Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — 2019 NAREIT REITworld
28 slides from Diamondrock Hospitality's conference presentation, Nov 12, 2019
Slide 1: 2019 NAREIT REITworld
2019 NAREIT REITworld Cavallo Point, the Lodge at Golden Gate Bridge November 2019 1
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements made during this presentation are forward-looking statements that are subject to risks and uncertainties. Forward-looking statements generally include the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “project,” “will,” “intend” or other s
Slide 3: DiamondRock at a Glance
DiamondRock at a Glance KEY STATISTICS RECENT HIGHLIGHTS Hotels (Rooms) 31 (>10K) • Q3 2019 Results Enterprise Value $3.1B • Total RevPAR up 3.1% • RevPAR up 1.6% Market Cap $2.1B • EBITDA Margin of 30.67% • Adj FFO per share of $0.27 Enterprise Value / Key ~$309K Dividend Yield 4.9% • 0.3MM common
Slide 4: Key Points
Key Points 1 Resort Focus Capturing Secular Growth ROI Projects 2 Creating Shareholder Value 3 Frenchman’s Relaunch Accelerating Earnings Growth Opportunistic Recycling 4 Closing the Gap to NAV Per Share 5 Asset Repositioning Unlocking Asset Value 6 2020 Setup Group Pace up 17% 4
Slide 5: Resort Strategy Rationale
RESORT STRATEGY RATIONALE 5 The Landing, Lake Tahoe
Slide 6: Research Demonstrates Small Resorts Outperform
Research Demonstrates Small Resorts Outperform • According to CBRE/PKF research study, small resorts(1) have: • Less downside risk due to larger stream of reliable non-rooms revenue • Preserved the most ADR through the recession of the early 2000s • Achieved superior levels of ADR growth since 2009
Slide 7: DRH Lifestyle & Independent Strategy
DRH Lifestyle & Independent Strategy RATIONALE FOR TARGETING LIFESTYLE CURRENT HOTELS, INDEPENDENTS, & SOFT BRANDS ALLOCATION(1) • To grow with shift towards experiential travel Lifestyle, Independents, & Soft Brands • Reduces reliance on traditional brands 21% Traditional • Balances portfolio Brand
Slide 8: Consumers Spending More on Experiences Than Material Goods
Consumers Spending More on Experiences Than Material Goods Indexed Spending Growth (1980-2017) 15-Year Spending CAGR (2002-2017) 1,000 5.0% 800 Shift in 600 Consumer Spending 3.0% 2.2% 400 200 0.9% 0 1980 1985 1990 1995 2000 2005 2010 2015 Motor Vehicles Home Jewelry and Consumer Furnishings Watches
Slide 9: Strong Resort Market Presence
Strong Resort Market Presence Approximately 1/3 of portfolio located in destination resort markets. 9
Slide 10: Resort Thesis Already Proven Successful
Resort Thesis Already Proven Successful EBITDA Multiple @ EBITDA Increase Investment ($MM) Purchase YE 2018 $MM Burlington Hilton $62 16.5x 8.8x $3.8 Cavallo Point $152 13.8x 13.8x $0.0 Charleston Renaissance $42 11.9x 7.1x $2.6 Fort Lauderdale Westin $166 14.8x 11.1x $4.9 Frenchman's Reef & Morning
Slide 11: ROI Pipeline
ROI PIPELINE 11 Hotel Emblem, San Francisco
Slide 12: ROI Projects Create $0.78/sh In Value
ROI Projects Create $0.78/sh In Value Incremental Capital Incremental Incremental Property Project Spend EBITDA Value JW Marriott Denver Renovation and Restaurant Repositioning $2.4M $1.25M $17M Hotel Emblem Complete Renovation and Repositioning $5.1M $1.5M - $1.8M $25M - $30M Sheraton Key West Repo
Slide 13: Frenchman's Update
FRENCHMAN’S UPDATE 13 Noni Beach Resort
