DiamondRock Hospitality (DRH) 8-K Regulation FD Disclosure

Investor Day Presentation

September

2013

Exhibit 99.1

2

Safe Harbor

Certain statements made during this presentation are forward-looking statements that are subject to risks and

uncertainties.

Forward-looking

statements

generally

include

the

words

“believe,”

“expect,”

“anticipate,”

“plan,”

“estimate,”

“project,”

“will,”

“intend”

or other similar expressions.  Forward-looking statements include, without

limitation, statements regarding, industry outlook, results of operations, cash flows, business strategies, growth and

value opportunities, capital and other expenditures, financing plans, expense reduction initiatives and projected

dispositions. 

Factors that could cause actual results to materially differ from those contained in the forward-looking statements

include, without limitation, those risks and uncertainties discussed in the Company’s most recent Annual Report on

Form 10-K, quarterly report on Form 10-Q and current reports on Form 8-K, which have been filed with the Securities

and Exchange Commission, all of which you should carefully review. The forward-looking statements made are based

on our beliefs, assumptions and expectations of future performance, taking into account all information currently

available

to

us.

Actual

results

could

differ

materially

from

the

forward-looking

statements

made

during

this

presentation. The forward-looking statements made during this presentation are subject to the safe harbor of the

Private Securities Litigation Reform Act of 1995.

Any forward-looking statement speaks only as of the date on which it is made. Although the Company believes the

expectations

reflected

in

such

forward-looking

statements

are

based

upon

reasonable

assumptions,

it

can

give

no

assurance that the expectations will be attained or that any deviation will not be material. All information in this

presentation is as of the date of this presentation, and the Company undertakes no obligation to update any forward-

looking statement to conform the statement to actual results or changes in the Company's expectations.

This presentation contains statistics and other data that has been obtained or compiled from information made

available by third-party service providers.

3

Presentation Overview

Company Overview….………………………………………………………………..

4

Industry Outlook………………………………….……………………………………

9

Investment Strategy....….…………………………………………………………….

12

Growth Catalysts…………...…………....………….………………………………..

20

Asset Management ……………………………….………………………………….

38

Optimal Capital Structure..……………………….…………………………………..

50

Key Takeaways……………....…………………….……….....................................

57

COMPANY OVERVIEW

5

DiamondRock at a Glance

MARKET BREAKDOWN

KEY STATISTICS at Sept. 3, 2013

Hotels

27

Rooms

11,600

Enterprise Value

$2.9B

Enterprise Value / Key

$250,000

Net Debt/EBITDA

4.9x

Positioned in Top US Markets

1

86% Urban and Destination Resorts

2

Geographically Diversified Portfolio

3

Values in % of EBITDA

5

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

6

6

Company Vision & DiamondRock 2.0

•

Disciplined capital allocation

•

Premium portfolio of hotels

•

Optimal capital structure

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

•

Better, higher quality hotels

•

Greater diversity of hotel brands and managers

•

Intensive asset management of the portfolio

•

Best-in-class capital structure

COMPANY VISION

DIAMONDROCK 2.0

7

7

DiamondRock Strategy –

Three Pillars

Portfolio Investment

Buy opportunistically early in

the cycle

Focus on top gateway markets

and destination resorts

Diversify brand and

management companies

Focus on assets with value-

add opportunities

Recycle capital from non-core

asset sales

Capital Management

Maintain low leverage

Simple, conservative capital

structure

Lower risk with non-recourse

debt

Maintain consistent,

sustainable dividend

Asset Management

Promote accountability

Capitalize on deep industry

experience and relationships

Disciplined approach to capital

expenditures

Mining value from portfolio

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

8

8

A Compelling Investment Opportunity

Portfolio Positioned to

Outperform

•

Urban and resort focused

•

Concentrated in higher-growth

gateway markets

•

Group recovery mid-cycle

driving strong 2014 booking

pace

Substantial Upside from 2013

Investments

•

$140M capital expenditure

program

•

Renovations and ROI projects

nearing completion

•

Market share/EBITDA gains

post-renovation

Best-In-Class Capital Structure

With Well Covered Dividend

•

Net Debt/EBITDA among lowest

in peer group²

•

13 unencumbered hotels with

$85 million 2013F EBITDA

•

Ample liquidity with undrawn

revolver

Favorable Industry

Supply/Demand Forecast¹

•

Supply growth: 25% below

historical average

•

Demand growth: 40% above

historical average

•

RevPAR growth: 6.8%, 2X+

historical average

Enhanced Asset Management

Focus to Drive Internal Margins

•

New COO with deep experience

•

New revenue and cost

containment strategies

implemented

•

ROI opportunities developed

Attractive Valuation With Above

Average Growth Potential

(1)

