Diamondrock Hospitality Co (DRH) 2005 Q4 法說會逐字稿

Welcome to DiamondRock Hospitality's fourth quarter conference call. The press release was distributed this morning as well as furnished on Form 8-K to provide access to the widest possible audience.

In the press release, the company has reconciled all non-GAAP financial measures for the most directly comparable GAAP measure in accordance with Reg G requirements. If you did not receive a copy, these documents are available on the company's website at www.drhc.com in the investor relations section.

Additionally we are hosting a live webcast of today's call which you can access in the same section. At this time, management would like me to inform you that certain statements made during this conference call which are not historical may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although DiamondRock Hospitality believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors and risks that could cause actual results to differ materially from those expressed or implied by forward-looking statements are detailed from time to time in the company's filings with the SEC. The company does not undertake a duty to update any forward-looking statements.

I'd now like to welcome management. With us today are Bill McCarten, Chief Executive Officer, John Williams, Chief Operating Officer and Mark Brugger, Chief Financial Officer.

At this time I would like to turn the call over to Bill McCarten for his opening remarks.

Thank you, Megan. Good afternoon everyone and welcome to DiamondRock Hospitality's fourth quarter 2005 earnings conference call. 2005 was a terrific year for the lodging industry and for DiamondRock. And we expect that 2006 will be another excellent year. The industry is clearly in full recovery and demand and supply fundamentals continue to be strong.

In fact, the industry recovery was stronger in 2005 than many of us anticipated at the beginning of the year. The industry should enjoy particularly strong pricing power in 2006 and all of the industry signals suggest strong industry performance for at least the next several years. The REIT index continued to significantly outperform the broader market indices with a total return of 12% last year and about 10% so far this year. Public to private transactions have put a floor on the value of public REITs and are creating positive funds flows as the cash is recycled back into the REIT sector.

For DiamondRock, 2005 was a milestone year. We successfully completed our initial public offering in June and are pleased with how our stock has traded since the offering. Since the IPO our annualized total return to our shareholders is over 37%. Together with our 2004 private offering we have raised nearly $500 million of equity, creating about a billion dollars of investment capacity in the first 12 months of our existence. We have put that capital to work quickly and productively, creating a portfolio of 15 high-quality hotels. Our 2006 property level EBITDA multiple should be about 9 times based on our average total investment in 2006 in those properties.

Our financial results in the 2005 fourth quarter and for the full year were outstanding. Fourth RevPAR was up 13.1% and hotel EBITDA profit margins increased 269 basis points. Our full year results exceeded prior guidance on all measures. We expect another outstanding year in 2006 with excellent RevPAR and margin growth.

Mark Brugger will now review our 2005 fourth quarter and full year financial performance, discuss our increased dividend and provide guidance for 2006.

Thank you, Bill. As Bill touched on, DiamondRock had an outstanding fourth quarter and full year 2005. The results exceeded our previous guidance on all measures. Let me start by reviewing some of our financial highlights. For the fourth quarter, the company reported total revenue of $104 million and adjusted FFO of $15 million. Full year revenue was $230 million and Adjusted FFO of $31 million, above the high end of our previous guidance despite a $400,000 lower than anticipated tax benefit in the fourth quarter. RevPAR for the 12 hotels covered in our previous guidance increased 13.1%in the fourth quarter. For the full year driven mostly by higher averaged [inaudible] rate RevPAR for 12 hotels increased 11.2%, significantly above our prior guidance of 9 to 10%.

To avoid any confusion, while we discuss the 12 hotels we are discussing all of our hotels except our 3 most recent acquisitions -- Oak Brook Hills Marriott Resort, the Orlando Airport Marriott and the newly built Springhill Suites Buckhead. We excluded these hotels from our performance discussion to enable our investors to compare our performance on a same-store basis with the guidance we provided at the end of the third quarter. Additionally, to provide our investors with meaningful comparison, the discussion of RevPAR and hotel-adjusted EBITDA margins are done on a pro forma basis -- in other words, assuming that the acquired hotels were owned by the company for the entire reporting period of 2005 and the similar periods of the prior year, 2004.

