DRH - Earnings call transcript Q2 2019 | DiamondRock Hospitality Company

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Operator

Good day, ladies and gentlemen. Welcome to the Second Quarter 2019 DiamondRock Hospitality Company Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

introduce President for and to Quinn, call, like Vice Senior Treasurer. would your today's host Briony I Please go ahead.

Briony Quinn

webcast. Thank you, quarter and second welcome to Jorinda. Good morning, XXXX everyone earnings and DiamondRock's call

everyone Before that today we considered under statements securities forward-looking like begin, to are many the comments I'd of made laws. federal remind

materially with comments SEC, uncertainties future cause that statements in from implied subject our are differ by those described As the to our today. could results filings these numerous and to risks

we call, reconciliation today's in In discuss to certain most A on addition, press GAAP found information. financial will can of the release. non-GAAP our earnings be information this financial directly comparable measures

for Brugger, on our balance XXXX will our Mark Chief and sheet. provide morning, our Executive results, commentary quarter Officer, outlook and This second discuss President revised our

open his line we Following for will the remarks, questions.

that, pleased With Mark. call over the to turn am to I

Mark Brugger

thank morning, the and continued DiamondRock supply in the your everyone, joining to neared new Good grow appreciate overall continued and us. industry We equilibrium. demand interest quarter industry as modestly The you story. hotel for lodge second in

group the and portfolio, skills quarter, temporary through. good the and in capital of decisions environment asset our current allocation offset believe traveler. It spend cautious come our the a is this helped resilient growth we management team that a quality In of more that consumer business our the benefits of

basis in RevPAR at line XXX average increased the grew slightly XX of RevPAR were our portfolio the basis was as million, Overall, EBITDA second the $XX.X substantially with which markets. outperformed in Portfolio pleased for came of results X.X%, points. we by XX and And national internal points quarter ahead share top growth market the with expectations. adjusted

we streams in they Total X.X% trend grew RevPAR, bright our continued which in as of customers services the spot includes was once the were it more a buying the quarter in second by positive revenue saw This prior outside of quarter. rooms, other just hotels. also

remains outperformed that our resorts with X.X%. which double-digit resort L'Auberge outperform. trends up Cabana from Marriott, growth travel resorts RevPAR healthy impressive all Vail the and with strong in to supports This of Sedona West, Havana consumer Key experience had and Particularly likely came performance RevPAR Our increases. the that observation de are

Boston our combined was quarter. terrific growth the an market Boston there by X.X%, With XXX generating hotels in our RevPAR hotels already-robust points. basis of outperformed

in market another the market delivered in was hotels two strong RevPAR Phoenix second the Our combined for San good Francisco growth of quarter. us. also X.X%

the the market as As the X.X% conditions initiatives positive fruits turned there we last with Kimpton a growth Palomar hotel year. result RevPAR combined of of in asset management implemented

saw performance hotels also good relative City they XXX in and their basis markets and New points, Chicago our respectively. by from XXX We as points basis RevPAR York outperformed

with most our declining an City Salt was X.X% the in expected, Lake quarter citywide off from As RevPAR market difficult convention calendar.

there often headquarters a Salt essentially its hotel convention convention for Our the and hotel the at correlates is with Palace. bookings center, performance

the quarter. City a RevPAR in our a result D.C. citywide less X.X% Similarly, of Center as contraction Westin Hotel market was difficult and activity experienced

in Cherry Marriott a as high-end the supply Creek JW Finally, of Denver new underperformed result submarkets. the

this expect quarters. is few the the over We next better supply to when hotel absorbed new perform

room outside it Group the in what is segmentation, that by in But type about points. segment growth the quarter right the just the portfolio X% the was kind The Groups was that is and at looking generated Transient in up of And basis Group. the increased quarter, spend. segment XX.X% XX interesting of Group the

at our RevPAR This revenue X.X%. Boston management's growth great total powerfully Downtown our continued The which combined rooms These story for a strategies. of collectively revenue results was Waterfront, Worthington, which Let's strong positive growth be X.X%, asset the largest illustrated of little of three the Chicago Marriott Westin into for delve growth in continues to non-rooms portfolio, outsized just deeper revenue had the DiamondRock. a and successful despite The represent of execution hotels:

Of impressively XX XX.XX%. the EBITDA a hotel in Profit points ultimately margins EBITDA enabled adjusted growth expanded it profits. of to quarter profit Portfolio basis is course, same-store healthy about X.X%. growth

and you can proud imagine, grow to are As extremely we modest even RevPAR profits a in NAV environment.

work is our with driven our results. team's testament profit I to it management think real to closely deliver a asset operators ability to

quarter the with renovations. capital success pleased to of the $XX.X our our our hotels million program, Turning into we and invested in recent are

earlier on executing Day are the at year. of many that this projects our Investor We were identified

The in the few. just last ramps XX% me as up. it repositioned year, West a generated Let almost on quarter Havana Cabana Key growth touch RevPAR

other number Customers XXX hotels in San month, Viceroy the Travel the three last by three repositioning resort The was Emblem earlier it and number love this & just Francisco. this in now in than Francisco year of higher any Florida repositioning. Leisure. on completed hotels named ranks TripAdvisor, was market Viceroy And San

with West a being that is center, Spa expansion. These component and Key that help lifestyle to repositioned key its Suites Vail up underway outcome. ultimately are branding just ROI drive Sheraton among hotel, underway a similar NAV to of construction Marriott the DiamondRock $X currently examples new resort. within a a and projects expect can numerous portfolio few Fitness the we is and The The renovated great million

the of of well fantastic looks is aware, is largest and the Frenchman’s capital rebuilding The undertaking in you our most As design underway. Virgin U.S. construction the Reef are Islands. the resort

reopen in We expect to resort XXXX. the

collect amount While in received go U.S. to January we Virgin Islands $XXX to trial claim company our XXXX. full we in expect insurance and have the are with in litigation million already of in to insurance proceeds, the the

project million entire stabilization. and that is very excited to generate me its upon this the about Let team add EBITDA just $XX ability ultimately of

new facility loans, as ended Subsequent million expanded which the proceeds off debt-to-EBITDA Turning a XX-month well of X.Xx. the and including in million to primarily The million of sheet. $XXX term were in term financings, pay to the credit quarter Company of end used a the Company $XXX with the ratio existing balance to loans. $XXX trailing quarter, completed as

our it expense, it future. DiamondRock our years, think our investments. accomplish reduced for well opportunistic What We position for us? the that did increased and extended this for five interest financing extensions moves these dry another including powder activity Well, it for maturities

Speaking of some capacity, we investment use pullback of take to capacity and the the that market. of advantage opportunistic stock be in

since XX% average of the of has the of start shares of of has internal NAV the estimates. which is repurchased midpoint worth the December, our In of plus company have a an stock share, company X.X per believe authorization. last repurchased noting on its we million million million Since of price to tremendous remaining second $X.XX value, common XXXX, our the quarter its total, discount we It's at stock. shares X.X common capacity board still over that well a $XXX

growth As business points year. by by will full-year at RevPAR the of we look that the second the and we've experienced midpoint Accordingly, the for the persist forward, transient quarter comparable XX at adjusted trends basis million the full-year midpoint. $X.X we in guidance reducing modest expectations now adjusted expect balance guidance, EBITDA

reflect FFO expense shares through financing allocation increased full-year expectations by to share. $X.XX share the offsetting well able repurchase capital to activities. adjusted as more adjusted decisions our Updated raise per were of share was than benefits per reduce to FFO interest as for guidance we per Fortunately, to

displacement to X.X%; X.X%; to as RevPAR X.X% of EBITDA million; now be year's in The benefit to per profit RevPAR up impact. follows: and $X of XXXX XXXX last million full-year growth of share for renovations at results $X.XX. comp total strike expects of Westin easy union will growth The to to adjusted adjusted FFO million from the of Company $X.XX less $XXX back and $XXX an half flat to Boston