Source: PKF Hotel Horizons June to August 2013; US Upper Upscale

CAGR 2013-2016

(2)

Source: Citi Investment Research

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

I

II

III

IV

V

VI

•

2014 growth projected above

average

•

25% discount to replacement

cost

•

Discount  to NAV

INDUSTRY OUTLOOK

10

10

Lodging Cycle –

Many Years Left To Go

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

•

Supply growth 25% below

historic average

•

Demand growth 40% above

historic average

•

RevPAR increase at a CAGR

of 6.8%

Forecast through 2016 of:

HISTORICAL AND FORECAST REVPAR, SUPPLY AND DEMAND

Source:

Smith

Travel

Research,

PKF

Hotel

Horizons

June

to

August

2013

11

11

Portfolio Focused on Markets with Above Average

RevPAR Growth Potential

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

PKF

FORECASTED

REVPAR

CAGR

2013-2016

(1)

(1)

Chart excludes Destination Resorts and Other components of DRH portfolio. Source: PKF Hotel Horizons June to August 2013.

(2)

Represents 2014 growth rate of 13.3%, adjusted for renovation disruption, and PKF projections for 2015 and 2016

Completion of renovations

should drive outperformance

INVESTMENT STRATEGY

13

13

Premier Portfolio With Urban and Resort Concentration

Hilton Burlington

Hilton Boston

Boston Westin

Westin

Washington DC

Worthington

Renaissance

Courtyard Midtown NYC

Courtyard 5

th

Ave NYC

Hilton Garden Inn

Chelsea NYC

Hilton Garden Inn

42

nd

Street NYC

Lexington Hotel NYC

Westin San Diego

Hotel Rex

San Francisco

Torrance

Marriott

Los Angeles

Airport Marriott

Courtyard Denver

JW Marriott

Denver

Salt Lake City

Marriott

Hilton Minneapolis

Conrad Chicago

Chicago Marriott

Charleston Renaissance

Sonoma Renaissance

Resort and Spa

Vail Marriott

Mountain Resort

Frenchman’s Reef

Marriott Resort and Spa

14

14

Investment Strategy

FIVE PRINCIPLES

I.

Buy early cycle

II.

Target top markets based on

extensive research

III.

Diversify brand and management

IV.

Focus on value-add opportunities

•

Rebranding

•

Repositioning

•

Undermanaged properties

V.

Recycle capital from non-core assets

Lexington Hotel NYC

Westin Boston Waterfront

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Significant Value Created by Early Cycle Acquisitions

21%

-4%

-15%

-31%

17%

20%

20%

12%

15%

9%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

U.S. ANNUAL GROWTH IN VALUE PER ROOM

Significant early cycle value appreciation

•

Price per key increased 68% from 2010 to 2012

Value creation opportunity remains

•

Forecasted price per key to increase 40% from 2013 to 2015

Courtyard Denver

Charleston Renaissance

Source: HVS Hotel Valuation Index

15

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

16

16

Increased Exposure to Urban Hotels

Acquired 3,900 urban and destination resort

rooms since 2010

Disposed of 1,800 non-core rooms in 2012

Increased growth potential based on

historical trends

Urban markets historically outperform

CURRENT PORTFOLIO (BY EBITDA)

HISTORICAL 100BPS REVPAR CAGR PREMIUM FOR URBAN vs U.S.

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Source: Smith Travel Research

17

Increased Third Party Managers And Brand

Diversification

Goal of 50/50 brand/third-party managers

Adoption of best practices, improving overall portfolio profitability

Increased third party management by 30 percentage points¹

Reduced concentration in Marriott brand family by 19 percentage points¹

17

CURRENT PORTFOLIO (BY EBITDA)

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

(1)

By EBITDA.

18

18

Dispositions –

Successfully Recycling Capital

Intend to sell 3 non-core hotels over the next 36 months to take advantage of favorable transactions

market, promote growth, and recycle capital

Griffin Gate

Waverly

Westin Atlanta

North

Austin

STRATEGIC DISPOSITIONS

($40)

(13%)

(58%)

2%

14.4x

1

RevPAR vs.

Portfolio RevPAR

Profit Per Key

vs. Portfolio

TTM Multiple

with Capital

Market

Lexington,

KY

Suburban

Atlanta, GA

Suburban

Atlanta, GA

Suburban

Austin, TX

14.4x

1

22.8x

14.4x

1

($35)

($44)

($33)

(9%)

(1)

Portfolio sale. Multiple represents transaction average.

