Ryman Hospitality Properties Inc (RHP) 2011 Q1 法說會逐字稿

Welcome to the Gaylord Entertainment Company's First Quarter 2011 Earnings Conference Call. Hosting the call today from Gaylord Entertainment are Mr. Colin Reed, Chairman and Chief Executive Officer; Mr. David Kloeppel, President and Chief Operating Officer; Mr. Mark Fioravanti, Chief Financial Officer; and Mr. Carter Todd, Executive Vice President and General Counsel.

This call will be available for digital replay. The number is 800-642-1687. The conference id number is 59357120. (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 for Gaylord Entertainment Company. Thank you for joining us today on our first quarter 2011 earnings call. You should be aware 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 are 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 these statements may be affected by the important factors, among others, set forth in Gaylord Entertainment's filing with the Securities and Exchange Commission and in our first quarter 2011 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 a result of new information, future events or otherwise.

I would also like to remind that you in our call today we would 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 would like to turn the call over to our Chairman and Chief Financial Officer, Colin Reed.

Thank you, Carter. Good morning and welcome, everyone. Thanks for joining us to discuss our first quarter results. I, for one, am pleased that it's this year not this time last year, one day after the great flood of Nashville.

As usual, I'm going to start off by giving an overview of our business and performance for the quarter, and I will also provide a sense of how we're thinking about the rest of 2011. Then our President, Dave Kloeppel, will offer some color around our sales and marketing activities. And then Mark Fioravanti, our CFO, will conclude our prepared remarks by providing detail on our financial results for the quarter. And then, of course, we'll open the lines up for questions.

Our business performed just about as we expected this quarter, and we're well on our way to achieving our 2011 guidance. When we were setting our guidance for 2011, we knew that we were sitting at a natural inflection point in the group lodging cycle. The majority of higher-rated room nights booked before the recession had travelled and the higher-rated room nights booked as the economy began to recover during the second half of 2010, have yet to travel. As we pointed out in the past, our business model is very different from the majority of our industry, because so much more of our business is derived from the group customer, whose contracts are typically negotiated years in advance. Conversely, the data from Smith Travel Research indicates that much of the RevPAR growth for our markets in the first quarter was due to growth in the business transient sector which represents a very small portion of our business.

Our plans and guidance for 2011 was based on group room nights that have already been contracted, a historically based group reach number and an appropriate goal for leisure, that is not materially different from what we had achieved in 2010. Based on these assumption, I would summarize our first quarter results sort of this way -- Opryland and Texan did a little better than we had planned, Palms was roughly flat to our expectations and National was a little behind because we underachieved on the group reach, primarily in month of January. Overall, we slightly exceeded our own internal plans.

We expect to have performance in the second quarter to follow roughly the same pattern as the first. But in the second half of the year, things change. Now to illustrate, at the end the first quarter, we have more group room nights already on the books for the second half of 2011 than we had at the same time last year for the second half of 2010. And the room nights on the books reflect a very healthy increase in room rates over the prior year.

We knew before the year began, that RevPAR growth would have to be proceeded by a recovery in demand from corporate groups. This also appears to be happening. In fact, during the first quarter of 2011, corporate group room nights that travelled to our hotels during the quarter increased by approximately 30%. So as we survey our first quarter results, and our position for the remainder of 2011, I would summarize by saying thus far, the year has played out just as we had expected and is pretty much in line with our internal budgets.

Now in terms of our top-line results, on an adjusted basis, excluding Gaylord Opryland, our RevPAR performance was up slightly compared to the first quarter last year. Notably, total RevPAR increased 285 basis points, driven by a lift in outside of the room spending, and particularly, food and beverage spend. This is one of several positive indicators in our business that the group lodging environment is continuing to strengthen.

Additionally, attrition and cancellation levels continued to trend downward in the first quarter as groups continue to perform better against the block of rooms for which they had contracted. Attrition decreased 1.4 percentage point and cancellations in the year for the year were down nearly 40% when compared to the prior year quarter. As we've stated in the past, lower level of attrition and cancellation results in lower attrition and cancellation fee revenue, but even with the decline in these fees, and the rate pressures I mentioned earlier, we were able to maintain our margin performance. Our CCF margin was flat compared to the first quarter last year, and actually increased when you remove loss of attrition and cancellation fees from the comparable quarter.

