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Hotel Industry News |
Tuesday December 2nd, 2008 |
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DiamondRock Hospitality Company Reports Strong Fourth Quarter and Full Year 2006 Results and Raises Dividend |
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RevPAR: Same-store revenue per available room increased 10.9 |
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DiamondRock Hospitality Company (the "Company") (NYSE:DRH) today announced results of operations for its fourth fiscal quarter and full year 2006. DiamondRock Hospitality Company is a self-advised real estate investment trust ("REIT") that is an owner and acquirer of premium hotels in North America.
Fourth Quarter 2006 Highlights
• RevPAR: Same-store revenue per available room ("RevPAR") increased 10.9 percent over the comparable period in 2005.
• Hotel Adjusted EBITDA Margins: Same-store hotel adjusted earnings before interest expense, taxes, depreciation and amortization ("Adjusted EBITDA") margins increased 282 basis points.
• Adjusted EBITDA: The Company's Adjusted EBITDA was $44.8 million.
• Adjusted FFO: The Company reported adjusted funds from operations ("Adjusted FFO") of $30.7 million and Adjusted FFO per share of $0.40.
• Dividend: The Company declared a quarterly dividend of $0.18 per share during the fourth quarter.
• High Quality Hotel Acquisitions: The Company closed on three hotel acquisitions for combined contractual purchase prices of $355 million.
• Completed Successful Equity Raise: The Company raised net proceeds of $97 million in connection with a follow-on equity offering in the fourth quarter.
Full Year 2006 Highlights
• RevPAR: Same-store RevPAR increased 11.7 percent over the comparable period in 2005.
• Hotel Adjusted EBITDA Margins: Same-store hotel Adjusted EBITDA margins increased 300 basis points.
• Adjusted EBITDA: The Company's Adjusted EBITDA was $133.9 million.
• Adjusted FFO: The Company reported Adjusted FFO of $93.6 million and Adjusted FFO per diluted share of $1.38.
• High Quality Hotel Acquisitions: The Company closed on five hotel acquisitions for combined contractual purchase prices in excess of $700 million.
• Completed Two Successful Equity Raises: The Company raised net proceeds of $335 million in connection with two follow-on equity offerings.
• Subsequent Events: Shortly after the end of the year, the Company completed an equity raise for $318 million of net proceeds. The proceeds were used for the $330 million acquisition of the Westin Boston Waterfront hotel.
William W. McCarten, chairman and chief executive officer, stated, "2006 was a terrific year for DiamondRock with our portfolio of hotels and resorts generating double digit RevPAR increases and robust profit margin growth. We are very proud of the fact that DiamondRock ranked as the number one performing REIT in the Bloomberg lodging REIT index in 2006 based on total shareholder return. 2006 was a transformational year for the Company as we continued to improve our portfolio quality and geographic diversity with the acquisition of over $700 million of very high quality hotels. With the acquisition of the $330 million Westin Boston Waterfront hotel, more than seventy-five percent of DiamondRock's earnings are projected to come from 3 destination resorts and hotels in the 5 gateway cities of New York, Chicago, Atlanta, Boston and Los Angeles. The outlook for 2007 and 2008 remains bright. Having completed a number of major renovations at our hotels in the last two years, we are well positioned to leverage the continuing strength in the lodging market and restrained supply growth."
Operating Results
For the fourth quarter, beginning September 9, 2006 and ended December 31, 2006, the Company reported the following:
• Revenues of $168.9 million compared to $104.2 million for the comparable period in 2005.
• Adjusted EBITDA was $44.8 million compared to $21.8 million for the comparable period in 2005.
• Adjusted FFO and Adjusted FFO per diluted share were $30.7 million and $0.40, respectively, compared to $15.3 million and $0.30, respectively, for the comparable period in 2005.
• Net income of $10.5 million (or $0.14 per diluted share) compared to $1.6 million (or $0.03 per diluted share) for the comparable period in 2005.
For our entire portfolio of 20 hotels, same-store RevPAR for the fourth quarter increased 10.9 percent from $106.82 to $118.50 as compared to the same period in 2005, driven by an 11.7 percent increase in the average daily rate offset by a 0.4 percentage point decrease in occupancy (from 68.3 percent to 67.9 percent). Same-store hotel Adjusted EBITDA margins for our hotels increased 282 basis points over the same period in the prior year.
For the full year 2006, the Company reported the following:
• Revenues of $491.9 million compared to $229.5 million for the comparable period in 2005.
• Adjusted EBITDA of $133.9 million compared to $47.1 million for the comparable period in 2005.
• Adjusted FFO and Adjusted FFO per diluted share were $93.6 million and $1.38, respectively, compared to $31.1 million and $0.79, respectively, for the comparable period in 2005.
• Net income of $35.2 million compared to a net loss of $7.3 million for the comparable period in 2005.
Same-store RevPAR for the full year 2006 increased 11.7 percent from $107.62 to $120.26 as compared to the same period in 2005, driven by an 11.1 percent increase in the average daily rate and a 0.4 percentage point increase in occupancy (from 72.4 percent to 72.8 percent). Full year 2006 same-store hotel Adjusted EBITDA margins for our hotels increased 300 basis points (from 25.79 percent to 28.79 percent) over the same period in the prior year.
