DiamondRock Hospitality Company — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide separate Q4 results.
Business context
DiamondRock is a lodging REIT that owns, but does not directly operate, premium hotels and resorts. At year-end it owned 32 properties with 9,349 rooms across 22 North American markets. Third-party managers and hotel brands operate the properties. The company acquired Tranquility Bay Beachfront Resort in Florida on January 6, 2022, after year-end.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $567.1 million | $299.5 million |
| Net loss | $195.4 million | $396.0 million |
| Net loss attributable to common stockholders | $204.4 million; $0.96 per share | $397.7 million; $1.97 per share |
| Adjusted EBITDA | $83.5 million | $(64.5) million |
| Adjusted FFO available to common stock and unit holders | $26.3 million | $(85.3) million |
| Cash from operations | $(2.3) million | $(83.7) million |
- Revenue rose 89.3% year over year. Rooms revenue increased 102.8%; food and beverage revenue increased 71.7%.
- Portfolio occupancy was 49.8% versus 28.1%; ADR was $237.13 versus $209.10; RevPAR was $118.15 versus $58.83. The filing attributes the improvement to hotel reopenings and recovery in travel demand.
- Hotel operating expenses were $461.7 million, up 30.3%. Revenue growth outpaced expense growth, but hotel operations remained exposed to weak demand and cost pressures.
- GAAP net loss included $126.7 million of impairment losses: $115.2 million related to The Lexington Hotel and $11.5 million to Frenchman’s Reef. The comparable 2020 impairment was $174.1 million, related to Frenchman’s Reef.
- Interest expense declined to $37.0 million from $54.0 million, primarily reflecting interest-rate-swap fair-value changes and lower average credit-facility borrowings. This includes noncash mark-to-market effects.
Balance sheet, liquidity and capital
- Year-end total debt was approximately $1.1 billion, with a 3.88% weighted-average interest rate and approximately 2.5-year weighted-average maturity. About $308.6 million was variable-rate debt.
- Debt maturities for mortgage debt and unsecured term loans were concentrated in 2023–2025: $236.4 million, $432.4 million and $295.8 million, respectively. The schedule excludes $90.0 million drawn on the revolving facility at year-end.
- Cash and cash equivalents were $38.6 million; restricted cash was $36.9 million. Management reported liquidity of $441.3 million, including available credit capacity. The company had $90.0 million outstanding on its $400 million revolving credit facility at year-end and subsequently drew another $70.0 million.
- Twenty-four of 32 hotels were unencumbered by mortgage debt. Cash-trap provisions were triggered on all mortgage loans except the Salt Lake City Marriott loan; $2.8 million was held in cash traps. Management did not expect these to impair short-term liquidity.
- The common dividend remained suspended, while the company paid $9.8 million in Series A preferred dividends during 2021. The preferred stock carries an 8.25% rate and approximately $119.0 million aggregate liquidation preference.
Material changes, outlook and risks
- During 2021, the company sold Frenchman’s Reef for $35.0 million cash plus a contingent future-profit participation right, and The Lexington Hotel for $185.3 million. It acquired Bourbon Orleans for $90.1 million, Henderson Park Inn for $26.4 million and Henderson Beach Resort for $110.1 million.
- Management expected 2022 RevPAR growth, supported by leisure travel and a gradual recovery in corporate and group demand. Group room nights on the books at the start of 2022 were nearly 40% above 2021 realized group room nights, but about 75% of typical pre-pandemic bookings.
- Management expected continued COVID-19 effects in 2022, with new variants capable of slowing or reversing recovery. It also cited labor scarcity and costs, shorter booking windows, and supply-chain and construction-cost risks.
- The company expected approximately $100 million of 2022 capital improvements, including hotel renovations and repositioning projects. These plans, and the recovery outlook, are forward-looking and subject to change.
- Credit agreements had covenant waivers through Q1 2022 and modified covenant terms thereafter through 2023 under a February 2022 amendment. The company said it expected to comply after the waiver period, but noted no assurance of future covenant compliance or further lender waivers.
- Other material risks include the cyclical, high-fixed-cost hotel model; business-travel weakness; competition from hotels and alternative lodging; refinancing and interest-rate exposure; property-level cash traps; weather and catastrophe exposure; and maintaining REIT status. Management said ordinary-course litigation was not expected to have a material adverse effect, while acknowledging outcomes are uncertain.
Investor verification points
- Track occupancy, ADR and RevPAR recovery by leisure, urban, corporate and group demand, rather than relying only on portfolio-wide comparisons.
- Reconcile reported liquidity to unrestricted cash, revolver availability, subsequent borrowings and any restrictions on cash.
- Review debt maturities and covenant tests, including the 2023–2025 maturity concentration and the status of cash traps.
- Assess the assumptions and cash-flow effects behind the 2022 capital plan, renovation returns and acquisition strategy.
- Confirm the timing and conditions for any common-dividend reinstatement; preferred dividends are cumulative and senior to common distributions.
- Distinguish GAAP losses from adjusted measures and review the impairment, swap fair-value and contingent Frenchman’s Reef participation assumptions.