Looking at how these results brokedown acorss our properties; the Gaylord Texan had another excellent quarter, as room rates, aided by the SuperBowl, made a strong recovery in that market and drove a double-digit RevPAR increase. We're very excited about how this asset had been performing and we expect these positive trends to continue as occupancy increases.

Conversely, rate remains challenged in the Orlando market. But again, this was something we anticipated, given the significant increase in supply we've seen in the market over the past two years. That said, we're seeing pricing begin to improve relative to 2010 and 2009 and in-the-year for-the-year bookings volume and rate in the first quarter were both up compared to prior year quarter. Additionally, we're investing in the property with our room refurbishment that we talked about. And because of demand from our rotating group customers, we'll be adding a sports bar, which will double as a late-night entertainment area in this hotel.

We also knew that in-the-year for-the-year bookings at the Gaylord National would be negatively impacted by the ongoing federal budget debate and a drop in the government per diem rate for the market. But again, we're pretty optimistic, given the level of advanced group bookings we have already secured for the National that will travel in the second half of the year. Now to illustrate this, at the end of the first quarter of 2011 Gaylord National had already had more group room nights contracted and on the books for the fourth quarter of 2011 than all the group room nights that actually travelled to the property in the fourth quarter of 2010. Additionally the group room nights currently on the books at the Gaylord National in the fourth quarter of 2011, reflects a room rate increase in lower double digits. The National should have, therefore, a very solid performance in the second half of 2011.

Now here in Nashville, at the Gaylord Opryland, just by the top comparison against an exceptional first quarter last year, we delivered 5% RevPAR growth and a 10% total RevPAR growth. A testament to the impact of the investments we've made to enhance the property's offerings when we rebuilt from the flood a year ago. We expect this property to continue to gain momentum and be a very strong performer. As Dave will speak to shortly, the guest reaction to the new and improved Opryland has been tremendous.

Let's talk about advance bookings. In the first quarter, we booked over 360,000 gross room nights. While this represents a decline from the prior year quarter, it's important to note a few things. First, the quarter of 2010 was especially strong. Additionally, the fourth quarter of 2010 was also very strong. Therefore, we're not disappointed in the least with our performance.

Let me share with you some more data on this subject. As we shared with you in our call in February, we made a decision to become more aggressive in our pricing model for 2012 and beyond. As a result, our advance bookings during the first quarter were lighter for the 'four years and out' dates, as compared to our production in the same period last year. Our production in the first quarter for groups travelling in the next 12 to 24 months was up, both in volume and in rate. These are both good signs that we're moving rate and volume in a positive direction in the short-term, while ensuring that in the long-term we've positioned to capitalize on the group industry recovery. I want you to know we'll continue to push group rates as long as the pace of the lodging recovery remains healthy. I will let Dave speak a little bit more about bookings shortly, but suffice to say, we're confident that the strategy we're taking is the right one.

Now as many of you are likely aware, last week we made an announcement that we have entered in a strategic alliance with DreamWorks Animation to expand our family-friendly leisure offerings. Starting in the holiday season of 2011, our resort properties will be offering a unique experience for our guests including; live characters, merchandise, inventive food and beverage offerings and new vacation packages focused around all of these types of events.

Why have we confected this alliance? Let me say this, our primarily strategic focus is and will continue to be on the large group customer. However, the behavior of this segment is pretty much the same, whether we're in an economic downturn or not. Simply put, the higher-rated group customers travel from mid-January to mid-June and from early September to Thanksgiving. Now while we do see group customers outside these times, they tend to be price sensitive customers that spend less outside of the room. It's for this reason why we have created leisure programs like ICE! and Country Christmas here in Nashville, which has helped to transform the holidays from one of the worst performing times into one of the most profitable for us.

So the rationale is simply this -- we own and operate fabulous assets that customers really like, that are empty about 20% to 25% of the time. Now we have the opportunity to create exclusive, fun-filled family vacations in periods where we have been historically slow that will drive occupancy without discounting the living heck out of the product. We also feel very proud that DreamWorks, a company synonymous with innovation and world class entertainment, saw Gaylord as the ideal company to form an alliance within the hospitality industry.

Financially, we expect this venture to make a difference. And we'll have more to say about this as our holiday plans for the latter part of this year and summer of 2012 are finalized.

Let me touch on growth before handing over to Dave. First and foremost, we're still focused on continuing to improve the performance of our four assets and drive organic growth in each. These are fantastic assets, and we are excited by the prospects for revenue and profitability growth across our brand as the economy recovers.

