EX-99.1 2 d595312dex991.htm EXHIBIT 99.1

Investor Day Presentation September 2013 Exhibit 99.1

2 Safe Harbor Certain statements made during this presentation are forward-looking statements that are subject to risks and uncertainties. Forward-looking statements generally include the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “project,” “will,” “intend” or other similar expressions. Forward-looking statements include, without limitation, statements regarding, industry outlook, results of operations, cash flows, business strategies, growth and value opportunities, capital and other expenditures, financing plans, expense reduction initiatives and projected dispositions. Factors that could cause actual results to materially differ from those contained in the forward-looking statements include, without limitation, those risks and uncertainties discussed in the Company’s most recent Annual Report on Form 10-K, quarterly report on Form 10-Q and current reports on Form 8-K, which have been filed with the Securities and Exchange Commission, all of which you should carefully review. The forward-looking statements made are based on our beliefs, assumptions and expectations of future performance, taking into account all information currently available to us. Actual results could differ materially from the forward-looking statements made during this presentation. The forward-looking statements made during this presentation are subject to the safe harbor of the Private Securities Litigation Reform Act of 1995. Any forward-looking statement speaks only as of the date on which it is made. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. All information in this presentation is as of the date of this presentation, and the Company undertakes no obligation to update any forward- looking statement to conform the statement to actual results or changes in the Company's expectations. This presentation contains statistics and other data that has been obtained or compiled from information made available by third-party service providers.

3 Presentation Overview Company Overview….……………………………………………………………….. 4 Industry Outlook………………………………….…………………………………… 9 Investment Strategy....….……………………………………………………………. 12 Growth Catalysts…………...…………....………….……………………………….. 20 Asset Management ……………………………….…………………………………. 38 Optimal Capital Structure..……………………….………………………………….. 50 Key Takeaways……………....…………………….………..................................... 57

COMPANY OVERVIEW

5 DiamondRock at a Glance MARKET BREAKDOWN KEY STATISTICS at Sept. 3, 2013 Hotels 27 Rooms 11,600 Enterprise Value $2.9B Enterprise Value / Key $250,000 Net Debt/EBITDA 4.9x Positioned in Top US Markets 1 86% Urban and Destination Resorts 2 Geographically Diversified Portfolio 3 Values in % of EBITDA 5 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

6 6 Company Vision & DiamondRock 2.0 • Disciplined capital allocation • Premium portfolio of hotels • Optimal capital structure Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways • Better, higher quality hotels • Greater diversity of hotel brands and managers • Intensive asset management of the portfolio • Best-in-class capital structure COMPANY VISION DIAMONDROCK 2.0

7 7 DiamondRock Strategy – Three Pillars Portfolio Investment Buy opportunistically early in the cycle Focus on top gateway markets and destination resorts Diversify brand and management companies Focus on assets with value- add opportunities Recycle capital from non-core asset sales Capital Management Maintain low leverage Simple, conservative capital structure Lower risk with non-recourse debt Maintain consistent, sustainable dividend Asset Management Promote accountability Capitalize on deep industry experience and relationships Disciplined approach to capital expenditures Mining value from portfolio Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

8 8 A Compelling Investment Opportunity Portfolio Positioned to Outperform • Urban and resort focused • Concentrated in higher-growth gateway markets • Group recovery mid-cycle driving strong 2014 booking pace Substantial Upside from 2013 Investments • $140M capital expenditure program • Renovations and ROI projects nearing completion • Market share/EBITDA gains post-renovation Best-In-Class Capital Structure With Well Covered Dividend • Net Debt/EBITDA among lowest in peer group² • 13 unencumbered hotels with $85 million 2013F EBITDA • Ample liquidity with undrawn revolver Favorable Industry Supply/Demand Forecast¹ • Supply growth: 25% below historical average • Demand growth: 40% above historical average • RevPAR growth: 6.8%, 2X+ historical average Enhanced Asset Management Focus to Drive Internal Margins • New COO with deep experience • New revenue and cost containment strategies implemented • ROI opportunities developed Attractive Valuation With Above Average Growth Potential (1) Source: PKF Hotel Horizons June to August 2013; US Upper Upscale CAGR 2013-2016 (2) Source: Citi Investment Research Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways I II III IV V VI • 2014 growth projected above average • 25% discount to replacement cost • Discount to NAV

