Marriott International acquired the Gaylord Hotels brand and the management rights to its hotels for $210 million pending approval by shareholders. Gaylord Entertainment Corp. retains ownership of the four Gaylord properties.
Marriott will manage the four hotels—the Gaylord Opryland in Nashville, Tenn.; the Gaylord National in National Harbor, Md.; the Gaylord Palms in Kissimmee, Fla.; and the Gaylord Texan in Grapevine, Texas—under the Gaylord name. The transaction adds 7,800 rooms and 2 million square feet of meeting space to the Marriott portfolio.
“We chose Marriott—a brand that is a recognized leader in the hospitality industry—due to their focus on providing the highest quality experience for both group and leisure customers ” says Colin Reed, chairman and chief executive officer, Gaylord Entertainment Co.
Marriott President and Chief Executive Officer Arne Sorenson says the deal is an opportunity to advance the growth for Marriott and the Gaylord brand. “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, and distribution systems, while Marriott will be able to capture even a greater share of the major event market, ” says Sorenson. “Gaylord’s ‘everything-in-one-place’ properties are very attractive to group meeting planners.” Marriott spokeswoman Stephanie Hampton says there would be no changes to the way that Marriott manages the Gaylord hotels.
Gaylord Entertainment, which will reorganize its ownership into a real estate investment trust, expects to see greater profitability. “We believe that by working with Marriott International, our shareholders will benefit from significant property efficiencies and corporate overhead reductions, as well as revenue synergies which include Marriott’s ability to attract and market to large group customers,” says Reed. “Based on our analysis to date, we anticipate annualized cost synergies, net of management fees, will total approximately $33 to $40 million.” The REIT structure offers a more tax-efficient structure that will allow the company to grow, added Reed.
The company won’t pursue a planned Gaylord hotel in Aurora, Colo.—at least not on the same scale. “The company will no longer view large-scale development as a means for growth and will not proceed with the Colorado project in the form previously anticipated,” says Reed. “The company will re-examine how the project could be completed with minimal financial commitment by Gaylord during the development phase.”
However, reports MeetingsNet’s sister publication, Lodging Hospitality, Gaylord Entertainment will seek other acquisitions. One option, reports LH, is buying or building smaller group hotels with 500 to 700 rooms and 75,000 to 125,000 square feet of meeting space to serve smaller meetings. “We have a lot of embedded knowledge about the meetings business, and we’ve built a geographic profile of potential markets for these kinds of hotels,” says Reed in LH. “Most of the planners who book one of the Gaylords also book a variety of smaller meetings. We know the cities in which they want to hold these meetings, and that will provide a road map for our acquisitions strategy.”
Jan Freitag, senior vice president at Smith Travel Research, Hendersonville, Tenn., says the deal makes sense for both companies. “You can get a higher valuation if you’re either a pure play management company or a pure play REIT,” he says. “From Gaylord’s perspective, being just in the ownership game makes more sense for them financially and Marriott gains a very well-established brand in the meeting space that they can integrate into their own Marriott meetings portfolio.”
There won’t be any impact on meeting planners, other than it gives them more rooms within the Marriott family to book in those four Gaylord destinations, says Freitag. It also gives attendees the opportunity to get Marriott reward points at the Gaylord hotels.