UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal
    year ended December 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    001-32514
  DIAMONDROCK HOSPITALITY
    COMPANY
 (Exact Name of Registrant as
    Specified in Its Charter)
  Maryland

20-1180098(State or Other Jurisdiction
    of

(I.R.S. EmployerIncorporation or
    Organization)

Identification Number)6903 Rockledge Drive, Suite 800

20817Bethesda, Maryland

(Zip Code)(Address of Principal Executive
    Offices)   Registrants telephone number, including area code:
    (240) 744-1150
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $.01 par value


New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
 þ o
  o þ
  þ o
 Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large
    accelerated
    filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ
     Documents
    Incorporated by Reference




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DIAMONDROCK
    HOSPITALITY COMPANY
  INDEX
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


10Item 1B.


Unresolved Staff Comments


28Item 2.


Properties


29Item 3.


Legal Proceedings


43Item 4.


Submission of Matters to a Vote of Security
    Holders


43PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


43Item 6.


Selected Financial Data


46Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


49Item 7a.


Quantitative and Qualitative Disclosures About
    Market Risk


68Item 8.


Financial Statements and Supplementary Data


69Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


69Item 9A.


Controls and Procedures


69Item 9B.


Other Information


69PART IIIItem 10.


Directors and Executive Officers of the
    Registrant


69Item 11.


Executive Compensation


69Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


69Item 13.


Certain Relationships and Related Transactions


69Item 14.


Principal Accounting Fees and Services


69PART IVItem 15.


Exhibits and Financial Statement Schedules


70   2




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SPECIAL
    NOTE ABOUT FORWARD-LOOKING STATEMENTS
  Form 10-K, Form 10-K.
  Form 10-K
 PART I  Item 1.
    Business  Overview
    barrier-to-entry
      
    high-quality urban- and destination resort-focused branded hotel
    real estate;
    conservative capital structure; and
    thoughtful asset management.  High
    Quality Urban and Destination Resort Focused Branded Real
    Estate
  barrier-to-entry
 3




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barriers-to-entry,
      Conservative
    Capital Structure
        
    We completed a follow-on public offering of our common stock
    during the second quarter of 2009. The net proceeds to us, after
    deduction of offering costs, were approximately
    $82.1 million.
    We initiated two separate $75 million controlled equity
    offering programs, raising net proceeds as of December 31,
    2009 of $123.1 million through the sale of
    16.1 million shares of our common stock at an average price
    of $7.72 per share.
    We repaid the entire $57 million outstanding on our senior
    unsecured credit facility during 2009. As of December 31,
    2009 we have no outstanding borrowings on our senior unsecured
    credit facility.
    We refinanced the mortgage on our Courtyard Manhattan/Midtown
    East hotel with a $43.0 million secured loan from
    Massachusetts Mutual Life Insurance Company, which matures on
    October 1, 2014.
    We repaid the $27.9 million loan secured by the Griffin
    Gate Marriott with corporate cash during the fourth quarter of
    2009. The loan was scheduled to mature on January 1, 2010. 4




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
    We repaid the $5 million loan secured by the Bethesda
    Marriott Suites with corporate cash during the fourth quarter of
    2009. The mortgage debt was scheduled to mature in July 2010.
    We paid 90% of our 2009 dividend in shares of our common stock,
    as permitted by the Internal Revenue Services Revenue
    Procedure
    2009-15, as
    amplified and superseded by Revenue Procedure
    2010-12,
    which preserved approximately $37 million of corporate cash.
    We focused on minimizing capital spending during 2009. Our 2009
    capital expenditures were $24.7 million, of which only
    $4.6 million was funded from corporate cash and the balance
    funded from escrow reserves.    Thoughtful
    Asset Management
          Our
    Company
   5




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Our
    Relationship with Marriott
  Investment
    Sourcing Relationship
        Key
    Money and Yield Support
     6




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Investment
    in DiamondRock
    Our
    Corporate Structure
      
  Environmental
    Matters
  clean-up clean-up clean-up
 7




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Competition
   8




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Employees
    Legal
    Proceedings
    Regulation
    Insurance
      Available
    Information
  www.drhc.com. Form 10-K.
 9




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##### 



Form 10-K, Form 10-Q, Form 8-K
  Item 1A.
    Risk
    Factors  Form 10-K
  Risks
    Related to the Recession and Credit Crisis
  The
    lack of availability and terms of financing have adversely
    affected the amounts, sources and costs of capital available to
    us.
        The
    scarcity of debt capital has limited the market for buying and
    selling hotels.
   10




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Our
    liquidity strategy may cause stockholder dilution and reduce our
    funds from operations in the future.
    
    paying a portion of our dividend in common stock,
    selling one or more hotels,
    incurring property-level debt or
    issuing common stock.    2010-12 2009-15), non-U.S. stockholders,
        Our
    credit facility covenants may constrain our
    options.
   11




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A
    continued or worsening recession could result in further
    declines in our average daily room rates, occupancy and RevPAR,
    and thereby have a material adverse effect on our results of
    operations.
      The
    market price of our common stock could be volatile and could
    decline, resulting in a substantial or complete loss on our
    common stockholders investment.
    Risks
    Related to Our Business and Operations
  Our
    business model, especially our concentration in premium
    full-service hotels, can be highly volatile.
      
    dependence on business and commercial travelers and tourism,
    both of which vary with consumer and business confidence in the
    strength of the general economy; 12




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
    competition from other hotels that may be located in our markets;
    an over-supply or over-building of hotels in our markets, which
    could adversely affect occupancy rates and revenues at our
    properties;
    increases in energy and transportation costs and other expenses
    affecting travel, which may affect travel patterns and reduce
    the number of business and commercial travelers and tourists;
    increases in operating costs due to inflation and other factors
    that may not be offset by increased room rates; and
    changes in governmental laws and regulations, fiscal policies
    and zoning ordinances and the related costs of compliance.      Our
    portfolio is highly concentrated in a handful of core
    markets.
    Our
    hotels are subject to significant competition.
     13




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Investments
    in hotels are illiquid and we may not be able to respond in a
    timely fashion to adverse changes in the performance of our
    properties.
    
    adverse changes in international, national, regional and local
    economic and market conditions;
    changes in supply of competitive hotels;
    changes in interest rates and in the availability, cost and
    terms of debt financing;
    changes in governmental laws and regulations, fiscal policies
    and zoning ordinances and the related costs of compliance with
    laws and regulations, fiscal policies and ordinances;
    the ongoing need for capital improvements, particularly in older
    structures;
    changes in operating expenses; and
    civil unrest, acts of God, including earthquakes, floods,
    hurricanes and other natural disasters and acts of war or
    terrorism, including the consequences of terrorist acts such as
    those that occurred on September 11, 2001, which may result
    in uninsured losses.      In the
    event of natural disasters, terrorist attacks, significant
    military actions, outbreaks of contagious diseases or other
    events for which we may not have adequate insurance, our
    operations may suffer.
     14




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We are
    subject to risks associated with our ongoing need for
    renovations and capital improvements as well as financing for
    such expenditures.
    
    construction cost overruns and delays;
    a possible shortage of available cash to fund capital
    improvements and the related possibility that financing for
    these capital improvements may not be available to us on
    affordable terms;
    the renovation investment not resulting in the returns on
    investment that we expect;
    disruptions in the operations of the hotel as well as in demand
    for the hotel while capital improvements are underway; and
    disputes with franchisors/hotel managers regarding compliance
    with relevant management/franchise agreements.     15




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There
    are several specific risks associated with the ownership of
    Frenchmans Reef & Morning Star Marriott Beach
    Resort (Frenchmans
    Reef).
         16




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Our
    hotel portfolio is not diverse by brand or manager and there are
    risks associated with using Marriotts brands on most of
    our hotels and having Marriott manage most of our
    hotels.
  Our
    success depends in part on the success of Marriott.
    Our
    success depends in part on maintaining good relations with
    Marriott.
     17




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Our
    results of operations are highly dependent on the management of
    our hotel properties by third-party hotel management companies,
    including Marriott.
      Our
    ownership of properties through ground leases exposes us to the
    risk that we may have difficulty financing such properties, may
    sell such properties for a lower price or may lose such
    properties upon breach or termination of the ground
    leases.
   18




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Due to
    restrictions in our hotel management agreements, mortgage
    agreements and ground leases, we may not be able to sell our
    hotels at the highest possible price (or at all).
  Our
    current hotel management agreements are long-term and contain
    certain restrictions on selling our hotels, which may affect the
    value of our hotels.
    
    certain competitors of the manager;
    purchasers who are insufficiently capitalized; or
    purchasers who might jeopardize certain liquor or gaming
    licenses.      Our
    mortgage agreements contain certain provisions that may limit
    our ability to sell our hotels.
    
    obtain the consent of the lender;
    pay a fee equal to a fixed percentage of the outstanding loan
    balance; and
    pay any costs incurred by the lender in connection with any such
    assignment or transfer.    Our ground leases contain certain provisions that may limit
    our ability to sell our hotels.
   19




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We
    face competition for the acquisition of hotels and we may not be
    successful in identifying or completing hotel acquisitions that
    meet our criteria, which may impede our growth.
    Our
    success depends on senior executive officers whose continued
    service is not guaranteed.
  day-to-day
    Seasonality
    of the hotel business can be expected to cause quarterly
    fluctuations in our earnings.
    The
    Employee Free Choice Act could substantially increase the cost
    of doing business.
   20




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Risks
    Related to Our Debt and Financing
  Our
    existing indebtedness contains financial covenants that could
    limit our operations and our ability to make distributions to
    our stockholders.
    Many
    of our existing mortgage debt agreements contain cash
    trap provisions that could limit our ability to make
    distributions to our stockholders.
    There
    is refinancing risk associated with our debt.
    If we
    default on our secured debt in the future, the lenders may
    foreclose on our hotels.
  loan-to-value
 21




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Future
    debt service obligations may adversely affect our operating
    results, require us to liquidate our properties, jeopardize our
    tax status as a REIT and limit our ability to make distributions
    to our stockholders.
    
    our cash flow from operations will be insufficient to make
    required payments of principal and interest;
    we may be vulnerable to adverse economic and industry conditions;
    we may be required to dedicate a substantial portion of our cash
    flow from operations to the repayment of our debt, thereby
    reducing the cash available for distribution to our
    stockholders, funds available for operations and capital
    expenditures, future investment opportunities or other purposes;
    the terms of any refinancing is likely not as favorable as the
    terms of the debt being refinanced; and
    the use of leverage could adversely affect our stock price and
    the ability to make distributions to our stockholders.      Risks
    Related to Regulation, Taxes and the Environment
  Noncompliance
    with governmental regulations could adversely affect our
    operating results.
  Environmental
    matters.
   22




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clean-up
        
    our knowledge of the contamination;
    the timing of the contamination;
    the cause of the contamination; or
    the party responsible for the contamination of the property.      Americans
    with Disabilities Act and other changes in governmental rules
    and regulations.
    Our
    hotel properties may contain or develop harmful mold, which
    could lead to liability for adverse health effects and costs of
    remediating the problem.
   23




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A
    portion of our revenues may be attributable to operations
    outside of the United States, which will subject us to different
    legal, monetary and political risks, as well as currency
    exchange risks, and may cause unpredictability in a significant
    source of our cash flows that could adversely affect our ability
    to make distributions to our stockholders.
    
    the enactment of laws prohibiting or restricting the foreign
    ownership of property;
    laws restricting us from removing profits earned from activities
    within the foreign country to the United States, including the
    payment of distributions, i.e., nationalization of assets
    located within a country;
    variations in the currency exchange rates, mostly arising from
    revenues made in local currencies;
    change in the availability, cost and terms of mortgage funds
    resulting from varying national economic policies;
    changes in real estate and other tax rates and other operating
    expenses in particular countries; and
    more stringent environmental laws or changes in such laws.    Any
    properties we invest in outside of the United States may be
    subject to foreign taxes.
  non-U.S. properties.
  Risks
    Related to Our Status as a REIT
  We
    cannot assure you that we will remain qualified as a
    REIT.
   24




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Maintaining
    our REIT qualification contains certain restrictions and
    drawbacks.
  Complying
    with REIT requirements may cause us to forego otherwise
    attractive opportunities.
    Failure
    to make required distributions would subject us to
    tax.
    The
    formation of our TRSs and TRS lessees increases our overall tax
    liability.
  non-U.S. TRSs
   25




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You may
    be restricted from transferring our common stock.
      We may
    be adversely affected by increased use of business related
    technology which may reduce the need for business related
    travel.
  day-to-day
  Risks
    Related to Our Organization and Structure
  Provisions
    of our charter may limit the ability of a third party to acquire
    control of our company.
     26




