Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Investor Presentation (February 2020)
39 slides from Diamondrock Hospitality's investor presentation, Feb 26, 2020
Slide 1: Investor Presentation | February 2020
Hotel Emblem, San Francisco Investor Presentation | February 2020 1
Slide 2: Recent Events February 2020
Recent Events February 2020 • DiamondRock announces full year 2020 guidance: RevPAR Growth -0.5% to 1.0% Total RevPAR Growth 0.5% to 3.0% Adjusted EBITDA $245MM - $255MM Adjusted FFO $203MM - $211MM Adjusted FFO per share $1.00/sh to $1.04/sh (based on 203 million diluted shares) • 2020 group pace u
Slide 3: Agenda
Agenda DiamondRock at a Glance 1 Resort Focus Capturing Secular Growth 2 ROI Projects Creating Shareholder Value 3 Frenchman’s Reef Relaunch Accelerating Earnings Growth 4 Opportunistic Recycling Capturing Secular Growth 5 Asset Repositioning Unlocking Asset Value 6 2020 Setup Group Pace up 14% 3
Slide 4: Company Overview
COMPANY OVERVIEW 4 The Landing, Lake Tahoe
Slide 5: DiamondRock at a Glance
DiamondRock at a Glance KEY STATISTICS RECENT HIGHLIGHTS Hotels (Rooms) 31 (>10K) • Q4 2019 Results Enterprise Value $3.1B • Total RevPAR up 1.6% • RevPAR up 1.5% Market Cap $2.1B • EBITDA Margin of 29.25% • Adj FFO per share of $0.27 Enterprise Value / Key ~$305K Dividend Yield 4.8% • Successfully
Slide 6: High Quality Portfolio in Key Gateway Markets
High Quality Portfolio in Key Gateway Markets Approximately 2/3 of portfolio located in top, gateway markets. 6
Slide 7: Strong Resort Market Presence
Strong Resort Market Presence Approximately 1/3 of portfolio located in destination resort markets. 7
Slide 8: Top-Tier Portfolio Quality
Top-Tier Portfolio Quality 2018 Portfolio Average Daily Rate $246 $237 $233 $229 $226 $221 $219 Peer Average: $223 $173 PEB DRH HT SHO HST PK (1) XHR RLJ Top Tier (1) Proforma for Chesapeake merger Source: Company Filings as of Q4 2018. 8
Slide 9: 2020 Full-Year Guidance
2020 Full-Year Guidance 2020 Guidance Metric Low End High End RevPAR Growth -0.5% 1.0% Total RevPAR Growth 0.5% 3.0% Hotel Adjusted EBITDA Growth -1.5% 2.0% Adjusted EBITDA $245 million $255 million Adjusted FFO $203 million $211 million Adjusted FFO per share $1.00 per share $1.04 per share (based
Slide 10: Share Repurchase Plan: 7.8MM Shares
Share Repurchase Plan: 7.8MM Shares • $250MM Plan Authorization • $75MM repurchased at $9.58 per share under current 10b5-1 • $175MM remaining under repurchase authorization Implied Valuation 2019 EBITDA Multiple 11.2x 2019 NOI Cap Rate 8.2% Discount to NAV 25% - 40% 10
Slide 11: Resort Strategy Rationale
RESORT STRATEGY RATIONALE 11 L’Auberge de Sedona
Slide 12: Research Demonstrates Small Resorts Outperform
Research Demonstrates Small Resorts Outperform • According to CBRE/PKF research study, small resorts(1) have: • Less downside risk due to larger stream of reliable non-rooms revenue • Preserved the most ADR through the recession of the early 2000s • Achieved superior levels of ADR growth since 2009
Slide 13: DRH Lifestyle & Independent Strategy
DRH Lifestyle & Independent Strategy RATIONALE FOR TARGETING LIFESTYLE CURRENT HOTELS, INDEPENDENTS, & SOFT BRANDS ALLOCATION(1) • To grow with shift towards experiential travel Lifestyle, Independents, & Soft Brands • Reduces reliance on traditional brands 22% Traditional • Balances portfolio Brand
Slide 14: Consumers Spending More on Experiences Than Material Goods
Consumers Spending More on Experiences Than Material Goods Indexed Spending Growth (1980-2019) 15-Year Spending CAGR (2004-2019) 5.0% 1,000 900 4.0% 800 700 Shift in Consumer 3.0% 600 Spending 500 2.0% 400 300 1.0% 200 100 0.0% 1980 1985 1990 1995 2000 2005 2010 2015 Motor Vehicles Jewelry and Home
Slide 15: Resort Thesis Already Proven Successful
Resort Thesis Already Proven Successful EBITDA Multiple @ EBITDA Increase Investment ($MM) Purchase YE 2019 $MM Burlington Hilton $64 16.5x 8.9x $3.9 Cavallo Point $154 13.8x 13.9x $0.1 Charleston Renaissance $43 11.9x 7.0x $2.9 Fort Lauderdale Westin $167 14.8x 10.7x $5.5 Frenchman's Reef & Morning
Slide 16: ROI Projects
ROI PROJECTS 16 Renaissance Charleston Historic District
Slide 17: ROI Projects Drive Shareholder Value
ROI Projects Drive Shareholder Value Incremental Incremental Incremental Projected Property Project Capital Spend EBITDA Value Project Status Completion ($MM) ($MM) ($MM) Hotel Emblem Complete Renovation and Repositioning $5.1 $1.5M - $1.8 $25 - $30 Complete Q1 2019 Worthington Renaissance Restauran
Slide 18: DRH to Benefit from Renovated Portfolio
