Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Nareit Conference November 2022
38 slides from Diamondrock Hospitality's conference presentation, Nov 14, 2022
Slide 1: Nareit Conference November 2022
NAREIT CONFERENCE NOVEMBER 2022
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
Slide 3: Key Takeaways and Highlights
KEY TAKEAWAYS AND HIGHLIGHTS ROI PROJECTS KEY TAKEAWAYS 1. Record Third Quarter Revenue and Profits - +8.7% RevPAR - +11.4% Total RevPAR 2. Reinstated Common Dividend 3. Completed $1.2B Refinancing 4. Repurchased $12M of Common Stock 5. ESG Excellence - GRESB Sector Leader (Hotels/America) - 4 Green
Slide 4: Portfolio
4 PORTFOLIO Tranquility Bay Resort
Slide 5: DiamondRock at a Glance
DIAMONDROCK AT A GLANCE 9,548 ROOMS 34 PROPERTIES 23 GEOGRAPHIC MARKETS BALANCE SHEET SUMMARY DIVERSIFIED GEOGRAPHIC MIX Net Debt1 to LTM EBITDA2 Total Debt1 % of Debt at Fixed Rate1 DIVERSIFIED PORTFOLIO PRO FORMA Q3 2022 $1.2B 52% 4.2X % of 2019 Pro Forma EBITDA URBAN 56% LUXURY RESORT 13% LIFESTY
Slide 6: Portfolio: Data Table
PORTFOLIO: DATA TABLE 6 6Note: 2021A results used for Henderson Beach Resort, 2022 Forecast used for Kimpton Goodland, 2019A results used for all other hotels. 2019 PRO FORMA KEYS REVPAR ($) TREVPAR ($) REVENUE/KEY ($000s) EBITDA/KEY ($000s) % of 2019A EBITDA LUXURY RESORT 930 $281 $489 $179 $48 15%
Slide 7: Strong Resort Market Presence
STRONG RESORT MARKET PRESENCE 7 MARATHON, FL DESTIN, FL HENDERSON BEACH RESORT CAVALLO POINT TRANQUILITY BAY RESORT VAIL, CO DESTIN, FL THE HYTHE, A LUXURY COLLECTION HOTEL HENDERSON PARK INN FORT LAUDERDALE, FL WESTIN FORT LAUDERDALE BEACH RESORT FORT LAUDERDALE, FL SEDONA, AZ SONOMA, CALAKE TAHOE,
Slide 8: High Quality Portfolio in Key Gateway Markets
HIGH QUALITY PORTFOLIO IN KEY GATEWAY MARKETS 8 ATLANTA, GA ATLANTA MARRIOTT ALPHARETTA BOSTON, MA NEW YORK, NY FORT WORTH, TXDENVER, CO CHICAGO, IL CHICAGO MARRIOTT MAGNIFICIENT MILE WASHINGTON, DC WASHINGTON, DC SAN DIEGO, CA HILTON BOSTON DOWNTOWN-FANEUIL HALL BOSTON, MA NEW YORK, NY WESTIN BOSTO
Slide 9: Portfolio: Operator and Guest Mix Diversification
PORTFOLIO: OPERATOR AND GUEST MIX DIVERSIFICATION Note: % of 2019 proforma EBITDA, 2022 projected EBITDA used for Kimpton Ft. Lauderdale 9 BENEFITS OF SHORT-TERM AGREEMENTS ■ SUPERIOR COST CONTROLS ■ Utilize most cost-effective procurement & sourcing ■ Identify cost-effective product alternatives ■
Slide 10: Strategic Portfolio Changes Over the Last Years
STRATEGIC PORTFOLIO CHANGES OVER THE LAST 10 YEARS PORTFOLIO MIX AVERAGE REVPAR UNENCUMBERED BY MANAGEMENT 2012 CURRENT 10 $134 $187 17% / 83% Leisure/Resort Urban 44% / 56% Leisure/Resort UrbanUrban Lifestyle included in Leisure/Resort 67% 6% >> MORE DIVERSIFIED >> >> 40% INCREASE >> >> FEWER ENCUM
Slide 11: Why DiamondRock
WHY DIAMONDROCK Henderson Beach Resort
Slide 12: DiamondRock Is Positioned for Outsized Growth
DIAMONDROCK IS POSITIONED FOR OUTSIZED GROWTH POSITIVE MARKET OUTLOOK OPERATIONAL EXCELLENCE 2023 – 2024 SET UP COMPELLING ROI PIPELINE CAPACITY FOR GROWTH ESG EXCELLENCE 1 2 3 4 5 12 THE LODGE AT SONOMA 6
Slide 13: Positive Market Outlook
POSITIVE MARKET OUTLOOK The Lodge at Sonoma, Autograph Collection
Slide 14: Strong Macro Fundamentals
50% 60% 70% 80% 90% 100% 110% 120% 130% 2018 2019 2020 2021 2022 Nominal GDP RevPAR STRONG MACRO FUNDAMENTALS Runway remaining for recovery compared against GDP 14 GDP AND REVPAR INDEXED TO 2018 13% Upside To Trendline 122% 108%