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Certain
    advance notice provisions of our bylaws may limit the ability of
    a third party to acquire control of our company.
    Provisions
    of Maryland law may limit the ability of a third party to
    acquire control of our company.
      We
    have entered into an agreement with each of our senior executive
    officers that provides each of them benefits in the event his
    employment is terminated by us without cause, by him for good
    reason, or under certain circumstances following a change of
    control of our company.
    You
    have limited control as a stockholder regarding any changes we
    make to our policies.
   27




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Changes
    in market conditions could adversely affect the market price of
    our common stock.
    
    the extent of investor interest in our securities;
    the general reputation of REITs and the attractiveness of our
    equity securities in comparison to other equity securities,
    including securities issued by other real estate-based companies;
    the underlying asset value of our hotels;
    investor confidence in the stock and bond markets, generally;
    national and local economic conditions;
    changes in tax laws;
    our financial performance; and
    general stock and bond market conditions.    Further
    issuances of equity securities may be dilutive to current
    stockholders.
  one-to-one
  Future
    offerings of debt securities or preferred stock, which would be
    senior to our common stock upon liquidation and for the purpose
    of distributions, may cause the market price of our common stock
    to decline.
  and/or
  Item 1B.
    Unresolved
    Staff Comments   28




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Item 2.
    Our
    Properties  Overview
    % ChangeNumber of











from 2008Property

Location

Rooms


Occupancy


ADR ($)


RevPAR ($)


RevPARChicago Marriott

Chicago, Illinois


1,198



74.2
%

$
175.12


$
129.92



(14.8
)%Los Angeles Airport Marriott

Los Angeles, California


1,004



73.5
%


106.58



78.39



(19.0
)%Westin Boston Waterfront Hotel

Boston, Massachusetts


793



67.9
%


194.46



132.05



(6.0
)%Renaissance Waverly Hotel

Atlanta, Georgia


521



60.8
%


131.96



80.25



(15.5
)%Salt Lake City Marriott Downtown

Salt Lake City, Utah


510



52.0
%


131.66



68.40



(22.9
)%Renaissance Worthington

Fort Worth, Texas


504



65.0
%


161.48



104.91



(17.9
)%Frenchmans Reef & Morning Star Marriott Beach
    Resort

St. Thomas, U.S. Virgin Islands


502



81.6
%


212.52



173.39



(8.8
)%Renaissance Austin Hotel

Austin, Texas


492



59.4
%


146.03



86.68



(21.6
)%Torrance Marriott South Bay

Los Angeles County, California


487



73.5
%


107.82



79.22



(18.4
)%Orlando Airport Marriott

Orlando, Florida


486



73.1
%


102.77



75.08



(12.2
)%Marriott Griffin Gate Resort

Lexington, Kentucky


408



62.6
%


124.57



78.00



(16.2
)%Oak Brook Hills Marriott Resort

Oak Brook, Illinois


386



43.0
%


114.92



49.47



(28.4
)%Westin Atlanta North at Perimeter

Atlanta, Georgia


369



67.7
%


100.29



67.91



(19.3
)%Vail Marriott Mountain Resort & Spa

Vail, Colorado


346



56.2
%


205.19



115.30



(24.5
)%Marriott Atlanta Alpharetta

Atlanta, Georgia


318



60.0
%


122.60



73.53



(16.6
)%Courtyard Manhattan/Midtown
    East

New York, New York


312



85.3
%


222.50



189.72



(29.0
)%Conrad Chicago

Chicago, Illinois


311



74.8
%


187.34



140.10



(22.3
)%Bethesda Marriott Suites

Bethesda, Maryland


272



63.7
%


167.61



106.83



(20.0
)%Courtyard Manhattan/Fifth Avenue

New York, New York


185



88.7
%


232.61



206.28



(21.8
)%The Lodge at Sonoma, a Renaissance Resort & Spa

Sonoma, California


182



61.9
%


193.23



119.52



(23.2
)%TOTAL/WEIGHTED AVERAGE




9,586



67.7
%

$
154.45


$
104.60



(17.6
)%  29




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TotalYear

Number of


Total


InvestmentProperty

Location

Opened

Rooms


Investment


Per RoomChicago Marriott

Chicago, Illinois

1978


1,198


$
343,446


$
286,683Los Angeles Airport Marriott

Los Angeles, California

1973


1,004



134,699



134,162Westin Boston Waterfront Hotel

Boston, Massachusetts

2006


793



351,111



442,763Renaissance Waverly Hotel

Atlanta, Georgia

1983


521



132,583



254,478Salt Lake City Marriott Downtown

Salt Lake City, Utah

1981


510



63,959



125,410Renaissance Worthington

Fort Worth, Texas

1981


504



87,914



174,433Frenchmans Reef & Morning Star Marriott Beach
    Resort

St. Thomas, U.S. Virgin Islands

1973/1984


502



91,403



182,078Renaissance Austin Hotel

Austin, Texas

1986


492



113,568



230,829Torrance Marriott South Bay

Los Angeles County, California

1985


487



76,459



157,000Orlando Airport Marriott

Orlando, Florida

1983


486



83,851



172,533Marriott Griffin Gate Resort

Lexington, Kentucky

1981


408



60,583



148,488Oak Brook Hills Marriott Resort

Oak Brook, Illinois

1987


386



82,435



213,562Westin Atlanta North at Perimeter

Atlanta, Georgia

1987


369



65,880



178,537Vail Marriott Mountain Resort & Spa

Vail, Colorado

1983/2002


346



70,149



202,743Marriott Atlanta Alpharetta

Atlanta, Georgia

2000


318



41,013



128,972Courtyard Manhattan/Midtown East

New York, New York

1998


312



80,225



257,131Conrad Chicago

Chicago, Illinois

2001


311



125,599



403,855Bethesda Marriott Suites

Bethesda, Maryland

1990


272



48,918



179,846Courtyard Manhattan/Fifth Avenue

New York, New York

1990


185



45,987



248,578The Lodge at Sonoma, a Renaissance Resort & Spa

Sonoma, California

2001


182



36,817



202,291Total






9,586


$
2,136,599


$
222,887   Our
    Hotels
  Bethesda
    Marriott Suites
     30




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Chicago
    Marriott
  90,000 square-feet
        Conrad
    Chicago
  13,000 square-feet
        Courtyard
    Manhattan/Fifth Avenue
      49-year
  Courtyard
    Manhattan/Midtown East
  nd rd
 31




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Frenchmans
    Reef & Morning Star Marriott Beach
    Resort
  17-acre
      Los
    Angeles Airport Marriott
      Marriott
    Atlanta Alpharetta
        Marriott
    Griffin Gate Resort
  163-acre 4-Diamond
 32




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sub-sublessee
  Oak
    Brook Hills Marriott Resort
    110-acre,
  Orlando
    Airport Marriott
      Renaissance
    Austin
         33




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Renaissance
    Waverly
  sub-market Coca-Cola.
    Renaissance
    Worthington
          Salt
    Lake City Marriott Downtown
  Latter-Day
  Latter-Day
    The
    Lodge at Sonoma, a Renaissance Resort &
    Spa
   34




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Torrance
    Marriott South Bay
      Westin
    Atlanta North at Perimeter
  20,000 square-feet sub-market square-feet
    Westin
    Boston Waterfront Hotel
      1 2
 35




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Vail
    Marriott Mountain Resort & Spa
          Our Hotel
    Management Agreements
     36




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Term
    Date ofAgreement

Initial Term

Number of Renewal TermsAustin Renaissance

6/2005

20 years

Three ten-year periodsAtlanta Alpharetta Marriott

9/2000

30 years

Two ten-year periodsAtlanta Westin North at Perimeter

6/2009

10 years

NoneBethesda Marriott Suites

12/2004

21 years

Two ten-year periodsBoston Westin Waterfront

5/2004

20 years

Four ten-year periodsChicago Marriott Downtown

3/2006

32 years

Two ten-year periodsConrad Chicago

11/2005

10 years

Two five-year periodsCourtyard Manhattan/Fifth Avenue

12/2004

30 years

NoneCourtyard Manhattan/Midtown East

11/2004

30 years

Two ten-year periodsFrenchmans Reef & Morning Star Marriott Beach
    Resort

9/2000

30 years

Two ten-year periodsLos Angeles Airport Marriott

9/2000

40 years

Two ten-year periodsMarriott Griffin Gate Resort

12/2004

20 years

One ten-year periodOak Brook Hills Marriott Resort

7/2005

30 years

NoneOrlando Airport Marriott

11/2005

30 years

NoneRenaissance Worthington

9/2000

30 years

Two ten-year periodsSalt Lake City Marriott Downtown

12/2001

30 years

Three fifteen-year periodsThe Lodge at Sonoma, a Renaissance Resort & Spa

10/2004

20 years

One ten-year periodTorrance Marriott South Bay

1/2005

40 years

NoneWaverly Renaissance

6/2005

20 years

Three ten-year periodsVail Marriott Mountain Resort & Spa

6/2005

151/2
    years

None   Amounts
    Payable under our Hotel Management Agreements
   37




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Base Management

IncentiveFee(1)

Management Fee(2)Austin Renaissance

3%

20%(3)Atlanta Alpharetta Marriott

3%

25%(4)Atlanta North at Perimeter Westin

2.5%

10%(5)Bethesda Marriott Suites

3%

50%(6)Boston Westin Waterfront

2.5%

20%(7)Chicago Marriott Downtown

3%

20%(8)Conrad Chicago

2.5%(9)

15%(10)Courtyard Manhattan/Fifth Avenue

5.5%(11)

25%(12)Courtyard Manhattan/Midtown East

5%

25%(13)Frenchmans Reef & Morning Star Marriott Beach
    Resort

3%

25%(14)Los Angeles Airport Marriott

3%

25%(15)Marriott Griffin Gate Resort

3%

20%(16)Oak Brook Hills Marriott Resort

3%

20% or 30%(17)Orlando Airport Marriott

3%

20% or 25%(18)Renaissance Worthington

3%

25%(19)Salt Lake City Marriott Downtown

3%

20%(20)The Lodge at Sonoma, a Renaissance Resort & Spa

3%

20%(21)Torrance Marriott South Bay

3%

20%(22)Waverly Renaissance

3%

20%(23)Vail Marriott Mountain Resort & Spa

3%

20%(24)     (1)
    
    As a percentage of gross revenues.(2)
    
    Based on a percentage of hotel operating profits above a
    negotiated return on our invested capital as more fully
    described in the following footnotes.(3)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $5.9 million and (ii) 10.75% of
    certain capital expenditures.(4)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $4.1 million and (ii) 10.75% of
    certain capital expenditures.(5)
    
    Calculated as a percentage of operating profits after a pre-set
    dollar amount of owners priority beginning in 2010. The
    owners priority is $3.0 million in 2010,
    $3.7 million on 2011, $4.2 million in 2012,
    $4.7 million in 2013, $5.0 million in 2014. In 2015
    and thereafter, the owners priority adjusts annually based
    upon CPI. The incentive management fee cannot exceed 1.5% of
    total revenue.(6)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) the payment of certain loan procurement costs,
    (ii) 10.75% of certain capital expenditures, (iii) an
    agreed-upon
    return on certain expenditures and (iv) the value of
    certain amounts paid into a reserve account established for the
    replacement, renewal and addition of certain hotel goods. The
    owners priority expires in 2027.(7)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) actual debt service and (ii) 15% of
    cumulative and compounding return on equity, which resets with
    each sale.(8)
    
    Calculated as 20% of net operating income before base management
    fees. There is no owners priority.(9)
    
    The base management fee will increase to 3% for fiscal year 2010
    and thereafter.(10)
    
    Calculated as a percentage of operating profits after a pre-set
    dollar amount ($8.7 million in 2009 and $8.8 million
    in 2010) of owners priority. Beginning in fiscal year
    2011, the incentive management fee will be based on 103% of the
    prior year cash flow. 38




---



##### 



(11)
    
    The base management fee will be equal to 5.5% of gross revenues
    for fiscal years 2010 through 2014 and 6% for fiscal year 2015
    and thereafter until the expiration of the agreement. Beginning
    in 2011, the base management fee may increase to 6.0% at the
    beginning of the next fiscal year if operating profits equal or
    exceed $5.0 million.(12)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $5.5 million and (ii) 12% of certain
    capital expenditures, less 5% of the total real estate tax bill
    (for as long as the hotel is leased to a party other than the
    manager).(13)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.9 million and (ii) 10.75% of
    certain capital expenditures.(14)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $9.2 million and (ii) 10.75% of
    certain capital expenditures.(15)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $10.3 million and (ii) 10.75% of
    certain capital expenditures.(16)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $6.1 million and (ii) 10.75% of
    certain capital expenditures.(17)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $8.1 million and (ii) 10.75% of
    certain capital expenditures. The percentage of operating
    profits is 20% except from 2011 through 2021 when it is 30%.(18)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $8.9 million and (ii) 10.75% of
    certain capital expenditures. The percentage of operating
    profits is 20% except from 2011 through 2021 when it is 25%.(19)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.6 million and (ii) 10.75% of
    certain capital expenditures.(20)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $6.2 million and (ii) 10.75% of
    capital expenditures.(21)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $3.6 million and (ii) 10.75% of
    capital expenditures.(22)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.5 million and (ii) 10.75% of
    certain capital expenditures.(23)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $10.3 million and (ii) 10.75% of
    certain capital expenditures.(24)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.4 million and (ii) 11% of certain
    capital expenditures. The incentive management fee rises to 25%
    if the hotel achieves operating profits in excess of 15% of our
    invested capital.   39




