DRH - Earnings call transcript Q3 2017 | DiamondRock Hospitality Company

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Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Third Quarter 2017 DiamondRock Hospitality Company Earnings Conference Call. At this time, all participants are in a listen-only mode to prevent background noise. [Operator Instructions] As a reminder, this call is being recorded.

Now I’d now like to welcome and turn the call to Mr. Finance. of Director Kensil, Sean

Sean Kensil

Thank you, DiamondRock’s – to everyone, Good quarter XXXX morning, third webcast. and earnings welcome Collin. call and

begin, Company’s law, statements to as not and be to are like not be our subject considered I in SEC They that in may statements described we may facts. forward-looking securities of are comments uncertainties the remind federal risks under updated filings. and historical many the today Before participants would future. These

financial and earnings revised Investment non-GAAP as our Chief review Sean today’s for will certain Healy, balance our it Troy With morning, Mark overview discusses Chief discuss and company’s may GAAP Sean a to management results, as Mark President addition, will sheet. on third helpful third measures, the Officer; provide quarter Tom Executive detail our Furbay, set Mahoney, our be In Brugger, me the Chief This outlook our is provide call forth discuss on Officer. press brief our our to and of greater Officer; quarter XXXX. reconciliations Chief performance then in as Operating our release. well Officer; Financial

open pleased will over we for remarks, that, line I’m their Following Mark. With to questions. call the turn the to

Mark Brugger

joining Good earnings for everyone, morning, and third thank us quarter DiamondRock’s for you call.

looking But and those and our time. Before our hotels we challenging at the by affected safety recent job ensuring after all are express begin, fellow been that the of natural the for a incredible I’d like This folks support to to take proud a did associates. guests our the disasters. has of moment we

with of South continued a and the quarter, general committed I’ll the economy strength. today series Northern Florida St. communities Despite U.S. making economy disasters about are in the affected show the of we of the to forward, by fundamentals. in health logic and signs to natural third remarks California. start working brief the few closely Going Thomas,

Third of for where revised they had trend the consecutive rate grew quarter consensus and of corporate X% X.X% second right two GDP indicators, continue the the fastest a mid key with economy combined to confidence, for unemployment growth consumer in profits, since the quarters expectations quarter growth XXXX. direction. Other of including GDP at

However, Demand steady, lodging more indicators RevPAR bit quarter. for slow, was nuanced. but the are X.X% industry remains growth third

supply, While many the in and supply outpace fact increase that markets. demand top did continued growth to is is to up substantially gateway it X.X%, more

performance the RevPAR markets books. despite markets top is able challenging underperforming been quarter. group disasters in be of to a in This range the As several bolstered more these of range year pleased in XX is already these trend October needed to in challenges, a increasing full growth our and as DiamondRock only strong by extremely has light full of X.X% This XX.X% year on increased X% quarters. as for to top impact continue of national new the months more result, several quarterly RevPAR the guidance recent is expected raise in In averages well to with coming to RevPAR from of natural with for X.X% all our markets XX X.X%.

to which and was ahead I at driven This the up group. quarter, of comparable good impressively, third growth the Lake four expectations Worth. This during hotels share and Looking portfolio City outperformance had market More the points the by our percentage RevPAR time highest Fort the peer DiamondRock X.X%, is Salt Chicago, is at our of believe in our internal quarter. gained in successful also only is delivered once only X.X% of entire The off. asset and team growth, with Tom so this these driving growth investments far containment on COO, they total pay starting renovations cost management group. are outstanding again credit the quarter. were to completed expense they our six to line Healey give in year work in our Not our top of and third

working broad a implemented that of being opportunities In addition, are management array capital the portfolio. the to large across asset our ROI team on projects is

reduce to example, payback. which is lighting takes one is as a in in XX% pride to management have early the great forward just Just several increase our going platform reduce initiatives labor food momentum in in asset excellent a is and productivity, XXXX initiative to two XXXX. energy new and to of cost, IRR implementing costs year expected DiamondRock is its the benefit stages there us and team

in natural from disasters. a recent Marriott minute closed from damage the Hurricane spend Irma. on due to Reef The Thomas significant Frenchman’s on St. Let’s impact X September

end remediation We assessment, we expect of of Frenchman’s the process complete our professionals the damage final while and team a have to on a detailed assessment architects and already rebuild. least to estimate initial at the of begin engineers closed develop XXXX. the Based through to remain their deployed Reef

rethink at and will to resort course also damage. related water closed With best of and opportunity sustained in West that shareholders. our wind Key September the the boutique we closure, The determine on this Inn the of action take the is and interest X,

smoke us this expect hotel Mother Nature cause quarter fourth affect also to to us rethink an days I’m situation second currently We the is XX of for wildfires online. quarter the close presents with remain open that XXXX. damage report in opportunity the remediated to to of The to happy the continued some the into hotel rooms closed back wildfires This caused October. as during for XXX% hotel. subsequently Sonoma was that at and Lodge

commenced insurance three these hotels, For each have claims. of we

working is profits and lost interruption. business Our fair and with from damage obtain property executive proceeds to for insurers our consultants team closely

with insurance carriers. coverage Fortunately, have strong we excellent

for and/or and more in us either million DiamondRock positioned dry repurchases on for powder be the allows capacity want cycle capital acquisitions. including reserve unrestricted million this to details over valuable is the did $XXX to well of quarter is third at touch turning capacity over $XXX Sean cash to call I With This opportunistic. Before future allocation. stock particularly over point results, our of on to investment

in As numerous you to hotels are know acquisition earlier excellent opportunities, market supply value two zero were in add an have of off-market price of add we both lifestyle this located Sedona. and year, able that the execute

patient, our turn for Sean? deals, our be I’ll we always for remain to pricing are I them. with broadly sellers. our shareholders. the above buyers to deals While certainly but create uncover more looking as continues hard materially are that we’re Sean. we characteristics can add underappreciated Again to They in now continue that patient, to gem. work over and value find, difficult call marketed those we to but would underwriting

