Company: DRH-PA
Filing Date: 2025-05-02
Form Type: 10-Q
Source: 0001298946-25-000049
Chunk: 113

Company: DiamondRock Hospitality Co
Filing Date: 2025-05-02
Form: 10-Q
Item: Part I, Item 4
Chunk 113
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.S. GDP growth, employment, personal discretionary spending levels, corporate earnings and investment, foreign exchange rates and travel demand. 

Given that our hotels are concentrated in major urban markets and destination resort locations in the U.S., our business has historically attracted some international travelers, who may be particularly sensitive to changes in foreign exchange rates or any increase in negative international perception of the U.S. arising from its political or other positions, which may cause a negative decline in inbound international travel. Furthermore, other macroeconomic factors, such as consumer confidence and conditions which negatively shape public perception of travel, including travel-related disruptions or incidents, heightened uncertainty surrounding tariffs and their impact on the economy, visa restrictions, or other federal policy changes, may have a negative effect on the lodging industry and may adversely impact our revenues and profitability.

Many of our expenses, such as operating expenses, interest expense and acquisition and renovation costs, could be adversely impacted by periods of heightened inflation or heightened tariffs and/or a tight labor market.

During 2024, inflation began to moderate, but remained elevated relative to the years preceding 2021. Inflationary increases in certain of 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