DRH to Benefit from Renovated Portfolio >70% of DRH portfolio has been renovated in recent years. CapEx as a % of Revenue (3-Year Average) 13.2% 12.6% 11.7% 11.6% 2020-2022E 7.9% 7.2% 7.0% SHO DRH PEB LHO HST PK DRH $110 Million Renovation Complete $27 Million Renovation Complete Chicago Marriott Do
Slide 19: Cavallo Point: Years of ROI Opportunities
Cavallo Point: 10 Years of ROI Opportunities Newly acquired luxury resort located in Golden Gate National Recreation Area in Sausalito, CA. Situational Overview • Famous luxury resort in highly desirable Sausalito • Situated at the base of the Golden Gate Bridge with sweeping views of the San Franci
Slide 20: Frenchman's Reef Relaunch
FRENCHMAN’S REEF RELAUNCH 20 Noni Beach Resort
Slide 21: Frenchman's Reef Re-Opening Q4 2020
Frenchman’s Reef Re-Opening Q4 2020 Project Update Insurance Claim Settled Q4 2019 Anticipated Opening Q4 2020 Noni Beach Pool Area Rendering Branding Established Marriott/Autograph Management Selected Aimbridge Stabilized EBITDA $25M Coco’s Beach Club Rendering 21
Slide 22: Frenchman's Reef Return on Investment
Frenchman’s Reef Return on Investment Pre Hurricane EBITDA Hotel Development Act 2012 2013 2014 2015 2016 5 Year Average • The Hotel Development Act (Bill 33- 0104), passed in 2019, permits certain $10.9MM $12.5MM $14.9MM $15.6MM $16.6MM $14.1MM hotels with sufficient damage to recoup costs uncovere
Slide 23: 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 24: Frenchman's Reef Lobby
Frenchman’s Reef Lobby Frenchman's Virtual Tour 24 Frenchman’s Reef Lobby Rendering 24
Slide 25: Frenchman's Reef Renovated Guestroom
Frenchman’s Reef Renovated Guestroom Frenchman's Virtual Tour 25 Frenchman’s Reef Guestroom Rendering 25
Slide 26: Morningstar Lobby
Morningstar Lobby Morningstar Virtual Tour 26 Noni Beach Lobby Rendering 26
Slide 27: Morningstar Renovated Guestroom
Morningstar Renovated Guestroom Morningstar Virtual Tour 27 Noni Beach Guestroom Rendering 27
Slide 28: Opportunistic Capital Recycling
OPPORTUNISTIC CAPITAL RECYCLING 282 The Westin San Diego 8
Slide 29: Creating Value Throughout Cycle
Creating Value Throughout Cycle Value Creation Playbook Tools Available • Match-fund Near-term Accretive Acquisitions By Issuing • $300MM Investment Equity At or Above NAV Lower Capacity • Consider Opportunistically Raising Equity Above NAV, if • Acquisitions appropriate • ATM program • Limit Non-co
Slide 30: 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 2019 Low Mid High Low Mid High Mid / Key(3) Boston $36.8 6.0% 6.5% 7.0% $525.1 $565.5 $612.6 $473 Chicago $34.8 6.5% 7.0% 7.5% $463.
Slide 31: DRH Return of Capital
DRH RETURN OF CAPITAL DRH Return of Capital (1) Dividend & Share Repurchase Dividend & Share Repurchase Dividend Yield (2) (3) Yield Payout Ratio SVC 8.9% RLJ 10.3% PK 94% AHT 8.6% APLE 10.3% APLE 94% PK 8.5% HT 9.9% DRH 87% HT 7.7% AHT 8.9% RLJ 82% RLJ 7.4% SVC 8.9% HST 80% APLE 7.4% PK 8.5% SHO 74
Slide 32: $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 25% floating ra
Slide 33: Asset Repositioning
ASSET REPOSITIONING 33 Havana Cabana
Slide 34: Short Term Agreements Driving Value
Short Term Agreements Driving Value Over 70% of EBITDA Not Encumbered by Brand and Management in 2026 One of the least encumbered portfolios among all full-service REITs 2020 2026 33% 27% 67% 73% Management 29% 23% 24% 47% Brand 48% 29% 9 Hotels Terminable Franchise Agreements(1)(2) Encumbered(1)(2)
Slide 35: Management Transitions Unlock Profitability
Management Transitions Unlock Profitability Westin Fort Lauderdale Beach Resort Westin Boston Waterfront (Case Study) • December 2014 Acquisition AimbridgeAimbridge/Interstate/Interstate Replaces Replaces BrandManagement Manager in in January January2020 2020 • Replaced brand manager with HEI in 201
Slide 36: 2020 Outlook
2020 OUTLOOK 36 Boston Harbor Cityscape
Slide 37: DRH 2020 Outlook Favorable
DRH 2020 Outlook Favorable • Total 2020 booking pace up 14% • Chicago combined pace up 20% • Boston combined pace up 30% Chicago • Fort Worth pace up 15% • Frenchman’s Reef Marriott Resort & Spa and Noni Beach, an Autograph Hotel Reopening 4Q 2020 Boston Note: Latest pace data as of 1/24/20 Source:
Slide 38: 2020 Key Market Outlook
2020 Key Market Outlook DRH Asset (1) (1) Portfolio % Demand Supply DRH / Market Notes Outlook • Resorts expected to outperform in 2020 as leisure Resorts 30% 0.7% 1.1% travel continues to outpace corporate travel • Combined group pace up 30% Boston 14% 3.1% 3.4% • Boston Hilton under renovation and
Slide 39: DiamondRock Hospitality
DIAMONDROCK HOSPITALITY
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