Slide 14: Frenchman's Reef Overview
Frenchman’s Reef Overview REBUILD ~$280MM COST: OWNER $55MM* INVESTMENT: INSURANCE ~$290MM CLAIM: Noni Beach Pool Area Rendering Anticipated Anticipated Trial Date Set Branding Established Management Stabilized Project Completion Opening January Marriott/ Selected EBITDA Update Q3 2020 Q4 2020 2020
Slide 15: Best-in-Class Rebuild Team
Best-in-Class Rebuild Team Kollin Altomare Architects WhiteSpace The Johnson Studio (Design) (F&B Design) WhiteSpace (Design) Four Seasons Punta Mita Resort & Spa Four Seasons Scottsdale at Troon North The Ritz-Carlton Grand Cayman Four Seasons Scottsdale at Troon North The Ritz-Carlton Laguna Nigue
Slide 16: Opportunistic Capital Recycling
OPPORTUNISTIC CAPITAL RECYCLING 16 The Chicago Gwen, Luxury Collection
Slide 17: Opportunistic Capital Recycling
Opportunistic Capital Recycling Similar to most lodging REIT peers, DRH currently trades at >25% discount to NAV per share Hotel NOI Cap Rate Estimated Value(2) Region TTM Q3 2019 Low Mid High Low Mid High Mid / Key(3) Boston $35.2 6.0% 6.5% 7.0% $503.4 $542.1 $587.2 $453 Chicago $34.7 6.5% 7.0% 7.5
Slide 18: DRH Return of Capital: $1.13B Since IPO
DRHDRH Return RETURN ofOF Capital:CAPITAL Return $1.13B Since IPO DRH’s return of capital profile is among the most attractive relative to peers Dividend Yield (1) Dividend + Stock Repurchase Yield Dividend + Stock Repurchase Payout (2) Ratio (3) SVC 8.4% APLE 10.0% PK 102% RLJ 7.8% RLJ 9.1% APLE 93
Slide 19: $300MM of Investment Capacity
$300MM of Investment Capacity CONSERVATIVE BALANCE 2019 CREDIT RECAST SHEET STRATEGY (1) EXTENDED MATURITIES $600 • 23 unencumbered hotels $500 • Well-laddered maturity schedule with no $400 maturities until November 2020 $300 • $300 million of investment capacity $200 • No more than 35% floating ra
Slide 20: Asset Repositioning
ASSET REPOSITIONING 20 Havana Cabana
Slide 21: Short Term Agreements Driving Value
Short Term Agreements Driving Value ~75% of EBITDA Not Encumbered by Brand and Management in 2026 One of the least encumbered portfolios among all full-service REITs 2019 2026 % of Portfolio EBITDA % of Portfolio EBITDA 28% 58% 3 assets 72% 42% Become Unencumbered Management 21% 32% 43% 4 assets 44%
Slide 22: High Quality Portfolio in Key Gateway Markets
High Quality Portfolio in Key Gateway Markets Approximately 2/3 of portfolio located in top, gateway markets. 22
Slide 23: 2020 Outlook
2020 OUTLOOK 23 Boston Harbor Cityscape
Slide 24: DRH 2020 Outlook Favorable
DRH 2020 Outlook Favorable • Total 2020 booking pace up 17%+ • Chicago combined pace up over 20% • Boston combined pace up nearly 40% Chicago • NYC supply additions to decline by double digits from 2019 increase • Frenchman’s Reef Marriott Resort & Spa and Noni Beach, an Autograph Hotel Reopening 20
Slide 25: DiamondRock Hospitality
DIAMONDROCK HOSPITALITY
Slide 26: Appendix
APPENDIX 26 Shorebreak Hotel
Slide 27: Summary of DRH's Historic ESG Performance
Summary of DRH’s Historic ESG Performance Summary of DiamondRock’s Historic ESG Performance 2015 2016 2017 2018 Current 2019 GRESB Annual Results DRH GRESB Score 55 48 51 78 81 Lodging Peer Score Average(1) 54 51 58 62 69 Index to Peer Score Average 103% 95% 87% 126% 117% ISS Quality Ratings Annual
Slide 28: L'Auberge de Sedona
28 L’Auberge de Sedona