Diamondrock Hospitality Company

Good morning, everyone. Welcome to Diamond Rock's third quarter 2022 earnings call and webcast. Before we get started, let me remind everyone that many of our comments today are not historical facts 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'm pleased to turn the call over to Mark Brugger, our President and Chief Executive Officer. Mark?

Thank you for joining us today for Domrock's third quarter earnings call. Our entire executive team joins me today to answer your questions. The third quarter was a record quarter for Diamond Rock. Demand in leisure, business travel, and group business all exceeded our expectations. Consumers continue to spend on experiences like travel, and we see this continuing into 2023. We believe we are in a golden age of travel, distinguished by a societal shift in the necessity of travel that has been created by the rapid adoption of hybrid work environments, changes in mobility, preferences for experience over things, and the wanderlust of boomers and millennials alike. The future of travel is very bright. The Dimerock portfolio continues to separate itself from our peers with over 60% of our hotels falling into the luxury resort, lifestyle resort, or urban lifestyle categories. Of our last nine acquisitions, over two-thirds are waterfront resorts, all are lifestyle, and all are unencumbered by long-term management agreements. In fact, among the full-service lodging REITs, we have the lowest exposure to long-term brand management encumbrances and among the lowest exposure to ground leases. These qualities enhance operational control and increase exit value, a distinguishing factor that should drive a premium valuation. It is our strategy to curate a portfolio of experiential resorts and urban lifestyle hotels that deeply resonate with what today's travelers want. Damaroc's experiential hotel focus is paying off. Our performance through the pandemic has been strong, stronger than our peers. In fact, the portfolio took another 180 basis points of market share from the competitive set in the third quarter alone. This focus does not mean we sacrifice diversification. We remain well balanced with corporate demand contributing over one third of stabilized earnings and group demand exceeding 25%. Our focus puts us in the enviable position to capitalize on the strongest demand trends, and this translated into record performance for the third quarter for REVPAR, Total Revenues, and Hotel EBITDA. We soared past 2019 comparable revenues. Total revenues were up 11.7% versus 2019. Hotel adjusted EBITDA margins increased 125 basis points compared to 2019 on best-in-class asset management and tight cost controls. Average daily rates for the portfolio increased 17.5% over 2019 and 12.5% over 2021. Importantly, there is still room to run on occupancy. Despite a 9.8% percentage point improvement over last year, occupancy is still behind 2019 levels by 6.1 percentage points. The ability to close that occupancy gap is a real opportunity in 2023. Let's take a closer look at our resort and lifestyle performance. We continue to see incredible demand at our resort and lifestyle hotels. Even as we move to beyond summer, RevPAR and total revenue growth at our resorts was actually up more in September versus 2019 than in August. Looking ahead to the fourth quarter, a seasonally slower leisure quarter, we still expect our resort and lifestyle hotels to deliver over 20% revenue growth compared to 2019. Our urban gateway hotels also exceeded expectations for the third quarter. I'm proud to say that September marked the first month since the onset of the pandemic that revenues and profits for our Urban Gateway portfolio exceeded comparable 2019 results. There are some powerful trends in several of our urban markets that are worth highlighting. Our three New York City hotels sell robust demand and pricing power in the quarter, collectively increasing revenues by over 17% compared to 2019. The Worthington and Dallas-Fort Worth also beat 2019 revenues by nearly 17%, and profit margins expanded over 600 basis points. Our Westons in Boston Seaport and downtown San Diego both exceeded third quarter 2019 revenues and profits. Year-to-date through September, even at our largest hotel, the Chicago Marriott Magnificent Mile, is at 99% of year-to-date 2019 EBITDA, one of our most pleasant surprises of the year. Even our small representation in San Francisco, the emblem by Viceroy, was a star in the quarter with 172% market share. The emblem is ranked number three by travelers on TripAdvisor, the highest ranked hotel owned by any public company in San Francisco. In short, We believe our carefully assembled and focused urban gateway portfolio remains a competitive advantage as our