Ryman Hospitality Properties Inc (RHP) 2009 Q1 法說會逐字稿

Welcome to the Gaylord Entertainment Company's first quarter 2009 earnings 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're 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 reply. The number is 800-642-1687 and the pin number is 93662682. (Operator instructions.)

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 of Gaylord Entertainment Company. Thank you for joining us today on our first quarter 2009 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 & Exchange Commission and in our first quarter 2009 earnings release. And, consequently, actual operations and results may differ materially from the results discussed or projected in the forward-looking statements. Gaylord Entertainment undertakes no obligation to update publicly any forward-looking statements, whether as the result of new information, future events, or otherwise.

I'd also like to remind you that in our call today we will discuss certain non-GAAP financial measures and a reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures has been provided as an exhibit to our earnings release and is also available on our website under the investor relations section.

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

Thank you, Carter. Good morning and welcome, everyone. Thank you for joining us today to discuss Gaylord Entertainment's first quarter 2009 financial results.

As always, I will begin our conference call with an overview of our business in the first quarter and then give you some thoughts for the rest of 2009. Our President and Chief Financial Officer, Dave Kloeppel, will then provide more color on the Company's financial performance in the quarter and then discuss the outlook for the rest of the year. And then as is our practice we will then open up the phone lines for questions.

We're acutely aware of how difficult an economic environment we've been operating in during recent quarters. And the first quarter of this year proved to be the most challenging thus far. As an industry the hospitality sector has been hit particularly hard. According to Smith Travel Research Q1 RevPAR was down 20% for the quarter in the U.S., and companies across the hospitality sector continue to report declines in occupancy and very weak estimates for the remainder of the year.

Our business was not immune to the pressures of these challenging economic conditions. As you saw in our release this morning, occupancy across our same store properties dropped 16 points as a result of the increasing large corporate group cancellations and attrition.

In fact, we saw in the last few months of 2008 and in the first quarter of 2009 cancellation and attrition levels that we haven't seen since just after the events of 9-11. All across the nation companies and organizations slashed spending, stimulated in large part by the economic meltdown, and in some cases bowing to the increased scrutiny and rhetoric around spending on meetings and travel.

Many of these organizations became particularly frightened in November and December of last year, cancelling events as close in as January and February of this year. As a result, we saw a 22% decline in same store RevPAR and an 18.6% decline in same store Total RevPAR.

While we experienced a significant number of cancellations, we also collected a significant amount of cancellation and attrition fees, providing some protection for our bottom line results. In the first quarter we collected $7.6 million in cancellation and attrition fees, more than four times the $1.8 million we collected in the first quarter of 2008.

I would remind all of you again that we only book cancellation fees when we collect them, so not all of our first quarter cancellations have yet settled. While all our same store CCF performance was down 32.2% compared to the same period last year, our results reflect a solid margin of 26.2%. and if you add back the [once off] severance costs our margins would have been at 28%.

While the cancellation and attrition fees we collected cushioned the impact the lower occupancy levels had on our business, the solid margin performance that we delivered in the first quarter is largely the result of our continued focus on aggressively managing our costs as demand declined.

So what are our thoughts on the rest of the year? While we're seeing some signs of stabilization in demand, we will continue to aggressively manage our business certainly through the rest of 2009 as if there is no economic recovery.

Therefore, as we did in the first quarter, we're focusing our efforts on three primary initiatives. One, driving revenue in 2009 and 2010. Two, improving operating efficiency even more so. And, three, further improvements of Gaylord National.

Now, let me provide some additional color on those three bullets. First, from a revenue perspective, and as we discussed in our last call in February, we have redeployed ourselves and marketing resources to focus their efforts on short-term revenue generation, specifically for 2009 and 2010.

That is not to say we're ignoring booking opportunities for 2011 and beyond. Long-term group bookings are an important part of our yield management strategy and, in fact, we continue to see our pace for 2011 and 2012 track at a favorable rate to historical averages.

Instead, we have realigned the production goals and compensation structure of our sales force to ensure that initiative, that incentives are achieved only when the 2009 and 2010 booking goals are satisfied.

In addition, we have launched a number of new marketing programs and initiatives, targeting small and midsized meetings that book and travel within an 18-month window. These efforts are producing results as we have seen our gross bookings for 2009 that have been contracted for during the first three months of this year pacing at a level consistent with historical averages, despite economic conditions in which you would expect bookings to be substantially depressed. In addition to our group efforts we have expanded our marketing programs to attract transient business to fill need periods created by increased cancellations and attrition.

Through sensible online offerings and creative packaging we have grown our presence in the transient market, expanding the awareness of our hotel brand. Second, as I mentioned earlier in the call, we are reducing costs through greater operational efficiency and by consolidating our management structure.

