Sean Kensil – Director of Finance Mark Brugger – President, Chief Executive Officer Sean Mahoney – Chief Financial Officer Tom Healy – Chief Operating Officer

Jeff Donnelly – Wells Fargo Rich Hightower – Evercore ISI Austin Wurschmidt – KeyBanc Capital Patrick Scholes – SunTrust Bill Crow – Raymond James David Bragg – Green Street Advisors Thomas Allen – Morgan Stanley Anthony Powell – Barclays Shaun Kelley – Bank of America Stephen Grambling – Goldman Sachs Michael Bellisario – Baird

Thank you, Collin. Good morning, everyone, and – welcome to DiamondRock’s third quarter 2017 earnings call and webcast.

Before we begin, I would like to remind participants that many of our comments today are considered forward-looking statements under federal securities law, and may not be historical facts. They may not be updated in the future.

These statements are subject to risks and uncertainties as described in the Company’s SEC filings. In addition, as management discusses certain non-GAAP financial measures, it may be helpful to review the reconciliations to GAAP set forth in our earnings press release.

With me on today’s call is Mark Brugger, our President and Chief Executive Officer; Sean Mahoney, our Chief Financial Officer; Tom Healy, our Chief Operating Officer; and Troy Furbay, our Chief Investment Officer. This morning, Mark will provide a brief overview of our third quarter results, as well as discuss the company’s revised outlook for 2017.

Sean will then provide greater detail on our third quarter performance and discuss our balance sheet. Following their remarks, we will open the line for questions.

With that, I’m pleased to turn the call over to Mark.

Good morning, everyone, and thank you for joining us for DiamondRock’s third quarter earnings call. Before we begin, I’d like to take a moment to express our support for all those affected by the recent natural disasters.

This has been a challenging time. But we are proud of the incredible job that the folks at our hotels did and ensuring the safety of our guests and looking after fellow associates.

Going forward, we are committed to working closely with the affected communities in St. Thomas, South Florida and Northern California.

I’ll start today by making a few brief remarks about the health of the general economy and logic fundamentals. Despite the series of natural disasters in the third quarter, the U.S.

economy continued to show signs of strength. Third quarter GDP growth of 3% where they had a consensus of expectations combined with revised GDP growth of 3.1% for the second quarter the economy grew at the fastest rate for two consecutive quarters since mid 2014.

Other key indicators, including corporate profits, unemployment and consumer confidence, continue to trend in the right direction. However, lodging indicators are bit more nuanced.

Demand remains slow, but steady, industry RevPAR growth was 1.9% for the third quarter. While demand growth continued to outpace supply, the fact is that supply did increase to 1.9%, and it is up substantially more in many top gateway markets.

As a result, performance in top 25 markets has been more challenging with quarterly RevPAR in these markets increasing only 0.3% in the quarter. This trend of the top 25 markets underperforming national averages is expected to continue for several more quarters.

In light of these challenges, and despite impact from several natural disasters in recent months DiamondRock is extremely pleased to be able to raise our full year RevPAR guidance to a new range of 2% to 2.5%. This increased range is bolstered by our October RevPAR coming in with strong growth of 7.9% as well as 99.6% of all group needed for the full year already on the books.

Looking at the third quarter, DiamondRock had comparable RevPAR growth up 2.1%, which I believe is the highest of our peer group. This was ahead of the internal expectations and driven by outperformance at our hotels in Chicago, Salt Lake City and Fort Worth.

More impressively, our portfolio gained four percentage points in market share during the quarter. This is the good time to give credit to our outstanding work of our COO, Tom Healey and our entire asset management group.

Not only were they successful in driving top line growth, they once again delivered on cost containment with total expense growth of only 1.6% in the third quarter. The team is also completed six renovations so far this year and these investments are starting to pay off.

In addition, to the large capital projects the asset management team is working on a broad array of ROI opportunities that are being implemented across our portfolio. Just one example, is our lighting initiative to reduce energy cost, which is expected to have a 53% IRR in a two year payback.

DiamondRock takes great pride in its asset management platform and there is excellent momentum going forward as the team is just in the early stages of implementing several new initiatives to increase labor productivity, and reduce food costs to benefit us in 2018 and 2019. Let’s spend a minute on the impact from recent natural disasters.

The Frenchman’s Reef Marriott in St. Thomas closed on September 6 due to significant damage from Hurricane Irma.

We have already deployed a team of professionals to begin the remediation process while our engineers and architects complete their final assessment of the damage and develop a detailed estimate to rebuild. Based on the initial assessment, we expect Frenchman’s Reef to remain closed through at least the end of 2018.

With the closure, we will take this opportunity to rethink the resort and determine the course of action that is in the best interest of our shareholders. The boutique Inn at Key West also closed on September 6, and sustained wind and water related damage.

We expect this hotel to remain closed into the second quarter of 2018. This situation also presents an opportunity for us to rethink the hotel.

Mother Nature continued to affect us during the fourth quarter as wildfires cause Lodge at Sonoma to close for 10 days in October. The wildfires caused some smoke damage that was subsequently remediated and I’m happy to report that the hotel is currently open with 100% of the rooms back online.

For each of these three hotels, we have commenced insurance claims. Our executive team is working closely with our consultants and insurers to obtain fair proceeds for property damage and lost profits from business interruption.

Fortunately, we have excellent insurance coverage with strong carriers. Before turning the call over to Sean for more details on our third quarter results, I did want to touch on capital allocation.

