Ladies and gentlemen, thank you for standing by, and welcome to DiamondRock Hospitality's first quarter 2022 earnings release. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during that session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker, Jeff Donnelly, Chief Financial Officer at DiamondRock. Please go ahead.
Thank you, Carmen. Good morning, everyone. This is Jeff Donnelly, Chief Financial Officer of DiamondRock Hospitality. Welcome to our first quarter 2022 earnings call. With me on the call today is Mark Brugger, our President and Chief Executive Officer. Before we begin, let me remind everyone that many of our comments today are not historical facts and are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from those expressed or implied by our comments today. In addition, on today's call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. With that, I am pleased to turn the call over to Mark Brugger.
Thanks, Jeff. Thanks for joining us today for DiamondRock's earnings call. The recent rebound in travel demand has exceeded our expectations, despite the Omicron pause in January. Americans are clearly getting back on the road after being locked down for the last two years. The culmination of our strategically crafted portfolio and operational excellence has allowed us to deliver first quarter Hotel Adjusted EBITDA higher than the comparable period in pre-pandemic 2019. In fact, based on current demand trends, we expect portfolio total revenue to exceed full year 2019 same store total revenues for the full year 2022. Moreover, Hotel Adjusted EBITDA is projected to exceed 2019 levels for the next 12-month period. Let me highlight a few of our successes this year. The portfolio took 280 basis points of market share from competitive hotels compared to 2019.
Getting past Omicron impacted January, results for February and March collectively were terrific, with total revenues exceeding the comparable months in 2019 by 2.5%, and Hotel Adjusted EBITDA was up an impressive 16.2% compared to 2019. April total RevPAR continued this positive story and was up 4.2% versus comparable 2019. For the entire first quarter, comparable Hotel Adjusted EBITDA margins were 26%, an increase of 122 basis points over comparable 2019, despite the headwind in January. These robust results in the quarter meant we complied with all our original unmodified loan covenants, and we expect to exit covenant waivers at the end of the second quarter.
To top it off, we acquired the synergistic Kimpton Fort Lauderdale Beach Resort on April first in an off-market transaction for only $360,000 per key. In many ways, our portfolio of 34 hotels is uniquely balanced for a 1-2 recovery that should put DiamondRock out front. We have the right kind of assets in the right kind of markets to set up for success in this cycle. Today's traveler is focused on experiential travel, especially in leisure. We believe that our portfolio of 14 resorts will continue to outperform for the foreseeable future because consumer demand for frequent leisure trips has accelerated. The U.S. remains massively under-resorted, and new supply remains permanently constrained due to scarcity of prime resort land parcels and regulatory restrictions that often lead to an outright prohibition against new development.
Importantly, thus far at resorts, we have seen little pricing resistance from leisure customer. Encouragingly, the advanced bookings at our resorts, even as far out as next festive week and into 2023, are at rates higher than this year. On the group side, we are well positioned with strong citywide demand in our key group markets this year and next. Meeting planners are actively booking, and we expect to exceed our budgeted goals for 2022. The pent-up group demand and the need to meet make it likely that group bookings will hit new highs over the next few years. The last segment to recover, business transient, is coming back, and it has increased dramatically in just the last few weeks. While we are seeing big jumps in BT demand, we should point out that it is coming from very low levels.
We still expect BT recovery to take some time to fully heal, and it will vary significantly by city. With that said, overall, each demand segment is trending much stronger than we thought, even as recently as our last earnings call. Before getting into details on the numbers, let me just hit a few reasons why DiamondRock is so well set up. First, our footprint, which we spent the last cycle strategically repositioning, is just where you wanna be for this entire upcoming growth cycle. Second, we have several ROI repositionings that have just been completed and many more on the way. Third, we have restructured our management agreements such that over 90% of our hotels have short-term agreements, and that gives DiamondRock a unique advantage.
Finally, we have a pipeline of deals populated with properties that have the kind of characteristics that continue powering our current outperformance. Now jumping into the numbers. Let's turn to profit margins. Resort and leisure properties are gonna be the big long-term winners in the profit margin game this cycle. Our resorts expanded profit margins by 759 basis points in the first quarter compared to 2019, and are collectively at new highs. Conversely, despite outperforming their comp sets, urban hotel profit margins contracted by nearly 1,200 basis points in the first quarter from comparable 2019. The urban hotels are now fully on the upswing. In January, during the Omicron wave, total revenue at our urban hotels was 47% below the same period in 2018. By March, this dwindled to just 16% below.