---



##### 



Our
    Franchise Agreements
    Date of

InitialAgreement

Term(1)

Franchise FeeVail Marriott Mountain Resort & Spa

6/2005

16 years

6% of gross room sales plus 3% of gross food and beverage salesAtlanta Westin North at Perimeter

5/2006

20 years

7% of gross room sales plus 2% of food and beverage sales     (1)
    
    There are no renewal options under either franchise agreement.    Our
    Ground Lease Agreements
    
    The Bethesda Marriott Suites hotel is subject to a ground lease
    that runs until 2087. There are no renewal options.
    The Courtyard Manhattan/Fifth Avenue is subject to a ground
    lease that runs until 2085, inclusive of one
    49-year
    renewal option.
    The Salt Lake City Marriott Downtown is subject to two ground
    leases: one ground lease covers the land under the hotel and the
    other ground lease covers the portion of the hotel that extends
    into the City Creek Project. The term of the ground lease
    covering the land under the hotel runs through 2056, inclusive
    of our renewal options, and the term of the ground lease
    covering the extension runs through 2017. In 2009, we acquired a
    21% interest in the land under the hotel for approximately
    $0.9 million.
    The Westin Boston Waterfront is subject to a ground lease that
    runs until 2099. There are no renewal options.    
    The golf course that is part of the Marriott Griffin Gate Resort
    is subject to a ground lease covering approximately
    54 acres. The ground lease runs through 2033, inclusive of
    our renewal options. We have the right, beginning in 2013 and
    upon the expiration of any
    5-year
    renewal term, to purchase the property covered by such ground
    lease for an amount ranging from $27,500 to $37,500 per acre,
    depending on which renewal term has expired. The ground lease
    also grants us the right to purchase the leased property upon a
    third party offer to purchase such property on the same terms
    and conditions as the third party offer. We are also the
    sub-sublessee
    under another minor ground lease of land adjacent to the golf
    course, with a term expiring in 2020.
    The golf course that is part of the Oak Brook Hills Marriott
    Resort is subject to a ground lease covering approximately
    110 acres. The ground lease runs through 2045 including
    renewal options.  15-year
   40




---



##### 



Property

Term(1)

Annual RentGround leases under hotel:

Bethesda Marriott Suites

Through 10/2087

$483,161(2)Courtyard Manhattan/Fifth Avenue(3)(4)

10/2007-9/2017

$906,00010/2017-9/2027

1,132,81210/2027-9/2037

1,416,01510/2037-9/2047

1,770,01910/2047-9/2057

2,212,52410/2057-9/2067

2,765,65510/2067-9/2077

3,457,06910/2077-9/2085

4,321,336Salt Lake City MarriottDowntown



Greater of $132,000 or 2.6%(Ground lease for hotel)

Through-12/2056

of annual gross room sales(Ground lease for extension)

1/2008-12/2012

$10,2771/2013-12/2017

11,305Westin Boston Waterfront Hotel(5) (Base Rent)

Through-5/2012

$06/2012-5/2016

500,0006/2016-5/2021

750,0006/2021-5/2026

1,000,0006/2026-5/2031

1,500,0006/2031-5/2036

1,750,0006/2036-6/2099

No base rent(Percentage Rent)

Through-6/2016

0% of annual gross revenue7/2016-6/2026

1.0% of annual gross revenue7/2026-6/2036

1.5% of annual gross revenue7/2036-6/2046

2.75% of annual gross revenue7/2046-6/2056

3.0% of annual gross revenue7/2056-6/2066

3.25% of annual gross revenue7/2066-6/2099

3.5% of annual gross revenueGround leases under parking garage:

Renaissance Worthington

Through-7/2012

$36,6138/2012-7/2022

40,4008/2022-7/2037

46,0818/2037-7/2052

51,7648/2052-7/2056

57,444Ground leases under golf course:

Marriott Griffin Gate Resort

9/2003-8/2008

$90,7509/2008-8/2013

99,8259/2013-8/2018

109,8009/2018-8/2023

120,7509/2023-8/2028

132,7509/2028-8/2033

147,000Oak Brook Hills Marriott Resort

10/1985-9/2025

$1 (6)  41




---



##### 



(1)
    
    These terms assume our exercise of all renewal options.(2)
    
    Represents rent for the year ended December 31, 2009. Rent
    will increase annually by 5.5%.(3)
    
    The ground lease term is 49 years. We have the right to
    renew the ground lease for an additional 49 year term on
    the same terms then applicable to the ground lease.(4)
    
    The total annual rent includes the fixed rent noted in the table
    plus a percentage rent equal to 5% of gross receipts for each
    lease year, but only to the extent that 5% of gross receipts
    exceeds the minimum fixed rent in such lease year. There was no
    such percentage rent earned during the year ended
    December 31, 2009.(5)
    
    Total annual rent under the ground lease is capped at 2.5% of
    hotel gross revenues during the initial 30 years of the
    ground lease.(6)
    
    We have the right to extend the term of this lease for two
    consecutive renewal terms of ten years each with rent at then
    market value.    Debt
    PrincipalBalance









AmortizationProperty

(in thousands)


Debt per Key

Interest Rate

Maturity Date


ProvisionsFrenchmans Reef & Morning Star Marriott Beach
    Resort

$
61,422


$122,355

5.44%


August 2015



30 yearsMarriott Los Angeles Airport


82,600


82,271

5.30%


July 2015



Interest OnlyCourtyard Manhattan / Fifth Avenue


51,000


275,676

6.48%


June 2016



30 years
(1)Courtyard Manhattan / Midtown East


42,949


137,657

8.81%


October 2014



30 yearsOrlando Airport Marriott


59,000


121,399

5.68%


January 2016



30 years
(2)Marriott Salt Lake City Downtown


33,108


64,918

5.50%


January 2015



20 yearsRenaissance Worthington


57,103


113,300

5.40%


July 2015



30 years
(3)Chicago Marriott Downtown Magnificent Mile


219,595


183,301

5.975%


April 2016



30 years
(4)Renaissance Austin


83,000


168,699

5.507%


December 2016



Interest OnlyRenaissance Waverly


97,000


186,180

5.503%


December 2016



Interest OnlySenior unsecured credit facility







LIBOR + 1.25%


February 2011
(5)


Interest OnlyTotal debt

$
786,777     (1)
    
    The debt has a five-year interest only period that commenced in
    May 2006. After the expiration of that period, the debt will
    amortize based on a thirty-year schedule.(2)
    
    The debt has a five-year interest only period that commenced in
    December 2005. After the expiration of that period, the debt
    will amortize based on a thirty-year schedule. 42




---



##### 



(3)
    
    The debt had a four-year interest only period that expired in
    July 2009. The debt is currently amortizing based on a
    thirty-year schedule.(4)
    
    The debt had a 3.5 year interest only period that expired
    in October 2009. The debt is currently amortizing based on a
    thirty-year schedule.(5)
    
    The senior unsecured credit facility matures in February 2011.
    Subject to certain conditions, including being in compliance
    with all financial covenants, we have a one-year extension
    option that will extend the maturity to 2012.  Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for our common stock and related stockholder
    matters  Market
    Information
    Price RangeHigh


LowYear Ended December 31, 2008First Quarter

$
15.14


$
11.50Second Quarter

$
14.41


$
11.72Third Quarter

$
12.07


$
8.65Fourth Quarter

$
9.93


$
2.63Year Ended December 31, 2009First Quarter

$
5.35


$
2.67Second Quarter

$
7.75


$
3.61Third Quarter

$
7.72


$
5.28Fourth Quarter

$
8.92


$
7.26Year Ending December 31, 2010First Quarter (through February 25, 2010)

$
9.78


$
7.90       
    90% of our REIT taxable income determined without regard to the
    dividends paid deduction, plus;
    90% of the excess of our net income from foreclosure property
    over the tax imposed on such income by the U.S. Internal
    Revenue Code of 1986, as amended (the Code), minus;
    Any excess non-cash income. 43




---



##### 



2009-15, 2010-12,
    Equity compensation plan information.
  Equity
    Compensation Plan Information
  Number of SecuritiesRemaining Available forNumber of Securities


Weighted-Average


Future Issuance Underto be Issued Upon Exercise


Exercise Price of


Equity Compensation Plansof Outstanding Options,


Outstanding Options,


(Excluding SecuritiesPlan Category

Warrants and Rights


Warrants and Rights


Reflected in Column (a))(a)


(b)


(c)Equity compensation plans approved by security holders


300,225


$
12.59



4,881,639Equity compensation plans not approved by security holders










Total


300,225


$
12.59



4,881,639   Repurchases of equity securities.
 44




---



##### 



S&P 500 Total Return RMZ Total
    Return
    
  May 25,


December 31,


December 31,


December 31,


December 31,


December 31,2005


2005


2006


2007


2008


2009DiamondRock Hospitality Company Total Return


$
100.00



$
117.58



$
185.72



$
163.19



$
59.00



$
101.97RMZ Total Return


$
100.00



$
111.73



$
151.85



$
126.32



$
78.36



$
100.78S&P 500 Total Return


$
100.00



$
106.07



$
122.82



$
129.58



$
81.64



$
103.24  45




---



##### 



Item 6.
    Selected
    Financial Data  Form 10-K.
    Year EndedDecember 31,


December 31,


December 31,


December 31,


December 31,2009


2008


2007


2006


2005Historical (in thousands, except for per share data)Revenues:Rooms

$
365,039


$
444,070


$
456,719


$
316,051


$
149,336Food and beverage


177,345



211,475



217,505



143,259



63,196Other


33,297



37,689



36,709



25,741



14,254Total revenues


575,681



693,234



710,933



485,051



226,786Operating expenses:Rooms


97,089



105,868



104,672



73,110



36,801Food and beverage


124,046



145,181



147,463



96,053



47,257Other hotel expenses and management fees


231,838



257,038



253,817



182,556



95,647Impairment of favorable lease asset


2,542



695











Corporate expenses(1)


18,317



13,987



13,818



12,403



13,462Depreciation and amortization


82,729



78,156



74,315



51,192



27,072Total operating expenses


556,561



600,925



594,085



415,314



220,239Operating income


19,120



92,309



116,848



69,737



6,547Interest income


(368
)


(1,648
)


(2,399
)


(4,650
)


(1,548
)Interest expense


51,609



50,404



51,445



36,934



17,367Gain on early extinguishment of debt










(359
)






(Loss) Income before income taxes


(32,121
)


43,553



68,161



37,453



(9,272
)Income tax benefit (expense)


21,031



9,376



(5,264
)


(3,750
)


1,200(Loss) Income from continuing operations


(11,090
)


52,929



62,897



33,703



(8,072
)Income from discontinued operations, net of tax










5,412



1,508



736Net (loss) income

$
(11,090
)

$
52,929


$
68,309


$
35,211


$
(7,336
) 46




---



##### 



Year EndedDecember 31,


December 31,


December 31,


December 31,


December 31,2009


2008


2007


2006


2005Historical (in thousands, except for per share data)(Loss) Earnings per share:Continuing operations

$
(0.10
)

$
0 .56


$
0.66


$
0.49


$
(0.21
)Discontinued operations

$



$



$
0.06


$
0.02


$
0.02Basic and diluted (loss) earnings per share

$
(0.10
)

$
0 .56


$
0.72


$
0.51


$
(0.19
)Dividends declared per common share(2)

$
0.33


$
0 .75


$
0.96


$
0.72


$
0.38FFO(3)

$
71,639


$
131,085


$
140,003


$
87,573


$
20,254EBITDA(4)

$
102,217


$
172,113


$
200,150


$
127,890


$
36,268   As of December 31,2009


2008


2007


2006


2005(In thousands)Balance sheet data:Property and equipment, net

$
1,862,087


$
1,920,216


$
1,938,832


$
1,686,426


$
870,562Cash and cash equivalents


177,380



13,830



29,773



19,691



9,432Total assets


2,215,491



2,102,536



2,131,627



1,818,965



966,011Total debt


786,777



878,353



824,526



843,771



431,177Total other liabilities


253,208



206,551



226,819



190,266



71,446Stockholders equity


1,175,506



1,017,632



1,080,282



784,928



463,388     (1)
    