With over $350 million of investment capacity including over $160 million of unrestricted cash DiamondRock is well positioned to be opportunistic. This dry powder is particularly valuable at this point in the cycle and allows us to either reserve capacity for future stock repurchases and/or acquisitions.

As you know earlier this year, we were able to execute add an excellent price in off-market acquisition of two lifestyle hotels that both have numerous value add opportunities, and are located in the zero supply market of Sedona. While we remain patient, deals with those characteristics certainly can create value for our shareholders.

They are difficult to find, but we continue to work hard to uncover them. I would add that in broadly marketed deals, pricing continues to be materially above our underwriting as our more buyers and sellers.

Again we are patient, but we’re always looking for that underappreciated gem. I’ll now turn the call over to Sean.

Sean?

Thanks Mark. Before discussing our results, please note that our RevPAR, hotel adjusted EBITDA, margin and other portfolio statistics are presented on comparable basis, which excludes Frenchman’s Reef Marriott and The Inn at Key West for all periods presented; adjust available rooms for the closed periods at The Westin Fort Lauderdale, Sheraton Suites Key West and Sonoma Renaissance and include the Orchards Inn and L’Auberge de Sedona for all periods presented.

In addition, reported adjusted EBITDA and adjusted FFO add back natural disaster expenses, which for $1.5 million during the third quarter. Our hotels performed ahead of expectations and gain market share during the third quarter.

Comparable RevPAR grew 2.1%. Monthly comparable RevPAR growth was 4.1% in July, 1.2% in August and 1.3% in September, which was negatively impacted by the timing of the Jewish holidays.

The positive RevPAR growth was offset by a 6.1% decline in comparable food and beverage revenue. The F&B decline was driven by banquets and catering, which was impacted by less group volume in Chicago and Boston.

In total, third quarter revenue was essentially flat with a 0.1% decline. Our asset managers and operators successfully implemented tight cost controls that enabled the hotels to limit total operating costs to grow to only 1.6%, which limited the third quarter hotel adjusted EBITDA margin contraction to 115 basis points.

For the year-to-date period ended September 30, the company reported comparable RevPAR growth of 2% and hotel adjusted EBTIDA margin contraction of 73 basis points. Property tax increases impacted year-to-date hotel adjusted EBITDA margins by approximately 80 basis points.

Let me spend a couple of minutes discussing trends in our three significant segments. The business transient segment, which represented 36% of total room revenues, was a primary driver of our third quarter outperformance.

Business transient revenues increased 8% from a 9.6% increase in demand partially offset by 1.5% decline in average daily rate. We benefited from successful asset management initiatives in response to the challenging group environment in Chicago and Boston by shifting demand in the business transient, our highest rated segment.

In particular, our Chicago hotel successfully grew business transient revenues by 34% in a quarter where citywides were down. Our business transient also benefited from the continued post-renovation ramp up at Worthington Renaissance wherethird quarter business transient revenue grew over 75%.

The group segment, which represented 27% of room revenues in the quarter outperformed expectations. Despite group being negatively impacted by the timing of the Jewish holidays, our third quarter group revenues increased 2.5%.

Our third quarter group significantly outperformed industry group revenue declines of 6%. Short term pick up exceeded expectations with $4.4 million of in-the-quarter, for-the-quarter business booked, which represents a 13% increase from prior year.

There are a few other group trends worth noting. We are encouraged that our 2017 group pace improved from last quarter.

Full year pace is now up 2.2% compared to up 0.7% last quarter. The 150 basis point improvement was driven by the increase in our in-the-quarter, for-the-quarter bookings I just mentioned, as well as improved fourth quarter group expectations.

During the third quarter, we booked over $8 million dollars of fourth quarter group, which is a 34% increase from last year. We now expect fourth quarter to be the strongest group quarter of the year with approximately 5% revenue growth.

This is a big improvement from the end of the second quarter when we expected flat fourth quarter group revenues. Finally, we are very confident in our full-year booking pace, as there is very little additional group pick up incorporated in the guidance.

We currently have over 99.5% of the forecasted group revenues on the books. Finally, third quarter leisure contracts and other revenues, which represented 37% of total room revenues declined 4.6%.

The decline was the result of natural disaster disruption in our resort markets, which have a higher leisure concentration. We also continued our revenue management strategies to mix shift from leisure into higher rated business transient segment.

Now, I will comment on a few of our markets. Despite challenging third quarter citywides, our two Chicago hotels significantly outperformed in the Chicago market.

Generating combined RevPAR growth of 3.3%. We continue to expect the Gwen to outperform Chicago, and national growth, with fourth quarter group pace up over 18%.

The Chicago Marriott also continues to benefit from its ongoing renovation and push towards more business transient. Our 2018 outlook for Chicago remains constructive due to strong citywide activity and combined group pace up 13.4%.

The Salt Lake City Marriott continued to outperform with third quarter and year-to-date RevPAR of 12.4%. That Worthington Renaissance generated third quarter RevPAR growth of 46.3%.

The majority of the growth relates to the renovation. However, the Fort Worth market also benefited from displaced demand from Hurricane Harvey in August.

Our outlook for the Worthington as improved each quarter in 2017 and we now expect over 20% RevPAR growth in 2017 and continued outperformance in 2018. RevPAR at our four New York City hotels declined 1.7%, which slightly underperformed the Manhattan market.

