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Jun 30, 2023
DiamondRock Hospitality Q2 2023 Earnings Report
DiamondRock Hospitality's Q2 2023 performance reflected strong urban hotel RevPAR growth and strategic portfolio repositioning, amidst leisure travel redistribution and macroeconomic headwinds.
Key Takeaways
DiamondRock Hospitality reported all-time record revenues in Q2 2023, with total revenues reaching $289 million, a modest increase of nearly 1% year-over-year, and Hotel adjusted EBITDA was $93.6 million. Urban hotels showed strong RevPAR growth, up 7.9% year-over-year, while resort portfolio RevPAR decreased by 13% compared to last year due to the redistribution of leisure travel.
Total revenues in the second quarter were $289 million, nearly 1% ahead of 2022, driven by strong performance of urban hotels.
Hotel adjusted EBITDA in the second quarter was $93.6 million, $3.2 million ahead of 2019, despite disruptions from upgrades and a fire incident.
Urban hotels experienced strong RevPAR growth, up 7.9% year-over-year, exceeding 2019 levels for the first time this cycle.
Resort portfolio RevPAR was down 13% compared to last year, influenced by the redistribution of leisure travel to international destinations and cruise lines.
DiamondRock Hospitality
DiamondRock Hospitality
Forward Guidance
DiamondRock anticipates continued solid group demand and potential business transient pickup, balanced by leisure demand normalization and renovation impacts in the second half of 2023. Cost controls are a priority, but property insurance and tax increases are expected to impact margins.
Positive Outlook
- Overall US travel is projected to hit a new record next year with the occupancy of more than 1.3 billion hotel nights.
- Group revenue pace is up a terrific 28%.
- Leisure segment in the US next year will have its adjustment to the new normal behind it and can resume its long-term trend line of outperformance.
- US industry fundamentals should benefit over the next three to five years from constrained new hotel supply as high construction cost and high borrowing cost limit the viability of many new projects.
- The Dagny Boston repositioning this year is projected to grow profits 35% in 2024 with revenues up more than $3500000.
Challenges Ahead
- Chicago, their biggest market, was materially stronger in the first half than they expect it will be in the second half of the year.
- Business transient gains are leveling off.
- Leisure demand continues to reset to a new normal, well ahead of 2019, but a little behind 2022, and this normalization may play out the remainder of the year.
- Renovations and repositionings are projected to negatively impact second half total revenue growth by roughly $4 million, or an additional headwind of 115 basis points per quarter on RevPAR.
- Year-over-year property tax and property insurance increases will impact second half hotel adjusted EBITDA margins by approximately 270 basis points compared to the second half 2022 margins.