searching for a new General Manager. This guy that we brought in I think it's an endorsement to our company that we were able to attract someone of his caliber and we're very delighted with the performance so far.

Great. That's all for me. Thank you.

Thanks, Will.

Our next question comes from the line of Steve Kent with Goldman Sachs.

Hi. Good morning. Just three questions just quickly. One is are you seeing increased competition from some of the other hotels? As you've noted, they're showing weakness going more aggressively after convention business. What are you hearing from your sales people as they try to offset their declining trends?

Second, are you starting to give any concessions to your groups? How flexible are you with penalties in this environment, again with meeting planners?

And then third, just because maybe I don't understand this, but on these cancellation fees do you put anything aside for potentially not being able to collect on them or whether these entities may not be able to pay the cancellation fee since they're collected over a few months or longer?

Let me try Steve, Colin. Good morning to you. Let me try and answer some of these questions and David if I miss parts of it, jump in. First, the increase what are we seeing from our competition? Obviously, I get calls from our head of sales all the time saying, "Hey, our salespeople are telling us that Company A is doing crazy things and Company B is doing crazy things in terms of waiving attrition fees and waiving this and waiving that." Our answer is look, our customer satisfaction scores are so much better than our competition. The meeting planning community loves our business. Our hotels are all recognized in the awards that are given out by these meeting planning magazines as the best in the business. We tend to turn down a lot of group business for the busy times. We are not going to be lemmings and follow craziness. Frankly, if you've got a strong brand I mean I've seen recessions before and what tends to happen are the weak brands tend to be lemmings and the strong brands hold their position. That's the position that we have taken.

In terms of concessions and penalties, what are we doing along that? Frankly, it really, really depends on who the customer is. A contract is a contract. That's the way we look at everything. I've got our General Counsel sitting to my right here and he will tell you the same thing. We have very strong strict enforceable contracts and our customers go into these contracts eyes wide open and understand that. However, the reality is if we've got a customer that comes to us and says, "Look, I can't do this convention next March, but I would like to do it next September or next October." And this is a customer that has been a loyal customer to us for five, seven years. Of course, we will work with that customer. But a contract is a contract and that's the way we go into these dialogues around penalties and concessions.

And then the whole issue of cancellation fees and are we making reserves for cancellation fees. Remember what we said in the script. We do not we bill the customer, but we don't book it until we collect it. So, you can take comfort from the fact that we're not accruing and running it through revenue and then a year from now we don't collect it and then all of a sudden we have a reserve to reverse the accrual. It doesn't work that way. We book it when we get it.

The other part of that whole debate is how good our credit granting procedures are. I think we have very good credit granting procedures. Our company we look at our over 60, our over 90 day receivables every single week. And frankly, they're tracking at levels that are very, very good relative to where they've been in past years.

So, I think summarizing we're not going to play the crazy games that our competition is playing. When it comes to concessions, a contract is a contract. And then when it comes to cancellation fees we'll book them when we collect them and we believe that all of the customers we do business with are credit worthy.

Okay. Thank you.

Thank you.

You're next question comes from the line of Nap Overton with Morgan Keegan.

Good morning. Most of my questions have actually been answered, but I'm curious. Did you mean to indicate from your prepared comments that you still expect Gaylord National to stabilize at a CCF north of $100 million by 2010?

Nap, one thing that I don't want to do is get too far ahead here because I don't know. You've been around a long time. I've never seen anything like this economy. I doubt whether you've ever seen anything like this economy and I think what we would like to do is before we get into projections about 2010 I'd like to understand where the next 90 days to 180 days are going.

But let me make one observation about the National, if I good. Just bear with me here for a second. One of the questions that I think is implicit in the questions that we had on the National this morning and your question, too, is is this another gaming facility that you've seen built in Las Vegas over the last three to four years. It costs a lot of money and basically doesn't make a lot of money. Is that sort of the implied question that's going on here? We believe categorically unequivocally the answer to that question is no. We have almost 58 points of occupancy on the books for next year. The amount of activity we're seeing with meeting planners gets stronger and stronger. Our customer satisfaction levels are going up in that hotel.

I had a conversation last week with one of the the week before last with one of the top meeting planners in the pharmaceutical industry. They just held a conference in our place two, three weeks ago. This person said, "I could not believe the quality of this convention, both the food, the whole service levels, the quality of the asset and I have told our senior management in our big pharmaceutical company that this is the place we need to hold our business." That's the sort of stuff that we're hearing on this hotel. So, this hotel will make us a lot of money.