outperformance continues. I did want to recognize the achievements of our stellar asset managers. Asset management has been delivering for us all year. Cost controls have been tight, but as exciting, we have been seeing big returns from the three game-changing repositionings that were completed last year. Year-to-date statistics tell a great story. The Lodge at Sonoma, converted to an autograph collection, is up 62.3% in total rev par as compared to 2021. The Vail Heights Resort, converted to a luxury collection, is up 78.9% in total rev par as compared to 2021. And the Margaritaville Key West is up 21.4% in total rev par as compared to 2021. up a breathtaking 95.6% as compared to 2019 when the resort was flagged as a Sheraton. These numbers showcase and are a testament to the value creation capabilities of our talented asset management team. On external growth, our recent acquisitions of Tranquility Bay, Henderson Park Inn, Henderson Beach Resort, Bourbon Orleans, and Shorebreak Fort Lauderdale Beach are collectively performing more than $3 million ahead of underwriting for 2022. Total rep part of this year for these hotels is projected to be up 39% over 2019, excluding non-com Shorebreak. These hotels all have the key traits that we are looking for. Be simple lifestyle hotels located in desirable high barrier entry markets with opportunities for our team to quickly grow NAV through asset management initiatives. Going forward, while it's hyper-competitive for broadly marketed leisure-oriented hotels out there, we have been able to find better opportunities by focusing on smaller owner-operated properties. It is here where we have developed an early mover advantage by forging years-long relationships with these potential sellers and becoming experts on highly desirable micro markets like Sausalito, Destin Beach, and Sedona. We continue to track approximately 50 of these unique micro markets. Before I turn the call over to Jeff to talk more about our results, I want to highlight the key attributes of Dimerock's Fortress Balance Sheet. Our recent $1.2 billion financing addressed all near-term debt maturities, eliminated half of our mortgages, and doubled our weighted average debt maturity. Today, we have over $600 million of total liquidity, a powerful figure for a company our size. Our liquidity and low financial leverage gave us the confidence and flexibility to commence a share purchase program subsequent to quarter end at an average purchase price in the high sevens. While we were mindful to maintain that Fortress balance sheet, Measured share repurchases of our stock at deeply discounted values remains another arrow in our quiver for opportunistic capital allocation. Let me now hand the call over to Jeff.

Jeff? Thanks, Mark. Let's look at the results and note that throughout our prepared remarks, when we give comparable stats to 2019, it excludes the Kempton Fort Lauderdale because that hotel is new and was not open in 2019. You'll find a detailed table of our quarterly comparable data on page 15 of this morning's press release. Okay. Total comparable revenues for the company were $267 million in the quarter, an increase of $28 million over the comparable period in 2019. Comparable REVPAR for the portfolio in the third quarter was $211, or 8.7% higher than 2019. This growth was driven by room rates nearly 18% above 2019. Occupancy is down over 600 basis points to 2019, and closing this gap remains one of our several sources of future growth. Other revenue, which speaks directly to our asset management team's creativity in identifying and expanding new income streams, was up over 27%, or 4.5 million, over 2019. F&B revenue, was over $8 million above 2019, double the $4 million positive variance in the second quarter. Similarly, total banquet and group contribution was up nearly $3 million, an increase of over 9% versus 2019, despite group room nights being down over 7% to 2019. With fewer groups in-house, we're generating more ancillary revenue by upselling the groups through creative sales strategies. Outlet performance was the strongest of any third quarter in the company history, as many of the celebrity chef venues we created and opened just prior to or during the pandemic drove dramatically more business to many of our hotels. And there is more to come. We will share with you soon several new or upgraded outlets we are working on for 2023 and beyond that will continue to drive profits to new levels. Hotel adjusted EBITDA was $84.2 million. which beat third quarter 2019 by nearly 12 million. Comparable hotel adjusted EBITDA margins were 31.6% exceeding 2019 by 125 basis points. Adjusted EBITDA was 76.3 million or 8.8 million over third quarter 19. And finally, FFO per share was 28 cents or nearly 4% above third