Furthermore, in order to present a more accurate picture of our results, we adjust EBITDA for two items -- one, we adjust for the non-cash portion of ground run expense in all periods and two, we adjust for the one time share grants to management and directors resulting from our IPO in the second quarter.

For our fiscal fourth quarter, adjusted EBITDA was $22 million. For the full year, adjusted EBITDA was $47 million, $1 million above our prior guidance. Hotel adjusted EBITDA margins increased a strong 269 basis points in the fourth quarter. For the full year, hotel adjusted EBITDA Margins for the 12 hotels increased 233 basis points, again, above our guidance of 210 to 230 basis points. This strong margin expansion is driven in large part by RevPAR growth being derived mostly from increased room rates which has little incremental cost associated with it. Now we also wanted to touch on our strong balance sheet and conservative capital structure.

As of year end 2005, the company had total assets of $966 million including $23 million of restricted cash dedicated to future capital improvements at the hotels. Total debt was only $431 million. Over 90% of the debt is property specific, fixed-rate debt.

Overall, our debt has an average interest rate of 5.6% and an average maturity of 8.3 years. Looking at recent events, we are refinancing our Fifth Avenue Courtyard. We have received a commitment letter from Lehman Brothers to refinance the $23 million mortgage loan on the Fifth Avenue Courtyard with a $51 million, 10-year, fixed rate loan. These loan proceeds will be $9 million more than our total investment in this hotel of $42 million. Note that we acquired the hotel less than 16 months ago. We think that this is an excellent example of how we -- how targeting the right markets and smart asset management -- i.e., rebranding the hotel -- can create significant value for our shareholders.

Turning to dividends, during the fourth quarter, the company declared a dividend of $0.1725 per share, which was paid in January 2006. The board of directors has recently approved an increase in the quarterly dividend to $0.18 per share. The annualized dividend of $0.72 per share is very well covered and has a conservative payout ratio. The dividend ought to represent a very competitive yield of 5.6% based on our stock price. The level of future dividends will be determined by a number of factors including our operating results, expected capital expenditure requirements and the expected value of alternative uses of our capital. However we generally intend to regularly increase our dividend.

Getting to our outlook. Overall, the outlook for the company's operating results are excellent. For the full year 2006 the Company is providing the following guidance. RevPAR to expected to increase between 8 and 10%, up a full percentage point from our previous guidance. Hotel adjusted EBITDA margins to expected to increase approximately 160 to 210 basis points. We expect adjusted EBITDA of $92 million to $96 million. Adjusted FFO is expected to be $64.4 to $68.4 million. Although we are not providing quarterly guidance, the distribution of our 2006 adjusted FFO should fall roughly as follows -- 16 to 18% in the first quarter, 30 to 32% in the second quarter, 19 to 21% in the third quarter and 31 to 33% in the fourth quarter. The seasonality of the company's results is partially impacted by our reporting calendar which is described in detail in our press release. For example the results for the month of March at Vail and Frenchman's are reported in our second, not first quarter. Lastly, in 2006, total capital expenditures will approximate $84 million including $20 million of carryover from 2005 projects.

Overall, management believes that 2006 will be an outstanding year and that is reflected in our guidance.

With that I would like to turn it back over to John Williams -- back to John Williams -- our Chief Operating Officer.

John?

Thanks, Mark. As you've heard, our fourth quarter performance was very strong. I will just spend a couple minutes on some of the highlights, then talk briefly about our CapEx plans, spend a minute on labor and energy costs and close with a few facts about the recent Orlando acquisition. In 2005, the Manhattan lodging growth accelerated. Fourth quarter RevPAR and margin growth for our two Manhattan Courtyard properties increased an impressive 25.5% and 990 basis points respectively, benefitting from the very strong market fundamentals as well as the Fifth Avenue Courtyard renovation which was completed on time and on budget in the beginning of the fourth quarter. We expect continued strength in 2006 although there will be some disruption at the Third Avenue Courtyard during its first quarter renovation.

