DiamondRock Hospitality pany(US:DRH)2023-08-06 06:20Financial Data and Key Metrics Changes - Total revenues in Q2 2023 were $289 million, nearly 1% ahead of 2022, with hotel adjusted EBITDA at $93.6 million, which was $3.2 million ahead of 2019 [78][30][29] - Portfolio RevPAR increased by 0.5%, with total revenue up 0.9% in the quarter, driven by a 7.1% increase in urban hotels and an 8.3% decrease in the resort portfolio [29][30] - Adjusted EBITDA was $85.8 million, impacted by disruptions and property tax refunds from the previous year [30][31] Business Line Data and Key Metrics Changes - Urban hotels experienced nearly flat performance compared to 2019, down just 0.7%, while resorts were robustly 33% higher [29] - Group room nights increased by 4.6% compared to Q2 2022, but were still 11.1% behind 2019 levels [88] - Business transient demand showed mixed results, with strong performance in cities like New York but continued weakness in San Francisco [109][95] Market Data and Key Metrics Changes - Group demand is solid in Boston, San Diego, and Washington, D.C., but Chicago, the largest group market, is expected to be weaker in the second half of the year [39][39] - Florida continues to show a year-over-year trend, with RevPAR for non-Florida hotels increasing by 3.7% [29] - The leisure segment in the U.S. is projected to hit a new record next year, with occupancy expected to exceed 1.3 billion hotel nights [47][46] Company Strategy and Development Direction - The company is focusing on capital allocation towards high IRR opportunities, including internal ROI projects and share repurchases [34][35] - The acquisition of Chico Hot Springs Resort in Montana is seen as a strategic move to enhance the portfolio, with plans to implement best practices and modern revenue management systems [54][55] - The company remains committed to a strong balance sheet with low leverage and significant liquidity, allowing for opportunistic investments [37][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of business travel and the normalization of leisure travel patterns, expecting improvements post-Labor Day [95][39] - The company anticipates that renovations and repositionings will negatively impact revenue growth in the second half of the year by approximately $4 million [41] - Management highlighted the importance of demographic changes driving leisure travel, with a significant increase in travel by millennials and baby boomers [91] Other Important Information - The company has completed or is nearing completion of $58 million in ROI repositionings at 16 of its 36 properties [51] - The company is exploring dispositions to fund additional repurchases and future growth opportunities [36] - The impact of increased property insurance costs and property tax comparisons is expected to be a headwind in the second half of 2023 [43][42] Q&A Session Summary Question: What is the expected year-over-year impact from ROI projects and acquisitions? - Management estimates a few million dollars from acquisitions and additional contributions from ROI projects, with specific expectations for Chico and Dagny [66][67] Question: How is the performance of the ex-Florida portfolio and potential for recovery? - Management noted that the Florida Keys are stabilizing, with expectations for normalization by late 2023 [68][69] Question: What is the outlook for group bookings in Chicago? - Management indicated that 2024 looks strong for Chicago, with solid bookings expected [131] Question: How does the company view the acquisition environment? - The acquisition volume is down significantly, but the company sees advantages as a public entity with lower borrowing costs [119][120] Question: What are the plans for the new acquisition in Montana? - The company plans to enhance the property and build relationships within the community for future opportunities [122][121]