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

19

19

Portfolio Transformation

BETTER MARKETS, HIGHER QUALITY

(1)

Represents 2011 data for comparability purposes.

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

GROWTH CATALYSTS

21

Multiple Growth Catalysts Lead to Outperformance in 2014

2014 GROWTH CATALYSTS

Renovations

HGI Times

Square

Urban Portfolio

Group Business

2013 Disruption of

$12M -

$15M

EBITDA

Addition of

$5M EBITDA

$2M -

$4M

EBITDA Growth

+10.3%

Group Revenues

The Lexington Autograph Conversion, Courtyard

Fifth Avenue & Courtyard Midtown East

Expected mid-year opening

Premier location will drive demand and ADR

Value add renovations drive market share

Strong portfolio-wide group booking trends led

by Boston Westin and Frenchman’s Reef

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

22

NYC Is The Leading Lodging Market In The US

3.88%

2.80%

2.68%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

NYC

Avg. of Top 25

Total US

40% HIGHER HISTORICAL REVPAR GROWTH

Source: STR. Long run average reflects 1987 to 2012..

Since 2009:

•

Demand increase: Over 7M room nights

•

Supply increase: 6M available room nights

•

RevPAR increase: CAGR of 8.1% vs.

industry average of 6.8%

Occupancy expected to exceed 80%

through 2017

Annual visitors to NYC reached a record

52M in 2012

•

Brazil and China are expected to be

significant growth drivers

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Value in Millions

Source: New York Economic Development Corporation

23

NYC Success: Courtyard Midtown East

Embedded gain of $84 million (20.0%

unlevered IRR since acquisition)

Created 10 additional keys since acquisition

•

Potential for 4 additional keys

2013 renovation to drive outsized growth in

2014 (3,900 displaced room nights)

2012 RevPAR 14% below prior peak

Renovated Guestroom

Sky Lobby Seating

Acquisition Date

November 2004

# of Keys

317

(307 at acquisition)

Total Investment

$82.5 million

Total Investment Per Key

$265,000

Estimated Value

$166.0 million

Estimated Value Per Key

$525,000

Unlevered IRR Since Acquisition

20.0%

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

24

NYC Success: Courtyard Fifth Avenue

Embedded gain of $50 million (19.5%

unlevered IRR since acquisition)

Branding at acquisition drove returns

•

$48 ADR gain 1

st

month post-conversion

•

35% RevPAR increase 1

st

Year

2013 renovation to drive outsized growth in

2014 (5,900 displaced room nights)

2012 RevPAR 6% below prior peak

Renovated Guestroom

Renovated Lobby

Acquisition Date

December 2004

# of Keys

185

Total Investment

$46.2 million

Total Investment Per Key

$250,000

Estimated Value

$97.0 million

Estimated Value Per Key

$525,000

Unlevered IRR Since Acquisition

19.5%

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

25

NYC Success: Hilton Garden Inn Chelsea

Embedded gain of $19 million (21.0%

unlevered IRR since acquisition)

Highest margins in DRH portfolio

Terminable contract provides flexibility

Opportunity for ADR growth

•

2012 ADR 12% below prior peak

•

Superior product quality should allow hotel to

outperform competitive set

Entrance off 28

th

Street

Lobby

Acquisition Date

September 2010

# of Keys

169

Total Investment

$70.0 million

Total Investment Per Key

$415,000

Estimated Value

$89.0 million

Estimated Value Per Key

$525,000

Unlevered IRR Since Acquisition

21.0%

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

26

$5

$15

$25

$35

2013F

2016E

$100.00

$150.00

$200.00

$250.00

$300.00

2013F

2016E

Lexington Hotel Rebranding

Rebranded to Autograph Collection

$46 million capital plan

Created 15 new rooms

Rate upside

•

$90 ADR gap to comparable Marriott

•

Each dollar = $250k revenue

25% rate growth to prior peak

Upside from potential retail repositioning

Anticipate multi-year growth in EBITDA to

$30 million

EXPECTED REVPAR GROWTH OF 80% BY 2016

EBITDA EXPECTED TO QUADRUPLE BY 2016

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Value in Millions

27

Lexington Hotel: 15 New Keys

Converted underutilized junior suites into two guestrooms

Converted airline crew lounge into two guestrooms

Original suite room with living area

Two new guestrooms

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

28

Hilton Garden Inn Times Square

282 keys –

Expected mid-2014 delivery

Spectacular location (42nd St & Broadway)

Below current market cost ($450,000 per key)

Immediately accretive

(9% initial EBITDA yield)

Embedded gain of $20+

million on investment

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Value in Millions

29

HGI Times Square: Premier NYC Location

Premier location surrounded

by prime retail and 72mm

sq. ft. of office space.