Our two Renaisssance hotels also turned in very strong performances with a RevPAR increase of 18.7% and margin expansion of 420 basis points. A number of our Marriott hotels, including Frenchman's Reef, Salt Lake City, Alpharetta and Bethesda Suites also turned in strong revenue and margin growth in the quarter. Torrance was negatively impacted by the rooms renovation in the fourth quarter and will continue to experience some disruption in 2006 with continued renovation activities. However, we're quite pleased with the meeting and banquet space and rooms renovation completed in January on time and under budget and are optimistic that this hotel will be successfully repositioned once comprehensive lobby renovation and conversion of a lounge to meeting space is completed this year.

The LAX Marriott struggled somewhat in the quarter because it underestimated the impact of the Renaissance hotel coming back onstream after being out of service for much of 2004. The hotel still achieved its best ever EBITDA in 2005.

We completed a restaurant conversion to a junior ballroom as well as renovation of the ballrooms and pre-function space in the fourth quarter and will accelerate the planned 2007 rooms renovation to Q2 and Q3 of 2006. Despite disruption from the rooms renovation we expect LAX to contribute significantly to our overall EBITA growth in 2006. And LAX is off to a very good start to the year. Both Torrance and LAX have lagged the Los Angeles market recovery thus far. With our new and renovated meeting and banquet space at both hotels we've raised group target room levels to offset the slower recovery of transient business.

Finally, the Oak Brook Hills resort and the Orlando Airport Hotel will contribute significantly to our 2006 results as Mariott management and marketing programs are fully implemented. Overall food and beverage reversed its negative trend with solid performance in the quarter. Fourth quarter food and beverage sales at the 11 hotels where we have comparable data were up nearly 6% led by catering sales at 8%, compared to flat sales in quarter three of 2005. 2006 food and beverage sales for the entire portfolio are budgeted to increase 11.3% -- again, led by high margin catering sales.

Energy costs increased 20% in 2005 with a 50-basis point impact on margin. In Q4 energy expense was up 32.6%, 22% excluding Worthington which was impacted by the expiration of a forward contract. We expect a 12% increase in 2006. We continue to work with our hotels to evaluate various energy management programs and these costs fortunately only represent 4% of revenue and will be more than offset by strong increases in demand. We also expect a meaningful increase in property insurance in 2006. The insurance increase will become clear after completion of renewal negotiations around April 1st. We have a budgeted 17% increase in 2006.

Wages and benefits increased only 3.4% for the full year as a result of continued labor productivity efforts. Sales per man hour were up again in 2005 and man hours per occupied room were down again in 2005. Both are good indicators of productivity. We expect wages and benefits to increase between 3 and 4% in 2006. While the labor union issue is concerning, we're well insulated since only one of our hotels -- the Fifth Avenue Courtyard -- is unionized. And it only has about 70 employees.

As Bill mentioned we're undertaking a number of renovation projects in 2006. We've budgeted aggregate capital expenditures of $84 million. About $26 million will be funded from existing escrow funds, leaving 58 million of owner funding. Our capital budget is higher than our previous estimates primarily because of timing changes including $20 million of carryover from 2005 and the acceleration of renovation projects at LAX and Oak Brook Hills. Additionally, we'll invest more in our profitable Frenchman's Reef resort including two high-return ROI projects. Our 2006 capital expenditure projects were described in our press release, so I won't discuss them in detail now. But we're confident that they'll contribute to future profit growth. Moreover with the exception of Torrance and Frenchman's Reef the vast majority of our projects involve rooms and public space renovations and very little construction. So we're comfortable with our cost and disruption estimates. Thus far, each of the projects completed or nearly completed are on or under budget and on time. Our estimate of renovation disruption has also been quite accurate thus far. We've included about $3 million in our 2006 EBITDA budget for estimated disruption across the portfolio. And we will continue to put extraordinary emphasis on our renovation efforts.

With respect to our pipeline we continue to look at many opportunities but plan to stay very disciplined given the aggressive pricing in the market today. The five assets purchased shortly after our IPO were off-market transactions created by our industry relationships. In fact, of our 15 transactions, 10 of them were off-market. Of the remaining five, we were able to create distinct advantages over our competition and four of them by virtue of our Marriott relationship. Our quarterly pace of acquisition since inception has been approximately $150 million. We're working on an off-market property acquisition which we're very excited about. We're not prepared to provide any more details at this time but we expect to announce the transaction by next Wednesday. The guidance Mark provided earlier does not reflect the benefit of this acquisition.