Sean Mahoney

Thanks Mark.

de our Key results, that EBITDA, margin and please and basis, for our RevPAR, presented hotel Frenchman’s available Inn Orchards and presented. note at comparable the presented; are L’Auberge periods excludes adjusted Inn portfolio other The all Westin West and at include The Marriott West discussing for which adjust rooms all periods Sonoma closed Renaissance Suites periods Reef the statistics Before on Fort Lauderdale, for Sheraton and Sedona Key

and reported for add back third adjusted addition, $X.X which adjusted million FFO In expenses, disaster natural EBITDA the quarter. during

by third September, volume banquets The and and timing offset revenue. X.X% Chicago beverage growth Comparable group and flat the was Our revenue driven was grew was was by and impacted which by gain RevPAR comparable hotels performed in was comparable holidays. ahead The which Jewish in RevPAR growth Monthly of a X.X% total, F&B August in X.X%. In July, a market quarter. in X.X% share less of the during and Boston. catering, negatively by X.X% positive RevPAR food was expectations impacted decline. X.X% third decline in essentially quarter decline the with

controls that margin basis limit Our only to asset managers total points. cost to XXX limited enabled tight third and EBITDA the adjusted implemented the hotel grow costs X.X%, quarter contraction to operators operating successfully which hotels to

increases year-to-date EBITDA the RevPAR comparable approximately basis by impacted EBTIDA basis and XX, reported points. contraction XX September X% Property period ended For year-to-date margin adjusted hotel XX of of growth margins hotel points. company adjusted the tax

a decline challenging transient in revenues the by our the me three revenues transient, was from segment, The significant partially Chicago represented transient segment. of XX% where from of shifting trends a of primary in business In daily X.X% in X.X% business management offset X% Let a by our average business in minutes increase driver demand rate. and room particular, in by transient to third spend XX% asset rated Boston highest initiatives We quarter segments. grew successful our quarter benefited total increased environment a group which successfully demand down. revenues, our response in were outperformance. hotel Business couple Chicago discussing citywides in

by the increased quarter Our business our transient grew which revenues benefited in of wherethird Renaissance third Jewish segment, continued group the quarter XX%. outperformed at group group business up Despite Worthington revenues post-renovation The room represented X.X%. the from impacted of revenue quarter negatively the expectations. being transient XX% over holidays, ramp timing also

up Our $X.X noting. third outperformed pick a revenue industry group in-the-quarter, quarter exceeded trends worth prior term represents significantly few group group from year. expectations booked, XX% Short of There which business with million for-the-quarter a are increase other declines of X%.

was in pace is mentioned, up that driven The increase compared improved now expectations. improvement as the quarter. our pace group encouraged to XXX up XXXX just are quarter as fourth by point year We our last group I for-the-quarter from improved bookings basis in-the-quarter, X.X% X.X% Full quarter. well last

we group to XX% the growth. last group, which quarter, now year. million revenue X% from fourth quarter improvement over fourth This fourth booked big quarter a group revenues. approximately second quarter During We the the the when of the is quarter end be of quarter year strongest $X third expect we of flat a dollars is increase with expected from

revenues the confident incorporated books. XX.X% additional pace, guidance. are booking very up group our there group Finally, of very currently we the the over We forecasted have pick is in full-year little in on as

Finally, concentration. other disruption the our The disaster resort total natural revenues, higher represented declined of third XX% revenues and have a result which quarter contracts decline markets, X.X%. room in leisure which of leisure was

higher our We to mix into management revenue shift also strategies from rated leisure transient business segment. continued

Now, combined a Chicago citywides, challenging I of on outperformed will quarter two RevPAR of Generating growth the hotels Despite significantly in markets. our X.X%. Chicago few our third comment market.

Gwen to national towards continue up and fourth also ongoing outperform to Marriott The benefit Chicago, from its pace renovation business transient. with Chicago push the XX%. more growth, continues and quarter group over expect We to

continued to remains of for Worthington That XX.X%. activity Renaissance outlook to Lake strong XX.X%. third of outperform combined quarter RevPAR with The City and relates Salt RevPAR and Chicago majority Marriott XXXX renovation. pace XX.X%. due quarter of group the third growth up generated Our the growth year-to-date to The citywide constructive

Worth Fort market displaced from the However, also Hurricane August. demand Harvey in from benefited

the XXXX York New four we each City now the improved outperformance underperformed quarter expect for in which Our XX% continued at declined over Worthington hotels as XXXX Manhattan and slightly market. our RevPAR RevPAR in outlook in growth and XXXX. X.X%,

impacted by the EBITDA Courtyard transition franchise to was disruption. performance third hotel some quarter this over relative the the conversion the During which $X led again by quarter Lexington our Positively and Midtown adjusted million. East, at outperformed Hotel expectations exceeded

pace positive of Looking group forward with remains our approximately group booked. XXXX already the business XX% expected

second pace group improvement is an XXXX Our flat, from quarter call. which currently is our

pick booked group quarter this increase We compared where the a are representing our up by time we XX% year. in business last million XXXX same encouraged $XX.X to

the is XXXX Our the book with time for quarter. of the year and fourth business group in to left the strongest third quarter, first half

the balance call would I touch to back Mark, on turning sheet. like Before over to our

position in build company to be and capacity to capital opportunistic. maintain allow structure to We our liquidity to the continue order

had debt be with next in continues is our The to near sheet XXXX. in shape. term no weighted great debt balance We maturities our on interest average only maturity X.X%. Our rate

maturity mortgage are nearly XX unencumbered. XX of our six hotels years, average is Our

