Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Investor Presentation (November 2017)
34 slides from Diamondrock Hospitality's investor presentation, Nov 13, 2017
Slide 1: 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 2: DiamondRock at a Glance
DiamondRock at a Glance KEY STATISTICS Hotels (Rooms) 28 (9,619) Enterprise Value $3.1B Market Cap $2.3B Enterprise Value / Key ~$320K Dividend Yield 4.4% Net Debt/EBITDA(1) 3.1x Based on PF 2017F EBITDA and 2017F year-end net debt. Pro forma for acquisition of L’Auberge de Sedona and Orchards Inn S
Slide 3: Why DiamondRock?
Why DiamondRock? Premier Hotel Portfolio 1 5 6 Top-tier RevPAR portfolio among lodging REIT peers Strategically diversified brands, managers, and geographic distribution Intense Asset Management Focus Q3 hotel operating expense growth limited to 1.6% New asset management initiatives driving results,
Slide 4: High Quality Portfolio With Urban and Resort Concentration
High Quality Portfolio With Urban and Resort Concentration 5 JW Marriott Denver Hotel Rex Salt Lake City Marriott Chicago Marriott The Gwen, A Luxury Collection Hotel Hilton Burlington Hilton Boston Boston Westin Lexington Hotel NYC Westin San Diego L’Auberge De Sedona Orchards Inn Sedona Worthingto
Slide 5: High Quality Portfolio With Urban and Resort Concentration
( High Quality Portfolio With Urban and Resort Concentration Ft. Lauderdale Key West
Slide 6: Continued Strength in 2018
Continued Strength in 2018 DRH Chicago Portfolio to Significantly Outperform 1 Disruption from Renovations and Natural Disasters in 2017 2 Stability in NYC Market 3 Other Key Markets to Outperform including Denver, San Diego 4 1H18 to benefit from renovations in Charleston, Sonoma, Worthington, and
Slide 7: 2018 DRH Key Market Drivers
2018 DRH Key Market Drivers Market (% of 2017F EBITDA) 2018 Outlook 2018 Demand(1) 2018 Supply(1) DRH / Market Commentary: Chicago (13%) 2.1% 2.2% Strong citywide calendar with combined Marriott and Gwen group pace up ~13% in 2018 Chicago Gwen and Marriott to outperform off of renovation tailwinds F
Slide 8: Chicago to Outperform in 2018
Chicago to Outperform in 2018 The Chicago Marriott and the Gwen are expected to benefit from continued ramp post-renovation and a strong citywide calendar Combined group pace up 13.4% in 2018 Chicago Marriott completing final stage of $110M renovation in Q1 2018 Benefits from renovation already bein
Slide 9: Recent Repositionings to Drive Value in 2017 and 2018
Recent Repositionings to Drive Value in 2017 and 2018 Rebranded to Luxury Collection $27M comprehensive renovation completed in April 2017 1,200bps market share opportunity $3M NOI upside opportunity The Gwen 4th phase of $110M renovation to be completed Winter 2017-18 2018 group pace up double digi
Slide 10: DRH Trading at Compelling Valuation
DRH Trading at Compelling Valuation Source: Baird, FactSet. Data as of 11/7. 2018 Consensus EBITDA Multiple DRH currently trading at 0.8x discount to peer group Peer Average: 12.9x 15.5x 13.7x 12.8x 12.7x 12.6x 12.2x 12.1x 12.0x 11.6x PEB CHSP SHO LHO HST XHR DRH HT PK
Slide 11: 2018 Supply Outlook
2018 Supply Outlook Source: STR, DRH Estimates. San Francisco New York Chicago Boston Washington, DC Salt Lake City San Diego Fort Lauderdale Fort Worth Denver Sedona Vail DRH Supply Outlooks 2018 Supply Outlook Weighted average supply of 2.1% expected in 2018 Portfolio supply expected to modestly d
Slide 12: Case Studies: Creating Value Through Renovations and Repositionings
Case Studies: Creating Value Through Renovations and Repositionings 13