Actually, for March, our urban hotels finished at 65% occupancy and ADR within 1% of 2019. In April, we saw comparative RevPAR move still higher at our urban hotels. Urban hotel profitability is a major opportunity for DiamondRock. Full year 2021 Hotel Adjusted EBITDA for our urban hotels was $164 million or 90% below comparable 2019. This year, we expect to see a surge of profit recovery, which is projected to restore as much as 60% of this pre-pandemic urban profit in 2022. Banquet business is the most lucrative component of the group demand found at many of our urban hotels and several of our resorts too. As group activity returns and banquet business builds, we will see profit recovery accelerate.
Looking ahead to 2023, our portfolio should get a multipronged benefit from the continued recovery of group, the return of high-margin banquet business, and continued record restaurant sales. Ultimately, we believe that the DiamondRock portfolio will stabilize at margins 200 basis points-300 basis points higher than the prior peak. While some of our peers have made promises about profit margin expansion in some unnamed future year, DiamondRock has already proven out half of that promised gain with just our resort portfolio profit margin success, as they are on track to increase profit margins by 400 basis points-450 basis points in 2022 over 2019. Note that resorts represent about 50% of our stabilized profits.
Before turning the call over to Jeff, I did wanna talk about our internal growth initiatives and how they are benefiting results. Last year, we completed three repositionings, The Lodge at Sonoma, The Hythe, a Vail Luxury Resort, and the Margaritaville Key West. In the first quarter, those three hotels generated massive RevPAR growth, exceeding monthly 2019 levels by 22.7%, 22.6%, and 82.7% respectively. Putting it another way, the three repositioned hotels delivered an incremental $5 million of EBITDA in Q1 as compared to 2019, and are projected to produce over $15 million of incremental profit for the full year over comparable 2019. That's a heck of a return on our investment.
Collectively, these three properties are forecasted to generate an amazing 13% NOI yield in 2022 on our total investment in those properties. In the first quarter of 2021, we completed two more repositionings, the Hotel Clio, a Luxury Collection Hotel, Denver Cherry Creek, and the Embassy Suites by Hilton Bethesda, and we have several more opportunities on tap. Collectively, we believe that we will have executed more value-creating manager and brand conversions than any other full-service lodging REIT, which positions us to outperform going forward. I'll now turn it over to Jeff to discuss the quarter in more detail. Jeff?
Thanks, Mark. First quarter results were sharply ahead of our original forecast. Total revenue and hotel-adjusted EBITDA in the quarter were $197 million and $51 million respectively, with comparable hotel-adjusted EBITDA margins 122 basis points ahead of 2019. The momentum in the quarter was terrific. Excluding January, margins in the quarter were up 384 basis points compared to 2019. Room profits were strong, and room profit margins were ahead of 2019. Not surprisingly, F&B revenues and F&B profitability lagged 2019 due to the Omicron impact in January and the reason Mark alluded to earlier, less high-margin banquet business typically associated with groups. Turning to the balance sheet, we finished the quarter with over $350 million of total liquidity and $200 million of undrawn capacity on our revolver.
Inclusive of the asset recycling capacity, we have a gross potential acquisition capacity of $650 million. As Mark mentioned, the strong portfolio performance led to compliance with all original unmodified covenants in our credit facility in Q1 2022, and we expect to emerge from covenant waivers at the end of the second quarter since it is a two-quarter test. Let's talk about performance, starting with urban. Comparable urban hotel revenues were $82 million in Q1 2022, a $60 million improvement over 2021, which leaves a $34 million upside opportunity to get back to 2019 levels. The urban hotels had a strong recovery over the course of the quarter, with occupancy gaining 30 points from January to March and concluding the quarter with ADR less than 1% from hitting 2019 rates.
EBITDA margins at our urban hotels were 7% for the quarter, but the progression is really the important story and highlights the opportunity. In January, EBITDA margins at our urban hotels were -32%, owing to the impact of Omicron. By March, EBITDA margins were +24% and within just 350 basis points of 2019. Going forward, we expect that urban hotels will ultimately stabilize at profit margins better than our pre-pandemic performance. DiamondRock has some special advantages, including the restructuring and conversion of the majority of our Marriott management agreements. These modifications significantly reduced our exposure to incentive management fees, eliminating the profit flow-through drag others face as profitability is restored. For example, in 2022, we expect to pay $4 million or 80% less in incentive management fees compared to 2019.
