Company: DRH-PA
Filing Date: 2025-11-07
Form Type: 10-Q
Source: 0001298946-25-000085
Chunk: 126

Company: DiamondRock Hospitality Co
Filing Date: 2025-11-07
Form: 10-Q
Item: Part I, Item 2
Chunk 126
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 capital improvements, including, without limitation, by increasing the costs of labor, employee-related benefits, food, commodities and other materials, taxes, property and casualty insurance and utilities.

During the first nine months of 2025, inflation remained above the Federal Reserve’s long-term target, though it has moderated from the peak levels observed in recent years. The Federal Reserve reduced its benchmark interest rate by 25 basis points in September 2025 after holding rates steady earlier in the year, signaling a cautious, data-dependent approach to any further rate cuts as it monitors ongoing inflation trends. Any increases in interest rates, or a slower-than-expected pace of rate cuts, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty, and increasing the cost of new indebtedness and servicing our outstanding variable rate debt.

Seasonality

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The periods during which our hotels experience higher revenues vary from property to property, depending principally upon location and the customer base served. Accordingly, we expect some seasonality in our business. Volatility in our financial performance from the seasonality of the lodging industry could adversely affect our financial condition and results of operations. 

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business strategies, the primary market risk to which we are currently exposed, and to which we expect to be exposed in the future, is interest rate risk. The face amount of our outstanding debt as of September 30, 2025 was $1.1 billion, all of which had a variable interest rate. Our primary sensitivity in 2025 is to changes in one-month Secured Overnight Financing Rate (“SOFR”), as the interest rates on our variable-rate indebtedness were based on this benchmark rate. We use interest rate swaps in order to maintain what we believe to be an appropriate level of exposure to interest rate variability. As of September 30, 2025, the interest rate on $325 million of our variable-rate indebtedness had been effectively fixed through the use of interest rate swaps. In August 2025, we executed an interest rate swap for a notional amount of $75 million, effective January 2, 2026, to replace a maturing swap. In October 2025, we entered into an additional interest rate swap for a notional amount