Diamondrock Hospitality Co. (NYSE:DRH) Q3 2019 Earnings Conference Call - Final Transcript
Nov 08, 2019 • 11:00 am ET
Mark W. Brugger
into next year for many urban markets. But many destination resort markets will have very low or no supply.
DiamondRock's third quarter profits were modestly ahead of prior guidance. This positive result was made possible by the hard work of our asset managers and operators who delivered very solid performance in the face of a challenging operating environment. The portfolios relative performance was very good. We gained share at over two-thirds of our hotels and the portfolio reported a 1.6% increase in comparable RevPAR. This RevPAR growth exceeded our aggregate competitive set by over 400 basis points, even more impressively comparable total RevPAR increased a robust 3.1%. Thanks to excellent growth in outside the room spend by groups as well as the success with other revenue sources.
Third quarter adjusted FFO was $55.3 million, adjusted FFO per share was $0.27 and in line with our expectations. Third quarter adjusted EBITDA was $67.5 million, towards the high end of our guidance range. Comparable hotel adjusted EBITDA margins contracted 58 basis points in the quarter, but it is important to note that margins contracted only 15 basis points if we exclude the disruption from Hurricane Dorian and the one-time benefit from business interruption insurance proceeds recognized for Sonoma in the comparable quarter last year. This is a testament to the tight cost controls being implemented at our hotels. We are proud of this result.
In looking to how the main segments performed during the third quarter. We saw solid increases in group and business transient. Group and business transient demand increased 2% and a healthy 3.5% respectively, driving similar increases in segment revenues. Short-term pickup in the group was less than the first half of the year, but that was primarily because we had lots of groups already on the books as a result of strong group calendars in our markets, which left only the least desirable gaps to fill. We are happy to have sold more group room nights in the quarter than the comparable period. Nevertheless, we are watching our fourth quarter pace closely as there are less citywide events in our markets in that quarter.
Looking ahead, our booking pace for 2020 remains very strong and is currently up over 17%. We want to recognize the talented sales teams at our two most important group hotels, the Chicago Marriott and Boston Westin, where our pace for next year is collectively up 30%. As expected there was a small deceleration in our overall booking pace for 2020 from the end of the second quarter. The change primarily related to shifts at smaller hotels were frankly group is less important to their overall performance.
Our resort portfolio shined in the quarter. According to STR, destination resorts and spa hotels were the strongest performing segments in the third quarter with RevPAR up over 2% as compared to a 0.6% decline at urban hotels. For DiamondRock, our destination resorts outperformed even this positive trend in the quarter. Collectively, our resort portfolio generated 2.2%