Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Investor Presentation (January 2020)
38 slides from Diamondrock Hospitality's investor presentation, Jan 27, 2020
Slide 1: Investor Presentation
INVESTOR PRESENTATION Cavallo Point, the Lodge at Golden Gate Bridge January 2020 1
Slide 2: Recent Events
Recent Events January 2020 Names Aimbridge/Interstate as Manager of Westin Boston Waterfront • Aimbridge/Interstate replaces brand management in January 2020 • Expected to generate several million dollars of incremental annual EBITDA • Westin franchise expires 2026 • Only facility connected to Bosto
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 13% 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) • Q3 2019 Results Enterprise Value $3.1B • Total RevPAR up 3.1% • RevPAR up 1.6% Market Cap $2.1B • EBITDA Margin of 30.67% • Adj FFO per share of $0.27 Enterprise Value / Key ~$305K Dividend Yield 4.7% • 0.3MM common
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: 2019 Full-Year Guidance
2019 Full-Year Guidance 2019 Guidance Metric Low End High End RevPAR Growth 0.0% 0.75% Adjusted EBITDA $256 million $260 million Adjusted FFO $211 million $214 million Adjusted FFO per share $1.03 per share $1.05 per share (based on 204 million diluted shares) Note: Includes Frenchman's Reef busines
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 • $175MM remaining under repurchase authorization Implied Valuation 2019 EBITDA Multiple 11.9x 2019 NOI Cap Rate 7.7% Discount to NAV 25% - 40% Note: Based on latest data as of
Slide 11: Resort Strategy Rationale
RESORT STRATEGY RATIONALE 11 L’Auberge de Sedona
Slide 12: Research Demonstrates Small Resorts Outperform
Research Demonstrates Small Resorts Outperform • According to CBRE/PKF research study, small resorts(1) have: • Less downside risk due to larger stream of reliable non-rooms revenue • Preserved the most ADR through the recession of the early 2000s • Achieved superior levels of ADR growth since 2009
Slide 13: DRH Lifestyle & Independent Strategy
DRH Lifestyle & Independent Strategy RATIONALE FOR TARGETING LIFESTYLE CURRENT HOTELS, INDEPENDENTS, & SOFT BRANDS ALLOCATION(1) • To grow with shift towards experiential travel Lifestyle, Independents, & Soft Brands • Reduces reliance on traditional brands 22% Traditional • Balances portfolio Brand
Slide 14: Consumers Spending More on Experiences Than Material Goods
Consumers Spending More on Experiences Than Material Goods Indexed Spending Growth (1980-2017) 15-Year Spending CAGR (2002-2017) 1,000 5.0% 800 Shift in 600 Consumer Spending 3.0% 2.2% 400 200 0.9% 0 1980 1985 1990 1995 2000 2005 2010 2015 Motor Vehicles Home Jewelry and Consumer Furnishings Watches
Slide 15: Resort Thesis Already Proven Successful
Resort Thesis Already Proven Successful EBITDA Multiple @ EBITDA Increase Investment ($MM) Purchase YE 2018 $MM Burlington Hilton $62 16.5x 8.8x $3.8 Cavallo Point $152 13.8x 13.8x $0.0 Charleston Renaissance $42 11.9x 7.1x $2.6 Fort Lauderdale Westin $166 14.8x 11.1x $4.9 Frenchman's Reef & Morning
Slide 16: ROI Projects
ROI PROJECTS 16 Renaissance Charleston Historic District
Slide 17: ROI Projects Drive Shareholder Value
ROI Projects Drive Shareholder Value Incremental Incremental Incremental Projected Property Project Capital Spend EBITDA Value Project Status Completion ($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 Insurance (1) ~$202MM Proceeds Key Money ~$20MM (2) FEMA Funding ~$30MM Owner ~$48MM Contribution Rebuild Cost ~$300MM Noni Beach Pool Area Rendering Insurance Claim Anticipated Branding Established Management Stabilized Anticipated Opening Project Settled Complet
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- $10.9MM $12.5MM $14.9MM $15.6MM $16.6MM $14.1MM 0104), passed in 2019, permits certain 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 TTM Q3 2019 Low Mid High Low Mid High Mid / Key(3) Boston $35.2 6.0% 6.5% 7.0% $503.4 $542.1 $587.2 $453 Chicago $34.7 6.5% 7.0% 7.5
Slide 31: DRH Return of Capital: Return $1.13B Since IPO
DRHDRH Return RETURN ofOF Capital:CAPITAL Return $1.13B Since IPO DRH’s return of capital profile is among the most attractive relative to peers Dividend Yield (1) Dividend + Stock Repurchase Yield Dividend + Stock Repurchase Payout (2) Ratio (3) SVC 8.4% APLE 10.0% PK 102% RLJ 7.8% RLJ 9.1% APLE 93
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 35% floating ra
Slide 33: Asset Repositioning
ASSET REPOSITIONING 33 Havana Cabana
Slide 34: Short Term Agreements Driving Value
Short Term Agreements Driving Value Ober 70% of EBITDA Not Encumbered by Brand and Management in 2026 One of the least encumbered portfolios among all full-service REITs 2020 2026 35% 29% 65% 71% Management 31% 24% 26% 49% Brand 45% 24% 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 13% • Chicago combined pace up 20% • Boston combined pace up 30% Chicago • NYC supply additions to decline by double digits from 2019 increase • Frenchman’s Reef Marriott Resort & Spa and Noni Beach, an Autograph Hotel Reopening 4Q 2020 Boston
Slide 38: DiamondRock Hospitality
DIAMONDROCK HOSPITALITY
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