DiamondRock Hospitality (NYSE:DRH) reported fourth-quarter and full-year 2025 results that management said came in ahead of its most recent guidance, while also laying out a multi-year capital spending framework and initial expectations for 2026.
2025 results and fourth-quarter performance
For full-year 2025, the company posted corporate Adjusted EBITDA of $297.6 million and Adjusted FFO per share of $1.08, which management characterized as a company record. Free cash flow per share, defined as Adjusted FFO less capital expenditures, was $0.69, up 6% from 2024 and up 22% since 2023. Comparable total RevPAR increased 1.2% for the year, while comparable hotel Adjusted EBITDA grew 1.1%.
By demand segment during the quarter, management said business transient revenue grew 2.5%, while group revenue declined 1% and leisure transient revenue fell 2.5%. The company highlighted strong results in several markets, including Destin, the Greater San Francisco area, New York, and Denver, and pointed to performance at recently renovated assets such as The Cliffs at L’Auberge (integrated into L’Auberge de Sedona) and the Kimpton Hotel Palomar Phoenix.
Out-of-room revenue, margins, and operating expenses
Management emphasized that out-of-room spend was more resilient than anticipated. Total RevPAR increased 0.6% in the quarter, a 90-basis-point outperformance relative to RevPAR. The strength was concentrated in the resort portfolio, where out-of-room revenue per occupied room increased nearly 7%, which the company said was the strongest quarterly growth of the year and represented sequential acceleration throughout 2025.
Food and beverage was cited as a “bright spot” for the third consecutive quarter. Food and beverage revenue rose 1.4%, with banquets and catering up more than 2% and outlets up 0.5%. Food and beverage margins expanded 120 basis points as labor costs increased 50 basis points, which management said translated into more than 5% growth in food and beverage profits on 1.4% revenue growth. The company also pointed to mid- to high-single-digit increases in spa, parking, and destination fees, partially offset by slightly lower attrition and cancellation fees.
On expenses, total hotel operating costs declined 0.5% in the fourth quarter, driving an 82-basis-point increase in hotel EBITDA margin. Wages and benefits—nearly half of total expenses—rose 0.6%, which management attributed to productivity gains and expense “right-sizing.”
Group trends and 2026 booking commentary
Group room revenue declined 1.1% in the quarter, with rates up 2.6% but room nights down 3.6%. Management said the federal government shutdown disrupted typical short-term group pickup in November.
Looking to 2026, DiamondRock said it entered the year with $149 million of group room revenue on the books, which it described as the same level as 2025 and “a peak for DiamondRock.” Management expects additional “in the year for the year” pickup given a higher volume of tentatives and leads, though it noted that East Coast winter storms in January and February, limited snowfall in ski markets, and a slower start to the year in Chicago had pressured first-quarter pace.
In the Q&A session, management said leads and tentatives for the year are up about 10% versus the prior year and expressed optimism that lead conversion to firm group business would improve compared with 2025, when it said “Liberation Day” contributed to a significant drop-off in leads beginning in April.
Balance sheet actions, capital allocation, and 2026 guidance
The company said it redeemed its Series A redeemable preferred shares on December 31 using cash on hand. Management said that, net of lower interest income, the redemption will provide a $0.03 tailwind to FFO per share in 2026. Following credit facility amendments, repayment of property-level debt, and the preferred redemption, management described the capital structure as simplified: three fully pre-payable term loans, no secured debt, no joint ventures or off-balance-sheet encumbrances, and no debt maturities until 2029 (inclusive of extension options). The company said 70% of its debt is floating rate (including swaps) to benefit from a declining rate environment.
DiamondRock paid a common dividend of $0.08 per share each quarter of 2025 and a $0.04 per share sub-dividend in the fourth quarter, equating to an annual payout of 33% of FFO per share. Management said the payout is below historical levels as the company uses net operating losses to offset taxable income. For 2026, the company expects to declare quarterly dividends of $0.09 per share, with a potential fourth-quarter sub-dividend depending on full-year results.
In 2025, DiamondRock repurchased 4.8 million shares at an average price of $7.72 per share, which management said implied a 10% cap rate on consensus estimates. Executives reiterated that they continue to view repurchases as an attractive use of capital and noted on the call that the shares currently trade at an implied cap rate above 9%.
Management issued 2026 guidance calling for:
- RevPAR growth: 1% to 3%
- Total RevPAR growth: 25 basis points higher than RevPAR growth
- Adjusted EBITDA: $287 million to $302 million
- FFO per share: $1.09 to $1.16
- Capital expenditures: $80 million to $90 million
Management said the first quarter would be the toughest comparison of the year and expects first-quarter RevPAR to be essentially flat year-over-year, with first-quarter EBITDA and FFO representing a lower share of the full year than in 2025 due to event timing.
On expenses, management said the midpoint of guidance implies labor costs up around 3% in 2026, inclusive of New York contract renewals, and noted the company has three limited-service hotels in New York representing about 7% of overall labor costs.
Chief Executive Officer Jeff Donnelly also discussed a five-year capital plan targeting annual CapEx of 7% to 9% of total revenues (about $80 million to $100 million per year), which he contrasted with a peer average of 10% to 11%. He said the approach is designed to support positioning while limiting earnings disruption to about $2 million to $4 million per year. Donnelly highlighted the Kimpton Palomar Phoenix renovation, noting the hotel was nine years old when its first renovation was completed in 2025; by the fourth quarter, management said EBITDA increased nearly 20% and RevPAR index improved by 15 points by December.
On transactions, management said the market is showing signs of improvement and that it is increasingly likely DiamondRock will be a net seller in 2026, though it emphasized it does not feel pressure to sell. In response to analyst questions, executives said their relative neutrality on acquisitions reflects a belief that share repurchases currently offer the best risk-adjusted opportunity, while noting recent offerings skew toward very large luxury assets that may not align with the company’s typical criteria.
Separately, the company announced that Chairman Bill McCarten will retire from the board in late April, and that director Bruce D. Wardinski has been selected as the next chairman.
About DiamondRock Hospitality (NYSE:DRH)
DiamondRock Hospitality Company is a real estate investment trust (REIT) that acquires, owns and manages a diversified portfolio of upscale, full-service hotels in urban gateway markets across the United States. Established in 2004 and headquartered in Bethesda, Maryland, the company focuses on investing in high-quality lodging properties that cater to both business and leisure travelers. Its assets are positioned in key metropolitan areas, enabling DiamondRock to benefit from strong demand drivers such as corporate travel, group conventions and resort leisure stays.
The company’s portfolio includes full-service hotels offering a broad range of amenities, including guest rooms, on-site food and beverage outlets, meeting and event space, fitness centers and spa services.