INDUSTRY OUTLOOK

10 10 Lodging Cycle – Many Years Left To Go Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways • Supply growth 25% below historic average • Demand growth 40% above historic average • RevPAR increase at a CAGR of 6.8% Forecast through 2016 of: HISTORICAL AND FORECAST REVPAR, SUPPLY AND DEMAND Source: Smith Travel Research, PKF Hotel Horizons June to August 2013

11 11 Portfolio Focused on Markets with Above Average RevPAR Growth Potential Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways PKF FORECASTED REVPAR CAGR 2013-2016 (1) (1) Chart excludes Destination Resorts and Other components of DRH portfolio. Source: PKF Hotel Horizons June to August 2013. (2) Represents 2014 growth rate of 13.3%, adjusted for renovation disruption, and PKF projections for 2015 and 2016 Completion of renovations should drive outperformance

INVESTMENT STRATEGY

13 13 Premier Portfolio With Urban and Resort Concentration Hilton Burlington Hilton Boston Boston Westin Westin Washington DC Worthington Renaissance Courtyard Midtown NYC Courtyard 5 th Ave NYC Hilton Garden Inn Chelsea NYC Hilton Garden Inn 42 nd Street NYC Lexington Hotel NYC Westin San Diego Hotel Rex San Francisco Torrance Marriott Los Angeles Airport Marriott Courtyard Denver JW Marriott Denver Salt Lake City Marriott Hilton Minneapolis Conrad Chicago Chicago Marriott Charleston Renaissance Sonoma Renaissance Resort and Spa Vail Marriott Mountain Resort Frenchman’s Reef Marriott Resort and Spa

14 14 Investment Strategy FIVE PRINCIPLES I. Buy early cycle II. Target top markets based on extensive research III. Diversify brand and management IV. Focus on value-add opportunities • Rebranding • Repositioning • Undermanaged properties V. Recycle capital from non-core assets Lexington Hotel NYC Westin Boston Waterfront Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

Significant Value Created by Early Cycle Acquisitions 21% -4% -15% -31% 17% 20% 20% 12% 15% 9% -40% -30% -20% -10% 0% 10% 20% 30% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. ANNUAL GROWTH IN VALUE PER ROOM Significant early cycle value appreciation • Price per key increased 68% from 2010 to 2012 Value creation opportunity remains • Forecasted price per key to increase 40% from 2013 to 2015 Courtyard Denver Charleston Renaissance Source: HVS Hotel Valuation Index 15 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

16 16 Increased Exposure to Urban Hotels Acquired 3,900 urban and destination resort rooms since 2010 Disposed of 1,800 non-core rooms in 2012 Increased growth potential based on historical trends Urban markets historically outperform CURRENT PORTFOLIO (BY EBITDA) HISTORICAL 100BPS REVPAR CAGR PREMIUM FOR URBAN vs U.S. Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Source: Smith Travel Research

17 Increased Third Party Managers And Brand Diversification Goal of 50/50 brand/third-party managers Adoption of best practices, improving overall portfolio profitability Increased third party management by 30 percentage points¹ Reduced concentration in Marriott brand family by 19 percentage points¹ 17 CURRENT PORTFOLIO (BY EBITDA) Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways (1) By EBITDA.

18 18 Dispositions – Successfully Recycling Capital Intend to sell 3 non-core hotels over the next 36 months to take advantage of favorable transactions market, promote growth, and recycle capital Griffin Gate Waverly Westin Atlanta North Austin STRATEGIC DISPOSITIONS ($40) (13%) (58%) 2% 14.4x 1 RevPAR vs. Portfolio RevPAR Profit Per Key vs. Portfolio TTM Multiple with Capital Market Lexington, KY Suburban Atlanta, GA Suburban Atlanta, GA Suburban Austin, TX 14.4x 1 22.8x 14.4x 1 ($35) ($44) ($33) (9%) (1) Portfolio sale. Multiple represents transaction average. Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

19 19 Portfolio Transformation BETTER MARKETS, HIGHER QUALITY (1) Represents 2011 data for comparability purposes. Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

