As first theorized here in late April, Gaylord Entertainment, the parent company of the iconic Grand Ole Opry and radio station WSM, has been sold to Marriott International for $210 million. On May 16th, the company allowed a “poison pill” to expire, making the possibility of a sale a reality. According to a press release by Gaylord about the sale, the company will retain its Grand Ole Opry holdings for now, however will be reorganizing into an REIT, or Real Estate Investment Trust, meaning Gaylord is no longer an autonomous, shareholder-owned entertainment company, but a real-estate holding, and a subsidiary of the Marriott hotel chain.
The theory behind the sale and restructuring of Gaylord is to better manage the current Gaylord business that has gone from a company that predominantly owned radio stations, newspapers, and entertainment outlets, to owning 5 huge hotel properties in Nashville, Orlando, Grapevine, TX (Dallas), National Harbor, MD, and Denver (scheduled to open 2014). By restructuring into an REIT, Gaylord will receive certain tax benefits, and will be able to run more efficiently in a larger hotel corporate structure.
“We are thrilled to be aligning with Marriott, an organization that consistently receives the industry’s highest praise among group customers and meeting planners.” says Gaylord CEO Colin Reed. “The REIT structure allows us to benefit from a more efficient tax structure, and establish a platform to grow our distinct asset base through organic growth of our existing portfolio and, in time, through strategic acquisitions. Moreover, 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.
The press release from Gaylord about the sale expressly states the Grand Ole Opry and its real estate assets will remain assets of Gaylord.
Gaylord will continue to own and operate the Grand Ole Opry, Ryman Auditorium and other attractions as taxable REIT subsidiaries. Nothing will change at these iconic assets of the Nashville community, and Gaylord is fully committed to maintaining the legacy of these historic attractions.
However as Gaylord restructures into a real estate holding company over the coming months, an Opry sale could still be a possibility, if not a greater probably in the long term as the company continues to move away from the entertainment business.
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Barring a Grand Ole Opry sale during restructuring, this all could be bad news for friends of the Grand Ole Opry hoping for a return to the institution’s roots, or maintaining the roots that have been left in tact during Gaylord’s management regime. Becoming part of an even larger corporate structure, especially one not focused on entertainment, means even more focus of efficiencies and revenue, and less understanding of the Grand Ole Opry’s unique importance and place in the legacy of country music within the corporate structure The Opry finds itself in. The Opry’s business model was conceived nearly 85 years ago, and its viability depends on retaining certain values and traditions from that original structure that many times clash with today’s for-profit environment.
When Gaylord and Marriott talk about “significant property efficiencies and corporate overhead reductions, as well as revenue synergies…” this means The Grand Ole Opry could be be susceptible to even more rigorous oversight and revenue goals that do not reflect the institution’s original or core values. Even though Gaylord retains ownership in name of The Opry and its hotels in the larger Marriott structure, what Gaylord is selling is the rights for Marriott to manage Gaylord assets, including The Opry. And as Gaylord says in in the press release, it is not focused on entertainment as it restructures to an REIT, but is “focused primarily on group-oriented destination hotels in urban and resort markets.”
Furthermore for communities like Nashville, this restructuring will mean job losses as Gaylord trims the fat, and eliminates redundant positions Marriott can already manage. The Marriott press release from CEO Arne Sorenson mentions, “We will continue to focus on building careers for Gaylord’s “STARS”, whom we will welcome to the Marriott family,” but positions will be cut as the two companies merge and attempt to benefit from business synergy. This move also has specific effects on Gaylord’s Denver, CO property still under construction. According to Gaylord, the scope of this property will be scaled down during this process, two weeks after an $81.4 million tax incentive was approved by local officials for the already controversial project.