DRH - Earnings call transcript Q4 2020 | DiamondRock Hospitality Company

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Operator

Ladies and gentlemen, thank you for standing by and welcome to DiamondRock Hospitality's fourth quarter earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference may be recorded. Instructions]. [Operator like President conference and now host, to hand Vice Senior Treasurer, to would over the your I Briony Quinn. begin. may you Ma'am,

Briony Quinn

Thank everyone. morning, you Lateef. Good

Before statements under the securities laws. many call note considered federal we on are forward-looking made today's of be to begin, please comments that

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

non-GAAP can today's financial information press on we and in am call turn call Executive I of directly discuss certain pleased our that, A addition, this President the information. Chief Officer. In over to comparable will reconciliation GAAP be earnings most Mark the to With our to financial release. measure found Brugger,

Mark Brugger

Good you morning Thank everyone. Briony.

friends begin, decades I on Sorenson to condolences take heartbreaking news passing. DiamondRock, extend working by I of the and of career the and moment behalf unexpected ago, want Arne's a began two Before my to in our lodging continue family when his find to we into Over under miss at the future. I to CFO Marriott. a he knowing family, new will well the relatively dearly brought his his was take industry light But will that to I friendship. shine he comfort and the Arne

recovery As robust hotel the of future, the are we toward coming we industry. that look and more optimistic likely about today

in the in week. have everyone In shots past Encouragingly, projected over U.S. multiple two President million should coming in are summer. Johnson next Biden by Johnson approval publicly set in to enough short at they COVID-XX We the and have to the been & the point And since vaccines last year. that have U.S. have early Daily approved per and is vaccinations began doses are vaccine distribution weeks. XX been the has than said month receive our certainly more doubled mid-December. earnings vaccines the optimistic time exceed since over day million for last administered call, any

of to last the decline to demand emerging combination vaccinations demand. the of group the in The that and governmental the will the has current optimistic weeks cases and and improvement are strength of easing of transients over unique and in rapid restrictions drive-to an We untethering continued increasing pace lead of an in leisure coming modest focus data resorts pent-up points business trend segments. DiamondRock's on travel the six the fact by am was believers. strength recognize a that strategic squarely eight demonstrated Almost Getting team I of proud been trend we source last our for oriented. our the our category. of of hotels, that remain a fit was acquisitions favorable early that throughout a seven into and this committed half weighting XX leisure of company to result a pandemic. XX, are hotel here multi-year as our initiative, of

XXXX. pace hotel at Encouragingly, the daily EBITDA context, in adjusted $X.X Presidents' our much surpass resorts as in half this generate of a margin. XX portfolio of In glad our the XX% weekend, production a head-start January the our quarter to quarter, they a increased certainly as jumping of in adjusted earnings increase XXXX resort that have the saw generated In revenue sequentially GOP alone, to entire occupancy fourth on million. was competitors put are positive quarter, the to hotels over We XX%. Day first XX% building portfolio our $X.X this third $X.X quarter, on To bandwagon. hotel of now Leisure XX% EBITDA we resorts the nearly million fourth positive on In second million nearly saw did at in trend. our are EBITDA. in are on

comparisons, easy well-positioned to is to the are pent-up demand. that consumer XXXX We and summer summer due vaccination optimistic progress outperform XXXX

Let U.S. their the in scratch savings increased travel me consumers Aggregate XXXX in XXX% itch. point on that personal to sitting have money are of to plenty out $X.X trillion.

of Turning now suggests levels group improvement. they of seeing Many signs to are segment. months. we haven't activity our the seeing hotels are early that The seen data in

For example, XXX more and up larger making groups, group share a nights, room future are for needing larger bookings those the larger of than pipeline.

We increase we third have XX% portfolio, average the a depend over Western back fourth was four past Marriott, Chicago, from quarter. the producing booking largely we looking have of the will quarter rebookings. were Moreover, received seen This weeks, four pace new incentive Renaissance of leads Top Lauderdale of and year. fourth business, seeing XXX,XXX Westin the week across the largely Worthington. accounts is future a XXX,XXX are quarters. received In vaccination back the XXXX that in hotels also pace room in today just In nights March. upon quarter, last are activity leads Fort Boston, activity QX for timeline. the return highest X% whereas group half since increase Ultimately, predominantly the we the from the corporate our room nights a into over success leads in these the and the of

we planners second cancellations cautiously we meeting are confidence cancellations XXXX to expect XXXX. fewer growing half that book showing towards for into events more so XXXX We are the of first for because the scheduled half for optimistic and continue even of But trending late for are will XXXX. that

transient, window remains for extremely short. the As booking business

as really they top into of that start gaining the of our activity expect transient quarter we the most us to However, picking their move quarter, XXXX. in telling business up late fourth momentum are accounts second but

COVID-XX X% to rooms a the and not which end of of at up increased may bubbled holidays for weather transient over projected. returning bad the a cases activity better number was holidays consumers as quarter. from revenue as the third In as compared despite quarter short, include home in sequentially a headwinds, the This originally headlines, year. QX in overcame and quarter saw to before and growth XXXX, diminished the reduction the demand at material, than of resurgence the and the fourth we business modest seem but back fourth big well presidential election did lot X% better social Looking QX, a

forward the rollout we outlook As to upon control. and external XXXX, look vaccines beyond other our factors dependent highly the is

While as we sequential the potential do as not turn course expect to the in the over earnings year, in improvement quarter. the has be profitable first profitable to of portfolio early third half quarterly of XXXX the

outstanding fourth multiple on of fronts. Looking in back, DiamondRock made quarter progress the XXXX

significantly through ended major of Three, bank tangible of the Marriott in XXXX. monthly favorable quarter-end, Marriott XXXX to our year-end is fund Let total we we we will we waives me with ATM from subsequent already financial test $XX raised In management Marriott our depth highlight less through last converting crisis delivering a for projects fourth during use total, covenant the rate, full early had than burn ROI beating XXXX. multi-property deal that attractive done and total covenants to year third that million quarter pace Fourth, to all quarter. our Two, our of amendment expectations debt and few at We program a highlight million we our actually XXXX have to reduced the converted is franchise. the well pipeline pursue acquisitions. our $XXX as benefits debt liquidity. the increased And our at One, in all own XXXX. of relaxes we achievements. completed mention I hotels the six as

insurance per in expectations. third loss of of The quarter million, quarter. quarter quarter. proceeds adjusting adjusted of $X.X quarter in was which $X the our million dramatically Let's results. improvement the from third financial the million Corporate quarter. we Fourth marked was quarter turn loss, contracted was the internal $XX.X in ahead the still in Hotel the third share EBITDA in FFO specifically quarter, a $XX.X loss the to we adjusted a negotiated EBITDA successfully and better DiamondRock's are fourth well improving from than adjusted the for third $X.XX, the fourth million loss in quarter results even $X.XX a loss the pandemic $XX.X million

of York, the hotels the three below points fourth hotels had year. quarter, nearly the for open or prior the we portfolio total was XX XX.X% New Including closed the quarter, XX% our comprising about During in occupancy XX throughout rooms.