Last year we embarked on a detailed review of our entire organization and developed a cost reduction plan tiered to various levels of demand. In late 2008 we implemented initial cost reduction activities that total approximately $5 million in annual savings.

As the new year arrived, it was clear that things were going from bad to worse in the economy, and fortunately our preplanning allowed us to swiftly reduce operating costs even further. In early February we instituted a second phase of cost reduction initiatives as we described to you in our most recent earnings call that totaled approximately $30 million annually. This has had an immediate impact on our business and we saw steady improvement in operating margins each month in the first quarter as a result.

Given the fact that the economy shows little sign of improvement we are moving forward with the next phase of cost savings that will deliver approximately $10 million of additional annualized cost reductions. We will see the results of these initiatives beginning in our second quarter financials.

While we're confident that we can continue to streamline our operations without compromising guest satisfaction, we believe it is prudent to take more operational risk to ensure our forecasted levels of cash flow are not compromise.

Now, our third area of focus is the continued renting up of the Gaylord National. Obviously, it takes time for a hotel of this size and scope to fulfill its potential, but the property performed well this quarter despite a difficult environment, and we remain excited about its prospects.

Despite development delays at the National Harbor Complex, the property posted solid revenue results, good occupancy levels, and solid margins. The National delivered 61.8 points of occupancy, roughly $15 million in consolidated cash flow, and a 26.3% margin. We're confident that the momentum built in the first quarter will continue through the rest of 2009.

From a balance sheet perspective we will continue to be miserly with our capital spending, and we'll take opportunities as appropriate to de-lever the business. I'll let Dave provide more color on this, but our liquidity position is very solid.

Additionally, the poor market afforded us an opportunity to continue to selectively purchase some of our senior notes at very attractive yields, and we will continue to look for opportunities to buy-back our bonds as appropriate.

In terms of future development projects, we continue to make progress on our long-term plans for a hotel and convention center in Mesa, Arizona. However, the project is still in the very early stages, and given the current market we feel it is prudent to hold-off on any material financial commitments and certainly in the near term. Furthermore, we will continue to hold off on our expansion plans in Nashville, in Dallas, and Orlando.

Regarding guidance for the remainder of 2009 it is difficult to predict how long this current environment will last. As I said earlier, while we're seeing signs of stabilization, we will continue to adopt a very deliberate and conservative approach to our business.

While we hope they do not, we are planning for levels of cancellations and attrition that we experienced in the early part of this year to continue for the remainder of 2009. As a result, we're reducing our guidance for 2009 RevPAR and Total RevPAR, and as we have to date, we will continue to pursue cost reduction opportunities, and remain diligent in our collection, cancellation and attrition fees. However, we believe it is appropriate to modestly reduce our CCF projections for the remainder of the year.

Our focus for the rest of the year is to aggressively grow revenues and manage cost save so that we can maximize free cash flow, and to remind all of you if we hit the low end of our revised 2009 guidance because of the curtailment of our capital plans we will produce approximately $18 million of free cash flow, which we will use to reduce debt.

If the markets get worse or if additional anomalies are thrown in our way, we're confident that we have the right plans in place and we can pull the right levers to successfully deal with the issues as they come.

Warren Buffet refers to this financial meltdown as "our country's economic equivalent of Pearl Harbor." What we're experiencing is unprecedented, but I believe we at Gaylord are positioned to perform well in the short term and be in very good shape once we emerge from this awful mess, so that we're able to exploit the opportunities that will undoubtedly be before us.

And, with that, I'd like to turn the call over to Dave to go through the detail of our financial results and guidance for 2009.

Thank you, Colin. Good morning, everyone. As I've done in the past I'm going to discuss the financial performance of our business during the quarter and then take you through some of the highlights from the results for each of our properties. I'll then provide you with some additional color around what we're seeing for the rest of '09.

From a consolidated basis Gaylord Entertainment performed in line with our expectations in the quarter, achieving CCF of $39.1 million despite the deteriorating economy. CCF in the quarter included $6.3 million of severance costs and other costs associated with the resolution of a potential proxy content.

As Colin has discussed, the first quarter of 2009 was difficult across the industry with U.S. RevPAR declining 20%. Gaylord Hotels same store properties also faced significant headwinds during the quarter and experienced a RevPAR decline of 22%. This revenue decline was slightly more than expected and resulted from the cancellation and attrition levels that continued to accelerate in February and continued in March.

As a result same store occupancy declined 16 points as large group cancellations rose to elevated levels and attrition increased to 16.7%. Group ADR was relatively flat since most of these room nights were contracted several years ago and were not subject to the current economic conditions. Transient ADR was down as a result of the pricing pressure from discounting that emerged as competitors tried to fill short-term availability.