However, as I've said on previous investor calls, we're also looking very closely at ground-up opportunities, because they really are not many resorts in the country that look like ours. So there are several municipalities and local community leaders who recognize the enormous economic benefit that we bring to communities where we operate, and are eager to incentivize us to build a property in their area. But as you know, these are complex, time-intensive deals and we'll not announce anything until a deal is fully-baked, which would include the fundamental issue of how a government agency would incent us to build in their community. And as always, anything we will do will have to meet our strict financial criteria.

So, we have been working on some exciting opportunities. And when things are finalized, you'll be the first to know. And with that, let me hand over to Dave to talk about our operations.

Thank you, Colin. Good morning, everyone. Let me begin by saying that I'm very pleased with our results for the quarter, particularly with the positive signs in our business that indicate that the lodging industry continues to improve.

Now let me provide some detail on our sales performance in terms of advance group bookings. As Colin mentioned, Gaylord Hotels, including Gaylord Opryland, booked over 360,000 gross group room nights for all future years. And as of March 31st, we have five million net room nights booked for all future years. As of the end of the first quarter of 2011, Gaylord Hotels had 39.8 percentage points of net group occupancy on the books for 2012. This is about 1.5% ahead of where we stood at the same time last year.

And for 2013, we have 27 percentage points of net occupancy on the books, which is down about 3.1 percentage points from where we stood at the same time last year. But it reflects our decisions to be more aggressive on our rates in future periods. We believe that by delaying booking high command group periods until rates are more acceptable, we'll ultimately be able to ensure we reap the full benefits of the recovery. While the strategy may negatively impact our bookings in the short-term, we think it will be valuable in the long-term as rate recovers.

Along with bookings, guest satisfaction is a very important metric for us, since we know it's the unique experience that we provide that leads guests to return to our properties. So I'm thrilled to report that our guest satisfaction scores were at an all-time high in the first quarter. This is a testament to the incredible commitment of our STARS. It was also the best performance for Gaylord Opryland, which lead the brand in guest satisfaction for the first time in it's history. Our guest feedback at this property reinforces that Opryland is ramping up nicely from an operational perspective. And is positioned to potentially perform even better, following the additions and modifications we invested in after the flood.

It's also important to note while lodging fundamentals continue to improve, we're closely monitoring the economic environment and holding costs across our business very tightly, as a result. We've taken several steps to prevent costs from creeping back into the business, given the rises in fuel prices and the uncertainty surrounding the strength of the US economy. As we've done the past, we'll flex our business, as appropriate, to minimize the impact of rising costs and uncertain macro economic forces.

Now let me take a moment to discuss the transient side of our business. To reiterate Colin's enthusiasm, we believe that our agreement with DreamWorks represents a tremendous extension of what we've done in the past, from a leisure perspective. And we believe it's a meaningful addition for this segment of our business.

Beyond DreamWorks, we're also continuing to focus on additional ways of boosting transient room nights across our properties. For example, we anticipate the new pool we're developing at the Gaylord Texan, which opens in May, will help drive significant increase in transient guests once completed. The renovations at Gaylord Palms will not be completed until late 2011, but will help the competitive positioning of the property as we move forward.

And finally, I want to briefly mention 'GET Green,' which is our new sustainability initiative that we announced on Earth Day. This program will focus on reducing our impact on the environment while also improving efficiency in our properties. The first two goals we announced as a part of GET Green are reducing energy consumption and green house gas emissions per square feet by 20% by 2015. The second goal is pursuing LEED certification for all future developments. We believe that goals such as these can have a significant impact on the environment and significantly lower our operating costs in the process. Sustainability is a priority for us. It fits extremely well into our business and we believe it will be an important for our business as we move forward,particularly, as it continued to be a focus for meeting planners and our resort guests.

With that, I'll turn the call over to Mark for financial highlights.

Thank you, Dave. Good morning, everyone. I would like to spend a few minutes this morning reviewing some of the financial highlights for quarter. I'll also touch on the balance sheet and then review our guidance for the remainder of the year.

On a consolidated basis, Gaylord Entertainment revenue for the first quarter of 2011 was $220.7 million, a 2.9% increase from the first quarter of 2010. During the quarter, the Company generated a loss from continuing operations of $2 million or $0.04 per diluted share. Company-wide consolidated cash flow was $46 million for the quarter, a 4.1% increase from the same period last year.

