Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Investor Presentation (November 2018)
34 slides from Diamondrock Hospitality's investor presentation, Nov 5, 2018
Slide 1: Investor Presentation November 2018
INVESTOR PRESENTATION November 2018
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 FULL-YEAR 2018 GUIDANCE Hotels (Rooms) 30 (9.9K) • 2018 Full-Year Guidance: Enterprise Value $2.9B − Comparable RevPAR Growth of 1.0% to 1.5% Market Cap $2.2B Enterprise Value / Key ~$305K − Adj. EBITDA of $250M - $255M Dividend Yield 4.8% − Adj. FFO per share
Slide 4: Demand Remains Robust
Demand Remains Robust YTD Q3 Total US +3.1% +1.7% 2019 US RevPAR Forecasts Resorts +4.4% +2.6% STR: 2.6% PWC: 2.6% Luxury +4.9% +3.3% PKF: 2.6% Upper +2.1% +1.9% Upscale Source: STR. Q3 and YTD September 2018 RevPAR. 4
Slide 5: Why DiamondRock?
Why DiamondRock? 1 Top-Quality Portfolio 2 Resort Exposure The Gwen, A Luxury Collection Hotel 3 ROI Opportunities 4 Significant Dry Power Vail Marriott Mountain Resort 5 Compelling Valuation 5
Slide 6: Top Quality Portfolio
DIAMONDROCK HOSPITALITY Top Quality Portfolio
Slide 7: High Quality Portfolio in Key Gateway Markets
High Quality Portfolio in Key Gateway Markets Approximately 2/3 of DRH’s portfolio EBITDA is concentrated in top, gateway markets. 7
Slide 8: Strong Resort Market Presence
Strong Resort Market Presence DRH’s Resort Portfolio represents 1/3 of its pro forma EBITDA concentration. L’Auberge De Sedona Orchards Inn Sedona Shorebreak California The Lodge at Sonoma Hilton Vermont The Landing Lake Tahoe Vail Marriott Havana Cabana Key West Key West Suites Charleston Renaissan
Slide 9: Top-Tier Portfolio Quality
Top-Tier Portfolio Quality 2017 Portfolio Average Daily Rate $246 $229 $227 $225 $220 $211 Peer Average: $216 $209 $202 $171 PEB DRH HST CHSP HT SHO XHR PK RLJ Top Tier Source: Company Filings as of Q4 2017. Note: Pebblebrook data is not pro forma for LaSalle merger. 9
Slide 10: Resort Exposure
DIAMONDROCK HOSPITALITY Resort Exposure
Slide 11: DRH's Differentiated Resort Portfolio
DRH’s Differentiated Resort Portfolio Resort Portfolio Overview Hotels 13 Rooms(1) 2,536 2017 RevPAR(1) $193 2017 EBITDA(1) $90 Million L’Auberge De Sedona Orchards Inn Sedona Shorebreak Hotel Hilton Vermont - Burlington EBITDA Multiple on 9.2 Investment(1) 1 Exceptional quality real estate Sonoma R
Slide 12: Strong Return on Investment
Strong Return on Investment DRH’s resort portfolio EBITDA multiple has improved approximately five turns since acquisition with over $280M of NAV created. EBITDA Multiple @ EBITDA Increase Investment ($M) Purchase YE 2017 $M Burlington Hilton $61.6 16.5x 8.9x $3.7 Charleston Renaissance $41.1 11.9x
Slide 13: Unique ROI Opportunities
) Aen) HOSPITALITY Unique ROI Opportunities S Tree yr Ww ‘f
Slide 14: ROI Opportunities
ROI Opportunities 1 Vail Marriott 2 Hotel Emblem San Francisco • Comprehensive 2018 renovation of • Hotel is closed for renovation and hotel’s guestrooms completed in 3Q18 reopening in Jan ‘19 as the Hotel Emblem, a Viceroy lifestyle hotel • Renovation to luxury standard; currently $175 ADR gap with
Slide 15: Upside Opportunities at the Lexington
Upside Opportunities at the Lexington UNION BUYOUT • Voluntary union buyout program at the Lexington would reduce amount of FTE’s at hotel and significantly increase efficiency • Expected to yield 20% IRR RETAIL SPACE OPTIMIZATION • Signed lease for unoccupied lower level space for Crunch Fitness •
Slide 16: Frenchman's Reef Resort & Morning Star Beach Resort
Frenchman’s Reef Resort & Morning Star Beach Resort Key Facts & Figures Q2 2020 Projected Reopening $20M+ Brand Support $30M USVI Support $350+ Stabilized ADR $25M Stabilized EBITDA 16
Slide 17: Frenchman's Reef Resort
Frenchman’s Reef Resort • Frenchman’s Reef Resort is St. Thomas’s flagship resort - Located on approximately 21 acres of picturesque land overlooking Charlotte Amalie Bay & the Atlantic Ocean - Features over 1,200 linear feet of beach - Iconic asset with the most visible location and view to island
Slide 18: Significant Dry Powder
DIAMONDROCK HOSPITALITY Significant Dry Powder
Slide 19: Pending Acquisition of Luxury Northern California Resort
Pending Acquisition of Luxury Northern California Resort • Currently under contract to acquire luxury resort hotel in Northern California - Average daily rate over $400 - Independently branded with third-party operator - Low-to-zero supply growth market - Off-market transaction • Deal value of appro
