Ryman Hospitality Properties Inc (RHP) 2008 Q4 法說會逐字稿

Welcome to the Gaylord Entertainment Company Fourth Quarter 2008 Conference Call. Hosting the call today from Gaylord Entertainment are Mr. Colin Reed, Chairman and Chief Executive Officer and Mr. David Kloeppel, President and Chief Financial Officer. They are also joined by Mr. Mark Fioravanti, Senior Vice President and Treasurer, and Mr. Carter Todd, Executive Vice President and General Counsel.

This call will be available for digital replay. The number is 800-642-1687 and the pin number is 81082699.

At this time all participants have been placed on listen-only mode and the floor will be opened for your questions following the presentation.

It is now my pleasure to turn the floor over to Mr. Carter Todd. Sir, you may begin.

Good morning. My name is Carter Todd and I am the General Counsel for Gaylord Entertainment Company. Thank you for joining us today on our fourth 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 fourth 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 the result of new information, future events or otherwise.

I would also like to remind you that in our call today we will discuss certain non-GAAP financial measures, and a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures has been provided as an exhibit to our earnings release and is also available on our Web site under the Investor Relations section.

At this time, I would like to turn the call over to our Chairman and Chief Executive Officer, Colin Reed.

Thank you, Carter. Good morning and welcome everyone. Thank you for joining us today to discuss Gaylord Entertainment's fourth quarter and full year 2008 financial results.

As usual, I will begin our conference call with an overview of our business beginning with our results for 2008 and then I will provide you with some perspective on what we are seeing for 2009. Our Chief Financial Officer and President, Dave Kloeppel, will then provide some additional color on the financial results for this quarter and 2008, as well as more detail on the Company's outlook for the rest of the year. And then we will open up the call for questions.

I want to mention right up front that today's call is about reporting our operational highlights for the fourth quarter of the year and to give you some sense of what we believe 2009 holds for the Company. We know that some of you may have questions related to our recent announcement that we will be nominating several new independent director candidates for our Board of Directors.

We can confirm that we are in discussions with various shareholders on this topic and that we are fully committed to putting forth a Company-nominated slate of Directors that will act in the best interest of all shareholders. We will make a public announcement regarding the slate at the appropriate time, but until then we will not be providing any specifics related to our dealings with these shareholders, and we will defer answering questions on the subject on this call.

Of course we will update you when we have something concrete to report.

Now let's get into the results. We all know that 2008 was an extremely difficult -- was extremely difficult on the American and global economies as market forces significantly slowed and consumer and corporate spending was cut back.

In every industry, business and management teams continue to grapple with the new and unique challenges that have become part and parcel of this unprecedented environment. Our business, too, has been affected by these issues and our management team has been working diligently to develop and execute plans to successfully navigate us through these difficult times and we are confident that we have the right strategies and tactics in place.

But before we get into that, what is important to tell you is that our business held up pretty well in 2008, especially when you compare us to others in the hospitality industry. The following few examples helped distinguish our business performance in 2008.

For the full year of 2008 our hospitality revenue increased 26.7% and our same-store hospitality revenue increased 1.4% versus the prior year. We maintained more than 70 points of occupancy across our same-store hotels during the fourth quarter and nearly 75 points of occupancy for the year. We achieved solid same-store CCF results and we reported a strong 29% same-store CCF margin for the year.

This performance was possible first because of our unique group-centric business model and, second, because of the cost-saving measures we began putting in place in early 2008. This performance also underscored the significance of the brand that we had built and the loyalty we had developed with our customers -- the meeting planners.

Now let me remind you that we have 80% awareness amongst meeting planners and meeting planners for us really control the lion's share of the spend that occurs at our property. Meeting planners are ranking us best in class primarily because of our attention to service; and our unique culture makes it highly likely our customers leave happy and are anxious to return.

Now, because of all of this, we are confident that our business will continue to do well despite the economy, and that we will come out of these volatile times in relatively good shape. It is important to note that we entered 2009 with roughly 51 points of group occupancy already on the books for the year. And while this number is 5 to 7 points down from traditional levels when compared to previous years because -- previous years, due to the cancellations we've seen over the last couple of months, it still provides us with a level of confidence that 2009 will be better for our Company, relative to the overall lodging industry.

However, one must be realistic and we recognize that we are in historic times, and that visibility into the future even for our business is more limited than even a few months ago. Certainly the speed by which things have changed and are changing makes it difficult to provide you with an exact idea of what is to come.

To be more specific on the rapid deceleration our industry experienced beginning in the latter half of 2008, Smith Travel recently reported that while the total US lodging industry saw a RevPAR decline of 1.9% for the full year. The fourth quarter alone saw RevPAR declines of 9.8%.