GROWTH CATALYSTS

21 Multiple Growth Catalysts Lead to Outperformance in 2014 2014 GROWTH CATALYSTS Renovations HGI Times Square Urban Portfolio Group Business 2013 Disruption of $12M - $15M EBITDA Addition of $5M EBITDA $2M - $4M EBITDA Growth +10.3% Group Revenues The Lexington Autograph Conversion, Courtyard Fifth Avenue & Courtyard Midtown East Expected mid-year opening Premier location will drive demand and ADR Value add renovations drive market share Strong portfolio-wide group booking trends led by Boston Westin and Frenchman’s Reef Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

22 NYC Is The Leading Lodging Market In The US 3.88% 2.80% 2.68% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% NYC Avg. of Top 25 Total US 40% HIGHER HISTORICAL REVPAR GROWTH Source: STR. Long run average reflects 1987 to 2012.. Since 2009: • Demand increase: Over 7M room nights • Supply increase: 6M available room nights • RevPAR increase: CAGR of 8.1% vs. industry average of 6.8% Occupancy expected to exceed 80% through 2017 Annual visitors to NYC reached a record 52M in 2012 • Brazil and China are expected to be significant growth drivers Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Value in Millions Source: New York Economic Development Corporation

23 NYC Success: Courtyard Midtown East Embedded gain of $84 million (20.0% unlevered IRR since acquisition) Created 10 additional keys since acquisition • Potential for 4 additional keys 2013 renovation to drive outsized growth in 2014 (3,900 displaced room nights) 2012 RevPAR 14% below prior peak Renovated Guestroom Sky Lobby Seating Acquisition Date November 2004 # of Keys 317 (307 at acquisition) Total Investment $82.5 million Total Investment Per Key $265,000 Estimated Value $166.0 million Estimated Value Per Key $525,000 Unlevered IRR Since Acquisition 20.0% Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

24 NYC Success: Courtyard Fifth Avenue Embedded gain of $50 million (19.5% unlevered IRR since acquisition) Branding at acquisition drove returns • $48 ADR gain 1 st month post-conversion • 35% RevPAR increase 1 st Year 2013 renovation to drive outsized growth in 2014 (5,900 displaced room nights) 2012 RevPAR 6% below prior peak Renovated Guestroom Renovated Lobby Acquisition Date December 2004 # of Keys 185 Total Investment $46.2 million Total Investment Per Key $250,000 Estimated Value $97.0 million Estimated Value Per Key $525,000 Unlevered IRR Since Acquisition 19.5% Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

25 NYC Success: Hilton Garden Inn Chelsea Embedded gain of $19 million (21.0% unlevered IRR since acquisition) Highest margins in DRH portfolio Terminable contract provides flexibility Opportunity for ADR growth • 2012 ADR 12% below prior peak • Superior product quality should allow hotel to outperform competitive set Entrance off 28 th Street Lobby Acquisition Date September 2010 # of Keys 169 Total Investment $70.0 million Total Investment Per Key $415,000 Estimated Value $89.0 million Estimated Value Per Key $525,000 Unlevered IRR Since Acquisition 21.0% Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

26 $5 $15 $25 $35 2013F 2016E $100.00 $150.00 $200.00 $250.00 $300.00 2013F 2016E Lexington Hotel Rebranding Rebranded to Autograph Collection $46 million capital plan Created 15 new rooms Rate upside • $90 ADR gap to comparable Marriott • Each dollar = $250k revenue 25% rate growth to prior peak Upside from potential retail repositioning Anticipate multi-year growth in EBITDA to $30 million EXPECTED REVPAR GROWTH OF 80% BY 2016 EBITDA EXPECTED TO QUADRUPLE BY 2016 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Value in Millions

27 Lexington Hotel: 15 New Keys Converted underutilized junior suites into two guestrooms Converted airline crew lounge into two guestrooms Original suite room with living area Two new guestrooms Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

28 Hilton Garden Inn Times Square 282 keys – Expected mid-2014 delivery Spectacular location (42nd St & Broadway) Below current market cost ($450,000 per key) Immediately accretive (9% initial EBITDA yield) Embedded gain of $20+ million on investment Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Value in Millions