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

30

Westin Washington DC

Growth Story:

•

2014 group booking pace: 33%

•

2-year growth story post-renovation

•

Recapture business transient accounts that

abandoned hotel

•

Attract local group with renovated meeting space

and lobby

Upside Opportunities:

•

Rate increases following renovation

•

Renovated lobby including new lobby bar,

contemporary check-in experience and desirable

grab-n-go market

•

DC as an attractive convention market

2013F RevPAR Index

90.3

2016E RevPAR Index

105.3

Market Share Opportunity

15.0

Revenue Upside

$4.5 million

$7

$9

$11

$13

$15

2013F

2016E

EXPECTED EBITDA GROWTH OF 55% BY 2016

Company Overview

Industry Outlook

Investment Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Smithsonian Museums

Central Business District

Capitol Hill

WESTIN DC CENTRAL LOCATION

Westin

DC

White

House

K Street Lobbyists

Convention

Center

Value in Millions

31

Westin Washington DC Renovation

Fundamentally change hotel experience

with brand new lobby & arrival

New guest room renovation

•

First 5

th

generation Westin in the US

Renovate and upgrade meeting space

New Lobby Bar

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Renovated Guestrooms

View of New Guest Check-in and Lobby Bar

32

Westin San Diego

Growth Story:

•

2014 Group booking pace up 7%

•

2-year growth story post-renovation

•

CBD location with a variety of demand generators

•

Attract legal and media business from new Federal Courthouse

Upside Opportunities:

•

Business mix shift driven by enhanced sales strategies and

renovation

•

Creation of innovative legal war rooms

•

Outsource three-meal restaurant to further improve F&B margin

•

Reposition leased retail space

•

Potential expansion of convention center

2013F RevPAR Index

116.0

2016E RevPAR Index

126.0

Market Share Opportunity

10.0

Revenue Upside

$2.4 million

$6

$8

$10

$12

2013F

2016E

EXPECTED EBITDA GROWTH OF 35% BY 2016

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Value in Millions

Hilton Boston Downtown

Growth Story:

•

2014 Group booking pace up double digits due

to strong convention calendar in Boston

•

2-year growth story post-renovation and

management change

Upside Opportunities:

•

Create up to 40 additional keys by converting

excess suites

•

Leasing of over 4,000 sq. ft. of desirable retail

space

•

Evaluate highest and best use for 23,000 sq.

ft. leased to tenant through 2015

2013F RevPAR Index

91.5

2016E RevPAR Index

103.5

Market Share Opportunity

12.0

Revenue Upside

$3.4 million

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

EXPECTED EBITDA GROWTH OF 35% BY 2016

$6

$8

$10

$12

2013F

2016E

BOSTON HILTON CENTRAL LOCATION

Boston

Hilton

Central Business

District

Convention

Center

Back Bay

Cambridge

Seaport

District

North End /

Faneuil Hall

Value in Millions

33

34

Hilton Boston: Extracting Value from Real Estate

Exploring potential to add up to 40 new rooms (subject to permitting approval)

•

Convert

excess

suites

(currently

over

20%

of

inventory)

into

two

guestrooms

Leasing of over 4,000 sq. ft. of desirable retail space

Evaluate highest and best use for 23,000 sq. ft. leased to tenant through 2015

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Original suite room with living area

Two new guestrooms

35

Solid 2013 group booking pace:

•

Pace up 6% (8% excluding Boston)

•

Closed 33,000 more group room nights in Q2 2013 than Q2

2012

•

Q2 in-the-quarter for-the-quarter pickup was 46%

•

2H

2013

comparisons

challenging

–

Boston

Westin

2H

pace is -14% amidst weakest year at BCEC since opening

Robust 2014 group booking pace:

•

Pace up 10.3% (10 properties up >10%)

•

Strong convention calendars in key markets such as Boston

(record year), Frenchman’s Reef, Westin DC

•

$12.5 million of group revenue booked during Q2 2013;

another $4 million in July

•

ADR up 5%, demonstrating pricing power

Group Business: 2014 Positioned to Outperform

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Frenchman’s Reef Marriott

36

Westin Waterfront –

The Center of Boston’s Growth

Boston Convention & Exhibition Center

•

Largest convention center in Northeast

•

2014 booking pace: +26% (Record year for BCEC)

