DiamondRock Hospitality Company

DiamondRock reported Q2 comparable RevPAR growth of 7%, with April and May each up about 5.5% and June up 10.1%. Total hotel operating expenses increased 1.8% while total revenue grew 5.5%, producing 240 bps of hotel adjusted EBITDA margin expansion. Corporate adjusted EBITDA was $108 million and adjusted FFO per share was $0.44. The settlement of multiyear property tax appeals on the two Chicago hotels contributed $6.9 million, or $0.03 per share. Excluding that benefit, FFO margin expanded 303 bps, and trailing 12-month free cash flow per diluted share increased 27% year over year to $0.80. For 2026, management now expects RevPAR growth of 2.5% to 4%, adjusted EBITDA of $310 million to $320 million, adjusted FFO per share of $1.18 to $1.23, and capex of $75 million to $85 million; the updated outlook implies 18% free cash flow per share growth. They also now expect the World Cup to contribute about 30 bps to full-year RevPAR, versus an initial estimate of 20 bps.

Jeffrey John Donnelly emphasized that DiamondRock’s strategy is centered on growing free cash flow per share, saying the last two years were about disciplined execution across investments, asset management, operations, and capital allocation. He framed the company as more flexible than many lodging REITs because of its conservative balance sheet and ownership/control of hotel operating decisions, and he highlighted optionality around acquisitions, dispositions, brand conversions, and property-level repositioning. His tone was constructive and confident, especially on 2027, citing five earnings-growth drivers including higher-income consumers, limited supply, citywide event calendars, renovation upside, and Westin Boston franchise savings.

Briony R. Quinn said the quarter showed “strong operating performance,” with RevPAR up 7%, expense growth held to 1.8% excluding tax benefits, and 240 bps of margin expansion. She highlighted the $6.9 million Chicago property tax settlement, trailing 12-month free cash flow per diluted share of $0.80, and a 27% year-over-year increase in that metric. On capital allocation, she noted no debt maturities until 2029, no secured or convertible debt, no preferred equity, and leverage at the low end of the peer group; she also said one additional turn of leverage would add about $500 million of investment capacity. She paired the dividend increase with raised 2026 guidance and said the company expects payout ratio expansion over time as NOLs are utilized.

Analysts focused on labor costs, acquisition appetite, transaction-market competition, Q3 group pacing, Key West softness, the Marriott/brand situation, Chicago tax and liquidity, and potential overlapping capex projects. Management said labor productivity gains were driven by tighter staffing and efficiency, not by a specific hotel type or brand-driven cost cuts, and acknowledged expense growth should rise some in the back half, citing a 2.5% assumed expense-growth rate. On deals, management said competition has intensified with more high-net-worth and private-equity capital, and bid gaps have widened to roughly 10% to 15% on some assets; they remain interested in both resorts and urban hotels but are selective on price. They also said 2H group pace is up about 1%, with Q3 flatter and Q4 stronger, while 2027 group pacing is still too early to call.