However, in the Chicago that level XX.X% important this to quarter, recognize Magnificent third quarter-end, to additional on slow Marriott to compared season, it was was the points occupancy winter is the a below one Mile. we XX hotel real year. which improvement Subsequent for the closed prior the

the full April, expect Year-over-year will little the down By January June, better steady declines even the at As declined we measured have and lose revenue by in was XX% And modestly we XX% a reclose or down In little we down by XX%. seen December Total month that better a it first we compared have hotels money fourth to year-over-year revenue at so. if impact. duty however felt reopen improving improved is doing pandemic's see decreased September for in in the by portfolio can we as to the encouraged to past, quarter, are the XX% we the XX%. were we less XXXX. continued revenue. as our XXXX progress said improvement.

Let's talk about profitability.

quarter no sales operations quarter, third Our revenue. in of portfolio, quarter a seven quarter. in increased up the maximizing strategies. strict exception. the were positive to gross trends expense with profit of On the The asset hotel These the in basis, through room's ahead adjusted XX, hotels goal with from X% the XX%, fourth translated for quarter. dollars quarter. the oversee profitable combination of always million XX third quarter revenues margin absolute fourth this million up aggressive fourth as were GOP operating profit XX% and Total in from the just compared of $X.X was This $X $XX third hotels or coming in in into generating an encouraging. $X.X the million XX number of of to managers control hotels hotels EBITDA million third quarter. the earned growth third under The GOP was are double from the

rates a up some X,XXX EBITDA with in average in for saw basis and share in over saw per average The quarter. over surpassing from me with in room points increase EBITDA RevPAR room over with and $XXX compared QX nearly saw RevPAR, of XXXX. resort night basis also increasing X% margins hit Landing nearly rates Lake over record RevPAR XXX fourth increase with quarter. the total RevPAR for XXXX margins fourth in new to resort a Sedona $XXX margins QX The new X,XXX per the as Orchards, in up The fourth points. Tahoe X% in night increase you XX% points. a ADR quarter. the adjacent property, a EBITDA the QX The portfolio basis L'Auberge hit in a the Let record positives XXXX,

We was in In $X Barbary of in CapEx hotels peak West portfolio also recently of benefit $X.X fourth CapEx included the making disruption at the as projects the well our remains Beach. has the Beach final of high for have season. available spending that added This projects saved focus rooms Charleston million Key completing the the the accelerating at into more Outside House the QX. the phase our during can of and These quarter, high-rated repositioning Barbary for the conversion the by million. quarter prioritizing on maintenance, in ordinary Sonoma returns. as primary produce initiatives ROI

investments in We XX%. measurable earnings expect to XXXX, be these exceeding contributors average with ROI IRRs

received our I Jeff, Stars. among XXXX. environmental, Survey achievements all Estate Listed Sector to Leader off to recognized Global want Global as call on by public social Real and the five was the lodging ESG in or governance Benchmark touch Sustainability GRESB handing DiamondRock Green and or REITs Before

achieved highest DiamondRock ESG Prime early XXXX, for performance-based performing ISS' a real companies reserved worldwide. Rating Additionally, the Corporate estate in of rating

QualityScore social Finally, position top the environmental, for quality governance, the within and real ISS' high disclosures, DiamondRock all continued receiving sector. estate its third ESG of leadership for ratings

in good and deeply are good committed expect to to citizens We news we XXXX. being share corporate to have more

Donnelly turn our me to balance sheet. to Jeff the call let Now, over discuss

Jeff Donnelly

to subsequent the To company. we successfully of notable that debt benefit Thanks all amended several Mark. There amendments our features are quarter-end. in our start off, bank

we waivers First, covenant extended year. financial for the our entire

quarter Our will test of first from next not quarter second scheduled conducted XXXX. be until XXXX covenant using results

two Second, period the our relaxed period amendment. our earlier to beyond we and early in than we This longer is quarters thereafter covenant extended waiver had five quarters XXXX.

on pleased Fourth, acquisitions. we for we sell certain the new in our drawn both those of lenders. new term in revolver. cash rate and REIT. balance million the believe creating speak $XXX our to support were non-investment ability we weighted $XXX Third, interest to our cash and and great million our through raised DiamondRock undrawn and grade acquisitions. interest the end basis equity had terms the gives that we recycle and of I long-standing unsecured These of company quarter of the on points. debt hotels their this amendment the believe to capacity term million from non-recourse third appreciate on any million And loans fifth, the and $XXX shareholders, of increase focus debt operate the credit At company the revolving ability and ended million to that $XXX We that be favorable at the in hotel the The only of million preferred all has X.X% the on a ATM We the of five quarter, our its unsecured increased new $XX secure our acquisitions. mortgage shape. lowest value million sheet proceeds for common loans relationships facility. have of may investments $XX and business continued with the bank on use is $XXX internal of ability million comprised average and $XXX with excellent rate

shape. schedule in maturity Our great is also

in have in has We just option. revolver More extension our that early small which extension XXXX XXXX, a option. an matures one year mortgage one too significantly, maturity and has

of Our term loan in a in term late $XX XXXX. $XXX mature million matures million and XXXX loan

