Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Investor Presentation (September 2013)
80 slides from Diamondrock Hospitality's investor presentation, Sep 10, 2013
Slide 1: DiamondRock Hospitality
Slide 2: Safe Harbor
Safe Harbor 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 similar expressi
Slide 3: Presentation Overview
Presentation Overview Company Overview….……………………………………………………………….. Industry Outlook………………………………….…………………………………… Investment Strategy....….……………………………………………………………. Growth Catalysts…………...…………....………….……………………………….. Asset Management ……………………………….…………………………………. Optimal Capital Structure..……………………….……………
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Slide 5: Company Overview
COMPANY OVERVIEW
Slide 6: DiamondRock at a Glance
MARKET BREAKDOWN KEY STATISTICS at Sept. 3, 2013 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways DiamondRock at a Glance Hotels Rooms 11,600 Enterprise Value $2.9B Enterprise Value / Key $250,000 Net Debt/EBITDA 4.9x Pos
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Slide 8: DiamondRock Strategy – Three Pillars
Portfolio Investment Capital Management Asset Management Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways DiamondRock Strategy – Three Pillars Buy opportunistically early in the cycle Focus on top gateway markets and dest
Slide 9: A Compelling Investment Opportunity
Portfolio Positioned to Outperform Substantial Upside from 2013 Investments Best-In-Class Capital Structure With Well Covered Dividend Favorable Industry Supply/Demand Forecast ¹ Enhanced Asset Management Focus to Drive Internal Margins Attractive Valuation With Above Average Growth Potential Compan
Slide 10: Industry Outlook
INDUSTRY OUTLOOK
Slide 11: Lodging Cycle – Many Years Left To Go
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Forecast through 2016 of: HISTORICAL AND FORECAST REVPAR, SUPPLY AND DEMAND Lodging Cycle – Many Years Left To Go • Supply growth 25% below historic average • Demand growth
Slide 12: Portfolio Focused on Markets with Above Average RevPAR Growth Potential
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways PKF FORECASTED REVPAR CAGR 2013-2016 (1) Portfolio Focused on Markets with Above Average RevPAR Growth Potential (1) Chart excludes Destination Resorts and Other components
Slide 13: Investment Strategy
INVESTMENT STRATEGY
Slide 14: Premier Portfolio With Urban and Resort Concentration
Premier Portfolio With Urban and Resort Concentration Hilton Burlington Hilton Boston Boston Westin Westin Washington DC Worthington Renaissance Courtyard Midtown NYC Courtyard 5 th Ave NYC Hilton Garden Inn Chelsea NYC Hilton Garden Inn nd Street NYC Lexington Hotel NYC Westin San Diego Hotel Rex S
Slide 15: Investment Strategy
FIVE PRINCIPLES Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Investment Strategy I. Buy early cycle II. Target top markets based on extensive research III. Diversify brand and management IV. Focus on value-add opportu
Slide 16: Significant Value Created by Early Cycle Acquisitions
U.S. ANNUAL GROWTH IN VALUE PER ROOM Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Significant Value Created by Early Cycle Acquisitions 21% -4% -15% -31% 17% 20% 20% 12% 15% 9% -40% -30% -20% -10% 0% 10% 20% 30% Signi
Slide 17: Increased Exposure to Urban Hotels
CURRENT PORTFOLIO (BY EBITDA) HISTORICAL 100BPS REVPAR CAGR PREMIUM FOR URBAN vs U.S. Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Increased Exposure to Urban Hotels Acquired 3,900 urban and destination resort rooms s
Slide 18: Increased Third Party Managers And Brand Diversification
CURRENT PORTFOLIO (BY EBITDA) Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Increased Third Party Managers And Brand Diversification Goal of 50/50 brand/third-party managers Adoption of best practices, improving overal
Slide 19: Dispositions – Successfully Recycling Capital
Griffin Gate Waverly Westin Atlanta North Austin STRATEGIC DISPOSITIONS Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Dispositions – Successfully Recycling Capital Intend to sell 3 non-core hotels over the next 36 mont
Slide 20: Portfolio Transformation
BETTER MARKETS, HIGHER QUALITY Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Portfolio Transformation (1) Represents 2011 data for comparability purposes.