X.X of Our undrawn million forecasted XXXX $XXX $XXX an over million balance maintained approximately net line of we credit and cash. turn call times of debt-to-EBITDA I Mark? back to sheet Mark. and now will is the $XXX approximately capacity over million including currently corporate

Mark Brugger

Thanks, Sean.

expect our our insurance, the pursuing And from to. revised aggressively entitled in to interruption year from new full while insurance are to outlook. and not press companies all you payments business are from benefits include the our we important reviewing saw get guidance As we interruption it release, the that fully is money does know that business proceeds we any

policy Our accounting only when payments. income recognize companies final for agreement with the is we to its insurance have even interim

early status our on guidance guidance revisit will XXXX of appropriateness business the our set we interruption insurance into we the year, including proceeds of depending As claims. next

to reduced We the range and natural $XXX of the outlook our the to million. be range disasters full to guidance without reflect XXXX this, guidance, drilling impact significant We’ve incorporate business expect One, range comparable raising year of allocation to basis adjusted Now, proceeds adjusted X% of XXXX by increased gaining from the updated to adjusted interruption million changes. we EBITDA range portfolios RevPAR receive. natural we our relatively we initiatives which year there giving our be is full end in income the to on million asset of management now in of Based from into disasters Two, $X.XX. to full are recent and favorable our FFO traction. any all X.X%, year benefit the to guidance raised by as $X outperformance market share Consequently, down adjusted XXX FFO from end XXXX per the follows. top the to basis future from are points expect expected our EBITDA two XX RevPAR bottom new that revised insurance the hotels changed $XXX of our impact and points. to $X.XX we and

our our expectation As come at ranges always, guidance we FFO in with and midpoint. set adjusted to the EBITDA

are ahead, is that we growth to in confident position for even we well Looking portfolio a environment. our if continue be XXXX slow

should Chicago for be Specifically good us.

to an supply improving expect picture. XXXX the with Chicago have We good citywides XX% a approximately up and market

phase two performance. completed other million contribute and renovation Gwen should final this the across rebranding hotels its million several of winter. properties Our the is coming completing to Chicago $XXX $XX outperform Renovations XXXX year at our Marriott renovation its recently also four should the

Remember as and Renaissance, City renovations Sonoma should we our Kimpton of and of outperformed Denver, we is are term into final performance growth Shorebreak. market million to next portfolio. ebbs. Renaissance, US. expect it that the It from MSA X.X%. for healthy stronger the the gains demand the and year market constructive in set investing supply expectations York $XXX share We outperformance We XXXX, a completed number our the the year encouraged prospects Courtyard cautious Separately additions. $XXX outside million under-performance up recently substantially drive New to Renaissance, market Worthington in with Charleston for And supply with surprisingly as XXXX enters XXXX are strong long one remain stabilizing the its has

concept for affected some Sonoma natural at that our expected West disruption Lauderdale, Key is to have we disasters favorable West. in by in We is coming details further a forward reopen new in to name months. the second The that created you as XXXX from Key and renovated fully and it quarter finalized the Additionally, new comps identity. providing hotels of with Inn XXXX XXXX with were look in on Fort this

in receive Frenchman’s to hotel for at future. proceeds expect all – we insurance be Additionally, business interruption XXXX. will Reef the for of Reef Frenchman’s the off-line

insurance reopening. it for all We ramp as as XXXX for and until lost after are the profits well claims submitting reopens, up period for

resort. mentioned a us. I Historically earlier, been taking As rethink opportunity has are this Frenchman’s this winner we to for

XXXX to million have multiple Our XXXX, to with EBITDA up for Since be hurricane from of our which nine our and on over last the record Moreover, outcome investment. average in USVI represented a Frenchman’s The renovation completed event compounded working experts at the for best create at shareholders. a XXXX closely the XX% XXXX XX%. sub group a been tracking rate our our to team Marriott with to government, pacing for we total team year Frenchman’s was $X.X times renovation million $XX.X allowed in grow was $XX million. in EBITDA

our will We by our remarks hard. that you team have for morning saying will more is next prepared I on conclude call. details working our this

now to the raise even despite any to guidance more be disasters. open We the We’ll line questions. year to full able natural another for of up and good quarter happy able deliver growth to are be pleased RevPAR

Operator

is Wells Donnelly And from question with first Instructions] Fargo. Jeff Thank of line the you. [Operator

Your line is open.

Jeff Donnelly

and the at guys thanks there morning for the Good synopsis Mark, end.

didn’t have are corner XXXX? the more its broader might going might in New have turning eyes. you you just might trough kind industry better a and think as seen you in be Worthington a XXXX on it picture group first year And in in much Chicago be I the constructive it that York’s I found is strike remarks on just it strokes maybe Does would leave is your start stolen just optimistic a sounding that XXXX and broad on renovations the than sounds gave, times? the of in curious that transient’s view much maybe you you segment. that me weakness you strongest But certainly sometime we’ve bigger like this of to and I’m certainly think about year a my recent standpoint. how your from question. guys that At were say outlook

Mark Brugger

extrapolate small over whole is relatively Yes, industry Jeff, changing. say to don’t want to the what a from I is portfolio

to within it’s We into more are seeing portfolio, at seems what the XXXX. where broke setting happened year obviously I for of for similar are XXXX. a It going share broad are – not demand to initiatives our lot market up obviously our led think and pleased reaccelerating industry a trends certainly the with but But things as things we portfolio gains. right are way like for us

if specific was in for the instance to otherwise kind So that I outperform take the in market of our outperforming ability third quarter. sluggish the properties we there a really Chicago quarter, you our and third what to is think market did

Jeff Donnelly

parts? talk the what be completing the those EBITDA in versus but about completion talk your can in versus for nearing XXXX That’s with was Chicago about ask to And renovations all in just Gwen should about not been in you full-year given just from expectations? moving And it XXXX and maybe can you’ve Chicago, original guidance, useful. performance thinking you necessarily how we sticking Marriott, actually the at as how been April you’re has The

