Betting on Customer Loyalty

From Harrah's to National Harbor, Reed Puts His Chips on Guest Satisfaction

GRAPEVINE, Tex.

When he arrived at the Gaylord Entertainment Co. seven years ago, Colin V. Reed took the helm of a company that was hemorrhaging money and foundering with a cluttered portfolio of entertainment holdings.

It had its flagship venue, the vaunted Grand Ole Opry with neighboring hotel and convention center, but it also owned an unfocused assortment of other holdings, including a theme park, a music publishing company, a minor league baseball team and an outdoor sporting goods retailer.

There was a second hotel about to open in Orlando, a third one planned in Texas. And then there was a deal to partner with a developer in suburban Maryland to build a fourth hotel on the banks of the Potomac River.

Almost immediately, Reed launched a campaign to reconfigure, divest or pare down all of them.

National Harbor was among the first in his crosshairs.

In April 2001, "when I came in, [the plan] was a lot different than it is today," said Reed, who served as chief financial officer at Harrah's Entertainment before becoming chairman, chief executive and president of Gaylord. "It had been a lot more scaled to the advantage of National Harbor."

Then Sept. 11 happened, and the tourism industry went into a free fall. Reed took the opportunity to meet with developer Milt Peterson to renegotiate their agreement. The result, Reed said, was "a more palatable deal."

Less than four months from now, the Gaylord National Resort and Convention Center is likely to open in an uncertain economic landscape. The company trumpets the fact that it has already booked more than 1 million room nights at the National property, but the hotel industry is bracing for declines. For the year ending Friday, Gaylord's stock declined 29 percent and its total revenue per room -- a standard measure of hotel performance and demand -- lagged below projections in the latter part of the year.

Larger chains, like Marriott, Hilton, Starwood and Radisson, can hedge their exposure to downturns by slowing their growth rate domestically and focusing on international expansion. But Gaylord's future success depends on its ability to add properties that cater to large, 600- to 2,400-person meetings, and expand the geographic diversity of its holdings.

"Brand extension is very critical in today's competitive market," said Linda Hirneise, executive director of J.D. Power and Associates' global travel practice. "Marriott offers everything from a Fairfield to Residence Inn, to J.W. Marriott to Ritz Carlton. The greater the breadth of properties, the more opportunities to build brand strategy and loyalty."