Innovation District Taking Shape

•

Over 4,000 jobs with over 200 companies have been

added

•

6,300 jobs announced (Vertex, State Street, PWC)

•

Liberty Wharf has proven success of high-end restaurants

Internal Growth Opportunities

•

New retail tenants opening in 2013

•

Conversion of over 10,000 sq. ft. from unleased retail

space to meeting rooms

•

Evaluation of potential hotel expansion

Over 10 mm sq. ft. of

development under construction

or approved, including:

•

5 mm sq. ft. of office

•

2 mm sq. ft. of retail

•

3 mm sq. ft. of residential

Westin Waterfront

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

37

Vail Marriott –

Great & Getting Better

Irreplaceable real estate location at base of Vail Mountain

Epic Discovery -

Summer mountain resort facilities and activities

to drive Summer demand beginning in 2014

•

Forest Flyer™

Alpine Slide

•

Game Creek and Zip Line Tours

•

Adventure Ridge Challenge and Family Forest Adventure Park

•

Segway and Trail Tours

Ever Vail -

$1B green resort development¹

•

Mixed-use project located between Lionshead and Cascade Village –

Walking distance of Vail Marriott

•

New gondola access –

Vail Marriott within walking distance of 2 gondolas

Vail Marriott

Vail Marriott

1

Based on reports from Vail Resorts.

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

ASSET MANAGEMENT

39

Asset Management Playbook

FOUR PRINCIPLES

I.

Promote Accountability

•

Internal

•

External

II.

Leverage Strengths

•

Experience

•

Experts

III.

Capital Expenditure Management

•

Cost engineering

•

Creative problem solving

IV.

Mining Value From Portfolio

•

Operations

•

Enhance real estate value

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Conrad Chicago

Charleston Renaissance

40

Internal Accountability

Reorganized Department

•

Added Head of Design and Construction

•

Allows asset managers to fully focus on

operations

•

Put optimal team in place to drive growth and

add value

Realigned Portfolio

•

Creation of “major market experts”

through

redistribution of properties

•

Collaborative approach in NYC

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Frenchman’s Reef Marriott

Chicago Marriott

41

External Accountability

Property Management Team Initiatives:

•

Strong leadership

•

Talent-driven approach to operations

•

Comprehensive sales strategies

•

Targeting right customer base

•

Optimal mix of transient/group business

•

Strategies appropriately aligned for seasonality

•

Drive revenue management

•

Specific transient and group strategies

•

Weekly sales meetings to adapt approach and

tactics in real-time

•

Profit improvement initiatives

•

Labor productivity

•

Cost savings programs

•

Innovative pricing programs for ancillary

departments

•

Monthly stretch goals

•

Drive profitability

New GM at Conrad Chicago

New Revenue Manager at Boston Hilton

New GM at Boston Westin

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

42

Leveraging Past Experience

FRENCHMAN’S REEF STRATEGY

Moved revenue management on

property

Changed out GM, allowing for a fresh

perspective

Additional management changes in

process

Analyzing opportunity to create

“Trade Winds”

Club paid-only

concierge floors

Frenchman’s Reef

Conrad Chicago

Aruba Marriott

vs

vs

Waldorf Astoria

Chicago

CONRAD CHICAGO STRATEGY

Change transient mix

Draft behind Waldorf Astoria’s ADR

Reanalyzing group sales force

deployment

•

Dedicated on-property team versus

shared regional team

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

43

Leveraging Experts to Cut Costs & Promote Efficiencies

Across Expense Categories

Consultant hired at Boston Westin

Potential lease out of multiple food and

beverage outlets

Identified operating expense savings as well as capital

avoidance across portfolio

Boston and NYC opportunities

Increased EBITDA

Flow Thru

Improve profitability by increasing rates and

renegotiating contracts

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

44

Capital Expenditure Management

Head of Design & Construction brings in-house

expertise to capital expenditure management

Realized savings of $1.9 million in the Urban

Portfolio by cost engineering

a variety of projects

Reduced estimated $1.4 million cost of building

improvement through creative solutions at

Westin San Diego

Reduce reliance on outside parties-

with

dedicated resource oversight on all projects.