DiamondRock is entitled to contractual yield support from its hotel operators under certain management agreements, most significantly at the Oak Brook Hills Marriott Resort and the Orlando Airport Marriott. The Company recorded $426 thousand of yield support in the fourth quarter, contributing 25 basis points to our fourth quarter Hotel Adjusted EBITDA margins, and an aggregate of $2.8 million of yield support for the full year 2006, contributing 57 basis points to our full year Hotel Adjusted EBITDA margins.
Operating Results Compared to Prior Guidance
The following is a chart showing our actual fourth quarter 2006 results compared to our guidance for the fourth quarter 2006:
4Q 2006 Guidance Actual 4Q 2006 Results
RevPAR Growth 10% to 11% 10.9%
Hotel Adjusted EBITDA
Margins 280 to 320 basis points 282 basis points
Adjusted EBITDA $41 to $42 million $44.8 million
Adjusted FFO $27.5 to $28.5 million $30.7 million
Adjusted FFO/Share $0.36 to $0.37 per $0.40 per diluted diluted share share
Balance Sheet
As of year end, the Company had total assets of approximately $1.8 billion. Cash and cash equivalents were $48.3 million, including $28.6 million of restricted cash.
As of year end, the Company had total debt of approximately $843.8 million, comprised entirely of fixed-rate, property specific mortgages with a weighted average interest rate of 5.7 percent and a weighted average maturity of 9 years. Eight of the Company's 20 hotels were unencumbered by mortgage debt as of year end.
As of year end, the Company continued to own 100% of its properties directly and has issued no operating partnership units or preferred stock.
Outlook
The Company is providing guidance, but does not undertake to update it for any developments in our business. Achievement of the anticipated results is subject to the risks disclosed in our filings with the Securities and Exchange Commission.
The guidance below includes results from the estimated disruption impact of renovations planned for our hotels during 2007 as well as from the Westin Boston Waterfront hotel acquisition in January 2007 and the related equity raise. Furthermore, the RevPAR and Hotel Adjusted EBITDA margin guidance are presented on a pro forma basis as they assume that we owned all of our hotels for the comparable prior year periods.
For the first fiscal quarter of 2007, we expect:
• RevPAR to increase 8 to 10 percent.
• Hotel Adjusted EBITDA Margins to increase 100 to 150 basis points.
• Adjusted EBITDA of $31.5 million to $33.5 million.
• Adjusted FFO of $22.9 million to $24.9 million.
• Adjusted FFO per share of $0.25 to $0.27 based on 91.4 million diluted weighted average shares.
For the full year 2007, we expect:
• RevPAR to increase 8 to 10 percent.
• Hotel Adjusted EBITDA Margins to increase 150 to 200 basis points.
• Adjusted EBITDA of $204 million to $208 million.
• Adjusted FFO of $148.6 million to $152.6 million.
• Adjusted FFO per share of $1.58 to $1.62, based on 94.3 million diluted weighted average shares.
Increased Dividend for First Quarter 2007
Our Board of Directors has authorized a 33% increase in our quarterly dividend. Shareholders of record as of March 23, 2007 will receive a cash dividend of $0.24 per share on April 2, 2007.
2007 Major Capital Expenditures
We have and continue to make significant capital investments in our hotels. During 2006 we completed over $61 million of capital improvements. In 2007, we plan to complete approximately $76 million of capital improvements at our hotels. The most significant projects are as follows:
• Chicago Marriott Downtown: The Company is currently in the planning stages of a $35 million renovation of the hotel. The renovation includes a complete redo of all the meeting and ballrooms, adding 17,000 square feet of new meeting space, reconcepting and relocating the restaurant, expanding the lobby bar and creating a Marriott "great room" in the lobby. The work will begin in the second half of 2007 and be completed in the first half of 2008. The estimated disruption, mainly associated with the ballroom renovations, will occur primarily in the first quarter of 2008.
• Westin Boston Waterfront: The Company is currently planning the construction of approximately $15.5 million of tenant improvements to the 100,000 square foot retail building attached to the hotel. The project will be completed in late 2007.
• Oak Brook Hills Marriott Resort: The Company began a significant renovation in the fourth quarter of 2006 and will complete the work in early 2007. The renovation includes the guestrooms and bathrooms, the main ballroom and meeting rooms and the lobby. The work remains on budget and will be completed by the end of the first quarter with very limited disruption.
• Los Angeles Airport Marriott: The Company plans to renovate the breakout meeting rooms and 19 suites during the second quarter of 2007 with very limited disruption projected as a result of the work.
• Griffin Gate Marriott Resort: The Company is currently adding a spa, repositioning and reconcepting the hotel restaurants as well as adding meeting space to the hotel. The projects will be completed early in the second quarter.
• Westin Atlanta North: The Company plans to renovate the guestrooms during the third quarter of 2007. There is minimal disruption anticipated as a result of the work.
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| Last: |
3.62 |
| Time: |
12/2/2008
4:03pm |
| Change: |
+0.62 |
| Opened: |
3.05 |
| Day: |
3.62 - 2.85 |
| Volume: | 4216499
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