Diamondrock Hospitality Company · NASDAQ:DRH
Diamondrock Hospitality — Investor Presentation (June 2020)
38 slides from Diamondrock Hospitality's investor presentation, Jun 1, 2020
Slide 1: Investor Presentation | June 2020
Investor Presentation | June 2020 1
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: Recent Events
Recent Events March/April 2020 • Acquired leasehold interest in Shorebreak for ~8% cap rate • Named Top 5% Worldwide Real Estate platform by ISS-OEKOM • Implemented COVID-19 Action Plan • 20 Hotels suspended operations as a result of COVID-19 May 2020 • Reopened Charleston Renaissance and Orchards I
Slide 4: DiamondRock at a Glance
DiamondRock at a Glance (1) 2019 FINANCIAL SUMMARY CREDIT FACILITY COMPLIANCE Covenant Limitation DRH Q1’20 Hotels (Rooms) 31 (>10K) Maximum Leverage Ratio < 60.0% 34.4% Total Revenue $938.1MM Fixed Charge Coverage Ratio > 1.50x 2.92x Secured Indebtedness to Total < 45.0% 20.9% Room Revenue $661.2MM
Slide 5: DiamondRock Balance Sheet Profile
DiamondRock Balance Sheet Profile (1) DiamondRock Has Significant Liquidity, FUTURE PRINCIPAL PAYMENTS (IN $MM) Balance Sheet Flexibility and No Material Near-Term Maturities • Debt statistics as of Q1 $400 • Net debt-to-EBITDA: 4.6x $350 • Net Debt Per Key: $101K $50 $326 • TTM Net Debt yield: 24.3
Slide 6: Agenda
Agenda COVID-19 Action Plan DiamondRock at a Glance Resort Focus 1 Capturing Secular Growth ROI Projects 2 Creating Shareholder Value 4 Asset Repositioning 3 Unlocking Asset Value Corporate Citizenship 4 OEKOM Ranks DRH Top 5% 6
Slide 7: COVID-19 Action Plan
COVID-19 ACTION PLAN 7 The Landing, Lake Tahoe
Slide 8: DiamondRock Action Plan
DiamondRock Action Plan Bank Debt: Finalizing covenant waiver with bank group. Balance Sheet 2020 Maturity: Executed term sheet to extend Salt Lake City Mortgage CMBS Debt: Seeking relief Reduced Capital Reduced capital expenditures by 65% Expenditures Non-essential capital expenditures cancelled or
Slide 9: Minimizing “Cash Burn” Rate
Minimizing “Cash Burn” Rate Property Level Cash Burn $11-12MM Per Month Principal & Interest $5.5MM Per Month Corporate Overhead $2.0MM Per Month Monthly Cash Burn $18.5-19.5MM Per Month Note: Property Level Cash Burn includes all taxes, insurance, utilities, essential labor and ground lease payment
Slide 10: Long Runway Under Conservative Assumptions
Long Runway Under Conservative Assumptions Cash Balance(1) $370MM Less: Essential CapEx ($26MM) Cash After Major Items $344MM $344MM Cash Balance 18 Months of Runway $19MM Monthly Burn Assumes extension of SLC Mortgage (1) As of 5/31/2020 10
Slide 11: The Road Back
THE ROAD BACK 11 Renaissance Charleston Historic District
Slide 12: Group Cancellations Slowing
Group Cancellations Slowing % Share of Weekly Cancellations Mar 16 Mar 23 Mar 27 Apr 3 Apr 10 Apr 17 Apr 24 May 1 May 8 May 15 May 22 Total to Date February 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% March 55% 18% 9% -3% 0% 0% 0% 0% 0% 0% 0% 17% April 29% 46% 19% 6% 2% 0% 10% 0% 15% 0% 0% 20% May 8% 21% 56
Slide 13: Hotel Occupancy Gradually Rebuilding
Hotel Occupancy Gradually Rebuilding Trailing 7 Day Average Portfolio Occupancy 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 16.5% 10.0% 0.0% 2/29/2020 3/10/2020 3/20/2020 3/30/2020 4/9/2020 4/19/2020 4/29/2020 5/9/2020 5/19/2020 13
Slide 14: Resuming Hotel Operations
Resuming Hotel Operations June Projected 6/30 DiamondRock anticipates over two-thirds of hotels 9 will be operating Hotels Expected to Resume by the end of Operations Q2 2020 6/1 Havana Cabana May Barbary Beach House Charleston Renaissance 23 Operating March/April Orchards Inn Hotels 10 Operating Ho
Slide 15: Breakeven Occupancy
Breakeven Occupancy Hotel EBITDA expected to break even at approximately 40% portfolio occupancy level FFO $0MM Corporate EBITDA $5.5MM Hotel EBITDA $8MM GOP $15MM Monthly Burn Rate 20% 30% 40% 50% 60% Occupancy Rate 15
Slide 16: Company Overview
COMPANY OVERVIEW 16 The Landing, Lake Tahoe
Slide 17: Strong Resort Market Presence
Strong Resort Market Presence Approximately 1/3 of portfolio located in destination resort markets. 17
Slide 18: High Quality Portfolio in Key Gateway Markets
High Quality Portfolio in Key Gateway Markets Approximately 2/3 of portfolio located in top, gateway markets. 18
Slide 19: Resort Strategy Rationale
RESORT STRATEGY RATIONALE 19 L’Auberge de Sedona
Slide 20: Research Demonstrates Small Resorts Outperform