Despite the highs in expected same store RevPAR declines, our Total RevPAR decline of 18.6% was in line with our expectations. We were able to perform within our Total RevPAR expectations as a result of the attrition and cancellation fees we collected. During the quarter we collected about $3.1 million in attrition and about $4.5 million in cancellation fees across the brand.

And to put some of this in perspective, the attrition cancellation fees we collected in the first quarter represent about half of what we collected in all of last year and are more than four times what we collected in the first quarter of 2008.

Same store CCF of $37.9 million was in line with expectations and included severance costs of about $2.6 million. Our CCF performance was driven by the diligent collection of attrition and cancellation fees, coupled with the aggressive management of our costs, that Colin referenced earlier.

These efforts resulted in a 26.2% CCF margin, a solid margin in a tough economy, but it's important to note that if you exclude the severance cost our same store CCF margin was 28.4%. So despite lower occupancy and revenue levels, flow through remained quite strong.

Now, let me quickly walk through the performance of our individual properties, starting with Opryland. The first quarter produced a very difficult environment for Opryland. The property generated revenue of $54.5 million in the quarter compared with $72.6 million a year ago.

A 17.7% decline in occupancy was primarily driven by large group cancellations and attrition in the corporate segment. It's important to note that this quarter is in comparison to an exceptionally strong first quarter last year and Opryland in the first quarter, their CCF decreased 56.5% to $9.3 million and was adversely impacted by about $1.4 million in severance costs.

Now, looking at The Palm in Florida, in the first quarter occupancy was down to 68.8% for the quarter. Group ADR was flat, but transient ADR declined due to pricing pressure of the competitive Orlando market, which has been hard hit by the current economic challenges.

Despite a 15.7 decrease in occupancy, aggressive cost management of the property resulted in strong CCF margins of 34.8%. the property achieved $16 million in CCF in the quarter compared to $20 million in the first quarter of 2008, and CCF in 2009 was adversely impacted by about $700,000 in severance costs.

As for The Texan, revenue was $42.4 million in the first quarter of 2009, a decrease of 12.2% from $48.3 million in the prior year quarter. And occupancy declined 15 points to 61.2%. while the property was able to drive the $1 increase in ADR, occupancy declined and drove a RevPAR decline of 19.3%.

Again, aggressive cost management of property produced CCF of $12.4 million in the quarter compared to $14.1 million in the first quarter of '08. And once again, CCF was adversely impacted by severance cost this time by about a half a million dollars. But the CCF margin, The Texan was able to produce in the quarter was 29.2%.

And, finally, to the National, as I mentioned the National delivered a strong first quarter consistent with our expectations, as guests and meeting planners continued to embrace our newest property as a destination of choice.

During the quarter the property achieved customer satisfaction scores on par with the industry leading levels we achieved across our same store portfolio. Occupancy for the quarter was 61.8% and coupled with a strong ADR of $225.61 the property achieved RevPAR of 139.33. CCF was $14.8 million for the quarter, resulting in a 26.3% CCF margin.

Turning to the balance sheet, our liquidity position is solid as we have no loan maturities until 2012, and we're taking steps to opportunistically de-lever our balance sheet. During the quarter we used available cash in our revolver to purchase some of our 8% and 6-3/4% senior notes at attractive yields. As of the end of March we've purchased $59.9 million in face value for $43.6 million, and we recorded a pretax gain of $16.6 million in the quarter.

We continue to ration capital putting any actions related to future development or expansion programs on hold, as we believe it's prudent to wait for further tangible signs of revival from the market before making these types of commitments.

We have no significant capital commitments other than maintenance for the foreseeable future, and our focus is to maximize free cash flow and right now we believe that's the best thing to do with that cash is to reduce indebtedness.

As we look toward the rest of 2009 we expect the challenging business environment to persist at the very least through the end of the year. While we are steadily booking business on a gross basis our efforts for 2009 have been offset by a large volume of cancellations and attrition.

However, we are seeing some positive signs of stabilization. For example, some meeting planners who have previously cancelled programs for 2009 and 2010 are beginning to consider adding meetings back. And 2010 bookings even net of cancellations have grown stronger since early in the year. There is a sense of activity returning to the sector.

That said, it's still too early to tell how or when this will impact our bookings or revenue in a meaningful way and we are, therefore, planning for the business environment to remain unsteady and for the elevated levels of attrition and cancellation that we saw in the first quarter to continue throughout at least the remainder of this year.

As a result, we've lowered our RevPAR and Total RevPAR guidance from a decline of 9% to 12% to a decline of 15% to 20% for RevPAR and 13% to 18% for Total RevPAR.