During the third quarter our relative performance was impacted by the franchise conversion at the Courtyard Midtown East, which led to some transition disruption. Positively the Lexington Hotel outperformed again this quarter and exceeded hotel adjusted EBITDA expectations by over $1 million.

Looking forward our 2018 group pace remains positive with approximately 60% of the expected group business already booked. Our 2018 group pace is currently flat, which is an improvement from our second quarter call.

We are encouraged by our pick up this quarter where we booked $15.3 million in 2018 group business representing a 19% increase compared to the same time last year. Our 2018 group is strongest in the first half of the year and the fourth quarter, with time left to book business for the third quarter.

Before turning the call back over to Mark, I would like to touch on our balance sheet. We continue to position our capital structure to maintain liquidity and build capacity in order to allow the company to be opportunistic.

Our balance sheet continues to be in great shape. The weighted average interest rate on our debt is only 3.8%.

We had no near term debt maturities with our next maturity in 2020. Our average mortgage maturity is nearly six years, 20 of our 28 hotels are unencumbered.

Our forecasted 2017 net debt-to-EBITDA is approximately 3.1 times and we currently maintained over $350 million of balance sheet capacity including an undrawn $300 million line of credit and approximately $167 million of corporate cash. I will now turn the call back over to Mark.

Mark?

Thanks, Sean. As you saw in our press release, we revised our full year outlook.

And reviewing our new guidance is important to know that it does not include the benefits from any proceeds from business interruption insurance, while we are aggressively pursuing business interruption payments from the insurance companies and fully expect to get all the money that we are entitled to. Our accounting policy is to only recognize its income when we have final agreement with the insurance companies even for interim payments.

As we set 2018 guidance early next year, we will revisit the appropriateness of including business interruption insurance proceeds into our guidance depending on the status of our claims. Now, drilling down into our revised full year 2017 guidance, there are two significant changes.

One, we are raising full year RevPAR guidance to reflect the outperformance of our hotels from the portfolios relatively favorable market allocation and from our new asset management initiatives gaining traction. Two, we changed our 2017 adjusted EBITDA and adjusted FFO to incorporate the impact of recent natural disasters without giving any benefit to future income from business interruption insurance proceeds that we expect to receive.

Based on all of this, our updated 2017 outlook is as follows. We raised our comparable full year RevPAR guidance range to 2% to 2.5%, which increased the bottom end of the range 100 basis points and the top end by 50 basis points.

We’ve reduced adjusted EBITDA by the $6 million impact from natural disasters and now expected to be in the range of $239 million to $247 million. Consequently, we expect adjusted FFO per share to be in the range of $0.95 to $0.98.

As always, we set our adjusted EBITDA and FFO guidance ranges with our expectation to come in at the midpoint. Looking ahead, we are confident that our portfolio is well position for 2018 even if we continue to be in a slow growth environment.

Specifically Chicago should be good for us. We expect the Chicago market to have a good 2018 with citywides up approximately 25% and an improving supply picture.

Our two hotels should outperform at the Gwen recently completed its $27 million rebranding renovation and the Chicago Marriott is completing the final phase of its four year $110 million renovation this coming winter. Renovations across several other properties should also contribute to our 2018 performance.

We expect our recently completed renovations to drive market share gains and market outperformance next year and the Worthington Renaissance, Charleston Renaissance, Sonoma Renaissance, Courtyard Denver, and the Kimpton Shorebreak. Remember 2017, we are investing a healthy $110 million to $120 million into the portfolio.

Separately New York City has outperformed our cautious expectations with surprisingly strong 2017 demand growth of 5.2%. And we are encouraged that the market is stabilizing as it enters its final year of under-performance from outside supply additions.

It should set up for stronger performance in 2019 as supply substantially ebbs. We remain constructive with the long term prospects for the number one MSA in the US.

Additionally, we have some favorable comps for 2018 that were created by disruption from natural disasters in 2017 that affected our hotels in Fort Lauderdale, Sonoma and Key West. The Inn at Key West is expected to reopen in the second quarter of 2018 fully renovated with a new name and new identity.

We look forward to providing you with further details on this concept as it is finalized in the coming months. Additionally, we expect to receive insurance proceeds for business interruption at the hotel in the future.

Frenchman’s Reef – Frenchman’s Reef will be off-line for all of 2018. We are submitting insurance claims for all lost profits for 2018 and until it reopens, as well as for the ramp up period after reopening.

As I mentioned earlier, we are taking this opportunity to rethink this resort. Historically Frenchman’s has been a winner for us.

Our last renovation at Frenchman’s was completed in 2011 for $45 million. The renovation allowed our team to grow EBITDA at a 10% compounded average rate from $9.5 million in 2010 to $16.6 million in 2016, which represented a sub nine times EBITDA multiple on our total investment.

Moreover, 2018 was tracking to be a record year for Frenchman’s with group pacing up over 70%. Since the hurricane event we have been working closely with the USVI government, Marriott and our team of experts to create the best outcome for our shareholders.

We will have more details for you on our next call. I will conclude our prepared remarks this morning by saying that our team is working hard.

We are happy to be able to deliver another quarter of good growth and even more pleased to be able to raise full year RevPAR guidance despite the natural disasters. We’ll now open up the line for any questions.

Good morning guys and Mark, thanks for the synopsis there at the end. I think you might have stolen my first question.