Mark Brugger

moving a of are lot parts. there Yes,

we’ll quarter renovated We first the the gain renovations Chicago big the December next XXXX share the in through market Marriott X So, of to outperform hotel, a the downtown, market would expect for complete product. that’s given year. and

at as have If of the lot obviously the like a XX still they the points. in city. guest And gaining meeting the on traction are scores, satisfaction best up were you the location, we look – planners something they rooms best renovated brand

a pleased So it TripAdvisor with We years particularly Gwen you take maximized The gain to obviously on five ramp-up of market It’s, do outperform. takes city share to re-launched. gaining great rebranded number you hotel. we launch story. fully I’m the is report, to expect get and really continues – in re- to and to three brand, on the where It’s two Chicago. soft traction. a period it When the takes different can

So, we for Gwen. underwriting would it Frankly gets think RevPAR below expect growth The this we original it’s very year, but strong our in ultimately there.

outperformance expect the make hotel. years and two with So that we leaps we would real next as bounds over

Jeff Donnelly

how a EBITDA have of we much you Do XXXX? XXXX to as swing can go sense two those hotels the from from

Mark Brugger

guidance. XXXX given not We’re

don’t I now. put to out want that So right there

Jeff Donnelly

in challenges selling still And and carrying Okay. it just property. the may future the because redevelopment? of ultimately you rebuilding, the versus of there one and asset, like that could think prospect value I considering the collecting proceeding you then and guess on with of the complexity the do land just the face maybe topic, monetizing will Frenchman’s, how the approach claim potentially about that time last insurance maybe sounds insurance

Mark Brugger

that’s of the still tough in I question. we very innings Yes, the process. a loan early mean, are

have on issues. the remarks, site, have they in mentioned on even out As prepared we weeks been site figuring estimates prepared The structural for several the engineers the yet. I cost are don’t

right for And it’s know hard get total so, to is the until estimate shareholders. what a outcome the we

We Friday. governor property at with the meeting the this are

the work We to the continue to to to plan the work are outcome. with our best with – get operator island, continue to is

we to expect having even which another opinion to XX it’s give don’t hard rational a more So, about have for to XX you details days.

Jeff Donnelly

as you same perceive entirely residential off complexity maybe way it in sell that resort? as is that it there for the Maybe well on financially this with portion where, maybe proceeding rather the camp, falls a than development the easier a from redevelopment, to the standpoint extent beach you look to you would your own? scenario but for make to to the example, find front Like a a area, as of

Mark Brugger

so XXX the Morningstar portion Yes, integral. could They is That’s about they a We what about probably – the of beach really be think two XXX one we resort of be ability resort. rethink resort. are room is may said the is capture talking really lot there that in remarks things we prepared beachfront the to were rate. more about move the a upstream when and front

evaluating between pretty so, the of one But now. are are we that’s substantial. And the synergies the two things right

wouldn’t our Plan new could think I property, off and one, in up ability end the the the about essentially we up things So, we’d with be do rebuild that we’d Islands. location at to Virgin A. that the think we’d given best we fix sell end hotel be pretty the resort don’t excited If be the is better what and a with where

So, we’ll see of proceed along those where lines and up. end we kind

Jeff Donnelly

Okay, thanks guys.

Operator

our line question comes and from next you the ISI. Evercore of Hightower Thank Rich with

line is Your open.

Rich Hightower

year? know morning are to you’re we that think can this quickly, out portfolio I really as an next Hi, directionally where the guys. good not indication into give year, CapEx going you putting about $XXX guidance million shake to on the relative you you’re $XXX us million, XXXX, but giving Mark,

Mark Brugger

can But we’re good where Things failed just portfolio the now. moving a right CapEx get like plan rooms but the budgets in returns. standard, those investments going we Yes, invest other we resorts, think luxury next up through we other to substantially year. properties to at

environment, to some wise, on continues going year. and steady the make to are as investments it and to get We portfolio those are We we them. this be to in in invest think continue returns next try to slow

Rich Hightower

higher would it whether next or generally indication year? be Okay, but no lower as to

Mark Brugger

number $XX still XXXX. the that projects you another, are that It’s to big evaluating or as way substantial move literally a couple would it I there to give mean, But million $XXX one we from into a now will be I want a right not we is so million, needle going don’t number. of

Rich Hightower

your to with to And York, fine. back prepared are York, with thinking the from and specifically according the the in pipeline supply as comment up being XXXX for aggregate look set numbers I then to you a least New some of plus about I just MSA, there. mean now cumulatively to just at at New SDR. I’m some better inventory not comments or I the – supply much going that’s of XX% existing respect to that’s Okay, is mean those risk the just that’s – lines. you regard. at guess looking I get along significantly Manhattan than XXXX development to that but going how that or there’s conclusion that or XXXX to in respect projects XXXX be better curious those Or financing something are maybe

that Just for you come to curious how conclusion.

Mark Brugger

we going lot is are Yes. of substantially. new projects. of to to development. that There One, on a looking parsing at circled Obviously the in a and the on going it’s the couple everything ground time spent But numbers is that so curtail curtail through the all happen, are projects, that things have going really a the red Manhattan development obviously going lenders financed. to it’s lot

use. has the other the highest cost FAR, that’s of going made hotels not lot on the and for The these a thing the sites sites is on now best

play the for think given So that the of just for the that them. and out stage are XXXX some happen we economics don’t XXXX planning in won’t hotels

think going So we to it’s curtail.