    Corporate expenses for the year ended December 31, 2009
    include non-recurring charges of approximately $2.6 million
    related to the retirement of our Executive Chairman and the
    termination of our Executive Vice President and General Counsel.(2)
    
    We paid 90% of the 2009 dividend in shares of common stock and
    the remainder in cash as permitted by the Internal Revenue
    Services Revenue Procedure
    2009-15. All
    of our other dividends have been paid in cash.(3)
    
    FFO, as defined by the National Association of Real Estate
    Investment Trusts (NAREIT), is net income (loss)
    determined in accordance with GAAP, excluding gains (losses)
    from sales of property, plus real estate related depreciation
    and amortization and after adjustments for unconsolidated
    partnerships and joint ventures (which are calculated to reflect
    FFO on the same basis). The calculation of FFO may vary from
    entity to entity, thus our presentation of FFO may not be
    comparable to other similarly titled measures of other reporting
    companies. FFO is not intended to represent cash flows for the
    period. FFO has not been presented as an alternative to
    operating income, but as an indicator of operating performance,
    and should not be considered in isolation or as a substitute for
    measures of performance prepared in accordance with GAAP.   47




---



##### 



Year Ended December 31,2009


2008


2007


2006


2005(In thousands)Net (loss) income

$
(11,090
)

$
52,929


$
68,309


$
35,211


$
(7,336
)Real estate related depreciation(a)


82,729



78,156



75,477



52,362



27,590Gain on property disposal, net of tax










(3,783
)






FFO

$
71,639


$
131,085


$
140,003


$
87,573


$
20,254   (a)
    
    Amounts for the years ended December 31, 2007, 2006, and
    2005 include $1.2 million, $1.2 million and
    $0.5 million, respectively, of depreciation expense
    included in discontinued operations.  (4)
    
    EBITDA is defined as net income (loss) before interest, taxes,
    depreciation and amortization. We believe it is a useful
    financial performance measure for us and for our stockholders
    and is a complement to net income and other financial
    performance measures provided in accordance with GAAP. We use
    EBITDA to measure the financial performance of our operating
    hotels because it excludes expenses such as depreciation and
    amortization, taxes and interest expense, which are not
    indicative of operating performance. By excluding interest
    expense, EBITDA measures our financial performance irrespective
    of our capital structure or how we finance our properties and
    operations. By excluding depreciation and amortization expense,
    which can vary from hotel to hotel based on a variety of factors
    unrelated to the hotels financial performance, we can more
    accurately assess the financial performance of our hotels. Under
    GAAP, hotels are recorded at historical cost at the time of
    acquisition and are depreciated on a straight-line basis. By
    excluding depreciation and amortization, we believe EBITDA
    provides a basis for measuring the financial performance of
    hotels unrelated to historical cost. However, because EBITDA
    excludes depreciation and amortization, it does not measure the
    capital we require to maintain or preserve our fixed assets. In
    addition, because EBITDA does not reflect interest expense, it
    does not take into account the total amount of interest we pay
    on outstanding debt nor does it show trends in interest costs
    due to changes in our borrowings or changes in interest rates.
    EBITDA, as calculated by us, may not be comparable to EBITDA
    reported by other companies that do not define EBITDA exactly as
    we define the term. Because we use EBITDA to evaluate our
    financial performance, we reconcile it to net income (loss)
    which is the most comparable financial measure calculated and
    presented in accordance with GAAP. EBITDA does not represent
    cash generated from operating activities determined in
    accordance with GAAP, and should not be considered as an
    alternative to operating income or net income determined in
    accordance with GAAP as an indicator of performance or as an
    alternative to cash flows from operating activities as an
    indicator of liquidity. The following is a reconciliation
    between net income (loss) and EBITDA (in thousands):  Year Ended December 31,2009


2008


2007


2006


2005(In thousands)Net (loss) income

$
(11,090
)

$
52,929


$
68,309


$
35,211


$
(7,336
)Interest expense


51,609



50,404



51,445



36,934



17,367Income tax (benefit) expense(a)


(21,031
)


(9,376
)


4,919



3,383



(1,353
)Real estate related depreciation(b)


82,729



78,156



75,477



52,362



27,590EBITDA

$
102,217


$
172,113


$
200,150


$
127,890


$
36,268   (a)
    
    Amounts for the years ended December 31, 2007, 2006, and
    2005 include $0.3 million, $0.4 million and
    $0.2 million, respectively, of income tax benefit included
    in discontinued operations.(b)
    
    Amounts for the years ended December 31, 2007, 2006, and
    2005 include $1.2 million, $1.2 million and
    $0.5 million, respectively, of depreciation expense
    included in discontinued operations. 48




---



##### 



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
    barrier-to-entry
      
    high-quality urban- and destination resort-focused branded hotel
    real estate;
    conservative capital structure; and
    thoughtful asset management.  High
    Quality and Destination Resort Focused Branded Real
    Estate
  barrier-to-entry
  barriers-to-entry,
     49




---



##### 



Conservative
    Capital Structure
        
    We completed a follow-on public offering of our common stock
    during the second quarter of 2009. The net proceeds to us, after
    deduction of offering costs, were approximately
    $82.1 million.
    We initiated two separate $75 million controlled equity
    offering programs, raising net proceeds as of December 31,
    2009 of $123.1 million through the sale of
    16.1 million shares of our common stock at an average price
    of $7.72 per share.
    We repaid the entire $57 million outstanding on our senior
    unsecured credit facility during 2009. As of December 31,
    2009, we have no outstanding borrowings on our senior unsecured
    credit facility.
    We refinanced the mortgage on our Courtyard Manhattan/Midtown
    East hotel with a $43.0 million secured loan from
    Massachusetts Mutual Life Insurance Company, which matures on
    October 1, 2014.
    We repaid the $27.9 million loan secured by the Griffin
    Gate Marriott with corporate cash during the fourth quarter of
    2009. The loan was scheduled to mature on January 1, 2010.
    We repaid the $5 million loan secured by the Bethesda
    Marriott Suites with corporate cash during the fourth quarter of
    2009. The mortgage debt was scheduled to mature in July 2010.
    We paid 90% of our 2009 dividend in shares of our common stock,
    as permitted by the Internal Revenue Services Revenue
    Procedure
    2009-15, as
    amplified and superseded by Revenue Procedure
    2010-12,
    which preserved $37 million of corporate cash.
    We focused on minimizing capital spending during 2009. Our 2009
    capital expenditures were $24.7 million, of which only
    $4.6 million was funded from corporate cash and the balance
    funded from escrow reserves.   50




---



##### 



Thoughtful
    Asset Management
          Key
    Indicators of Financial Condition and Operating
    Performance
  and/or
  
    Occupancy percentage;
    Average Daily Rate (or ADR);
    Revenue Per Available Room (or RevPAR);
    Earnings Before Interest, Income Taxes, Depreciation and
    Amortization (or EBITDA); and
    Funds From Operations (or FFO).   51




---



##### 



Overview
    of 2009 Results and Outlook for 2010
         52




---



##### 



% ChangeNumber of











from 2008Property

Location

Rooms


Occupancy


ADR ($)


RevPAR ($)


RevPARChicago Marriott

Chicago, Illinois


1,198



74.2
%

$
175.12


$
129.92



(14.8
)%Los Angeles Airport Marriott

Los Angeles, California


1,004



73.5
%


106.58



78.39



(19.0
)%Westin Boston Waterfront Hotel

Boston, Massachusetts


793



67.9
%


194.46



132.05



(6.0
)%Renaissance Waverly Hotel

Atlanta, Georgia


521



60.8
%


131.96



80.25



(15.5
)%Salt Lake City Marriott Downtown

Salt Lake City, Utah


510



52.0
%


131.66



68.40



(22.9
)%Renaissance Worthington

Fort Worth, Texas


504



65.0
%


161.48



104.91



(17.9
)%Frenchmans Reef & Morning Star Marriott Beach
    Resort

St. Thomas, U.S. Virgin Islands


502



81.6
%


212.52



173.39



(8.8
)%Renaissance Austin Hotel

Austin, Texas


492



59.4
%


146.03



86.68



(21.6
)%Torrance Marriott South Bay

Los Angeles County, California


487



73.5
%


107.82



79.22



(18.4
)%Orlando Airport Marriott

Orlando, Florida


486



73.1
%


102.77



75.08



(12.2
)%Marriott Griffin Gate Resort

Lexington, Kentucky


408



62.6
%


124.57



78.00



(16.2
)%Oak Brook Hills Marriott Resort

Oak Brook, Illinois


386



43.0
%


114.92



49.47



(28.4
)%Westin Atlanta North at Perimeter

Atlanta, Georgia


369



67.7
%


100.29



67.91



(19.3
)%Vail Marriott Mountain Resort & Spa

Vail, Colorado


346



56.2
%


205.19



115.30



(24.5
)%Marriott Atlanta Alpharetta

Atlanta, Georgia


318



60.0
%


122.60



73.53



(16.6
)%Courtyard Manhattan/Midtown East

New York, New York


312



85.3
%


222.50



189.72



(29.0
)%Conrad Chicago

Chicago, Illinois


311



74.8
%


187.34



140.10



(22.3
)%Bethesda Marriott Suites

Bethesda, Maryland


272



63.7
%


167.61



106.83



(20.0
)%Courtyard Manhattan/Fifth Avenue

New York, New York


185



88.7
%


232.61



206.28



(21.8
)%The Lodge at Sonoma, a Renaissance Resort & Spa

Sonoma, California


182



61.9
%


193.23



119.52



(23.2
)%TOTAL/WEIGHTED AVERAGE




9,586



67.7
%

$
154.45


$
104.60



(17.6
%)   Results
    of Operations
  Comparison
    of the Year Ended December 31, 2009 to the Year Ended
    December 31, 2008
    Revenues.
  Year Ended December 31,2009


2008


% ChangeRooms

$
365,039


$
444,070



(17.8
)%Food and beverage


177,345



211,475



(16.1
)%Other


33,297



37,689



(11.7
)%Total revenues

$
575,681


$
693,234



(17.0
)%  53




---



##### 



Year Ended December 31,2009


2008


% ChangeChicago Marriott

$
86.7


$
96.2



(9.9
)%Westin Boston Waterfront Hotel


65.5



73.0



(10.3
)%Frenchmans Reef & Morning Star Marriott Beach
    Resort


48.2



54.7



(11.9
)%Los Angeles Airport Marriott


47.7



59.1



(19.3
)%Renaissance Waverly Hotel


29.6



35.2



(15.9
)%Conrad Chicago


21.8



27.4



(20.4
)%Renaissance Austin Hotel


29.2



35.7



(18.2
)%Oak Brook Hills Marriott Resort


19.6



24.6



(20.3
)%Marriott Griffin Gate Resort


23.3



28.2



(17.4
)%Renaissance Worthington


30.5



38.3



(20.4
)%Courtyard Manhattan/Midtown East


22.6



31.7



(28.7
)%Torrance Marriott South Bay


20.8



25.1



(17.1
)%Vail Marriott Mountain Resort & Spa


20.7



27.8



(25.5
)%Salt Lake City Marriott Downtown


19.5



24.9



(21.7
)%The Lodge at Sonoma, a Renaissance Resort & Spa


13.9



18.1



(23.2
)%Orlando Airport Marriott


20.8



24.4



(14.8
)%Westin Atlanta North at Perimeter


14.7



18.3



(19.7
)%Courtyard Manhattan/Fifth Avenue


14.1



18.0



(21.7
)%Bethesda Marriott Suites


14.1



17.6



(19.9
)%Marriott Atlanta Alpharetta


12.4



14.9



(16.8
)%Total

$
575.7


$
693.2



(17.0
)%     Year Ended December 31,2009


2008


% ChangeOccupancy%


67.7
%


71.8
%

(4.1) percentage pointsADR

$
154.45


$
176.73


(12.6)%RevPAR

$
104.60


$
126.95


(17.6)%    54




---



##### 



Year Ended


Year EndedDecember 31, 2009


December 31, 2008$ in millions


% of Total


$ in millions


% of TotalBusiness Transient

$
92.9



25.5
%

$
131.1



29.5
%Group


134.1



36.7
%


163.5



36.8
%Leisure and Other


138.0



37.8
%


149.5



33.7
%Total

$
365.0



100.0
%

$
444.1



100.0
%         Hotel operating expenses.
  Year Ended December 31,2009


2008


% ChangeRooms departmental expenses

$
97.1


$
105.9



(8.3
)%Food and beverage departmental expenses


124.0



145.2



(14.6
)%Other departmental expenses


29.8



31.8



(6.3
)%General and administrative


51.9



57.1



(9.1
)%Utilities


24.5



27.8



(11.9
)%Repairs and maintenance


28.6



30.4



(5.9
)%Sales and marketing


42.1



47.6



(11.6
)%Base management fees


15.3



18.9



(19.0
)%Incentive management fees


4.3



9.7



(55.7
)%Property taxes


25.8



23.9



8.0
%Ground rent  Contractual


1.9



2.0



(5.0
)%Ground rent  Non-cash


7.7



7.8



(1.3
)%Total hotel operating expenses

$
453.0


$
508.1



(10.8
)%  55




---



##### 



Impairment of favorable lease asset.
  Depreciation and amortization.
  Corporate expenses.
  Interest expense.
 56




