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DiamondRock Hospitality Co (DRH)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 results modestly outperformed internal expectations: total revenue rose 0.1% YoY to $285.4M, Adjusted EBITDA grew 2.7% to $79.1M, and Adjusted FFO/share increased 7.4% to $0.29, while diluted EPS was $0.10 .
  • Management raised full-year guidance midpoints: Adjusted EBITDA to $287–$295M (+$6M) and Adjusted FFO/share to $1.02–$1.06 (+$0.03), citing strong expense control and F&B/out-of-room strength .
  • Against Wall Street consensus (S&P Global), DRH delivered a beat on revenue ($285.4M vs $277.7M*) and primary EPS (0.1315* vs 0.1037*); note company-reported diluted EPS of $0.10 reflects different definitions .
  • Strategic catalysts: portfolio now fully unencumbered following $1.5B credit facility upsizing (earliest maturity extended to 2028/2030), continued share repurchases (4.8M YTD), and a planned transfer of listing to Nasdaq on Dec 1, 2025 .

What Went Well and What Went Wrong

What Went Well

  • Expense discipline drove margin resilience: total hotel operating expenses rose only 1.6% YoY, limiting hotel-adjusted margin contraction to just 3 bps; F&B margins expanded ~180 bps on menu reengineering and staffing focus .
  • Out-of-room revenue strength: comparable Total RevPAR increased 1.5% on 5.1% growth in out-of-room categories (banquets & catering, spa, parking, destination fees), boosting bottom-line flow-through .
  • Balance sheet improved: $1.5B credit facility upsized/extended; mortgage loans on Hotel Clio and Westin Boston repaid, creating a fully unencumbered portfolio and full prepayment flexibility; weighted average interest ~5.3% .
    • CEO: “Our conservative balance sheet and growing free cash flow per share provide significant optionality…” .

What Went Wrong

  • Room-rate softness: Comparable ADR dipped 0.4% and Comparable RevPAR declined 0.3% YoY, reflecting tough comps from DNC Chicago and fewer Boston citywides; group room revenues fell 3.5% .
  • Reported EPS down YoY: diluted EPS decreased to $0.10 vs $0.11 in Q3 2024, despite Adjusted FFO/share growth; loss on debt extinguishment ($5.85M) and higher corporate expenses contributed .
  • Resorts bifurcation and select property disruptions: lower ADR resorts underperformed; renovation impacts in Sedona and accelerated work at Havana Cabana pressured RevPAR; resort RevPAR -2.5% even as resort EBITDA margins expanded 150+ bps .

Financial Results

Quarterly Performance vs Prior Periods

MetricQ1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$254.9 $305.7 $285.4
Diluted EPS ($USD)$0.04 $0.18 $0.10
Adjusted EBITDA ($USD Millions)$56.1 $90.5 $79.1
Hotel Adjusted EBITDA Margin (%)24.36% 31.19% 29.14%
Comparable RevPAR ($USD)$186.20 $226.95 $214.21
Comparable Total RevPAR ($USD)$291.56 $350.00 $323.29

Q3 2025 vs Prior Year and Consensus

MetricQ3 2024Q3 2025S&P Consensus (Q3 2025)
Total Revenues ($USD Millions)$285.1 $285.4 $277.7*
Diluted EPS ($USD)$0.11 $0.10 Primary EPS: 0.1037*
EBITDAre ($USD Millions)$73.9 $69.6 EBITDA: 70.1*
Adjusted EBITDA ($USD Millions)$77.0 $79.1 —
Hotel Adjusted EBITDA Margin (%)29.17% 29.14% —
Comparable RevPAR ($USD)$214.79 $214.21 —

Values retrieved from S&P Global.*

Segment Revenue Mix (Q3 2025 vs Q3 2024)

SegmentQ3 2024 ($USD Millions)Q3 2025 ($USD Millions)
Rooms$192.5 $189.1
Food & Beverage$65.8 $67.4
Other$26.9 $28.9
Total Revenues$285.1 $285.4

Key Operating KPIs (Q3 2025 vs Q3 2024)

KPIQ3 2024Q3 2025
Comparable ADR ($USD)$282.05 $281.05
Comparable Occupancy (%)76.2% 76.2%
Comparable RevPAR ($USD)$214.79 $214.21
Comparable Total RevPAR ($USD)$318.60 $323.29
Comparable Hotel Adjusted EBITDA ($USD Millions)$82.0 $83.2
Margin (%)29.17% 29.14%