XXXX it’s not and XXXX. in XXXX relatively as we send wrong next in Also XXXX market will the be better will it into through despite in there. underperforming let’s will We we XXXX; think pushed could get generally in message But it XXXX. XXXX, year we think think an things think we things we additions about do the move better do feel stabilize. stable Now but be much

Sean Mahoney

to And add Rich, one quick comment that. to

look XXXX that you demand in a fact from healthy the when outperformed that significant just York at think the as year that to the with speaks there, has it’s how It demand to this that. is the and a pretty City year standpoint expectations able of New well. market been market out supply demand our I withstand drivers comes diverse the

market. XXXX And so, is into our those in and demand trends hope that the continue XXXX

Rich Hightower

is Okay, there a there then New that. have to in years. been Courtyard. The contract talk as Can respect that changes helpful, I past more few those color something Marriott been whether that’s and with more for talking I issues a I or guess York personnel to manager manager, – maybe bit I it the know New more appreciate that as – it’s general? that. with or the in sticking at a asset about with specifically little over you specifically know York Just guys. fundamental were whether of second. a on little just

Mark Brugger

Yes.

just So, at those of to The really hotel that for a from behind managed up freeing know, Courtyard, recently. that rationale Marriott don’t the the was ultimate a we hotel hotel converted franchised The exit value the hotel.

hurt asset. a the had Marriott, fee, which the on exit XX% think we value their agreement, also management management in Additionally, incentive

that – by switch value asset. improved we but the doing the we it job, So, NAV a Marriott of thought and the making the good exit not wasn’t thought

that the really big was that making So change. behind motivating force

Rich Hightower

Can management And layer to agreement Can the then old and the color new franchise you provide any as step will contract that. out give that? changed of contract? on the economics a overall after versus you you how the in specifics I as queue any

Mark Brugger

Sure, Rich.

did by are that those you are when line. of detailed Marriott the bear go costs of away Many a costs and when system. we franchise. you a you go in There analysis distributor bunch So, line managed

off is and Marriott managed. particular at franchise under net-net better hotel this think NOI So, as the the we

union profitability. hotel did the up become at they will those year, certainly Now impact ramp so costs this future the will property and

Rich Hightower

Mark. Thanks

Operator

from next comes with Capital. question And Austin you. KeyBanc our line the of Thank Wurschmidt

open. is line Your

Austin Wurschmidt

Hi, morning. good

question are your about exposure you last moderate, that et to to starting market given of on to growth some cetera? supply tagging remaining talked strong, growth the of kind evaluating Just or about how you dynamics that thinking this longer-term there, with demand are

Mark Brugger

think probably that We feel think the York depending the we good some that’s over years New really next New exposure place we measure next we’ll about the very get to so over XX% five as growth In good you see how years, we be. a through about wave. it. York supply good And five we are

Austin Wurschmidt

at I look that you you where provide what’s this there you the when side? seeing Any would citywides is on year? that driving, – guess, are And you I leisure seeing growth? that demand be it referenced, growth it X% you Are increased more can mean, color helpful. business transient, Is

Mark Brugger

our back are little a business very a with down that we York. New limited has hotels. fill bit. to seeing has been transient International switched good It’s easily we’ve But at hard very our portfolio. in little. Leisure able Obviously been is

coming not international demand, business and more from it’s really leisure the from but it’s traveler. So, domestic the transient coming

Austin Wurschmidt

for the seeing trends how different in South the color prior the winter, the at of as hurricanes? destination, there. than you noticeably up And a shape anything guess Thanks And Florida aftermath leisure into for you years? look then booking I are

Tom Healy

This a is had West the actually group amount in-the-month in-the-quarter benefitted for-the-quarter results Key light fair damage. to for-the-month, to we’ve and and pretty hurricane with activity obviously a due Florida had and Tom Healy. of due Booking We strong the Lauderdale Fort power. pace, the in side

about the we XXXX stuff into to and has we pace of up demand is And that. feel would that significant perform and are we transient Southern expect we see we activity indicators shifts positive. – in Fort been rooms. and Lauderdale, the go positive looking group normally expect see group think rooms transient the I be is increases We coming Florida, Caribbean there to to

So fairly perform Florida next we year. that are should decently confident

Austin Wurschmidt

those the you the or in worrisome on saw that that’s last several anything side for months markets? cancellation Anything

Tom Healy

some group Fort seen changes cancellations for or There not said, like We’ve year. up I we in are behavior new changes really think been in market. There Florida. the X,XXX hotels hotels coming Lauderdale into I next we we positive feel are But no have out where changes. – any and the some market rooms about overall coming of are pretty about in or

Sean Mahoney

going pretty half for overall the comfortable for right we were with activity. actually year been Austin, our And increased about year a sits feel psychology for the X%, about for now. it’s for-the-quarter up lowest cancellations increase Couple on the feel quarter two , setup. the was where group that and group which portfolio only good and the in-the-quarter years, pretty in-the-quarter We next and with so

Austin Wurschmidt

leisure that Thanks, the you these me you hotels, rate exit type or – can some versus a New York the how for underwrite City risk last detail. cap from on then just what asset Sean. underwrite you market? major I underwrite Sedona one appreciate of other And more destination type do as

Mark Brugger

depends It the location. on

Sedona. So take we will

think a we large institutional has Sedona quality buyers. pool of So,

the different; of rate the So, it’s buyers. not is pool cap just

the the Chinese-based You’re going get not probably investor Sedona. to buying

the might, to necessarily. different cap the of rate expect we but not would You buyers pool but be

Austin Wurschmidt

for thanks the time. Okay,

Operator

you. from Thank of comes with our And line Scholes Patrick the next SunTrust.

open. is line Your

Patrick Scholes

about good for pace I talked you morning. clarification an Thank group this that of next comparison? but Hi Is you taking noted for of wanted year. talk call conference about your flat. call. point previous apples-to-apples I remaining just as pace XXXX when you group call on my a the it’s positive,