---



##### 



Interest income.
  Income taxes.
  Comparison
    of the Year Ended December 31, 2008 to the Year Ended
    December 31, 2007
    Revenues.
  Year Ended December 31,2008


2007


% ChangeRooms

$
444,070


$
456,719



(2.8
)%Food and beverage


211,475



217,505



(2.8
)%Other


37,689



36,709



2.7
%Total revenues

$
693,234


$
710,933



(2.5
)%     Year Ended December 31,2008


2007


% ChangeOccupancy%


71.8
%


74.0
%

(2.2) percentage pointsADR

$
176.73


$
177.49


(0.4)%RevPAR

$
126.95


$
131.33


(3.3)%     Hotel operating expenses.
 57




---



##### 



Year Ended December 31,2008


2007


% ChangeRooms departmental expenses

$
105.9


$
104.7



1.1
%Food and beverage departmental expenses


145.2



147.5



(1.6
)%Other departmental expenses


31.8



30.0



6.0
%General and administrative


57.1



58.1



(1.7
)%Utilities


27.8



26.1



6.5
%Repairs and maintenance


30.4



29.4



3.4
%Sales and marketing


47.6



47.4



0.4
%Base management fees


18.9



19.5



(3.1
)%Yield support






(0.8
)


(100.0
)%Incentive management fees


9.7



11.1



(12.6
)%Property taxes


23.9



23.3



2.6
%Ground rent  Contractual


2.0



1.9



5.3
%Ground rent  Non-cash


7.8



7.8



0.0
%Total hotel operating expenses

$
508.1


$
506.0



0.4
%     Impairment of favorable lease asset.
  Depreciation and amortization.
  Corporate expenses.
  Interest expense.
 58




---



##### 



Interest income.
  Income taxes.
  Gain on early extinguishment of debt.
  Discontinued operations.
  Revenues

$
6,483Pre-tax income from operations


1,284Gain on disposal, net of $0.1 million of income taxes


3,783Income tax benefit from operations of related TRS


345Income from discontinued operations

$
5,412   Liquidity
    and Capital Resources
       59




---



##### 



Our
    Financing Strategy
        
    We completed a follow-on public offering of our common stock
    during the second quarter of 2009. The net proceeds to us, after
    deduction of offering costs, were approximately
    $82.1 million.
    We initiated two separate $75 million controlled equity
    offering programs, raising net proceeds as of December 31,
    2009 of $123.1 million through the sale of
    16.1 million shares of our common stock at an average price
    of $7.72 per share.
    We repaid the entire $57 million outstanding on our senior
    unsecured credit facility during 2009. As of December 31,
    2009, we have no outstanding borrowings on our senior unsecured
    credit facility.
    We refinanced the mortgage on our Courtyard Manhattan/Midtown
    East hotel with a $43.0 million secured loan from
    Massachusetts Mutual Life Insurance Company, which matures on
    October 1, 2014.
    We repaid the $27.9 million loan secured the Griffin Gate
    Marriott with corporate cash during the fourth quarter of 2009.
    The loan was scheduled to mature on January 1, 2010.
    We repaid the $5 million loan secured by the Bethesda
    Marriott Suites with corporate cash during the fourth quarter of
    2009. The mortgage debt was scheduled to mature in July 2010.
    We paid 90% of our 2009 dividend in shares of our common stock,
    as permitted by the Internal Revenue Services Revenue
    Procedure
    2009-15, as
    amplified and superseded by Revenue Procedure
    2010-12,
    which preserved $37 million of corporate cash.
    We focused on minimizing capital spending during 2009. Our 2009
    capital expenditures were $24.7 million, of which only
    $4.6 million was funded from corporate cash and the balance
    funded from escrow reserves.   60




---



##### 



Follow-on Public Offering.
  Controlled Equity Offering Programs.
  Credit
    Facility
      Leverage Ratio60% or Greater

55% to 60%

50% to 55%

Less Than 50%Alternate base rate margin


0.65
%


0.45
%


0.25
%


0.00
%LIBOR margin


1.55
%


1.45
%


1.25
%


0.95
%     Actual atDecember 31,Covenant

2009Maximum leverage ratio(1)

65%

50.3%Minimum fixed charge coverage ratio

1.6x

1.76xMinimum tangible net worth(2)

$892.3 million

$1.5 billionUnhedged floating rate debt as a percentage of total indebtedness

35%

0.0%     (1)
    
    Maximum leverage ratio is determined by dividing the
    total debt outstanding by the net asset value of our corporate
    assets and hotels. Hotel level net asset values are calculated
    based on the application of a contractual capitalization rate
    (which range from 7.5% to 8.0%) to the trailing twelve month
    hotel net operating income.(2)
    
    Tangible net worth is defined as the gross book
    value of our real estate assets and other corporate assets less
    our total debt and all other corporate liabilities. 61




---



##### 



Actual atDecember 31,Covenant

2009Minimum implied debt service ratio

1.5x

N/AMaximum unencumbered leverage ratio

65%

0.0%Minimum number of unencumbered borrowing base properties

4

10Minimum unencumbered borrowing base value

$150 million

$529.0 millionPercentage of total asset value owned by borrowers or guarantors

90%

100%     EBITDA Change from 2009Covenant

-5%

-10%

-15%

-20%Maximum leverage ratio


65
%


53
%


55
%


58
%


62
%Minimum fixed charge coverage ratio


1.6
x


1.7
x


1.5
x


1.4
x


1.4x     Mortgage
    Loan Default
    Form 10-Qs
   62




---



##### 



Sources
    and Uses of Cash
    Cash From Operations.
      Cash From Investing Activities.
      Cash From Financing Activities.
 63




---



##### 



Dividend
    Policy
    
    90% of our REIT taxable income determined without regard to the
    dividends paid deduction, plus
    90% of the excess of our net income from foreclosure property
    over the tax imposed on such income by the Code, minus
    any excess non-cash income.  2009-15, 2010-12, 2010-12.
 64




---



##### 



Dividend perPayment Date

Record Date

ShareJanuary 4, 2007

December 21, 2006

$
0.18April 2, 2007

March 23, 2007

$
0.24June 22, 2007

June 15, 2007

$
0.24September 18, 2007

September 7, 2007

$
0.24January 10, 2008

December 31, 2007

$
0.24April 1, 2008

March 21, 2008

$
0.25June 24, 2008

June 13, 2008

$
0.25September 16, 2008

September 5, 2008

$
0.25January 29, 2010

December 28, 2009

$
0.33   Capital
    Expenditures
    return-on-investment
  Off-Balance
    Sheet Arrangements
    Non-GAAP Financial
    Measures
     65




---



##### 



Year Ended2009


2008


2007(In thousands)Net (loss) income

$
(11,090
)

$
52,929


$
68,309Interest expense


51,609



50,404



51,445Income tax (benefit) expense(1)


(21,031
)


(9,376
)


4,919Real estate related depreciation(2)


82,729



78,156



75,477EBITDA

$
102,217


$
172,113


$
200,150     (1)
    
    Amounts for the year ended December 31, 2007 include
    $0.3 million of income tax benefit included in discontinued
    operations.(2)
    
    Amounts for the year ended December 31, 2007 include
    $1.2 million of depreciation expense included in
    discontinued operations.    Year Ended December 31,2009


2008


2007(In thousands)Net (loss) income

$
(11,090
)

$
52,929


$
68,309Real estate related depreciation(1)


82,729



78,156



75,477Gain on property disposal, net of tax










(3,783
)FFO

$
71,639


$
131,085


$
140,003     (1)
    
    Amounts for the year ended December 31, 2007 include
    $1.2 million of depreciation expense included in
    discontinued operations.  Critical
    Accounting Policies
    Investment in Hotels.
 66




---



##### 



and/or
  Revenue Recognition.
  Stock-based Compensation.
  Income Taxes.
  built-in-gains
  Inflation
   67




---



##### 



Seasonality
    New
    Accounting Pronouncements
    Contractual
    Obligations
    Payments Due by PeriodLess Than


1 to 3


4 to 5Total


1 Year


Years


Years


After 5 Years(In thousands)Long-Term Debt Obligations including interest

$
1,064,494


$
52,417


$
107,084


$
148,031


$
756,962Operating Lease Obligations  Ground Leases and Office
    Space


645,570



3,486



5,572



5,000



631,512Total

$
1,710,064


$
55,903


$
112,656


$
153,031


$
1,388,474   Item 7a.
    Quantitative
    and Qualitative Disclosures About Market Risk and Risk
    Factors  Quantitative
    and Qualitative Disclosures about Market Risk
   68




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e) Rules 13a-15 15d-15
  Rules 13a-15 15d-15 page F-2.
  Item 9B.
    Other
    Information   PART III  Items 10-14
  Item 10.
    Directors
    and Executive Officers of the Registrant    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accounting Fees and Services   69




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  Financial Statements
    Financial Statement Schedules
  pages F-32 F-33:
    Regulation S-X
  Exhibits
  Regulation S-K
 70




---



##### 



SIGNATURES
      By:
    /s/  William
    J. Tennis   Title:
    Executive Vice President, General     By:
    /s/  Mark
    W. Brugger   Title:
    Chief Executive Officer     By:
    /s/  John
    L. Williams   Title:
    President and Chief Operating Officer and Director    By:
    /s/  Sean
    M. Mahoney   Title:
    Executive Vice President and 
    Chief Financial Officer     By:
    /s/  William
    W. McCarten   Title:
    Chairman   71




---



##### 



Title:
    Director    By:
    /s/  W.
    Robert Grafton   Title:
    Lead Director    By:
    /s/  Maureen
    L. McAvey   Title:
    Director    By:
    /s/  Gilbert
    T. Ray   Title:
    Director   72




---



##### 



EXHIBIT INDEX
  ExhibitNumber

Description of Exhibit3
.1.1

Articles of Amendment and Restatement of the Articles of
    Incorporation of DiamondRock Hospitality Company
    (incorporated by reference to the Registrants
    Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))3
.1.2

Amendment to the Articles of Amendment and Restatement of the
    Articles of Incorporation of DiamondRock Hospitality Company
    (incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    January 10, 2007)3
.2.1

Third Amended and Restated Bylaws of DiamondRock Hospitality
    Company (incorporated by reference to the Registrants
    Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 17, 2009)4
.1

Form of Certificate for Common Stock for DiamondRock Hospitality
    Company (incorporated by reference to the Registrants
    Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.1

Agreement of Limited Partnership of DiamondRock Hospitality
    Limited Partnership, dated as of June 4, 2004
    (incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q/A
    filed with the Securities and Exchange Commission on
    December 7, 2009)10
.2

Form of Hotel Management Agreement (incorporated by reference
    to the Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.3

Form of TRS Lease (incorporated by reference to the
    Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.4*

2004 Stock Option and Incentive Plan (incorporated by
    reference to the Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.5*

Form of Restricted Stock Award Agreement (incorporated by
    reference to the Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.6*

Form of Incentive Stock Option Agreement (incorporated by
    reference to the Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.7*

Form of Non-Qualified Stock Option Agreement (incorporated by
    reference to the Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123065))10
.8*

Form of Deferred Stock Award Agreement (incorporated by
    reference to the Registrants Registration Statement on
    Form S-11
    filed with the Securities and Exchange Commission (File
    no. 333-123809)10
.9

Amended and Restated Credit Agreement, dated as of
    February 28, 2007 by and among DiamondRock Hospitality
    Limited Partnership, DiamondRock Hospitality Company, Wachovia
    Bank, National Association, as Agent, Wachovia Capital Markets,
    LLC, as Sole Lead Arranger and as Book Manager, each of Bank of
    America, N.A., Calyon New York Branch and The Royal Bank Of
    Scotland PLC, as a Syndication Agent, and Citicorp North
    America, Inc., as Documentation Agent (incorporated by
    reference to the Registrants Quarterly Report on
    Form 10-Q/A
    filed with the Securities and Exchange Commission on
    December 7, 2009)10
.10*

Form of Severance Agreement, dated as of March 9, 2007
    (incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    March 9, 2007)10
.11*

