DiamondRock Hospitality pany(US:DRH)2025-02-28 17:15Financial Data and Key Metrics Changes - Comparable total RevPAR increased by 5.5% over 2023, exceeding expectations and showing a growth of over 250 basis points compared to the previous quarter [4][12] - Hotel adjusted EBITDA for Q4 was $75.9 million, reflecting a 16.4% growth over 2023, with a margin increase of 250 basis points [12] - Corporate adjusted EBITDA was $68.7 million, representing nearly 20% growth over 2023 [12] - Adjusted funds from operations (AFFO) was $0.24 per share, a 33% increase over 2023 [12] Business Line Data and Key Metrics Changes - Urban hotels saw RevPAR increase by 8.2%, driven by a 5.4% increase in average daily rate [5] - Resort hotels experienced mixed results, with RevPAR declining by 150 basis points, while out-of-room spending helped maintain total revenue with only a 10 basis point decline [8] - Group room revenues increased by 8.1% over 2023, with urban hotels seeing a 10.2% increase [10] Market Data and Key Metrics Changes - Florida resorts faced a 5.8% decline in RevPAR, attributed to post-pandemic headwinds [9] - Urban markets, particularly in December, showed exceptional growth with RevPAR up 13.2% [7] Company Strategy and Development Direction - The company aims to focus on increasing earnings per share and free cash flow per share, which will allow for share repurchases and dividends [42][43] - Capital expenditures were rationalized to minimize costs and maximize impact, with ongoing renovations and repositioning projects [22][26] - The company is actively looking for opportunities to prune hotels from its portfolio to realize attractive pricing [35] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the Florida market, expecting it to stabilize in the latter half of 2025 [60] - The company anticipates RevPAR growth of 1% to 3% for 2025, with group revenue expected to improve [37][41] - There is recognition of economic uncertainties, including inflation and job market pressures, which may impact leisure travel [62] Other Important Information - The company announced a $0.20 per share stub dividend in addition to the regular $0.03 per share quarterly dividend for 2024, with plans for a regular quarterly dividend of $0.08 per share in 2025 [13][15] - The company is reviewing refinancing options for maturing loans, with expectations of slightly lower overall interest expenses in 2025 [16][17] Q&A Session Summary Question: Can you provide insights on leisure group revenue growth expectations? - Management noted that leisure weakness is primarily in Florida, where their portfolio is more broadly appealing compared to luxury properties elsewhere [46][47] Question: What is the current state of the transaction market? - The transaction volume is down significantly, about 75% compared to pre-COVID levels, with few transactions closing [50][52] Question: Are further hotel-level operating efficiencies expected in 2025? - Management expects a slowing of expense growth due to reduced labor growth as group pace slows, while focusing on productivity improvements [55][56] Question: What are the expectations for labor and wage growth in 2025? - Wages and benefits are expected to grow around 4% in 2025, with a noted slowdown in labor growth [73][74] Question: Will a stub dividend be paid in 2025? - Management expects to pay a stub dividend in the fourth quarter, despite a loss on the sale of the Westin [79] Question: How is the company managing capital expenditures? - The company is being disciplined about capital expenditures, focusing on projects with better ROI and potentially delaying others [85][88]