At the start of this year I would say it didn’t strike me that you guys were maybe as constructive on transient’s outlook and group is your strongest segment. But the remarks you just gave, it sounds like you are certainly sounding much more optimistic on certainly the renovations on Worthington in Chicago and New York’s weakness might be turning a corner in your eyes.

Does that leave you just a broader view that the industry might have found its trough sometime in 2016 and 2017? And that in broad strokes that maybe 2018 is going to be a much better year than we’ve seen in recent times?

I’m just kind of curious how you think about it from a bigger picture standpoint.

Yes, Jeff, I don’t want to over extrapolate from what is a relatively small portfolio to say the whole industry is changing. We are obviously pleased with what happened within our portfolio, but we are not seeing broad trends where things are reaccelerating for the industry going into 2018.

It seems like it’s setting up more for a similar year to 2017. But things are – obviously broke the right way for us at our portfolio and certainly as demand initiatives I think led to a lot of market share gains.

So if you take Chicago for instance in the third quarter, what we did there and our ability to really outperform the market I think is specific to our properties kind of outperforming a market that was otherwise sluggish in the third quarter.

That’s useful. And actually sticking with Chicago, just as you’ve been completing those renovations at The Gwen in April and you’re nearing completion in the Marriott, can you talk about how performance has been versus your original expectations?

And not to necessarily ask for guidance, but maybe can you talk about how we should be thinking about the EBITDA from Chicago in full-year 2018 versus what it was in 2017 just given all the moving parts?

Yes, there are a lot of moving parts. So, for the Chicago Marriott downtown, that’s a big hotel, we’ll complete the renovations December 1 through the first quarter of next year.

We would expect to gain market share and outperform the market in 2018 given the renovated product. If you look at the guest satisfaction scores, they are up on the renovated rooms something like 20 points.

And the meeting planners were obviously gaining a lot of traction as they – we still have the best location, best brand in the city. So it continues to gain market share and we do expect to outperform.

The Gwen is a different story. We obviously rebranded and re-launched.

It’s, I’m pleased to report, number five on TripAdvisor in the city of Chicago. It’s gaining great traction.

When you re- launch with particularly a soft brand, the ramp-up period takes – it takes two to three years to really get fully maximized on where you can take the hotel. So, we would expect very strong RevPAR growth in The Gwen.

Frankly it’s below our original underwriting for this year, but we think ultimately it gets there. So we would expect real outperformance as we make leaps and bounds over the next two years with that hotel.

Do you have a sense of how much the EBITDA can swing from those two hotels as we go from 2017 to 2018?

We’re not given 2018 guidance. So I don’t want to put that out there right now.

Okay. And then maybe one last will topic, because on Frenchman’s, it just sounds like the insurance claim there could potentially approach maybe the carrying value of that property.

I guess just considering the time and complexity of rebuilding, and the challenges you may face still in the future ultimately monetizing that asset, how do you think about the prospect of collecting the insurance and selling the land versus proceeding with redevelopment?

Yes, that’s a tough question. I mean, we are still in the very early innings of the loan process.

As I mentioned in the prepared remarks, we don’t even have the cost estimates prepared yet. The engineers are on site, they have been on site for several weeks figuring out the structural issues.

And so, until we get a total estimate it’s hard to know what the right outcome is for the shareholders. We are meeting with the governor at the property this Friday.

We are – our plan is to continue to work with the island, continue to work with the operator to get to the best outcome. So, it’s hard to give you even a rational opinion about having more details which we don’t expect to have for another 30 to 60 days.

Maybe this falls in the same camp, but is there a scenario where, to the extent you perceive as redevelopment, that it would make it easier for you financially as well as from a complexity standpoint that maybe you look to find a way to maybe sell off a portion of the resort? Like the beach front area, for example, to residential rather than proceeding with the development entirely on your own?

Yes, so the beach front portion is the Morningstar resort. That’s about 100 of what is really about a 500 room resort.

We think they are probably integral. They could be two – one of the things we were talking about when we said rethink in the prepared remarks is there may be the ability to move that beachfront resort really upstream and capture a lot more rate.

And so, that’s one of the things we are evaluating right now. But the synergies between the two are pretty substantial.

So, I don’t think we’d sell off one, that wouldn’t be our Plan A. If we do rebuild we’d be pretty excited about where we’d end up with the property, given the ability to fix the things that could be better at the hotel and end up with essentially a new resort and what we think is the best location in the Virgin Islands.

So, we’ll proceed along those lines and kind of see where we end up.

Okay, thanks guys.

Hi, good morning guys. Mark, really quickly, I know you’re not giving guidance on 2018, but as we think about CapEx next year, can you give us an indication directionally where you’re going to shake out relative to the $110 million, $120 million that you are putting into the portfolio this year?

Yes, but we’re just going through the CapEx budgets right now. But we plan to invest substantially in the portfolio next year.

Things like failed resorts, moving those rooms up to a luxury standard, other investments at other properties where we think we can get good returns. We are going to continue to invest in the portfolio next year.

We think it continues to be wise, as we are in this slow and steady environment, to make those investments and try to get some returns on them.

Okay, but no indication as to whether it would be higher or lower generally next year?

It’s not going from $110 million to $40 million, I mean, literally there is a couple of big projects that we are evaluating right now that would move the needle one way or another, so I don’t want to give you a number. But it will still be a substantial number as we into 2018.

Okay, that’s fine. And then in New York, going back to some of the prepared comments just thinking about your comment with respect to 2019 being a much better set up and specifically with respect to supply there.