This deceleration doesn't seem to be getting much better. Preliminary January 2009 data, also out of Smith Travel, indicates that RevPAR for the total US lodging industry was down 15 to 17% versus January 2008.

In our hotels, cancellation and attrition levels were elevated most of the year compared to prior periods. But they rose substantially in November through January, as companies and groups have cut costs and eliminated non-essential spending, due to the economic pressure or due to fear of negative optics and increased scrutiny around holding or attending retreats and meetings in the current economic climate.

We are also seeing meeting planners defer decisions, all of which has translated into shorter booking windows and less visibility.

Collectively, when you put all of these factors together, we decided to be prudent and modify our guidance for 2009 to better reflect the issues we know we will face as a business in the next 11 months. I will let Dave provide a lot more specifics here.

So rather than spending more time looking backwards, let's deal with the central question of the day -- what are we doing about all this?

First, we have been aggressively taking steps to reduce costs and maximize profitability. Now early in the second quarter of 2008 we brought in one of the nation's leading consulting firms to help us take apart our corporate and SG&A expense in order to rightsize our organization, given the deteriorating business environment that we were witnessing at that time.

Simultaneously, we embarked on a comprehensive systematic review of our operating processes with the goal of identifying inefficiencies and waste that could be eliminated. The initial process has yielded several millions of dollars in cost savings across the organization, but more importantly gave us a template to help us manage our cost more aggressively if we experienced significant business deceleration due to the economic environment.

We are experiencing lower volumes and are implementing further, deeper cost cuts that include, among other things, salary freezes across our entire management ranks, elimination of certain benefits, staff eliminations, curtailment of travel, all of which will resolve in a -- what we call internally our Phase 2 cost savings initiative of approximately $35 million.

I can assure you that we will not cut costs in areas where it will impact customer service, as it is one of the fundamental principles that differentiate our Company from the big box hotels of other brands. I know that you are hearing about other companies slashing costs and services in order to stabilize cash flows.

Second, we continue to be diligent in collecting attrition and cancellation fees. As we have mentioned to you in the past, the contracted nature of our group business to a large extent protects us from some of the degradations to profitability that normally occurs in transient orientation hospitality businesses as occupancies decline.

In 2008, we were pretty successful in offsetting some of the lost revenue that occurred. And we believe that these fees will again aid us in 2009 in mitigating margin erosion.

Third, our cost control measures have not been solely focused on the income statement. In 2008, we put the brakes on our capital expenditures in order to preserve liquidity. And we will continue to do so in 2009 as the economic mess continues to play out.

Finally, and very importantly, let me touch on a point that you likely saw in our press release this morning. We are turning our sales efforts to focus aggressively on the short term, specifically on 2009 and 2010, where group occupancy has fallen off a bit as I discussed earlier in this call. This is an important shift for our organization since, historically, most of our sales efforts have been geared towards booking rooms many years in advance. As cancellations for 2009 have increased over the last couple of months, it leaves us with room space available that we can sell against and we are focusing our efforts to do just that.

We are also increasing our marketing at first to attract more transient leisure business to fill some of the short-term availability left vacant by convention and meeting clients. These efforts will reach and communicate with new transient guests, building awareness of our brand and creating leisure demand for our hotels in 2009 and for the years to come.

Now some of you may think this is a tall challenge. But if you look at our same-store transient room solve in 2008 over 2007, we increased by 12.6% due to these types of efforts.

Now let me quickly turn to Gaylord National. I'm proud of our performance and how this property is coming along. National continues to gain traction in terms of both transient and group production, and because we have been able to book the hotel with more than 1.4 million room nights to date, we are confident that we will continue to see additional success at this property.

Incidentally the National has over 86 STAR (sic, see press release) accounts on the books for 2009. Just to refresh everybody's memory, STAR accounts are groups that turned out with 600+ people. And so because of this, this should be a pretty good year for this hotel.

Moving on to our new development project in Mesa, Arizona, I will repeat that we remain committed to an exceedingly prudent approach to capital commitments. And don't forget that the development of this property is in the very early stages and we won't have any material capital expenditures related to it for quite a while.

In conclusion, let me reiterate that I was pleased with our performance in 2009. I beg your pardon, our performance in 2008. But that feels to me like a lifetime ago.

We are managing the business to maximize cash flow by minimizing expenses and capital expenditures, because this slowdown feels like we will be here for a while. Fortunately, we have levers to pull and our capital structure is in good condition. 2009 will be a tough year, but we will come through this a better company.

With that, what I'd like to do is turn the call over to David to go through some details of the financials. David.

Thank you, Colin, and good morning, everyone. As I typically do, today I will walk you through the financial performance of our business for the fourth quarter and for the full year; and then I will provide a more detailed review of the results for each of our properties and share our outlook for the Company during the first quarter of '09 and for the first year -- and for the full year.

