DiamondRock Hospitality Co Q3 FY2024 earnings call

• Technology initiatives: New ERP system and enterprise analytics platform enhance detailed custom analyses and forecasts. - Capital markets: Repurchased 700,000 shares at $8.14 average, net debt-to-EBITDA ratio 3.7 times, repaid mortgage loan, executed swaps to fix SOFR, extended term loan maturity. - Capital and ROI projects: Success of Dagny conversion, Hotel Champlain debut, room renovations at various hotels, new bar at Havana Cabana. - Awards: Multiple hotel accolades and GRESB Hotel Global Sector Leader status for fifth consecutive year.

Urban hotels led with comparable RevPAR growth of 4.2% in the quarter, with ADR up 5.6% but occupancy down 1%. Resorts saw comparable RevPAR decline 80 basis points from 2023, but total revenue growth of 1.6%. Group was the strongest segment, increasing 15.7% over 2023. Comparable hotel adjusted EBITDA was $82.3 million, reflecting 2.2% growth over 2023. Corporate adjusted EBITDA increased 3.3% to $75.6 million.

• Affirmed midpoint of EBITDA guidance, narrowed range. - Adjusted FFO per share range increases to $0.97 to $0.99. - Tightened comparable RevPAR growth to 1.5%-2%, full-year total RevPAR growth 150 basis points higher than RevPAR. - 2024 adjusted EBITDA between $281M-$287M, adjusted FFO between $205M-$210M.

• Hurricane Helene impacted RevPAR growth by ~35 basis points. - Economic factors affecting business transient demand. - Uncertainty in insurance renewal and potential headwinds. - Volatility in hotel market and competition.

Q: As you look forward at your list of ROI projects slated over the next three years, are there others where changes are likely just given your rerun of return expectations? And should we somehow shift how we're thinking of your total spend?

A: Jeff Donnelly says they're aiming to remain in the 7%-9% of revenue range for total capital spending, always evaluating projects.

Q: If you could take a crack at where labor costs may be over the next year versus the current year, just what some initial thoughts may be?

A: Justin Leonard says resort labor pressure cooling, urban side may see 3%-5% wage growth over next 12 months.

Q: How does this continued mixed shift and any change in trend line for some of the transient side of the business impact kind of the outlook as you think about next year?

A: Jeff Donnelly says resorts have long-term appeal due to demographic trends, near term has challenges due to economic pressure but expects abatement as rates fall.

Q: Any more color on the booking curve? I guess to say that first half group pace is up meaningfully, but you're down a little bit over 3%. Can you just comment on the booking curve year over year?

A: Jeff Donnelly says cadence affected by Chicago's tough comps in 2025, but smaller hotels have positive first half group pace.

Q: Just on the CapEx commentary, it's certainly directionally encouraging that you're taking a hard scrub on everything and finding some opportunities to reduce a little bit. I guess along those lines, though, are those same analyses being done?

A: Justin Leonard says brand partners more willing on renovation cycle times and scope, leading to savings in recent renovations.

Q: Touching on the Orchard Inn repositioning, can you walk through the anticipated EBITDA disruption for next year?

A: Jeff Donnelly says disruption in fourth quarter, ~$0.5M on EBITDA, aiming for roughly flat EBITDA overall.

Q: Just broadly, I'm curious if you could speak to current conditions, any observed changes in pricing that you've seen across the types of assets that you own?

A: Justin Leonard says limited transactions, depth of market not deep, but desire to transact exists.