Sean Mahoney

West and those It within is not numbers. Frenchman’s at because last Patrick, included quarter, we Key Inn Reef

was last Reef quarter, up last XXXX as Frenchman’s pace which was dramatic a quarter mentioned, under a little driver of of XX%. As Mark our

for couple we activity a where was quarter we up booked we improved basis for is sequentially the in the was on hundred that which So, quarter-to-quarter. are XXXX our what from comparing this booking that third quarter XXXX points pace apples-to-apples in XX%. And

Patrick Scholes

you or exit stay what Marriott to just It value. get clarification. New market on termination you something but pretty here? trying a in thank – looking second you’re of Okay, fees on – want some bullish out the sounds to a clarification. then in order to York increase out understand this paid like for you City, I’m to And to is question you’re

Sean Mahoney

it key was – Patrick, preopening which million the as some – money $X.X about adjustment actually majority transition. actually was we costs severance gained the The key off related this deal, recognition non-cash as with – employee a But for well the of Sean was started of of from that off costs received again. is that we XXXX. money by will, to the if was you for got right change the vast associated offset in it we Courtyard The that some write the gain, when

Mark Brugger

Mark. is This

So portfolio with We given I size right in strategy. our New overall allocation representation the think guess our it’s York. representation we are pleased

we which what Midtown for our in like East the long-term. market. the and But are the for everything in portfolio in we Obviously supply we we entire New a So, sale has York price. the at locations, growth concentration is particularly our lowest have in like

Patrick Scholes

Okay, clarification again. thank you for the

Operator

the our And come you. question from next Thank Crow James. Raymond line of with Bill

Your line is open.

Bill Crow

Great, thanks. Good morning guys.

increased First was whether negative wondering particular you’re question, in the just I hotel challenges having talking this at level. hotel. earnings We Kimpton. commentary that about season earlier management some changes at on heard

Mark Brugger

hotel There some discussions overall Beach. Kimpton No, so good one the that. in Kimpton been the Shorebreak pleased our around performance have they’ve think structure been doing with is to trying Kimpton and there at how larger are one integrated with a But there. Kimpton job has we’re Huntington ongoing are they’re And of good into doing what discussions our there. we property, about with it company. the We

Bill Crow

Could targets, San four increase in we time you were market. different where stands? on Francisco looking talked pipeline update one an Last I think including your at would Great. give acquisition the the presence you or three us that

Mark Brugger

don’t We announce anything right now. Sure. to have

We are one very which looking are of Francisco, two destination small several of at locations. resorts in is smaller in desirable which San acquisitions,

We those our don’t like but So, work come continue know of will if hard looks we pipeline deals what them. fruition, today. that’s on to to any

that’s the stuff just in remarks, of in a on to deals. it. much broadly and As not there’s I prepared mentioned, the great wall marketed really that capital compete it’s chasing There’s hard the market

to to be So those additive shareholder deals able aren’t be value going for to DiamondRock.

yet that’s is strategy. Or in discovered everyone some we different uncover are it’s working add unique really we that or either market great attributes else value have that Sedona something bit So, little and a bucket. hasn’t hard got a where very

Bill Crow

side to exploiting your if of selling the Is bid now what other assets assets? a feels for market and portfolio. fair non-core Mark, what’s switch maybe your right the side, in disposition thoughts that are good I the things, in about there pretty like there’s still longer-term

Mark Brugger

question. a Yes, great that’s

We have that be dialogue regularly looking internally. By definition there’s always a bottom monetizing. XX% of should a at portfolio you

I long not is that sold we were million perspective deals $XXX now think ago our too non-core. right of

sitting cash. over are million $XXX We of on

that. more will We year with than end probably the

just thing So, capacity acquisitions right more interesting – right more until monetizing a to stuff now. maybe And like to us for is have pipeline make deals of we start acquisition lot for that little feel the do until we probably the we us. not finding sense do bit probably a gets

Bill Crow

Yes, fair enough.

Is and Key you a basically get could better than come some possible Finally key a from be into would quickie. that The Inn otherwise? turn West you money out brand, me it at

Mark Brugger

So, think it a market answer brand, don’t that value creates enough could the that is be the to the we cost. but in for on brand pay

now we Plan are right make on boutique the A it a is operation. working So, unique higher-end to

some think are doing. the working into are put are of was a themes lift and down fire we and they manager, partner, independents really on real Properties they considerably going we to They features our Ocean know So operate where it, that. rate kind and we money can concept, is our terrific it new all pre-hurricane. several We there. what

that can help confidence that us execute on they strategy. have we So,

Bill Crow

time. That’s Perfect. it for me, thanks your for

Operator

of our from you. with And come Thank next Street Green Lukas Advisors. the Hartwich line question

Your open. line is

David Bragg

in this that the about all as you natural �� Lukas quick in on to then half, stand one, the XXXX David second disruption comps? quarters the think half This disaster for that XXXX, allow expect there the modeling first and had we easier any A are out morning. renovation some impact given you is of maybe

Sean Mahoney

this David, is Sean. Hi

occupancy hundred significant of in think couple portfolio within with had we the our the first renovations going through we certainly that April. on I basis points a disruption really quarter had

because would was expect occupancy all So back you up pick to that it disruption.

a been quarter the Key correctly reopened was so disasters the of portion a expect And quarter. that $X.X a natural you will fourth certainly through as that The that natural of get stated, million not the be into the back. the first West hotels to disaster Inn comfortable then, million back disruption. basis feel relative as to certainly be the in then, disruption, expect we we we as But were back we piece but impacted on of would quarter by at Obviously pretty XXXX, by So Reef third $X a feel have Frenchman’s with. getting well back about

David Bragg

last just on Okay, the ramp one, hotel but you hotel regarding how take ones, for it two Maybe typically that’s again. after generally expectations changes long just helpful. up replace the to the does to recent a speaking then guys’ not manager manager? And your

Mark Brugger

guess I so Yes, everyone’s different.

independent took up went within we the a rate experience put and the Manhattan had on an Courtyard it we’ve So and in past the where month. a in $XX

we hotel XXXX Viceroy in in over expect chase putting a we going We it in a the Rex don’t the bring to expect take ramp. that itself significant renovation expect we that we’re always significant I’ll and difference there in San really with post manager So well-known we XXXX. short-term. there, short-term, quality segments to operating but took me and relatively going and example. changes brands in We and it’s to the they performance Francisco the a don’t renovate we change took When racks that make be management. in up in another quick a change in are branded the the to are outperformance material

in managers trajectory when expect change the is but nuanced, a the bit So, you little things term. it we change that shouldn’t short

David Bragg

thanks, All right, guys.

