After a third quarter described as "largely in line with expectations," officials with DiamondRock Hospitality Company see more optimism on the horizon, with expectations for stronger travel demand and a more refined portfolio in 2025.
Speaking during the company's latest earnings call, CEO Jeffrey Donnelly said he expects the demand picture to get sequentially better over the course of next year, particularly as the effects of easing monetary policy spread across the economy.
"That leads me to believe that as we progress through 2025, main street will feel what Wall Street is experiencing now," he said, noting hotel industry year-over-year comparisons will get easier in the second half of the year.
This could combine into strong growth for the industry, Donnelly said, driven primarily by a reinvigorated leisure traveler and a continued bounce back for business travel.
At the same time, he said the company's long-term focus will be on developing a more refined portfolio of leisure resorts and urban hotels with specific, resilient demand drivers. To that end, he anticipates the sale of some noncore hotels through the course of the year and noted the company is close to a deal to purchase a small urban asset that is more in line with their long-term vision.
Executive Vice President and Chief Financial Officer Briony Quinn said the company is currently laying the groundwork for greater asset sales in 2025.
"We are working to enhance the marketability of non-core assets by extending ground leases, pre-negotiating [property-improvement plans] and vetting financing options," she said, noting the company could focus on recycling the proceeds of sales into acquisitions or in repurchasing stock, based on market conditions.
During the quarter, the company focused much of its capital on its existing portfolio across several projects, including completing renovation work of guestrooms at the Bourbon Orleans Hotel. At the start of this month, the company began work on a repositioning of the Orchards Inn Sedona, which after renovation work will become the Cliffs at L'Auberge.
In total, DiamondRock officials expect to spend $85 million on capital improvements across all of 2024.
Third-quarter performance
During the third quarter, DiamondRock had comparable revenue per available room growth of 2.8%, growing to $214.44. Total revenues were up 2.5% to $285.1 million, and net income came in at $26.6 million.
Adjusted earnings before interest, taxes, depreciation and amortization was $75.6 million, a 3.3% year-over-year increase.
The company lowered both its full-year RevPAR and total RevPAR guidance down 0.5% at the midpoint, now expecting 2024 RevPAR growth between 1.5% and 2% and TrevPAR growth between 3% and 3.5%.
The midpoint of adjusted EBITDA guidance remained the same but moved in $3 million at both the high end and low end, for a full-year projection between $281 million and $287 million.
As of press time, DiamondRock's stock was trading at $9.30 a share, down 0.85% year to date. The NYSE composite was up 18.2% for the same period.