Results in project cost savings as well as

enhanced controls

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Worthington Renaissance

Hilton Boston Downtown

45

Mining for Value: Operations

Current and Future Value-Add Projects:

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Boston Westin

•

Add convertible beds to make parlor suites rentable -

100% IRR

•

Utilize low-flow toilets to conserve energy -

50% IRR

•

Walk-In Cooler efficiencies -

20% IRR

•

New retail tenant driving additional lease income in 2014 -

$275K incremental

EBITDA

Chicago Marriott

•

Comprehensive lighting retrofit -

$75K in cost savings

•

Rebidding multiple service contracts with over $150k in savings

Minneapolis Hilton

•

Analyzing the conversion of 9,600 sq. ft. of vacant office space to meeting

space

Worthington Renaissance

•

Renegotiated parking contract, generating $100K in additional profit

•

Exploring potential to lease-out food and beverage operations to a third party

46

Mining for Value: Operations

Current and Future Value-Add Projects:

Company Overview

Industry Outlook

Investment Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

•

Eliminating Pay-Per-View movie program, adding $35K in profit

•

Increased room service trip change which will add an incremental

$35K annually

•

Telephone consultant found $55K in cost savings and $125K in CapEx savings

•

Saved

$100K

through

the

installation

of

industrial

grade

BTU

meters

Boston Hilton

•

Investment Grade LED Lighting & Occupancy Controls –

63% IRR

Alpharetta Marriott

•

Creation of 2

nd

concierge floor adding $53K of revenue annually

Burlington Hilton

•

Implement 24 Hour summer weekend cancellation fee

Sonoma Renaissance

•

New resort fee will add $300K in Net Profit

Hilton Garden Inn

Chelsea

•

Telephone consultant found $28K in cost savings

Portfolio Wide Initiative

•

Exploring additional “view”

rate categories

Westin San Diego

47

Mining For Value: Management Agreements

Creating Value Through Management Agreements:

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Frenchman’s Reef

Marriott

•

Negotiated manager contribution of $5 million cash and 40% reduction in future

incentive management fees worth an estimated $5+ million to upgrade facility

•

Added $10+ million in value

Salt Lake City Marriott

•

Negotiated a reduction in management fee by 50% for two years and 33% for

three additional years to offset new supply additions

•

Potential to add $1.6 million (estimated) in value

Conrad Chicago

•

Manager subordinated 3% management fee to operating profit threshold in order

to retain agreement after failed performance test

•

Added $3+ million in value

Orlando Airport Marriott

•

Subordinated 33% of management fee to actual debt service because operating

performance was below debt service

•

Added $0.5 million in value

Chicago Marriott

•

Negotiated a manager cash contribution of $10 million for “brand enhancement”

capital projects during 2008 renovation

•

Added $10.0 million in value

Bethesda Suites

•

Leveraged contract provision to expense loan costs through Hotel

P&L, thereby

reducing incentive management fees

•

Added $1 million in value

48

Mining for Value: Adding Keys

Creating Value by Additional Keys:

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Lexington Hotel

•

Created 15 new rooms from an unused lounge and underutilized junior suites

•

Added

$9.0 million ($600k/key) in value

Courtyard Midtown East

•

Created 10 additional keys from underutilized suites

•

Opportunity exists to convert 4 more conversions

•

Added

$5.25 million ($525k/key in value)

Chicago Marriott

•

Relocated concierge lounge to mezzanine level, creating 6 premium new rooms

with skyline views

•

Added $2.4 million ($400/key) in value

Hilton Boston

•

By splitting underutilized suites, opportunity exists to add up to 40 new guestrooms

•

Potential to add $18.0 million ($450k/key) of value

Frenchman’s Reef

•

Exploring the creation of 23 new guest rooms from expiring tenant lease

•

Value increase to be determined

49

Mining for Value: New Meeting Space

Creating Value by Maximizing Meeting Space:

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

•

Created 15,000 sq. ft. of new junior ballroom and breakout meeting rooms

targeted at small corporate groups from the low volume 4

th

floor restaurant and

lounge

Chicago Conrad

•

Relocated executive offices to “last sell”

breakout rooms and created 4,100 sq. ft.

of

desirable

high

end

social

and

small

group

meeting

space

with

views

of

Michigan Ave

Torrance Marriott

•

Converted dated restaurant into 4,500 sq. ft. of new meeting space utilized by car

companies for product launches.

•

Relocated bar to activate lobby

Westin Boston Waterfront

•

Negotiated with ground lessor to change the allowed use of previously vacant retail

space, creating 37,000 sq. ft. of ballroom, breakout and exhibit hall space

•

Potential to create additional 10,000 sq. ft. of meeting space

Bethesda Suites

•

Converted 2 last sell hospitality suites to 1,500 sq. ft. of meeting space

Vail Marriott

•

Converted racquet ball courts to 2,100 sq. ft. of meeting rooms

Chicago Marriott

OPTIMAL CAPITAL STRUCTURE

51

(1)

Year end 2012 ratio.  Calculated as defined under the Company’s corporate credit facility.