Nevertheless, we to we debt and continue borrowing debt our that our extended capital opportunities opportunistic average today Our address maturity. means not be to maturities. costs, extend maturity reviewing pressure will to reduce in raise under schedule liquidity weighted are

liquidity of We level level cash, to corporate total and Moving revolver undrawn on liquidity. concluded hotel quarter million the $XXX with capacity. including cash

per by our average common for amount Our of of net stock been the price share was and an million shares under no our issuance goal $X.XX XX.X quarter-end. $XX.X million. after issued program shares liquidity at bolstered ATM raised proceeds have of of We

further of liquidity preserve and the also identify Reef in the derisk XXXX our We early by partner we fund the Frenchman's consultant a completion To a help year. engaged rebuild. to of to reconstruction capital pausing exposure shareholder value, last late create

were XXXX. U.S. We expect of its Reef. more GAAP quarter, required million to recognize GAAP rules, fourth that complete the in likely we that than loss would the process useful as to determination a we $XXX.X not, related was remaining later loss the impairment Under In of a recognized Frenchman's life. result not to we it hold impairment for a property

I that original am Turning estimate. to rate, are our report our extremely pleased beating burn we cash burn to monthly

expenditures, This XX% per capital averages the midpoint range at million pace. to than and XX% the fourth we NAREIT $XX quarter quarter provided in rate our our $XX.X month. million $XX the better burn is better third million than Before monthly of

or nearly me Let the explain expectation. million were a our why $X month, of for ahead quarter $XX we roughly million

$X better over half projected, beat. representing the of the hotel was than million quarter First, operating in had income net we

million of claim. insurance to interruption a received we payment a one-time related $X.X Second, business pandemic

represented If reductions $XX.X the assessments benefit, our I to company payment, Unlike the three expectations explain a XX% quarter we property insurance and per hotel month million for Third, one-time runway XX% received $XX burn burn in benefit burn expenditures, again over and the continue improvement our the These QX our we million one-time should tax tax insurance nearly extends the capital our the XXXX in payment, Chicago average a our accruals reduced by to beat that rate but one-time in Including our million for during rate. QX improvement the implies rate from and collectively a items quarter. our insurance lower assessments XXXX. $X.X total monthly XXXX. that pace. payment was still over excluding adjust

the For the we uncertain obvious providing are with associated earnings for recovery, year guidance of trajectory the not full reasons XXXX.

to and G&A corporate with expect do which quarter, we in for first be quarter. burn fourth rate million for is hotel estimate the the $X prior our NOI to our around $X.X combined flat However, monthly million cash

$XX.X is burn the place the put over the only the back will XXXX began I very Adding changes than for to quarter towards in insurance we benefited a and end quarter be Mark. With of this of estimate total in rate first favorable quarter, XXXX. the recall will accrual. the roughly quarter. that fourth tax for service Moreover $X.X restrictions dividends travel quarter we in little CapEx, realized the million one-time higher debt from what burn and and turn fourth that expect the that in the million million with cash fourth QX preferred but for call the to monthly $XX average million Now $X payment company first were

Mark Brugger

Thanks Jeff.

Before your we three take I cover to want additional points. questions,

opportunistically mentioned, offering, we fund raised ATM position high our have acquisitions. $XX Together of program for Jeff for today capital late with we accessed our in as million external and our these First, through to ROI We available growth. million $XXX December. preferred ourselves projects previous pipeline of capital funds

We mostly exceed existing of potential number in are that that our resort have our of a to actively properties, underwriting generate capital. returns currently cost markets the

to you when have We share. will more update details we

$XX struck the total, led point to the deal, brand Marriott cover another factors, XXXX, in as we in coming portfolio these on with convert were, In XXXX deal among lodging million ways, estimate NAV heels experiencing changes the are benefits as the a significant second we reduction of these unique least already transaction all in conversions managed of tailwind from many that full-service XXX-room to This that our to give hotels franchise Boston a other Marriott earlier going DiamondRock, of revenue five from to we struck out And the all conversion we agreements. of now have sweeping managed DiamondRock among for with deal The These a came in to unencumbered REITs. created was pandemic. that to we portfolio. Westin brand August to we management cost more franchise management wanted than franchise well. and changes. The and are transformative

add I portfolio. to are within are portfolio's The rebranding basis the year incremental the we on that highlight margins stabilization. XX still upon they final is entire fact, standing profit points projected In will not cover to full opportunities an

upbranding In fact, potential year. of the of hotels exploring next the over we are our six

a Lodge at for Autograph me Let Sonoma those to it you. out convert $XX completes its will after summer. of renovation The few an brand point this million

Our renovation. will from Marriott convert a Vail completes fall million this standard to multi-year it its Collection Resort as a Luxury brand $XX

Additionally, announce Denver are Luxury conversion to the brand. excited we that Collection Marriott JW of today with we upbranding the were to proceeding and a

later Now That on this an is hotels other year. details value have and you details while provide more this at cannot time opportunities, expect of we owned Finding obsession concludes remarks. opportunities are prepared at announcements our creation we additional exciting to many for ours.

to are recovery close an are we on in and by door XXXX. trends the emerging We encouraged XXXX the are we of seeing happy

a is note, going assets, good over numerous shape balance the solid that the strong questions. downturns to great open-up team outperform forward. sheet, in On now DiamondRock have will We happy that experienced call and prior industry years. and your are weathered XX relationships we take has last management an

Operator

KeyBanc. Wurschmidt from comes first is of Austin line [Operator the of Instructions] Our question

please? question, Your

Austin Wurschmidt

stacking start thanks was group the know, all interested provided. Hi. some Good I activity Chicago Westin side well in morning I room can and year am XXXX as comparisons or rate this that or for be any at up how Marriott. comparisons out you hoping to provide XXXX? back additional and then Boston detail half and I really you the wanted most of even And on versus helpful. provide on would And that you XXXX detail group in nights are And the everybody. could you the