Slide 21: Growth Catalysts
GROWTH CATALYSTS
Slide 22: Multiple Growth Catalysts Lead to Outperformance in 2014
2014 GROWTH CATALYSTS Renovations HGI Times Square Urban Portfolio Group Business Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Multiple Growth Catalysts Lead to Outperformance in 2014 2013 Disruption of $12M - $15M EB
Slide 23: NYC Annual Visitation
NYC ANNUAL VISITATION « a amo 001 20 209 OOF 2S OS NO 2a MO HD 2 M2 Toes
Slide 24: NYC Is The Leading Lodging Market In The US
40% HIGHER HISTORICAL REVPAR GROWTH Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways NYC Is The Leading Lodging Market In The US 3.88% 2.80% 2.68% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% NYC Avg. of To
Slide 25: NYC Success: Courtyard Midtown East
Acquisition Date # of Keys Total Investment Total Investment Per Key Estimated Value Estimated Value Per Key Unlevered IRR Since Acquisition Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways NYC Success: Courtyard Midtown
Slide 26: NYC Success: Courtyard Fifth Avenue
Acquisition Date # of Keys Total Investment Total Investment Per Key Estimated Value Estimated Value Per Key Unlevered IRR Since Acquisition Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways NYC Success: Courtyard Fifth Av
Slide 27: NYC Success: Hilton Garden Inn Chelsea
Acquisition Date # of Keys Total Investment Total Investment Per Key Estimated Value Estimated Value Per Key Unlevered IRR Since Acquisition Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways NYC Success: Hilton Garden Inn
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Slide 30: Lexington Hotel Rebranding
EXPECTED REVPAR GROWTH OF 80% BY 2016 EBITDA EXPECTED TO QUADRUPLE BY 2016 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways $5 $15 $25 $35 2013F 2016E $100.00 $150.00 $200.00 $250.00 $300.00 2013F 2016E Lexington Hotel Re
Slide 31: Lexington Hotel: New Keys
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Lexington Hotel: 15 New Keys Converted underutilized junior suites into two guestrooms Converted airline crew lounge into two guestrooms Original suite room with living are
Slide 32: Hilton Garden Inn Times Square
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Hilton Garden Inn Times Square 282 keys – Expected mid-2014 delivery Spectacular location (42nd St & Broadway) Below current market cost ($450,000 per key) Immediately accr
Slide 33: HGI Times Square: Premier NYC Location
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways HGI Times Square: Premier NYC Location Premier location surrounded by prime retail and 72mm sq. ft. of office space.
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Slide 36: Westin Washington DC
2013F RevPAR Index 2016E RevPAR Index Market Share Opportunity Revenue Upside EXPECTED EBITDA GROWTH OF 55% BY 2016 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways WESTIN DC CENTRAL LOCATION Westin Washington DC Growth S
Slide 37: Westin Washington DC Renovation
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Westin Washington DC Renovation Fundamentally change hotel experience with brand new lobby & arrival New guest room renovation • First 5 th generation Westin in the US Reno
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Slide 39: Westin San Diego
2013F RevPAR Index 2016E RevPAR Index Market Share Opportunity Revenue Upside EXPECTED EBITDA GROWTH OF 35% BY 2016 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Westin San Diego Growth Story: • 2014 Group booking pace
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Slide 41: Hilton Boston Downtown
2013F RevPAR Index 2016E RevPAR Index Market Share Opportunity Revenue Upside Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways EXPECTED EBITDA GROWTH OF 35% BY 2016 BOSTON HILTON CENTRAL LOCATION Hilton Boston Downtown Gr
Slide 42: Hilton Boston: Extracting Value from Real Estate
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Hilton Boston: Extracting Value from Real Estate Exploring potential to add up to 40 new rooms (subject to permitting approval) • Convert excess suites (currently over 20%
Slide 43: Group Business: 2014 Positioned to Outperform
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Solid 2013 group booking pace: • Pace up 6% (8% excluding Boston) • Closed 33,000 more group room nights in Q2 2013 than Q2 • Q2 in-the-quarter for-the-quarter pickup was 4
Slide 44: Westin Waterfront – The Center of Boston's Growth
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Westin Waterfront – The Center of Boston’s Growth Boston Convention & Exhibition Center • Largest convention center in Northeast • 2014 booking pace: +26% (Record year for
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Slide 46: Asset Management
ASSET MANAGEMENT
Slide 47: Asset Management Playbook
FOUR PRINCIPLES Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Asset Management Playbook I. Promote Accountability • Internal • External II. Leverage Strengths • Experience • Experts III. Capital Expenditure Management
Slide 48: Internal Accountability
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Internal Accountability Reorganized Department • Added Head of Design and Construction • Allows asset managers to fully focus on operations • Put optimal team in place to d
Slide 49: External Accountability
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways External Accountability Property Management Team Initiatives: • Strong leadership • Talent-driven approach to operations • Comprehensive sales strategies • Targeting right