Given the continued unpredictable and challenging trends of the hospitality industry of late, and the concerns about what lies ahead, I recognize the desire to focus on 2009 rather than our recent results. But before I share our outlook for '09, I do want to make sure we don't overlook our performance in the last quarter and the full year, which were both fairly good.

Our unique group-centric model positions us relatively well to handle the pressures of a normal cyclical downturn in the economy. Though we are certainly feeling the effects of the recession and will be very cautious about our outlook for 2009 as a result, our model performed as it was supposed to in 2008.

We faced significant revenue headwinds in the last part of 2008, as attrition and cancellations among our meeting clients substantially increased. But as it is designed to do, the contractual attrition and cancellation fees inherent to our model helped to protect our bottom line. That is a big reason what we have not seen as significant of an impact on our revenue and margins relative to our peers.

Also as Colin mentioned, in the early months of '08, we began to take a hard look at what was in our control. The way we commit capital and the way we spend money. Our management team began focusing on creating a leaner and more efficient operation without sacrificing the industry-leading customer service that differentiates us in the minds of guests and meeting planners.

Our efforts paid off and we were successful in managing our costs down as revenue declined. These efforts, along with the increase in attrition and cancellation fees, enabled us to deliver a 7.4% increase in same-store CCF and drive a 1.6 point increase in our same-store CCF for the year when compared to full year 2007. Even in the face of a rapidly decelerating lodging industry late in the fourth quarter, we maintained our same-store CCF margin to achieve 27.4% for the quarter.

Our efforts were not solely relegated to our hotel business though, as our focus on cost containment yielded an 18.4% decrease in corporate overhead in the fourth quarter. I will discuss our efforts on cost more when I get to our guidance for 2009.

Now let me walk you through the performance of our Gaylord National property. After three full quarters, the property continues to impress our guests and has become a destination of choice for meeting planners across the country. Revenue for the quarter was $51.7 million and RevPAR and total RevPAR were $112.11 and $281.44 respectively.

For the full year, the property generated $169.2 million in revenue, but CCF fell slightly below our guidance at $33.1 million. Lower-than-expected transient room night sales, as a result of the construction delays on the completion of the National Harbor complex, were partially to blame. However, we have made great progress at the property and as evidenced, we were able to achieve a solid CCF margin of 19.6% for the year. As we continue to refine our strategy to make additional progress, we remain confident in this property's ability to grow its reputation as a world-class facility.

The property is already achieving impressive customer satisfaction scores that are on par with the industry-leading levels we achieve across our portfolio. It is also important to note that we entered 2009 with roughly 60 points of occupancy on the books for the year -- of importance, that is 9 percentage points higher than we have at the three existing hotels with the short and the long term.

And with that, let's move on to our outlook for 2009 which I'm sure is where you want to focus your attention.

As you know, the market environment is making it increasingly difficult to provide accurate guidance and during the fourth quarter we began to see significantly more pressure on revenue, which has only complicated the matter further.

Given the uncertainty about what is to come, many companies both in and out of the hospitality industry are choosing to refrain from providing any kind of guidance for 2009. But as we have said in the past, under normal market conditions, our group-focused model gives us unique visibility into our performance.

That being said, we are living in unprecedented times and as we took a hard look at our business and began to discuss and debate our prospects for '09, we determined that it was prudent to factor into our guidance several key assumptions.

Our outlook assumes there is no short-term catalyst to change the direction of the economy. And all segments of the economy which are our customers are under pressure to reduce expenditures and we are recognizing this pressure in our outlook. We are also recognizing the significant cost savings initiatives described earlier in the call by Colin which provide a profitability cushion.

Now for the more specific assumptions built into our forecast. First, we have assumed that attrition and cancellation levels remain at the elevated levels we have witnessed in the last 90 days.

To give you more color on the subject, we have seen cancellation levels rise for approximately 29,000 room nights that we received cancellations for in the fourth quarter of '07 and January of '08 for the '08 year to approximately 55,000 room nights canceled in the same period in '08 and '09. That's a roughly 100% increase in cancellations in that short-term period.

That coincidentally works out to be about 3 points of occupancy of decline on the same store hotels. Similarly, we have seen the impact of this economic turmoil as group attrition has risen from levels ranging from 9 to 11% during 2008 through the third quarter to a range of 12 to 14% late in the fourth quarter of 2008. And these increased levels of attrition are factored in to our forecast.

Now second, we believe that our change in tactics to focus on short-term bookings for 2009 will yield the results we are targeting. While many meeting planners appear to be holding off on contractually committing to events and dates, demand is still there; and we are confident that we have the value and service as well as the properly focused sales team necessary to capture that short-term demand.

That said, our current guidance level does not assume heroic production from end of year meetings. In fact, the bottom end of our guidance range assumes that we had no material revenue for that which is already on the books. In other words, any new bookings only offset cancellations and attrition.

