DiamondRock Hospitality Company Reports Strong Second Quarter Results

DiamondRock Hospitality Company (NYSE:DRH) today announced results of operations for its second fiscal quarter 2007. The Company is a lodging focused real estate investment trust that owns and acquires premium hotels in North America.

Second Quarter 2007 Highlights

• RevPAR: Same-store revenue per available room ("RevPAR") increased 8.6 percent over the comparable period in 2006.

• Hotel Adjusted EBITDA Margins: Same-store hotel adjusted earnings before interest expense, taxes, depreciation and amortization ("Adjusted EBITDA") margins increased 96 basis points.

• Adjusted EBITDA: The Company's Adjusted EBITDA was $54.6 million.

• Adjusted FFO: The Company reported adjusted funds from operations ("Adjusted FFO") of $39.6 million and Adjusted FFO per share of $0.42.

• Dividend: The Company paid a quarterly dividend of $0.24 per share during the second quarter.

William W. McCarten, chairman and chief executive officer, stated: "DiamondRock had a terrific second quarter as it continued to leverage a very strong travel environment. Our hotels in New York, Chicago, and Torrance were particularly strong during the quarter and enjoyed the favorable pricing environment. For the balance of 2007, we continue to see strong fundamentals with constrained supply in urban and resort markets and solid demand from all of our customer segments."

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 Margin," "FFO," "Adjusted FFO" and "Same-Store." Moreover, the discussions of RevPAR and Hotel Adjusted EBITDA Margin exclude the Westin Boston Waterfront Hotel due to the fact that this hotel was newly built in 2006 and there are no comparable statistics for the same period in the prior year.

For the second quarter, beginning March 24, 2007 and ended June 15, 2007, the Company reported the following:

• Revenues of $179.5 million compared to $125.0 million for the comparable period in 2006.
• Adjusted EBITDA was $54.6 million compared to $38.4 million for the comparable period in 2006.
• Adjusted FFO and Adjusted FFO per diluted share were $39.6 million and $0.42, respectively, compared to $27.3 million and $0.39, respectively, for the comparable period in 2006.
• Net income of $20.5 million (or $0.21 per diluted share) compared to $13.9 million (or $0.20 per diluted share) for the comparable period in 2006.

Same-store RevPAR for the second quarter increased 8.6 percent from $126.24 to $137.10 as compared to the same period in 2006, driven by a 7.3 percent increase in the average daily rate and a 0.9 percentage point increase in occupancy (from 75.5 percent to 76.4 percent). Same-store Hotel Adjusted EBITDA margins for our hotels increased 96 basis points over the same period in the prior year. Excluding yield support, same-store Hotel Adjusted EBITDA margins for our hotels increased 183 basis points over the same period in the prior year.

Year-to-date, beginning January 1, 2007 and ended June 15, 2007, the Company reported the following:

• Revenues of $313.3 million compared to $208.1 million for the comparable period in 2006.
• Adjusted EBITDA was $88.6 million compared to $59.3 million for the comparable period in 2006.
• Adjusted FFO was $63.8 million compared to $42.4 million for the comparable period in 2006.
• Net income of $27.3 million (or $0.29 per diluted share) compared to $18.3 million (or $0.30 per diluted share) for the comparable period in 2006.

Same-store RevPAR for year-to-date increased 9.1 percent from $118.06 to $128.81 as compared to the same period in 2006, driven by a 7.5 percent increase in the average daily rate and a 1.2 percentage point increase in occupancy (from 73.1 percent to 74.3 percent). Year-to-date, same-store Hotel Adjusted EBITDA margins for our hotels increased 134 basis points over the same period in the prior year. Excluding yield support, same-store Hotel Adjusted EBITDA margins for our hotels increased 187 basis points over the same period in the prior year.

Operating Results Compared to Prior Guidance

The following is a chart showing our actual second quarter 2007 results compared to our guidance for the second quarter 2007:

                          2Q 2007 Guidance         Actual 2Q 2007 Results

  RevPAR Growth           7% to 8%                 8.6 %

  Adjusted EBITDA         $51.0 to $53.0 million   $54.6 million

  Adjusted FFO            $36.0 to $38.0 million   $39.6 million

  Adjusted FFO/Share      $0.38 to $0.40 per       $0.42 per diluted

                           diluted share            share

Balance Sheet

As of the end of the second quarter, the Company had total assets of approximately $2.2 billion. Cash and cash equivalents were $51.9 million, including $28.6 million of restricted cash.

As of the end of the second quarter, the Company had total debt of approximately $868.5 million, comprised primarily of $839.4 million of fixed- rate, property specific mortgages and $26.5 million drawn on our unsecured credit facility. The Company's debt has a weighted average interest rate of 5.7 percent and a weighted average maturity of 8 years as of June 15, 2007. Nine of the Company's 21 hotels were unencumbered by mortgage debt as of June 15, 2007.

As of the end of the second quarter, 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 RevPAR guidance is presented on a pro forma basis as it assumes that we owned all of our hotels for the comparable prior year periods.

For the third fiscal quarter of 2007, the comapny expects:

• Same-store RevPAR to increase 9 to 10 percent.

• Hotel Adjusted EBITDA Margins to increase 150 to 200 basis points.

• Adjusted EBITDA of $43.5 million to $45.5 million.

• Adjusted FFO of $30.9 million to $32.9 million.

• Adjusted FFO per share of $0.32 to $0.35 based on 95.2 million diluted weighted average shares.

Guidance for the full year 2007 is unchanged. The company expects:

• Same-store 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.

Dividends for Second Quarter 2007

On June 22, 2007, a cash dividend of $0.24 per share was paid to shareholders of record as of June 15, 2007, the last day of our fiscal second quarter.

2007 Major Capital Expenditures

We have and continue to make significant capital investments in our hotels. In 2007, we expect to incur approximately $70 to $80 million of capital improvements at our hotels. We incurred $26.0 million of capital projects for the period from January 1, 2007 to June 15, 2007. The status of our most significant projects is 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 rooms 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 million of improvements to the unfinished shell space attached to the hotel. The improvements include the creation of over 37,000 square feet of meeting/exhibit space as well as 20,000 square feet for restaurant outlets.

• Oak Brook Hills Marriott Resort: The Company completed a significant renovation of the hotel. The renovation included the guestrooms and bathrooms, the main ballroom and meeting rooms, the restaurant, lounge and lobby.

• Los Angeles Airport Marriott: The Company completed the renovation of 19 suites during the second quarter of 2007 and plans to renovate the breakout meeting rooms in the fourth quarter of 2007.

• Griffin Gate: The Company added a spa, repositioned and reconcepted the hotel restaurants as well as added meeting space to the hotel. These projects were completed during the second quarter of 2007.

• Westin Atlanta North: The Company plans to renovate the guestrooms during the third quarter of 2007.

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