As Colin has outlined, our internal cost analysis over the past 12 months has positioned us to manage our costs appropriately in this challenging environment. We're ready to implement additional cost initiatives if business volumes continue to deteriorate in order to maximize our cash flow.

Nevertheless we believe it's prudent to modestly reduce our same store CCF and Gaylord National CCF by $5 million each to $155 million to $165 million for the same store hotels and $55 million to $65 million for the National.

In closing, we're acutely aware of the challenging market conditions evidenced by our reduced occupancy and revenue levels this quarter. However, our performance this quarter also proves that our model, coupled with aggressive cost management, can produce solid margins and CCF results even in a very, very difficult environment.

As we move through 2009 we will continue to focus on generating short-term revenue through small meetings and transient guests. We'll focus on the aggressive collection of attrition and cancellation fees, and a continued streamlining of our cost structure and the prudent management of our balance sheet.

And, with that, I'm going to turn the call back over to the operator to begin the Q&A session.

Thank you. (Operator instructions.)

Your first question is from the line of Chris Woronka with Deutsche Bank.

Hey, good morning, guys.

Hi, Chris.

I was hoping you could maybe just give us a little bit more color on the forward bookings number you printed in the press release? I know first quarter was not a great business environment. I'm just kind of curious as to how those bookings fell, and maybe if you've seen any changes subsequent to the end of the quarter? Thanks.

You take it, and I'll jump in.

Yes, Chris, as we described on our call back in February, we really reoriented our sales force and adjusted our deployment and adjusted our incentive programs to focus them on shorter term bookings. And so as a result we are not as focused on booking kind of four years out and beyond kind of bookings, because as we look right now, '09 and '10 are where the meat is and '11 and '12 pays us at an attractive rate relative to where we are for '09 and '10.

So as you look at the bookings and you see the bookings are down on a gross basis about 35% that decline for 2009 and 2010 were basically flat for '09 on a gross basis and were up a little bit for '10 on a gross basis. The declines in bookings, really are for those out years, four years out and beyond.

What we've also seen is during the quarter if you look at January, February and March we had a steady improvement as we compare our self to January, February, March of last year, and there's gross and net bookings each month.

So January was a very, very difficult month, and February got marginally better, and March got marginally better on a gross and a net basis, so we're seeing slow signs of improvement as we've gone through the year.

Yes, I'll just add a little bit of anecdotal support to what David has just said. Over the last month and a half I've spent a lot of my time with our big customers and meeting planners and trying to figure out in their minds what is -- when are they going to start moving their customers back into our establishments. And the problem has been, Chris, over the last four or five months corporations have just been absolutely frightened about how bad this economic meltdown can get.

And what meeting planners are telling me is businesses aren't going to change their behavior prospectively. They are going to meet. They believe it's an important thing to meet, and their -- all of these meeting planners and their clients are looking for signs of stabilization.

So my view will be that there will be a kind of a pent-up demand here that hopefully over the next six, nine months we're going to see releasing back into the sector. And so I'm actually pretty happy with the level of business we've booked in this first quarter because this -- I've been in this business 30 years and I've never seen anything like what we've experienced here over the last three to four months, and I'm actually pleased that we've booked over 300,000 room nights in this shocking environment.

And we have the luxury of having a solid pace for years out into the future, so.

Right.

So as a result we're trying to be thoughtful and selective about the bookings we take for those periods because it's a difficult environment out there and meeting planners are trying to use every ounce of leverage they can to fight for rates even in the out years.

Yes, and you didn't ask this question, one of the things that I'm also pleased with is that we held steadfast in 2006 and 2007 dealing with the Association market. We got a little bit of flack from the analyst community as to why our RevPARs weren't growing at the rate of, the same rate as some of our competitors that were focused on the corporate side of the equation. But I am so happy that we've come into this period of time in '09 and '10 with a solid book of association business, which is really creating a very strong solid platform for our Company.

Great, that's very helpful. And just one quick follow-up, so it's fair to say that a very high percentage of your cancels are for '09 and '10? Is that right?

Yes, that's correct.

Yes, just actually I've got every single cancellation here. The answer to that question is yes. We've received two or three out in '11 and '12 from the same folks that may have cancelled for '09 and '10, but by and large it's '09 and '10.

Okay, thanks.

Thank you.

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

Hi, good morning. Good morning. So, and I apologize if I've missed this because we're jumping back and forth with it this morning, but could we talk about a realistic target leveraged level for the Company? And then I have one other -- and a timeline for getting there, if possible? And then I have one other quick question.

David, I think as we went through I would I guess cycle back to about five years ago when we did our notes offering, you know, our target leverage level on a kind of a sustained basis was to be in the kind of 4.5 to 5 times range, and that was what we marketed the time of our bond offering and that was where we were prior to the completion of National and prior to the economy kind of shutting down on us.