Third, as Colin said a few moments ago, now is not the time for companies to be in denial. Consequently, our cost reduction planning that we put in motion during the second quarter of last year is allowing us to implement an even deeper level of cost reductions that will yield approximately $35 million of savings in '09.

These reductions include, among other things, salary freezes across our entire management ranks, eliminations of certain benefits, staff eliminations, curtailment of travel, among others. So should these assumptions hold true, we will achieve RevPAR results that we have projected and as such we'll deliver the results in line with our CCF guidance.

One last point on the subject, we have essentially frozen discretionary capital spending until we see a brighter light at the end of the tunnel.

Now getting on to the details of the guidance. Based on the assumptions I've just outlined, we have recalibrated our outlook for '09 and as a result, we expect our same store RevPAR for the first quarter to decline 18 to 20% when compared to the first quarter of '08. Also in the first quarter we expect same-store total RevPAR to decrease 17 to 19%. For the year we are anticipating same store RevPAR declines of 9 to 12% and total RevPAR declines of the same level, 9 to 12%.

When you bake in the cost savings and you take into account our elevated collection of attrition and cancellation fees, our margins in 2009 are projected to be at a pretty healthy level. We are, however, adjusting our same-store CCF guidance to $160 million to $170 million.

Despite the negative pressures of the current economic climate, we do continue to see the Gaylord National detraction, both in terms of transient production and group production in the market. The National started 2009 with approximately 60 points of group occupancy on the books, which was higher than any of our other properties.

The National also continues to benefit from the fact that it is fresh and new in the market. Transient room nights increased 25% from the third quarter to the fourth quarter of 2008 and preliminary results for January were positive.

While we are confident of this property's ability to grow and drive demand, no hotel is immune to a rapidly deteriorating economy. And we are therefore reducing our guidance for the National to $60 million to $70 million from $65 million to $75 million.

The Opry and Attractions group has also felt the impact of the substantial slowdown in consumer and group spending and despite the strength of our unique entertainment offerings, traffic has declined thus far in 2009. And we are therefore adjusting guidance modestly to $12 million to $13 million.

And in light of the successful results of cost-cutting initiatives we discussed previously, we are adjusting our Corporate and Other CCF guidance for the year from a loss of $49 million to $46 million to a loss of $40 million to $44 million. And consequently, we expect our total Company CCFs to be between $188 million and $213 million.

So that is where we are, but needless to say, this is a dynamic time and it requires all of us at Gaylord to be nimble and and on our toes. And with that I'll turn the call back over to Colin.

Okay, David. Thank you. We will open up the line for questions now, please.

(Operator Instructions) Chris Woronka with Deutsche Bank.

Good morning. Colin, I understand your comments upfront. I won't ask you specifically about the Board, but I did want to point out that since the last call, I think we have all seen a number of filings from some third parties. And I think you guys have been pretty gentlemanly in your written responses to those.

But I wanted to ask you if you wanted to comment right now on how you feel internally in terms of what are these third parties looking at, doing differently? I mean you guys have been around for a while. You've seen different cycles.

What is it that you think an outsider has that you guys have not considered or looked at? Is there anything and then what might that be? Thanks.

Chris, I'm going to stay true to the comments I made at the beginning of this call.

Look, I learned a long time ago that all businesses probably can be improved by different eyes and ears on it when you have totally different views and thoughts coming into it. So we are not adverse to that and that is one of the reasons why our Board acted the way it did last week to agree that we should put on several new independent directors.

If we were entrenched in our views, we wouldn't be doing those types of things. And so I think that it's clear from the communications that TRT had the week earlier that TRT is receptive to talk to us, we to them, and I think at this stage we just need to leave it at that and when we have more things to say, we will do so.

Okay. Thanks.

Kevin Milota with JPMorgan.

I was hoping you could provide some commentary on where in particular you are experiencing the most weakness in regards to forward bookings? Could you give some details on property type or different types of group whether it be corporate or association or different industries where you are seeing the weakness?

Yes. We are seeing the reticence on behalf of primarily the corporate customer. The corporate customer seems to be going into, for want of a better word, a nuclear winter here. I think every organization is concerned that things could play out and get worse before they get better. So I think everybody in corporate America is being very cautious on continuing to do things the way they have historically done them.

We are still in active engagement with most of the association customers and, frankly, there are corporate customers that are looking to book business. And if we didn't see that and didn't believe that, we wouldn't have refocused our meeting, our sales folks to try and deal with the opportunities that are out there today.

But it is primarily corporate, but we are still seeing activity on the association. Dave, do you want to add any other color on that?

I would just echo Colin's comment on we are still seeing good levels of bookings for periods like 11 and 12; and one reason we are refocusing the sales force is because as we sit here today, from a [pace] perspective we look at the revenue on the books. 2011, 2012 look pretty healthy and (multiple speakers).