the The still of has more booking did basis on have the excellent, quarter. pace quarter Even work some been for good bookings Group want points fourth a for XXXX last since the increasing trends. back our half from QX Before XXX up, to increasing in momentum call. Group were with spend do we the XXX wrapping I impressively, for basis XXXX. second minute points Albeit, to the

over up XXXX XX%. Now is revenue Group pacing

markets, most calendars. important Chicago, Boston XXXX and two strong have group Our convention

and next over In fact, are Boston over next they're pacing combined Chicago pacing our for year, our for XX% while up XX% year. hotels up hotels

now Now questions any Operator? be glad note, to on you take might have. we'd that

Operator

Evercore first [Operator Rich comes Our question from from ISI. Hightower Instructions]

Your open. line is

Richard Hightower

morning, guys. good Hey,

Mark Brugger

Good morning.

Richard Hightower

two Mark, categories of seeing business consistently think would we're softness out I the there be pair future the what a to do the expect should think trends. in want spend to the moment? to room Or demand transient is of that you play segment side some maybe that we dig the little across And versus we're bit do that in Or two you lag those to maybe And trends? pretty unrelated? in between trying the effect seeing driving strength divergence maybe a in out up are quarters? non-room at the that maybe

Mark Brugger

that versus different we've of spend for consulting two KPMG we're is steak our at group behaviors. that seeing when pharma have spending whether hotel, the and more XL, dinner. the seen get going hotel, to our the It's more. more to it's are dinner trying the they pick running year-to-date financials, or some or to are groups what the They the more Yes. AV. spend they are chicken bars. We're that to or groups The coming But we

with the second be trend year-to-date. stronger that hoped than transient it trend, business it's to than but which that positive So the quarter, was that growing, at a and it's different seeing through grow is we're would X%. We'd what growing little continued

unexpected divergence It's going little so headlines more cautious wars. be the And a not on there a the transient is and there. business the with that trade given bit will what's

always was macro we a which a bit is basis little spend, down nonresidential corollary, the recently. And on investment watch

is that through that. trends into we business the more for of is modest persist the next what things in into hope on growth transient, saw, But to move noise, the the the revised Now moved year. the that balance of improve and guidance particularly kind year, we've we the we as built

Richard Hightower

second then Okay. Mark. question. I my And appreciate that, maybe

in and comparing Looking were price or change here, to at year-to-date so and period. stock that repurchases where the $X.XX made the

capital incremental would repurchases factor into your where grid? allocation wondering from Just here

And terms of hard use that the an capital, thinking be hotel assets, also attractive of barring just in extraordinary out landscape seems there today. about circumstance would believe an to acquisition that, it

context? that would in for And maybe so just appetite wondering repurchases the share additional be what

Mark Brugger

we're cap Sure. first NAV, The published to question. we've early in robust. markets. seen It's The on year. continued indicate in confident that three estimates great our I'd about the private four remain market very, very the last private that NAV months transactions strength or this a great rates we January, still say, over

transactions. we We any good and a the feel have go we good we sure about make private those look good. market marketplace, handle to back, and in regularly at So on fairly changes feel

in do repurchased been said on mean X.X I couple as the prepared million repurchases, no $XXX ago. a for a we've value. as it. million market really authorization board as tremendous We've stock stock is around the in recently There remarks, that at these to is and already other left On way levels we of think shares. is shares, I look weeks our there

the tremendous is value where generally you I as it's tipped focused tell opportunities. allocation traditionally repurchases. board they're hasn't However, that our hand future stock and But see can and the today, on company capital to does

Richard Hightower

Okay. Thanks, Mark.

