DiamondRock Hospitality Q2 Earnings Call Highlights

Strong second-quarter performance: Comparable RevPAR rose 7%, while operating leverage drove a 240-basis-point expansion in Hotel Adjusted EBITDA margins. Adjusted FFO was $0.44 per share, including a $0.03 benefit from Chicago property-tax settlements. DiamondRock raised its 2026 outlook to 2.5%–4% RevPAR growth, $310 million–$320 million of Adjusted EBITDA and $1.18–$1.23 of Adjusted FFO per share. The company also increased its quarterly dividend 22% to $0.11 per share. Demand remained broad-based, with resort RevPAR up 7.9%, urban hotel RevPAR up 6.6% and group revenue up 6.6%; management particularly highlighted the strong performance and improving group pace at L’Auberge de Sedona. DiamondRock is evaluating acquisitions and dispositions and could be a net seller this year.

DiamondRock Hospitality NYSE: DRH reported second-quarter 2026 operating results marked by higher revenue per available room, expanded hotel margins and an increase to its full-year outlook, as strength across group, transient and leisure demand supported results. Chief Financial Officer Briony Quinn said comparable RevPAR increased 7% from a year earlier, with growth accelerating from roughly 5.5% in April and May to 10.1% in June. Group and transient revenue each rose more than 6% during the quarter, while Total RevPAR increased 5.6%.

The company reported corporate Adjusted EBITDA of $107.9 million and Adjusted FFO per share of $0.44. Results included a $6.9 million benefit, or $0.03 per share, from settling multiyear property-tax appeals involving its two Chicago hotels. Excluding that benefit, the company said FFO margin expanded 303 basis points. DiamondRock’s trailing-12-month free cash flow per diluted share, defined by the company as Adjusted FFO less capital expenditures, rose 27% year over year to $0.80. CEO Jeff Donnelly said free cash flow per share has increased approximately 30% over the past 12 months as the company pursued its “DiamondRock 2.0” strategy.

Quinn said hotel operating expenses increased 1.8% during the quarter, excluding the favorable property-tax appeals, compared with total revenue growth of 5.5%. That produced 240 basis points of Hotel Adjusted EBITDA margin expansion. Wages and benefits increased 2.2%, while labor hours declined despite higher occupancy, according to the company. During the question-and-answer session, President and Chief Operating Officer Justin Leonard clarified that labor costs were not down overall, but were “slightly down or generally flat on a per occupied room basis.” He attributed the performance to productivity improvements across the portfolio rather than cost actions by hotel brands. Management said the company expects expense growth of about 2.5% for the second half of 2026. Leonard said some of the margin gains seen in the first half are expected to moderate because of factors including the New York hotel union renewal and higher bonus accruals tied to performance. The company said the World Cup contributed an estimated 90 basis points to second-quarter RevPAR growth, particularly in Boston and Greater San Francisco, but was not the main driver of the quarter. DiamondRock now expects the event to contribute about 30 basis points to full-year RevPAR growth, modestly above its prior 20-basis-point estimate. Management pointed to continued demand from higher-income travelers. The average guest bill at checkout exceeded $475 per day during the quarter, while the company’s five highest-average-daily-rate hotels generated guest bills above $1,200 per night. Hotels with ADRs above $300 outperformed lower-rate hotels by almost 300 basis points on Total RevPAR growth over the past y...