29 HGI Times Square: Premier NYC Location Premier location surrounded by prime retail and 72mm sq. ft. of office space. Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

30 Westin Washington DC Growth Story: • 2014 group booking pace: 33% • 2-year growth story post-renovation • Recapture business transient accounts that abandoned hotel • Attract local group with renovated meeting space and lobby Upside Opportunities: • Rate increases following renovation • Renovated lobby including new lobby bar, contemporary check-in experience and desirable grab-n-go market • DC as an attractive convention market 2013F RevPAR Index 90.3 2016E RevPAR Index 105.3 Market Share Opportunity 15.0 Revenue Upside $4.5 million $7 $9 $11 $13 $15 2013F 2016E EXPECTED EBITDA GROWTH OF 55% BY 2016 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Smithsonian Museums Central Business District Capitol Hill WESTIN DC CENTRAL LOCATION Westin DC White House K Street Lobbyists Convention Center Value in Millions

31 Westin Washington DC Renovation Fundamentally change hotel experience with brand new lobby & arrival New guest room renovation • First 5 th generation Westin in the US Renovate and upgrade meeting space New Lobby Bar Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Renovated Guestrooms View of New Guest Check-in and Lobby Bar

32 Westin San Diego Growth Story: • 2014 Group booking pace up 7% • 2-year growth story post-renovation • CBD location with a variety of demand generators • Attract legal and media business from new Federal Courthouse Upside Opportunities: • Business mix shift driven by enhanced sales strategies and renovation • Creation of innovative legal war rooms • Outsource three-meal restaurant to further improve F&B margin • Reposition leased retail space • Potential expansion of convention center 2013F RevPAR Index 116.0 2016E RevPAR Index 126.0 Market Share Opportunity 10.0 Revenue Upside $2.4 million $6 $8 $10 $12 2013F 2016E EXPECTED EBITDA GROWTH OF 35% BY 2016 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Value in Millions

Hilton Boston Downtown Growth Story: • 2014 Group booking pace up double digits due to strong convention calendar in Boston • 2-year growth story post-renovation and management change Upside Opportunities: • Create up to 40 additional keys by converting excess suites • Leasing of over 4,000 sq. ft. of desirable retail space • Evaluate highest and best use for 23,000 sq. ft. leased to tenant through 2015 2013F RevPAR Index 91.5 2016E RevPAR Index 103.5 Market Share Opportunity 12.0 Revenue Upside $3.4 million Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways EXPECTED EBITDA GROWTH OF 35% BY 2016 $6 $8 $10 $12 2013F 2016E BOSTON HILTON CENTRAL LOCATION Boston Hilton Central Business District Convention Center Back Bay Cambridge Seaport District North End / Faneuil Hall Value in Millions 33

34 Hilton Boston: Extracting Value from Real Estate Exploring potential to add up to 40 new rooms (subject to permitting approval) • Convert excess suites (currently over 20% of inventory) into two guestrooms Leasing of over 4,000 sq. ft. of desirable retail space Evaluate highest and best use for 23,000 sq. ft. leased to tenant through 2015 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Original suite room with living area Two new guestrooms

35 Solid 2013 group booking pace: • Pace up 6% (8% excluding Boston) • Closed 33,000 more group room nights in Q2 2013 than Q2 2012 • Q2 in-the-quarter for-the-quarter pickup was 46% • 2H 2013 comparisons challenging – Boston Westin 2H pace is -14% amidst weakest year at BCEC since opening Robust 2014 group booking pace: • Pace up 10.3% (10 properties up >10%) • Strong convention calendars in key markets such as Boston (record year), Frenchman’s Reef, Westin DC • $12.5 million of group revenue booked during Q2 2013; another $4 million in July • ADR up 5%, demonstrating pricing power Group Business: 2014 Positioned to Outperform Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Frenchman’s Reef Marriott

