DiamondRock Hospitality (NYSE: DRH) Expands with $30M AC Hotel Acquisition in Minneapolis

DiamondRock Hospitality Expands Portfolio with Strategic Acquisition in Minneapolis

On November 15, 2024, DiamondRock Hospitality Company (NYSE: DRH) announces its acquisition of the AC Hotel Minneapolis Downtown, a 245-room property, for $30 million. This acquisition, which equates to approximately $122,000 per key, is fully funded with cash reserves. The hotel, opened in 2016, is ideally situated in downtown Minneapolis, an area known for its concentration of Fortune 1000 companies and its burgeoning biotechnology and medical innovation sectors. Jeffrey Donnelly, CEO of DiamondRock, underscores the strategic importance of this investment, highlighting it as an opportunity to acquire a modern urban hotel with robust cash flow potential in a market that is beginning to recover. This acquisition aligns with DiamondRock's broader strategy of reallocating capital into properties that are available at significant discounts compared to their replacement costs.

The financial metrics of the deal reveal an 8.2% capitalization rate based on the projected net operating income for 2024, a positive indicator for the future profitability of the property. With this acquisition, DiamondRock expands its portfolio to 37 hotels, reinforcing its position in the hospitality market. While the acquisition is not reflected in the company’s updated guidance for the full year of 2024, it is expected to have a favorable impact on revenue per available room (RevPAR). Specifically, the addition is projected to contribute approximately 20 basis points to the company's comparable full-year RevPAR growth and 10 basis points to Total RevPAR growth, signaling a beneficial enhancement to DiamondRock's earnings potential.

DiamondRock Hospitality operates as a self-advised real estate investment trust (REIT) and boasts a diverse portfolio of hotels across prominent leisure destinations and gateway markets, aggregating over 10,000 rooms. The company has successfully positioned its assets under both major global brands as well as independent boutique hotels within the lifestyle segment, allowing it to cater to a wide array of travelers. The acquisition of the AC Hotel Minneapolis Downtown not only enhances its portfolio but also aligns with the company’s strategic vision of capitalizing on high-potential urban settings that can drive long-term growth.

In related news, the hospitality sector shows signs of recovery as travel demand continues to rebound following recent global challenges. Hotel acquisitions like DiamondRock's reflect a confidence in the market's trajectory and the potential for profitability in urban hospitality. The company's strategic focus on quality properties in key locations positions it well for future growth as it navigates the evolving landscape of the hospitality industry. For more information, visit DiamondRock’s website at www.drhc.com.