We're in the -- we're at about 6.7 times on a total debt to CCF basis right now at the beginning of the first quarter. We're focused on getting ourselves down below 6 by the end of the year, and to the extent we can continue to manage the business aggressively we should be back in those 5 type of range during 2010.

All right.

And it's the appetite for the type of bonds we own on our Washington Project open up and we are able to get those off our balance sheet and use that to repay our debt we'll do so.

All right. Okay. I think I'm actually good for right now. Thank you very much.

Thank you. Okay.

Your next question is from the line of Jeff Donnelly with Wachovia.

Good morning, guys. I guess following up maybe to one of Chris' comments, Chris' questions, maybe this is part question and part statement at the same time is that each quarter we do see something of I guess it's a unique presentation around gross net bookings data from you guys on forward bookings. But frankly there isn't always much comparability over time or consistency to the way it's presented, so I'm at something of a loss as to how to incorporate that into a fair analyses.

Is there -- can you shed some light I guess on how we can be I guess incorporating the bookings data that you share into our models that I guess somebody else will recommend in future periods, perhaps you guys could provide some sort of consolidated data on the future bookings by either by year or the assumptions around future cancellations and attrition rates you're using, and if you're able to some detail around the bookings that relate to each hotel?

Long statements, last question. The challenge with the booking data from a -- the perspective of discussing it with the investment community is the numbers can bounce around fairly materially within booking windows.

So if we were to start to say bookings were Q plus 1 meaning 2010 are up X percent, in one quarter they may show a very different comparison to the next quarter. And we're trying to eliminate the kind of natural visceral reaction that people might have to those types of changes, because the business is so lumpy.

I think if you wanted more detail, kind of a review of how to model attrition and cancellation levels, that's probably more appropriate for us to take you through offline, and then we'd be happy to take you through that and take you through what we've seen historically from an attrition and cancellation perspective. Because we want you all to be able to model the business as accurately as we believe that we can so.

And let me just add to this, Dave. I mean one of the things that we've consistently said over the years to the investment community is we throw a lot of statistics out and these are also benchmarks for folks to be able to measure the health and long-term viability of the business, and we've said consistently that we need to book about 1.3 million room nights on our same store and we need to book about 350,000 room nights on Washington to accomplish this 60ish points of group occupancy.

And so we've historically said that, and so that's why we're very transparent, showing how our quarter by quarter pace of group bookings are going, because if we do that, if we do that 60 points of group business that we aim and we set our goal internally to accomplish and we break that down by the way of association and corporation. And then we overlay on that the transient side of our business, we run that by our 80 points of occupancy.

And that's what we've historically said. So, Jeff, Dave is right, this is lumpy, it is different from quarter to quarter to quarter. We always tend to have the fourth quarter tends to be the big quarter for us, but it's really just we share this information with you just so you have yet another benchmark because of the unique compilation of our mix of business.

Thank you, I appreciate that it is certainly a lumpy business, and I think I understand you intend to provide additional color and transparency, I'd highlight and I think what most people believe is will increase the resiliency or stickiness, if you will, of your bookings and revenue but the volatility nevertheless in the numbers or the different ways they're represented over time doesn't always effectively convey that.

But actually, Colin, I wanted to follow-up, and in your comments I think you mentioned that you would be proceeding with a handful of the expansions. Is there some portion of your forward bookings as you look at the firm wide pipeline of forward bookings that's actually tied to those expansion projects, such that they're delayed or cancelled there?

No, no, we've basically, we've stopped taking bookings on our three expansions six months, nine months ago, six, nine months ago, the latter part of last year we shut down any availability that would be conditioned on new supply in any of those areas.

Okay, and just one last question or two, that are you finding that instead of getting aggressive on select or cancellation or attrition fees you're finding it to be competitive with others out there maybe you have to waive those or apply them with deposits to future bookings, say in 2010 and beyond?

No, it doesn't work that way. We have this contract and we sit with the client and we say irrespective of what company A, B, C, D, E is doing we have this agreement and in good faith three years ago we set aside our hotel not to book because you wanted the space and this is what you owe us.

Now, I will tell you we do get into debates with our customers about, look, we're scared to death right now because of this environment. We would like to "re-book" and come not in the first quarter of this year but come late this year or early next year. And we will sit down with those people and work with them.

But if it doesn't, period, end of story cancelling we pursue those cancellation fees and attrition fees in earnest. When the company comes, actually comes and shows up with two -- 20% less than they should have done, we pursue those in a -- we don't use what Brand A or Brand B or Brand C is doing as frankly an excuse to relieve the customer.

And just a last question, because I know it's a smaller segment of your business, but what's been the early success of -- in trying to pick-up market share in the transient business. Is there a way that you can measure that for us, I guess in nights, some travel, sell penetration or--?

