NASHVILLE— Despite the ever-falling prices of hotel stocks, Gaylord Entertainment, which is due to announce its third-quarter results later this month, told investors it plans to open new hotels sooner than previously expected. With a turnaround nowhere in sight, Hilton Hotels, Starwood Hotels & Resorts and other lodging securities, which are already down 9% on the year, took another hit last week when a Bear Stearns analyst predicted RevPAR could fall 2% next year, Forbes.com reported. That forecast followed Credit Suisse First Boston cutting its targets and earnings estimates of several hotel chains. One of them, Marriott, also faces a high-stakes legal battle from hotel owners who say the company improperly charged fees. The bleak outlook, however, hasnt hampered a $1 billion expansion undertaken at Gaylord. To the contrary, the Nashville-based hospitality company told investors last month it plans to open new hotels sooner than expected. According to Forbes.com, Gaylord is spending nearly $1 billion over five years to build 1,500- to 2,000-room convention hotels— one near Dallas and the other in the Washington, D.C. area. The tab for each of them, at more than $450 million, makes them 20% more expensive to build than a full-service Marriott or Hyatt. Once completed, each hotel will feature dozens of dining choices, two-acre atriums with special effects and an average 450,000 square feet of meeting space. The plan is to tap into the $60 billion a year convention business. Currently, Gaylord operates two resort-cum-convention center properties: the flagship Opryland resort in Nashville and the 8-month-old Gaylord Palms in Orlando. Chief Executive Colin Reed estimates the new hotels will churn $200 million in positive cash flows after capital expenditures by 2006. Last year, cash flows from operating activities brought in just $33 million. All this development is surprising given the fact that a month before Reed joined the company in April 2001, Gaylord Entertainment suffered a painful loss, reversing its 2000 profits of $350 million to a loss of $152 million. Reed has since restructured the company, selling off non-hospitality assets, and has wrestled more control away from the billionaire Gaylord family of Oklahoma, which owns 38% of the stock. In the last nine months, Gaylord Entertainment has replaced at least two family-nominated board members with hospitality industry veterans. Reed has also used asset-sales proceeds to reduce total debt— 60% of current shareholder equity, compared with the sector average of 90%— and to exit unprofitable entertainment ventures, including film production and a Christian music Internet portal. SOURCE: Forbes.com
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