Company: DRH-PA
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001298946-25-000015
Chunk: 69

Company: DiamondRock Hospitality Co
Filing Date: 2025-02-28
Form: 10-K
Item: Item 7
Chunk 69
---
 Travel demand is highly sensitive to changes in macroeconomic factors and even the threat of a modest slowdown creates a backdrop of uncertainty for the hospitality industry. Corporate and group travel demand is expected to remain steady, but persistent inflation, elevated operating costs, and 

-46-

shifts in consumer preferences may create headwinds for the industry. Additionally, elevated interest rates continue to impact real estate financing and transaction activity, influencing capital allocation decisions within the industry.

Our portfolio, which consists primarily of luxury and upper upscale hotels and resorts in major urban centers and desirable leisure destinations, is well positioned for continued resilient performance. More than 60% of our 2024 earnings came from our urban hotels, and we expect further recovery in group and corporate transient travel as businesses continue to refine their hybrid work models. Group meetings and events are anticipated to continue to drive revenue growth, supported by an evolving office environment where companies prioritize offsite meetings to foster collaboration and engagement. Corporate transient demand is expected to show incremental improvements, benefiting from higher office attendance and expanding business travel budgets. While drive-to-resort destinations remain attractive, shifting economic conditions and evolving travel patterns could lead to some moderation in leisure spending. Longer term, we believe robust secular demand for experiential leisure travel, low growth in directly competitive supply, and targeted investments to renovate and reposition destination hotels can extend and intensify our growth. We anticipate industry profitability will be challenged by elevated interest rates and cost pressures on labor, insurance and property taxes. We continue to work closely with our hotel managers to maximize revenue and identify operating efficiencies.

We expect the continued expansion of corporate travel demand will enable the industry to improve profits in 2025 and we enter the year with several favorable factors, including: (1) ownership of a high-quality portfolio, (2) expected internal growth from six recent and one additional in-process hotel rebranding or repositionings, (3) expected internal growth from the continuation of our asset management initiatives and return on investment projects, (4) conservative debt capital structure, and (5) liquidity of $584.3 million as of December 31, 2024.

Results of Operations

At December 31, 2024 and 2023, we owned 37 and 36 hotels, respectively. All properties owned during these periods have been included in our results of operations during the respective periods since their date of acquisition. Based on when a property was acquired, operating results for certain properties are not comparable for the year ended December 31, 2024 and