Guidance Changes

MetricPeriodPrevious Guidance (Aug 7, 2025)Current Guidance (Nov 6, 2025)Change
Comparable RevPAR GrowthFY 2025(1.0)% to 1.0% (0.5)% to 0.5% Maintained midpoint
Comparable Total RevPAR GrowthFY 2025(0.5)% to 1.5% 0.0% to 1.0% Maintained midpoint
Adjusted EBITDA ($USD Millions)FY 2025$275 to $295 $287 to $295 Raised midpoint (+$6M)
Adjusted FFO ($USD Millions)FY 2025$200.5 to $220.5 $213 to $221 Raised midpoint (+$6.5M)
Adjusted FFO per share ($USD)FY 2025$0.96 to $1.06 $1.02 to $1.06 Raised midpoint (+$0.03)
Corporate Expenses (ex-SBC) ($USD Millions)FY 2025~$24–$25 ~$24–$25 Maintained
Cash Interest Expense ($USD Millions)FY 2025~$63–$64 ~$62–$63 Lowered midpoint (-$1M)
Fully Diluted Shares (Millions)FY 2025209.0 208.5 Slight decrease
Available RoomsFY 20253,502,175 3,502,175 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3 2025)Trend
Expense control/productivityQ2: expense growth limited to 0.7%; ex-Chicago property tax margins +30 bps . Q1: margin +39 bps, EBITDA ~flat Expenses +1.6% YoY; F&B margins +180 bps; wages/benefits +1.1% Improving operational efficiency
Out-of-room revenue strengthQ2: out-of-room accelerated, continued into Q3 Banquets/catering +~8%; spa/parking/destination fees each +10%+ Positive
Group/business transient demandQ2: stabilizing travel patterns Business transient +~2%; group room revenue -3.5% vs tough comps; short-term group conversions strong; 2026 pace up mid-high single digits Mixed near-term; constructive into 2026
Resorts performance bifurcationQ1/Q2: mixed resort trends, higher ADR outperform Resort RevPAR -2.5% but EBITDA margins +150+ bps; higher ADR resorts outperform Mixed topline; improving margins
CapEx strategy & ROIQ2: active projects; $85–$95M spend Detailed strategy to elongate cycles, reduce costs; The Cliffs at L’Auberge +65% ADR; 10% yield on cost target Positive ROI discipline
Macro/policy backdropQ1: lowered top-line outlook 200 bps amid uncertainty Federal government shutdown weighing on Q4 assumptions; guidance moderated Near-term headwind
Financing & balance sheetQ2: $1.5B refi; maturities pushed; unencumbered goal Portfolio fully unencumbered; earliest maturity 2028/2030; 30% fixed/70% floating Stronger flexibility
AI/technology efficiency—Shifting focus to administrative/sales labor; leveraging AI to streamline processes Emerging initiative

Management Commentary

  • CEO on capital allocation and FCF: “Our North Star at DiamondRock remains driving outsized free cash flow per share… our G&A per owned hotel is nearly 45% below our peer average” .
  • CEO on CapEx discipline: “We work hard to elongate [renovation] cycle and reduce costs… our internal design and construction team plans our renovations at least two years in advance… supply chain is monitored” .
  • CFO on guidance raise and dividend policy: “We have raised the midpoint of our adjusted EBITDA guidance by $6M… dividend to FFO/share payout ~30% at midpoint” .
  • CEO on 2026 tailwinds: renovations roll-off (~75 bps RevPAR tailwind), FIFA exposure, group pace strength; expectation to widen FCF/share outperformance vs peers .

Q&A Highlights

  • Expense controls: Focus on productivity rather than headcount cuts; tactical labor scheduling reduces hours worked and mitigates wage inflation .
  • CapEx/dispositions: 2026 disruption expected to be modest; capital recycling likely, with bias toward accretive share repurchases at current levels; potential mix shift if large assets sold (e.g., Chicago Marriott) .
  • Labor cost trajectory: Wages/benefits likely pace ~2.5–3% in 2026; targeting admin/sales efficiencies, including AI, to offset .
  • Event-driven demand: FIFA strategy cautious pending team draws; anticipate compression/rate power where match importance is high .
  • Industry/privatization: Improving RevPAR outlook and lower rates could revive private-market appetite; underwriting challenged in markets where cash flow hasn’t recovered (e.g., West Coast) .

Estimates Context

Metric (Q3 2025)ConsensusActual (S&P)Company-Reported
Primary EPS ($USD)0.1037*0.1315*Diluted EPS: $0.10
Revenue ($USD)$277.7M*$285.4M*$285.4M
EBITDA ($USD)$70.1M*$73.2M*EBITDAre: $69.6M; Adjusted EBITDA: $79.1M

Values retrieved from S&P Global.*
Note: S&P “Primary EPS” and “EBITDA” reflect standardized definitions and may differ from company-reported diluted EPS and Adjusted EBITDA.

Key Takeaways for Investors

  • Expense discipline is the quarter’s differentiator: minimal expense growth and strong F&B/out-of-room margins drove Adjusted EBITDA growth despite flat RevPAR—supportive for estimate revisions focused on margins and FCF .
  • Guidance midpoints raised for FY25 (Adjusted EBITDA, Adjusted FFO/share) with interest expense trimmed—probable positive estimate revisions and sentiment .
  • Balance sheet flexibility enhanced: fully unencumbered portfolio, extended maturities, significant liquidity (~$145M cash; $400M revolver available)—capacity for opportunistic buybacks or preferred redemption .
  • Near-term headwind: federal shutdown introduces Q4 uncertainty; group pace stepped back from Oct to Nov—near-term trading may hinge on resolution and holiday calendar comps .
  • Resorts show margin resilience even with topline pressure; higher ADR resorts outperform—positioning benefits into 2026 tailwinds (renovation roll-offs, FIFA) .
  • Capital recycling likely over 12–18 months; management biased to accretive share repurchases at current implied cap rates (~9.7% cited) versus acquisitions with lower all-in yields .
  • Listing transfer to Nasdaq (Dec 1) may modestly improve trading dynamics and corporate services engagement; ticker remains DRH .

Appendix: Additional Data and Disclosures

  • Share repurchases: 1.5M shares in Q3 at $7.87; 4.8M YTD at $7.72; $137M remaining authorization .
  • Dividends: $0.08 common dividend paid Oct 14; preferred $0.515625 on Sept 30 .
  • Debt metrics: $1.1B unsecured term loans; weighted average interest rate 5.3%; net debt/EBITDA 3.3x; fixed charge coverage 4.7x .
  • Non-GAAP definitions and reconciliations provided in press release/8-K exhibits .