Plagued by Loss, Greenbrier Files for Chapter 11, Pursues $130M Sale to Marriott
- Mar 20, 2009
Ghastly economic conditions have claimed another victim in the hospitality industry. The Greenbrier Hotel Corp., owner of the historic Greenbrier resort in White Sulphur Springs, Va., has just filed for Chapter 11 bankruptcy protection and entered into an asset purchase agreement for Marriott Hotel Services Inc. to acquire the luxury property for $60 million to $130 million, to be paid within a seven-year period. In an effort to secure funds to continue The Greenbrier’s operation for the time being, GHC included in the filing a request for approval of financing from railroad concern CSX Corp., GHC’s parent company. CSX may be forking over even more funds down the road, as GHC’s agreement with Marriott calls for CSX to furnish $50 million over two years to finance the operation of the resort after the closing of the deal. Located on 6,500 acres approximately 250 miles southwest of Washington, D.C., The Greenbrier (pictured) has been a coveted destination since visitors set foot on the grounds back in 1778 to “take the waters.” Tents were erected soon after, followed by cottages, and in 1858, the first hotel was built on the property. The core of the renowned hotel that exists today was developed in 1913. In addition to the 721 upscale guestrooms, the resort encompasses 85,000 square feet of meeting space and a 40,000-square-foot spa. Perhaps the resort’s most infamous feature is the 112,500-square-foot bunker. Camouflaged by its location deep within a hillside, the bunker reached completion in 1961 as a Cold War fallout shelter for members of the U.S. Congress, and remained a secret until 1992. Yet, as is the case with much of the hospitality industry, the finest amenities and a long history as a popular destination was not enough to keep The Greenbrier out of bankruptcy court. “Last year The Greenbrier lost over $37 million and over the last six years, losses totaled more than $90 million,” a spokesperson for the resort told CPN. “We just couldn’t continue to operate with such large deficits.” News emerged in early January of this year that investment banker Goldman Sachs & Co. had been retained by Greenbrier parent company CSX to review options for the resort’s viability. The crippling impact of years of declining profits has been compounded by the current economic climate. Additional debilitating factors, the spokesperson noted, include the “economic downturn, the corresponding decrease in demand for resorts and conference accommodations, as well as the high costs we faced to operate.” The numbers for the hospitality industry as a whole leave little room for hope of recovery anytime soon. According to U.S. hotel performance statistics by Smith Travel Research Inc. for the second week of March, in year-over-year measurements, the industry’s occupancy declined 15.7 percent to 55.2 percent. Worse yet, the figure for the luxury segment dropped 20.3 percent to 61.1 percent. Numerous resort industry players are feeling the burn. Station Casinos is considering bankruptcy as one of three survival options to pursue by April 15. MGM Mirage, which announced this week that it has received a two-month extension from banks on a $7 billion loan facility, may very well be teetering on the brink of bankruptcy. And last month, Trump Entertainment Resorts Inc. filed for Chapter 11 bankruptcy protection, minus celebrated namesake Donald Trump and daughter Ivanka Trump who, reportedly discouraged by shareholders’ refusal of a Trump privatization in favor of going the bankruptcy route, resigned from the board in advance of the filing. For The Greenbrier, plans for the Marriott rescue are not yet written in stone. The customary acquisition purchase conditions must still be met, and GHC is obligated to negotiate contracts with labor unions to Marriott’s satisfaction. However, the hotel company’s role as new owner is not a done deal either. Other hopeful buyers will be able to bid on the property via a court-supervised auction. Should the Marriott plan move forward, the exact ultimate price tag for the property would be continent upon the resort’s performance, and Marriott would take the reigns as property manager.