DiamondRock Hospitality Company Q3 FY2025 earnings call

• CapEx Strategy: Efficient CapEx spending, elongating renovation cycles by leveraging strong RevPAR and bottom-line profits, reducing renovation costs through internal planning and supply chain monitoring. For example, Kimpton Palomar in Phoenix had a $21,000 per key renovation. • Portfolio Performance: Urban portfolio RevPAR growth and resorts showing EBITDA margin expansion despite RevPAR decline. F&B revenues increased 4%, with margins expanding 180 basis points. • Balance Sheet: Successfully refinanced, upsized, and extended senior unsecured credit facility, debt fully unencumbered, 30% fixed rate debt, share repurchases with $37 million spent year-to-date. • Awards: Cavallo Point with 2 Michelin keys, The Gwen with 1, Lake Austin Spa Resort named #1 destination spa by Conde Nast.

Corporate adjusted EBITDA in the third quarter was $79.1 million. Revenue segments: Business transient grew almost 2%, leisure transient declined 1.5%, group room revenue declined 3.5%. Urban portfolio, accounting for over 60% of annual EBITDA, achieved RevPAR growth of 0.6% with total RevPAR growth of 2.1%. Resorts saw RevPAR decline 2.5% but total RevPAR increase 0.4% due to 4% growth in out-of-room revenues, with EBITDA margins expanding over 150 basis points.

• Maintained midpoint of RevPAR and total RevPAR guidance while tightening ranges, with a slight decline at midpoint in Q4. • Raised adjusted EBITDA guidance midpoint by $6 million to $287M-$295M and adjusted FFO per share guidance midpoint by $0.03 to $1.02-$1.06.

• Federal government shutdown increasing uncertainty in short-term group pick up, attrition, and transient guest arrivals. • Competition in branding and market uncertainties affecting franchise expirations and asset disposition decisions.

Q: How much of expense control is driven by head count reduction?

A: Not primarily head count, but persistent company-wide focus on productivity and efficiency, like reducing front desk staffing during group events to mitigate wage increases.

Q: Thoughts on franchise expirations?

A: Evaluate options such as upbranding, going independent, or sticking with current flag to maximize return for shareholders. For example, Westin Boston is in a brand RFP process.