DiamondRock Hospitality Company Reports Fourth Quarter and Full Year 2009 Results
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DiamondRock Hospitality Company Reports Fourth Quarter and Full Year 2009 Results
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Category: Worldwide - Industry economy -
Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2010-03-01
DiamondRock Hospitality Company (the “Company”) (NYSE: DRH) today announced results of operations for its fourth fiscal quarter and the full fiscal year ended December 31, 2009. The Company is a lodging focused real estate investment trust that owns twenty premium hotels in North America.
“Fundamentals in the U.S. travel industry continued to be difficult in the fourth quarter of 2009,” stated Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company. “However, we believe the worst is behind us and we are beginning the process of rebuilding demand and slowly improving the mix of business at our hotels. Going forward, we expect to achieve our growth objectives as our existing hotels benefit from the expected cyclical recovery and we deploy our investment capacity derived from our conservative balance sheet to complete attractive acquisition opportunities as they arise.”
Fourth Quarter 2009 Highlights
RevPAR: The Company’s RevPAR was $102.50, a decrease of 14.8 percent compared to the same period in 2008.
Hotel Adjusted EBITDA Margins: The Company’s Hotel Adjusted EBITDA margins were 21.27%, a decrease of 557 basis points compared to the same period in 2008.
Adjusted EBITDA: The Company’s Adjusted EBITDA was $32.9 million, a decline of 39.9% compared to the same period in 2008.
Adjusted FFO: The Company’s Adjusted FFO was $22.1 million and Adjusted FFO per diluted share was $0.18.
Frenchman’s Reef Mortgage Loan: The Company is currently in non-monetary default under the limited recourse mortgage loan secured by the Frenchman’s Reef Marriott as a result of not meeting certain deadlines to complete capital projects stipulated in the loan agreement. The Company is currently in discussions with the loan servicers to amend the loan to extend the deadline to complete such projects and waive any penalty interest incurred to date. In connection with the default, the Company accrued $3.1 million of penalty interest, which as of February 26, 2010 has not been paid. The accrual for penalty interest lowered the Company’s Adjusted FFO per share by $0.03 for the fourth quarter and full year, respectively. Some or all of the $3.1 million penalty interest accrual may be reversed in 2010 if the loan servicers accept our proposed amendment.
Management Transition Costs: The Company recorded approximately $2.6 million of expense related to two management changes. These non-recurring charges are added back to calculate the Company’s Adjusted EBITDA and Adjusted FFO.
Controlled Equity Offering Program: The Company completed its initial $75 million controlled equity offering program and initiated a new $75 million controlled equity offering program during the fourth quarter. Under the initial program, the Company sold 10.2 million shares at an average price of $7.34. Under the second program, the Company sold 5.9 million shares at an average sales price of $8.37. There is currently $25.4 million remaining under the second program.
Dividends: On January 29, 2010, the Company paid a dividend to stockholders of record as of December 28, 2009 in the amount of $0.33 per share. In total, $4.1 million of the dividend was paid in cash and $36.9 million was paid in shares of the Company’s common stock.
Debt Repayments: The Company repaid the $27.9 million loan secured by its Griffin Gate Marriott and the $5 million loan secured by its Bethesda Marriott Suites with corporate cash during the fourth quarter.
Full Year 2009 Highlights
RevPAR: The Company’s RevPAR was $104.60, a decrease of 17.6 percent compared to the same period in 2008.
Hotel Adjusted EBITDA Margins: The Company’s Hotel Adjusted EBITDA margins were 22.36%, a decrease of 520 basis points compared to the same period in 2008.
Adjusted EBITDA: The Company’s Adjusted EBITDA was $113.4 million, a decline of 36.6% compared to the same period in 2008.
Adjusted FFO: The Company’s Adjusted FFO was $82.8 million and Adjusted FFO per diluted share was $0.77.
Operating Results Please see “Certain Definitions” and “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margins,” “FFO,” “Adjusted FFO” and “same-store.”
For the fourth quarter ended December 31, 2009, the Company reported the following:
Revenues of $175.7 million compared to $218.0 million for the comparable period in 2008.
Adjusted EBITDA of $32.9 million compared to $54.6 million for the comparable period in 2008.
Adjusted FFO and Adjusted FFO per diluted share of $22.1 million and $0.18, respectively, compared to $41.5 million and $0.46, respectively, for the comparable period in 2008.
Net loss of $9.0 million (or $0.07 per diluted share) compared to net income of $13.8 million (or $0.15 per diluted share) for the comparable period in 2008.
