DiamondRock Hospitality (DRH) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01Our business model, especially our concentration in premium full-service hotels, can be highly volatile
2. 02Economic conditions and other factors beyond our control may adversely affect the lodging industry
3. 03Our hotels are subject to significant competition
4. 04Our hotels are subject to seasonal volatility, which is expected to contribute to fluctuations in our financial condition and results of operations
5. 05The increase in the use of third-party internet travel intermediaries and the increase in alternative lodging channels, such as Airbnb, could adversely affect our profitability
6. 06The increased use of business-related technology may materially and adversely affect the need for business-related travel, and, therefore, demand for rooms in some of our hotels
7. 07Investments in hotels are illiquid and we may not be able to respond in a timely fashion to adverse changes in the performance of our properties
8. 08Certain of our current hotel management and franchise agreements are long-term
9. 09Our mortgage agreements contain certain provisions that may limit our ability to sell our hotels
10. 10Our ground leases contain certain provisions that may limit our ability to sell our hotels
11. 11Some of our hotels are subject to rights of first offer that may limit our ability to sell our hotels
12. 12We may be subject to unknown or contingent liabilities related to recently sold or acquired hotels, as well as hotels that we may sell or acquire in the future
13. 13We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing for such expenditures
14. 14The costs of these capital improvements or profit displacements during the completion of these capital improvements could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders
15. 15Any future pandemic, epidemic or outbreak of any highly infectious disease, could cause widespread disruptions to the U.S. and global economy and volatility and negative pressure in financial markets
16. 16In the event of natural disasters caused by climate change or otherwise, terrorist attacks, active shooter incidents, significant military actions, outbreaks of contagious diseases or other events for which we may not have adequate insurance, our operations may suffer
17. 17constitute a default under the loan agreements. Depending on our access to capital, liquidity and the value of the properties securing the affected loan in relation to the balance of the loan, a default could have a material adverse effect on our results of operations and ability to obtain future financing
18. 18We and our hotel managers rely on information technology in our operations and any material failures, inadequacies, interruptions, security failures, or cybersecurity incidents could harm our business
19. 19Our results of operations are highly dependent on the management of our hotel properties by third-party hotel management companies
20. 20We may be unable to maintain good relationships with third-party hotel managers and franchisors
21. 21Several of our hotels are operated under franchise agreements and we are subject to the risks associated with the franchise brand and the costs associated with maintaining the franchise license
22. 22Contractual and other disagreements with third-party hotel managers and franchisors could make us liable to them or result in litigation costs or other expenses
23. 23Our business may be adversely affected by consolidation in the lodging industry
24. 24Our ownership of properties through ground leases exposes us to the risks that we may have difficulty financing such properties, be forced to sell such properties for a lower price, are unable to extend the ground leases at maturity or lose such properties upon breach or termination of the ground leases
25. 25The failure of tenants to make rent payments under our retail and restaurant leases may adversely affect our results of operation
26. 26We face competition for hotel acquisitions and investments, and we may not be successful in identifying or completing hotel acquisitions and investments that meet our criteria, which may impede our growth
27. 27Many of our costs, such as operating expenses, interest expense and acquisition and renovation costs, could be adversely impacted by periods of heightened inflation
28. 28Even if we successfully complete hotel acquisitions, there can be no assurance that we will be able to successfully integrate the hotels we acquire into our existing operations or otherwise realize the expected benefits of these acquisitions
29. 29Actions by organized labor could have a material adverse effect on our business
30. 30Labor shortages could slow our growth or harm our business
31. 31Actions by federal, state or local jurisdictions could have a material adverse effect on our business

Risks Related to the Economy and Credit Markets

1. 32The lack of availability and terms of financing could adversely impact the amounts, sources and costs of capital available to us
2. 33An uncertain environment in the lodging industry and the economy generally could result in declines in our average daily room rates, occupancy and RevPAR, and thereby have a material adverse effect on our results of operations

