Gaylord Entertainment shares drop on lower outlook

Shares of Gaylord Entertainment Co., which owns a network of meetings-focused resorts and country music's Grand Ole Opry, tumbled Tuesday after the company slashed its 2009 guidance, citing a drop in bookings and a jump in cancellations.

Gaylord shares fell $2.37, or 20.1 percent, to close at $9.14.

Gaylord reported that its fiscal fourth-quarter profit more than doubled partly on a gain related to the extinguishment of some debt and new revenue from the Gaylord National Resort and Convention Center, which opened in April 2008.

But Gaylord said it expects conditions to be more difficult in the first quarter as greater numbers of companies delay bookings to reduce travel and event spending. Cancellations and attrition have also increased as businesses have backed out of previously scheduled events or brought fewer attendees than they had initially planned.

"The corporate customer seems to be going into, for lack of a better word, a 'nuclear winter' here," said Gaylord Chairman and Chief Executive Colin V. Reed in a conference call with investors.

He stressed that the Nashville, Tenn.-based company is aggressive about collecting cancellation or attrition fees when businesses break their booking contracts. "A deal is a deal," he said, "we have very strong contracts."

The company reported that future bookings at its comparable resorts plunged 52.2 percent in the fourth quarter of 2008 compared with the same period in 2007.

Friedman Billings Ramsey analyst C. Patrick Scholes called the company's forward booking levels "disconcerting."

"Bottom line, this greater than expected decline in forward booking levels suggests that (Gaylord's) group bookings is not as resilient across all business cycles, as has been the bull case for the stock," Scholes said.

Gaylord's fourth-quarter revenue per available room, or revpar, fell 8 percent, while total revpar _ which also includes food, beverage and other revenue _ dropped 8.9 percent. Revenue per available room, or revpar, is a key gauge of a hotelier's performance.

The company now expects revpar at its comparable hotels to fall 18 percent to 20 percent in the first quarter, with total revpar down 17 percent to 19 percent.

For 2009, Gaylord expects revpar declines of 9 percent to 12 percent. The company previously predicted that 2009 revpar would be flat or decline as much as 3 percent.

Gaylord is also attempting to defuse a proxy battle with its largest shareholder, TRT Holdings, which said it would nominate four directors to the company's board. Last week, the company said that its board plans to nominate several new independent director candidates for election at its 2009 annual meeting.

On the conference call, Reed confirmed that the company is in discussions with several shareholders about the board slate.

"We think the very public complaints by TRT about (Gaylord's) overhead spending have management focused on cutting out the fat and streamlining spending to volume-appropriate levels," said Robert LaFleur of Susquehanna Financial Group. "This year will be a very difficult year for (Gaylord) and the rest of the lodging sector."

Deutsche Bank analyst Chris Woronka said he still expects that Gaylord will outperform the broader lodging industry.

"It appears (Gaylord) is attacking its cost structure in a meaningful and permanent way, which we view as positive development that further bolsters liquidity and partly offsets the impact of a weaker top-line operating environment," Woronka said.