Operator

you. come Thomas next with And Allen from question line our Stanley. Thank of Morgan

line Your is open.

Thomas Allen

good Hi morning.

and you? outlook major You you give another gave Boston, some some Chicago market helpful your New color Can just for around York. color for on more it’s Thanks.

Mark Brugger

year next that’s Citywides an market. a be performing okay Boston a so going Yes, We to little down be to so expectations for bit. are okay have going Boston for is high year. don’t XXXX,

Sean Mahoney

the pace in our is down market about specifically X%, And Thomas.

that next difference up okay perform make business expect and we of some year. in Now for to Boston transient

averages. And next slight year. so, a about be laggard becomes positive to a citywide group relative it’s the think RevPAR And averages slightly going all we still hoping it’s national But Boston we are activity. the market to national that to and

Thomas Allen

that level your And consensus business set said just numbers. you to interruption XXXX earlier in going then to including helpful. expectations, you were reassess Okay,

shouldn’t our from so EBITDA – is you that Reef So next expectations? think Do out whatever should all that quarter of to comparable assume you we guide take Frenchman’s us. we

Mark Brugger

when about I as come are payments would We conclusion on do we don’t tell in to Ideally working could before, with mentioned we question. of we a the we have agreement difficult February. for and Yes, that just an we insurers preliminary that’s – a in you guidance stages, that. interim the XXXX insurers with

to clarity give So, exactly how great it. on treat I can’t you

of if think put you an view in gives probably the there I don’t companies. anything inaccurate of the that performance

So, what and we’ll to that would the where to I continue be. the with talk claim right we to about think insurance way have are model

Sean Mahoney

present because numbers And data. have historical actual you we hotel-by-hotel Thomas,

And – to look at think that. a We better so XXXX to historically. base for modeling XXXX a better than would XXXX fine to basis any much purposes year to will probably and that’s some was XXXX supposed that expect model. obviously for be for be hotel what the than did base good XXXX you as least XXXX. be at was But I have as

Thomas Allen

was it XXXX. Reef you should adjusted have we in get $XX EBITDA don’t just add unfairly back in Frenchman’s So, to we assume penalized made, that maybe million would’ve assumed I to what think around

doesn’t So a massive EBITDA. it show your decline in

Mark Brugger

That is probably representation. fairest the

Sean Mahoney

we the on number continue and as get will sensitive each just more proceeds insurance will we providing business have present too companies. interruption guidance a obviously detail quarter, on interruption And with much a to the Thomas, we get, business we in when market. February. color that subsequent more because We as involving it update are is on But that, we negotiation we dialogue color very

Thomas Allen

bye. against You Understood, to don’t negotiate thank yourselves. Good you. want

Operator

And next you. line Thank our question with of from the Barclays. Powell is Anthony

open. is line Your

Anthony Powell

good Hi, guys. morning

Marriott if missed structures. the seeing to Starwood same your their see of Are of in one I starting Sorry you they but thing? some early the mentioned benefits cost were this, peers merger

Mark Brugger

So will a through it we as as go as that We neutral. XXXX with some cost they number the bigger much expect budgets this for a have I cost Boston they would now we rebid have – over I spread and know savings the for their seeing contracts year a cost that properties. we in reduced platform. net are Boston a in of base larger at think all they

start some to seeing big yet, but cost. some some small So, we would real in benefits. are say of expectations see benefits shared XXXX we wouldn’t starting our the I are in cost reductions

Anthony Powell

Many agents. Got Street’s are or any but expectations. I’m OTA OTAs it, quarter? that it not booking you on the next what’s seeing in slowdown below in the reported thanks. major have And the portfolio your below is were – online penetration over expectations there, their on my of past of question seems going quarters travel sure three

Tom Healy

No.

market-by-market Obviously haven’t different. case-by-case, it’s do it’s an really mix to expensive direct prefer we brand channel can be pretty that. And is it But think when it’s to we consistent. demand. going we and hotels, I avoid brand go using versus seen the a and in unbranded slowdown

Sean Mahoney

Anthony; our it and And comes it’s of relatively hotel. business small the it’s chunk XX% our be for OTAs tends business, shoulder periods need and about a the total of from to during seasons

Anthony Powell

what more Got XXXX? in is pace thanks. And up relative one Chicago, it, to XXXX the citywide time

Sean Mahoney

Chicago portfolio our impact for we combined pace hotels. on our for in consider up mid-teens the citywides XX% pace and the what is is So, up

Anthony Powell

for it Thank you. me. That’s Great.

Operator

Thank Shaun our Kelley the is you. America. next Bank question with And of of line from

Your line is open.