Mark Brugger

both to But you encouraging. look then for they it are Hi. Good if for for I some Tom comments. Chicago Boston Mark. start morning XXXX, off will convention at Austin. This both very is the over calendars and and kick

wise, move convention from into over fact, the city actually as we room nights, XXXX. XXXX are they In levels

that good. So very feels

experiencing window their year. after short people momentum to QX the see building and still cancellations QX term are in get we We back as cancellation in and expect

up in prepared has I last remarks, As the weeks. mentioned really the momentum four in picked

seeing that have still business. lead are activity, and will we increased So to a increased of volume close lot

of as has and a trend the rollout really summer. phenomenon I occur think will confidence early have confidence the that think been with vaccine and more when in recent fairly more So vaccination I in U.S. people full

they booking in on. XXXX. more feeling strength mid-summer, confident September is more greater really So certainly the really, And are and really

Tom, do the comments some want So usual make on what are you to hotels? you seeing

Tom Healy

Sure.

like level, think, second the a Just high is comparing, the I half been we pace, when half at to have of we first look at XXXX the going of XXXX. behave

heavily are a nights and XX,XXX and shift nights have we we for we to for and QX. XXXX. And salvage to into focused compare we had on can QX group note, what room books positive XXXX, can On on on we So books the those room what QX the months. XX,XXX about that

that So that well. bodes

heard Now groups cancels majeure to to people of inside talk and to out ghost you a contract terms get waiting contracts. get force of about use their their have and lot

had that have we lot in of So a QX.

the QX also half of And much for and some in had cancels of in the year. QX occurred for we QX XXXX, in the XXXX. mentioned, were for significant Mark the As that first cancels

very for future rooms idea, last nights when to quarter. XXX,XXX So we the actually now. we positive on To in to point an once had about focusing give back up that months. holding again, XXX,XXX we spoke which right rooms you books. are we looks And prospects the goes the on have quarter, room XXXX, up. QX, you XXXX are had we XXX,XXX QX, come That's give about from up

So that's extremely positive.

and were January in three kept up have monitoring Some month. week were momentum The in week-over-week, into up been each the last the highest we through Cvent trends February. is Awarded U.S. March. RFPs January weeks the that since

weeks back two more improved The January, average or booking of larger levels, XXX last window rooms there. pre-COVID share. booking window strong are of in to almost meetings growing looks momentum So the

second very We arrival dates, continue and positive. XXXX half shift XXXX of to toward which looks

through are pace window back XX% same is seeing XXXX generally, normal. about demand is largest for the to is positive for and bookings XXXX even XXXX. [indiscernible] way And shift Cvent we year-over-year them at and the property the market, in The XX% We down, booking for seeing the level. rate are then still are

And social, are in But and point. XXX,XXX. And what's most short segmentation corporate no there based corporate To and showing leisure we finished still education strength that example the changes is we you had the very with the term coming. significant year and really an Not in see. will rooms this then come. on the that we pickup give can know yet at at books XXX,XXX on we it XXXX

have we we into get the as the year So, of as in we this for certainly for about and year XXX,XXX bodes up year move well picked XXXX. XXXX. back the That in us in half

benchmark, are has XXXX time, look XXX,XXX When is the on nights XX%. we room citywide at up give books. on on notes Boston That the a other you room the The books. about had pace, same important. nights we XXXX at XXX,XXX To the

X.XX was important Compared which ahead Chicago to pace. XX%. So has metric, on is million. million X.XXX XXXX's books. That's rooms another the Boston's of about up actually XXXX,

pace citywide both Chicago's and Boston So up to XXXX. are

has to the on compared San like about Francisco, books. XXX,XXX As which

to down significantly still Now to that year, up it's about shows XXX,XXX. XXXX that but it's significantly prior

XXX,XXX. That's we That's then a Diego's compared up at by markets XX% was some is And which up XXX,XXX. San positive. on the up to XXXX, room XXX,XXX XXX,XXX XX% DC that compared So other looking nights XXXX were to up rooms. about books. highlight

good pretty to and very positive our up positive, in is shaping are a seeing it's So, portfolio. XXXX be we activity

Austin Wurschmidt

lot us for pipeline and sense competition Certainly, you. give characterize of these transactions? of great but there. talked you assets in then detail of to there targeted of How the have where I were where forward types about can sense you increasingly moving And a could these And with resorts? level A process have towards exposure you in the of acquisition if others that are a which have of early, you would pricing like increased? of you wanted your transition it comfort would kind types guess, you that to the were opportunities to give for you Thanks. you transact, feels looking are I same and of to before deals. get you us

Mark Brugger

Sure is Mark. This Austin.

sub-questions So a lot of in there.

level. on the comfort first So

you So, from offense we are defense comfortable shifting point. to at this

we can think the underwrite end comfortable at feel vaccine I the see light we tunnel. the that can We the rollout. of

not exact think are have go. a enough going to I we kind that we to trajectory feel We right. But the get going have confidence it's of where good for

competitive with deploy capital we level, environment. are and also So have is in comfort to out today with the $XXX acquisitions. go a have million comfortable we We do a pipeline. It

we off-market that of both relationships there try that assets the And As those within a with and existing to transactions. can owners one we deals. we in, own markets are are doing synergistic that of focus of of encourage other to remarks, is we often, things on underwrite have assets strategic I the prepared number mentioned so it's to already the markets we those in where

pipeline. competitive. is So we It have a

loose We are a that head-start our create and hoping and of working been some we owners environment. for in that frankly deals pry to be assets some and we years, this will have number able and these off-market

Austin Wurschmidt

to with with put your targeted guess, respect of where I then And this exposure? you, just would kind

Mark Brugger

Yes.

We XX%. resort get to to would about we So leisure. third, like are

to lighten some all that of as our we point, incremental. on probably years obviously of to shift assets get will urban as over some it's So well. At up couple well the next

Austin Wurschmidt

Great. Thanks the for answering all questions.

Mark Brugger

Austin. Thanks

Operator

you. Thank

Citi. of comes Rose Smedes from question next Our

line Your is open.

Smedes Rose

about you potential Hi folks. I trend little positive. to a ask the wanted just bit more to

levels just what breakeven and you do to you just I you the corporate to about I corporate level? talk about that, portfolio achieve order mentioned sort at as you could well. wondering, And level not portfolio, third that? think And occupancy level just you to could And think you at you is of say get need in talk quarter. in maybe the what that's need was rates when the to

Mark Brugger

want you do to take Jeff, that?

