Gaylord Throws in Chula Vista Towel

Sometimes, there just are too many hoops to jump through to get something done – at least that was the case when Nashville, Tenn.-based Gaylord Entertainment decided to pull the plug on its long-planned $1 billion hotel-convention center project along the bayfront in Chula Vista, Calif.

The project, which would have included 400,000 square feet of meeting and exhibit space and a 1,500-room hotel, was announced more than two years ago, and, since then, Gaylord has battled with local labor unions, run the gamut with environmental groups, faced rising construction costs and navigated the complicated world of trying to build on land owned by the Port of San Diego.

And, as if that weren't enough, the company also has dealt with a steep decline in its stock price and tightening credit markets that have affected some of its other development plans.

“We are very disappointed to have made this decision since the greater San Diego region is such an important convention market,” said Colin V. Reed, chairman and CEO of Gaylord Entertainment. “However, over the last 18 months, this project has become more and more complicated as risky infrastructure costs escalated and the timeline for the hotel was extended by the very complicated and prolonged approval process.”

And, just in case people think the scraped project was a result of the downturn in the economy, Reed added, “While many will likely attribute this announcement to the rapidly deteriorating economy, the fact is that the complexity and costs of the project were the main drivers of this decision.”

The Chula Vista project was dogged with problems early on, and it wasn't the first time the company has pulled out of the city.

In 2007, after Gaylord failed to come to an agreement with local construction labor unions in Chula Vista, the company decided enough was enough. A letter Gaylord officials sent at the time to the city's mayor, Cheryl Cox; Port of San Diego Board Chairwoman Sylvia Rios; and city council members, stated: “After a year of unproductive discussions with the San Diego Building Trades Council, we have concluded that their unwavering, unreasonable demands render the project unfeasible for our company and our shareholders.”

It looked like Gaylord was gone for good, but, with some behind-the-scenes cajoling, the company decided to take another chance on Chula Vista.

The latest news that Gaylord finally had given up entirely on the project was a blow to not only the city of Chula Vista, but also the Port of San Diego.

“As you can imagine, I'm deeply disappointed,” Cox said. “My colleagues and I – port commissioners and port and city staffs, council members and mayors who preceded us and this community – invested years in our Chula Vista bayfront planning. Gaylord would have been the catalyst for redeveloping 550 acres of prime waterfront property. It's a goal this city has talked about and pursued for at least 35 years.”

She added that everyone had “fought hard to make this project happen, but Gaylord determined that there have always been challenges.”

Board of Port Commissioners Chairman Michael Baxter said, “This was a project that could have provided a much-needed stimulus to Chula Vista and the South Bay area. Obviously, we will seek other opportunities.”

The port also acknowledged the stringent regulatory requirements that are “unique to California.” Approval was required by at least 10 regulatory agencies, including the California Coastal Commission, the State Lands Commission and the local water board, to name a few.

According to port officials, “The infrastructure costs for preparing the land for the Chula Vista project is estimated to be about $200 million.”

Even though the San Diego Convention Center Corp., which oversees that city's convention center, wasn't too pleased when, at one point, Gaylord's plans called for a 550,000 sq. ft. convention center that would directly compete with San Diego's, the city just north of Chula Vista also thought the canceled project was a disappointment.

“I think it's a huge loss to the San Diego region and to Chula Vista,” said Steven Johnson, vice president of public affairs for the SDCCC. “To (Gaylord's) credit, they moved forward in good faith. There's no doubt that the scale of what they were trying to do in this economic climate would be difficult.”

The canceled project aside, Gaylord has had to contend with other troubles, such as its stock price dropping from a 52-month high of $44.58 to a low of $6.01, posted Nov. 21.

For the third quarter, the company reported a net income loss of $6.51 million, compared with net income of $2.2 million from the same period in 2007.

On the other hand, revenue saw an uptick, with an increase of 35.8 percent to $226.73 million, compared with $166.92 million in the prior-year quarter. Same-store hospitality revenue also increased 1.1 percent to $148.1 million.

“This quarter, our group-centric business model continued to perform despite the challenges presented by the current economic environment,” Reed said. “... However, in the last several weeks, we experienced deterioration in forward-booking trends for our fourth-quarter transient programs. Therefore, we have taken a cautious approach to our outlook due to the potential impact the current economy could have on holiday transient demand and short-term, new, group bookings.”

In the meantime, despite the economy and a downward trend in bookings in the near future, Gaylord seems to be moving ahead with its strategy to have a location in the western U.S. after another one of its plans also was canceled this year.

In April, four months after Gaylord announced its acquisition of the Westin La Cantera Resort in San Antonio, Gaylord terminated the agreement. Reed cited unfavorable conditions in the current capital markets and economic environment as reasons for dropping the project.

But, in September, Gaylord announced plans to buy 100 acres in Mesa, Ariz., near Phoenix, for a resort-convention center complex.

According to Gaylord officials, plans for the project, about a 25-minute drive from Phoenix Sky Harbor Intl. Airport, are in the preliminary stages, and specifics about its scope and budget still are under discussion.

Gaylord has four existing hotel-convention centers: Gaylord Opryland Resort & Convention Center in Nashville, Tenn.; Gaylord Palms Resort & Convention Center in Kissimmee, Fla.; Gaylord Texan Resort & Convention Center in Grapevine, Texas; and Gaylord Natl. Resort & Convention Center in Prince George's County, Maryland.