quarter 2019. Let me talk a little about performance in our major segments and provide some insights to what we're seeing in the remainder of the year. Each of the three major segments performed well for us in the third quarter. Of course, resorts was our most robust portfolio segment with many resorts setting new highs. Rates for our luxury and lifestyle resorts were up 36% over 2019. Leaders in the quarter included Tranquility Bay and Margaritaville in the Florida Keys and The Landing in Lake Tahoe. Each of these hotels delivered rate growth up over 70% from 2019. Occupancy in the resort portfolio was five percentage points behind 2019 and remains a real opportunity for us going forward. Urban hotels extended the strength that emerged last quarter. Average rates were up 5.2% over 2019 in the quarter, a sequential improvement over the 0.2% growth seen in the second quarter. Occupancy increased 76.9%. This is 6.6 percentage points behind 2019, which was a sequential improvement as compared to a nine percentage point deficit in the second quarter. Midweek occupancy, a key indicator of the return of the business traveler, increased sequentially to 79.1% in the third quarter as compared to 77.4% in the second quarter. In fact, Midweek occupancy at our urban hotels ramped steadily from 77.7% in July to over 81% in September. The snapback in business travel this quarter exceeded our expectations. As a testament to the strength of our urban footprint, most of our urban hotels had total rev par that exceeded 2019 levels, including all three of our hotels in New York City, our two hotels in Denver, the West and Boston Seaport, the Westin San Diego, the Worthington, and our luxury collection hotel in Chicago. Two big hotels, the Chicago Marriott and Hilton Boston, were over 96% of 2019 total RevPar. Group demand has been robust. The booking window remains short, but we have seen significant pieces of business book on short notice. For example, group rooms revenue in the third quarter was 45.5 million, as compared to $40.7 million on the books at the end of the second quarter. The $5 million upside was double our expectation for in the quarter pickup. I also want to highlight the $45 million of group rooms revenue exceeded third quarter 2019 by 3.5% on nearly 12% higher rates. We expect group rooms revenue in the fourth quarter to also edge past 2019. On a full year basis, group rooms revenue should surpass 90% of the 2019 production. Looking ahead, group room revenue on the books for 2023 increased 34% from the second quarter to over $90 million at rates that are nearly 13% ahead of 2019. In our largest convention markets, Boston, Chicago, San Diego, Washington, DC, and Phoenix, There are 3.1 million room nights on the books for 2023 and 3.2 million room nights in 2024. The next two years surpass the 2.9 million room nights in 2019, and there is still time to extend the game. Concerning Hurricane Ian, we had no material damage to our buildings and only minor damage to landscaping. Business interruption was a little more than $500,000 in September. Turning to the balance sheet, as Mark mentioned, we recast and expanded our credit facility during the third quarter. The $1.2 billion facility includes $800 million of term loans and a $400 million revolver. As detailed in the press release announcing the transaction, proceeds from the facility were or will be utilized to pay off the $750 million facility, a $50 million term loan, four mortgages totaling approximately $180 million that were scheduled to mature in 2023, and are eligible for repayment without penalty in 2022, and pay off our revolving credit facility. As of this call, our $400 million revolver is fully available and undrawn, and we have unencumbered Sonoma, the Westin DC, and the Salt Lake City Marriott. The fourth and last mortgage on the Westin San Diego will be paid off before year end. We have $225 million of fixed rate swaps against the $800 million of term loans and including our remaining fixed rate mortgages, approximately 52% of our total debt is fixed rate. We have over 600 million of liquidity for continued opportunistic share repurchases or external investment. We will opportunistically allocate capital to take advantage of any market dislocation, but we are committed to maintaining a conservative balance sheet. Before turning the call back to Mark, I did want to address the common dividend. Recall, we reinstated a $0.03 per share quarterly dividend last quarter. Based upon our current internal forecast for taxable income, we expect our total common dividends paid in the fourth quarter will exceed $0.03. We are finalizing our taxable income forecast and will make a declaration prior to year end. Okay, now I'll turn it back to Mark to discuss our outlook.