DiamondRock Hospitality Co

Current report

year ended December 31, 2024 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025.

Previous report

Economic conditions and other factors beyond our control may adversely affect the lodging industry.

Previous report

Our entire business is related to the lodging industry. The performance of the lodging industry is highly cyclical and has historically been linked to key macroeconomic indicators, such as U.S. GDP growth, employment, personal discretionary spending levels, corporate earnings and investment, foreign exchange rates and travel demand.

Previous report

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

Previous report

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

Previous report

During 2024, inflation began to moderate, but remained elevated relative to the years preceding 2021. Inflationary increases in certain of our operating expenses, including, but not limited to, labor costs, employee-related benefits, food, beverage and utility costs, repairs and maintenance expenses, property taxes and insurance premiums, have and may continue to negatively impact our business and results of operations. Changes in U.S. policies that discourage immigration, restrict the number of immigrants permitted into the U.S., or negatively impact certain types of work visas, may put further inflationary pressures on labor costs if there is a material decrease in available and/or willing workers. While, in general, operators of hotels possess the ability to adjust room rates daily to reflect the effects of inflation, competitive pressures, customer resistance to higher booking costs or other factors may limit the ability of our management companies to raise room rates. Additionally, inflation may have a negative effect on our ability to renovate or make capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. Proposed or enacted tariffs on imported goods, including construction materials, furniture, and equipment, particularly those sourced from Asia, may further exacerbate inflationary pressures on renovation costs and limit the availability of certain supplies, thereby increasing the cost and timing uncertainty of planned capital projects. Additionally, see “Risk Factors—Risks Related to our Business and Operations—We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing for such expenditures.”

Previous report

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

Previous report

-32- maintain our tax status as a REIT and limit our ability to make distributions to our stockholders.” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Previous report

In addition, historically, during periods of increasing interest rates, real estate valuations have generally decreased as a result of rising capitalization rates, which tend to be positively correlated with interest rates. Consequently, prolonged periods of higher interest rates may negatively impact the valuation of our portfolio and result in the decline of the quoted trading price of our securities and market capitalization, as well as lower sales proceeds from future dispositions.

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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.

Previous report

In order to remain competitive, our hotels have an ongoing need for renovations and other capital improvements, including replacements, from time to time, of furniture, fixtures and equipment. These capital improvements may give rise to the following risks:

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•construction cost overruns and delays, including those caused by supply chain disruptions, uncertainty around tariffs or inflationary price increases;

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•increased costs resulting from proposed or enacted tariffs on imported goods such as construction materials, furniture, fixtures, and equipment;

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•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;

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•the renovation investment failing to produce the returns on investment that we expect;

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•disruptions in the operations of the hotel as well as in demand for the hotel while capital improvements are underway; and

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•disputes with franchisors/hotel managers regarding compliance with relevant franchise/management agreements.

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The costs of these capital improvements or profit displacements during the completion of these capital improvements could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.

Previous report

In addition, we may not be able to fund capital improvements or acquisitions solely from cash provided from our operating activities because we generally must distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains, each year to maintain our REIT tax status. As a result, our ability to fund capital expenditures or investments through retained earnings is very limited. Consequently, we rely upon the availability of debt or equity capital to fund our investments and capital improvements. These sources of funds may not be available on reasonable terms or conditions.