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BETHESDA, Md., May 5, 2017-- DiamondRock Hospitality Company (the "Company") (NYSE: DRH), a lodging-focused real estate investment trust that owns a portfolio of 28 premium hotels in the United States, today announced results of operations for the quarter ended March 31, 2017.

First Quarter 2017 Highlights

  • Net Income: Net income was $8.9 million and earnings per diluted share was $0.04.
  • Comparable RevPAR: RevPAR was $161.89, a 1.9% increase from the comparable period of 2016. Renovation disruption negatively impacted the Company's RevPAR growth by approximately 210 basis points.
  • Comparable Hotel Adjusted EBITDA Margin: Hotel Adjusted EBITDA margin was 26.79%, a increase of 5 basis points from the comparable period of 2016. Renovation disruption negatively impacted the Company's comparable Hotel Adjusted EBITDA margins by approximately 76 basis points. Total hotel operating expenses increased approximately 1% from the comparable period of 2016.
  • Adjusted EBITDA: Adjusted EBITDA was $47.3 million.
  • Adjusted FFO: Adjusted FFO was $36.6 million and Adjusted FFO per diluted share was $0.18.
  • Acquisitions: The Company acquired the 88-room L'Auberge de Sedona and the 70-room Orchards Inn for a combined purchase price of $97 million.
  • Chief Operating Officer: Thomas G. Healy joined the Company as Chief Operating Officer and Executive Vice President, Asset Management.
  • Dividends: The Company declared a dividend of $0.125 per share during the first quarter, which was paid on April 12, 2017.

Recent Developments

  • Term Loan: On April 26, 2017, the Company closed on a new five-year $200 million unsecured term loan.
  • Mortgage Loan Repayment: On April 26, 2017, the Company repaid the $170.4 million mortgage loan secured by the Lexington Hotel New York with the proceeds from the new term loan.

Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company stated, "First quarter results benefited from our asset management team's strong execution in limiting total hotel expense growth to approximately 1%. We continued to position the portfolio for success in the quarter with the substantial completion of most of our 2017 renovations.  Additionally, our recent acquisitions, the L'Auberge and Orchards Inn, exceeded underwriting in the first quarter with combined RevPAR growth of approximately 25%.  As we look forward, with approximately $120 million of cash on hand and full capacity available under our $300 million credit facility, DiamondRock is positioned to to take advantage of opportunities as they emerge."

Operating Results

Please see "Non-GAAP Financial Measures" attached to this press release for an explanation of the terms "EBITDA," "Adjusted EBITDA," "Hotel Adjusted EBITDA Margin," "FFO" and "Adjusted FFO"and a reconciliation of these measures to net income. Comparable operating results include our 2017 acquisitions for all periods presented and exclude our 2016 dispositions for all periods presented.  See"Reconciliation of Comparable Operating Results" attached to this press release for a reconciliation to historical amounts.

For the quarter ended March 31, 2017, the Company reported the following:

 

First Quarter

 
 

2017

 

2016

Change

Comparable Operating Results (1)

       

ADR

$218.58

   

$217.33

 

0.6

%

Occupancy

74.1

%

 

73.1

%

1.0 percentage points

RevPAR

$161.89

   

$158.88

 

1.9

%

Revenues

$199.6 million

 

$197.4 million

1.1

%

Hotel Adjusted EBITDA Margin

26.79

%

 

26.74

%

5 basis points

         

Actual Operating Results (2)

       

Revenues

$196.2 million

 

$213.0 million

-7.9

%

Net income

$8.9 million

 

$16.8 million

-$7.9 million

Earnings per diluted share

$0.04

   

$0.08

 

-$0.04

 

Adjusted EBITDA

$47.3 million

 

$50.3 million

-$3.0 million

Adjusted FFO

$36.6 million

 

$42.8 million

-$6.2 million

Adjusted FFO per diluted share

$0.18

   

$0.21

 

-$0.03

 
               

(1)  The amounts include pre-acquisition operating results for Sedona L'Auberge and Sedona Orchards Inn from January 1, 2017 to February 27, 2017 and January 1, 2016 to March 31, 2016. The pre-acquisition operating results were obtained from the seller of the hotels during the acquisition due diligence process. We have made no adjustments to the amounts provided to us by the seller. The pre-acquisition operating results were not audited or reviewed by the Company's independent auditors.  Additionally, 2016 amounts exclude the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

 

(2) Actual operating results for 2016 include the operating results from January 1, 2016 to March 31, 2016 for the three hotels sold during 2016: Orlando Airport Marriott, Hilton Minneapolis and Hilton Garden Inn Chelsea.

 

Hotel Acquisitions

The Company acquired the 88-room L'Auberge de Sedona and the 70-room Orchards Inn Sedona located in Sedona, Arizona for $97 million on February 28, 2017.  The hotels are tracking ahead of the Company's underwriting, with combined RevPAR growth of approximately 25% for the quarter ended March 31, 2017.

