Gaylord Entertainment Co., the company with ambitions to build the largest hotel-meeting complex in Washington's history, has had recent troubles juggling its many lines of business.
Gaylord has been hobbled by a series of conspicuous business failures and three executive departures, leaving some analysts to doubt the company's ability -- both financially and managerially -- to fulfill its grand development plans. Gaylord's core business is entertainment and large hotels, but in recent years it launched forays -- now abandoned -- into developing Internet music portals, a film production chain and several golf promotion outlets.
Salvatore Muoio, a media and communications analyst who follows Gaylord at S. Muoio & Co., said that other than the Opryland Hotel in its hometown of Nashville, Gaylord has managed to "screw up everything in the last five years."
The sprawling, extravagant, almost 3,000-room Opryland stands as Gaylord's one solid success, by itself generating most of the company's cash flow and often carrying its hodgepodge of other entertainment properties.
In the last few years, Gaylord has set about selling or shutting down most of that jumble of companies to peg its future on the hotel and meeting business. Betting that the Opryland magic will translate to other communities, Gaylord's management is building three gigantic hotel complexes near Dallas and Orlando and, eventually, in Prince George's County, south of the Woodrow Wilson Bridge, as part of the $2 billion National Harbor project being developed by the Peterson Cos.
Gaylord's strategy is to focus on the large associations and corporations that already come to the Opryland Hotel in Nashville. The idea is to sell them multi-year contracts to rotate their conventions through the chain of Opryland hotels in the East, the West and the South. The Opryland name is derived from the Grand Ole Opry country music show Gaylord has owned since 1983.
"Our strategy when you come to Nashville is it's all done in the Southern heritage," said David Jones, president of Gaylord's hospitality group, explaining how the brand will translate to different markets. "When you go to Florida, it's all Florida. It's the Keys and St. Augustine," he said. "In Texas, it's the best of Texas -- big. In Washington, it's going to be the best of America."
One thing all the hotels will be is expensive. The price tag for construction will come to $1.3 billion. However, right now Gaylord doesn't have the money. Some analysts worry that with Gaylord's problematic recent past and the capital markets in turmoil, it could be tough to find financing to finish its building program. And hotel development experts caution that financing is increasingly difficult to find for large hotel projects.
"The financing of their deals has always been a question mark," said Muoio. "You ask [the company] and they say, 'We don't know. We're working on it.' That's it."
Christopher P. Dixon, a meeting and entertainment analyst at UBS Warburg who covers Gaylord, said: "They've still got stable cash flows. But one of the big issues going forward is how do they restructure to create the necessary financial footings."
Top management at Gaylord said it is close to finding financial partners for its Florida and Texas projects, which combined will cost between $830 and $860 million and are scheduled to open in 2002 and 2003 respectively. Last month, Gaylord received $375 million in financing from Merrill Lynch & Co. to help in those projects and in the $50 million expansion and upgrade at Opryland Hotel Nashville.
Denise Warren, Gaylord's chief financial officer, said long-term financing is becoming a challenge, given the worsening economy. But she points to the healthy returns on Opryland Hotel Nashville as proof that lenders will be eager to fund other projects.
"It's easier to get financing for our properties than, say, a Marriott or a Starwood because we do 85 percent group business and we've got meetings booked out until 2020 [in Nashville]. We're not depending on transient travelers as much as others," she said. "It allows us to show we do have the means to repay our loans."
Still, Gaylord has not said exactly how it will supplement the Merrill Lynch financing to pay for the projects -- leaving some to speculate that Gaylord will try to use what cash it can generate on its own and other short-term loans, then sell off the entire hotel business.
Jones denied the company would sell the hotel. "We are committed to developing our Opryland Hotel brand," he said.
According to the company's annual report, filed last week with the Securities and Exchange Commission, it has enough cash and available financing to complete the Orlando and Dallas projects. The report doesn't say how it will pay for the Washington project, which is slated to begin construction in 2003 and open in late 2005 or early 2006.
Last year Gaylord lost $154 million on revenue of $514 million, compared with net income of $350 million on $532 million in revenue in 1999. President and chief executive Dennis J. Sullivan Jr. put it bluntly: "We are glad to have 2000 behind us."