36 Westin Waterfront – The Center of Boston’s Growth Boston Convention & Exhibition Center • Largest convention center in Northeast • 2014 booking pace: +26% (Record year for BCEC) Innovation District Taking Shape • Over 4,000 jobs with over 200 companies have been added • 6,300 jobs announced (Vertex, State Street, PWC) • Liberty Wharf has proven success of high-end restaurants Internal Growth Opportunities • New retail tenants opening in 2013 • Conversion of over 10,000 sq. ft. from unleased retail space to meeting rooms • Evaluation of potential hotel expansion Over 10 mm sq. ft. of development under construction or approved, including: • 5 mm sq. ft. of office • 2 mm sq. ft. of retail • 3 mm sq. ft. of residential Westin Waterfront Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

37 Vail Marriott – Great & Getting Better Irreplaceable real estate location at base of Vail Mountain Epic Discovery - Summer mountain resort facilities and activities to drive Summer demand beginning in 2014 • Forest Flyer™ Alpine Slide • Game Creek and Zip Line Tours • Adventure Ridge Challenge and Family Forest Adventure Park • Segway and Trail Tours Ever Vail - $1B green resort development¹ • Mixed-use project located between Lionshead and Cascade Village – Walking distance of Vail Marriott • New gondola access – Vail Marriott within walking distance of 2 gondolas Vail Marriott Vail Marriott 1 Based on reports from Vail Resorts. Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

ASSET MANAGEMENT

39 Asset Management Playbook FOUR PRINCIPLES I. Promote Accountability • Internal • External II. Leverage Strengths • Experience • Experts III. Capital Expenditure Management • Cost engineering • Creative problem solving IV. Mining Value From Portfolio • Operations • Enhance real estate value Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Conrad Chicago Charleston Renaissance

40 Internal Accountability Reorganized Department • Added Head of Design and Construction • Allows asset managers to fully focus on operations • Put optimal team in place to drive growth and add value Realigned Portfolio • Creation of “major market experts” through redistribution of properties • Collaborative approach in NYC Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Frenchman’s Reef Marriott Chicago Marriott

41 External Accountability Property Management Team Initiatives: • Strong leadership • Talent-driven approach to operations • Comprehensive sales strategies • Targeting right customer base • Optimal mix of transient/group business • Strategies appropriately aligned for seasonality • Drive revenue management • Specific transient and group strategies • Weekly sales meetings to adapt approach and tactics in real-time • Profit improvement initiatives • Labor productivity • Cost savings programs • Innovative pricing programs for ancillary departments • Monthly stretch goals • Drive profitability New GM at Conrad Chicago New Revenue Manager at Boston Hilton New GM at Boston Westin Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

42 Leveraging Past Experience FRENCHMAN’S REEF STRATEGY Moved revenue management on property Changed out GM, allowing for a fresh perspective Additional management changes in process Analyzing opportunity to create “Trade Winds” Club paid-only concierge floors Frenchman’s Reef Conrad Chicago Aruba Marriott vs vs Waldorf Astoria Chicago CONRAD CHICAGO STRATEGY Chan ge transient mix Draft behind Waldorf Astoria’s ADR Reanalyzing group sales force deploy ment • Dedicated on-property team versus shared regional team Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

43 Leveraging Experts to Cut Costs & Promote Efficiencies Across Expense Categories Consultant hired at Boston Westin Potential lease out of multiple food and beverage outlets Identified operating expense savings as well as capital avoidance across portfolio Boston and NYC opportunities Increased EBITDA Flow Thru Improve profitability by increasing rates and renegotiating contracts Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

44 Capital Expenditure Management Head of Design & Construction brings in-house expertise to capital expenditure management Realized savings of $1.9 million in the Urban Portfolio by cost engineering a variety of projects Reduced estimated $1.4 million cost of building improvement through creative solutions at Westin San Diego Reduce reliance on outside parties- with dedicated resource oversight on all projects. Results in project cost savings as well as enhanced controls Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Worthington Renaissance Hilton Boston Downtown

45 Mining for Value: Operations Current and Future Value-Add Projects: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Boston Westin • Add convertible beds to make parlor suites rentable - 100% IRR • Utilize low-flow toilets to conserve energy - 50% IRR • Walk-In Cooler efficiencies - 20% IRR • New retail tenant driving additional lease income in 2014 - $275K incremental EBITDA Chicago Marriott • Comprehensive lighting retrofit - $75K in cost savings • Rebidding multiple service contracts with over $150k in savings Minneapolis Hilton • Analyzing the conversion of 9,600 sq. ft. of vacant office space to meeting space Worthington Renaissance • Renegotiated parking contract, generating $100K in additional profit • Exploring potential to lease-out food and beverage operations to a third party

