Company: DRH-PA
Filing Date: 2025-05-02
Form Type: 10-Q
Source: 0001298946-25-000049
Chunk: 109

Company: DiamondRock Hospitality Co
Filing Date: 2025-05-02
Form: 10-Q
Item: Part I, Item 3
Chunk 109
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 our operating expenses, including, but not limited to, labor costs, employee-related benefits, food, beverage and utility costs, repairs and maintenance expenses, property taxes and insurance premiums, have and may continue to negatively impact our business and results of operations. Changes in U.S. policies that discourage immigration, restrict the number of immigrants permitted into the U.S., or negatively impact certain types of work visas, may put further inflationary pressures on labor costs if there is a material decrease in available and/or willing workers. While, in general, operators of hotels possess the ability to adjust room rates daily to reflect the effects of inflation, competitive pressures, customer resistance to higher booking costs or other factors may limit the ability of our management companies to raise room rates. Additionally, inflation may have a negative effect on our ability to renovate or make capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. Proposed or enacted tariffs on imported goods, including construction materials, furniture, and equipment, particularly those sourced from Asia, may further exacerbate inflationary pressures on renovation costs and limit the availability of certain supplies, thereby increasing the cost and timing uncertainty of planned capital projects. Additionally, see “Risk Factors—Risks Related to our Business and Operations—We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing for such expenditures.”

In March 2022, the Federal Reserve began to raise interest rates in an effort to curb inflation. While the Federal Reserve made several cuts to interest rates in the second half of 2024 in response to decreases in inflation levels, it continues to indicate that it will remain data-dependent in determining whether to hold its benchmark rate at current levels or continue to slowly ease interest rates throughout 2025. Our direct exposure to increases in interest rates in the short term is limited to our unhedged variable rate debt, which amounted to approximately $475.0 million as of March 31, 2025. However, the effect of inflation on interest rates could increase our financing costs over time, either through near-term borrowings under our Credit Agreement or refinancing of our existing borrowings that may incur higher interest expenses related to the issuance of new debt. For more information, see “Risk Factors—Risks Related to our Debt and Financing— Future debt service obligations may adversely affect our operating results, require us to liquidate our properties, jeopardize our ability to make cash distributions necessary to 

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maintain our tax status as a REIT and limit our ability