Slide 15: Long Term Supply & Demand Trends
LONG TERM SUPPLY & DEMAND TRENDS 15 Undersupply of Leisure Hotels Should Benefit From Accelerating Demand 0.58% 1.27% Leisure Set Urban Set 2000-2020 Supply CAGR 2.7 1.3 Newly Flexible Days for U.S. Office Workers Total U.S. 2019 Room Night Demand New “Work from Anywhere Paradigm” Incremental Days o
Slide 16: Lodging as an Inflationary Hedge
LODGING AS AN INFLATIONARY HEDGE Hotel NOI growth has historically outpaced inflation, with smaller resorts having consistently higher RevPAR, even during recession years; Household income continues to break away from medium-term trend 16 • Healthy labor market • Wealthier average consumer and high-
Slide 17: Durability of Leisure Rates
DURABILITY OF LEISURE RATES Leisure-focused markets have consistently outperformed during economic crises, Resorts benefit from higher RevPAR starting point relative to 2019 17
Slide 18: Recovery of Urban Markets
RECOVERY OF URBAN MARKETS Remote and hybrid work models are boosting travel with longer, blended trips and more frequent, smaller business travel; Skift estimates Digital Nomads to be a new $1B market in the US Urban Occupancy vs 2019 18 -43% -33% -24% -19% -23% -11% -11% -14% -7% 1Q 21 2Q 21 3Q 21
Slide 19: Operational Excellence
OPERATIONAL EXCELLENCE The Gwen, a Luxury Collection Hotel
Slide 20: 2022 YTD Operating Results
2022 YTD OPERATING RESULTS (1) Comparable operating information excludes the Kimpton Fort Lauderdale Beach Resort as it was not operating in 2019 (2) Preliminary results (3) “Resort/Lifestyle” refers to Luxury Resort, Lifestyle Resort, and Urban Lifestyle hotels (4) “Urban” refers to Urban Gateway h
Slide 21: Consistent Outperformance Against Peers
CONSISTENT OUTPERFORMANCE AGAINST PEERS QUARTERLY REVPAR GROWTH (vs. 2019) 21Source: Company filings (1) Excludes DRH Q3 2022 PEER PERFORMANCE (vs. 2019) DRH XHR HST APLE PEB RLJ SHO PK AVG1 ADR Growth +18% 16% 21% 13% 20% 6% 16% 8% +14% Occupancy Growth -8% -16% -14% -5% -15% -10% -15% -15% -13% Re
Slide 22: Robust Revenue and EBITDA Recovery
34% 41% 48% 50% 56% 64% 92% 82% 76% 82% 84% 100% 78% 98% 106%104%107%110%113%110%112% 0% 20% 40% 60% 80% 100% 120% 140% % o f 2 01 9 Co m pa ra bl e To ta l Re ve nu e ROBUST REVENUE AND EBITDA RECOVERY 22 ■ CONSUMER SPEND SHIFT Consumers continue to spend on experiences rather than goods REVENUE RE
Slide 23: 2023 – 2024 Setup
2023 – 2024 SETUP Kimpton Palomar Phoenix
Slide 24: 2023-2024 Positioned for Outsized Growth
24 2023-2024 POSITIONED FOR OUTSIZED GROWTH 24 LIFESTYLE/RESORT PORTFOLIO DRIVERS URBAN PORTFOLIO DRIVERS HOTEL CLIO, A LUXURY COLLECTION HOTEL STRONG URBAN RATES & POSITIVE DEMAND TRAJECTORY • ADR up +5% vs Q3’19, Over 6pp of occupancy upside to Q3’19 BUSINESS TRANSIENT GAINING MOMENTUM • Q3 BT rev
Slide 25: Diversified Segmentation & Positive Operating Trends
DIVERSIFIED SEGMENTATION & POSITIVE OPERATING TRENDS Group 23% Business Transient 28% Leisure Transient 49% 2022 YTD SEGMENTATION Q3’22 YTD Revenue BUSINESS TRANSIENT RECOVERY MID-WEEK URBAN OCCUPANCY IMPROVING GROUP BOOKING PACE LEISURE DURABILITY 0% 2% 4% 6% 8% 10% 12% Q1'20 Q2'20 Q3'20 Q4'20 Q1'2
Slide 26: Improving Group Trends