46 Mining for Value: Operations Current and Future Value-Add Projects: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways • Eliminating Pay-Per-View movie program, adding $35K in profit • Increased room service trip change which will add an incremental $35K annually • Telephone consultant found $55K in cost savings and $125K in CapEx savings • Saved $100K through the installation of industrial grade BTU meters Boston Hilton • Investment Grade LED Lighting & Occupancy Controls – 63% IRR Alpharetta Marriott • Creation of 2 nd concierge floor adding $53K of revenue annually Burlington Hilton • Implement 24 Hour summer weekend cancellation fee Sonoma Renaissance • New resort fee will add $300K in Net Profit Hilton Garden Inn Chelsea • Telephone consultant found $28K in cost savings Portfolio Wide Initiative • Exploring additional “view” rate categories Westin San Diego

47 Mining For Value: Management Agreements Creating Value Through Management Agreements: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Frenchman’s Reef Marriott • Negotiated manager contribution of $5 million cash and 40% reduction in future incentive management fees worth an estimated $5+ million to upgrade facility • Added $10+ million in value Salt Lake City Marriott • Negotiated a reduction in management fee by 50% for two years and 33% for three additional years to offset new supply additions • Potential to add $1.6 million (estimated) in value Conrad Chicago • Manager subordinated 3% management fee to operating profit threshold in order to retain agreement after failed performance test • Added $3+ million in value Orlando Airport Marriott • Subordinated 33% of management fee to actual debt service because operating performance was below debt service • Added $0.5 million in value Chicago Marriott • Negotiated a manager cash contribution of $10 million for “brand enhancement” capital projects during 2008 renovation • Added $10.0 million in value Bethesda Suites • Leveraged contract provision to expense loan costs through Hotel P&L, thereby reducing incentive management fees • Added $1 million in value

48 Mining for Value: Adding Keys Creating Value by Additional Keys: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Lexington Hotel • Created 15 new rooms from an unused lounge and underutilized junior suites • Added $9.0 million ($600k/key) in value Courtyard Midtown East • Created 10 additional keys from underutilized suites • Opportunity exists to convert 4 more conversions • Added $5.25 million ($525k/key in value) Chicago Marriott • Relocated concierge lounge to mezzanine level, creating 6 premium new rooms with skyline views • Added $2.4 million ($400/key) in value Hilton Boston • By splitting underutilized suites, opportunity exists to add up to 40 new guestrooms • Potential to add $18.0 million ($450k/key) of value Frenchman’s Reef • Exploring the creation of 23 new guest rooms from expiring tenant lease • Value increase to be determined

49 Mining for Value: New Meeting Space Creating Value by Maximizing Meeting Space: Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways • Created 15,000 sq. ft. of new junior ballroom and breakout meeting rooms targeted at small corporate groups from the low volume 4 th floor restaurant and lounge Chicago Conrad • Relocated executive offices to “last sell” breakout rooms and created 4,100 sq. ft. of desirable high end social and small group meeting space with views of Michigan Ave Torrance Marriott • Converted dated restaurant into 4,500 sq. ft. of new meeting space utilized by car companies for product launches. • Relocated bar to activate lobby Westin Boston Waterfront • Negotiated with ground lessor to change the allowed use of previously vacant retail space, creating 37,000 sq. ft. of ballroom, breakout and exhibit hall s pace • Potential to create additional 10,000 sq. ft. of meeting space Bethesda Suites • Converted 2 last sell hospitality suites to 1,500 sq. ft. of meeting space Vail Marriott • Converted racquet ball courts to 2,100 sq. ft. of meeting rooms Chicago Marriott

OPTIMAL CAPITAL STRUCTURE

51 (1) Year end 2012 ratio. Calculated as defined under the Company’s corporate credit facility. Best-in-Class Capital Structure Leverage Statistics 2013 Net Debt / EV 35% Net Debt / EBITDA ¹ 4.9x Fixed Charge Coverage 2.7x Unencumbered Assets 13 Average Interest Rate 5.2% Average Maturity (years) 3.50 Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways CAPITAL STRUCTURE FRAMEWORK Low Leverage Mitigated Cyclical Risk Simple Capital Structure No Corporate Debt Significant Pool of Unencumbered Hotels Sustainable Dividend Source: Citi Investment Research and Analysis