That's an important point. That is a very important point. Give the folks some color about our pace for '11 and '12.

Yes, as we sit here today and look at '11 and '12 and the revenue on the books, it is running at levels that are well in excess of where we saw the same period out T+3, T+4, in the last several years. So through the down cycle of '08 and early '09, we still have been successful in putting good business on the books for '11 and '12.

So consequently, late in 2008 we began to look at how we could refocus the sales force, and how we could refocus our marketing efforts around generating better and higher qualified leads and being able to process and close those leads from a sales perspective. And so we think those are going to have a nice benefit for us in 2009 and 2010, but as I said earlier in my comments, we haven't really baked those positive opportunities into the guidance we have given you.

Just one last thing. The CCF guidance, does that include any assumptions for cancellation or attrition fees?

Of course we expect to collect cancellation and attrition fees . We were successful in collecting them through all of last year and I think our collection on attrition fees was around 20% higher last year than it was the year prior. We are not assuming that we are going to collect substantially more next year than we did this year because, again, it doesn't pay for us to be heroic in terms of how strong our assumptions are.

But we do believe that our contracts are strong and valid and binding. And we are prosecuting those collections vigorously and continuing to collect

Yes you said not -- we don't expect to collect substantially more next year versus this year. I think you mean 2009 versus 2008.

Correct.

Yes. And, look, contracts are contracts. There's been a few analysts that have written that entirely likely that corporations that have contracts to collect fees for canceled events will probably not get it. Because the meeting planner will say if you come after us, we are not going to give you future business.

We book typically 250 STAR accounts a year. That's 24,000 historically before this turndown that book every year. And a deal is a deal. We have set aside these blocks of rooms literally years in advance and a deal is a deal and we have a contract and we don't intend to not prosecute this.

Okay. Appreciate it. Thanks.

Will Marks with JMP Securities.

Thank you. I had some questions. First of all on the cost-cutting. Can you give us a sense of where that falls? How much of that would be in the SG&A line?

Basically all of it. It's corporate and -- well, no. No, it's not. That is not quite right. David -- ?

Well, you give it a pretty significant $30 million to $35 million cost reduction. So I assume that (multiple speakers) fair amount.

Yes. No, some of it is -- you are absolutely right. Some of it is in the direct operations of the business.

About $20 million to $25 million is going to be in the SG&A line and the rest is going to be in operating areas.

And should we assume that -- how should we look at 2008 versus 2007? I assume we don't look at the SG&A line as being, as dropping $20 million, $25 million in 2008. Some of it was done in 2007 or some will be in 2010?

Ask that question again.

Sorry. I didn't ask it correctly. So should I assume that a full $20 million to $25 million is cut from the 2008 SG&A of roughly $49 million?

Well no. Your SG&A and Corporate are two different (multiple speakers).

Corporate is a -- if you look at our 10-K, its broken out revenues, direct expenses and SG&A costs. So of the SG&A costs that are reflected in our 10-K, about $25 million of those savings will hit that SG&A component. Some of those SG&A costs are corporate expenses. Some of those SG&A costs are property expenses.

So as we model, as we look at 2009, the Corporate number, if that is what you're trying to get to -- I think we got it -- was between $40 million and $44 million. And there are some kinds of ups and downs in -- that we have to live within the corporate expense line. For instance we have our frozen pension plan that our management team froze in 2001 when we got here because of the market valuation issues and the way the pension accounting rules work.

We are going to have several million -- a couple million dollars more in pension expense this year that's going to hit the Corporate line. But that is offset by cost savings that you'll see on the other side.

So long story short, the $40 million to $44 million is the number we expect for 2009.

Okay. Then, different question. On -- did you mention that margins would be roughly flat with 2008 levels at the property level?

I think David said margins would be healthy. I think [was the word] he used.

Yes, I think that's right. I mean I think if you work through your model, the kind of RevPAR decline that we described and the CCF target that we targeted, you'll see a margin decline in probably 100 to 150 basis point decline.

Then just the last question. I'm a little confused on how we should think about the RevPAR calculation and tying that to the CCF figure. Where -- I mean, is there -- can you quantify the attrition and cancellation fees.

And I know that somewhere in the revenue line, you don't have a separate line for it, but any kind of help would be appreciated.

I would say last year attrition and cancellation collections were in the neighborhood of $12.5 million. I think we have a pretty similar assumption for this year in terms of total attrition and cancellation collections.

Now we are going to experience elevated levels of cancellation and attrition as we described, so we may collect more than that. But as I said earlier, it doesn't make a whole lot of sense for us to be heroic with assumptions in this environment.

And while those revenues are not included in the RevPAR calculation, they are included in the revenues, correct?

Correct.