Jeff Donnelly

talked need different and corporate morning to about Good gave in we level. where had that the we We some level Yes. Smedes. at would hotel at be thresholds past on to that order the both breakeven occupancy the in

I is, low are was mid the level. GOP on looking of in occupancy we think level, think occupancy that kind the at or the the figures mid-XX% I in a to

presumes down around rates are at the at level, EBITDA of probably XX%. looking I think XX% think that to are we I XX% kind corporate is that the to figures And occupancy. XX%

Smedes Rose

Okay.

it mean like those the fourth were certainly the doesn't change But than forecasts seems to than your that getting And I are mentioned that our you expectations. terms what better in cost of savings was you model? So to breakeven? relative quarter internal anticipating, scattered

Jeff Donnelly

sorry. am I

You broke bit last the your of in a little question. part up

Smedes Rose

of just, quarter the like the savings? get you you what It at was breakeven have levels given seems I rate am just be a guys you to just to mentioned? you could lower fourth expected. levels, wondering, expense at better able that think being maybe Or that And does savings would do is than confidence better in gives it more even

Jeff Donnelly

Thank Yes. you.

expense have more over the It's more start seen lower pointed would explain Sorry. I to of and good I some measured around that it. trend for our that we say we think side. have you way by pandemic, I and had to And out, the competence is, that's good success a of occupancy a threshold breakeven as question. compared the time think

by ability a mix as own portfolio obviously, to have environment. been where it's But think unique its roll of in point. bit because every the encouraged that we forward, a this we within hotel occupancy I materializes control our costs has breakeven and our of function

Smedes Rose

the what's a Thanks. could partner leisure you you And just does Frenchman's? on talk kind in heightened And then given bit about, in little active constructive there? that extend the conversations of, lot Mark, having market Or feel the assets, to of a bringing guess, I around interest a are level?

Mark Brugger

capital oriented is, the and There's lot are macro deals, Sure. for And in particularly think leisure I of of a been right. lot assets. people environment interest raised hunting a

us. investment been, our of to could the an and advisor last the exceeded rebuild go expectations. think That mentioned balance seek fund call, of out process capital amount with we engaged So a have the initial I partner we has interest that

think is and to leisure for durable of So those And said, assets. more to stretch on be and I just you reason recognize that's probably strong people was the that willing positive. going that more it kind

And so yes, originally we we have interest more than expected.

now. are we to hope And coming. working process resolved that that in We the get

Smedes Rose

Okay. Thank you.

Mark Brugger

Sure.

Operator

you. Thank

question comes Stanley. of Thomas Our from Morgan next Allen

is Your open. line

Thomas Allen

Good Hi. morning.

about potential it How covenants, retain assets So those you to proceeds acquisitions? with to your you disposition? thinking sell and make are allows

Mark Brugger

Mark. is this Tom, Yes.

So you sheet like position. balance we know, our

So lot not inquiries we a compelled. of inbound number of But feeling are we a are getting on assets.

so is at guess price. asset every technically the right And for sale I

the evaluating. assets continue leisure consistent certainly oriented will Having strategic into urban to is particularly and flexibility sell, with more our those we So assets redeploy goals.

So strategic our of we those work individual, balance if see and transformation. the keep we of find at inbound of evaluate and over will to XXXX kind kind arbitrage can mostly inquiries

Thomas Allen

it's it? think haven't I been insurance, get interruption to companies business the able you to of How get uniform on were insurance just that then interruption been pretty And COVID. because able business Thanks. Helpful.

Jeff Donnelly

specific that I work said limits. with policy. for into track jump it. different everyone I pandemic claim. here. could negotiated in mean, to insurance And were of got sub kind yes, the we able Yes. cancellations a Jeff, insurance a some bookings to Well, everyone's We of

insurers entitled when policy, got for negotiated was what we were we claim. are to our with we So we agreed and happy that pre-pandemic sour which the

Thomas Allen

kind is it? Or you using be think you it? will Do to of continue able this

Jeff Donnelly

a limit sub There's per property.

claim we for that hit the was Boston is So the sub-limit related. where which have Westin,

Thomas Allen

Perfect. you. Thank

Operator

Thank you.

the of Barclays. comes question ahead. next go of line Powell Please Anthony Our from

Anthony Powell

some to Hi. options will A ADR hold been to able you resources be this of have we as the reemerge? impressive. pretty morning. for kind of Do think and growth on that of years at in lot Good more future the travel both growth, year

Mark Brugger

Yes.

some generally, think yes. There will I be go-backs. probably

people domestic are I going of some before. people XXXX these think, travel not them going discovering discover still the to and resorts be didn't I think for for XXXX, abroad. that beneficiary is And of

they So are audience friends I I colleagues. and in think, we telling brought and their think the

I mean, they higher having think are are read at staying people even resorts, of these having good experiences. you elevated if so experiences. reviews they ADRs, And great at these that the the I

basically little over these other groups The there's I couple no may of resorts. piece that we small ebbing of the at a think backfill have if it, that next is years

to to the doesn't a rate So just exist Sedona, [indiscernible] might incentive able we now. bit to go were lose of extent little and right some high-rated group. we instead of France put in That some-high rated

that out. it's washes probably So

kinds for So are future these we assets. of encouraged about pretty the

Anthony Powell

you upbranding hotels. mentioned a of some I mean, And are some I your follow-up. you more as at doing guess

making? what's more. rate these a just and you you Or identified portfolio mean, upbranding seeing you that, decisions than Is three of are better your are You expected? I across three opportunity said you kind driving

Mark Brugger

Yes.

I good success. have think, we had

come brands. particularly into designs willingness with plans good Marriott's or execution of up allow operating shown more and good think, higher with models luxury I we move to good to and if lot a categories rated us

an deck really think, slide think I number in projects. ROI page IRR we projects them money. all on look a return of XX% ROI at last there, our a of on, its So use of we out are investor updated these average good it's if XX, And you is and put And in the night. our the

you can So I an hard IRR. get a to asset buy it's mean where XX%

remain focused we best the are those. excited So within the about portfolio. and super so we of opportunities make of more is return high team those finding investments They the some can on

Anthony Powell

you. Thank Great.

Mark Brugger

you. Thank

Operator

Thank you.

of from Michael Bellisario Baird. comes question next Our

Your line is open.