I mean as I look at the supply pipeline for New York, at least according to the aggregate numbers from SDR. I mean you are looking at cumulatively 20% plus of existing inventory – now that’s the MSA, that’s not Manhattan – but I’m just curious how you get to the conclusion that 2019 is going to be significantly better I guess than 2017 or 2018 in that regard.

Or are those just projects that maybe there’s some risk to development or financing or something along those lines. Just curious for how you come to that conclusion.

Yes. Obviously we spent a lot of time parsing through the numbers and looking at all the projects.

There are a couple things going on that are going to curtail development. One, everything that is in the ground is obviously going to happen, it’s financed.

But the lenders have really red circled Manhattan on a lot of the new development projects, so it’s going to curtail that substantially. The other thing that’s going on is the FAR, the cost for the sites has now made hotels on a lot of these sites not the highest and best use.

So we think some of the hotels that are in the planning stage for 2019 and 2020 just won’t happen given that the economics don’t play out for them. So we think it’s going to curtail.

Now things in 2018 could get pushed into 2019, but we feel much better about 2019. Also next year we think things will generally stabilize.

We do think it will be an underperforming market in 2018; let’s not send the wrong message there. But we think it’s relatively stable as we move through 2018 and we do think in 2019 it will be better despite the additions in 2018.

And Rich, one quick comment to add to that. I think when you look at the demand that comes out of New York City and the diverse demand drivers there, the fact that the market has outperformed our 2017 expectations in a year with pretty significant supply this year as well.

It just speaks to how healthy the market is from a demand standpoint that it’s been able to withstand that. And so, our hope is that those demand trends continue into 2018 and 2019 in the market.

Okay, that’s helpful, guys. I appreciate that.

I guess – and then sticking with New York for a second. I know that there have been – talking about the manager contract changes at The Courtyard.

I know there of been issues with that asset over the past few years. Can you talk a little bit more as to whether those were personnel specifically or is it something more fundamental with respect to Marriott as a manager, whether it’s in New York specifically or just in general?

Just maybe a little more color on that.

Yes. So, at The Courtyard, for those that don’t know, we converted the hotel from a Marriott managed hotel to a franchised hotel recently.

The rationale behind that was really just freeing up the ultimate exit value of the hotel. Additionally, Marriott, in their management agreement, had a 25% incentive management fee, which also we think hurt the exit value on the asset.

So, we thought by making the switch – not that Marriott wasn’t doing a good job, but we thought it improved the NAV and the exit value of the asset. So that was really the big motivating force behind making that change.

Can you provide any specifics as to how the economics overall changed as you layer in the new management contract and a franchise agreement versus the old contract? Can you give any color on that?

And then I will step out of the queue after that.

Sure, Rich. So, we did a detailed analysis line by line.

There are a bunch of distributor costs that you bear when you are in the Marriott managed system. Many of those costs go away when you go and franchise.

So, net-net we think the NOI is better off under the franchise at this particular hotel and as Marriott managed. Now the hotel did become union this year, so those costs will ramp up at the property and they will certainly impact future profitability.

Thanks Mark.

Hi, good morning. Just kind of tagging on to that last question there, how are you are evaluating or thinking about your exposure to this market longer-term given some of the dynamics that you talked about with supply growth starting to moderate, demand growth remaining strong, et cetera?

We feel very good about New York over the next five years, so we are about 10% exposure depending how you measure it. In New York we think that’s probably a good place to be.

And we think that over the next five years we’ll see some really good growth as we get through the supply wave.

And when you look at that 5% demand growth that you referenced, I mean, where are you seeing – what’s driving, I guess, that growth? Is it more business transient, is it on the leisure side?

Are you seeing increased citywides this year? Any color you can provide there would be helpful.

It’s hard with our limited portfolio. Obviously business transient has been very good in New York.

Leisure has switched a little. International is down a little bit.

But we are seeing we’ve been able to back fill that very easily at our hotels. So, it’s not coming from international demand, but it’s really coming more from the business transient and the domestic leisure traveler.

Thanks for the color there. And then as you look at booking trends into the winter, how are you seeing South Florida shape up for a leisure destination, I guess in the aftermath of the hurricanes?

And anything noticeably different than prior years?

This is Tom Healy. Booking pace, we’ve actually had a pretty strong in-the-month for-the-month, in-the-quarter for-the-quarter results with Fort Lauderdale and Key West benefitted in the group side obviously due to the Florida light and power.

We had a fair amount of activity due to the hurricane and damage. I think we expect is there to be significant demand increases and shifts coming to Southern Florida, stuff that would normally go into the Caribbean we feel positive.

We see the transient activity has been positive and group pace is looking – we are up about 5000 rooms in Fort Lauderdale, group rooms. And we expect the transient to perform and we see indicators of that.

So we are fairly confident that Florida should perform decently next year.

Anything on the cancellation side that’s worrisome or anything that you saw in the last several months for those markets?

We’ve not seen any cancellations or changes in – like I said, we are up in Fort Lauderdale about 5,000 group rooms for next year. There have really been no changes or behavior changes.

There are some hotels coming out of the market and some new hotels coming into the market. But overall I think we feel pretty positive about where we are in Florida.

And Austin, overall cancellations for the quarter were actually only up about 3%, which was the lowest increase it’s been for our portfolio for going on year and a half , two years, and so we feel pretty good about where the group psychology sits right now. Couple that with the increased in-the-quarter for-the-quarter and in-the-quarter for next year activity.