Form of Stock Appreciation Right (incorporated by reference
    to the Registrants Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on May 6,
    2008)10
.12*

Form of Dividend Equivalent Right (incorporated by reference
    to the Registrants Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on May 6,
    2008) 73




---



##### 



ExhibitNumber

Description of Exhibit10
.13

First Amendment to Amended and Restated Credit Agreement, dated
    as of December 15, 2008 by and among DiamondRock
    Hospitality Limited Partnership, DiamondRock Hospitality
    Company, Wachovia Bank, National Association, as Agent, Wachovia
    Capital Markets, LLC, as Sole Lead Arranger and as Book Manager,
    each of Bank of America, N.A., KeyBank National Association and
    The Royal Bank Of Scotland PLC, as a Syndication Agent, and
    Citigroup North America, Inc., as Documentation Agent and Wells
    Fargo, National Association and Merrill Lynch Bank USA, as
    lenders (incorporated by reference to the Registrants
    Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 15, 2008)10
.14*

Form of Amendment No. 1 to Dividend Equivalent Rights
    Agreement under the DiamondRock Hospitality Company 2004 Stock
    Option and Incentive Plan (incorporated by reference to the
    Registrants Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 30, 2008)10
.15

Purchase Agreement, dated April 13, 2009, by and among
    DiamondRock Hospitality Company, DiamondRock Hospitality Limited
    Partnership, and Merrill Lynch & Co., Merrill Lynch,
    Pierce, Fenner & Smith Incorporated, and Wachovia
    Capital Markets, LLC (incorporated by reference to the
    Registrants Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    April 15, 2009)10
.16

Sales Agreement, dated July 27, 2009, by and among
    DiamondRock Hospitality Company, DiamondRock Hospitality Limited
    Partnership, and Cantor Fitzgerald & Co.
    (incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q/A
    filed with the Securities and Exchange Commission on
    December 7, 2009)10
.17

Sales Agreement, dated October 19, 2009, by and among
    DiamondRock Hospitality Company, DiamondRock Hospitality Limited
    Partnership, and Cantor Fitzgerald & Co.
    (incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q/A
    filed with the Securities and Exchange Commission on
    December 7, 2009)10
.18*

Form of Indemnification Agreement (incorporated by reference
    to the Registrants Current Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 16, 2009)10
.19

Severance Letter, dated as of December 16, 2009, by and
    between DiamondRock Hospitality Company and Michael D. Schecter
    (incorporated by reference to the Registrants Current
    Report on
    Form 8-K
    filed with the Securities and Exchange Commission on
    December 16, 2009)10
.20*

Letter Agreement, dated as of December 9, 2009, by and
    between DiamondRock Hospitality Company and William J. Tennis10
.21*

Form of Severance Agreement12
.1

Ratio of Earnings to Combined Fixed Charges and Preferred Stock
    Dividends21
.1

List of DiamondRock Hospitality Company Subsidiaries23
.1

Consent of KPMG LLP31
.1

Certification of Chief Executive Officer Required by
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as amended.31
.2

Certification of Chief Financial Officer Required by
    Rule 13a-14(a)
    of the Securities Exchange Act of 1934, as amended.32
.1

Certification of Chief Executive Officer and Chief Financial
    Officer Required by
    Rule 13a-14(b)
    of the Securities Exchange Act of 1934, as amended.     *
    
    Exhibit is a management contract or compensatory plan or
    arrangement. 74




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
    INDEX TO FINANCIAL STATEMENTS
   PageManagements Report on Internal Control Over
    Financial Reporting


F-2Reports of Independent Registered Public
    Accounting Firm


F-3Consolidated Balance Sheets as of
    December 31, 2009 and 2008


F-5Consolidated Statements of Operations for the
    years ended December 31, 2009, 2008 and 2007


F-6Consolidated Statements of Stockholders
    Equity for the years ended December 31, 2009, 2008 and
    2007


F-7Consolidated Statements of Cash Flows for the
    years ended December 31, 2009, 2008 and 2007


F-8Notes to Consolidated Financial Statements


F-9Schedule III  Real Estate and
    Accumulated Depreciation as of December 31, 2009


F-32   F-1




---



##### 



Managements
    Report on Internal Control Over Financial Reporting            Internal Control  Integrated
    Framework
             F-2




---



##### 



Report of
    Independent Registered Public Accounting Firm           Internal Control 
    Integrated Framework
  
    F-3




---



##### 



Report of
    Independent Registered Public Accounting Firm
     Internal Control  Integrated Framework
        Internal Control  Integrated Framework
    
    F-4




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANYCONSOLIDATED BALANCE SHEETSDecember 31, 2009 and 2008
  2009


2008(In thousands, except share amounts)ASSETSProperty and equipment, at cost

$
2,171,311


$
2,146,616Less: accumulated depreciation


(309,224
)


(226,400
)1,862,087



1,920,216Restricted cash


31,274



30,060Due from hotel managers


45,200



61,062Favorable lease assets, net


37,319



40,619Prepaid and other assets


58,607



33,414Cash and cash equivalents


177,380



13,830Deferred financing costs, net


3,624



3,335Total assets

$
2,215,491


$
2,102,536LIABILITIES AND STOCKHOLDERS EQUITYLiabilities:Mortgage debt

$
786,777


$
821,353Senior unsecured credit facility






57,000Total debt


786,777



878,353Deferred income related to key money, net


19,763



20,328Unfavorable contract liabilities, net


82,684



84,403Dividends declared and unpaid


41,810



Due to hotel managers


29,847



35,196Accounts payable and accrued expenses


79,104



66,624Total other liabilities


253,208



206,551Stockholders Equity:Preferred stock, $.01 par value; 10,000,000 shares
    authorized; no shares issued and outstanding






Common stock, $.01 par value; 200,000,000 shares
    authorized; 124,299,423 and 90,050,264 shares issued and
    outstanding at December 31, 2009 and 2008, respectively


1,243



901Additional paid-in capital


1,311,053



1,100,541Accumulated deficit


(136,790
)


(83,810
)Total stockholders equity


1,175,506



1,017,632Total liabilities and stockholders equity

$
2,215,491


$
2,102,536    F-5




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANYCONSOLIDATED STATEMENTS OF OPERATIONSYears Ended December 31, 2009, 2008 and
    2007
  2009


2008


2007(In thousands, except share amounts)Revenues:Rooms

$
365,039


$
444,070


$
456,719Food and beverage


177,345



211,475



217,505Other


33,297



37,689



36,709Total revenues


575,681



693,234



710,933Operating Expenses:Rooms


97,089



105,868



104,672Food and beverage


124,046



145,181



147,463Management fees


19,556



28,569



29,764Other hotel expenses


212,282



228,469



224,053Impairment of favorable lease asset


2,542



695



Depreciation and amortization


82,729



78,156



74,315Corporate expenses


18,317



13,987



13,818Total operating expenses


556,561



600,925



594,085Operating income


19,120



92,309



116,848Interest income


(368
)


(1,648
)


(2,399
)Interest expense


51,609



50,404



51,445Gain on early extinguishment of debt










(359
)Total other expenses (income)


51,241



48,756



48,687(Loss) income before income taxes


(32,121
)


43,553



68,161Income tax benefit (expense)


21,031



9,376



(5,264
)(Loss) income from continuing operations


(11,090
)


52,929



62,897Income from discontinued operations, net of tax










5,412Net (loss) income

$
(11,090
)

$
52,929


$
68,309(Loss) earnings per share:Continuing operations

$
(0.10
)

$
0.56


$
0.66Discontinued operations










0.06Basic and diluted (loss) earnings per share

$
(0.10
)

$
0.56


$
0.72Weighted-average number of common shares outstanding:Basic


107,404,074



93,064,790



94,199,814Diluted


107,404,074



93,116,162



94,265,245    F-6




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANYCONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITYYears Ended December 31, 2009, 2008 and
    2007
  Common Stock


Additional


AccumulatedShares


Par Value


Paid-In Capital


Deficit


Total(In thousands, except share amounts)Balance at December 31, 2006


76,191,632


$
762


$
826,918


$
(42,752
)

$
784,928Sale of common stock in secondary offerings, less placement fees
    and expenses of $380


18,342,500



183



317,372







317,555Dividends of $0.96 per common share










358



(91,733
)


(91,375
)Issuance and amortization of stock grants, net


196,681



2



863







865Net income














68,309



68,309Balance at December 31, 2007


94,730,813


$
947


$
1,145,511


$
(66,176
)

$
1,080,282Share repurchases


(4,800,000
)


(48
)


(48,776
)






(48,824
)Dividends of $0.75 per common share










437



(70,563
)


(70,126
)Issuance and vesting of common stock grants, net


119,451



2



3,369







3,371Net income














52,929



52,929Balance at December 31, 2008


90,050,264


$
901


$
1,100,541


$
(83,810
)

$
1,017,632Share repurchases










(749
)






(749
)Dividends of $0.33 per common share














(41,890
)


(41,890
)Issuance and vesting of common stock grants, net


280,265



3



6,625







6,628Sale of common stock in secondary offerings, less placement fees
    and expenses of $669


33,968,894



339



204,636







204,975Net loss














(11,090
)


(11,090
)Balance at December 31, 2009


124,299,423


$
1,243


$
1,311,053


$
(136,790
)

$
1,175,506    F-7




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANYCONSOLIDATED STATEMENTS OF CASH FLOWSYears Ended December 31, 2009, 2008 and
    2007
  2009


2008


2007(In thousands)Cash flows from operating activities:Net (loss) income

$
(11,090
)

$
52,929


$
68,309Adjustments to reconcile net (loss) income to net cash provided
    by operating activities:Real estate depreciation


82,729



78,156



75,477Corporate asset depreciation as corporate expenses


145



164



172Non-cash financing costs as interest


930



808



779Non-cash ground rent


7,720



7,755



7,823Gain on disposal of asset, net of taxes










(3,783
)Impairment of favorable lease asset


2,542



695



Gain on early extinguishment of debt, net










(359
)Amortization of debt premium and unfavorable contract liabilities


(1,720
)


(1,720
)


(1,807
)Amortization of deferred income


(564
)


(557
)


(392
)Yield support received






797



1,803Non-cash yield support recognized










(894
)Stock-based compensation


6,937



3,981



3,584Deferred income tax (benefit) expense


(21,566
)


(10,128
)


2,952Changes in assets and liabilities:Prepaid expenses and other assets


(430
)


(2,183
)


(347
)Due to/from hotel managers


10,513



1,773



(6,795
)Restricted cash


520



(1,773
)


1,217Accounts payable and accrued expenses


3,872



(1,196
)


959Net cash provided by operating activities


80,538



129,501



148,698Cash flows from investing activities:Hotel acquisitions










(331,325
)Proceeds from sale of asset, net










35,405Purchase of ground lease interest


(874
)






Hotel capital expenditures


(24,692
)


(65,116
)


(56,412
)Receipt of deferred key money






5,000



5,250Change in restricted cash


(2,465
)


3,449



(4,210
)Net cash used in investing activities


(28,031
)


(56,667
)


(351,292
)Cash flows from financing activities:Proceeds from mortgage debt


43,000







5,000Repayments of mortgage debt


(73,409
)






(18,392
)Repayments of credit facility


(57,000
)


(116,000
)


(108,000
)Draws on credit facility






173,000



108,000Scheduled mortgage debt principal payments


(4,167
)


(3,173
)


(3,233
)Prepayment penalty on early extinguishment of debt










(1,972
)Payment of financing costs


(1,219
)


(123
)


(1,237
)Proceeds from sale of common stock


205,642







317,935Payment of costs related to sale of common stock


(667
)






(380
)Repurchase of shares


(1,057
)


(49,434
)


(2,720
)Payment of dividends


(80
)


(93,047
)


(82,325
)Net cash provided by (used in) financing activities


111,043



(88,777
)


212,676Net increase (decrease) in cash and cash equivalents


163,550



(15,943
)


10,082Cash and cash equivalents, beginning of period


13,830



29,773



19,691Cash and cash equivalents, end of period

$
177,380


$
13,830


$
29,773Supplemental Disclosure of Cash Flow Information:Cash paid for interest

$
47,595


$
49,614


$
50,560Cash paid for income taxes

$
1,023


$
1,080


$
1,867Capitalized interest

$
19


$
259


$
50Non-Cash Financing Activities:Unpaid dividends

$
41,810


$



$
22,922    F-8




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  1.
    Organization        2.
    Summary
    of Significant Accounting Policies  Basis
    of Presentation
  and/or
  Use of
    Estimates
    Risks
    and Uncertainties
    Fair
    Value of Financial Instruments
   F-9




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property
    and Equipment
      and/or
    Goodwill
    Cash
    and Cash Equivalents
    Revenue
    Recognition
   F-10