Slide 13: Case Study: Frenchman's 2011 Renovation
Case Study: Frenchman’s 2011 Renovation Pre-hurricane ’17 forecast and ’18 budget Comprehensive $45M renovation in 2011 Post-Renovation CAGR (2011-2018): 10.4% Comprehensive $45M renovation of guestrooms and public spaces in 2011 drove strong growth in EBITDA, with 2016 EBITDA growing 75% since prio
Slide 14: Case Study: Worthington Renaissance
Case Study: Worthington Renaissance Renovated Guestroom Old Guestroom Impressive double-digit RevPAR growth since the renovation: Q3 RevPAR grew 46% Group room revenue up 27% and business transient rooms revenue up 79% RevPAR index has grown 8 out of 8 months since the renovation Average RevPAR inde
Slide 15: Case Study: Hilton Boston Downtown
Case Study: Hilton Boston Downtown DRH Basis of $452K/Key for 403-room hotel 41-key addition added >$15M to hotel’s NAV Added 41 additional guestrooms to hotel by converting under-utilized suites into two guestrooms in 2014 with over 20% IRR Upgraded ~90 rooms in the process Utilized DRH revenue man
Slide 16: Case Study: Westin Boston Waterfront
Case Study: Westin Boston Waterfront DRH Basis of $441K/Key for 793-room hotel Headquarters hotel for the Boston Convention and Exhibition Center, the largest convention center in the Northeast INVESTMENT HIGHLIGHTS RECENT VALUE-ADD PROJECTS Creation of 12,500 sq. ft. of meeting space in 2014 yieldi
Slide 17: Case Study: Westin Boston Waterfront
Case Study: Westin Boston Waterfront DRH Basis of $441K/Key for 793-room hotel Headquarters hotel for the Boston Convention and Exhibition Center, the largest convention center in the Northeast RECENT VALUE-ADD PROJECTS, Creation of 12,500 sq. ft. of meeting space in 2014 yielding approx. $3M in rev
Slide 18: Proven Asset Management Track Record
Proven Asset Management Track Record (1) Peer group includes Chesapeake, Hersha, Host, LaSalle, Pebblebrook, and Sunstone. (1) Hotel Adj. EBITDA Margin GrowtH: 2013-2016 +355bps OUTSIZED REVPAR EXPANSION SINCE 2013 +12.6% (1) (1) COO Tom Healy Brings New Initiatives Exploring new opportunities in la
Slide 19: Asset Management – Q3 2017 Successes
Asset Management – Q3 2017 Successes Lexington On Site Asset Management New Leadership Team Sales Strategy Redeployment Facility Fee Implementation Full Year GOP is currently forecasting to beat 2017 Budget by $4.1M Chicago Marriott Market Facing New Supply Transient Segmentation Improvement Cost Co
Slide 20: Case Study: Labor Operating Initiatives
Working with third-party to reduce labor expenses and improve productivity without sacrificing quality of service Case Study: Labor Operating Initiatives Year 1 Potential Savings Observe Visited 12 hotels to evaluate existing labor and productivity standards Studied historical productivity by job An
Slide 21: Case Study: Food Costs
Case Study: Food Costs Purchasing Management Operational Optimization L’Auberge de Sedona - Increased coffee price point, resulting in $26,000 of additional annual revenue L’Auberge de Sedona - Modifying specifications for Lamb Racks resulted in $38,000 annual savings (55%) Identifying opportunities
Slide 22: Marriott - Starwood Combination Fuels Growth
24 Marriott - Starwood Combination Fuels Growth DRH Portfolio has 20 of 28 Hotels in new-Marriott brand family Marriott most powerful hotel brand company in the world: Largest reservation system: 1.2M hotel rooms worldwide Most powerful loyalty program: 100M members globally, growing at 1M members p
Slide 23: Capital Allocation Opportunities
Capital Allocation Opportunities
