DiamondRock Hospitality Company (DRH) Q4 2018 earnings summary

Executive summary

• Strategic priorities advanced in 2018 through three acquisitions, $115.2M of capital improvements, asset-management initiatives and opportunistic share repurchases.

• The 31-hotel portfolio recorded 1.3% RevPAR growth and 1.8% total revenue growth; management expects lodging RevPAR growth to decelerate in 2019.

Financial highlights

• FY18 revenue was $863.7M, down 0.7% reported; excluding non-comparable changes from acquisitions, closures and renovation, revenue increased 1.6%.

• Net income was $87.8M vs. $91.9M in FY17; diluted EPS was $0.43 vs. $0.46.

• EBITDA was $236.4M vs. $239.7M; Adjusted EBITDA was $254.1M vs. $250.0M; Adjusted FFO was $210.0M vs. $201.0M.

• Comparable occupancy was 79.1%, down 1.0 percentage point; ADR rose 2.5% to $234.40 and RevPAR rose 1.3% to $185.51.

• FY18 business-interruption insurance income was $19.4M; Havana Cabana Key West settlement generated a $1.7M property-insurance gain.

Outlook and guidance

• 2019 RevPAR growth is expected to decelerate; resort hotels are expected to outperform the broader US market, with lower renovation disruption following 2018 work.

• 2019 capital improvements are expected to total ~$125M, including projects at JW Marriott Denver, Sheraton Suites Key West, The Lodge at Sonoma, Vail Marriott and Renaissance Worthington.

• Frenchman's Reef is expected to reopen in 2020; rebuilding continues while insurance coverage discussions remain unresolved.

• As of year-end, unrestricted cash was $43.9M and the $300M credit facility was undrawn; 2019 cash sources are expected from hotel operations, insurance claims and potential dispositions.