Prince George’s County business leaders and industry analysts laud Gaylord’s decision to sell management of its hotels, including Gaylord National Resort and Convention Center in Oxon Hill, to Marriott International.
The Bethesda hotel giant agreed to acquire the Gaylord brand from Gaylord Entertainment of Nashville, Tenn., for $210 million May 31, according to a Marriott statement.
"We’re thrilled that Gaylord is now allied with one of Maryland’s marquee businesses,” Milton V. Peterson, principal and chairman of The Peterson Cos., said in an email. Peterson is the owner and developer of National Harbor, the 300-acre mixed use development that includes Gaylord National.
“Marriott’s involvement will further strengthen National Harbor’s status as one of the nation’s premier destination resorts and further demonstrates that National Harbor is uniquely positioned to help give Maryland gaming access to national destination markets that it is missing today,” he said.
M.H. James Estepp, president and CEO of the Greater Prince George’s Business Roundtable, also viewed the arrangement as a positive step for the county and National Harbor.
“It gives a chain that had four properties access to a chain with thousands of properties,” he said. “It’s a tremendous combination that brings all the features Marriott provides.”
Marriott will promote the Gaylord hotels as a separate brand but will integrate their marketing into its 38 million-member guest rewards program, which helps steer visitors to its 3,700 properties worldwide, according to a press release from Marriott.
“It’s also recognition by a huge company of what National Harbor is doing to transform itself into a destination site in the Washington region,” Estepp said.
In addition to Gaylord National, the 35-year deal also includes management of Gaylord’s other hotels: its marquee Grand Ole Opry complex in Nashville; Gaylord Palms in Kissimmee, Fla.; and Gaylord Texan in Grapevine, Texas. Together, the four hotels, which will continue to bear the Gaylord brand, encompass about 7,800 rooms and 2 million square feet of space for meetings and other events.
As part of the deal, Gaylord will drop plans to develop another convention hotel complex near Denver.
Gaylord’s stock shot up 10.1 percent the day of the announcement; Marriott closed up 1.1 percent.
Wall Street favors companies that focus on either management or ownership, said Jan Freitag, senior vice president of STR Global, an Ohio firm that provides statistical analysis for the hotel industry.
Not many companies still feature both management and ownership components, Freitag said.
“The last couple years, companies have moved more toward spreading those out,” Freitag said.
Gaylord’s hotels have performed better than the industry average but the company’s growth has been hampered by tight credit conditions since the financial market collapse in 2008, company Chairman and CEO Colin V. Reed said during the conference call May 31. Failure to restructure Gaylord’s finances could have made the company vulnerable to low-ball takeover offers from outside investors, he said.
“We’re not going to have a fire sale for these brands,” Reed said.
Gaylord National reported $53.4 million in revenues for the first quarter ended March 31, up from $52.4 for the same time last year. Occupancy was also up to 65.5 percent from 64.2 percent, with total revenue per available room up to $294.06 from $291.44. Average daily rate was $188.58, up from $187.91.
Gaylord Entertainment also reported a net income of $6.0 million for the quarter, increasing from a net loss of $2.0 billion for the same time last year. Revenue increased to $238.9 million from 220.7 million.
Gaylord said the deal will result in a balance sheet that would put it at the top of the hotel real estate investment trust heap. Marriott will receive a 2 percent base management fee and an incentive fee linked to improvement in hotel profitability. Gaylord expects that shifting the cost of management to Marriott will yield net annual savings of $33 million to $40 million, with more than $20 million coming from staff cuts and other efficiencies at the corporate level.
Gaylord said it recently commissioned a survey of more than 400 meeting planners who said that Marriott ranked as the “undisputed top brand in terms of loyalty programs, pricing structure, meeting space, sales process, accommodations, and destinations.”
"Gaylord properties will benefit from Marriott's economies of scale, including lower costs for central reservations, procurement and other services, plus strong sales, revenue management, marketing and distribution systems, while Marriott will be able to capture even a greater share of the major event market,” Marriott CEO Arne Sorenson said in the statement. “Gaylord's ‘everything-in-one-place’ properties are very attractive to group meeting planners. As a new [real estate investment trust] owner, Gaylord Entertainment should benefit from improved hotel profitability associated with Marriott's ability to generate substantial cost savings and incremental demand."
The deal hinges, in part, on Gaylord shareholders approving the company’s conversion into a real estate investment trust. That vote is expected in August; the deal is expected to close by October.
“We are quite optimistic there will be additional Gaylords over time,” Sorenson said, adding that they are “big boxes” that take years to get off the ground.
Marriott was one of four companies to bid on the Gaylord brand, which the Tennessee company marketed after conducting a strategic review to improve its debt structure.
Commercial real estate columnist Sonny Goldreich contributed to this report.