Unfortunately, we've opened it in a blasted tsunami. The truth of the matter is in the first two months because of late delivery of the product we didn't do a very good job there, but things have really improved. There's very little we can do at this stage about the decline in transient, but the group side of this business gets stronger and stronger and I believe 2009 the hotel will do very well and I think in 2010 provided we're not facing an economic depression across this globe, I think 2010 will be even stronger and this hotel, like Texas, like the Palms, will continue to build and get stronger and stronger and stronger and will produce a decent return on capital here.

Nap, I would add to Colin's comments in terms of what helps us have that confidence is if you look at the booking space, the National has continued to have even through this economic downturn we're running I think 60% year to date ahead of what we had last year in terms of bookings for the National for future periods. If you look at the bookings for the next couple of years that's where we're seeing some of the biggest increases. So, the National is continuing to give us confidence that it's going to generate sufficient returns.

And because of the events of yesterday and all of the activity that's going to be seen in Washington, we pretty much discounted that for next year. We just have. So, I'm very optimistic that this hotel within a reasonably short period of time will show the type of performance that we expect to see from this type of investment.

Okay. All right. The second thing I've got in terms of this go or no go decision on expansion some time in the first half of 2009, the planned opening dates for those are late 2010 and early 2011 if I recall correctly if they were to move forward on a reasonable schedule. Isn't that strategically important to move ahead with those given those fairly distant opening dates? Or do your worst scenarios include continued difficult trends through that kind of through 2010 and into 2011?

Nap, the problem that David and I have and our Board has is really understanding what is going to happen three months from now, let alone three years from now. And I think we don't need to sit here and say why we believe that. You read the papers. You're in touch with the calamities of the last 90 days. I don't know how all of that, frankly, will be extrapolated over the next one to two years. So, we're doing what we think is the right thing by just putting a pause on any material capital decisions until we get comfortable that this economic nightmare that this world is facing, not just this country, is well on its way to healing. And so, we're not going to risk the Company and do silly things given the state of this economy. We're going to be very cautious and prudent here over the next six to nine months.

Nap, we're in a very, very comfortable financial position right now. We have no maturities until 2012. We've got $300 million available on our line of credit. We've got $50 million of cash on the balance sheet. We're going to generate $100 million of free cash next year. So, those are all good facts in a market where liquidity is extremely scarce. So, until we see significant changes in the market for liquidity and some improvements in the economic environment, we think it's appropriate for us to continue to manage the balance sheet cautiously.

I would say to you and it's wrong for me to get in discussing other corporations' decision making, but it catches my attention and David's attention when we see MGM last week selling bonds at 15% five year no call in order to fund capital projects where they have a gap. A company that a year and a half ago was trading $85 a share was considered to be the very best capitalized gaming company in America.

So, the world has changed and it would be irresponsible of us to pretend that it hasn't and for us to just blindly go on with these capital projects like the world was the same. And so, we're going to be very cautious here and very prudent and we're going to run our business the right way. And when things start to improve, hopefully the well run companies will have the ability to take advantage of the environment that will be improving.

Okay. Thank you very much.

Your next question comes from the line of David Katz with Oppenheimer.

Hi. Good morning.

Good morning, David.

Sorry about that. A couple of quick ones. I just to clarify firstly some comments you made about October trends. We think we heard you say revenue for same store hotels in October was down 5.2%. Did you make some other comment with regard to RevPAR versus Total RevPAR? I want to make sure we have that straight.

Yes, David. The number in the release, the 5.2% is preliminary Total RevPAR, if you will, because we have a comparable number of rooms. So, 5.2% is the Total RevPAR number. The RevPAR number is closer to 4% and the comparison I was making in my comments was that while we we're down 4%, we look at the Smith Travel Research for our competitor spend across all of our markets they were down 8.8%.

Got it. And then on net definite room nights booked, you talked about future bookings which appear to be remaining on a room nights basis at the same level. What kind of rate level are you booking those at relative to what you were booking a year ago?

Rate generally has held up frankly a little bit better than we had anticipated. We're showing rates tend to be more competitive for a shorter term booking windows, less competitive for longer term booking windows. So, Steve Kent's question earlier about competition from other hotels, that makes it more difficult for us to really push rate for the short term, but rates for the longer term are holding steady much as they were a year or two years ago.

Right, but let's be clear, David. The other thing is that our RevMax that literally identifies a rate per day out for the next five years. Our sales people when they're making a booking for 2010, 2011 have to be within a very tight bandwidth of that RevMax pricing grid for that particular day. If it falls outside it has to come up the chain of command to get approved. I think that the RevMax rate for the third quarter was within the bandwidth of target. So, embedded into our RevMax pricing I'm giving you a lot of detail here our price increases year over year over year. So, we're not slashing our prices.