Turning to the hotel segment; for the first quarter adjusted Gaylord Hotel RevPAR increased slightly, while total RevPAR increased 2.8%. Adjusted Gaylord Hotels in-the-year for-the-year cancellations for the quarter, totaled 9,495 room nights compared to 15,497 room nights in the first quarter of 2010. Attrition rates fell 1.4 percentage points from 11.2% in the first quarter last year to 9.8% in the first quarter of this year. During the quarter, we continued to benefit from attrition and cancellation fee collections. And for adjusted Gaylord Hotels, collections totaled $1.5 million compared to $2.5 million for the same period last year. Adjusted Gaylord Hotel CCF was flat at $42.6 million in first quarter, compared to $42.5 in the prior year quarter.

At Opryland, we had a very good quarter, as revenue increased 10.3% year-over-year, to $60.3 million. RevPAR at Opryland increased five percentage points for the quarter, driven by a 5.9 percentage point increase in occupancies. Total RevPAR increased 10.3% from the prior year quarter, driven by both the increase in occupancy and an increase in outside the room spending.

As it relates to the corporate and other segment; consolidated cash flow in the quarter improve $500,000 to a loss of $11.2 million, compared to a loss of $11.7 million in the same period last year.

Moving on to a few balance sheet items; as of March 31st, we had long-term debt outstanding, including the current portion, of approximately $1.2 billion and unrestricted cash of $87 million. Additionally, $300 million of borrowings remained undrawn under our credit facility and the lending banks had issued $8.2 million in letters of credit, leaving $291.8 million of availability under our credit facility.

Finally, turning to our guidance; we're reiterating our 2011 full-year guidance for RevPAR, total RevPAR and CCF. With that, I'll turn it back over to Colin for any closing remarks.

Melissa, I think what we'll do is we'll open up the phone lines for questions. And if you could do, that we'll start hearing from our shareholders.

(Operator instructions). Your first question comes from Chris Woronka of Deutsche Bank.

Good morning, guys.

Hi, Chris.

You mentioned, in terms of the forward-booking nights, that you are willing to sacrifice a few room nights in the near-term for the higher rates. Can you quantify where some of the rates are on the second half of 2011 or 2012 business?

Dave, do you want to touch on that?

Sure. Yes, Chris, as we've talked about for the last probably six months, we've really taken a different approach to how we want to come out of this downcycle than we took coming out of the 2001, 2002 downcycle. And that is to be more patient in booking some of those room nights in the -- where we are now in the 2013, 2014, 2015 period. Because we want to make sure we can take advantage of the recovery and take advantage of the increase in corporate demand that tends to happen when you see a recovery like this. So far we think that strategy is working. We're continuing to watch it closely and really monitor pace, particularly for 2013 and 2014.

If you look at the way bookings fell in the first quarter, the strategy looks likes it's working the way we want it to, which is producing room rate and production increases in-the-year for-the-year and next year windows, but sacrificing some production in the outyears. If you look at the production for in-the-year for-the-year and for next year, in the first quarter, we saw high single digit increase in production for in-the-year for-the-year. We saw mid-double digit increase in production for 20 -- I guess next year is 2012. But we saw sacrificing 2013, 2014, 2015 because we are getting out of the corporate window, as you get into 2013 booking period. And the associations are, right now, a little more price sensitive and waiting to see where rates shake out as we move into 2014, 2015 and 2016.

Dave, give Chris just a broad look at the rate that we booked 2012 at, compared to this time last year for the year out.

Yes, so the increase in rate that we booked for 2012, which is the T plus one period, is up -- I don't want to give you a specific number -- but it's up about $15 or $16 over what we booked for 2011 last year.

Which is a healthy increase.

A significant increase.

Okay. That is very helpful. And then in terms of the National, we still have a somewhat limited operating history and obviously disrupted by the recession. How should we think about seasonality there, going forward? Is there going to be any normal seasonal pattern? Or is it just you need to keep building the business up?

This is a very interesting question. We were actually as a group, the three of us, Mark, Dave and I, were discussing this issue last week. We had the senior, senior managers together.

Dave, to you want to touch on that? How we're now thinking about the National -- that questions is a good question.