Thank you.

Bill Crow with Raymond James.

Good morning. Couple of questions for you. As you look at the landscape for the next couple of quarters, do you anticipate second quarter actually will be worse than the first quarter given the shift of Easter?

No. We think first quarter will be worse than second.

Okay. And then -- .

And we actually planned it that way too.

Okay. The second question is you say that you assume attrition stays at that 12 to 14% level that you've seen over the last 90 days or so. You guys hit a peak back post 9/11 up near 20%. Is that correct?

And is it just that you think the environment then was dramatically different, given the construction to air travel, etc., that you don't anticipate getting it back to 20%?

Yes, if you take a look at the year of 2002 or really I guess the last three months of '01 and all of 2002, we did hit about a 20% attrition level in the first six months after 9/11. If you look at all of 2002, we ran an attrition level of about 14%, which would say that the second half of 2002 was in the low double digits.

So we are forecasting around a 14% attrition level which is what we said on the call, that factors in a post 9/11 environment where you had major travel disruptions and an economy in recession.

Yes and folks that were just fearful about getting on airplanes.

Sure. No it was definitely a different psychological environment.

You talked about the '11 and '12 outlook -- or not outlook, but the bookings are looking good. How much of that is dependent upon the expansion of existing properties?

You give a number of 200,000 room nights associated with the expansions which may or may not occur by 2011. I guess I want to know how much of that is related to -- of your optimism -- is related to that and how much if you don't go through with those expansions, you lose the 200,000 room nights, I assume? Could you lose a lot more than that with bigger meetings that are dependent upon those additional rooms?

Yes. Bill, what we've done with these 200,000 room nights is effectively put them over on the side. When David was talking about the current run rate for those years '11 and '12, they excluded any room nights with any form of expansion necessity.

This is same store, apples to apples.

Then one final question. At your analyst meeting -- I guess, it was a couple of years ago, you had talked about potentially acquiring additional assets to grow your brand. And certainly you looked at that in San Antonio.

Is it fair to say that given that market environment and your balance sheet, anything like that is off the table at this point?

Yes.

Okay. Terrific. Thank you.

Nap Overton with Morgan Keegan.

Good morning. Dave, you addressed this, but could you tell me what the short-term booking improvement that is baked in your 2009 expectations with the guidance you have given now?

At the low end of the range, we assume we will book 70% fewer revenues in 2009 than we booked in 2008. So there's no benefit from the redeployment of the sales force built into this guidance. Or at least not at the low end of the range. The top end of the range assumes that we will book roughly the same amount of revenue as we booked last year.

Okay. All right. Then the last I remember you talking about making some more specific determinations about the timing of the expansions that you have outlined previously was that you would make those decisions springtime, maybe May. April, May is what I remember. Is that still correct?

We talked about that timeline in -- I think it was in the November time frame of last year, but candidly in that, we are sort of -- right now we don't believe that we can make any concrete decisions on any of these expansions until at least the end of the third quarter of this year.

Okay. All right.

And it is just the reality of what we are dealing with here, which is quite frankly, I don't think there's a single person on this phone that has ever seen anything like this before. And so we have to be flexible. We have to be nimble on these types of issues.

I agree with you. Then what would you say -- so the RevPAR guidance next year is now down 9 to 12% and that seems inconsistent with the general belief that at least I have had and some have had that Gaylord's model is better insulated from industry swings than other lodging industry business models. What do you say to that?

Well, I guess I would say a couple of things. Number one, through the last 12 months, which has been a pretty significant economic slowdown, our business has performed better than the rest of the industry. And we all -- the entire industry and the economy -- has seen a very rapid deceleration in booking trends and in travel trend.

On top of that now we have Congress pillorying every executive who tries to take a trip or have a meeting. So those are negative trends that are directly aimed at our industry.

That being said our RevPAR down 9 to 12, there's only -- there aren't many good comps out there right now for where the industry is likely to the in terms of other companies who have reported. The only one being Starwood and they say they are going to be down 15% for the year.

So are we going to be better than the industry? We kind of think we will and that is what is built in a little bit to our 9 to 12 because I think we have a pretty bearish view on where the industry is going to be.

But the other thing is this, that we can't do anything about stopping corporations, associations -- whoever -- canceling a convention. That's not the unique part of our model.

People will make -- people will cancel which they're doing and that affects RevPAR which is what you just dealt with. Where our model kicks in is, we have these contracts. That says if you cancel them and you walk away from the agreement that you bargained for a year ago, two years ago, for a particular period of time this year, you have to pay us a sum of money.

That is completely different to the model of the rest of the industry that is far more transient, leisure-based hotel businesses. So that revenue comes in in the total RevPAR computation and obviously, positively affects the CCF.