Losses in each of the last four quarters have kept the stock price tamped down at around $26 a share, a 10 percent drop since the fall of 1997. Gaylord went public in 1991 at $20.50 a share. Last February it suspended dividends.
The Opryland brand has its roots in the country music industry that the company helped spawn in the early days of radio. Gaylord's origins date to 1925, when radio station WSM in Nashville started broadcasting a live Saturday night music revue that became the Grand Ole Opry. In 1943, the show moved to the Ryman Auditorium, where it helped make stars of such unknowns as Roy Acuff and Minnie Pearl. Now the Grand Ole Opry is in the Opry House.
In the 1970s, NLT Corp. of Nashville, then owner of the Opry, began expanding the brand and launched an Opryland theme park. The Opryland Hotel opened in 1977 with 600 rooms. The hotel has become a huge success, and almost single-handedly made Nashville a major player on the national meeting and convention scene.
In 1983, conservative Oklahoma newspaper publisher Edward L. Gaylord bought the Opryland properties. The company then started the Nashville Network and added music and cable stations. In 1991 it bought the Country Music Television station and by 1996 had expanded the Opryland Hotel to 2,833 rooms.
The Gaylord family still controls most of the stock, and Edward Gaylord's son E.K. Gaylord II is chairman. Christine Gaylord, Edward's sister, is also on Gaylord's board.
But beginning in 1997, with the appointment of Terry E. London as CEO, Gaylord Entertainment went through a series of reinventions.
It sold its Nashville Network and Country Music Television stations to CBS, now part of Viacom, for $1.55 billion. It also closed its long-struggling Opryland theme park in 1997 and turned it into a $200 million entertainment and retail complex in partnership with Arlington-based Mills Corp., owner of Potomac Mills. (Gaylord has a one-third interest in the shopping center.)
Analysts said the heavy losses at Gaylord's Internet businesses led to London's departure last summer. London could not be reached for comment. Since he left, the company has been "slimming down to its core," says Tom Adkinson, a Gaylord spokesman.
Brian Payne, who headed Gaylord's interactive media group, left the company last month. And Tim DuBois, president of the company's creative content group, left last September.
Gone are Internet ventures Lightsource.com, a Christian content provider for Web broadcasters, and Musicforce.com, an online retailer of contemporary Christian music, as well as minority interests in such ventures as kid portal Edgate.com Inc., country music site CountryCool.com and RockCity.com, which presented short films. Barely a year after it launched them, Gaylord took a $59 million charge and closed or sold its Internet properties, according to its SEC filings.
"It didn't hit its revenue and cash flow targets," said CFO Warren, formerly a Merrill Lynch analyst who covered the firm.
Last November, Gaylord closed its two-year-old Wildhorse Saloon, a dance club and restaurant for country music lovers in Orlando, taking a $16 million loss, and shelved plans to expand the concept to other parts of the country. In October 1999 it sold its Dallas-Fort Worth station, KTVT, to CBS for $485 million.
This year, for $22 million in cash, it also sold its interest in a film production division and several entities that produced and promoted golf events to Oklahoma Publishing Co. -- another Gaylord family firm that owns newspapers and radio stations. Gaylord has a 20 percent interest in the Nashville Predators, a National Hockey League expansion franchise, and it is paying $2 million a year for the next 20 years to rename the Nashville Arena the "Gaylord Entertainment Center."
"They've thrown a lot of money into a lot of stupid projects," said Muoio, the analyst, who owns shares of Gaylord. "Even with foresight, they've probably made too many mistakes. Their record label is bleeding money. They were putting money in motion pictures so they could feel good about themselves when they go to screenings."
Gaylord said such blunders are behind it. Its plan is to become a hotel company while keeping the core entertainment properties that put it on the map in the first place. Those include the Grand Ole Opry, Acuff-Rose Music Publishing and Word Entertainment -- its record label, three radio stations and cable stations that broadcast in the Pacific Rim and Latin America.
"We used 2000 as refocusing our business on our long-standing core of businesses," said Adkinson.
Muoio said the change is long overdue. "They've cut all that stuff out. They've been housecleaning. They are skinning down to the essential real estate portfolio."