I'll finish up with some further description of our most recent acquisition, the Orlando Airport Marriott, acquired in December. When we acquired the Orlando Airport Marriott, we budgeted $11.5 million in capital improvements, mainly related to rooms, corridors and bathroom renovations but also including a very high ROI conversion of a closed action lounge to meeting space. Design plans are progressing and we expect to bid the work this summer. Furthermore as we worked with Marriott to convert the property to Marriott Management, we developed a unique organization structure and the property is operating with only 22 managers. That's a 30 to 50% reduction from normal management staffing levels. The property exceeded budget which is also our acquisition pro forma in both RevPAR and EBITDA in period one. So in summary, the portfolio we've assembled at attractive prices and the strategic capital we continue to invest in the portfolio make us very confident about the prospects for continued growth and financial success for DiamondRock and our investors in 2006 and beyond.

With that I'll turn things back over to our Chairman.

Thanks, John. It's been a great year for DiamondRock. The lodging recovery remains very strong and our portfolio is performing well. With a strong industry fundamentals, our portfolio quality and our acquisition track record, we are very confident that our portfolio will deliver solid returns and that we will be able to continue growing at an impressive rate.

We'd now like to open it up to your questions.

[OPERATOR INSTRUCTIONS].

And your first question will come from the line of Jeff Donnelly with Wachovia Securities.

Good afternoon, guys.

Hey, Jeff.

I'm curious that you mentioned that you were working on an off-market deal. I apologize if I missed one of the details but I guess anything you can share with us, though? Maybe just the size of the transaction or how you're looking at pricing right there?

You know, our policy, Jeff, is really not to do that until we really have something that we're in a position to announce. But -- and we're really not prepared to make a formal announcement right now or to discuss the details. But again, we feel very confident that we'll be announcing something early next week.

I guess -- or just sticking with that, though, if I could. You know, as you just look generally then, I guess to call it, the acquisition market. You know clearly prices have been rising -- I think just in part because of the EBITDA push which we've seen in the last year or two but can you talk a little bit about multiples on acquisitions -- you know, from '05 and what you're looking at for '06. Have you seen much movement there?

Well, there's been a lot of money chasing deals in this segment, so I don't know that there's been a great change but in the markets we'd love to be in, I think things have gotten much more expensive. At least a little more expensive but we try and target -- depending upon the type of asset of 11, 12 times -- multiple.

'06

'06 -- sorry.

OK. On '06 numbers. And then on your New York assets, I think part of the strategy there if I'm not mistaken was in repositioning some of the Courtyard property and maybe closing the gap in rate and occupancy between those Courtyard properties. Where is that gap today and do you think there's more room to go -- is it on pace with what you guys are expecting?

I think at most it's about $20 gap in RevPAR and we can check that quickly. And that's 5A -- slightly lower than -- is lower than Third Avenue. And I think there are opportunities.

Yes, Jeff, in '04 we moved Fifth Avenue by the conversion by about $50 to 1 -- almost 180. Courtyard Midtown East finished the year about 202.50. So the gap is still -- as Bill says, about $20. That gap should close in '06 to virtually 0.

OK. And you think there's growth still though, at 5A?

Well, I think there's dramatic growth at 5A. Remember we just finished the rooms renovation in the beginning of the fourth quarter and they were way over 05's budget in that fourth quarter.

All right. And just two last questions. Actually -- it's something I actually addressed with you guys a few weeks back when we saw each other in Los Angeles but I was commenting on the excess land that's sort of at that Los Angeles Airport location. I guess being used as a parking lot. I mean, do you think there's a chance that that land could be converted to another use, maybe even another hotel -- limited service hotel site? Because there seems to be quite a bit of acreage there.

