Marriott bets big on convention hotels

By Danny King
Gaylord TexanThe acquisition last month of Gaylord Entertainment’s hotel brand and management contracts gives Marriott International a greatly enhanced, perhaps even dominant position in the convention-hotel segment.

While convention hotels make up less than 2% of U.S. hotels, they account for 12% of all hotel rooms in the country, according to Smith Travel Research (STR).

With the Gaylord acquisition, Marriott now controls 17 of the 100 largest U.S. convention hotels. In contrast, Hilton Worldwide controls 15, Starwood Hotels & Resorts controls 10 and Hyatt Hotels and Resorts controls five.

Marriott has estimated that the $210 million acquisition will boost annual earnings by 2 cents a share starting next year.

In a deal first announced in May, Marriott obtained 35-year management rights to four Gaylord hotels totaling 7,800 rooms: Nashville’s Gaylord Opryland, Maryland’s Gaylord National Resort, the Gaylord Texan Resort near Dallas and the Gaylord Palms Resort near Orlando.

In addition, Marriott will oversee the General Jackson Showboat, Gaylord Springs Golf Links, Wildhorse Saloon and the Radisson Hotel Opryland, which will become the Inn at Opryland, a Gaylord Hotel.

“Gaylord’s proven success in the meetings and family leisure markets and their ‘all-in-one-place’ properties will greatly enhance our portfolio,” Marriott CEO Arne Sorenson predicted in an Oct. 1 statement.

More importantly, the Gaylord hotels represent a product group that not only fetches higher room rates than the overall market but might have better growth potential, according to Jake Fuller, an analyst with Lazard Capital Markets.

While STR says that U.S. convention hotels in August recorded an average room rate of $151.76 a night, compared with $105.74 for all hotels, Fuller said that group demand has been running at about two-thirds of the pace of overall increases in demand since the lodging market bottomed out in early 2009.

“Group travel is slower than transient to react to economic changes,” Fuller said. “Group trends going forward look solid.”

The value of Gaylord's brand and management contracts apparently wasn’t lost on some of Gaylord Entertainment’s largest shareholders; about a quarter of the shareholders who cast votes on the transaction last month voted against the acquisition.

And as early as July, TRT Holdings, which accounted for another 22% of Gaylord Entertainment’s equity, had voiced opposition to the sale because of the length of Marriott’s management rights and other terms of the deal.

Gaylord Entertainment subsequently secured TRT Holdings’ vote by acquiring 5 million of TRT’s shares for $185 million and completing a secondary offering of TRT’s remaining 5.6 million shares.

Gaylord, which also owns Nashville’s Grand Ole Opry and Ryman Auditorium, was renamed Ryman Hospitality Properties and will become a real estate investment trust.

Bjorn Hanson, divisional dean of New York University’s school of tourism and hospitality management, said the Gaylord acquisition was less about bragging rights versus Hilton in the convention-hotel segment and more about continuing Marriott’s strategy of providing a guest an additional price point and service proposition.

“It’s an especially good time for Marriott to pursue a brand extension like Gaylord,” Hanson said. “Marriott could retain more conventions by allowing some events to change from maybe a more expensive hotel like a [Marriott] Marquis to a Gaylord.”

Follow Danny King on Twitter @dktravelweekly. 
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