We feel pretty comfortable with the group setup.

Thanks, Sean. I appreciate that detail.

And then just last one from me – as you underwrite some of these more Sedona leisure destination type hotels, how do you underwrite the cap rate risk on the exit versus what you can underwrite for a New York City type asset or other major market?

It depends on the location. So we will take Sedona.

So, we think Sedona has a large pool of institutional quality buyers. So, the cap rate is not different; it’s just the pool of buyers.

You’re not going to get the Chinese-based investor probably buying the Sedona. You might, but we would expect the pool of buyers to be different but not the cap rate necessarily.

Okay, thanks for the time.

Hi good morning. Thank you for taking my call.

I just wanted a point of clarification when you talk about your group pace for next year. I noted on the previous conference call you talked about 2018 group pace remaining positive, but as of this call it’s flat.

Is that an apples-to-apples comparison?

It is not because last quarter, Patrick, we included Frenchman’s Reef and Inn at Key West within those numbers. As Mark mentioned, Frenchman’s Reef was a dramatic driver of our 2018 pace last quarter, which as of last quarter was up a little under 80%.

So, what we are comparing on apples-to-apples for this quarter is where we sequentially improved a couple hundred basis points in our 2018 pace quarter-to-quarter. And that was from the booking activity that we booked in the third quarter for 2018 which was up 19%.

Okay, thank you for the clarification. And then a second question on – clarification.

It sounds like you’re pretty bullish on New York City, but you paid out some termination fees to Marriott in order to increase exit value. I’m just trying to understand what – is this a market you want to stay in or something you’re looking to get out of here?

Patrick, this is Sean again. The adjustment for The Courtyard change was actually – it was the right off which was actually – gained recognition of about $1.9 million for key money that we got when we started the deal, offset by some employee severance costs as well as some preopening costs associated with the transition.

But the vast majority of that related to – it was a non-cash gain, if you will, from the write off of the key money that we received in 2004.

This is Mark. So I guess we are pleased with our representation in New York.

We think it’s the right size representation given our overall portfolio allocation strategy. So, we are in New York for the long-term.

Obviously everything in the portfolio is for sale at a price. But we like what we have and we like our locations, particularly our concentration in Midtown East which has the lowest supply growth in the entire market.

Okay, thank you for the clarification again.

Great, thanks. Good morning guys.

First question, talking about management changes at the hotel level. We heard some negative commentary earlier in this earnings season on Kimpton.

I was just wondering whether you’re having increased challenges at that particular hotel.

No, so we have one Kimpton property, the Shorebreak in Huntington Beach. We think Kimpton is doing a good job there.

There are some discussions ongoing with Kimpton about how they’re trying to integrated it into the overall structure of the larger company. And there are discussions around that.

But our performance with Kimpton at our one hotel has been good and we’re pleased with what they’ve been doing there.

Great. Last time we talked I think you were looking at three or four different acquisition targets, including one that would increase your presence in the San Francisco market.

Could you give us an update on where the pipeline stands?

Sure. We don’t have anything to announce right now.

We are looking at several small acquisitions, one of which is in San Francisco, two of which are smaller destination resorts in very desirable locations. So, that’s what our pipeline looks like today.

We don’t know if any of those deals will come to fruition, but we continue to work hard on them. As I mentioned, in the prepared remarks, it’s really hard to compete in the broadly marketed deals.

There’s just not that much great stuff on the market and there’s a wall of capital that’s chasing it. So those deals aren’t going to be able to be additive to shareholder value for DiamondRock.

So, are working very hard either where we have a different unique value add strategy. Or it’s some market or something we uncover that’s got really great attributes that everyone else hasn’t discovered yet and Sedona is a little bit in that bucket.

Mark, if I switch to the other side, the disposition side of things, there still feels like there’s maybe non-core longer-term assets in your portfolio. Is that fair and what are your thoughts about exploiting what’s a pretty good bid right now in the market for selling assets?

Yes, that’s a great question. We have that dialogue regularly internally.

By definition there’s always a bottom 10% of a portfolio you should be looking at monetizing. I think our perspective right now is we sold $270 million of deals not too long ago that were non-core.

We are sitting on over $160 million of cash. We will probably end the year with more than that.

So, we feel like we have a lot of capacity to do deals right now. And maybe monetizing more stuff until we start finding acquisitions that make sense probably is just – probably not the right thing to do for us until the acquisition pipeline gets a little bit more interesting for us.

Yes, fair enough. Finally from me a quickie.

Is it possible that The Inn at Key West you could turn into a brand, get some key money and basically come out better than you would be otherwise?

So, the answer is it could be a brand, but we don’t think in that market the brand on that creates enough value to pay for the cost. So, the Plan A we are working on right now is to make it a higher-end unique boutique operation.

So we are working on a new concept, we are going to put some real money into it, fire features and themes and all that. We think we can lift the rate considerably where it was kind of pre-hurricane.

Ocean Properties is our partner, our manager, down there. They operate several really terrific independents and they know what they are doing.

So, we have confidence that they can help us execute on that strategy.

Perfect. That’s it for me, thanks for your time.

This is David on for Lukas this morning. A quick one, as we think about modeling 2018 – given all the renovation disruption you had in the first half of 2017, and then the natural disaster impact in the second half, are there maybe any quarters that you expect to stand out that allow some easier comps?