Michael Bellisario

everyone. morning Good

Mark Brugger

morning. Good

Michael Bellisario

what opportunistic XX% think earmarked Just with the the return versus first usage. secondarily, us why December, about have have opportunistic year-to-date there? higher? ROI you relative the you the then know talked stock if Could been question are haven't the issuance the proceeds maybe And you you the for? returns. ATM issuance help about price XX% to I with just you But in on

Mark Brugger

Hi Michael. Great question.

again, So of relates ROI back schedule. project kind it the to

if of So ROI deck projects. put we the have we identified night, look out in million $XX last we you have,

$XX other including three stage, in the we are the evaluation of top now. finalize trying So that, to about that on have million another repositioning that are we

don't be some we of and amount just it trade it cap have wish plus at an smart to raise like That allocation We unlimited did. IRRs. able seemed I those. good. redeploy money So XX% was relative very to

positioned thought the that further more with the fund we we amount we had raised start was it the projects about clarity that as in sufficient more us match recovery have lodging. and optimistic shift and we ROI offense the to just So are well from as high to value defense to

Michael Bellisario

the get around in just kind arms you of how the getting group Can And underwriting would that hotels back real or it. today? focused are our around fundamentals, you ramp-up but And buyers focused help maybe see estate are for hotels? in hotels. your Got the big then also group box those arms value group us underlying underlying or of that values the values, to box big you also see expectation your real your both in prospective estate

Mark Brugger

would I easiest. Yes. of boxes I I well, hard the tough of and been have where say have San valuation figure all think of value. assets, Resorts And think value Francisco fall the to out would big York to is. New been the spectrum on understand probably into kind

group We are pace four last in seeing the weeks. good

generally clarity, but for to a think these it's check, big continue we get hotels. I So will

check. investment risky so because a big that singular it's it's And more with

it's think the I US. been hard. has no big boxes in There So of trades virtually

city-by-city. I think be will it dependent

of these cities much cities. than cover Some other quicker

Chicago two I it's still of in uncertain check think because is still, think hotels the where is out. Boston going XXXX. we kind citywides right are more these in and actually now of But on assets valuation optimistic on I big box our

Michael Bellisario

Thank you.

Operator

you. Thank

Street. Our from Hartwich Lukas of next line question Green comes the of

Your question, please.

Lukas Hartwich

Thanks.

odds So in there around see increase the are wage. will seems curious that minimum be I we thoughts decent just your what to pretty an am that issue?

Mark Brugger

are I than where increased our these markets make you X% look bet our if workers, already Yes. assets wage. And minimum minimum wage. less our have I generally of concentrated, at mean hotels

So wage impact is shouldn't think located markets will the going impactful. a probably City probably more about minimum raising an be hour impact. $XX our I make New in on have are markets, $XX to mean, those a major York us. assets housekeepers it about our be some isn't of plus. in to you bulk where it major But There where if $XX

will it's more So, profitability the the kind see a we structure. in. But are hit in on the don't major think markets to that pressure cost I of of hotels you

Lukas Hartwich

kind these ratio, above wage? minimum does if forces minimum Do that if earning it you are stay ratio think that that Or today, the wage of minimum above kind down. the which earning minimum employees on goes wage of increase of put constant, Does ratio the wage change? increases, wage the pressure upward would that employees maybe that a

Mark Brugger

Yes. upward when new of I bring you new for set above $X in minimum people. am the pressure make the sure there's some wage employees that

So don't that's wage. basic have we economics. that people Again, many minimum around

on be But of containment will it's one top not now. So it's concerns probably,-there right some impact. our XX cost

Lukas Hartwich

supply use? in in that being markets. we outside New evidence one I last other in notably It's most some that supply But seeing for of converted but was an see New New there just York And to York me. some we of it. if are curious am of would evidence markets, some seeing Got just York? also last other reductions year, you expectation are

Mark Brugger

But poster our opportunity. little is where in New the that to not. university. specific. student market very we are New we might next a markets. But in there's not it I I right be at No, child markets seeing really York phenomenon this It's other mean, by it obviously for York housing it's conversion mean, to happen large, City of in moment. a and some are a

Lukas Hartwich

you. Thank Excellent.

Mark Brugger

Sure.

Operator

you. Thank

Our next question Bank. Deutsche comes of from Chris Woronka

open. is line Your

Chris Woronka

Hi. Good guys. morning

value? difference assets whether on there's buyers are recovery as about value urban years underwriting that focus some in of markets or how you potential have those how in potentially coming think to underwrite curious I a in to lightening recovery major on resorts. talked and/or you relative You certain am up same urban

Mark Brugger

of market. point makes view Different the Yes.

I mean I consider might people to want to views. we that we have more assets probably of some are in different San negative have a yes, marketplace. the out I other yes. in So, view we our I than Francisco, then don't think selling. any But different talk mean going against

East, Midtown market think market. we more dependent. We very are bullish interesting sub an York's its on. New

and kind District, bearish Financial area, the probably are South, of that think, on. I Battery we more

just specific So representing focused on a a to yesterday call themes. those. I that funds had a who they big was with are money was buy I there box mean, yes, from that broker fund raised hotels being raised frankly, just

group to have another talked York invest thesis. maybe raised weeks City, just two investor that I to City recovery in just ago York New New so money it And in

It's competitive environment So people a take going positions. are out different to there.

and redeploy different those. you think perspectives. than lighten urban the that aggressive up are there will into and I deploy with And of some of trade leisure some going the take thesis those Inevitably can next oriented hopefully, our assets more assets be relatively focused those pretty arbitrage there's we narrow to see people of over years. couple

Chris Woronka

that Obviously, How the talking do Okay. a That's seems we certainly it conversion those doing rooms. brand? positive hotel if Mark, Is opportunities go of them brands soft not think net net the But it's helpful. then to or to hotel? to that from new you negative it's And new family, few a the like soft not a of about a it's hear your street think it you and brand do about across your also within many are goes yourselves. that? and brand a of hotel you supply, lot same

Mark Brugger

Yes.