The other thing, David -- let me just say one thing. There are two parts to October that got us a little nervous. One was the fact that, as David just described, we were off 4%, but still we had very high levels of occupancy in the month of October. We had a very good month. The three hotels did about $58 million in revenue, which is tremendous. But the other thing was the forward bookings for the Christmas period. What we monitor on a day by day and week by week basis how many ice tickets we're selling, how many Rockette tickets we're selling, how many room nights we're booking for our weekend packages for November and December.

And it's interesting because our weekend packages, our packages actually running at or around where we would want them to be, but what we've seen is our Rockette tickets off about 10,000 seats to pace. We normally sell 120,000, 130,000 of those. So, it's not gone into the ditch. It's just that we're seeing a pause in discretionary spending here and we just believe that we should be cautious about that and reflect that in our guidance. It's no good being Herculean here in the short term. So, I've given you probably too much data there.

No, I think actually the no good Herculean comment is right on. And one last quick one since I know we're running out of time here. With respect to you know we've tried to go through the exercise of figuring out what the offset from attrition fees is and how that plays out in some sensitivity analysis. To the degree that you can talk about your fixed cost base at the various hotels versus variable, meaning if no one showed up hypothetically, of course, what kind of fixed what percentage wise or anything, what kind of fixed cost base do you have at the various hotels that would need to be offset? Or is this a better question for offline?

I would say it's probably better off line because we can get into an enormous amount of detail if you want to get into that question. The fixed cost basis of the hotels are not insignificant, but they're also probably not the majority of our costs. The variable costs relate to cleaning the rooms, the cost of the food that we would otherwise serve them, the servicing of the food and beverage outlets, the servicing of the banquet functions and those kind of things. So

Such as, we can turn the lights off. We don't expect that happen. We saw what happened after 9/11 and our business performed pretty solidly.

Okay. We'll circle back. Thanks very much.

Thank you. And just to follow up on David's question. He's really driving at a question of what happens in an extreme attrition example. October was the highest attrition we've seen year to date at 13% and I think the number we saw post 9/11 was close to about 20%. That was in part due to lack of available flights and fear of being on airplanes. In our 2009 expectations we have assumed that elevated levels of attrition such as we saw in October continues through 2009. So, to the extent that we think the economy is in a bad patch and it's going to remain in a very bad patch, we're assuming that into our 2009 guidance.

That's a good point. Okay. I think we'll do one more question, Christie, please. And then if there are any other questions the individuals can either call Dave, Mark Fioravanti or me off line. Thank you.

Thank you. Your final question comes from the line of William Truelove with UBS.

Last one. So, my biggest question is given that your hotels are mostly group focused and if you see a slowdown in transient business what can you do from an employee level at the hotel point of view? Because I would assume most of the employees are there to focus on the group services. So, if transient falls off is there how do you correlate that with the change in staffing levels at the hotel?

Okay. I think I understand the question. Good question. We have a bunch of staff at each of our hotels who are full time and then we have a bunch of staff that are on call part time. And it changes from hotel to hotel because group mix slightly changes from hotel to hotel. But we have the ability to scale our employee base, our star base, to a five point drop in transient occupancy. We have the ability to do that because of the relationship between full time and part time.

The other key component to that, Will, is if you think about the travel patterns of the group business versus the transient business, especially as you get into holiday periods like is coming up. The transient business is concentrated into non group patterns. So, we really shift around Thanksgiving just after Thanksgiving from a group house to a transient house. And so, to the extent that transient business levels are lower we're going to adjust staffing appropriately.

So, just to be crystal clear here I think you answered the question, I just want to be absolutely clear. If you have a large group show up, you need a certain amount of staff obviously to run that. And then all of a sudden transient isn't there. So, you're saying during that time period where there's a large group but not much transient you're able to still adjust the staffing levels appropriately? That's what I worry about on the margin front, right?

Yes, but most of the large groups, a lot of the large groups fill the hotel, so the hotel is full. What happens is the transient fill around the edges. There will be 100 rooms here, 200 rooms here, maximum 300 rooms in all the hotels outside of National because we have 3,000 rooms there. But typically National we're not doing more than 300, 400 room nights a night in transient business save the Christmas period, save the holiday period when we'll be doing 1,000, 2,000 people there. So, it's not as problematic as I think you describe it because the transient piece tends to fill around the edges every one to two weeks.

Okay. That's clear. Thank you so much guy.

Thank you. All right. Thank you everyone for joining us this morning. And again, any other follow up questions please feel free to call David, Mark Fioravanti or me. You know our telephone numbers. Thanks for joining us this morning. Thank you very much.

Thank you. This does conclude today's conference call. You may now disconnect.