DiamondRock Hospitality pany(DRH) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenues for DiamondRock's entire portfolio in Q3 2023 were $277.1 million, marking the highest third-quarter revenue in the company's history, despite being only modestly up from 2022 [77] - RevPAR in Q3 contracted 1.1% compared to the same period in 2022 but was up 7.6% compared to 2019, exceeding expectations [76] - Hotel adjusted EBITDA in Q3 was $81.1 million, which was $6.6 million or 8.9% ahead of 2019 [77][91] Business Line Data and Key Metrics Changes - Group business in Q3 was strong, with notable increases at various properties: Westin DC up 33%, Westin Boston up 10.4%, and Westin San Diego up 15.6% [78] - Resort RevPAR increased nearly 24% over 2019, despite an 8.2% contraction compared to last year [69] - The Dagny in Boston is projected to increase its EBITDA by $4 million next year, stabilizing at over $15 million of annual EBITDA [71][101] Market Data and Key Metrics Changes - Urban total RevPAR was up 2.9% in Q3 over last year, while resorts saw a significant sequential improvement [67] - Forward bookings for group revenue are pacing up over 23% compared to the same time last year, with Chicago Marriott up over 40% [90] - The company noted that the number of nights of locational flexibility has doubled post-pandemic, impacting demand positively [70] Company Strategy and Development Direction - DiamondRock's strategy focuses on maintaining a high-quality portfolio with nearly 95% of properties unencumbered by long-term management contracts, allowing for greater operational control [66] - The company has invested over $0.5 billion in renovations and repositioning over the last five years, enhancing competitiveness [81] - Future ROI projects include converting the Hilton Burlington to a lifestyle hotel and repositioning the Bourbon Orleans in New Orleans [82][115] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the travel industry's future, citing strong demand and limited hotel supply in most markets [162] - The company anticipates that 2024 will see improved expense comparisons and continued growth in group demand [99][162] - Management acknowledged the current economic environment's impact but remains constructive on travel demand and hotel performance [100][162] Other Important Information - The company repurchased over 1.8 million shares for approximately $14.7 million, indicating a focus on maximizing shareholder value [97] - The company is testing the market with potential dispositions, primarily in urban markets, due to better liquidity for smaller transactions [177] - The company expects a $6.2 million increase in property taxes in Q4 compared to last year [125] Q&A Session Summary Question: What are the trends in resort performance? - Management noted a sequential improvement in resort performance, with some markets stabilizing and others reaccelerating [4][10] Question: How does the company view the normalization period in resorts? - Management believes the normalization period is starting to improve and expects further reacceleration in 2024 [3][5] Question: What is the outlook for group revenue in 2024? - Group revenue is pacing up over 23% compared to the same time last year, with strong forward bookings in key markets [90][144] Question: How is the company managing expenses and margins? - Management indicated that expenses have come down substantially year-over-year, with a focus on improving productivity per room [14][99] Question: What is the company's strategy regarding asset sales? - The company is testing the market for potential dispositions, primarily focusing on urban assets below $100 million due to current market conditions [177]