52 Low Leverage Outperforms Total shareholder returns should outperform higher leveraged peers Balance sheet is built with the entire lodging cycle in mind Mitigates risk of value destructive capital decisions during downturn • Base case net debt/EBITDA remains below 5.0x Dry powder for early cycle acquisitions Allows for sustainable dividend Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Note: Period used in calculation of total shareholder returns is 05/26/2005 – 08/26/2013. Source: Citi and Bank of America Merrill Lynch

53 Hilton Boston Boston Westin Conrad Chicago Vail Marriott Courtyard Denver Hotel Rex San Francisco Hilton Burlington Hilton Garden Inn Chelsea Torrance Marriott Alpharetta Marriott Charleston Renaissance Bethesda Marriott Suites Oak Brook Hills Marriott Chicago Marriott Lexington Hotel Hilton Minneapolis Frenchman’s Reef Marriott LAX Marriott JW Marriott Cherry Creek Courtyard 5 th Avenue Courtyard Midtown East Salt Lake City Marriott Worthington Renaissance Orlando Airport Marriott Westin Washington, DC Sonoma Renaissance Westin San Diego Low Leverage Mitigates Cyclical Risk, Increases Flexibility $1.1B Individual Property Debt $134M 2013 EBITDA 1 $2.0B Asset Value Valuation “floor” set at $85M 2013 EBITDA 1 $1.2B Asset Value (over $6/share) Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways 14 ENCUMBERED HOTELS 13 UNENCUMBERED HOTELS (1) Based on mid-point of Company 2013 guidance.

54 Sustainable Dividends Current yield of 3.5% DRH has returned $432M of capital through dividends Payout of 65% of CAD Expect to pay cash dividends throughout lodging cycle DIVIDENDS ARE KEY DRIVER OF LODGING REIT TOTAL SHAREHOLDER RETURN Source: Citi Investment Research and Analysis Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% BEE FCH SHO PEB HST DRH AHT LHO HT DIVIDEND YIELD $432M IN TOTAL DIVIDENDS PAID

55 Recent Capital Actions Have Enhanced Financial Flexibility Took advantage of attractive financing environment: • $450 million of new property-specific secured debt • Average interest rate of 4% Increased floating rate debt to 15% of total debt Improved line of credit pricing, flexibility and tenor; • Full $200M line available Laddered debt maturities Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Westin Washington D.C. Sonoma Renaissance

56 Plan in Place to Support Funding Needs Achieve 3.0x net debt/EBITDA by 2016 Maximize flexibility to address capital needs • Borrowing capacity of $600M to $700M from unencumbered hotels • Up to $150M proceeds from dispositions of non-core hotels over next three years • Refinancing of debt maturities through 2016 • $200M of credit line capacity plus $200M accordion option • Expect to end 2013 with $30M cash, generate $40M to $50M in annual free cash flow 2013 Capital Expenditure program • $70M remaining through early 2014 42 nd Street commitment ($100M in mid-2014) Debt Maturities Dividends FUNDING NEEDS ACTION PLAN Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways

KEY TAKEAWAYS

58 A Compelling Investment Opportunity Portfolio Positioned to Outperform Substantial Upside from 2013 Capital Investments Favorable Industry Supply/Demand Dynamics Enhanced Asset Management Focus to Drive Internal Margins Best-In-Class Capital Structure With Well Covered Dividend Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways Courtyard Denver Hilton Garden Inn Times Square Westin San Diego