When you see us, our model doing well is like in the fourth quarter when we've -- our levels of profitability were at the same levels they were in the previous year. And so that's the benefit of our model. We can do nothing about conventions walking away, but what we can do is we have contracts and that money comes in and we can scale our business as a convention cancels. We can scale the expense side of that business yet get the benefit of the income from those cancellation fees.

So our model is very different.

Okay. Thanks.

William Truelove with UBS.

Just getting to a little more focus on your -- on that. Could you first give us what the full year attrition rate was for 2008? I see it was 14% for the fourth quarter, but what was the full year attrition rate?

David, do you have that handy?

Full year attrition -- I will have to get back to you. I will have to get back to you, Will, because I was focused on the quarter. So rather than guess on the call I will -- .

Would you say it was probably around 11 or 12 maybe? Is it going to be less than the 14?

I think it's probably about around 11.

Okay. So let -- .

And the first three quarters we -- it peaked in the fourth. So it absolutely was in (multiple speakers)

Right, it's going to be (multiple speakers)

10 to 11 range for the other quarters.

Okay. So let's call it 11. If you do 11, but now you are expecting 14% going forward, so there's a 300 basis point increase in the attrition rate plus the fact that you have three more months of National in 2009 than you did in 2008 because of opening [in April].

I'm a little surprised that you are not increasing the attrition fee expectations. Because if you are cranking up the full year attrition rate -- 300 basis points -- and having three more months of National, it seems to me that it would be pretty logical giving your explanation of the business model you just gave, to increase the attrition fees in 2009. Is that just a way of being conservative with the expectations or what?

It's a way of being conservative with the expectations. Like we've said a couple of times on the call, here optimism is not rewarded in this marketplace. And so we are trying to manage the business and manage the expectations of the market in a way that we are very comfortable that we can articulate that we are going to be a healthy company as we come out of this thing.

Okay. Let me just move on to something else then. You mentioned -- let's go back to the fourth quarter which is strange. You talked about, Colin, that you are very happy with National's performance. I assume that was really about customer satisfaction because the financial performance still missed your expectations even given in the third quarter slightly admittedly, but I mean $33 million versus $34 million to $37 million.

And it just is a little surprising you still missed it, given that you -- I would assume back in -- I know things are changing rapidly. But given that it's been continually missing, what's your confidence level in these kind of full year 2009 forecasts? I mean, I would have assumed that you would try to put everything in the kitchen sank in the 2009 number.

Is that what you're trying to do or is there still probably more downside risk here?

We don't believe so. You've thrown out a lot of comments there. Let me try and tackle them one by one.

First and foremost, one of the big issues that we had to deal with in National Harbor is the fact that the development is running behind six, nine months of where it should be. The other transient hotels in that complex have not been performing where they need to be performing because the project was behind.

And so that is one of the issues that we've had to deal with here with the volume of transient business into that complex. But it continues to build. Continues to get stronger.

Second thing is our customer satisfaction scores continued to rise in that hotel.

Third, the level of bookings that we see in National continues to do very well. We booked over 400,000 room nights in that hotel in 2008. We had a very good production year in 2008.

The reality is that, as we said on his call, we have over 85 STAR accounts booked for this year. You know that is 60 points of occupancy on the books and remember you made a comment about that we have got three more months of operation. I would argue that probably it's more like five to six because the first two months of operation at that hotel, and I'm being fairly candid here and very honest, was not where we needed it to be.

So the whole dynamics of that hotel this year versus last year are vastly different. And as I sit here today, I am pleased with what the progress that we have made in that hotel. And I can tell you the letters I get from our customers say just that, that this is an awesome hotel, levels of service have gone up and customers want to come back.

So I feel very confident about the performance of that. I feel pretty confident about the way that hotel will perform in 2009.

Great. Thanks so much. Appreciate the answers.

[Steve Kent] with Goldman Sachs.

Good morning. Colin, I know people have tried to get at this a couple of different ways, but I just wanted to be -- for you to answer it with a little bit more color which is just generally, you are suggesting Q1 RevPAR negative 18 to 20 and then, you have the full year negative 12 to 9.

And I'm just trying to understand what gets you there? Just because it's such a big hole that you are in in Q1. So how do you get back up to that negative 12, 9 for the full year?

And then, you know on customer retention, I thought maybe you mentioned it or maybe some of your competitors have mentioned it, that you don't want people to cancel and they feel the need to get to take chicken for dinner just as an example, rather than steak, that you are willing to work within and even cut some of the commitment. And then --

David, just one quick question, I don't know, maybe I'd never noticed it before. But on your balance sheet, your cash and cash equivalents is remarkably low in the third -- in the fourth quarter when you ended the quarter. And your trade receivables went up. And I've just forgotten what that might [be].

Steve, let me give you -- try and answer these questions in the order that you asked them.