Yes, our room night -- Dave, have you got that transient sheet that we went through, that's in the package? But our transient business is holding up pretty well. In most of our hotels it's at last year's level or above, but Mark has it there? And we've done this by becoming a lot smarter on the electronic side of being with the transient customer, we've got people dedicated to opening up all of GDSs and the OPEC sites that are out there.

On a 2008 same store basis, Mark, this is first quarter, right? Yes. In 2008 on a same store basis we booked 61,000 room nights. We actually incurred 61,000 room nights of transient business in the first quarter of 2008 and in 2009 we were at 62,000, so we were up quarter-over-quarter which is frankly quite, we believe is pretty impressive.

On the National we booked, we obviously were in business National in the first quarter of last year, but we booked over 12,000 transient room nights in the first quarter of 2009, and we're seeing core volumes National on the transient side continue to strengthen.

That's great. Thank you.

Thank you, Jeff.

Your next question is from the line of Will Marks with JMP Securities.

Thank you. Good morning, Colin. Good morning, Dave.

Hello, Will.

I have just one final question on the future bookings. Can you talk about the rate? Should we expect rates to grow? Do you have to bring rates down in this type of environment for 2011, 2010?

Yes, well, bookings for '09 and '10 we're still seeing price pressure on those bookings, and the closer you are to the booking window the more acute the price pressure is, so bookings for '09 versus and for the year we're seeing more price pressure than we are for '10, as an example, and we're certainly seeing more for '09 and '10 than we are for '11 and '12 and beyond.

Part of our strategy, as we've described the way that we've reoriented the sales force was a recognition that was because we're in a difficult market environment we're going to have to convert a larger percentage of the leads that we see from a sales perspective, and we're probably going to see price pressure and smaller, relatively smaller groups.

Because we have a good book of business on for '11 and '12 we said let's not ignore '11 and '12 but let's really focus everybody on '09 and '10, and let's take business for '11 and '12 more selectively, so that's the strategy we've undertaken.

That's great.

Will, it's Colin. Let me just add this. I would say this is one of the most debated internal subjects that we have right now. I mean we -- there's a lot of things that we're working on, but I will say that our whole pricing strategy for '11, '12, and '13 is a hotly debated topic.

And Dave's and my preference is to not book business at low rates in these periods of time out in '11, '12, and '13 because we saw the consequences of just that strategy from our sales organization and our operational leadership in 2002 and what it did in '04, '05, and '06 as the business recovered and demand picked up. And we -- there were some periods of time where we were dealing with contracts that were very low rated, so we're holding steadfast on our rate strategy for '11, '12, and '13.

Okay, thank you. Another question on cost savings, you quantified that in the press release and on the call, can you talk about how that impacts 2010? Does some of it spill over? In other words, should we expect the corporate overhead to be dropping in 2010 versus 2009?

I would think the answer to that question, I'm just trying to think through the math, the answer is it will, if we do no more cost savings other than the $10 million that we referenced this morning, our overhead should be marginally below 2009.

But, again, it really depends on how quickly the economic recovery comes back as to whether we add money back into some of our marketing programs to take advantage of a burgeoning economy. But not all of these cost savings will be annualized in 2009.

Okay, and can you tell us what percent would come from below the hotel line? In other words, more on the corporate side, how much of the $35 million or is it including the next 10?

Well, we adjusted our corporate CCF target down as of last -- the guidance that we did back in February, that contemplated some of that $35 million coming into the corporate line. We should see some additional benefit from that and the -- from the additional 10 that Colin referenced earlier.

As we look at the cost savings, at the 35 and the 10, that's an assessment of overall SG&A. we just happen to report our SG&A differently than some of our peers may, and we break it out into -- we leave SG&A that resides at the hotel at the hotel and we keep SG&A that resides outside the hotel in this corporate department.

So as you look at that $45 million in total, that $45 million in total will go to reduce SG&A across the Company and should bring our SG&A costs down fairly significantly, and irrespective of whether it's in the hotel or in the corporate line item.

Okay, that makes sense. A couple of other quick things. Maintenance CapEx, you had mentioned that's your only CapEx for the year -- what should we expect a range for that to be?

CapEx for this year?

Yes.

Around $30 million, maybe $35 million.

Okay. And then a last question, I think you've mentioned but maybe it's obvious, the roughly $6.3 million that -- of costs during the quarter, I guess of charge, of special expenses related to severance and other costs, is that included in the lower guidance?

No, it's not, it wasn't in the earlier --

It is not, okay.

-- and the lower guidance.

Okay, it is not included in lower guidance. Okay, good. Thank you.

Your next question is from the line of Kevin Milota with JPMorgan.