IMPROVING GROUP TRENDS WELL-POSITIONED FOR GROUP RECOVERY 26 ■ ENCOURAGING CITY-WIDE TRENDS Convention centers in major-markets forecast to surpass 2019 room nights CITYWIDE CONVENTION ROOM NIGHTS MARKET % of 2019A EBITDA 2019 2022E 2023E 2024E BOSTON 15% 349,030 330,927 438,015 394,007 CHICAGO 15%
Slide 27: Compelling ROI Pipeline
COMPELLING ROI PIPELINE Margaritaville Beach House Key West
Slide 28: ROI Pipeline: $85MM+ of ROI Projects at 40%+ IRRs
ROI PIPELINE: $85MM+ OF ROI PROJECTS AT 40%+ IRRs 28(1) Estimated Capital Spend and Estimated Incremental EBITDA based upon management proformas (2) Estimated IRRs are calculated assuming a 3-year stabilization period and a 10.0x terminal multiple PROPERTY PROJECT ESTIMATED CAPITAL SPEND(1) UNDERWRI
Slide 29: Recently Completed Projects
PROJECT COST IRR Completed $3.6MM 74% Mar 2022 PROJECT COST IRR Completed $9.8MM 25% Jul 2021 PROJECT COST IRR Completed $8.4MM 88% Nov 2021 JW MARRIOTT CHERRY CREEKSONOMA RENAISSANCE VAIL MARRIOTT 29Estimated IRRs are calculated assuming a 3-year stabilization period and a 10.0x terminal multiple P
Slide 30: Capacity for Growth
CAPACITY FOR GROWTH L’Auberge de Sedona
Slide 31: Completed $1.2B Refinancing in September 2022
(1) Reflects exercise of one-year extension of $300MM term loan COMPLETED $1.2B REFINANCING IN SEPTEMBER 2022 PROFORMA BALANCE SHEET BALANCE SHEET ENHANCED WITH SEPTEMBER REFINANCING 31 $77 $314 $300 $500 0 100 200 300 400 500 600 2022 2023 2024 2025 2026 2027 2028 Mortgages Term Loans and Revolver
Slide 32: Debt Target Leverage Strategy
DEBT TARGET LEVERAGE STRATEGY PEER (NET DEBT + PREFERRED) / EBITDA Source: Baird Comp Sheet (10/28/22), Net Debt + Preferred / EBITDA 2022 32 $600M+ Total Available Liquidity 52% Fixed Rate Debt 88% Unencumbered by Year End 12.1 8.1 7.9 7.1 6.8 6.5 6.3 6.1 4.8 4.5 4.3 4.2 3.2 2.4 AHT INN PEB BHR HT
Slide 33: Recent Acquisitions Outperforming Underwriting
RECENT ACQUISITIONS OUTPERFORMING UNDERWRITING BOURBON ORLEANS HOTEL (NEW ORLEANS, LA) 5 HOTELS ACQUIRED IN THE PAST 2 YEARS • Collectively performing $3M ahead of underwriting for 2022 Hotel Adjusted EBITDA • Total RevPAR projected to be up 39% as compared to 20191 • Collectively, acquisitions have
Slide 34: ESG Excellence
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Slide 35: ISS ESG Rankings and GRESB Results
ISS ESG RANKINGS(2) ISS-ESG CORPORATE RANKING Currently Ranked in Top 1% of all US Real estate companies DiamondRock ranks in the top 5% of the Worldwide Real Estate Sector, earning an ISS ESG Prime designation 3ENVIRONMENTAL 2SOCIAL 4GOVERNANCE GRESB ANNUAL RESULTS 2017 2018 2019 2020 2021 2022 DRH
Slide 36: ESG Metric Highlights
ESG METRIC HIGHLIGHTS ENVIRONMENTAL SOCIAL GOVERNANCE BOARD COMPOSITION • Completed energy-saving pilot programs at two hotels; exploring rollout to remainder of portfolio • Launched composting program at Westin Wash., D.C. City Center; exploring rollout to remainder of portfolio • Installed “smart”
Slide 37: Seasoned Executive Team
SEASONED EXECUTIVE TEAM The Hythe, a Luxury Collection Hotel
Slide 38: Extensive Management and Hospitality Experience
EXTENSIVE MANAGEMENT AND HOSPITALITY EXPERIENCE MARK W. BRUGGER CO-FOUNDER PRESIDENT, CEO AND DIRECTOR • Co-founded DRH in 2004 and successfully led its IPO in 2005 • Named Forbes’ list of America’s Most Powerful CEOs 40 and Under and a finalist for the E&Y Entrepreneur of the Year Award • Extensive
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