APPENDIX

60 HGI Times Square: View to New Year’s Ball

61 HGI Times Square: Lobby

HGI Times Square: Lobby 62

63 HGI Times Square: Restaurant

64 HGI Times Square: Guestroom

65 Lexington: Exterior

66 Lexington: Lobby

67 Lexington: Lobby Bar Artwork

68 Lexington: Lobby Library

69 Lexington: Guestroom

70 Lexington: Guest Bathroom

New York City Hotel Transactions Source: Eastdil Secured Hotel Name Location Date Keys Price Price / Key Holiday Inn Manhattan 6th Avenue New York, NY 226 Jun-13 121,400,000 537,000 The James New York, NY 114 May-13 85,000,000 745,614 Hyatt Union Square New York, NY 178 Apr-13 105,000,000 589,888 Hyatt Place Midtown South New York, NY 185 Mar-13 76,400,000 412,973 Milford Plaza Hotel (50% int.) New York, NY 1300 Mar-13 325,000,000 250,000 Alex Hotel New York, NY 203 Feb-13 115,000,000 566,502 Flathotel New York, NY 288 Feb-13 180,000,000 625,000 Beekman Tower Hotel New York, NY 174 Jan-13 82,150,000 472,126 Crown Hotel New York, NY 65 Jan-13 18,000,000 276,923 The Plaza and Shops at the Plaza New York, NY 230 Nov-12 575,000,000 2,500,000 Dream Downtown New York, NY 315 Nov-12 220,000,000 698,413 Setai Fifth Avenue New York, NY 214 229,000,000 1,070,093 Manhattan at Times Square Hotel New York, NY 665 Oct-12 275,000,000 413,534 Essex House New York, NY 518 Aug-12 362,300,000 699,421 Holiday Inn Express Madison Square Garden New York, NY 228 Jun-12 87,500,000 383,772 King & Grove Manhattan New York, NY 227 Jun-12 116,000,000 418,773 Courtyard Marriott New York, NY 226 May-12 82,000,000 362,832 Cassa Hotel New York, NY 165 Mar-12 130,000,000 787,879 Avalon Hotel New York, NY 100 Feb-12 48,300,000 483,000 Hyatt Place Midtown South New York, NY 185 Feb-12 76,500,000 413,514 Ritz-Carlton New York, NY 261 Jan-12 198,000,000 758,776 Knickerbocker Hotel New York, NY 330 Jan-12 230,000,000 696,970 Park Central Hotel New York, NY 934 Dec-11 396,200,000 424,197 Hampton Inn Manhattan New York, NY 146 Dec-11 69,500,000 476,027 Holiday Inn Midtown New York, NY 122 Dec-11 52,200,000 427,869 The Cooper Square Hotel New York, NY 145 Nov-11 90,000,000 620,690 Paramount Hotel New York, NY 597 Sep-11 275,000,000 460,637 Hotel Chelsea New York, NY 226 Aug-11 82,500,000 629,771 The Carlyle New York, NY 188 Jul-11 357,200,000 1,900,000 New York Palace Hotel New York, NY 899 Jul-11 377,000,000 419,355 Hyatt Union Square New York, NY 175 Jul-11 104,000,000 594,286 Affinia Manhattan New York, NY 526 Jun-11 292,200,000 555,513 Affinia Shelburne New York, NY 323 Jun-11 179,400,000 555,418 Affinia Dumont New York, NY 241 Jun-11 133,900,000 555,602 Affinia 50 New York, NY 210 Jun-11 116,700,000 555,714 Affinia Gardens New York, NY 129 Jun-11 71,700,000 555,814 The Benjamin New York, NY 209 Jun-11 116,100,000 555,502 YOTEL New York, NY 669 Jun-11 315,000,000 470,852 Four Points by Sheraton - Times Square New York, NY 244 Jun-11 112,000,000 459,016 Algonquin Hotel New York, NY 174 Jun-11 82,000,000 436,782 NYC HOTEL TRANSACTIONS 71

Transformation of Salt Lake City Marriott City Creek Center is multi-billion dollar, 23-acre mixed-use development • 1.2 mm sq. ft. of office, • 700,000 sq. ft. of retail • 800 new residential units Strong operating performance since opening of City Creek in early 2012: • 2012 RevPAR growth: +17.8% • 2012 EBITDA growth: +35.8% • 2013E RevPAR growth: +8.8% • 2013E EBITDA growth: +14.9% SLC Marriott after City Creek SLC Marriott after City Creek Company Overview Industry Outlook Investment Strategy Asset Management Optimal Capital Structure Growth Catalysts Key Takeaways 72