Slide 50: Leveraging Past Experience
FRENCHMAN’S REEF STRATEGY CONRAD CHICAGO STRATEGY Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Leveraging Past Experience Moved revenue management on property Changed out GM, allowing for a fresh perspective Additiona
Slide 51: Leveraging Experts to Cut Costs & Promote Efficiencies
Consultant hired at Boston Westin Potential lease out of multiple food and beverage outlets Identified operating expense savings as well as capital avoidance across portfolio Boston and NYC opportunities Improve profitability by increasing rates and renegotiating contracts Company Overview Industry
Slide 52: Capital Expenditure Management
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Capital Expenditure Management Head of Design & Construction brings in-house expertise to capital expenditure management Realized savings of $1.9 million in the Urban Portf
Slide 53: Mining for Value: Operations
Current and Future Value-Add Projects: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Mining for Value: Operations Boston Westin • Add convertible beds to make parlor suites rentable - 100% IRR • Utilize low-flow toilet
Slide 54: Mining for Value: Operations
Current and Future Value-Add Projects: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Mining for Value: Operations • Eliminating Pay-Per-View movie program, adding $35K in profit • Increased room service trip change whi
Slide 55: Mining For Value: Management Agreements
Creating Value Through Management Agreements: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Mining For Value: Management Agreements Frenchman’s Reef Marriott • Negotiated manager contribution of $5 million cash and 40%
Slide 56: Mining for Value: Adding Keys
Creating Value by Additional Keys: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Mining for Value: Adding Keys Lexington Hotel • Created 15 new rooms from an unused lounge and underutilized junior suites • Added $9.0 m
Slide 57: Mining for Value: New Meeting Space
Creating Value by Maximizing Meeting Space: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Mining for Value: New Meeting Space • Created 15,000 sq. ft. of new junior ballroom and breakout meeting rooms targeted at small
Slide 58: Optimal Capital Structure
OPTIMAL CAPITAL STRUCTURE
Slide 59: Best-in-Class Capital Structure
Leverage Statistics 2013 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways CAPITAL STRUCTURE FRAMEWORK (1) Year end 2012 ratio. Calculated as defined under the Company’s corporate credit facility. Best-in-Class Capital Str
Slide 60: Low Leverage Outperforms
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Low Leverage Outperforms Total shareholder returns should outperform higher leveraged peers Balance sheet is built with the entire lodging cycle in mind Mitigates risk of v
Slide 61: Low Leverage Mitigates Cyclical Risk, Increases Flexibility
$1.1B Individual Property Debt $134M 2013 EBITDA 1 $2.0B Asset Value Valuation “floor” set at $85M 2013 EBITDA 1 $1.2B Asset Value (over $6/share) Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways 14 ENCUMBERED HOTELS 13 U
Slide 62: Sustainable Dividends
DIVIDENDS ARE KEY DRIVER OF LODGING REIT TOTAL SHAREHOLDER RETURN Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways DIVIDEND YIELD $432M IN TOTAL DIVIDENDS PAID Sustainable Dividends Current yield of 3.5% DRH has returned
Slide 63: Recent Capital Actions Have Enhanced Financial Flexibility
Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Recent Capital Actions Have Enhanced Financial Flexibility Took advantage of attractive financing environment: • $450 million of new property-specific secured debt • Averag
Slide 64: Plan in Place to Support Funding Needs
FUNDING NEEDS ACTION PLAN Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Plan in Place to Support Funding Needs Achieve 3.0x net debt/EBITDA by 2016 Maximize flexibility to address capital needs • Borrowing capacity of
Slide 65: Key Takeaways
KEY TAKEAWAYS
Slide 66: A Compelling Investment Opportunity
Portfolio Positioned to Outperform Substantial Upside from 2013 Capital Investments Favorable Industry Supply/Demand Dynamics Enhanced Asset Management Focus to Drive Internal Margins Best-In-Class Capital Structure With Well Covered Dividend Company Overview Industry Outlook Investment Strategy Ass
Slide 67: Appendix
APPENDIX
Slide 68: HGI Times Square: View to New Year's Ball
HGI Times Square: View to New Year’s Ball
Slide 69: HGI Times Square: Business Center
Monogram bycaiuison HG! TSS Business Center
Slide 70: HGI Times Square: Lobby
HGI Times Square: Lobby
Slide 71: HGI Times Square: Restaurant
HGI Times Square: Restaurant
Slide 72: HGI Times Square: Guestroom
HGI Times Square: Guestroom
Slide 73: Lexington: Exterior
Lexington: Exterior
Slide 74: Lexington: Lobby
Lexington: Lobby
Slide 75: Lexington: Lobby Bar Artwork
Lexington: Lobby Bar Artwork
Slide 76: Lexington: Lobby Library
Lexington: Lobby Library
Slide 77: Lexington: Guestroom
Lexington: Guestroom
Slide 78: Lexington: Guest Bathroom
Lexington: Guest Bathroom
Slide 79: NYC Hotel Transactions
NYC HOTEL TRANSACTIONS New York City Hotel Transactions Source: Eastdil Secured Hotel Name Location Date Keys Price Price / Key Holiday Inn Manhattan 6th Avenue New York, NY Jun-13 121,400,000 537,000 The James New York, NY May-13 85,000,000 745,614 Hyatt Union Square New York, NY Apr-13 105,000,000
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DiamondRock Hospitality — Investor Presentation (September 2013) on 6ix