Correction: An earlier version of this story said that Marriott oversees 38,000 properties. In fact, the company oversees 3,800 properties. This version has been corrected.
The Gaylord National Resort and Convention Center could be a town unto itself.
With 2,000 hotel rooms, five restaurants and 89 meeting rooms, the sprawling 41-acre property is a more self-sufficient destination than a run-of-the-mill hotel.
In the five years since it opened, the Gaylord National has found its footing, catapulting National Harbor — a town of 3,800 — into a major conference hub, outranking cities like Minneapolis and Charlotte.
But at the same time, government budget cuts, high attrition rates and slumping demand for group bookings have kept profits at bay. The transition to Marriott management, which began a year ago, has also been bumpy.
Marriott International, the Bethesda-based hotel giant, took over management responsibilities for four Gaylord hotels last October. The $210 million, 35-year deal with the owner of the complexes, Ryman Hospitality Properties, has been a large undertaking for Marriott, which has spent the past year merging its sales team and back-end systems with Gaylord’s and tweaking its strategy along the way.
“The transition has been taking a little bit longer than both Ryman and Marriott had anticipated,” said Michael Stengel, senior vice president of the Gaylord brand for Marriott. “But neither of us could have predicted the kind of things that have happened in the government this year and how that would affect business.”
The Gaylord National has been particularly hard hit by large cancellations.
Revenue per available room, a key measure for hotels, fell 1.74 percent to $140.73 in the first six months of this year, while occupancy rates slipped 5.3 percentage points to 65.8 percent in the same period. A planned water outage in Prince George’s County this summer further exasperated matters when the Gaylord National had to shutter operations for a day and a half, resulting in an estimated $1.5 million in lost revenue.
“We are disappointed with the results at the Gaylord hotels in the second quarter,” Arne Sorenson, president and chief executive of Marriott, said after the company’s recent earnings release.
The original idea behind the Marriott deal had been to help Gaylord lure more tourists to its properties by tapping into a pool of 44 million Marriott Rewards members. Ryman, which is based in Nashville, continues to own all four Gaylord properties.
“Gaylord on its own, it was a small number of hotels that was great at filling their rooms with large groups,” said David Loeb, a hotel analyst at Robert W. Baird & Co. “But they couldn’t fill rooms with leisure guests or weekend guests. That’s where Marriott came in.”
That effort has so far been successful, with individual bookings up 21.9 percent across all four Gaylord hotels in the second quarter.
But group bookings — the Gaylord’s bread-and-butter and the business that brings in the most profit — have been on the decline as widespread government budget cuts batter the hotel industry.
At Gaylord National, government-related cancellations surged in 2013. One of the biggest hits, Ryman executives said, came when a group cancelled 6,000 room nights in one swoop. In the first quarter alone, occupancy rates fell 9.1 percentage points to 55.6 percent — more than half of that because of sequestration-related cancellations.
“National Harbor has been affected by sequestration,” Stengel said. “Government attendees stopped making it to a lot of big meetings, and business ended up being a lot smaller than we had anticipated.”
By May, it was clear that government business — which, in fiscal year 2012, brought in more than $13.8 million for the Gaylord and other National Harbor businesses — was falling off a cliff. The government had booked 22,000 room nights for the remainder of the year, less than half of the 54,000 it had secured the year before.
To make up for lost business, the hotel has begun looking to short-term corporate bookings, focusing on growing industries such as pharmaceuticals and technology.
The hotel is also looking to nab more large social events, which currently make up between 5 and 10 percent of the hotel’s business, said Bill Fink, the hotel’s director of event management.
“We’re changing our marketing to build focus on ethnic weddings — Indian weddings, kosher weddings — that typically have many guests,” Fink said. “The question is, how do we continue to find creative ways to draw customers?”
Perhaps the biggest challenge in the switch over to Marriott, analysts say, has been assembling a sales team that understands the intricacies of marketing Gaylord’s behemoth properties.
Over the years, the Gaylord had relied on a formula that brought in huge conventions year after year. The company had national sales representatives who focused on booking meetings at all four of the Gaylord’s sprawling hotels. Many conferences would sign multi-year deals, rotating from one Gaylord property to the next.
At Marriott — which oversees 3,800 properties — there are regional, national and global sales teams. Figuring out which team handles which bookings has been a work in progress, analysts say.
“We’ve augmented our sales model for Gaylord in the last few weeks,” Stengel said, adding that Marriott has hired additional sales employees to focus on individual properties. “We’re already seeing results, and I think [the sales staff] is beginning to feel more comfortable in the direction we are going.”
One element of the change: In recent months, former employees of Gaylord’s sales team have been hired back.
Ryman has asked Marriott to tinker further, adding extra incentives for employees who book conferences that account for more than 1,000 room nights at a time. Those bookings, Ryman executives say, are a vital part of Gaylord’s business, accounting for nearly half of all annual revenue.
“We [were] focused on the big, big whale groups in this country, and we had a very focused strategy to go after that,” Colin V. Reed, chief executive of Ryman, said in a February call with analysts. “Marriott has one hotel in this arena, and so their focus on the big whales was not quite the way our focus was.”
Even as the Gaylord National struggles to recover government business and ramp up group bookings, it has helped transform National Harbor into a self-sufficient destination of its own.
“Back when they were building the Gaylord, everyone was going, ‘Huh? Really? I don’t think anybody’s going to go out there,’” said Marty Covert, a meeting planner in Haymarket. “But it has become a classic example of ‘If you build it, they will come.’”
Retailers such as Harley-Davidson and Build-A-Bear Workshop have cropped up around the sprawling hotel, and dozens of restaurants have moved in. Next month, Tanger Outlets is opening an outlet mall less than two miles away from the Gaylord National. The area could get yet another boost if it is selected as the site of an $800 million casino being planned by MGM Resorts International.
“It has truly become a destination of its own,” said Eric Eden, vice president of marketing for Cvent, a McLean-based event management firm. “When [the Gaylord] first opened several years ago there wasn’t as much retail and night life sand restaurants. But now, when meeting planners see a piano bar and all that shopping, it makes a dramatic difference. They don’t feel like they have to ship people over to D.C. for night life outside the hotel anymore.”
Most recently, National Harbor debuted on Cvent’s list of top 50 meeting destinations, ranking 26th in the country for convention bookings. (Washington, meanwhile dropped five spots to No. 7. Arlington fell eight spots to 34.)
“It’s a very dramatic increase,” Eden said. “We don’t typically see a destination rise that much, and I think it’s because there has been a lot of investment in the area.”
The coming year is likely to bring another set of challenges for the Gaylord National, analysts say, particularly when the Washington Marriott Marquis opens in May. The 1,175-room convention center hotel may steal some of the Gaylord National’s spotlight and attract large conference bookings away from National Harbor.
“Meeting planners want to have conferences at a property that is new, that is easy to get to, that makes logistics simple,” Eden said. “That is what has made the Gaylord successful — but in another year, there will be competition from the Marriott Marquis.”
Marriott, for its part, says it expects bookings at Gaylord National to remain steady.
“The key is,” Stengel said, “that we don’t lose any local business. If we can bring folks to the area — whether that’s the Gaylord National or D.C. Marquis — that’s good for everyone.”