Shaun Kelley

been my but one touched I one. or think on, most of just big high have questions level picture

minute joined I for across your for you sorry, weighted this in looking prepared But XXXX? just a on you at are If late. supply portfolio what remarks, the hit average in or guys the markets growth

Sean Mahoney

what we have the average is growth within our weighted X.X% as portfolio. So, XXXX supply

Shaun Kelley

in I York? gave New but… you about And Sean. that, for assumption it, when talking maybe jumped so Thanks, what’s somebody was right already your know I

Sean Mahoney

are York assuming we supply next So, about year. are we X% New

Shaun Kelley

anywhere about heard bunch of for are Manhattan something you last slippage, for And differ think estimates there that? York, granted that can to varying from that these But X% lot of a or that submarket you I’ve is people MSA. you heard think We’ve when – potential and or Because of a number, just New ranging calculating question. or X.X. number we’ve again, is how by have heard numbers a X

Mark Brugger

from you stuff this remember, year know opening well. end That’s impact into of year. always at as to to that is slip the what’s But up get hard we next going

basis appropriate baseline. this demand been think We has Sure. slip have XXX Could – year we City think year we So in York will still New But year. X.X% another we the six demand that’s good is a it well. think baseline. I good points? as think And next

Shaun Kelley

it. Got

guidance you’re Maybe demand cautious on from put the guys to year. outlook the before on trying what be the year this right outlook And started seeing so, as give your York. New now to think in that tailwinds – appropriate is when just for quite about do, need outlook, make not doesn’t you you and we it next but side? guidance based pretty out you Again, cautious

Mark Brugger

Yes, it’s tough.

days reviews the to York the and in of New walking going We’re budget two market. be next

XXXX. opinion So to I we York are still we’ll expect an market in on But XXXX. literally underperforming say have the constructive New week. a we a that supply better more given would into we certainly than were going be in

Shaun Kelley

Perfect. lot, guys. Thanks a

Operator

Stephen Sachs. Thank you. with of question And Grambling our next the is line Goldman from

Your line is open.

Stephen Grambling

in year on comments missed Maybe anything you Thanks. Two remarks have and I that would prepared what and can this, follow-ups. projects this but your both large little these I guess you planned for first next there entail detail more could a were capital year? number asset opportunities. of about provide I additional think management a

Mark Brugger

capital to large XXXX. in So the remarks we prepared earlier projects the the referred six to reference completed projects in

obviously. are some capital there we as evaluate Now other XXXX projects

rooms major a capital last looking budgeting But going to the And next in at ballroom Fort significant are are Marriott redo the through to other we chunk renovation process and projects Vail, XX the XX potential we’re rooms. fairly some Chicago Lauderdale at the complete looking We going we and in Weston project. over That’s properties. of then are days.

XXXX ones about or XXXX sense get out we’ll pushed may to So XXXX. talk for which make which and

will we give So call next be earnings to obviously more about that. the able on color you

Stephen Grambling

be quick those dependent market? you’re I follow-up plans the what that are just on acquisition in And how on one would guess seeing

Mark Brugger

They are independent.

find we best evaluate risky are make existing have within opportunities can those into because time assets. understand we the the investments them investment They hotels. find obviously are we normally we least And and the had the So the to best best.

not it’s or. either So

versus is balance they powder, our we we of so not million mutually in sheet capacity exclusive. dry have are portfolio, the into constrained the capital $XXX that not are existing talk now. about assuming continue we When invest to that We significantly our

Stephen Grambling

then on the the follow-up And OTAs. other just

change seeing or sourcing basis. unbranded Are You case-by-case mentioned growth properties? that the versus you is in in OTA a branded performance any

Mark Brugger

too brand are They to OTAs cost answer. are year. coming we say give to think lower our initiatives channels. are is would of I I play with of by portfolio curtail that accurate industry-wide small ones an the actually encouraged replace a that the next pursuing strategies the new over a there’s number and you actively and into number

of But So within significant into a haven’t encouraged that. the I portfolio. branded we size industry we in portfolio. small trend But independents the that or the seen wouldn’t by our again, an shift our are either given extrapolate

Stephen Grambling

Thanks so enough. Fair much.

Operator

Thank the you. Bellisario question And our Michael comes from last with Baird.

line is Your open.

Michael Bellisario

questions. thanks for Good morning my guys, taking

markets broadly more but Just strategy really lift or comment driving continued made. any more asset up you your maybe strength you wanted Chicago, other know of result to assets the focus secondarily, it of this group on the kind then is of group market-based? is this? I mentioned or And

Sean Mahoney

broad for quarter So pickup Mike, based was portfolio. the in our pretty XXXX across our third much

that pretty the in mentioned I we strong again prepared as fourth-quarter had was once that pickup. pickup, third-quarter us. pickup was remarks, XXXX our was XX% as was Our Within up XXXX we pace strongest hotel a for at was the coming third consistent, for period Marriott under actually Chicago pretty little picked strong anyway. $X and at where quarter off during that million up pickup the booking that business a of our a

once or had more the to happy that our we an more be of pickup third-quarter – feel but well. pretty are When of frankly our outperformance industry And lot nice the a and so, were down think we the the that’s into more it’s pickup comfortable pickup, of of XXXX. when good function indicator our share indicator X.X% portfolio couldn’t the drove the in we groups We psychology a within up a it’s again, that And XXXX getting more be think the for we material healthier pickup portfolio. it. fair group is really we across of X% as group fact short-term pretty the our booking and way we more and get pickup

Michael Bellisario

versus then was October your expectations guidance helpful. range? big That’s that there, RevPAR just implied how And prior on print the much above

Sean Mahoney

within by outperformed range points. our So expectations our XXX about – it basis

Michael Bellisario

me. from all That’s Thanks.

Operator

Thank the you. to Mark his turn ladies gentlemen, for And, I remarks. and to like final the would concludes this Q&A call session. Brugger

Mark Brugger

appreciate you, year to updating on call. To your this with DiamondRock forward on everyone quarter results look full we continued call, the Carmen. our in Thank fourth next you and and interest

Operator

And, and that gentlemen, our with we conference. ladies conclude today’s

disconnect. may Have You all wonderful a day.

DiamondRock Hospitality (DRH) 7 Nov 172017 Q3 Earnings call transcript