Yes, good morning, guys. Hoping you'd talk a little about this stabilization in demand, maybe provide some more detail on where specifically you're seeing it, if it's by hotel or within different group types, or what exactly you're seeing from a demand standpoint?

Well, first, we're seeing a little bit of slowdown in the pace of cancellations but that tends to be in the corporate sector, and there really isn't a patent between the type of corporations that, a, have cancelled and then, b, are no longer cancelling.

But we're measuring and monitoring attrition levels on a daily basis, we're measuring and monitoring leads on a daily basis. And I will say to you that we're feeling a little more confident over the last two to three weeks because of the amount of leads that we are finding and just anecdotal discussions that we're having with the meeting planners.

But we're seeing a lot more business surface from government, believe it or not, and of course the pharmaceutical business is constantly pretty resilient, but I think I'll leave it at that because what we don't want to do is publicly describe our sales strategy for our competitors to copy us.

And, Kevin, just to add a little bit of color just in terms of what the numbers tell us specifically as we described we're seeing more stabilization. If you look at our bookings we went from in January down in the 70% to 80% range on a gross basis to by the time we got to March compared to last year we were flat.

So we saw a significant kind of improvement in the likelihood of meeting planners to begin to book, so that's the actual contracted room nights and then Colin already referenced the leads, as we talk about we track the lead line that comes into the sales force for them to process, and we've seen lead volume continue to kind of steadily increase here over the last few weeks.

Okay, I appreciate the details.

Your next question is from the line of Bill Crow with Raymond James.

Good morning, guys. A couple of questions on the cancellation and attrition fees, Colin, can you give us an idea of what percent you collected relative to the contractual amounts that you could have collected?

Oh, wow, I don't have that at my fingertips but I would say it's certainly over 50%, it's well north of 50%. And, Bill, one of the things I referenced in my part was I said that we haven't collected, we only book these when we collect them, so what you heard us reference was the actual fees that we collected in the first quarter. We've probably got another $4 million of fees that we're in negotiations on from the first quarter and the last quarter of last year that hopefully we will collect.

But in terms of the actual percentage conversion it's pretty high and we expect it to remain high. I don't have and I'm pumping on this because I don't have the actual percentage at my fingertips and I don't want to throw out a false percentage here, so we'll look at that and we'll get back to you on that, Bill.

Sure, well, the 30% or 40% or whatever the number is that you don't collect on a contractual basis, that would be through negotiations, companies have gone bankrupt, they've rebooked, whatever the -- is that the way to interpret that?

Well, there's -- yes, you're right. There's two or three baskets you've got to think about. There'll be the company or the association that has said, "We're out of here, we're out of business." We've only seen a couple of those. And one of those was -- we referenced last year, that was the Home Interior Company that we had, if you would.

The second basket is the company that we have done a deal with to book another piece of business in short order, and we -- and some of these companies we do that, because they're long-term standing organizations that have done business with us and we work with them.

And then the third part of those is I'm cancelling, I'm not rebooking, I'm out of business, and we go after them. I mean when I say "we go after them," we sit down and we say, "you owe us the money, renegotiate it." And we have a very high level of collection on those folks because we have a very good contract.

David, did you provide, maybe I missed it in the first place, an update on the expected cancellation and attrition fees collected and recognized in 2009? I think the old guidance was $12 million?

Yes, Bill, we didn't update that number in the guidance. We had -- you're right, on the February call we had described that we thought that the '09 number would be the same as the '08 number, which was $12 million.

And now you're at $7.6 million for the first quarter, so --

Yes.

-- how should we think about that impacting your results for the balance of the year?

Yes, I mean I think we would expect that we'll collect more than the $12 million we had previously guided. It'd probably be closer to the $14 million range.

The hard thing about that question, Bill, is the -- our clients' perception of the state of the economy and how long this thing is going to last. I mean there will almost certainly be companies that come second quarter that have had a very bad first quarter, a very bad second quarter, of saying, "We've got to cut our costs for the rest of this year, we've got to do that, we've got to do that." And they cancel with us in the third quarter or the fourth quarter.

And it's impossible for us to sit here today and predict our clients' individual decision-making around that. And it's hard to understand what this economy is going to do for the rest of this year, and if we could do that we wouldn't be doing what we're doing here.

But the fact of the matter is we've collected a lot of attrition and cancellation fees, and we've seen our attrition rates grow over the course of the, frankly, it surprised us that they grew into the 16% from the 12% to 14%. We believe that's now stabilized, but if that continues to grow and we don't believe it will but if it does then our collections of attrition fees are going to be greater.

But I think the way Dave answered it, $12 million to $14 million sort of as we see it today seems reasonable if these cancellations continue to slow and our attrition rate stabilizes.