on bit a So depends I the little circumstances. it unique guess

impact, if they manage,- there's much but than less It's hotel will When of system, new dramatically another an So and there. that we property a Hilton across hotel smaller, made going an the the have if curio. to integrity. it becomes a a not impact. already we curio. and But Yes, was impact built an was Hilton in some and was rate there way at a are it that's brand have had certainly they

me if use let So an bring independent, that example. same they in can

actually a they enough bigger own and at your funnel this the this, lower could Hilton. because that both, integrity. across a and got So the and be it the street you Across have a parity be it's don't have let's helps to in say brand rate. that big a I in it and can seen now we It have XXX-room becomes got and pipe it's a stronger that in. and And it's $XX hotel. hotel more problematic have goes independent much don't there's synergistic rate channel right it curio been There's street,

thousands circumstances. pipe think Clearly, unique they into if on rooms just will the it can converting nearby, I your it the But building. going depends are of dilute So also it the especially that in on not up help that you hotel rate environment can this and rate, are rate. are take struggling that get because on independents help your undercut being and

Chris Woronka

Very Okay. helpful. Thanks Mark.

Mark Brugger

Sure.

Operator

you. Thank

Our next question ahead. comes go James. of from Bill Raymond Crow Please

Bill Crow

and down that curious there out deciding have I and reports multiple Thank morning. went were in am just Mark. before that am Sunstone in others through? the the raise example. media to that you curious marketing path you. whether as you gone the And path were fourth an asset I were down how asset sales you of far Good the an sale or quarter. Lex, There equity Pebblebrook

Mark Brugger

good capital for redeploy. is what or sell relative can all Yes. question. a can what And you you It's

they there thought to assets and talking another were think in ROI sense of versus clarity. vaccine kind more last a clearer months was we Our to people just to on having the the think the ability path. it certainty if prices where and lot the I And and we six issue till considerably, the market NAVs this and was I were probably mark the to selling rollout of waited year the some get the assets a XX in three opportunities, the of could that was was XX up for the days funds out deploy last gone equity high at have of just the about,

advantage discount. So we issue too chose be much equity sell soon take in little pretty a private to. to could that match ROI we the projects smarter of be a would would than it rising we thought markets these that bit that and Well, if able to was of see fund the something to NAVs seems of we

Bill Crow

the on on new pricing that back were is I on the Okay. in how to different? versus books, curious group those already Maybe am Tom Healy meetings XXXX. the going book group

Tom Healy

Bill, pricing XXXX I are is seeing we stable. think

on earlier, mentioned what's XXXX's books at is to pricing probably I levels. As going around

think feel good pricing about XXXX. the we for So I

up. I a As the citywides were of I in guess, our more markets. has mentioned, property team lot confidence

we is good -- as Our demand, for going not year, think pent-up pace further. are shape. going to we in in be there's the air push the to And rate it's certainly it's and positive

Bill Crow

any-- Is ahead? Go there sorry.

Tom Healy

Good. No, go ahead.

Bill Crow

maybe there's starting for dates part the Or that meeting is to sense it prime any too are about year? curious just concern? next losing your get whether early planners was just for worried that I in

Tom Healy

early and shifts. there's There's as think so cancels mentioned, to I so many it's many, tell. such, too group

pushing QX cancels, cancel rebooked We groups and have into pushing of into we got and that XX.X% seen it up saw XXXX. in the they are QX out. are the They about

lot a of there's shifting with right now. So noise

on everybody's book think on trying is is, to going the the what's is I stay still then going what's the to, challenge book and to pickup.

backfill block. groups. to of up, a There's actualizes it citywide self sudden there's and for in, it's a works, then speaking, will pick Historically a with in at And of rooms will we that history you XX,XXX XX,XXX X,XXX all So reacts no contained starts point in at trying all block. drop. it when to, we know come come how to rooms. rates or this everybody doesn't and come and And you a sudden, are it's rooms if like reaction at it

going that's and come tricky our think on we I to are rate a puzzle. from we profit good. So where things it's And focused is see because

Bill Crow

Good. for One me. more

are Tom, more requests is, getting hybrid you for meetings? For that you

Tom Healy

we it meetings revenue with generators heard, association these them. make especially the say groups, the revenue, for I hear on, will you they are have that that they that can't of is

do So shows. to continue get they to want their meetings hybrids to in to

continues. hearing am that not I We sure are trend that.

I occurring term. think can't long I see that

that's think short term phenomenon. a I

Bill Crow

Okay. Thank you.

Operator

you. Thank

of comes Our of next question from Point. Floris Compass Dijkum van

is open. line Your

Floris van Dijkum

equity. really sense it question, was the comments you that? expensive a appears I the better NAV better your some Shouldn't wanted just maybe proceeds should have than in when in that you raised sheet Diamondrock's balance taking integrity. hindsight, the to additional to if sense like on street? Do you Great. in you used and of Thanks the maintain think you the But ROI the mid-Xs could have be? NAV for guys. was And understand of NAV provide We high equity were Mark, when my a maybe fund it obviously where you did really rates.

Mark Brugger

Yes.

questions. fair all So

a I think NAV, a statement not statement we it, use of of it's of looked at proceeds. it's

can redeploying can as is those value increased, It's any last a that. currents. your in time, XX, think at into I cross XX to opportunities. IRR lot are on XX% again, that underwriting, And this we so then trade return, equity correct if Even a IRRs a smart smart not on of to raising getting good our issuance, do stock where a hard mentioned over have of know return. going NAV's get point days. I high that are the XX% and see It's relative. $X.XX, earlier, at that's There's equity right. given you We

were are track would we our weeks, I some that the that and three it's within to there's had, inquiries portfolio. higher prices us have people December interesting, in We than that have come back XX% assets And in they inbound XX% last brokers have say last to been year. represent November, with people chasing

Floris van Dijkum

just was I up maybe. Great. another follow

peers that As makes balance one to talked this why guys, you build assets the a and higher? your some to and is build sheet chest again. Have sense pursuing protects strategic of of signal you your the you integrity sell significantly to a obviously similar actually maybe war thought are also about convert one is guys of which about have existing to war market, our NAV's the chest,

Mark Brugger

to Sure, take Jeff, want you that?

