Go on, book that Vegas trip
Posted on November 4, 2009 at 8:12 am
That’s almost what the investment community is saying to Gaylord Entertainment CEO Colin Reed, who on Tuesday put Sin City on a short list of cities his company may buy its way into.
A good chunk of the hotel/resort operator’s third-quarter earnings call Tuesday focused on Las Vegas, where a bunch of glitzy properties are struggling — or as Reed put it, “operating way below their pro formas” of six or seven years ago. Several analysts pushed Reed to clarify his recently floated strategic option of buying such a troubled property to add to his portfolio.
Generating an appropriate return is priority No. 1, Reed said, and such a return will have to come primarily from serving one of the company’s core customer groups — associations that rotate their meetings around the country each year. Half of those groups, Reed added, will never go to Vegas. The other half wants to be there regularly — and they could be enough to tip Gaylord’s M&A scales in the coming year or so, when Reed thinks the market will really hit bottom.
“I don’t think we should get into too much detail, but we’ve been consistent in telling people over the years that people rotate out of our system to go to Vegas,” Reed said. “Is it a market that interests us? It is. There are probably as well five, six, seven other markets in the United States that interest us as well.”
Investors seem plenty interested, too. Gaylord shares (Ticker: GET) jumped almost 8 percent Tuesday. Put a good chunk of that down to the company’s solid cost controls and the improving performance of its D.C.-area property, but also consider it a sign that the market is confident Reed and his team will soon find something to their liking in the Nevada desert.
