DiamondRock Hospitality pany(US:DRH)2024-08-02 15:30Portfolio and Operations - As of June 30, 2024, the company owned a portfolio of 36 premium hotels and resorts with a total of 9,760 guest rooms located in 25 different markets in the United States[57] - The company owned 36 hotels as of June 30, 2024, compared to 35 hotels in the same period of 2023[71] - The weighted average occupancy across all properties was 73.1%, with a RevPAR of $206.72, reflecting a 1.0% increase from the previous year[70] Financial Performance - Room revenue accounted for approximately 65% of total revenues for the six months ended June 30, 2024[66] - Total revenues increased by $30.9 million, or 5.8%, from $534.8 million for the six months ended June 30, 2023, to $565.7 million for the six months ended June 30, 2024[79] - Total revenues increased by $18.0 million, from $291.2 million in Q2 2023 to $309.3 million in Q2 2024, representing a 6.2% growth[72] - Rooms revenue rose by $9.0 million, or 2.5%, primarily due to improved occupancy and an acquisition of a non-comparable property[80] - Rooms revenue rose by $6.2 million, with $1.5 million attributed to the acquisition of a non-comparable property, and the remaining $4.7 million due to improved occupancy and increased ADR[73] - Food and beverage revenues increased by $18.3 million, or 14.3%, driven by higher banquet and audiovisual revenues[82] - Food and beverage revenues increased by $9.7 million, with $1.5 million from the acquisition of a non-comparable property, driven by higher banquet and audio-visual revenues[75] - Net income for Q2 2024 decreased to $24,631,000 from $39,134,000 in Q2 2023, a decline of 37.0%[119] - The company reported FFO (Funds From Operations) of $52,504,000 for Q2 2024, down from $67,915,000 in Q2 2023, a decrease of 22.6%[121] Key Performance Indicators - The company employs key performance indicators such as Occupancy percentage, Average Daily Rate (ADR), and Rooms Revenue per Available Room (RevPAR) to evaluate financial performance[65] - RevPAR is calculated as the product of ADR and occupancy percentage, serving as a critical measure for monitoring hotel performance[66] - Occupancy rate improved to 77.8% in Q2 2024, up from 76.6% in Q2 2023, marking a 1.2% increase[74] - Average Daily Rate (ADR) increased slightly to $294.55 in Q2 2024, compared to $292.67 in Q2 2023, a 0.6% rise[74] - Revenue per Available Room (RevPAR) increased to $229.21 in Q2 2024, up 2.2% from $224.27 in Q2 2023[74] - The occupancy rate improved to 73.1% for the six months ended June 30, 2024, compared to 71.8% for the same period in 2023[81] Expenses and Costs - Total hotel operating expenses increased by $26.4 million, or 6.9%, from $382.2 million to $408.6 million, largely due to higher occupancy levels and increased labor costs[83] - Total hotel operating expenses rose by $12.2 million, from $199.7 million in Q2 2023 to $211.9 million in Q2 2024, a 6.1% increase[75] - Corporate expenses surged by $21.3 million, primarily due to $20.4 million in severance expenses related to leadership changes[85] - Corporate expenses surged by $20.2 million, primarily due to $20.4 million in severance expenses related to leadership changes announced in April 2024[77] - Interest expense decreased by $0.3 million, or 0.9%, from $32.7 million to $32.4 million, attributed to the conversion of interest rate swaps to cash flow hedges[86] Leadership and Strategy - Leadership changes were announced on April 15, 2024, including the appointment of Jeffrey J. Donnelly as CEO and Briony R. Quinn as CFO[61] - The company focuses on aggressive asset management and disciplined capital allocation to high-quality lodging properties[58] - The company evaluates its hotels to ensure alignment with its strategic vision and identifies opportunities for capital investment or asset sales[60] - The company regularly assesses the availability and affordability of capital to maximize stockholder value and minimize enterprise risk[60] Capital and Debt Management - As of June 30, 2024, the company had $1.2 billion of debt outstanding with a weighted average interest rate of 5.22%[92] - The company intends to repay a mortgage loan of $73.4 million maturing on August 6, 2024, using cash on hand[87] - The company maintains an "at-the-market" equity offering program with an aggregate offering price of up to $200.0 million, which has not yet been utilized[94] - The company has a $400 million senior unsecured revolving credit facility and two term loan facilities totaling $800 million, with the right to increase the aggregate amount to $1.4 billion[97] - As of June 30, 2024, the company had $125.2 million of unrestricted cash and no outstanding borrowings on its senior unsecured credit facility[99] Future Outlook and Investments - The company expects to spend approximately $90 million to $100 million on capital improvements at its hotels in 2024, having already invested $35.8 million during the first half of the year[105] - Significant projects in 2024 include the rebranding of Hilton Burlington Lake Champlain to Hotel Champlain Burlington and a comprehensive renovation of Westin San Diego Bayview[105] - The company intends to distribute dividends at least equal to its REIT taxable income to avoid corporate income tax, having paid $0.06 per share for the six months ended June 30, 2024[102] - The company plans to extend the maturity of its $300 million term loan by an additional year upon meeting certain conditions[97] Economic and Market Conditions - The company experienced inflationary pressures affecting labor, materials, and operational costs, impacting overall expenses[124] - Seasonality in hotel revenues is expected, with variations based on property location and customer base[125] - The company continues to evaluate its critical accounting estimates and policies, with no significant changes reported since December 31, 2023[122] Non-GAAP Measures - The company uses non-GAAP financial measures such as EBITDA and FFO to evaluate operating performance, which may not be comparable to other companies[106] - Hotel Adjusted EBITDA for Q2 2024 was $99,488,000, compared to $93,529,000 in Q2 2023, reflecting an increase of 4.3%[119] - Adjusted EBITDA for the first half of 2024 was $146,105,000, up from $141,139,000 in the same period of 2023, representing a growth of 3.4%[119] Interest Rate Management - As of June 30, 2024, the company had outstanding debt of $1.2 billion, with $0.8 billion at a variable interest rate[126] - The company holds interest rate swaps related to $325 million of its variable-rate debt, which helps manage interest rate exposure[126] - If market interest rates on unhedged variable rate debt fluctuate by 100 basis points, interest expense could change by $4.8 million annually[126]