Research Demonstrates Small Resorts Outperform • According to CBRE/PKF research study, small resorts(1) have: • Less downside risk due to larger stream of reliable non-rooms revenue • Preserved the most ADR through the recession of the early 2000s • Achieved superior levels of ADR growth since 2009
Slide 21: DRH Lifestyle & Independent Strategy
DRH Lifestyle & Independent Strategy RATIONALE FOR TARGETING LIFESTYLE CURRENT HOTELS, INDEPENDENTS, & SOFT BRANDS ALLOCATION(1) • To grow with shift towards experiential travel Lifestyle, Independents, & Soft Brands • Reduces reliance on traditional brands 22% Traditional • Balances portfolio Brand
Slide 22: Consumers Spending More on Experiences Than Material Goods
Consumers Spending More on Experiences Than Material Goods Indexed Spending Growth (1980-2019) 15-Year Spending CAGR (2004-2019) 5.0% 1,000 900 4.0% 800 700 Shift in Consumer 3.0% 600 Spending 500 2.0% 400 300 1.0% 200 100 0.0% 1980 1985 1990 1995 2000 2005 2010 2015 Motor Vehicles Jewelry and Home
Slide 23: Resort Thesis Already Proven Successful
Resort Thesis Already Proven Successful EBITDA Multiple @ EBITDA Increase Investment ($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 24: ROI Projects
ROI PROJECTS 24 Hotel Emblem
Slide 25: Renovated Portfolio Positioned to Gain Share
Renovated Portfolio Positioned to Gain Share >70% of DRH portfolio has been renovated in recent years. CapEx as a % of Revenue (3-Year Average)(1) 14.7% 14.1% 11.9% 10.5% 9.8% 9.0% 7.9% 7.3% DRH HT SHO PEB RLJ XHR HST PK $110 Million Renovation Complete $27 Million Renovation Complete Chicago Marrio
Slide 26: ROI Projects Drive Shareholder Value
ROI Projects Drive Shareholder Value Expected Expected Incremental Incremental Incremental Projected Property Project Capital Spend Project Status EBITDA Value Completion ($MM) ($MM) ($MM) Hotel Emblem Complete Renovation and Repositioning $5.1 $1.5M - $1.8 $25 - $30 Complete Q1 2019 Worthington Ren
Slide 27: 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 28: Asset Repositioning
ASSET REPOSITIONING 28 Havana Cabana
Slide 29: Short Term Agreements Driving Value
Short Term Agreements Driving Value Over 70% of EBITDA(1) 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 Encumbered Unencumb
Slide 30: Announcing Barbary Beach House Key West
Announcing Barbary Beach House Key West Sheraton Suites Key West (Before) Barbary Beach House Key West (After) Projected ADR Total Renovation Savings in Annual High Occupancy Leisure Project Increase Cost Brand Fees Market Business Details 5% $19.2MM $1.5MM +80% in 2019 80% 30
Slide 31: Corporate Citizenship
CORPORATE CITIZENSHIP 31 Cavallo Point, the Lodge at Golden Gate Bridge
Slide 32: Responsible Corporate Citizen
Responsible Corporate Citizen GRESB (2) ISS-ESG Corporate ISS ESG Rankings Annual Results Ranking 2016 2017 2018 2019 Environmental Currently DRH GRESB 50 53 75 81 Score Ranked Peer Score 51 57 58 69 Average(1) Index to Peer #2 98% 93% 129% 117% Score Average Social of 174 US Real Estate Companies G
Slide 33: DiamondRock Hospitality
DIAMONDROCK HOSPITALITY
Slide 34: Appendix
APPENDIX Shorebreak Hotel
Slide 35: A Closer Look At Hotel Staffing Models
A Closer Look At Hotel Staffing Models Manager Hourly Total FTE Average Monthly Headcount Headcount Headcount Payroll (in 000’s) Total 736 3,822 $25,550 Portfolio 4,559 Prior Staffing Prior Average 24 123 147 $851 Manager Hourly Total FTE Projected Headcount Headcount Headcount Monthly Payroll (in 0
Slide 36: Scaling Back Hotel Operations
Scaling Back Hotel Operations 4/10 Chicago 4/6 Marriott Charleston 3/31 Renaissance Chicago Gwen Palomar Phoenix Five closures due to Orchards Inn government mandates Burlington 3/29 Hilton The Lexington Hotel 15 Hilton Garden Elective 3/27 Inn Times Sq New York Suspended Courtyard 5th 3/25 Ave Oper
Slide 37: Non GAAP Measures
Non GAAP Measures The Company considers the following non-GAAP financial measures to be useful to investors as key supplemental measures of operating performance: EBITDA, EBITDAre, Adjusted EBITDA, Hotel EBITDA and Hotel Adjusted EBITDA. These measures should not be considered in isolation or as a s
Slide 38: Definitions
Definitions • Net Debt represents total debt less unrestricted cash • Net Debt to EBITDA represents Net Debt divided by trailing twelve months EBITDA • Net Debt Yield represents Hotel EBITDA divided by Net Debt 38
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