First, why do we believe the annual RevPAR predictions when we have done the first -- when we've guided what we have for the first. If you look at our performance last year, you'll see that we had a very, very, very strong first quarter. Practically just the way we have booked for 2009 before we started seeing these cancellations in December and January, we expected that first quarter to be behind the same pace last year, notwithstanding this change in the economy, just because of the huge volume of business that we had on the books in '08 for that first quarter.

We have relatively easy -- we have very strong bookings for the summer months on our books here. And we have pretty easy comps to deal with in the second, third and fourth quarter this year.

So that's how we believe the year will play out for our Company.

You made a comment about accounts receivable. Could you ask that question again, please?

Yes, no, just [it's some] -- on the balance sheet it is a surprisingly low amount for cash. It's only a bit -- only $1 million, and then the trade receivable is $49 million and I just didn't know what caused that. Maybe it occurred during the year, but it is a low amount of cash on your balance sheet to end the year with.

Yes. We just made a concerted effort to manage the cash number down to a smaller number at the end of the year. You know we had paid the bills we needed to pay. We had bought back some bonds. We had paid off Perini so we decided to keep that cash number as small as possible.

From a receivables perspective, the receivables should be up in the fourth quarter of this year over last year, largely because we have a new hotel that was open and operating. In terms of receivables aging and quality of receivables and those kind of items, we haven't seen an appreciable difference in receivables aging in quality last 12 months as we saw in the prior 12 months.

Okay. Thanks. And then just Colin, it was the question about customer retention, how you work with your customers in this environment and my question about chicken versus steak. You know, what we've heard from other conference planners. And I thought from yourself at one point.

Yes, we do. We have -- look, we have a pretty intimate relationship with our meeting planners. All of us in the senior management of our Company touch base with our meeting planners. I am meeting two or three of our best meeting planners in about five hours this afternoon in Washington. We do all this, and our senior salespeople are constantly working with our meeting planners to help them navigate through this period of time.

But from my perspective, and we have our General Counsel sitting here, a deal is a deal. We have very strong contracts and I know that there's been two or three of the analysts who have implied that we are not going to collect. We are not going to collect our attrition fees.

We have good relationships. We deliver. We deliver the product and the service we tell our folks and we say to our meeting planners you know, the quid pro quo here is a deal is a deal. If we fall short in our delivery, it is easy for meeting planners to come back to us and say, "Sorry, the attrition did run high but we can't pay you."

But that is not what is going on here. We are delivering world-class service to these folks. They are all happy when they leave and we are having, I think -- I think we have a pretty good relationship with these folks. And we are navigating convention by convention by convention right now. And I think we will be fine through this period because of the relationships we have with these folks.

Okay. Thanks very much.

All right. I think it's three minutes to. I think one more question and then any other questions that folks have they can get in touch with David and myself and Mark over the next few days. One more question if there is one.

Dennis Farrell with Wachovia.

Good morning. Couple of quick ones. I guess on a big picture perspective, we are seeing the convention planning business. There's been a dramatic shift in terms of moving away from resort conventions. And I was wondering how you are positioning your sales force to maybe grab some of that business away from markets such as Las Vegas?

Or I know you have a property in Orlando. That market is under pressure, but even New Orleans. I was just wondering your market seems to be more regional and potentially not as reliant on airfare. So just wanted to get your thoughts on that.

I was wondering when we were going to get a question like that this morning. Dave and I talked about it before the call, as to what our precise tactics shifts were going to be here.

You are astute. There are a lot of fundamental changes taking place and, of course, we are positioning our sales force to take advantage of those things. And that's really all I want to say at this stage. We won't get into too much detail as to precisely what we're doing, but your comment is astute.

I saw this morning one of the other big banks again moved a convention in the last 24 hours from Las Vegas to San Francisco. So we've just got to be on top of our game here and understand the changing tides.

Okay. My last question, comes and in terms of capital allocation, how are you going to favor share repurchases versus bond repurchases and also what is your restricted payments basket at this point?

David, do you want to deal with the latter?

Yes. Our view right now is we need to focus on things that are leverage neutral or leverage positive. So we don't have any plans to do any share repurchases because that's capital that gets allocated and we can't get back. You know, in terms of how we think about buying back bonds, you know as we said in our release a few weeks ago, we will continue to consider occasionally being the marketplace to buy bonds if the price is attractive to us. And that's an opportunity to delever the balance sheet to some extent.

In terms of the restricted payments basket, I think right now it's in the neighborhood of $90 million or $100 million. So I think that answers your three questions.

Thank you very much.

All right. Thank you. Well look Julianne, I think that's the end of the call this morning. Thank everyone. I would like to thank everyone for joining us and, again, any other questions you may have please feel free to contact us. And if you have something more to say on our business with our shareholders, we will be in communication.

Thanks a lot for joining us.

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