Comparable Total RevPAR: Increased 5.5% over 2023. Urban Hotels RevPAR: Increased 8.2% with a 5.4% increase in average daily rate. December RevPAR Growth: Up 13.2% in urban markets. Resort Hotels RevPAR: Declined 150 basis points in the quarter. Florida Resorts RevPAR: Declined 5.8%. Chico Hot Springs RevPAR: Grew nearly 18% with over 12% ADR growth. Group Room Revenues: Increased 8.1% over 2023. Hotel Adjusted EBITDA: $75.9 million, reflecting 16.4% growth over 2023. Corporate Adjusted EBITDA: $68.7 million, representing almost 20% growth over 2023. Adjusted Funds from Operations (AFFO): $0.24 per share, 33% increase over 2023. Common Dividends for 2024: Total of $0.32 per share. 2025 Expected RevPAR Growth: 1% to 3% for the year. 2025 Corporate Adjusted EBITDA Guidance: $275 million to $300 million. 2025 Adjusted FFO Guidance: $199 million to $224 million. 2025 Adjusted FFO per Share Guidance: $0.94 to $1.06.

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Release Date: February 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Diamondrock Hospitality Co (NYSE:DRH) reported a stronger-than-expected fourth-quarter performance with a 5.5% increase in comparable total RevPAR over 2023. Urban hotels showed significant growth with an 8.2% increase in RevPAR, driven by a 5.4% increase in average daily rate. Group room revenues increased by 8.1% over 2023, with urban hotels seeing a 10.2% increase, boosting total food and beverage revenue by 6.4%. Hotel adjusted EBITDA for the fourth quarter was $75.9 million, reflecting a 16.4% growth over 2023, with corporate adjusted EBITDA growing by nearly 20%. The company plans to increase its regular quarterly dividend to $0.08 per share in 2025, up from $0.03 per share in 2024.

Negative Points

Fourth-quarter results at resort hotels were mixed, with a 150 basis point decline in RevPAR, particularly impacted by Florida's market challenges. The company faces upcoming debt maturities, including three mortgage loans totaling nearly $300 million in 2025 and a $300 million term loan in early 2026. Florida resorts experienced a 5.8% decline in RevPAR, attributed to post-pandemic challenges and market headwinds. The company anticipates a $1.2 million EBITDA disruption in the first half of 2025 due to the redevelopment of Orchards Inn Sedona. Diamondrock Hospitality Co (NYSE:DRH) expects RevPAR growth to be modest at 1% to 3% for 2025, with continued softness in leisure markets.

Q & A Highlights

Q: Can you give us a sense of your leisure, business travel, and group revenue growth expectations that aggregate up to the 1% to 3% RevPAR guide? A: Jeff Donnelly, CEO: A lot of it relates to our footprint. In Florida, where our properties are more popular priced, we've seen more weakness. Outside Florida, our properties are more luxury-oriented, facing fewer headwinds. We rank group as better than business travel, which is better than leisure. We budget more by hotel location than by segment.

Story Continues

Q: What are you seeing today on the transaction front, and how competitive was the process for the Westin City Center? A: Justin Leonard, COO: Transaction volume is down about 75% from pre-COVID levels. Few transactions are getting done, and there's a significant bid-ask gap. We haven't seen much forced selling, and the market remains quiet, similar to six months ago.

Q: Does your 2025 guide assume further hotel-level operating efficiencies are achieved? A: Justin Leonard, COO: We expect a slowing of expense growth, particularly in labor, as our group pace has slowed. We've focused on productivity and implemented business intelligence tools to highlight inefficiencies and best practices.

Q: How are you thinking about the Florida resort assets relative to the overall portfolio, given the normalization in resort patterns? A: Jeff Donnelly, CEO: We expect Florida to find its footing in the back half of the year, with year-over-year declines subsiding. However, we remain cautious due to economic uncertainties like inflation and unemployment.

Q: What are your expectations for labor and wage growth in 2025, and how does it compare to 2024? A: Justin Leonard, COO: In 2024, wages were up about 7%, with salaries up 5% and benefits up 12.5%. For 2025, we expect wages and benefits to grow around 4%. The job market has slowed, leading to less wage pressure.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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