Same-store RevPAR for the fourth quarter decreased 14.8 percent from $120.33 to $102.50 for the comparable period in 2008, driven by a 2.4 percentage point decrease in occupancy (from 67.8 percent to 65.4 percent) and an 11.7 percent decrease in the average daily rate (from $177.56 to $156.75). Same-store Hotel Adjusted EBITDA margins for its hotels decreased 557 basis points (from 26.84% to 21.27%) from the comparable period in 2008.
The Company’s 2009 fourth quarter included the period from September 12, 2009 to December 31, 2009 (111 days) whereas the 2008 fourth quarter included the period from September 6, 2008 to December 31, 2008 (117 days) for our 15 domestic Marriott-managed hotels. The difference in the number of days in each quarter negatively impacts the comparisons to the prior year. RevPAR for the 15 domestic Marriott-managed hotels was $148.58 for the period from September 6, 2008 to September 11, 2008. If the period from September 6, 2008 to September 11, 2008 was excluded from the fourth quarter of 2008, the Company’s pro forma RevPAR decline was 14.0%.
For the full year 2009, the Company reported the following:
Revenues of $575.7 million compared to $693.2 million for the comparable period in 2008.
Adjusted EBITDA of $113.4 million compared to $178.8 million for the comparable period in 2008.
Adjusted FFO and Adjusted FFO per diluted share of $82.8 million and $0.77, respectively, compared to $137.8 million and $1.48, respectively, for the comparable period in 2008.
Net loss of $11.1 million (or $0.10 per diluted share) compared to net income of $52.9 million (or $0.56 per diluted share) for the comparable period in 2008.
Same-store RevPAR for the full year 2009 decreased 17.6 percent from $126.95 to $104.60 for the comparable period in 2008, driven by a 4.1 percentage point decrease in occupancy (from 71.8 percent to 67.7 percent) and a 12.6 percent decrease in the average daily rate (from $176.73 to $154.45). Full year Hotel Adjusted EBITDA margins decreased 520 basis points (from 27.56% to 22.36%) from the comparable period in 2008.
Hotel Fundamentals
The Company’s RevPAR declined in 2009 by 17.6%. Most of the decline in RevPAR can be attributed to a significant decline in the average daily rate and reflects a number of negative trends within the Company’s primary customer segments, as well as a change in the mix between
those segments. The Company’s room revenue by primary customer segment for the year ended
December 31, 2009 was as follows:
$ in millions % of Total $ in millions % of Total
Business Transient $ 92.9 25.5% $ 131.1 29.5%
Group 134.1 36.7% 163.5 36.8%
Leisure and Other 138.0 37.8% 149.5 33.7%
Total $ 365.0 100.0% $ 444.1 100.0%
Year Ended December 31, 2009 Year Ended December 31, 2008
The business transient segment, traditionally the most profitable segment for hotels, experienced
room revenue declines of almost 30% in 2009 due to a 15% decrease in room nights and an 18%
decrease in average rate. The declines in business transient revenue moderated to 24% during the
fourth quarter, the lowest level of decline during the year. The Company expects the business
transient segment to remain depressed until there is a sustained improvement in the overall
economic climate in the United States. Business transient room revenue was partially replaced
by lower-rated leisure and other business. Although leisure and other revenue declined during
2009 by almost 8%, room nights increased by over 5%.
In response to the current economic climate, a number of groups postponed, cancelled or reduced
their meetings in 2009. As a result, the Company’s group room revenue declined 18% on a
12.5% decline in group room nights. Group business is not demonstrating the same moderating
trends as business transient, as it was down 22% during the fourth quarter, but the group booking
window remains very short. This effect was illustrated during the fourth quarter 2009 when the
Company’s hotels booked, net of cancellations, 47% more group rooms than during the fourth
quarter 2008. As of December 31, 2009, the Company’s 2010 group booking pace is
approximately 17% lower than as the same time last year.
During 2009, the Company continued to identify and implement its aggressive cost containment
program. As a result, despite the 17.6% decline in RevPAR, the Company’s 2009 Hotel
Adjusted EBITDA margins declined only 520 basis points compared to the same period in 2008.
Evidence of the success of some of these initiatives is as follows:
The Company reduced support costs at its hotels by approximately 10%.
The Company reduced the single largest hotel expense category, labor (wages & benefits)
by almost 11%.
Productivity at the Company’s hotels increased just over 7%, as measured by man hours
per occupied room.
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