Hi David, this is Sean. I think certainly in the first quarter we had a couple hundred basis points of occupancy disruption within our portfolio with the significant renovations that we had going on really through April.

So you would expect to pick that back up because it was all occupancy disruption. So the first quarter we feel on a relative basis we feel pretty comfortable with.

And then, as you correctly stated, getting back a portion of the natural disaster disruption, certainly we expect The Inn at Key West to be back by then, as well as the hotels that have been reopened but were impacted by the natural disasters in the third quarter into the fourth quarter. Obviously Frenchman’s Reef will not be back through 2018, so that was about $3.5 million of a $6 million disruption.

But certainly a piece of that we would expect to get back.

Okay, that’s helpful. And then last one, just regarding the hotel manager changes again.

Maybe just generally speaking not on the two recent ones, but how long does it typically take for a hotel to ramp up to your guys’ expectations after you replace the manager?

Yes, so I guess everyone’s different. So we’ve had the experience in the past where we took an independent and put a Courtyard on it in Manhattan and the rate went up $50 within a month.

So with the change to branded well-known brands it’s a relatively quick ramp. When we make manager changes itself we don’t always expect there to be a significant change in the operating performance in the short-term.

I’ll take another example. We took me racks the Rex in San Francisco and we are putting Viceroy in there, they took over management.

We don’t expect a significant difference in the short-term, but we are going to renovate that hotel in 2018 and really bring it up in quality and the segments that we’re going to chase and we expect a material outperformance post that renovation in 2018. So, it is a little bit nuanced, but you shouldn’t expect that when we change managers things change the trajectory in the short term.

All right, thanks, guys.

Hi good morning. You gave some helpful color on your outlook for Chicago and New York.

Can you just give some more color around Boston, it’s another major market for you? Thanks.

Yes, so Boston next year is going to be a okay year. Citywides are down a little bit.

We don’t have high expectations for Boston for 2018, so that’s going to be an okay performing market.

And specifically our pace is down in the market about 5%, Thomas. Now we expect business transient to perform okay and make up some of that difference in Boston for next year.

And so, we are hoping that Boston becomes a slightly positive RevPAR market next year. But relative to national averages we still think it’s going to be a slight laggard to the national averages.

And it’s all about the group and citywide activity.

Okay, helpful. And then just to level set consensus expectations, you said earlier that you were going to reassess including business interruption in your 2018 numbers.

So – so that whatever you guide next quarter is comparable to all of us. Do you think we should assume that we shouldn’t take out Frenchman’s Reef from our EBITDA expectations?

Yes, that’s a difficult question. Ideally we would come to a conclusion with the insurers about interim payments and we could tell you that we have an agreement for 2018 when we do guidance in February.

We just don’t – we are in the preliminary stages, as I mentioned before, of working with insurers on that. So, I can’t give you great clarity on exactly how to treat it.

I think if you don’t put anything in there that probably gives an inaccurate view of the performance of the companies. So, I think we’ll have to continue to talk about where we are with the insurance claim and what the right way to model that would be.

And Thomas, you have historical actual numbers because we present hotel-by-hotel data. And so for modeling purposes probably that’s as good a basis as any to look at what the hotel did historically.

2016 would be a fine base year for that. We obviously expect 2018 to be – 2017 was better than 2016 and 2018 was supposed to be much better than 2017.

But I think that will at least have some base for you to model.

So, you don’t get unfairly penalized we should assume that maybe just to add back in adjusted EBITDA what we would’ve assumed Frenchman’s Reef to have made, I think it was around $17 million in 2018. So it doesn’t show a massive decline in your EBITDA.

That is probably the fairest representation.

We will have more color on that, Thomas, when we present guidance in February. And each subsequent quarter, as we get more color on business interruption proceeds that we get, we will obviously update the market.

But we are just sensitive to providing too much detail on business interruption because it is a negotiation and a very involving number as we continue dialogue with the insurance companies.

You don’t want to negotiate against yourselves. Understood, thank you.

Good bye.

Hi, good morning guys. Sorry if I missed this, but one of your peers mentioned they were starting to see some early benefits of the Starwood Marriott merger in their cost structures.

Are you seeing the same thing?

So I think for this year we are seeing it as a net neutral. We would expect as we go through the budgets for 2018 that we will have some cost savings as they spread cost over a larger platform.

I know in Boston they rebid all the contracts with their – now that they have a much bigger base in Boston and reduced cost at a number of properties. So, we are starting to see some small benefits.

I wouldn’t say big benefits yet, but our expectations are in 2018 we would start seeing some real cost reductions in some of the shared cost.

Got it, thanks. And my next question is on online travel agents.

Many of the major OTAs it seems have reported quarters that were below their expectations or below the Street’s expectations. I’m not sure what’s going on there, but are you seeing any slowdown in OTA penetration of booking in your portfolio over the past three – quarter?

No. I think it’s pretty consistent.

Obviously it’s an expensive channel and when we can avoid using it and go brand direct we prefer to do that. And it’s market-by-market case-by-case, brand versus unbranded hotels, the mix is going to be different.

But we haven’t really seen a slowdown in demand.

And it’s a relatively small chunk of our business, Anthony; it’s about 10% of our total business comes from the OTAs and it tends to be during shoulder seasons and need periods for the hotel.

Got it, thanks. And one more time Chicago, what is the citywide pace up in 2018 relative to 2017?