This is a distinct advantage for DiamondRock as the recovery matures as compared to a brand managed portfolio. Turning to business transient, Omicron proved a temporary setback by delaying the return to office. Nevertheless, we saw strong, steady improvement in business travel indicators over the course of the quarter. Midweek occupancy increased from 36% in January to 57% in February, 70% in March, and 78% for April. Midweek occupancy on the books for the next four weeks is already surpassing January and February, and given the short-term booking window, we expect significantly more demand will fill in as we move through the month and quarter. Group activity really accelerated in the quarter. Cancellations are down, conversion is up, in-person meeting activity is increasing, and less desirable space-only meetings are trending down.
In Q1, we had over 16,000 group leads for 2.8 million room nights of business. That is 36% more leads than we generated in the same period prior to the pandemic, and 40% sequential increase in room nights. The outlook is very encouraging, and we expect full-year group room nights to recover to 85% of 2019 levels. Group rates on the books for the remainder of the year are up 5.5% over 2019 and another 6% in 2023. Comparable resort revenues were $115 million in Q1 2022. Resort RevPAR was 31% ahead of 2019, driving Hotel Adjusted EBITDA margins up to nearly 40%.
Our resorts showed strong and steady progress over the course of the quarter, with total revenue up nearly 10% over 2019 in January, despite Omicron, 31% in February, 35% in March. This strength is continuing as we move into Q2. Occupancy on the books at our resorts for the next 12 months is up 12% year-over-year at 19% higher rates. In just the next 90 days, occupancy on the books at our resorts is up 32% year-over-year at 15% higher rates. That is an acceleration in the ADR on the books as we move into the future. In fact, during festive week in late December 2022, our rates on the books are currently up 36% over the prior year.
If you intend to plan a vacation at one of our resorts, I strongly encourage you to book early. Let me give you a few specific property examples. Henderson Beach Resort summer season ADR is up 16% over 2021, and festive season revenues are up 50%. The Hythe, our newly upgraded luxury resort in Vail, is seeing festive season rates up $200 over the prior year. In Q1 2023, ADR pace is already up 38%. This summer, at the Lodge at Sonoma, another recently upbranded resort, we are seeing a 43% gain in ADR and 60% improvement in occupancy on the books. Moreover, the revenue pace for fall is up 100% over 2021. Finally, at L'Auberge de Sedona, we are seeing an incredible 2023 advanced booking activity with overall revenue pace up 52%.
In fact, L'Auberge de Sedona is expected to generate $195,000 of EBITDA per key, which translates into a 17% yield on 2022 NOI. NAV has more than doubled since we acquired this resort in an off-market transaction just three years ago. We expect our recently acquired and upgraded resorts will continue to outperform against this backdrop of strong leisure demand. As Mark mentioned earlier, we expect total revenues for the entire portfolio for full year 2022 to meet or exceed full year 2019 same store total revenues. The information is on page 13 of our press release and is an excellent guide. Full year 2022 hotel adjusted EBITDA margins should ramp slightly behind that from the lag in group recovery with associated banquet profitability. Given our strong performance, we project we will have taxable income for 2022.
Accordingly, we expect to recommence a quarterly dividend on our common shares beginning in the third quarter of 2022. With that, let me hand the floor back to Mark.
Thanks, Jeff. Our outlook is very constructive. As Jeff said, we do currently expect total hotel revenues to meet or exceed 2019 levels for the full year 2022, and for Hotel Adjusted EBITDA to exceed 2019 levels for the next twelve-month period. Our resorts continue to push ahead at an accelerating pace while group and business transient demand at our urban hotels is kicking in to provide a double benefit in recovery trajectory. Ultimately, we continue to believe that we will stabilize at higher portfolio profit margins based on the implementation of best practices from this downturn, the benefit from recent brand to independent management conversions at another 20% of the portfolio, and the boost from ROI projects. On that note, I should mention that we have several other high ROI projects underway or under evaluation.