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Income
    Taxes
          Intangible
    Assets and Liabilities
    Earnings
    Per Share
    Stock-based
    Compensation
   F-11




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Comprehensive
    (Loss) Income
    Restricted
    Cash
    Deferred
    Financing Costs
    Hotel
    Working Capital
    Key
    Money
    Derivative
    Instruments
    Straight-Line
    Rent
    Concentration
    of Credit Risk
   F-12




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Yield
    Support
    3.
    Property
    and Equipment    December 31,


December 31,2009


2008Land

$
220,445


$
219,590Land improvements


7,994



7,994Building


1,671,821



1,658,227Furniture, fixtures and equipment


270,042



259,154Corporate office equipment and Construction in progress


1,009



1,6512,171,311



2,146,616Less: accumulated depreciation


(309,224
)


(226,400
)$
1,862,087


$
1,920,216       4.
    Favorable
    Lease Assets      As of December 31,

As of December 31,2009

2008Carrying



CarryingAmount

Fair Value

Amount

Fair Value(In thousands)

(In thousands)Lease Right

$
9,513


$
9,513


$
12,055


$
12,055    F-13




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      5.
    Capital
    Stock  Common
    Shares
    Follow-on Public Offering.
  Controlled Equity Offering Programs.
  Preferred
    Shares
    Operating
    Partnership Units
  one-for-one
 F-14




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   6.
    Stock
    Incentive Plan    Restricted
    Stock Awards
      Weighted-AverageNumber of


Grant Date FairShares


ValueUnvested balance at January 1, 2007


461,527


$
12.57Granted


199,885



17.99Vested


(314,787
)


11.27Unvested balance at December 31, 2007


346,625



16.88Granted


406,767



10.92Vested


(147,583
)


16.31Unvested balance at December 31, 2008


605,809



13.02Granted


1,517,435



2.82Forfeited


(7,184
)


14.61Vested


(396,684
)


9.77Unvested balance at December 31, 2009


1,719,376


$
4.76     Deferred
    Stock Awards
   F-15




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Stock
    Appreciation Rights and Dividend Equivalent Rights
      Weighted-AverageNumber of


Grant Date FairSARs/DERs


ValueBalance at January 1, 2008






Granted


300,225


$
6.62Exercised






Balance at December 31, 2008


300,225



6.62Granted






Exercised






Balance at December 31, 2009


300,225


$
6.62  F-16




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    (Loss)
    Earnings Per Share   F-17




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009


2008


2007Basic (Loss) Earnings per Share Calculation:Numerator:Net (loss) income

$
(11,090
)

$
52,929


$
68,309Less: dividends on unvested restricted common stock






(389
)


(483
)Net (loss) income after dividends on unvested restricted common
    stock

$
(11,090
)

$
52,540


$
67,826Less: discontinued operations










(5,412
)Net (loss) income from continuing operations after dividends on
    unvested restricted common stock

$
( 11,090
)

$
52,540


$
62,414Weighted-average number of common shares outstanding 
    basic


107,404,074



93,064,790



94,199,814Basic (loss) earnings per share:Continuing operations


(0.10
)

$
0.56


$
0.66Discontinued operations










0.06Total

$
(0.10
)

$
0.56


$
0.72Diluted (Loss) Earnings per Share Calculation:Numerator:Net (loss) income

$
(11,090
)

$
52,929


$
68,309Less: dividends on unvested restricted common stock






(389
)


(483
)Net (loss) income after dividends on unvested restricted common
    stock

$
(11,090
)

$
52,540


$
67,826Less: discontinued operations










(5,412
)Net (loss) income from continuing operations after dividends on
    unvested restricted stock

$
(11,090
)

$
52,540


$
62,414Weighted-average number of common shares outstanding 
    basic


107,404,074



93,064,790



94,199,814Unvested restricted common stock






51,372



65,431Unvested SARs










Weighted-average number of common shares outstanding 
    diluted


107,404,074



93,116,162



94,265,245Diluted (loss) earnings per share:Continuing operations

$
(0.10
)

$
0.56


$
0.66Discontinued operations










0.06Total

$
(0.10
)

$
0.56


$
0.72  F-18




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   8.
    Debt      Maturity


AmortizationProperty

Principal Balance


Debt per Key


Interest Rate

Date


Provisions(In thousands)Frenchmans Reef & Morning Star Marriott Beach
    Resort

$
61,422


$
122,355


5.44%


August 2015



30 yearsMarriott Los Angeles Airport


82,600



82,271


5.30%


July 2015



Interest OnlyCourtyard Manhattan / Fifth Avenue


51,000



275,676


6.48%


June 2016



30 years
(1)Courtyard Manhattan / Midtown East


42,949



137,657


8.81%


October 2014



30 yearsOrlando Airport Marriott


59,000



121,399


5.68%


January 2016



30 years
(2)Marriott Salt Lake City Downtown


33,108



64,918


5.50%


January 2015



20 yearsRenaissance Worthington


57,103



113,300


5.40%


July 2015



30 years
(3)Chicago Marriott Downtown Magnificent Mile


219,595



183,301


5.975%


April 2016



30 years
(4)Renaissance Austin


83,000



168,699


5.507%


December 2016



Interest OnlyRenaissance Waverly


97,000



186,180


5.503%


December 2016



Interest OnlySenior unsecured credit facility









LIBOR + 1.25%


February 2011
(5)


Interest OnlyTotal debt

$
786,777Weighted-Average Interest Rate









5.86%     (1)
    
    The debt has a five-year interest only period that commenced in
    May 2006. After the expiration of that period, the debt will
    amortize based on a thirty-year schedule.(2)
    
    The debt has a five-year interest only period that commenced in
    December 2005. After the expiration of that period, the debt
    will amortize based on a thirty-year schedule.(3)
    
    The debt had a four-year interest only period that expired in
    July 2009. The debt is currently amortizing based on a
    thirty-year schedule. F-19




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (4)
    
    The debt had a 3.5 year interest only period that expired
    in October 2009. The debt is currently amortizing based on a
    thirty-year schedule.(5)
    
    The senior unsecured credit facility matures in February 2011.
    The Company has a one year extension option that will extend the
    maturity to 2012.    2010

$
5,9022011


7,2572012


7,9302013


8,4862014


50,081Thereafter


707,121$
786,777   Mortgage
    Debt Refinancing and Repayments
      Mortgage
    Loan Default
    Form 10-Qs
   F-20




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Senior
    Unsecured Credit Facility
      Leverage Ratio60% or Greater

55% to 60%

50% to 55%

Less Than 50%Alternate base rate margin


0.65
%


0.45
%


0.25
%


0.00
%LIBOR margin


1.55
%


1.45
%


1.25
%


0.95
%     Actual atDecember 31,Covenant

2009Maximum leverage ratio(1)

65%

50.3%Minimum fixed charge coverage ratio

1.6x

1.76xMinimum tangible net worth(2)

$892.3 million

$1.5 billionUnhedged floating rate debt as a 
    percentage of total indebtedness

35%

0.0%     (1)
    
    Maximum leverage ratio is determined by dividing the
    total debt outstanding by the net asset value of our corporate
    assets and hotels. Hotel level net asset values are calculated
    based on the application of a contractual capitalization rate
    (which range from 7.5% to 8.0%) to the trailing twelve month
    hotel net operating income.(2)
    
    Tangible net worth is defined as the gross book
    value of the Companys real estate assets and other
    corporate assets less the Companys total debt and all
    other corporate liabilities.    Actual atDecember 31,Covenant

2009Minimum implied debt service ratio

1.5x

N/AMaximum unencumbered leverage ratio

65%

0.0%Minimum number of unencumbered borrowing base properties

4

10Minimum unencumbered borrowing base value

$150 million

$529.0 millionPercentage of total asset value owned by borrowers or
    guarantors

90%

100%  F-21




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    9.
    Discontinued
    Operations    Year EndedDecember 31,2007Revenues

$
6,483Pre-tax income from operations


1,284Gain on disposal, net of tax


3,783Income tax benefit


345Income from discontinued operations

$
5,412   10.
    Dividends  2009-15, 2010-12,
  Dividend perPayment Date

Record Date

ShareApril 1, 2008

March 21, 2008

$
0.25June 24, 2008

June 13, 2008

$
0.25September 16, 2008

September 5, 2008

$
0.25January 29, 2010

December 28, 2009

$
0.33   11.
    Income
    Taxes   F-22




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year EndedDecember 31,


December 31,


December 31,2009


2008


2007Current  Federal

$



$



$
901State


535



665



752Foreign






87



314535



752



1,967Deferred  Federal


(17,299
)


(8,330
)


1,803State


(3,882
)


(1,978
)


426Foreign


(385
)


180



723(21,566
)


(10,128
)


2,952Income tax (benefit) provision(1)

$
(21,031
)

$
(9,376
)

$
4,919     (1)
    
    Amounts for the year ended December 31, 2007 includes
    $0.3 million of income tax benefit included in discontinued
    operations.    Year EndedDecember 31,


December 31,


December 31,2009


2008


2007Statutory federal tax provision (35)%

$
(11,243
)

$
15,663


$
23,856Tax impact of REIT election


(7,757
)


(24,565
)


(20,353
)State income tax (benefit) provision, net of federal tax benefit


(2,176
)


(854
)


766Foreign income tax provision


(126
)


267



1,037Other


271



113



(42
)Income tax (benefit) provision from continuing operations

$
(21,031
)

$
(9,376
)

$
5,264      F-23




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,


December 31,2009


2008Deferred income related to key money

$
7,824


$
8,065Net operating loss carryforwards


41,213



16,208Alternative minimum tax credit carryforwards


3,017



3,017Deferred tax assets


52,054



27,290Land basis difference recorded in purchase accounting


(4,260
)


(4,260
)Depreciation and amortization


(19,137
)


(16,123
)Deferred tax liabilities


(23,397
)


(20,383
)Deferred tax asset, net

$
28,657


$
6,907       12.
    Relationships
    with Managers  Our
    Hotel Management Agreements
   F-24




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Date of


InitialAgreement


Term


Number of Renewal TermsAustin Renaissance


6/2005



20 years


Three ten-year periodsAtlanta Alpharetta Marriott


9/2000



30 years


Two ten-year periodsAtlanta Westin North at Perimeter


6/2009



10 years


NoneBethesda Marriott Suites


12/2004



21 years


Two ten-year periodsBoston Westin Waterfront


5/2004



20 years


Four ten-year periodsChicago Marriott Downtown


3/2006



32 years


Two ten-year periodsConrad Chicago


11/2005



10 years


Two five-year periodsCourtyard Manhattan/Fifth Avenue


12/2004



30 years


NoneCourtyard Manhattan/Midtown East


11/2004



30 years


Two ten-year periodsFrenchmans Reef & Morning Star Marriott Beach
    Resort


9/2000



30 years


Two ten-year periodsLos Angeles Airport Marriott


9/2000



40 years


Two ten-year periodsMarriott Griffin Gate Resort


12/2004



20 years


One ten-year periodOak Brook Hills Marriott Resort


7/2005



30 years


NoneOrlando Airport Marriott


11/2005



30 years


NoneRenaissance Worthington


9/2000



30 years


Two ten-year periodsSalt Lake City Marriott Downtown


12/2001



30 years


Three fifteen-year periodsThe Lodge at Sonoma, a Renaissance Resort & Spa


10/2004



20 years


One ten-year periodTorrance Marriott South Bay


1/2005



40 years


NoneWaverly Renaissance


6/2005



20 years


Three ten-year periodsVail Marriott Mountain Resort & Spa


6/2005



151/2
    years


None  F-25




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Base Management

IncentiveFee(1)

Management Fee(2)Austin Renaissance


3
%

20%(3)Atlanta Alpharetta Marriott


3
%

25%(4)Atlanta North at Perimeter Westin


2.5
%

10%(5)Bethesda Marriott Suites


3
%

50%(6)Boston Westin Waterfront


2.5
%

20%(7)Chicago Marriott Downtown


3
%

20%(8)Conrad Chicago


2.5
%(9)

15%(10)Courtyard Manhattan/Fifth Avenue


5.5
%(11)

25%(12)Courtyard Manhattan/Midtown East


5
%

25%(13)Frenchmans Reef & Morning Star Marriott Beach
    Resort


3
%

25%(14)Los Angeles Airport Marriott


3
%

25%(15)Marriott Griffin Gate Resort


3
%

20%(16)Oak Brook Hills Marriott Resort


3
%

20% or 30%(17)Orlando Airport Marriott


3
%

20% or 25%(18)Renaissance Worthington


3
%

25%(19)Salt Lake City Marriott Downtown


3
%

20%(20)The Lodge at Sonoma, a Renaissance Resort & Spa


3
%

20%(21)Torrance Marriott South Bay


3
%

20%(22)Waverly Renaissance


3
%

20%(23)Vail Marriott Mountain Resort & Spa


3
%

20%(24)     (1)
    