Best-in-Class Capital Structure

Leverage Statistics

2013

Net Debt / EV

35%

Net Debt / EBITDA¹

4.9x

Fixed Charge Coverage

2.7x

Unencumbered Assets

13

Average Interest Rate

5.2%

Average Maturity (years)

3.50

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

CAPITAL STRUCTURE FRAMEWORK

Low Leverage

Mitigated Cyclical Risk

Simple Capital Structure

No Corporate Debt

Significant Pool of Unencumbered

Hotels

Sustainable Dividend

Source:  Citi Investment Research and Analysis

52

Low Leverage Outperforms

Total shareholder returns should outperform higher leveraged peers

Balance sheet is built with the entire lodging cycle in mind

Mitigates risk of value destructive capital decisions during downturn

•

Base case net debt/EBITDA remains below 5.0x

Dry powder for early cycle acquisitions

Allows for sustainable dividend

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Note:

Period

used

in

calculation

of

total

shareholder

returns

is

05/26/2005

–

08/26/2013.

Source:

Citi

and

Bank

of

America

Merrill

Lynch

53

Hilton Boston

Boston Westin

Conrad Chicago

Vail Marriott

Courtyard Denver

Hotel Rex San Francisco

Hilton Burlington

Hilton Garden Inn Chelsea

Torrance  Marriott

Alpharetta Marriott

Charleston Renaissance

Bethesda Marriott Suites

Oak Brook Hills Marriott

Chicago Marriott

Lexington Hotel

Hilton Minneapolis

Frenchman’s Reef Marriott

LAX Marriott

JW Marriott Cherry Creek

Courtyard

5

th

Avenue

Courtyard Midtown East

Salt Lake City Marriott

Worthington Renaissance

Orlando Airport Marriott

Westin Washington, DC

Sonoma Renaissance

Westin San Diego

Low Leverage Mitigates Cyclical Risk,

Increases Flexibility

$1.1B Individual

Property Debt

$134M 2013 EBITDA

1

$2.0B Asset Value

Valuation “floor”

set at

$85M 2013 EBITDA

1

$1.2B Asset Value

(over $6/share)

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

14 ENCUMBERED

HOTELS

13 UNENCUMBERED

HOTELS

(1)

Based on mid-point of Company 2013 guidance.

54

Sustainable Dividends

Current yield of 3.5%

DRH has returned $432M of capital through dividends

Payout of 65% of CAD

Expect to pay cash dividends throughout lodging cycle

DIVIDENDS ARE KEY DRIVER OF LODGING REIT TOTAL SHAREHOLDER RETURN

Source:  Citi Investment Research and Analysis

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

BEE

FCH

SHO

PEB

HST

DRH

AHT

LHO

HT

DIVIDEND YIELD

$432M IN TOTAL DIVIDENDS PAID

55

Recent Capital Actions Have Enhanced Financial

Flexibility

Took advantage of attractive financing

environment:

•

$450 million of new property-specific secured debt

•

Average interest rate of 4%

Increased floating rate debt to 15% of total debt

Improved line of credit pricing, flexibility and tenor;

•

Full $200M line available

Laddered debt maturities

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Westin Washington D.C.

Sonoma Renaissance

56

Plan in Place to Support Funding Needs

Achieve 3.0x net debt/EBITDA by 2016

Maximize flexibility to address capital needs

•

Borrowing capacity of $600M to $700M from

unencumbered hotels

•

Up to $150M proceeds from dispositions of non-core

hotels over next three years

•

Refinancing of debt maturities through 2016

•

$200M of credit line capacity plus $200M accordion option

•

Expect to end 2013 with $30M cash, generate $40M to

$50M in annual free cash flow

2013 Capital Expenditure

program

•

$70M remaining through

early 2014

42

nd

Street commitment

($100M in mid-2014)