Jeff Donnelly

three some to to four really been probably an explored is peers on raise It's to been deals maturities. existing something would point those we months. deals done our convert Yes, basis debt or peers that at XX of as was debt have that next XX who opportunistic in that happy thus do the look proceeds converts refinance I and Yes, one to. out maturing there's recognize bond that ways and of have far, The push in it. our have our I

us, is is but For as nevertheless which debt, a your debt, viewed is it and to puts as covenants. it explore convert, on debt viewed pressure more unsecured

an capital event. favorable appreciate example attractive I on For raise if the as for assuming is convert raise proceeds a us leveraging to it to ROI to that am today, a spread. well. return that's It's convert I your use is But projects,

an You in still back the think, are recognize out be trying I that say ways other leveraging was folks the of industry on not hand, I up words time. that might to to a covenants. will there we ideal do as that. the ensure be And we look and But time to find are are compliant that and an we yet will with future,

risk environment leveraging So there the inherent now, is right in say. I into would

Floris van Dijkum

resorts? would comments. are pay you makes not pricing Fair resort the additional does Maybe now for going Seasons comment enough. type key. for you provide in Presumably to of kinds you willing And the $X Four on can million What hotels I rumors appreciate Again, right if of Calistoga sense view? prices. those pricing actually a like? your the some for

Mark Brugger

right It's Yes. for the in the flavor marketplace. today's reasons hot

be bad made I will resorts. think So some, there on some be yes, listen, that deals will

Our relationships we for on focus time unique we been places that where and we existing a we advantage an because have has have chasing deals individual really have assets. long and have particularly been

where it's savings a it well, the synergies our And compelling make synergies bit from and only so for things if make cost complex can as there's but deal pricey, even a we not the it, it's really strategic, little company.

are ourselves. to trying we how distinguish that's So

into a think been starting this get for to are have it. we doing number good years people of I that other it's before

to think lot doing of make edge. a But assets, have solid an we I we of gives prices a sure work going so are us that bit these little deals. hard to are to for very

where going a the bit. We we have think of kind team. right maybe little value will uncover create we our good that. think And call, distinguishing new other I us and feature can people to where to just, game, give that actually overpay deals strategy head forced I do I certainly to a starts work that are the some have that

Floris van Dijkum

Thanks I appreciate Mark. it.

Mark Brugger

Absolutely.

Operator

you. Thank

comes of question Dori Kesten Fargo. next from Wells Our

Your line is open.

Dori Kesten

to find internal increase Good JV capital an in outright everyone. consultant an sale? Is in to inbound a versus outright sale? And preference resulted has an Frenchman's morning Thanks. calls partners for an there engaging

Mark Brugger

great Dori, question. it's a

have partners the on flexible what someone And with primary of get we our folks there So as soon told open goal are advisors then, possible. is, out the been and have fund finding hotel as can we that structure. this and help

in So it. we believe

So different us. backend probably stay of six presented are more Sure. we have to come happy to been to with, take to us in structures and piece? say, different would I eight a have And investors

all on involvement, or trade they have price risk So we much back-ended, the take more less more how more involvement front-ended. kind of purchase construction versus of the versus offs

for the who And a are, we NPV be I are accommodate still the forma. deal. highest do partner and to ultimately we to back-ended the in deal. the So happy think can kind our the move the a believe We to of outlines provides a broad capital pro fastest more take would piece in going shareholders structured structured

Dori Kesten

Okay. Thank you.

Mark Brugger

Absolutely.

Operator

Thank you.

a Our KeyBanc. Austin next is Wurschmidt question from of follow-up

is line Your open.

Austin Wurschmidt

Thanks Yes. for guys. this, taking

a Just little a Bill's on of dispositions. bit around quick question one, follow-up one

at guys include hotel the update Lexington on right give up amended last year the Could You the April. a believe, I latest franchise to agreement termination that? you option this until, just

Mark Brugger

going first whether down has, at with The and the flexibility terminate franchise cost any asset gives the that buyer. marketability to And Marriott So, the us as part the sweeping owner substantially amend Lexington increases it future. of ratchets in on, the point and did over forward. transaction that the so of we certainly subsequent agreement ability Actually, or time. agreement

disposition probably marketable. more helps on we the asset certainly won't years And primary that negotiating that that So it makes that goal that's But certainly own Marriott. feature was five from the side an and with in now.

good a So, observation.

Austin Wurschmidt

Got you. Understood. it. Thank

Operator

you. Thank

Grambling Our of question Sachs. Stephen from Goldman comes next

Your line is open.

Stephen Grambling

Thanks.

You answered lot. a have already

peer Curator, way that for these? letting a entry for evaluate soft more So like your to as as barriers how related similar, a you operating brand your to by someone something would me resort And in. in edge what are you Pebblebrook, niche? focus thanks that the independent referenced follow-up, given increase then further you like launched launching your Giving a potentially on properties,

Mark Brugger

Yes.

on a synergies we comment be our through I of else's really done we able operators. have So someone lot find done, want deal. The deals to would that

whether or get having lower So those or all power that's right realize in credit ability I purchasing the synergies. fees the think to operator OTA, negotiated card can we fees, by almost there,

of by own, the incremental managers it to cost we use. creating buying I and think power something any setup offsets that of And frankly, doing our on the small that difference some the would So don't hard be probably of get there.

not road we down. that's go a So to are going

We brands independents are lifestyle hotels. on and soft focused and

we counting had portfolio independent. those. the the the I L'Auberge success stars in Tahoe Lake mean right now are Landing We that is and with in de of kinds the those are of a lot of are on have The things both Sedona,

their buying operators system. the We within benefit the there are and their their power all synergies getting with of

already our in those we P&L. realized So

that. don't I wheel create any or the think to recreate incremental there's profit on that trying from So

Stephen Grambling

Helpful. it. much. so Got Thanks

Mark Brugger

Absolutely.

Operator

for this the Thank I Mark to and closing over back Sir? President Brugger At time, would remarks. you. CEO call like turn to

Mark Brugger

we call, look care. on you interest we this to continued updating and next the forward call. on Everyone your in Take DiamondRock appreciate you. Thank

Operator

for conference Thank Ladies and participating. gentlemen, this call. you today's concludes

may now disconnect. You

DiamondRock Hospitality (DRH) 28 Feb 212020 Q4 Earnings call transcript