Financing Activity

On April 26, 2017, the Company entered into a new five-year $200 million unsecured term loan.  The interest rate on the term loan is based on a pricing grid ranging from 145 to 220 basis points over LIBOR, based on the Company's leverage ratio.  The interest rate is currently 145 basis points over LIBOR.  The proceeds were used to repay the $170.4 million mortgage loan secured by the Lexington Hotel New York and for general corporate purposes.

Capital Expenditures

The Company spent approximately $35.8 million on capital improvements at its hotels during the three months ended March 31, 2017, primarily related to the third phase of the Chicago Marriott Downtown renovation and guest room renovations at the Gwen, Worthington Renaissance, Charleston Renaissance, and The Lodge at Sonoma. The Company expects to spend between $110 million and $120 million on capital improvements at its hotels in 2017.  Significant projects include the following:

  • Chicago Marriott Downtown: The Company recently completed the third phase of the multi-year renovation, which included the upgrade renovation of approximately 340 guest rooms. The Company expects to commence the final phase of the multi-year renovation, which includes renovating the final 258 of 1,200 guest rooms, meeting rooms and certain public spaces, during late 2017 with completion in early 2018.
  • The Gwen: The Company completed the renovation of the hotel's 311 guest rooms in April 2017.
  • Worthington Renaissance: The Company completed the renovation of the hotel's 504 guest rooms in January 2017.
  • Charleston Renaissance: The Company completed the renovation of the hotel's 166 guest rooms in February 2017.
  • The Lodge at Sonoma: The Company commenced the renovation of the hotel's 182 guest rooms in January 2017 and expects to complete the project during the second quarter of 2017.
  • JW Marriott Denver: The Company expects to renovate the hotel's 196 guest rooms, corridors, meeting space and lobby during the seasonally slow period beginning in late 2017 through early 2018.

Balance Sheet

As of March 31, 2017, the Company had $112.4 million of unrestricted cash on hand and approximately $918.0 million of total debt, which consisted of property-specific mortgage debt and a $100.0 million unsecured term loan.  Following the closing of the new term loan, the Company has approximately $120 million of unrestricted cash on hand and approximately $943.3 million of total debt, consisting of property-specific mortgage debt and $300.0 million of unsecured term loans.  The Company has no outstanding borrowings on its $300 million senior unsecured credit facility and 20 of its 28 hotels are unencumbered by debt.

Dividends

The Company's Board of Directors declared a quarterly dividend of $0.125 per share to stockholders of record as of March 31, 2017.  The dividend was paid on April 12, 2017.

Guidance

The Company is providing annual guidance for 2017, but does not undertake to update it for any developments in its business.  Achievement of the anticipated results is subject to the risks disclosed in the Company's filings with the U.S. Securities and Exchange Commission.  Comparable RevPAR assumes that all of the Company's 28 hotels were owned since January 1, 2016.

The Company is maintaining its 2017 guidance as previously reported and expects the full year 2017 results to be as follows:

Metric

Low End

High End

 
 

Comparable RevPAR Growth

-1.0 percent

1.0 percent

 

Adjusted EBITDA

$238.5 million

$251.5 million

 

Adjusted FFO

$193 million

$203 million

 

Adjusted FFO per share (based on 201.5 million shares)

$0.96 per share

$1.01 per share

 

 

The full year guidance range above reflects expected income tax expense of $7.5 to $11.5 million, expected interest expense of $37 million to $38 million and expected corporate expenses of $25 million.

The Company expects approximately 30% to 31% of its full year 2017 Adjusted EBITDA to be earned during the second quarter of 2017.

Selected Quarterly Comparable Operating Information

The following table is presented to provide investors with selected quarterly comparable operating information for 2016.  The operating information includes our 2017 acquisitions for all periods presented.

 

Quarter 1, 2016

Quarter 2, 2016

Quarter 3, 2016

Quarter 4, 2016

Full Year 2016

ADR

$

217.33

 

$

233.36

 

$

224.91

 

$

232.91

 

$

227.36

 

Occupancy

73.1

%

85.4

%

84.0

%

76.1

%

79.6

%

RevPAR

$

158.88

 

$

199.22

 

$

188.88

 

$

177.21

 

$

181.06

 

Revenues (in thousands)

$

197,395

 

$

240,366

 

$

226,957

 

$

214,765

 

$

879,483

 

Hotel Adjusted EBITDA (in thousands)

$

52,775

 

$

85,525

 

$

71,997

 

$

67,070

 

$

277,367

 

        % of full Year

19.0

%

30.8

%

26.0

%

24.2

%

100.0

%

Hotel Adjusted EBITDA Margin

26.74

%

35.58

%

31.72

%

31.23

%

31.54

%

Available Rooms

871,689

 

872,417

 

882,004

 

883,016

 

3,509,126

 

 

To view full financial release and corresponding tables please click the PDF icon or visit:
http://investor.drhc.com/phoenix.zhtml?c=181049&p=irol-IRHome​

About DiamondRock Hospitality Company

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations.  The Company owns 28 premium quality hotels with over 9,600 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment. For further information on the Company and its portfolio, please visit DiamondRock Hospitality Company's website at www.drhc.com.

Contact: Sean Mahoney

(240) 744-1150

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