Slide 20: The Landing Resort & Spa (Lake Tahoe, CA)
The Landing Resort & Spa (Lake Tahoe, CA) $42M Acquisition of Luxury Hotel in Premier Resort Market • Numerous awards including 2018 TripAdvisor Traveler’s Choice Award as a Top 25 Hotel in the US and 2016 Conde Nast Readers’ Choice #1 Northern California resort • Beachfront location and walking dis
Slide 21: Hotel Palomar (Phoenix, AZ)
Hotel Palomar (Phoenix, AZ) $80M Acquisition of Boutique, Lifestyle Hotel in High-Growth Market • Attractive Deal Metrics: ‒ $331K per key purchase price ‒ 10.8x stabilized EBITDA multiple by 2022 • Terminable management contract in 2020 • TripAdvisor ranked #2 of 174 Phoenix hotels • Centerpiece of
Slide 22: Compelling Valuation
DIAMONDROCK HOSPITALITY Compelling Valuation
Slide 23: Compelling Valuation
Compelling Valuation 2018 Consensus EBITDA Multiple 15.2 13.9 13.9 13.8 12.5 12.4 Peer Average: 12.4x 11.8 11.8 11.8 11.6 11.3 11.2 11.1 10.7 LHO RHP PEB CHSP CLDT HT SHO DRH HST PK APLE INN XHR RLJ Source: Baird, FactSet. Data as of 11/1/18. 23
Slide 24: Compelling Valuation (cont'd)
Compelling Valuation (cont’d) DRH Company Valuation - Share Price Sensitivity Stock Price $10.00 $11.00 $12.00 $13.00 $14.00 $15.00 Shares Outstanding 207,840 207,840 207,840 207,840 207,840 207,840 Equity Market Cap $2,078,400 $2,286,240 $2,494,080 $2,701,920 $2,909,760 $3,117,600 Debt 931,637 931,
Slide 25: $400 Million of Investment Capacity
$400 Milllion of Investment Capacity CONSERVATIVE BALANCE SHEET STRATEGY LEVERAGE AT LOW END OF PEER GROUP • 2018 Net Debt to EBITDA of 3.1x 9.8 • $300M Line of Credit with no 8.6 outstanding borrowings 7.7 • $169 million unrestricted cash at 5.9 9/30/18 Average: 4.9X 4.6 4 • 22 unencumbered hotels
Slide 26: Why DiamondRock?
Why DiamondRock? 1 Top Tier Quality Portfolio & Growth • Top tier quality portfolio as measured by ADR • Top tier growth with 2017 RevPAR growth of 2.5% 2 Resort Exposure • Resort markets to continue to outperform (450bps of outperformance in 2017) • Recent resort repositionings driving value at Hav
Slide 27: Why DiamondRock?
Why DiamondRock? 1 Top-Quality Portfolio 2 Resort Exposure The Gwen, A Luxury Collection Hotel 3 ROI Opportunities 4 Significant Dry Power Vail Marriott Mountain Resort 5 Compelling Valuation 27
Slide 28: 2020 Pace Update
2020 Pace Update • DRH 2020 pace up 20% • Key markets trending positively • Chicago hotels up >40% combined • Boston portfolio up approximately 20% • DC up approximately 70% Source: STR. 28
Slide 29: Appendix
DIAMONDROCK HOSPITALITY Appendix
Slide 30: Diverse Operator Base Drives Best Practices
Diverse Operator Base Drives Best Practices More than half of portfolio is subject to short-term or terminable management agreements. HEI 16% Interstate Recent Operator Changes Driving Value 7% • Two Roads Hospitality brought in as new operator Highgate 8% for L’Auberge de Sedona and Orchards Inn in
Slide 31: NYC Market Update
NYC Market Update Quarterly Manhattan RevPAR Trending Positive 10.0% 8.0% 7.4% 6.0% 4.2% 4.0% 2.0% 1.3% 0.5% 0.7% 0.0% (0.5%) (2.0%) (1.3%) (1.7%) (2.6%) (4.0%) (3.1%) (6.0%) (5.0%) Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 Q118 Q218 Q318 • Q4-to-date RevPAR estimated at 5.7% Source: STR. 31
Slide 32: NYC Supply Outlook
NYC Supply Outlook • Supply in NYC remains elevated, but DRH submarkets have minimal supply • DRH’s primary submarket of Midtown East has no new supply in 2018-19 with total pipeline of rooms at 1% ‒ Less than 1% supply CAGR over last three years • Waldorf Astoria (1,413 rooms) came offline Q117 ‒ 1
Slide 33: Manhattan Building Permits Declining Significantly
Manhattan Building Permits Declining Significantly • Since 1988 when supply growth was less than 1.o percent, Manhattan RevPAR growth averaged 10.1 percent • 719 keys were permitted in Manhattan in 2017 (522 excluding Roosevelt Island), which is 85.3 percent less than 2011-2016 averages • Only 51.6
Slide 34: Chicago Outperforming in 2018
Chicago Outperforming in 2018 • The Chicago Marriott and the Gwen are up a combined 11% YTD 2018 ‒ Combined group pace up ~15% in Q4 2018 • Chicago Marriott completed final stage of $110M renovation in Q1 2018 ‒ Average guest satisfaction score of a renovated room is 20 points higher than the pre-re
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