Risks Related to Our Debt and Financing

1. 34The instruments governing our existing indebtedness contain, and instruments governing our future indebtedness may contain, financial covenants that could limit our operations and our ability to make distributions to our stockholders
2. 35Our credit facility and term loans contain financial covenants that may constrain our ability to sell assets and make distributions to our stockholders
3. 36All of our existing mortgage debt agreements contain, and future mortgage debt agreements may contain, “cash trap” provisions that could limit our ability to make distributions to our stockholders
4. 37There is refinancing risk associated with our debt
5. 38If we default on our secured debt in the future, the lenders may foreclose on our hotels
6. 39Future debt service obligations may adversely affect our operating results, require us to liquidate our properties, jeopardize our ability to make cash distributions necessary to maintain our tax status as a REIT and limit our ability to make distributions to our stockholders
7. 40Increases in interest rates may increase our interest expense
8. 41Hedging against interest rate exposure may adversely affect us

Risks Related to Regulation and the Environment

1. 42Americans with Disabilities Act and other changes in governmental rules and regulations
2. 43Our hotel properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem

Risks Related to Our Status as a REIT

1. 44We cannot assure you that we will remain qualified as a REIT
2. 45Complying with REIT requirements may cause us to forgo otherwise attractive opportunities
3. 46To qualify as a REIT, we must meet annual distribution requirements
4. 47The formation of our TRSs and TRS lessees increases our overall tax liability
5. 48If the leases of our hotels to our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT
6. 49You may be restricted from transferring our common stock and Series A Preferred Stock
7. 50Even if we maintain our status as a REIT, in certain circumstances, we may be subject to U.S. federal and state income taxes, which would reduce our cash available for distribution to our stockholders
8. 51Our property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flow
9. 52Dividends payable by REITs generally do not qualify for reduced tax rates
10. 53Failure of our operating partnership to be taxable as a partnership could cause us to fail to qualify as a REIT and we could suffer other adverse tax consequences
11. 54Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders
12. 55Legislative or regulatory action could adversely affect our stockholders

Risks Related to Our Organization and Structure

1. 56Provisions of our charter may limit the ability of a third party to acquire control of our company
2. 57Certain advance notice provisions of our bylaws may limit the ability of a third party to acquire control of our company
3. 58Provisions of Maryland law may limit the ability of a third party to acquire control of our company
4. 59Stockholders have limited control over any changes that we make to our policies
5. 60Our success depends on senior executive officers whose continued service is not guaranteed, and changes in our senior executive officers may adversely affect the operation of our business
6. 61We have entered into an agreement with each of our senior executive officers that provides each of them benefits in the event that his or her employment is terminated by us without cause, by him or her for good reason or under certain circumstances following a change of control of our company
7. 62We may be unable to generate sufficient cash flows from our operations to make distributions to our stockholders at expected levels, and we cannot assure you of our ability to make distributions in the future
8. 63Changes in market conditions could adversely affect the market price of our common stock and Series A Preferred Stock
9. 64We may be subject to litigation, which could have a material adverse effect on our financial condition, results of operations, cash flow and trading price of our common stock and Series A Preferred Stock
10. 65The market price of our common stock has been volatile and could decline, resulting in a substantial or complete loss on our common stockholders’ investment
11. 66Future issuances of our common stock, Series A Preferred Stock or our operating partnership’s common OP units, may depress the market price of our common stock and have a dilutive effect on our existing stockholders
12. 67Holders of our outstanding Series A Preferred Stock have dividend, liquidation and other rights that are senior to the rights of the holders of our common stock
13. 68The conversion rights of our Series A Preferred Stock may be detrimental to holders of our common stock
14. 69Future offerings of debt securities or preferred stock, which would be senior to our common stock upon liquidation and for the purpose of distributions, may cause the market price of our common stock to decline
15. 70We cannot guarantee that we will repurchase our common stock pursuant to our share repurchase program or that our share repurchase program will enhance long-term stockholder value. Share repurchases could also increase the volatility of the price of our common stock and could diminish our cash reserves
16. 71Tax protection agreements may limit our ability to sell or otherwise dispose of certain properties and may require our operating partnership to maintain certain debt levels that otherwise would not be required to operate our business