Slide 24: Creating Value Throughout Cycle
26 Creating Value Throughout Cycle Cost of Capital Higher Lower Match-fund Near-term Accretive Acquisitions By Issuing Equity At or Above NAV Consider Opportunistically Raising Equity Above NAV, if appropriate Limit Non-core Asset Sales Sell Non-Core Assets Consider Accretive Acquisition Opportuniti
Slide 25: Acquisition of L'Auberge de Sedona and Orchards Inn Sedona
Acquisition of L’Auberge de Sedona and Orchards Inn Sedona Iconic assets with immediate asset management upside in attractive, high-growth resort market #1 Conde-Nast rated hotel in Southwest Sourced in off-market deal Recycled capital from dispositions at a 12.8x multiple and $120 RevPAR into 12.6x
Slide 26: Acquisition of L'Auberge de Sedona and Orchards Inn Sedona
0 Acquisition of Auberge de Sedona and Orchards Inn Sedona + Iconic assets with immediate asset management upside in attractive, high-growth resort market + #1 Conde-Nast rated hotel in Southwest + Sourced in off-market deal + Recycled capital from dispositions at a 12.8x multiple and $120 RevPAR in
Slide 27: Fortress Balance Sheet
Fortress Balance Sheet 20 UNENCUMBERED HOTELS 8 Encumbered Hotels Boston Westin Courtyard Midtown East Salt Lake City Marriott Westin Washington, DC Sonoma Renaissance Westin San Diego Worthington Renaissance JW Marriott Cherry Creek Unencumbered Pool Hilton Boston The Gwen Vail Marriott Courtyard D
Slide 28: Asset Management To Fuel Outperformance
30 Asset Management To Fuel Outperformance High Quality, Well Diversified Portfolio Portfolio Well-Positioned for 2018 Strategic Capital Allocation Creating Value Throughout Cycle (>$350M in Investment Capacity) Unique, Low Levered Balance Sheet The Lexington New York City Hilton Garden Inn Times Sq
Slide 29: Key Takeaways
Key Takeaways Y High Quality, Well Diversified Portfolio Y Strategic Capital Allocation Creating Value Throughout Cycle (>$350M in Investment Capacity) Y Portfolio Well-Positioned for 2018 v Asset Management To Fuel Outperformance v Unique, Low Levered Balance Sheet Westin Washington, D.C.
Slide 30: 2017 Renovation Program
2017 Renovation Program Significant Capital Projects Property Project Approx. ’16-’17 Spend($M) 4Q16 Disruption 1Q17 Disruption 2Q17 Disruption Charleston Renaissance Guestroom Renovation $8M 2.1K Rooms of 15.3K Total 5.0K Rooms of 14.9K Total -- Chicago Marriott Guestroom, Fitness Center and Meetin
Slide 31: Recent Renovations
Recent Renovations Chicago Marriott $110M Rooms Renovation The Gwen, Luxury Collection $27.5M Rooms Renovation Before After
Slide 32: Recent Renovations (cont'd)
Recent Renovations (cont’d) Charleston Renaissance $6.3M Rooms Renovation Sonoma Renaissance $7.3M Rooms Renovation Worthington Renaissance $18.1M Rooms Renovation Before After
Slide 33: Creating Value Through Opportunistic Dispositions
Creating Value Through Opportunistic Dispositions Orlando Airport Marriott Hilton Minneapolis HGI Chelsea Weighted Average Total Consideration(2) $67M $143M $65M $275M 2015 RevPAR $92.21 $115.44 $219.97 $119.78 TTM NOI Cap Rate(3) 9.7% 7.6% 6.6% 7.8% TTM NOI Cap Rate w/ Capital(3) 7.5% 6.3% 5.9% 6.6
Slide 34: Creating Value Through Opportunistic Dispositions
( Creating Value Through Opportunistic Dispositions ‘Sold three non-core hotels in 2016 for total of $275M: IMPROVED PORTOLIO QUALITY?) + Hilton Garden Inn Chelsea = ECS TEU RevPAR Hotel Ad EBITDA ener ees _ argins + Hilton Minneapolis +88 7 Fa bps ~ 31.56% = Ground lease, low RevPAR, brand-managed,
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