Consumer Macro Data Continues to Verify What I Suspected All Along - We Never Left the Recession!
A few days ago I warned my subscribers that the lodging industry, and the economy as a whole, were not truly recovering to any material extent (see The Most Recent Lodging Co. Forensic Analysis is Available and We Think Management Have Been a Little Optimistic). Y-o-Y comparisons made everything look good when you are on the verge of insolvency last year! Well, in the headlines today we have:
- Weekly Claims Show Surprise Gain in Wobbly Jobs Market: and exactly who is it was surprised by this??? Obviously someone who doesn't read BoomBustBlog! See "Are the Effects of Unemployment About To Shoot Through the Roof?"
- Many Retailers Post Weak July Sales, Short of Estimates: and exactly why were estimates so unrealistically high? There is close to no optimistic macro news out there, and fundamentals are worth doo doo.
Then there is the mainstream media and there reporting of earnings, without bothering to look past the marketing spiel put out by management. I can't blame management for this, I would probably do it too if it worked. Reference "Gaylord 2Q revenue up despite Nashville closure" 12 Jul 2010 - The Associated Press. Actually, revenue was down - and down materially, but why let a few facts get in the way. Here is an excerpt of our review of Gaylord Entertainment's 2nd quarter earnings:
Gaylord reported total revenues of $184 million in 2Q10 out of which hospitality segment generated revenues of $173 million and Opry and Attractions Segment reported revenues of $11.0 million. Since the properties at Nashville were closed for most of the period, the Company's 2Q10 performance is evaluated after excluding the results of the flood impacted properties - Nashville hotel and Opry and Attractions. The remaining revenues are largely generated from the three hotels - Texan, Palms and National and the combined revenues (room revenue and food revenue) of these three hotels -increased 4.7% (y-o-y) largely on the back of higher occupancy levels while prices continue to remain weak. Total Revpar of the three hotels increased 4.7% (y-o-y) as a result of 9.4% (y-o-y) jump in occupancy, offsetting 4.3% (y-o-y) decline in average revenue per occupied room. Room Revpar of the three hotels increased 5.7% (y-o-y) with ADR (Average daily rent) slipping 3.3% (y-o-y).
OCCUPANCY
While it is clearly evident that the surge in occupancy at these three hotels was the key driver behind the increase in revenues, a large portion of this increase in occupancy was due to the transfer of booked room nights from the flood impacted Nashville hotel. The performance of these three hotels would have been much more subdued in the absence of this temporary arrangement for the customers who had already booked rooms at the Gaylord's Nashville hotel. The management is under-rating the impact of this movement and have not reported the performance after adjusting this impact. However, based on the statement issued by the company officials in July, nearly 43,645 room nights were transferred from Nashville to other three hotels, adding nearly 9% to the incremental occupancy in these hotels. Assuming that these transferred room nights are distributed evenly across the period May 2010-Nov 2010 (during when the Nashville remained closed), the reported improvement in occupancy in 2Q09 includes the impact of transfer of nearly 12,400 room nights to these three hotels which amount to nearly 2.8% of the total available rooms at these hotels. The reported combined occupancy of the three hotels improved 9.4% (y-o-y) to 73.4%. However, after adjusting the 2.8% of the incremental occupancy from the transfer of room-nights from Nashville hotel, the average occupancy of the three hotels was 70.7%. Thus, the adjusted occupancy increased 5.3% (y-o-y) against the reported increase of 9.4% (y-o-y). Based on adjusted occupancy, total Revpar drifted marginally up by 0.8% (y-o-y) and room Revpar increased 1.7% (y-o-y) in 2Q10.
Oh yeah, and for good measure and as a note to the Associated Press who should probably run a retraction...
Average ADR for the three hotels declined 3.3% (y-o-y) and average revenue per occupied room declined 4.3% (y-o-y).
Paying subscribers can download the entire earnings review here: 
GET 2Q10 review. Note, that things have been moving along pretty much as we anticipated and not so much as the sell side had forecast. The full forensic analysis is available as follows:
Interested parties may click here to subscribe. We will be plugging the newest numbers from the earnings release into our models and will report back to subscribers with any relevant updates.