Debt Maturities

Dividends

FUNDING NEEDS

ACTION PLAN

Company Overview

Industry Outlook

Investment Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

KEY TAKEAWAYS

58

A Compelling Investment Opportunity

Portfolio Positioned to Outperform

Substantial Upside from 2013 Capital Investments

Favorable Industry Supply/Demand Dynamics

Enhanced Asset Management Focus to Drive Internal Margins

Best-In-Class Capital Structure With Well Covered Dividend

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

Courtyard Denver

Hilton Garden Inn Times Square

Westin San Diego

APPENDIX

60

HGI Times Square: View to New Year’s Ball

61

HGI Times Square: Lobby

HGI Times Square: Lobby

62

63

HGI Times Square: Restaurant

64

HGI Times Square: Guestroom

65

Lexington: Exterior

66

Lexington: Lobby

67

Lexington: Lobby Bar Artwork

68

Lexington: Lobby Library

69

Lexington: Guestroom

70

Lexington: Guest Bathroom

New York City Hotel Transactions

Source:  Eastdil Secured

Hotel Name

Location

Date

Keys

Price

Price / Key

Holiday Inn Manhattan 6th Avenue

New York, NY

226

Jun-13

121,400,000

537,000

The James

New York, NY

114

May-13

85,000,000

745,614

Hyatt Union Square

New York, NY

178

Apr-13

105,000,000

589,888

Hyatt Place Midtown South

New York, NY

185

Mar-13

76,400,000

412,973

Milford Plaza Hotel (50% int.)

New York, NY

1300

Mar-13

325,000,000

250,000

Alex Hotel

New York, NY

203

Feb-13

115,000,000

566,502

Flathotel

New York, NY

288

Feb-13

180,000,000

625,000

Beekman Tower Hotel

New York, NY

174

Jan-13

82,150,000

472,126

Crown Hotel

New York, NY

65

Jan-13

18,000,000

276,923

The Plaza and Shops at the Plaza

New York, NY

230

Nov-12

575,000,000

2,500,000

Dream Downtown

New York, NY

315

Nov-12

220,000,000

698,413

Setai Fifth Avenue

New York, NY

214

229,000,000

1,070,093

Manhattan at Times Square Hotel

New York, NY

665

Oct-12

275,000,000

413,534

Essex House

New York, NY

518

Aug-12

362,300,000

699,421

Holiday Inn Express Madison Square Garden

New York, NY

228

Jun-12

87,500,000

383,772

King & Grove Manhattan

New York, NY

227

Jun-12

116,000,000

418,773

Courtyard Marriott

New York, NY

226

May-12

82,000,000

362,832

Cassa Hotel

New York, NY

165

Mar-12

130,000,000

787,879

Avalon Hotel

New York, NY

100

Feb-12

48,300,000

483,000

Hyatt Place Midtown South

New York, NY

185

Feb-12

76,500,000

413,514

Ritz-Carlton

New York, NY

261

Jan-12

198,000,000

758,776

Knickerbocker Hotel

New York, NY

330

Jan-12

230,000,000

696,970

Park Central Hotel

New York, NY

934

Dec-11

396,200,000

424,197

Hampton Inn Manhattan

New York, NY

146

Dec-11

69,500,000

476,027

Holiday Inn Midtown

New York, NY

122

Dec-11

52,200,000

427,869

The Cooper Square Hotel

New York, NY

145

Nov-11

90,000,000

620,690

Paramount Hotel

New York, NY

597

Sep-11

275,000,000

460,637

Hotel Chelsea

New York, NY

226

Aug-11

82,500,000

629,771

The Carlyle

New York, NY

188

Jul-11

357,200,000

1,900,000

New York Palace Hotel

New York, NY

899

Jul-11

377,000,000

419,355

Hyatt Union Square

New York, NY

175

Jul-11

104,000,000

594,286

Affinia Manhattan

New York, NY

526

Jun-11

292,200,000

555,513

Affinia Shelburne

New York, NY

323

Jun-11

179,400,000

555,418

Affinia Dumont

New York, NY

241

Jun-11

133,900,000

555,602

Affinia 50

New York, NY

210

Jun-11

116,700,000

555,714

Affinia Gardens

New York, NY

129

Jun-11

71,700,000

555,814

The Benjamin

New York, NY

209

Jun-11

116,100,000

555,502

YOTEL

New York, NY

669

Jun-11

315,000,000

470,852

Four Points by Sheraton - Times Square

New York, NY

244

Jun-11

112,000,000

459,016

Algonquin Hotel

New York, NY

174

Jun-11

82,000,000

436,782

NYC HOTEL TRANSACTIONS

71

Transformation of Salt Lake City Marriott

City Creek Center is multi-billion

dollar, 23-acre mixed-use

development

•

1.2 mm sq. ft. of office,

•

700,000 sq. ft. of retail

•

800 new residential units

Strong operating performance since

opening of City Creek in early 2012:

•

2012 RevPAR growth: +17.8%

•

2012 EBITDA growth: +35.8%

•

2013E RevPAR growth: +8.8%

•

2013E EBITDA growth: +14.9%

SLC Marriott after City Creek

SLC Marriott after City Creek

Company

Overview

Industry Outlook

Investment

Strategy

Asset Management

Optimal Capital

Structure

Growth Catalysts

Key Takeaways

72