The transaction market for U.S. hotels and resorts appears to be heating up.
Bethesda, Maryland-based hotel real estate investment trust DiamondRock Hospitality Company is seeing more competition as hospitality properties come to market, CEO Jeff Donnelly said during a second-quarter earnings conference call Friday.
These new entrants to the hotel and resort buying pool appear to be high-net-worth individuals and private equity firms, DiamondRock's President and Chief Operating Officer Justin Leonard said.
"While it's probably been more skewed towards high-net-worth capital over the preceding 12 to 24 months, we've definitely seen private equity get significantly more active," Leonard said.
It's made the bidding process a bit surprising from DiamondRock's point of view, Donnelly said.
"There's some [properties] that I thought we would be close, and then we proved to be like 10% to 15% off with many bidders in between," he said. "I think that's what's probably been most surprising is maybe a year ago, the gap between a first-round bid and a second-round bid was relatively tight. We've seen that widen out pretty substantially. I think on the last few properties that we were pursuing, where there could be as much of a move as maybe 10%, 15%, or even buyers sort of going hard with a letter of intent, so it's gotten much more aggressive for certain properties."
Despite the higher level of competition in the hotel acquisition arena, Donnelly said DiamondRock is remaining opportunistic in its pursuit of deals.
"All else equal, if price was no object, I think the long-term secular drivers for resorts are particularly attractive, but pricing on resorts has been very, very competitive and has tightened substantially this year," he said. "So while we do look at a lot of them, there's a lot that I think get bid outside what we're willing to pay.
"We do look at urban markets, as well. So I would tell you all else equal, yes, I would like to tilt towards resorts, but we do look at everything, both urban markets and resorts."
DiamondRock's hotel portfolio includes 34 U.S. hotels with approximately 9,400 rooms across 16 states.
During the quarter, DiamondRock sold its leasehold interest in the 189-room Courtyard by Marriott New York Manhattan Fifth Avenue for $33 million. According to CoStar transaction data, the buyer was Knightstone Capital Management. The deal was completed on May 1.
So is DiamondRock a net buyer or a net seller in 2026? Donnelly left both options on the table.
"I said this at the beginning of the year that we would be a net seller this year. I think that's quite plausible that in this calendar year we will be a net seller," he said. "But as I look beyond and just seeing more transactions come to market, I guess I'm optimistic that we will eventually find something that we connect on. So I think we will be potentially a buyer and a seller, but there's nothing imminent today ... for an acquisition at this time."
Portfolio spending and branded vs. independent
The REIT spent approximately $40.3 million in capital expenditures during the first half of the year and projects between $75 million and $85 million in CapEx spending at its hotels for the full year. In the first quarter, DiamondRock renovated the guestrooms of the Courtyard by Marriott New York Manhattan Fifth Avenue and updated the guestrooms and bathrooms at the Henderson Park Inn in Destin, Florida. For the rest of the year, DiamondRock is planning a renovation of the entrance, lobby and bar of the Westin San Diego Bayview in the third quarter and a guestroom renovation of the Atlanta Marriott Alpharetta in Georgia in the fourth quarter.
Thirteen of DiamondRock's 34 hotels are independent with no brand affiliation, and over the years the REIT has repositioned some of its branded franchised properties as independents. DiamondRock has two hotels with either month-to-month or soon-to-expire franchise agreements that the company could reposition as independent properties: the 157-room Kimpton Shorebreak Resort in Huntington Beach, California, which is part of IHG Hotels & Resorts; and the 177-room Courtyard by Marriott Denver Downtown, which is part of Marriott International.
"I think we're at a time when brands are very focused on their unit growth, and those just happen to be assets where I think they have great locations. They perform very very well, particularly in the case of Denver," Donnelly said. "There's aspects of those properties, whether it's being oceanfront in Southern California — or having an adjacent parking lot that could have expansion rights in Denver — that just create opportunities whether it's for us, or to the extent those are assets that we look to monetize because we think we can get a better value. Someone else might see a path that's different than we want to pursue.
"That's something that we engage with the brands on, but we're also running different scenarios here internally. So it's still a little early, but those are situations that we continue to vet."
Overall, DiamondRock's independent hotel portfolio has performed well, Donnelly said.
"Their positioning, pricing, marketing and capital investment strategies are designed specifically to maximize our return on investment, rather than support the objectives of a brand system," he said. "Historically, [earnings before interest, taxes, depreciation and amortization] per key at our independent hotels has been 50% higher than our branded hotels. As the benefits of AI are fully integrated into travel, we do believe that spread will continue to expand. Branding is a choice, and if branding creates value, we have the option to move in that direction. The reverse is far more difficult."
In June, the Wall Street Journal reported that 51 hotel owners sent a letter to Marriott asking for more revenue from the Marriott Bonvoy loyalty program and its credit card agreements. An analyst asked DiamondRock executives on the REIT's earnings call if they could provide any update on those talks, but company officials declined to comment. Fifteen of DiamondRock's hotels are affiliated with Marriott brands.
Second-quarter highlights
In the second quarter, DiamondRock reported total revenue of $318.3 million, up 4.1% year over year, according to its earnings release. The REIT reported net income of $90.5 million for the quarter, up from $38.4 million in the same quarter of 2025.
DiamondRock's second-quarter adjusted earnings before interest, taxes, depreciation and amortization was $113.2 million, a 20.9% year-over-year increase.
For the quarter, DiamondRock's hotel portfolio reported comparable average daily rate rose 4.6% year over year to $308.50, occupancy rose 2.4% to 78.1% and revenue per available room increased 7% to $240.79.
DiamondRock ended the second quarter with $1.1 billion in total debt outstanding, which consists of three unsecured term loans bearing a weighted average interest rate of 4.9%. The REIT had approximately $106 million of unrestricted cash on hand and $400 million available through its undrawn revolving credit facility.
DiamondRock's board approved a new $300 million share repurchase program, effective May 1. During the second quarter, the REIT purchased 200,000 shares of its common stock at an average price of $9.79 for approximately $1.9 million.
As of press time, DiamondRock’s stock was trading at $13.22, up 47.5% year to date. The Nasdaq Composite was up 9% for the same period.