These include the potential repositioning of Orchards Inn Sedona to be the Cliffs at L'Auberge, the up-branding of our Burlington hotel, and the conversion of one of our branded urban properties to a lifestyle hotel. Collectively, the incremental stabilized EBITDA associated with those three projects is about $8 million a year. This doesn't even include the benefit from other smaller projects like adding 14 new keys at the Landing Lake Tahoe Resort, adding a new rooftop bar at the Gwen Chicago, or re-concepting the rooftop pool experience at the Palomar Phoenix. On the external growth front, we completed the acquisition of the Kimpton Fort Lauderdale Beach Resort in April. This is a synergistic deal with our Westin resort located only two blocks away.
This newly built resort has the qualities we look for, lifestyle, fee simple, terminable at will management agreement, and amazing upside opportunities with the best rooftop bar in the market. We expect the resort to stabilize north of 8% yield. Moreover, we have significant dry powder for future acquisitions and are currently close on one West Coast boutique resort with several more deals under various stages of evaluation. To wrap up, we are still very early in an emerging travel recovery with significant pent-up demand. With that backdrop, we are confident that DiamondRock has a unique portfolio with the right strategy and balance sheet to continue to distinguish itself in 2022 and going forward. At this time, we would like to open it up for your questions. Operator?
Thank you. As a reminder, to ask a question, simply press star one on your telephone. To withdraw the question, press the pound or hash key. Your first question comes from Dori Kesten with Wells Fargo. Your line is open.
Thanks. Good morning. If we can dig into the expectation that 2022 revenues should meet or exceed 2019, can you separate your portfolio by resorts and urban, in this context?
Hey, Dori. Yeah, give me a second. I'm just looking up that split and where we look for those numbers to be coming out. Give me one second just so I pull up the correct full year numbers. On a full year basis, we are expecting that our resorts. I'm just looking at it in dollars relative to where we were before. Sorry, just give me a second while I do the math in my head here. I think our urban asset, or I'm sorry, our resort assets will end up surpassing what we did in 2019. They'll do probably about $200 million, give or take. Probably that's about $100 million better than they did in 2019.
Our urban assets would be probably about $160 million, give or take. I'm sorry. I was looking at the wrong column. I apologize. I have too many numbers in front of me. The resorts would, sorry, be about $450 million, which would be about $100 million better, and that the urban assets would be about $480 million, which would be about $100 million below.
Okay.
Did you catch that? Sorry.
Yeah, yeah. No, I got it. There's been a weighting towards the REITs acquiring the Sun Belt, specifically Florida, but there's, you know, also a concern by investors that resorts could peak this year. Based on your resorts specifically, do you think this concern's fair?
I'll jump in here, Jeff. Dori, good morning. Jeff gave some good data points, but what we're seeing is we're actually seeing Q2 accelerate versus 2019. Quarter-over-quarter, we're seeing Q2 improve. At the data points that Jeff gave, admittedly, they're, you know, we're booking now, but we're seeing at a lot of the resorts, people have experienced getting blocked out over the last six months of resorts and vacations that they wanted to do. We're seeing people like Sedona and Sonoma, where people have been basically blocked out booking in advance and booking at higher rates to make sure they can lock in their vacations. We feel very good about going in for the balance of this year and going into 2023 based on the data points that we're seeing right now.
Okay. Thank you.
Thanks. Bye.
All right. Your next question is from Smedes Rose with Citi. Your line is open.
Hi. Thank you. I wanted to just ask you a little bit more on the transaction market. You mentioned a couple things in the pipeline, and I'm just wondering, first of all, if you could talk about maybe the kind of the scope or the size of the deals that you're interested in. Do you lean towards these kind of maybe, you know, doing more of these kind of smaller under 100 rooms type assets? Are you seeing any changes in pricing, I guess, with the changing interest rate environment?
Yeah. To answer your first question, I think we look for unlevered yields as the kind of magnetic north. Is it strategic and can we deliver a good yield versus the size limitation? Generally, our pipeline's populated with deals that are between $50 million-$150 million. That's kind of our sweet spot. We think we know how to do these what we call small and medium-sized resorts a little better than other people. I think we can underwrite them a little bit more efficiently. To your second question about are prices moving in relation to interest rates, we haven't seen that yet in the data points in the market and the deals that have crossed kind of crossed over and been reported.