And I appreciate that and we'll certainly trust you on that guidance, although is there any reason to believe that second quarter would be that much better than the -- in other words, the fee collection will be that much better in the first quarter than the second quarter? It seems like that $7.5 million might not be a bad run rate for the second quarter, is it?

Yes, no, Bill, you probably should expect it to be a little bit less for the second quarter than the first, and that's because when we -- the first quarter, the cancellation attrition, the cancellation collection efforts, excuse me, I can't talk today, was unusually high because the cancellations were unusually high.

We had for March, as an example, we had 12 points of occupancy that cancelled across the brand, and we don't have that kind of cancellation activity that we've heard about and usually by now we would have heard about cancellations for the second quarter.

Fair enough.

We should expect that to come down somewhat.

Okay, thank you, guys.

Sure thing. Thanks.

Your next question is from the line of Steve Kent with Goldman Sachs.

Yes, hi, good morning. Colin, can you just tell us what percentage of rooms are actually booked for 2009 as you stand right now? And then, secondarily, can you just tell us if you've actually seen a decline in the number of meeting planners, meaning the number of people that you actually can call on, or have they moved on?

What do you mean like moved on, what--?

Meaning that -- what I mean is that it seems to me like that if you're a corporation and you're not really planning on doing many meetings that there may not be many meeting planners out there to really talk to anymore.

Oh, I see what you mean.

Yes.

No, no, no, but what is happening, it's very interesting, Steve. I'm trying to deal with the last question first in sort of a global way, what is interesting is so many of the -- a lot of corporations actually are outsourcing their -- had outsourced their meeting planning or in the process of outsourcing their meeting planning business to be intermediaries, to the people that are the professional independent meeting planning companies, companies like HelmsBriscoe, Experient. These businesses are growing like no tomorrow. I think the HelmsBriscoe Company based out of Phoenix now has a thousand agents dealing with clients all across the country, so you're seeing the intermediary business grow.

And but I can tell you from the meetings I had last, two weeks ago in Washington with a huge amount of -- a lot of our big clients, both direct clients, clients that are representing directly the corporation or the association or the intermediaries, I don't see a material change in the way meetings will be conducted prospectively. It's just that folks are sitting on the sidelines at this stage and are not wishing to commit buckets of dollars to the meetings business in the way they were last year because of this economic overhang.

But I don't see the meeting planning business or meeting planners that work for associations directly or corporations directly changing in numbers.

In terms of your first question, I've lost track of what that first question was?

I just wanted to know what percentage of your rooms are booked today for the balance of 2009?

We, yes, I'm going to -- we're going to have to get back to you on that. We went into the year with about 7 points less on the books this year than with the cancellations that we took in November and December we went into the year with about 7 points less, but I will give you -- we'll get back to you on precisely where we stand today. David or Mark will get back to you here in the next half a day.

Thank you very much.

It's substantial.

Okay, thank you.

The next question is from the line of Nap Overton with Morgan Keegan.

We're going to have -- this is the last question because we're running over here, and Dave and I have, unfortunately, have meetings to go to, and but we'll take Nap's question and then say "au revoir," and folks can get on -- can get to us directly.

Okay, well, the first part of my question was just asked. And do you have a target for the level of group bookings going into 2010 that you'd like to have on the books at January 1, 2010?

Well, yes, we would like that to be across our brand in the 50% to 55% in this environment. We would like it to be at that level.

As compared to a 60% historical average, correct?

Exactly, yes, I mean 60 points gets us with our transient strategy gets us pushing 80 points of occupancy as a brand. We're going to operate under 70 this year. Last year on a same store basis, Mark, we did what -- 73, 74? And so we want to be going in the 52% to 53%, 55% grow business as we move in 2010 next year.

And you started this year at about 53%?

Yes, it was around that, Nap, it was --

Okay.

51%.

Was it 51%, David?

About 51% this year.

51%.

Yes, and that was heavily impacted by those fourth quarter cancellations that we lost.

Okay. All right, last thing, nobody has asked an equity raised question, so just to ask it, what might cause you to be interested in raising a substantial amount of equity as a number of real estate intensive companies have done over the past month?

You don't expect us to answer that question, Nap, do you?

I don't know, but I had to give it a try.

All right, well, good try. All right, any other questions, Nap?

No.

All right. Well, Operator, thank you, and thanks to everybody for taking the time to be on our call today, and if any of you have any additional follow-up questions call either David, Mark Fioravanti, or me, and we will diligently try and answer your questions. We'll get back to the folks that asked questions that we couldn't answer on the phone. So, anyway again, thank you everyone, and have a decent day. Thank you very much.

Thank you, all, for participating in today's Gaylord Entertainment Company's first quarter 2009 earnings conference call. You may now disconnect.