DiamondRock Hospitality pany(DRH) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Comparable RevPAR growth was 2.8% over 2023, which was 60 basis points stronger than the previous quarter, while comparable total RevPAR growth was 2.3% over 2023 [6] - Comparable hotel adjusted EBITDA was $82.3 million, reflecting 2.2% growth over 2023 on a 9 basis point lower margin [12] - Corporate adjusted EBITDA increased 3.3% to $75.6 million [12] - The company ended the quarter with a net debt-to-EBITDA ratio of 3.7 times and maintained strong liquidity with over $75 million in corporate cash [14] Business Line Data and Key Metrics Changes - Urban hotels led the portfolio with comparable RevPAR growth of 4.2% in the quarter, while comparable RevPAR at resorts declined by 80 basis points from 2023 [8] - Group revenues increased by 15.7% over 2023, driven by an 8.8% increase in rate and a 6.3% increase in roommates [10] - Total revenue growth for resorts was 1.6%, with specific highlights including Cavallo Point delivering RevPAR growth of over 18% [9] Market Data and Key Metrics Changes - The portfolio experienced a headwind from Hurricane Helene, which held back RevPAR and total RevPAR growth by approximately 35 basis points [7] - Group demand showed strength, but transient pickup, particularly on weekends, was slightly weaker than anticipated [8] Company Strategy and Development Direction - The company is focused on capital allocation strategies, including asset acquisitions and dispositions, share repurchases, and high-return internal investments [17] - A reduction in full-year capital expenditure guidance to $85 million from a previous range of $90 million to $100 million was announced, reflecting better planning and execution [23] - The company aims to maintain capital expenditures in the range of 7% to 9% of revenue going forward [40] Management's Comments on Operating Environment and Future Outlook - Management affirmed the midpoint of EBITDA guidance for the full year and narrowed the range based on recent hurricanes and economic outlook [24] - The group booking pace for 2025 is currently down over 3% compared to the same time last year, but there is positive growth in pace for the first half of 2025 [26] - Management remains optimistic about the leisure segment, expecting it to hold on to pandemic-era gains and return to premium growth [28] Other Important Information - The company was awarded Hotel Global Sector Leader status by GRESB for the fifth consecutive year, recognizing its dedication to corporate responsibility and ESG transparency [19] - The company executed several swaps to fix SOFR at an average rate of 3.2%, entering 2025 with approximately 57% of debt at fixed rates [15] Q&A Session Summary Question: Are there changes likely in ROI projects over the next three years? - Management aims to remain in the 7% to 9% of revenue range for total capital spending, with ongoing evaluations of projects [40][41] Question: What are the expectations for labor costs over the next year? - Labor costs in resort markets have cooled, with wages up about 1.5 points, while urban markets may see increases of 3% to 5% [43][44] Question: What is the outlook for major convention markets for next year? - There is a slight negative bias in convention markets like Chicago and DC, with Boston expected to be flat [46][47] Question: How does the shift in booking trends impact the outlook? - The focus on leisure and resort assets is a long-term strategy, with short-term challenges due to economic pressures [50][52] Question: What is the anticipated EBITDA disruption from the Orchard Inn repositioning? - Expected EBITDA disruption is about $0.5 million, with a goal of achieving a $250 ADR lift for the Orchards [81][83]