GlobeSt.com UPDATE: Gaylord Palms Opens Doors Ahead of Schedule

Colin V. Reed, Gaylord's president/CEO and Michael Rose, company chairman, couldn't be reached by GlobeSt.com at publication deadline for comment on their strategy. But hospitality industry brokers, familiar with the executives' plans, tell GlobeSt.com on condition of anonymity that Reed and Rose are betting heavily their Orlando operation will help pull the company out of the red and possibly save their jobs as well.

Largely due to non-hospitality acquisitions in the last two years, Gaylord Entertainment lost $237.3 million in the first nine months of 2001. In 2001, the Tennessee company lost $153.5 million on revenue of $514.4 million. In 1999, Gaylord showed a profit of $349.8 million.

So confident their Orlando Gaylord Palms undertaking will be a winner, Reed and Rose convinced a New York lender consortium in October 2001 to loan the company $210 million to complete construction at the Kissimmee, FL-based resort and convention center.

The three-year loan facility matures in October 2004 and is priced at 337.5 basis points over the London Interbank Offered Rate. The lenders are Deutsche Banc Alex.Brown Inc., Salomon Smith Barney and CIBC World Markets.

Hospitality industry insiders who have worked periodically with Reed and Rose say the executives are confident their strong bookings, comprised mostly of business and convention clientele, will generate enough revenue to pay off the loan on time. Room rates average $250 per night at Gaylord Palms. The hotel has to meet a weekly payroll for a staff of 1,400.

Gaylord is bucking the industry trend by not going after the tourist dollars which have largely evaporated since the Sept. 11 terrorist attacks in New York and Washington, some local brokers contend. Others tell GlobeSt.com Gaylord is carving a niche for itself by focusing on the business and convention guests instead of competing for family visitors.

"It's pretty obvious they want to be the top dog of the business travel sector," an International Drive hotelier tells GlobeSt.com on condition of anonymity. "But they'll have formidable competition from Orlando properties like the 1,900-room Marriott World Resort Center; Harris Rosen's stable of convention hotels; and, of course, from Disney's 20,000 rooms as well."

Gaylord officials predict occupancy at Gaylord Palms through 2002 will be at least 60%, even without the advance bookings. Smith Travel Research Inc. of Hendersonville, TN puts Orlando's overall average occupancy in November at 52% versus an average 68% in November 2000. Nationwide, hotels averaged 53.5% occupancy.

Average room rates in November among Orlando's 110,000 rooms were $79.31 compared to $89.44 in the same 2000 period. Room rates were down 23.5% versus an average decline of 8.9% nationwide.