Economy Stymies Gaylord Resort Bid

A little more than four months ago, Gaylord Entertainment, Gaylord Hotels' parent company, announced its intention to purchase the Westin La Cantera Resort in San Antonio for $252.5 million.

By the third week of April, the company had backed out of the deal.

"Over the past several months, we held fruitful discussions with a variety of potential partners," said Colin V. Reed, chairman and CEO of Gaylord Entertainment. "However, in the current capital markets and economic environment, it is not in the best interest of our shareholders to focus our resources and capital (on this) project at this time."

According to the company, as a result of the termination of the transaction, it will take a one-time cash charge of approximately $12 million in the first quarter of this year.

The acquisition of the resort, which has 508 rooms, 39,000 square feet of meeting space and two golf courses, would have represented the first time Gaylord bought an existing property, instead of building one from the ground up.

When the deal was announced, Reed said the company saw great potential for growth in the resort. "The substantial amount of land surrounding the hotel will afford us the opportunity to enhance the resort through additional long-term development," he added.

Gaylord also had planned to spend an additional $250 million on an expansion of the property that would have doubled the number of rooms to 1,000 and quadrupled the meeting and convention space to 160,000 sq. ft.

John Caparella, Gaylord Hotels COO and executive vice president, told Tradeshow Week at the time of the purchase it was part of a three-legged plan outlined at the company's analyst and investor conference in April 2007. "We're looking at new builds, expansions and acquisitions," he said.

The acquisition had been expected to be completed by the end of the first quarter, but by then the subprime mortgage crisis had taken hold and started to impact the overall economy.

Jan Freitag, vice president of Smith Travel Research, which covers the hotel industry, said, "There is a distinct feeling of gloom and doom in the lending industry."

The real estate industry has suffered, he added, and "hotels get swooped up into that. It's hard to secure loans overall."

Freitag was quick to add that in the bigger picture hotel operations "aren't great, but not bad" and rates continue to hold. "It's business as usual," he added.

As far as other hotel deals that have fallen through recently, Freitag said, there were only a few, limited to one or two condo hotel projects in Las Vegas.

For now, Gaylord's plan to expand into the top 20 to 30 convention markets may be on hold until the economic outlook is a little brighter.

Meanwhile, the company will have its four existing properties to bank on:

• Gaylord Opryland Resort & Convention Center, Nashville, Tenn., currently undergoing a $400 million expansion that will add 400,000 sq. ft. of meeting and exhibit space and another 400-room luxury hotel to the current facility
• Gaylord Palms Resort & Convention Center, Kissimmee, Fla., a 30-minute drive from Orlando
• Gaylord Texan Resort & Convention Center, Grapevine, Texas, 20 miles from Dallas
• Gaylord Natl. Resort & Convention Center, Natl. Harbor, Md., which had its grand opening April 25, and is a stone's throw from the nation's capital.