DiamondRock Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

RevPAR Growth: Increased 7% YoY, with notable growth in June at 10.1%.

Adjusted EBITDA: Reported at $108 million.

Adjusted FFO per Share: $0.44, benefiting from a $6.9 million property tax settlement.

FFO Margin: Expanded by 303 basis points, excluding the tax benefit.

Free Cash Flow per Share: Increased 27% YoY to $0.80.

Corporate Dividend: Increased by 22% to $0.11 per share.

2026 Guidance: RevPAR growth revised to 2.5% - 4%, and adjusted EBITDA forecast raised to $310 million - $320 million.

2Strategic Updates and Business Highlights

Operational Efficiency: Total hotel operating expenses rose only 1.8%, reflecting a focus on cost control.

Resort Performance: Resorts outperformed urban hotels with a RevPAR increase of 7.9%.

L'Auberge de Sedona: Exceeded expectations with a 17% revenue increase and a 40% rise in hotel adjusted EBITDA.

Urban Hotels: RevPAR increased 6.6%, with strong performance across multiple locations.

Transaction Market: Increased activity noted, with a focus on acquisitions and dispositions to enhance earnings growth.

3Forward Guidance and Outlook

Second Half Expectations: Anticipated flat performance in Q3, with stronger growth expected in Q4.

2027 Outlook: Positive drivers identified, including strong demand from higher-income travelers, limited new supply, and upcoming citywide events.

Capital Expenditures: Expected between $75 million - $85 million for the year.

4Bad News, Challenges, or Points of Concern

Group Demand: Noted a deficit in group bookings for Q3, though short-term transient demand is improving.

Labor Costs: While labor costs were managed, there are expectations of increases due to union negotiations and higher bonus accruals.

Competitive Market: Intense competition in the acquisition market, with properties often selling for higher than expected prices.

5Notable Q&A Insights

Labor Cost Management: Executives clarified that while labor costs are not down, they have maintained a flat rate per occupied room through productivity improvements.

Acquisition Strategy: The company is open to both resort and urban acquisitions, but competitive pricing is a concern.

Group Pace for 2027: Early bookings show variability, with only 5-6% of total revenues currently booked for group pace.

Chicago Property Tax Settlement: The settlement provides clearer future valuations, aiding potential transactions. Overall, DiamondRock reported strong operational performance in Q2 2026, with positive financial metrics and strategic initiatives aimed at enhancing shareholder value, despite facing challenges in group demand and competitive pressures in the acquisition market.