Great question, Chris. And really the seasonality of the National, if you look at what we experienced the first couple of years of opening, a lot of the seasonal patterns that you saw were a result of a lot of pre-opening bookings and booking a lot of brand customers into the National. And so it kind of masked what the actual seasonality should be, as we go forward. So as you look at the National, as we view it going forward, we think first quarter is going to be its weakest quarter going forward. Second quarter strengthens, third quarter is the strongest quarter and fourth quarter should hang in there pretty well, especially if we can get the transient business there really humming like we know we can.

As an example, unlike, for instance, Opryland, January is a hard month to get goods traveling to Washington. And so in the first quarter, we have slight variances within the first quarter.

That's correct.

Okay. Terrific, then finally just, in terms of new projects, Colin, I won't ask you about any specific project, even those that are being mentioned in the news outlets; but can you maybe remind us, in terms of the incentives -- what the priorities are? I know there are different types of packages and there is things upfront and things deferred and all that. What are your really top priorities there? And what is going to make you -- ?

I'm glad you've asked the question this way, and rather than the dumber question, what about this market? Because you know we can't do that.

But here is the -- here are the principles, right. I mean we've -- this brand of ours has been sort of operational for about five, six years now. And hotels like the Texan have now, four to five, six years worth of experience in a market. So here are the fundamental principles that we go in with here.

First is that we generate huge economic impact. For instance, the City of Grapevine commissioned an economic impact study recently on that -- on our impact into the community, the greater City of Denver --- City of Dallas, and also Texas as a whole. Freudian slip there. And the impact is monstrous. The impact, the jobs that we've created, the other developments that have taken place has been tremendous. Hundreds and hundreds and hundreds of millions of dollars of economic impact.

So the other principle is that, some cities, before this recession, decided that had they would build their own facilities. And you see this across the country. The large hoteliers, the Hyatts and the Hiltons and the Marriotts tend to go in and manage those big hotels. But the issue is that the city is on the hook for those hotels. Now some of these -- some cities have decided that they would rather see a public/private partnership. And so for us, we are prepared to invest in a market and build one of these assets that we have in the markets that we're in today, providing that we get a large part of the taxes that is we're in fact generating.

And I would say to you that you can't look back in history and see what occurred at the Texan and at the Palms and to some extent National, because our brand was in a different position then. The economic impact that we had created -- we were creating hadn't been fully appreciated. If you look at the before and after pictures of what has occurred in National Harbor in -- on the banks of the Potomac there, it's extraordinary what has taken place from 2003 to 2010. So communities are sitting with us and saying, we'd like to incent to you come to our market. And we're obviously in active negotiations.

And I slipped in my discussion about Dallas and said Denver, because recently there has been speculation about our involvement in this market. I would say to you this, that we analyze every year by talking to our meeting planners that we had very high retentions of our group customers -- retention rates of our group customers. And we talked to our groups about where they want to go. Denver has moved from top 15 to top 10 market of where customers want to go. So it's a market that we've been looking at. But we have nothing publicly to say at this stage and we said that this last week. But the basis under which we would go to a market today would be different to what we did three, four, five years ago, when our brand wasn't appreciated for the huge economic impact that we now generate.

Okay that is great. Thanks, guys.

Your next question came from David Katz of Jefferies.

Hi, good morning, all.

Hey, David.

So I just want to circle back for a second, Dave. I think you gave a $15 or $16 number on 2012. And I assume you are referring to a room rate and I want to make sure I'm hearing correctly. For example, if I looked at your room rate from the first -- looking at an ADR from 2010, for example, of $167, roughly. And so that is what we're talking about. Correct? Comparing that two, so we're talking 8% or 9% or 10%.

We're talking about a room rate. It's not compared to what we actualized for the entire year of 2010. I'm comparing to what we booked in the first quarter for 2011, right -- versus what we booked in the first quarter for 2012. Follow me?

Okay. So that is just a one Q reference point.

What we booked, that's correct.

So if I can follow that up a little bit.

If we looked at the whole of what you booked for 2012, I assume the 39.8% of occupancy that you have on the books is spread throughout the year, right, it's not just 1Q?

Correct.

So is there some qualitative comment you can make about what kind of rates that is booked at? Relative to something, right? Relative to what you may be thinking for 2011 that is imbedded in your guidance?

Back to the reference point that you were pointing to a few minutes ago of what we actualized for 2010, our -- what is on the books now for 2012 is low double-digit increase to that number -- the ADR.