Yes, I think it's about 3 acres. It has been studied over and over again and recently the market dynamics have been that it's actually worth more as a parking lot than it is as a limited service hotel. Now as the results at LAX improve -- as they inevitably will, those economics will change but at the moment it doesn't make sense to build any of the use that anyone's identified. Office space, certainly not. Limited service hotel -- the hotels are still trading at a significant discount to replacement cost. So at this point it's more valuable as a parking lot.

OK. And then just the last question is, what should we expect for GNA in 2006? What kind of a --

Jeff, probably 11.5 would be a good estimate. 11.5 million.

OK. Thank you guys.

Sure.

Your next question comes from the line of Will Marks of JMP Securities.

Great. Thanks. Hi everyone.

Hi, Will.

Just a few quick questions on the rooms out of service. Can you give us a sense of what we should be assuming this year on a quarterly basis as a pretty general question but --

Are you talking about disruption or are you talking about --

Yes. Well, no. I'm sorry, I was talking about actually out of service.

So the impact on RevPAR?

Yes.

OK.

Maybe as you're looking for that, I noticed that Smith Travel last week in New York was off by 14.5% and I know that was a big few week vacation week but any comment on that? I still couldn't figure out why it was off by so much.

Last week's numbers?

Yes.

Yes, I -- I frankly haven't looked closely at our last week's numbers yet.

Yes, we just had our flash report for the -- for period two which was up. But I didn't focus on last week particularly. We were getting ready for this call.

Sure, I understand.

The change in the adjusted versus unadjusted RevPAR is about 80 basis points in '06 over '05.

Right. The adjusts for the rooms in '06 usually is about 80 basis points.

OK. And how are you going to do the LA property -- in terms of how much you're going to take off at a time? How much -- how many rooms will you be renovating at a time?

It's about six months total elapsed time and they go three floors -- two floors to work on and one floor to buffer. So I forget the room count exactly per floor there. I think it's about -- it's probably about 60 rooms out of order for each of the weeks.

OK. OK. And then just one last question on just capacity. It looks like on the $75 million limit, you kind of have $12 million outstanding, $1 million reserved. Is that -- I mean you're going to be spending 80 million on this -- on the renovation. Do you plan to increase the size of the facility as you know you are able to do?

Well, we're going to get 19 million more in proceeds from refinancing the Fifth Avenue that could be applied towards that. We also have current cash flow obviously coming from our hotels that can be applied towards that as well. Currently we're not looking at expanding although we may this year.

We're really not forecasting that significant a net increase in the use of the line in '06, probably 14 or 15 million.

Now -- well out of the 84 million, remember we have 23 million not all of which is going to be applied but in restrict cash in our balance sheet today we also have significant contributions coming in from the FF and the escrows at the properties during the year that can be applied towards it as well. So with that -- with the current cash flow and with the refinancing of Fifth Avenue we should have plenty of cash to take care those projects.

OK. And -- what I'm kind of getting at is the need for equity and it's -- I assume it's not in your guidance but would you -- can you comment at all -- would you expect to issue equity in the next 12 months?

I think what we said during our last call -- and I think it's still valid, as we identify appropriate acquisitions I think it will be -- make sense for us for us to go back into the capital markets so we're continually looking at doing that as we work through our pipeline and as we watch the capital markets.

Thanks. That's great. Thank you, Bill, John, Mark.

Thanks, Will.

Your next question comes from the line of Justin Maurer with Lord Abbett.

Afternoon guys.

Hi, Justin.

Just a quick follow up, Mark -- I think I just want to verify -- or John, on the insurance costs and the -- I think you mentioned the EBITDA disruption in your prepared comments?

Right.

Yes.

Could you give me both those numbers again, sorry.

EBITDA we -- for our '06 EBITDA budget we have budgeted $3 million in disruption across the portfolio.

OK. And that's just a rooms assumption or is that some kind of assumption you're making on common area disruption as well?

Yes, it's rooms out of order. It's also in the case of Worthington and Torrance, it's some public space disruption. Frenchman's Reef has a ballroom re-do.

Yes.

The rest are rooms.

