DiamondRock Hospitality pany(DRH)2024-08-04 06:30Financial Data and Key Metrics Changes - Comparable RevPAR grew 2.2% year-over-year, which was 260 basis points higher than the growth in the first quarter [3] - Total RevPAR increased 4.5%, an acceleration from the 2.4% growth in the first quarter [3] - Comparable hotel adjusted EBITDA was 0.34 per share [5] - 2024 adjusted EBITDA is expected to range between 290 million [6] - 2024 adjusted FFO is projected to range between 213.5 million, with adjusted FFO per share increasing to 1 [6] Business Line Data and Key Metrics Changes - Group revenue increased 7.2% year-over-year, with banquet catering and AV revenue rising over 20% [4] - Comparable RevPAR at resorts was 1.9% higher than last year, with total RevPAR 2.7% higher [4] - Comparable RevPAR at urban hotels was 2.2% higher than last year, with total RevPAR 5.4% above 2023 [4] - Comparable hotel operating expenses increased 4.5% from last year, with total wages and benefits increasing by 7% [4] Market Data and Key Metrics Changes - Group room revenue on the books is up 14% over the prior year, with over 30% growth at specific urban hotels [11] - Resort comparable occupancy increased 8.6%, offset by a 6.1% decline in ADR [11] - The company is outperforming its markets, taking share in 14 of its 16 resorts [12] Company Strategy and Development Direction - The company is focused on maximizing profit rather than just RevPAR or margin, shifting towards Group business to enhance total RevPAR growth [10] - The strategy includes reducing capital expenditures as a percentage of revenues to improve retained earnings for share repurchases and ROI projects [17][18] - The company plans to continue growing its leisure market exposure while also targeting urban markets [15][20] Management's Comments on Operating Environment and Future Outlook - Management expects total RevPAR growth to be in the range of 3% to 4.5% for the year, with a slight reduction in room RevPAR growth due to the focus on Group business [6] - The company anticipates that the second half of the year will not see the same level of out-of-room spending as the first half [6] - Management is optimistic about the performance of the Group strategy and its ability to drive incremental revenue and profit [6] Other Important Information - The company successfully implemented a new Oracle cloud-based ERP system to streamline accounting activities and enhance data analysis [8] - Share repurchase activity commenced during the quarter, with 2.8 million shares repurchased at an average price of 73 million mortgage maturity with cash on hand and extend a $300 million term loan maturity to January 2026 [7] Q&A Session Summary Question: Update on noncore asset identification and transaction market - Management highlighted specific noncore assets and noted that the transaction market remains challenging due to high debt costs [21][22] Question: Rate sensitivity of leisure transient customers - Management indicated that there is a reversion to prior patterns, with a focus on building the base through Group bookings [23][24] Question: Insights on portfolio composition and guidance - Management attributed the ability to raise guidance to a strategic shift towards Group bookings and effective management of leisure-centric properties [27][28] Question: Appetite for dilutive trophy asset acquisitions - Management expressed a lack of interest in dilutive acquisitions, focusing instead on capital allocation that maximizes returns [30][31] Question: Benefits of the new enterprise analytics platform - The platform allows for standardized reporting and benchmarking across the portfolio, aiding in cost management [34] Question: Changes to ROI pipeline - Management confirmed no material changes to the ROI pipeline but continues to evaluate potential projects [36] Question: Priorities for share repurchase - Management indicated that share repurchases are a priority, especially given the current market conditions [39] Question: Sensitivity of smaller group bookings to economic changes - Management noted that smaller group bookings are less sensitive to economic changes compared to larger assets [75]