Diamondrock Hospitality Company

And ladies and gentlemen, thank you for standing by. And welcome to Diamond Rock Hospitality's first quarter 2022 earnings release. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker, Jeff Donnelly, Chief Financial Officer at Diamond Rock. Please go ahead.

Thank you, Carmen, and good morning, everyone. This is Jeff Donnelly, Chief Financial Officer of Diamond Rock Hospitality, and welcome to our first quarter 2022 earnings call. With me on the call today is Mark Brugger, our President and Chief Executive Officer. Before we begin... Let me remind everyone that many of our comments today are not historical fact and are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from those expressed or implied by our comments today. In addition, on today's call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. With that, I am pleased to turn the call over to Mark Berger.

Thanks, Jeff. Thank you for joining us today for Dime Rocks! The recent rebound in travel demand has exceeded our expectations, despite the Omicron pause in January. Americans are clearly getting back on the road after being locked down for the last two years. The culmination of our strategically crafted portfolio and operational excellence has allowed us to deliver first quarter Hotel Adjusted EBITDA higher than the comparable period in pre-pandemic 2019. In fact, based on current demand trends, we expect portfolio total revenue to exceed full year 2019 same store total revenues for the full year 2022. Moreover, Hotel Adjusted EBITDA is projected to exceed 2019 levels for the next 12-month period. Let me highlight a few of our successes this year. The portfolio took 280 basis points of market share from competitive hotels compared to 2019. Getting past Omicron impact in January, results for February and March collectively were terrific, with total revenues exceeding the comparable months in 2019 by 2.5%. and hotel-adjusted EBITDA was up an impressive 16.2 percent compared to 2019. April total REBPAR continued this positive story and was up 4.2 percent versus comparable 2019. For the entire first quarter, comparable hotel-adjusted EBITDA margins were 26 percent, an increase of 122 basis points over comparable 2019, despite the headwind in January. These robust results in the quarter meant we complied with all our original unmodified loan covenants, and we expect to exit covenant waivers at the end of the second quarter. And to top it off, we acquired the synergistic Kimpton Fort Lauderdale Beach Resort on April 1st in an off-market transaction for only $360,000 per key. In many ways, our portfolio of 34 hotels is uniquely balanced for a one-two recovery that should put Dimerock out front. We have the right kind of assets and the right kind of markets to set up for success in this cycle. Today's traveler is focused on experiential travel, especially in leisure. We believe that our portfolio of 14 resorts will continue to outperform for the foreseeable future, Because consumer demand for frequent leisure trips has accelerated, the U.S. remains massively under-resorted, and new supply remains permanently constrained due to the scarcity of prime resort land parcels and regulatory restrictions that often lead to an outright prohibition against new development. Importantly, thus far at resorts, we have seen little pricing resistance from the leisure customer, And encouragingly, the advanced bookings at our resorts, even as far out as next festive week and into 2023, are at rates higher than this year. On the group side, we are well positioned with strong citywide demand in our key group markets this year and next. Meeting planners are actively booking, and we expect to exceed our budgeted goals for 2022. The pent-up group demand and the need to meet make it likely that group bookings will hit new highs over the next few years. The last segment to recover, business transient, is coming back, and it has increased dramatically in just the last few weeks. While we are seeing big jumps in BT demand, we should point out that it is coming from very low levels. We still expect BT recovery to take some time to fully heal, and it will vary significantly by city. With that said, Overall, each demand segment is training much stronger than we thought, even as recently as our last earnings call. Before getting into details on the numbers, let me just hit a few reasons why Dimerac is so well set up. First, our footprint, which we spent the last cycle strategically repositioning, is just where you want to be for this entire upcoming growth cycle. We have several ROI repositionings that have just been completed and many more on the way. Third, we have restructured our management agreements such that over 90 percent of our hotels have short-term agreements, and that gives Amarok a unique advantage. And finally, we have a pipeline of deals populated with properties that have the kind of characteristics that continue powering our current outperformance. Now jumping into the numbers, let's turn to profit margins. Resort and leisure properties are going to be the big long-term winners in the profit margin game this cycle. Our resorts expanded profit margins by 759 basis points in the first quarter compared to 2019 and are collectively at new highs. Conversely, despite outperforming their comp sets, urban hotel profit margins contracted by nearly 1,200 basis points in the first quarter from comparable 2019. The urban hotels are now fully on the upswing. In January, during the Omicron wave, total revenue at our urban hotels was 47% below the same period in 2019. But by March, this dwindled to just 16% below. Actually, for March, our urban hotels finished at 65% occupancy and ADR within 1% of 2019. In April, we saw a comparative REPAR move still higher at our urban hotels. Urban hotel profitability is a major opportunity for Dimerock. Full year 2021, hotel adjusted EBITDA for our urban hotels was $164 million, or 90%. below comparable 2019. This year, we expect to see a surge of profit recovery, which is projected to restore as much as 60 percent of this pre-pandemic urban profit in 2022. Banquet business is the most lucrative component of the group demand found at many of our urban hotels and several of our resorts, too. As group activity returns and banquet business builds, we will see profit recovery accelerate. Looking ahead to 2023, our portfolio should get a multi-pronged benefit from the continued recovery of group, the return of high margin banquet business, and continued record restaurant sales. Ultimately, we believe that the Diamond Rock portfolio will stabilize at margins 200 to 300 basis points higher than the prior peak. While some of our peers have made promises about profit margin expansion in some unnamed future year, Domrock has already proven out half of that promise gain with just our resort portfolio profit margin success, as they are on track to increase profit margins by 400 to 450 basis points in 2022 over 2019. Note that resorts represent about 50 percent of our stabilized profits. Before turning the call over to Jeff, I did want to talk about our internal growth initiatives and how they are benefiting results. Last year, we completed three repositionings, the Lodge at Sonoma, the Height of Vail Luxury Resort, and the Margaritaville Key West. In the first quarter, Those three hotels generated massive Red Park growth, exceeding monthly 2019 levels by 22.7 percent, 22.6 percent, and 82.7 percent, respectively. Putting it another way, the three repositioned hotels delivered an incremental $5 million of EBITDA in Q1 as compared to 2019 and are projected to produce over $15 million of incremental profit for the full year over comparable 2019. That's a heck of a return on our investment. Collectively, these three properties are forecasted to generate an amazing 13 percent NOI yield in 2022 on our total investment in those properties. In the first quarter of 2021, we completed two more repositionings. The Hotel Clio Denver, a luxury collection hotel, and Embassy Suites Bethesda, and we have several more opportunities on tap. Collectively, we believe that we will have executed more value-creating manager and brand conversions than any other full-service lodging REIT, which positions us to outperform going forward. I'll now turn it over to Jeff to discuss the quarter in more detail. Jeff? Thanks, Mark.