All right. And while you're on that note, you mentioned the 80 basis points to RevPAR. Is that -- that's not the consolidated RevPAR, is it? That's just on the specific --

Yes, Jeff. No, that's for the consolidated RevPAR for the company.

Oh, it is. OK. All right. All right. And then insurance --

[inaudible] cost?

Yes.

It was insurance [inaudible] insurance.

Insurance we're budgeting 17% for property insurance now. Accident insurance liability is actually going down. But the property tax estimate is currently 17%. We won't know for sure until the renegotiation takes place in April.

Yes. How much of that's influenced by Frenchman's versus the others would you say?

Quite a bit.

Yes, Frenchman's and the California properties tend to be higher. You see great variability in property taxes by property.

Yes.

I mean, Justin, we have the benefit though that most of our hotels are in the Marriott system so they all get the benefit of being one big pool.

Yes.

You know, for instance in L.A., even though you have earthquakes, it's how many earthquake hotels do they have in their system. And when you got billions of billions of dollars of assets obviously they get better pricing.

Yes. But you guys have to apply those to the geographies in which they reside, though, right? Or not?

Yes, they get allocated out.

Yes.

But then we get much better pricing being in that program than if we had to bid out for instance, Reef by itself or --

All right. OK. All right. And just relative to the strength in the fourth quarter almost across the board -- I mean, with a couple exceptions there was a meaningful acceleration RevPAR and margins. I mean how much of that's just seasonality versus what you guys think is sustainable? I mean obviously some of the craziness -- the numbers aren't sustainable but is there anything more specific as to whether industrywise or blocking and tackling you guys feel like you're doing better than most that's allowing you to capture more than your fair share of that?

Well, Justin, I think a lot depends on the portfolio, obviously. So we'll take full credit for that. The Courtyard Fifth Avenue -- remember the rooms were redone and that was a dramatic difference. That was a 47% quarterly increase in RevPAR. Now offsetting that was Torrance, which had several -- had rooms out of service. So to some extent we were getting the benefit of our renovation but that was somewhat offset. I would have to say really it was market by market and the results were just very, very good in our markets.

Yes. OK. All right, guys. Thanks -- good luck this year.

Thanks, Jeff.

Sure.

[OPERATOR INSTRUCTIONS].

And you have a question coming from the line of David Loeb with Baird.

Hi. Just to circle back on Will's question. How much are you willing to push the balance sheet? How far in terms of debt to cost are you willing to push the balance sheet before you feel like you have to go back and get more equity or stop making acquisitions?

Our policy is right around 50 -- 55%. And that's something that we would seek over the long term. Right now we're very underlevered. Not -- underlevered may be the wrong word. We're about 41%. You know, so I think we're always going to seek to be in that 50 -- 55% range. Now if there's an opportunity that comes along would we temporarily take it up? Certainly. And I could see us going into the low to mid 60s.

So --

But it would be temporary.

Save me the trouble of doing the math, and tell me, John, how big is your wallet for acquisitions today? Would you say without --

Right now if you were to assume -- this is Bill. If you were to assume a 55% leverage we probably have 100 million plus of capacity.

OK. So would you consider going back to the equity market before you spend that 100 million or do you think you'll wait until after you have that in place or under contract?

No, I would hate to just sort of conjecture on a circumstance that isn't specific so it would depend on the situation.

Yes, David, it depends on -- yes, sometimes you need to move quickly on these acquisitions to get a good deal. Depends on the size of the particular acquisition -- depends if we like the stock price -- you know, where we're trading now -- depends how active the capital markets go. It's something we're always evaluating. There's no set formula for us.

OK.

And David, this is John. I'll tell you that we sort of got our fill of being a blind pool back at the 144A days. And so we are not going to get significant capital available without acquisitions I somewhat identified -- the level of identification I guess is the question.

I remember that well. So I understand that. And John, while I got you on here. The Courtyard Third Avenue had tremendous results. I mean, the -- 16% RevPAR is great. But what kinds of RevPAR growth do you think are possible there post-renovation given the challenging comparisons?