So, our pace is up 13% for our combined Chicago portfolio and the pace is up in the mid-teens for what we consider citywides impact on hotels.

Great. That’s it for me.

Thank you.

I think most of my questions have been touched on, but just one big picture or high level one. If you hit on this in the prepared remarks, sorry, I joined a minute late.

But just what are you guys looking at for weighted average supply growth in your markets or across the portfolio for 2018?

So, 2.2% is what we have as the weighted average 2018 supply growth within our portfolio.

Thanks, Sean. And what’s your assumption for New York?

I know I jumped in right when somebody was talking about it, so maybe you already gave that, but…

So, New York we are we are assuming about 6% supply next year.

And last question. We’ve heard a number of people have – we’ve heard a bunch of varying estimates for New York, and granted these can differ by submarket or Manhattan or MSA.

But when you think about that 6% number, just is that something that you think there is potential for a lot of slippage, or how are you calculating that? Because again, I’ve heard numbers ranging anywhere from 3 to 6.5.

That’s always hard to know what’s going to slip into next year. But you remember, we get impact from stuff that is opening up at the end of this year as well.

So we think six is a good baseline. Could it slip 100 basis points?

Sure. But I still think that’s the appropriate baseline.

And we think – demand has been 5.2% this year. We think we will have another good demand year in New York City next year as well.

Got it. And so, when we think about guidance and outlook, this year you started out pretty cautious on your outlook for New York.

Maybe it doesn’t need to be quite as cautious next year. Again, not trying to put – make you guys give guidance before you do, but is that the appropriate outlook based on what you’re seeing in the tailwinds right now just from the demand side?

Yes, it’s tough. We’re going to be in New York the next two days of budget reviews and walking the market.

So we’ll literally have a better opinion in a week. I would say we are more constructive on New York certainly than we were going into 2017.

But we still expect that to be an underperforming market given the supply in 2018.

Perfect. Thanks a lot, guys.

Thanks. Two follow-ups.

I guess first there were a number of comments I think in your prepared remarks about large capital projects and additional asset management opportunities. Maybe I missed this, but can you provide a little more detail on what these would entail both this year and anything that you could have planned for next year?

So the reference in the prepared remarks to large capital projects referred to the six projects we completed earlier in 2017. Now as we evaluate 2018 there are some other capital projects obviously.

We are going to complete the Chicago Marriott ballroom renovation and the last chunk of rooms. That’s a fairly major project.

And then we are looking at significant projects in Vail, we’re looking at potential rooms redo in Fort Lauderdale Weston and some other properties. But we are going through the capital budgeting process over the next 30 to 40 days.

So we’ll talk about which ones make sense for 2018 and which may get pushed out to 2019 or 2020. So we will obviously be able to give you more color on the next earnings call about that.

And I guess one quick follow-up on that would just be how dependent are those plans on what you’re seeing in the acquisition market?

They are independent. So normally we find the best investments we can make are into existing assets.

They are the least risky because we understand them the best. And we obviously have had the time to evaluate and find the best investment opportunities within those hotels.

So it’s not either or. We are not capital constrained versus the capacity we have in our balance sheet now.

When we talk about the $350 million of dry powder, that is assuming that we continue to invest significantly into our existing portfolio, so they are not mutually exclusive.

And then the other follow-up just on the OTAs. You mentioned that the performance is a case-by-case basis.

Are you seeing any change in OTA sourcing or growth in branded versus unbranded properties?

I think our portfolio is too small to give you an accurate industry-wide answer. I would say we are encouraged by the brand initiatives to curtail the OTAs and replace that with lower cost channels.

They are actively pursuing a number of strategies and actually there’s a number of new ones that are coming into play over the next year. So we are encouraged by that.

But we haven’t seen a significant shift in either the branded or the independents within our portfolio. But again, I wouldn’t extrapolate that into an industry trend given the small size of our portfolio.

Fair enough. Thanks so much.

Good morning guys, thanks for taking my questions. Just wanted to focus on the group strength comment you made.

I know you mentioned Chicago, but maybe more broadly any other markets or assets really driving this? And then kind of secondarily, is this lift of the result of your continued group up strategy or is it more asset market-based?

So Mike, our pickup in the third quarter for 2017 was pretty much broad based across our portfolio. Our third-quarter pickup, as I mentioned in the prepared remarks, was up 13% that was pretty consistent, as was our fourth-quarter pickup.

2018 once again was a strong pickup period for us. Within that we had our strongest pickup actually at the Chicago Marriott where we picked up a little under $2 million of business during the third quarter for 2018 and that was coming off a pretty strong booking pace at that hotel anyway.

And so, that drove a lot of our 2018 pickup, but we once again, we had pretty nice pickup across the portfolio into 2018. When we think of pickup it’s really – it’s a function or an indicator of the group psychology frankly the way we think of it.

And the more pickup and the more short-term pickup we get the healthier and more comfortable groups feel booking and the fact that we are getting more of our fair share is a good indicator as well. We couldn’t be more happy for our third-quarter to be up 2.5% in group when the industry were down 6% that’s pretty material outperformance within our portfolio.

That’s helpful. And then just on October the big RevPAR print there, how much above expectations was that versus your prior implied guidance range?

So within our range – it outperformed our expectations by about 250 basis points.

Thanks. That’s all from me.

Thank you, Carmen. To everyone on this call, we appreciate your continued interest in DiamondRock and look forward to updating you with our fourth quarter and full year results on the next call.