Operator

from Rose Our Smedes comes from next question Citi.

is line open. Your

Cameron Hughes

Hughes as it for is entirely Or Smedes. related In construction This proceeds behalf related well? regards Hi. and of dispute interruption? a is to it insurance is portion to business Cameron to Reef, Frenchman’s on

Mark Brugger

to related Cameron, It's this is Mark. both.

we paid. a they disputing have not in, So they're amount claim haven't that entire the and

us paid far. they've $XXX so So million

have claim We expenses. that property as both and well business interruption ongoing includes a as

dispute you What standard the does code of what do in call are, hotel? need to some the And for? rebuild current topics

that's For of that's to instance, calls a built have the that have calls the will they're we getting believe right that's what jury facts to disputing it believe hurricane-resistant and or what like requires, very what's building, and that law agreement that. And on and is we interpretation ultimately to code that we'll decide. it for the and come

Cameron Hughes

I Chicago. you could pace. in your pace, shaping And that prepared group if wondering was up those the in in Boston particularly how And about remarks, you group Great. calendar provide is on some convention detail and markets? talked then,

Mark Brugger

going We're outperform So – group's we expect Chicago. markets. to outperform tremendous and those for us in Boston those to

in the we XXXX may in for both with as issues While underperformed markets you in year, are citywides next merger recall, Boston. good

So to run. we room more have

to us our group but there XXXX. fortunately or outperform So allow the is compared Boston unfortunately, rest the should comp to of easy, market side the on in it in

Chicago has calendar got a into year. good convention going next

of lobby, the meeting million year. piece a was We ago, also months online renovation. couple recently just within the completed The our all of which and last came redid $XXX last space we

gain mentioned share that we're have hotel, We're gaining next as nice set really move would we share, market to and as expect I particularly and up, gaining earlier. we market side share, group the into to market we a So with continue on year.

Cameron Hughes

you. Thank

Operator

question comes from Thomas next Allen from Our Morgan Stanley.

line open. Your is

Thomas Allen

morning. good Hi,

mean transactions. So I hotels here? more on what's your first to question Thank appetite you. buy

Mark Brugger

morning, Thomas. Good

So can the – always and we're we're public markets I say always things. a at monitoring as company, looking

where special it deals to acquisition that's do opportunity. next could the we synergistic, versus located value think now. opportunity is and one of of stock tough would have G&A where But to to back an today, It really may be most a a the price the given it's to an justify. do make ours There hotel out be accretive. it's I small our relative may that be stock, of to tough

I the way to it. relatively new at is a high there would right So hurdle to think look be acquisitions

Thomas Allen

then And demand the environment. just question, Helpful. around second

nervous why You me is when your time, corporates out really booking further – you It trends like, soft, bookings seems for highlight economic they're of environment. a strong strong. counterintuitive period like what do and Can they're be the would the think demand long – basically? group is business about going which and me seems you to on but like are going out to

Mark Brugger

they it it. off is next our of year, a there of and Well, a Part lot convention year. were takes lot calendars puts this to and of citywide markets is, flip

the it citywides. the strength of So of is some just

Boston, convention the line think if the stronger D.C., markets up. about three Chicago are for and So you citywides they're very way this and look calendars year in and are XXXX, at those just they softer us, much you important

one a know, it They're may three pattern San And and rotate you favorable Orlando, groups one year; cycles, for Diego, year; in us. year. be or lot just in four-year Chicago, As of it more kind syncing these up one of a happens. on

the that's So helping numbers the and pace. overall

Thomas Allen

Do else you there going citywide on is calendars? think anything just beyond the

Mark Brugger

you have do Tom, anything add? to

Thomas Healy

are out. group that decisions think made the I further

has pretty you're So association and on, of pretty more the been some weekends layering that consistent. and corporate more been of drives strong business mix The short have but and consistent. group and is term,

the side, room think obviously on indicator increase, the nights seeing which I corporate volume is we're demand. of

more take demand, the room group citywide think that in said, there that's As I the Mark city, with less of is dynamic. transient to and part

how production part The the challenge going just of year-over-year. it rates, pricing and on maximize hotels. that is is side into our the The more other there you is and corporate in the do increasing the

sometime committing year XXXX. for You're for this probably in October rates September,

decisions the October, September, your year. what in volume corporate set you pricing make following So for

layered to with attention on heavily books, of And group other and pricing on maximizing we so focused really well. something channels good such to we're XXXX all for sure as a we're that's lot have – paying on the because want the we make

Thomas Allen

color. helpful you. a really That’s Thank

Mark Brugger

Thanks, Tom.