Got it. Okay. Perfect. And so as we sit here today, and I admit to being just a bit unclear on -- I understand the purpose of the strategy, but on what the execution of the strategy is. If we look at the remainder of 2011, should we be assuming that you have, as you sit today -- we've always known that that final 10% of occupancy walks in the door when it walks in the door. So at any point, we should be sitting with around 65% of the occupancy on the books for this current year, roughly?

I don't have that number in front of me, Mark might calculate it while we're sitting here. But if you look at where we are for the rest of this year, 2011, compared to where we were for the rest of 2010, at the end of March 2010 --

Yes.

so I'm comparing same period to same period; we're up about 5% in revenue on the books, from a group perspective.

Right. Okay. One last question -- and I apologize, because now I'm going to give Mark something else to do. It appears to me that we may be getting in a zone where your bank financing might need some addressing. And we've seen across our space, anyway, a number of very attractively priced bank deals. How are you thinking about that? And I admit to having seen some of the press about a new project being out there and so forth. What is your bank financing strategy at this point? And are you thinking about putting provisions in there for a new project or for the possibility of buying something and having that kind of flexibility?

We are working through those issues now, David. We're entering into the zone where we will look to refinance our bank deal. The feedback we've gotten from our banks has been very favorable. And as you pointed, out the market is very favorable currently. And so the activities that we're undertaking now will help inform that facility. And we think that rates -- the rate outcome will be positive and it will be some flexibility in that facility that we need for our business, going forward.

Can you just quickly remind me where your current bank deal is priced? And as I recall, you may have a swap against a portion of it?

It's L plus 250.

Right.

And $500 million of the term loan is swapped. And the average rate on that swap is about 3.9% for LIBOR.

And that swap goes off at the end of the year.

Yes, June of this year.

And the total bank deal is $1 billion, as I recall. Is that right?

That's correct. $700 million term loan and a $300 million revolver.

And $500 million of it is swapped at 3.9% and change, as I recall. That is it for me. Thanks.

Your next question comes from Andrew Didora, Bank of America Merrill Lynch.

Good morning, everyone. Just a quick question for David, I was wondering if you could provide some of the progression of your bookings throughout this year? We've been hearing from a lot your competitors that things picked up in March and April. Just curious if you guys saw similar patterns in booking trends.

Why don't you talk about the preliminary intensives -- just the whole bucket of volume. Because we're seeing it getting stronger. We've seen that again in April.

That is good direction. So the general tone was -- January was a little bit soft, February got a little bit better, March, a little better, still, and then April continued the improvement. I wouldn't describe it as a hockey stick, by any stretch of the imagination, but a steady progression of improvement through the four months of the year thus far.

Let me just add to that, Dave, because one of the things that we -- I think our competitors, they talk in the macro, and what we believe they're say something that what they're seeing increases in the corporate side of the business. And we're seeing fairly substantial increases in our bucket of inquiries on the corporate side. We're seeing numbers, 15%, 18%, 20% up, in terms of leads -- lead volume on the corporate side. So, that continues to strengthen and we have seen that again in April.

That is, that is very helpful. Finally for Colin; the commentary that you gave recording the municipalities from Chris' question was very helpful. Can you just remind us what your return metrics would be, from your perspective, on any future development deals?

Yes. If we're going to do -- take something on the balance sheet we want to make sure that we have got a 12 after tax on leverage as a minimum threshold as we structure deals. But going forward, we've said that we will also look at potentially partnering and that obviously adds levels of complexity. But the issue for us is making sure that if the incentives are big enough, and rewarding us for the economic impact we bring, that will cause us to look at structuring a deal one way versus another way. So more to follow on all of this.

Okay. Great, that is all I had. Thanks.

Thank you.

Your next question comes from Kevin Milota of JP Morgan.

Good morning, guys. I have a question here on guidance and what it implies through the year. If you are thinking second quarter is much like the first quarter, that implies double-digit growth in the back half of the year. I was wondering if you could speak to what the occupancy in ADR contribution looks like for the second, third and fourth quarter? Then a separate question, in terms of new asset builds -- but address the first one, I appreciate that.

Yes, Kevin, your math is correct. Mark?

Yes, as we indicated, the second quarter will look a lot like the first. And then we see continued growth in the third quarter and the fourth quarter being the strongest. As we mentioned earlier, group bookings in the fourth quarter look very good year-over-year, particularly at the National. Where as Colin mentioned, we already have more rooms on the books than travelled in the fourth quarter last year, from a group perspective.