    As a percentage of gross revenues.(2)
    
    Based on a percentage of hotel operating profits above a
    negotiated return on our invested capital as more fully
    described in the following footnotes.(3)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $5.9 million and (ii) 10.75% of
    certain capital expenditures.(4)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $4.1 million and (ii) 10.75% of
    certain capital expenditures.(5)
    
    Calculated as a percentage of operating profits after a pre-set
    dollar amount of owners priority beginning in 2010. The
    owners priority is $3.0 million in 2010,
    $3.7 million on 2011, $4.2 million in 2012,
    $4.7 million in 2013, $5.0 million in 2014. In 2015
    and thereafter, the owners priority adjusts annually based
    upon CPI. The incentive management fee cannot exceed 1.5% of
    total revenue.(6)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) the payment of certain loan procurement costs,
    (ii) 10.75% of certain capital expenditures, (iii) an
    agreed-upon
    return on certain expenditures and (iv) the value of
    certain amounts paid into a reserve account established for the
    replacement, renewal and addition of certain hotel goods. The
    owners priority expires in 2027.(7)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) actual debt service and (ii) 15% of
    cumulative and compounding return on equity, which resets with
    each sale.(8)
    
    Calculated as 20% of net operating income before base management
    fees. There is no owners priority.(9)
    
    The base management fee will increase to 3% for fiscal year 2010
    and thereafter. F-26




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (10)
    
    Calculated as a percentage of operating profits after a pre-set
    dollar amount ($8.7 million in 2009 and $8.8 million
    in 2010) of owners priority. Beginning in fiscal year
    2011, the incentive management fee will be based on 103% of the
    prior year cash flow.(11)
    
    The base management fee will be equal to 5.5% of gross revenues
    for fiscal years 2010 through 2014 and 6% for fiscal year 2015
    and thereafter until the expiration of the agreement. Beginning
    in 2011, the base management fee may increase to 6.0% at the
    beginning of the next fiscal year if operating profits equal or
    exceed $5.0 million.(12)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $5.5 million and (ii) 12% of certain
    capital expenditures, less 5% of the total real estate tax bill
    (for as long as the hotel is leased to a party other than the
    manager).(13)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.9 million and (ii) 10.75% of
    certain capital expenditures.(14)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $9.2 million and (ii) 10.75% of
    certain capital expenditures.(15)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $10.3 million and (ii) 10.75% of
    certain capital expenditures.(16)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $6.1 million and (ii) 10.75% of
    certain capital expenditures.(17)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $8.1 million and (ii) 10.75% of
    certain capital expenditures. The percentage of operating
    profits is 20% except from 2011 through 2021 when it is 30%.(18)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $8.9 million and (ii) 10.75% of
    certain capital expenditures. The percentage of operating
    profits is 20% except from 2011 through 2021 when it is 25%.(19)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.6 million and (ii) 10.75% of
    certain capital expenditures.(20)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $6.2 million and (ii) 10.75% of
    capital expenditures.(21)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $3.6 million and (ii) 10.75% of
    capital expenditures.(22)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.5 million and (ii) 10.75% of
    certain capital expenditures.(23)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $10.3 million and (ii) 10.75% of
    certain capital expenditures.(24)
    
    Calculated as a percentage of operating profits in excess of the
    sum of (i) $7.4 million and (ii) 11% of certain
    capital expenditures. The incentive management fee rises to 25%
    if the hotel achieves operating profits in excess of 15% of our
    invested capital.   F-27




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Yield
    Support
    Key
    Money
    Franchise
    Agreements
    Date of


InitialAgreement


Term(1)


Franchise FeeVail Marriott Mountain Resort & Spa


6/2005



16 years


6% of gross room sales plus 3% of gross food and beverage salesAtlanta Westin North at Perimeter


5/2006



20 years


7% of gross room sales plus 2% of food and beverage sales     (1)
    
    There are no renewal options under either franchise agreement.    13.
    Commitments
    and Contingencies  Litigation
   F-28




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Ground
    Leases
    
    The Bethesda Marriott Suites is subject to a ground lease that
    runs until 2087. There are no renewal options.
    The Courtyard Manhattan/Fifth Avenue is subject to a ground
    lease that runs until 2085, inclusive of one
    49-year
    renewal option.
    The Salt Lake City Marriott Downtown is subject to two ground
    leases: one ground lease covers the land under the hotel and the
    other ground lease covers the portion of the hotel that extends
    into the Crossroads Plaza Mall. The term of the ground lease
    covering the land under the hotel runs through 2056, inclusive
    of our renewal options, and the term of the ground lease
    covering the extension runs through 2017. In 2009, we acquired a
    21% interest in the land under the hotel for approximately
    $0.9 million. This gives us the right of first refusal in
    the event that the other owners want to sell their interests in
    the entity and the right to veto the sale of the land to a third
    party.
    The Westin Boston Waterfront is subject to a ground lease that
    runs until 2099. There are no renewal options.    
    The golf course which is part of the Marriott Griffin Gate
    Resort is subject to a ground lease covering approximately
    54 acres. The ground lease runs through 2033, inclusive of
    our renewal options. We have the right, beginning in 2013 and
    upon the expiration of any
    5-year
    renewal term, to purchase the property covered by such ground
    lease for an amount ranging from $27,500 to $37,500 per acre,
    depending on which renewal term has expired. The ground lease
    also grants us the right to purchase the leased property upon a
    third party offer to purchase such property on the same terms
    and conditions as the third party offer. We are also the
    sub-sublessee
    under another minor ground lease of land adjacent to the golf
    course, with a term expiring in 2020.
    The golf course which is part of the Oak Brook Hills Marriott
    Resort is subject to a ground lease covering approximately
    110 acres. The ground lease runs through 2045 including
    renewal options.  15-year
     F-29




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2010


3,4862011


2,8452012


2,7272013


2,5712014


2,429Thereafter


631,512$
645,570   14.
    Fair
    Value of Financial Instruments    As of December 31,

As of December 31,2009

2008Carrying



CarryingAmount

Fair Value

Amount

Fair Value(In thousands)

(In thousands)Mortgage Debt

$
786,777


$
670,936


$
878,353


$
750,899     15.
    Segment
    Information      Revenues


Investment2009


2008


2007


2009


2008


2007(In thousands)


(In thousands)Chicago

$
128,125


$
148,254


$
159,062


$
551,481


$
542,628


$
519,859Los Angeles


68,484



84,176



84,138



211,158



209,130



206,648Atlanta


56,746



68,425



73,381



239,475



237,307



233,947Boston


65,517



72,993



68,879



351,111



350,010



339,391US Virgin Islands


48,159



54,729



54,725



91,403



87,138



86,030New York


36,672



49,730



50,313



126,213



124,956



123,940Other


171,978



214,927



220,435



565,758



559,294



543,148Total

$
575,681


$
693,234


$
710,933


$
2,136,599


$
2,110,463


$
2,052,963  F-30




---



##### 



DIAMONDROCK
    HOSPITALITY COMPANY
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   16.
    Quarterly
    Operating Results (Unaudited)  2009 Quarter EndedMarch 27


June 19


September 11


December 31(In thousands, except per share data)Total revenue

$
118,544


$
143,607


$
137,800


$
175,730Total operating expenses

$
118,400


$
133,484


$
130,589


$
174,088Operating income

$
144


$
10,123


$
7,211


$
1,642Net (loss) income

$
(5,293
)

$
2,457


$
761


$
(9,015
)Basic and diluted (loss) earnings per share

$
(0.06
)

$
0.02


$
0.01


$
(0.07
)   2008 Quarter EndedMarch 23


June 15


September 7


December 31(In thousands, except per share data)Total revenue

$
132,863


$
181,016


$
161,395


$
217,960Total operating expenses

$
121,152


$
147,277


$
140,841


$
191,655Operating income

$
11,711


$
33,739


$
20,554


$
26,305Net income

$
5,177


$
21,755


$
12,212


$
13,785Basic and diluted earnings per share

$
0.05


$
0.23


$
0.13


$
0.15  F-31




---



##### 






DiamondRock
    Hospitality CompanySchedule III  Real Estate and
    Accumulated Depreciation
    As of December 31, 2009 (in thousands)
  CostsInitial Cost


Capitalized


Gross Amount at End of YearBuilding and


Subsequent to





Building and





Accumulated


Net Book


Year of


DepreciationDescription

Encumbrances


Land


Improvements


Acquisition


Land


Improvements


Total


Depreciation


Value


Acquisition


LifeThe Lodge at Sonoma, a Renaissance Resort and Spa

$



$
3,951


$
22,720


$
251


$
3,951


$
22,971


$
26,922


$
(4,170
)

$
22,752



2004



40 YearsCourtyard Midtown Manhattan East


(42,949
)


16,500



54,812



1,246



16,500



56,058



72,558



(7,056
)


65,502



2004



40 YearsMarriott Salt Lake City Downtown


(33,108
)






45,815



2,058



855



47,018



47,873



(5,870
)


42,003



2004



40 YearsCourtyard Manhattan/Fifth Avenue


(51,000
)






34,685



1,790







36,475



36,475



(4,597
)


31,878



2004



40 YearsMarriott Griffin Gate Resort






7,869



33,352



2,123



7,869



35,475



43,344



(4,418
)


38,926



2004



40 YearsMarriott Bethesda Suites










45,656



1,052







46,708



46,708



(5,823
)


40,885



2004



40 YearsTorrance Marriott South Bay






7,241



48,232



3,791



7,241



52,023



59,264



(6,422
)


52,842



2005



40 YearsMarriott Atlanta Alpharetta






3,623



33,503



239



3,623



33,742



37,365



(3,828
)


33,537



2005



40 YearsFrenchmans Reef & Morning Star Marriott Beach
    Resort


(61,422
)


17,713



50,697



1,979



17,713



52,676



70,389



(5,834
)


64,555



2005



40 YearsLos Angeles Airport Marriott


(82,600
)


24,100



83,077



3,502



24,100



86,579



110,679



(9,721
)


100,958



2005



40 YearsRenaissance Worthington


(57,103
)


15,500



63,428



948



15,500



64,376



79,876



(7,236
)


72,640



2005



40 YearsVail Marriott Mountain Resort






5,800



52,463



1,237



5,800



53,700



59,500



(6,007
)


53,493



2005



40 YearsOak Brook Hills Marriott Resort






9,500



39,128



2,295



9,500



41,423



50,923



(4,601
)


46,322



2005



40 YearsOrlando Airport Marriott


(59,000
)


9,769



57,803



1,981



9,769



59,784



69,553



(6,007
)


63,546



2005



40 YearsChicago Marriott


(219,595
)


36,900



347,921



16,649



36,900



364,570



401,470



(33,473
)


367,997



2006



40 YearsWestin Atlanta North at Perimeter






7,490



51,124



709



7,490



51,833



59,323



(4,765
)


54,558



2006



40 YearsConrad Chicago






31,650



76,961



1,350



31,650



78,311



109,961



(6,110
)


103,851



2006



40 YearsWaverly Renaissance


(97,000
)


12,701



110,461



1,724



12,701



112,185



124,886



(8,603
)


116,283



2006



40 YearsAustin Renaissance


(83,000
)


9,283



93,815



1,273



9,283



95,088



104,371



(7,265
)


97,106



2006



40 YearsBoston Westin Waterfront










273,696



15,124







288,820



288,820



(20,834
)


267,986



2007



40 YearsTotal

$
(786,777
)

$
219,590


$
1,619,349


$
61,321


$
220,445


$
1,679,815


$
1,900,260


$
(162,640
)

$
1,737,620   F-32




---



##### 



DiamondRock
    Hospitality Company
    Schedule III  Real Estate and Accumulated
    Depreciation  (Continued)
    As of December 31, 2009 (in thousands)
  Notes:
  A)
  Balance at December 31, 2006

$
1,604,227Additions:Acquisitions


273,696Capital expenditures


12,433Deductions:Dispositions and other


(31,979
)Balance at December 31, 2007


1,858,377Additions:Capital expenditures


27,434Balance at December 31, 2008

$
1,885,811Additions:Acquisition


855Capital expenditures


15,382Adjustments to purchase accounting


(1,788
)Balance at December 31, 2009

$
1,900,260   B)
  Balance at December 31, 2006

$
38,507Depreciation and amortization


41,549Dispositions and other


(1,699
)Balance at December 31, 2007


78,357Depreciation and amortization


41,693Balance at December 31, 2008


120,050Depreciation and amortization


42,590Balance at December 31, 2009

$
162,640   C)
 F-33