Operator

Bank. from Woronka Chris from comes Deutsche question next Our

open. is line Your

Chris Woronka

the softer? and How guys. you Hey. some into just I of fees other that room – group. point, points at topic want portfolio, a it then Good out resort what the maybe the this those year? to across get the to are when fees Mark, helpful spend much some bit happens helping of out we think not talk morning, and not you the thanks think on maybe drilldown little about, to fees for do the in data to we groups. always a but still And fun expand do all when

Mark Brugger

out. take kind of me this let So parse

transient. on one the going more particularly that difficult, business here the things is So with is of power that's pricing

asset a make So do can. think really group, we're gone in management really and group, dime in nickel has every the team to we've kind best business, path we and I a on asset philosophical the of management the Tom's getting everywhere sure

So find to not groups. are only more trying we profitable

We're bar is selling things similar and in sale. done which We there, to the the we've I lobby something relaunched. Chicago. Lexington, we in bars and increase the at have done F&B in every lobbies more redid lobby $X,XXX night mean

management gone any be to $XXX,XXX we found every a that concession which in participating And has So agreement can. way restaurant and they and to trying contract, calculating find reauditing asset could through we're had, try their we to the did in rent. over we opportunities team profit maximize Denver the every leased were

It versus a really be X%. can in and the chicken the nickels lease. cost, much auditing how in water and of getting lot food that with X% water making the a sure is chicken parking not dimes. watery It's releting It's we're

even back up valet it, So we not our to it's and RP trying parking out and renegotiate though and going have to contract due.

of a try to lot environment. a of is where really when opportunities concessions. strategy. is pushing There and we're That's management those lot There a difficult other it asset more those the pricing categories find rents is to

play So that you're seeing out.

As and value proposition require value. X:X X:X big real a to or your resort question fees there. about amenity chains The fees, there's

if $XX you to that be able value. worth had So need you're a delivering of prove to $XX you fee,

desk teams, headline actually – And number where trained value. a recently of of lawsuits. have win a win-win been lot that we that got one have and of think our a a was for in both well attorney D.C., front sides. There customers it's kind we general There

the And of is who are – but disclosure, or we it's whether they course, at good to good. from we one. day committed not And legal they're of disclosure. around big looking this We the in best the had course, and of think of this, lawyers not, of disclosure most are think course, charge brands they've

good feel So good we value the I about And experience. We feel right about proposition. about with feel the the we disclosure. good customer training, think

Chris Woronka

is it just, with some much their loyalists changes. at decisions, maybe But Do lot like uncertainty of the on some would some that. how side, then the guys it on think and you is do it just for of And is Or corporate of there agree, among kind things And that of Marriott right, of kind leisure of helpful. is you to any the that you noise? a transient in displeasure relates? – this Okay, factors recent of all? Bonvoy think this side the travel

Mark Brugger

still in we're and with. brand are job. we're programs. they changes, mean they families loyalty it think I do great But wasn't a best ability the We say number system, the Marriott We best size think the believers I it's big associated that think have We the clearly, properties, our into of would – Yes. – world There the Hilton to perfect. about don't the you of – that see seem happy. redeem in it's the perspective. when still they're from customers

and rewards Our on any brands related from the coming off seen the the from growing process been in redemption were portfolio. have of we're some to that that redeem so on will us in brands. rates contribution the that as and adjusted right, think but spots pains that points getting amount need impacted some I And pains fall into consistent, growing the particular has kind say, a had they've it I haven't we across in you point, hotels. we of contribution there

Chris Woronka

Thanks, Okay, very Mark. good.