And we do a lot of executive meetings in that hotel too. So that is a real good sign.

Okay. Then on the asset development front, was wondering if you give us some updated thoughts on how you see capital recycling play out with new development in mind? Are you still of a thought that you'll potentially sell a portion of one of our owned assets and recycle that into a new build? Give us an update on that front. Appreciate it.

The answer to your question is maybe. And let me say it this way. This Company -- we're going to generate a lot of free cash flow here over the next -- without a new deal. We're going to generate a lot of free cash here, over the next three to four years. We just are. And we are in the early part of this lodging recovery. And we believe these assets of ours are going to become a lot more valuable over the next one to two to three years. It's very interesting, we were sitting -- I was sitting with one of the larger shareholders that are in our bonds, and they're in our converts and they're also in our equity. And this particular shareholder said, we keep hearing other analysts and shareholders say that you should be selling your assets. But we believe these assets are extraordinarily valuable.

I thought to myself when Mark and I had this meeting about four or five weeks ago -- you are exactly right. So the issue for us is, we'll recycle capital if we've got alternative uses for it, number one. And number two, we'll recycle capital if the value that we're going to get for recycling is it what we think these assets are worth. So we have no need to recycle capital to do another deal. Because simply -- because of the free cash flow that this Company is going to generate here.

Very good. Thank you.

Your next question comes from Bill Crow of Raymond James.

Good morning, guys. I think my questions regarding growth initiatives have been answered. Let me shift to the DreamWorks deal. Colin, is this something that is a year-round effort? Or is this simply seasonal aimed at further increasing the leisure demand during that -- ?

Yes. Good question, Bill, good morning to you. Bill, let me answer it this way. The primary thrust of this deal will be in these months that we described earlier, where we have large occupancy gaps. And times, like, for instance, Easter, Mother's Day, Memorial Day, Labor Day, Halloween, Thanksgiving, where we find ourselves -- it's very difficult to get groups to move. So the primary focus will be during those dates that I have just articulated. However, there will be year-round opportunities -- and let me just give you one illustration of this. So, for instance, if you have a young daughter that wants to have a wonderful birthday party, we now can program a birthday party for that particular young lady in a way -- in their market, in a way that could have never been done before -- other, I suppose, than in a market like Orlando. So there will be year-round opportunities to deal with this. But primarily, it's going to be in the periods of time that I just referenced.

I see that opportunity. I want to make sure that the risk to the business travel -- the core constituent walking in there, in May or in March, and being inundated with kid stuff. It could be a negative.

We agree with you and we agree with that premise that you've just made. We want to make sure that we don't offend any of our group customers. That is not what this is about. But it was very interesting a week ago -- week and a half ago before the DreamWorks folks came here and we made the announcement. We did a photo shoot in Opryland and we had groups in the house and group customers were running up to Shrek and to these other animated characters and embracing them and wanting their photographs taken with them. It was quite extraordinary. But not withstanding that, the primary goal here is to fill the 25 points coming out of a recession year, to 20 points in a good year of occupancy that we haven't filled before. And we think the profitability implications to our business is going to be material on being able to do that.

That's it for me. Thank you.

Thank you very much. I think we will take one more question. And then if there are follow-up questions, folks know how to get a hold of Mark, David and me.

Your final question comes from Patrick Scholes of FBR Capital Markets.

Good morning, a quick question on your DC results -- the National results from the first quarter. You mentioned something pertaining to group reach or disappointment in group reach. Can you give a little more color on what exactly that was?

Yes, sure. As we set our budget late last year we knew we had -- as we looked at the year, we talked a lot about the second half at the National and the bookings that are on the books there, and we knew the second half was tremendously strong and that seasonally is a strong pure [crest] of books log more meetings into. As we looked at the first half of the year we have group reach that -- we always have group reach into all of the hotels, but National's was front-end loaded, if you will. So as we were preparing our budgets in October, we recognized that that was a need for us. We put our sales team on it aggressively. We didn't achieve the bookings that we wanted to for the month of January. And that, in particular, was where the bigger issue was with the first quarter. And then the rest of the first quarter performed pretty well as we expected.

Okay. Great. Thank you.

Okay. Thanks, everyone, thanks for joining us. And again, if you have any questions that you want to follow-up on, you have our telephone numbers. And have yourself a good one. Thanks a lot.

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