Well, the -- our budgeted increase is very conservative including rooms out of order. So including the renovation impact which I believe is about $500,000 EBITDA. We were projecting I think about a 12% increase this year, year over year. Yes, 11.2 -- to a $225 RevPAR. I -- we obviously hope that that's conservative. New York still appears to have a lot of room to run -- it's had a good first quarter. Particularly at Fifth Avenue thus far. So there may be upside there.

OK. And you think that as Fifth Avenue stabilizes that those two hotels will grow in tandem?

Well, we're saying that they're going to converge. You know, I won't speculate on location of Fifth versus Third but Third -- but Fifth being a smaller hotel, and I misspoke earlier by the way. There's still going to be around a $10 or $11 difference on budgeted '06 RevPAR between the two. So Fifth Avenue will still be on budget, $11 under Third Avenue. Being a smaller hotel, probably Third Avenue has some advantages locationally. Fifth Avenue has some maybe leisure advantages. So I won't speculate on where they'll wind up. But we think they should be pretty close.

OK. Great. Thanks very much. Thanks for the detail.

And your next question is a follow up coming from the line of Jeff Donnelly with Wachovia Securities.

Hey guys, actually just one or two questions. One more housekeeping -- I think your RevPAR outlook for 2006 is for the 15 hotels, can you tell us what the absolute occupancy ADR and RevPAR was for those same 15 in 2005?

Let's see, we typically haven't thought about disclosing those details but we think about the demand being roughly 4 and supply growing roughly 1.5 and probably get to an occupancy number there pretty close.

The consolidated -- well, for the 15 hotels is about $113 RevPAR in '06 over 103 in '05. And as Bill says, the bulk of that is in ADR.

OK. And then just a question -- again, sort of acquisitions [inaudible] are they -- what level of interest do you guys have in acquiring assets maybe located outside the U.S. or are there better deals to be had there? And I guess how do you weigh that versus the call to complexity of assets outside the U.S. -- particularly for a company your size?

You know, as you point out for a company our size we're satisfied to stay in North America. We've looked in Canada. We've looked in Mexico. We've not looked in Europe or Asia. I think at this point in our evolution we'll stay in North America. Yields traditionally, as you know, in Europe are lower and Asia's definitely a growth market so presumably its yields at the beginning would be lower. So we're focused on North America at this point.

OK. Thanks guys.

[OPERATOR INSTRUCTIONS].

And you have a follow up question from the line of Justin Maurer with Lord Abbett.

Hey guys, just on the Vail property -- is that -- do you guys touch that during season or is that just offseason?

Did we -- I'm sorry.

When do we do renovations.

Yes.

Oh. Oh, yes. That's always in offseason.

Offseason. OK. So the numbers though -- what do you -- just in the 8-K, what do you guys feel like the impact is even during season even without the direct disruption if you will? If that makes sense?

We -- well, we're not budgeting any disruption in Vail at this point because we can do the -- we're only doing the ballrooms. Everything else is done. The spa and the meeting rooms were finished this summer.

Yes.

So we're not -- we have downtime in November -- late October, November when we're -- and early December when we're doing the ballroom.

OK.

And then the second ballroom will be done in the spring next year when there also is no impact.

OK. So my -- what am I missing though relative to RevPAR up 9, but EBITDA down the magnitude that it was?

This year?

Yes.

In '05

In '05, I mean.

For the fourth quarter.

Well, what you're looking at is -- I believe what you're looking at is period of ownership.

Yes.

Yes, that -- you know, remember, 90% of the property NOI comes in January through March.

OK. OK.

And it -- on top of that we had construction disruption this summer for -- this past summer excuse me, from in L.A. from the work we were doing in the hotel.

Right.

And also from the overall Lions Head work which is pretty dramatically under construction.

Yes. OK. All right. Thanks.

We'll probably feel that again this year.

Yes. Thanks.

And with no further questions I will turn the call back over to management for closing remarks.

Great. Thanks, Megan. Well, thanks again to all of you for your continued interest in DiamondRock. We're committed to consistent and open communications with all of our stakeholders and we look forward to talking with you again on our first quarter conference call.

Ladies and gentlemen we thank you for your participation in today's conference. This concludes the presentation and you may now disconnect. Have a great day.