Mark Brugger

Sure.

Operator

question from from Street comes next Green Our Advisors. Lukas Hartwich

line Your open. is

Lukas Hartwich

sorts just about a the setting When the the of the plans morning. cycle, DiamondRock internal remaining curious how Company potential of Good length of years, Thanks. next downturn thinks those things? its for I'm is few severity

Mark Brugger

planning. a lot we of Board, the lot of we and say, I a with would strategy run sensitivities Yes. do

hard to So know. it's

balance the a downturn planned for we think all times. at sheet I

So years. balance how environment next a on typical much we're of our business growth powder sheet dry kind for more have slow of manage scenarios, we about but downside on we couple always the capacity, thinking

Lukas Hartwich

Great. you. Thank

Operator

Capital comes Wurschmidt Austin Markets. KeyBanc Our next question from from

Your open. line is

Austin Wurschmidt

to buybacks your million dry late needing share before do around I that Hi. Good kind to available matter repurchase have the respect how powder for with $XXX your your consider having sell under everybody. comments Mark, of keeping the or availability planned. acquisitions And would you of to today morning, cycle, additional – guess in pursue much hotels? share dry you powder

Mark Brugger

Yes.

of think calculation, the I to of investment we balance Q&A, still just stress have test about run a balance in scenarios million strong we mentioned the kind So and sheet. $XXX capacity We by sheet our remaining as last position. in

sure amount value like decisions obviously, consider to are capital going for fair we have a allocation Now maximizing capacity of make different shareholders. we to we're where now. We feel we're

Austin Wurschmidt

to So the thresholds what guess is if of, that I leverage and terms were deploy in target? ply of $XXX million your upper you

Mark Brugger

bit we're little on a Frenchman’s Reef but successful assuming litigation, resolve how depends Jay? It we the there,

Jay Johnson

Jay. is this Austin,

Reef, at Xx Frenchman’s of Xx sort X.Xx think that's in way of remaining excluding the to cycle about The through bottom range. – like it is the the we the below of Assuming sort cycle. to

So of in kind that scenario, X.Xx. we're around

Austin Wurschmidt

more, for that guess then Thank Okay. you growth? you'd I highlight reduction that specific any the broad-based? And was markets in detail the there. Understood. RevPAR drove Or it

Mark Brugger

Well, terrific in San Phoenix, X%. and resorts the in were second had Francisco over overall growth area Boston, quarter, we

Lake those markets. were our most So York markets. those in Washington, New tougher while our star both Salt were D.C. happy we our Chicago with really and markets. a in little difficult markets. were City and both then We And did relative performance City of outperform

Austin Wurschmidt

fair So those reduction – in of latter what's assume two markets of is to it the biggest are two terms your RevPAR driving guidance? the the percentage that

Mark Brugger

back than really particular transient of markets. trend half for it's year business Well, balance about the the for the the the of more year,

kind we've a year, traveler I'd kind extrapolated perform. of more that of robust business X% grew And the and we for say, the the It would guidance. driver expectation beginning second year. the quarter, adjusted the at really So in transient throughout of to – had how out our that's had now portfolio, it. balance the of we're of the main seeing the And

Austin Wurschmidt

Thank thoughts. the Appreciate Okay. you.

Mark Brugger

Sure.

Operator

Mark back call further to Brugger remarks. closing showing this I'll turn time. questions I'm for no the at

Mark Brugger

very next look updating forward call, DiamondRock, you on the call. appreciate in everyone interest you we we To your our on really to Thank much. Good. and

Operator

the you in This concludes today's gentlemen, and thank Ladies conference. for participating program.

You may have disconnect, and a day. wonderful

DiamondRock Hospitality (DRH) 10 Aug 192019 Q2 Earnings call transcript