So far, the demand hasn't shown any softening. The feedback we're getting from some market makers, if you will, is that people are viewing hotels as an inflation hedge in the real estate world. There's some incremental capital that's flowing towards hotels as a more attractive asset class within real estate, and that's potentially offsetting the incremental cost of debt associated with those acquisitions.
Okay. Yeah, interesting. I guess the final thing I just wanted to ask you. I know it's relatively small, but I saw you took about a $500,000 severance charges in the quarter. It said it's just associated with, you know, eliminating positions at some of your hotels. Do you feel like you're done now in terms of, you know, kind of restructuring the hotel operating model, or is there more to go in order to reach your margin expectations?
Yeah. Let me answer kind of both parts of the question. I think the severance you're referring to is the change in executives with Tom, our COO departing and reversing his accrued stock. That's not in our Hotel Adjusted EBITDA. But what we're seeing at the property level is we've substantially reduced permanently the manager count. Where we might have had assistant F&B, assistant rooms director, those kind of positions, we learned a lot during this downturn of what we can operate with. I think we just did a model ground up of what we think the stabilized model is on managers, and we think it's about a 10% permanent reduction in FTEs. It's uneven. Some of our bigger hotels, it's a 40% reduction.
Those are the kind of data points that make us really feel good about emerging on the other side of this with higher stabilized margins, as travel fully recovers.
Okay. Thank you.
Your next question is from Chris Woronka with Deutsche Bank. Your line is open.
Hey. Good morning, guys. Appreciate all the data points as always. Wanted to follow up a little bit on the comment about the 200 basis points-300 basis points of margin expansion. How much of that is kind of higher rates at a sustainably higher level versus how much of it is, you know, cost takeouts and operational efficiencies and things like that?
Yeah. For DiamondRock, it really breaks into a couple different buckets. Obviously, having more resorts, that's people with more resorts are gonna be able to cling on to greater long-term profit expansion in that segment than folks that don't have a greater weighting, just because so much rate's been gained in that space, and we think a lot of that's permanent. That's just gonna flow better. That's just the way the math works. That's part of it. For us, there's a couple other unique gradients. Everyone's gonna probably have more efficient labor models on the other side of this. That's gonna be universal, I think, within our space to help people get to better margins on the other side.
You know, a couple of the, we'll call secret sauce for us, we have those big repositions which have been completed. They're gonna have higher rates associated with those reposition assets, which is gonna flow better. That's part of it. I think, you know, something people haven't focused on but now as revenues are returning for folks is this, the fact that we don't have, you know, 90% of our hotels don't have long-term management contracts on them. As IMF kicks in, you know, we're not gonna return to an IMF world at DiamondRock. That's gonna help us versus 2019 levels, as we move forward, getting higher stabilized margins in the portfolio. There, there's a number of factors contributing to it, but they're kind of all working in our favor.
Okay. Very helpful. Thanks, Mark.
Your next question comes from Austin Wurschmidt with KeyBanc. Your line is open.
Great. Thanks, and good morning, everyone. As far as the midweek occupancy figures that you provided, I think you said it reached 78% in April. Can you give us a sense how much upside kind of remains to get to a more stabilized level? And do you think, you know, as that's kind of ramped, you know, through 78%, do you think midweek ADR could strengthen like you've seen in the resort portfolio?
Without giving specific numbers, there are a couple phenomena which are, I think, gonna be good for midweek. Obviously, the more group that we book in and the stronger group is, the better it is for midweek, particularly for the urban-based assets. I think the other thing that we're noticing and super encouraged is the small midweek group that's going into the resort. If you think about an asset like Cavallo, which is in Sausalito, as more hybrid work environments have emerged, particularly in tech-centric markets like San Francisco or Seattle, there's more and more of this. Team leaders can organize and get their smaller groups together to launch products, culture building, training, whatever it may be, these kind of 25-100 person groups.
We're seeing a surge in midweek business at places like Cavallo, the Lodge at Sonoma, where these team leaders at particularly tech-oriented companies are using that instead of getting people in the office five days a week. We think that, you know, that band of midweek push, it's gonna stabilize at higher levels than we've ever seen. We're leaning into that, and as we're thinking about external growth opportunities, that's clearly a thesis that we're willing to bet on as we move forward.
That's helpful. I'm just curious, you know, could you quantify maybe the synergies you get from these sort of clustering of hotels like we saw you do here with the Kimpton in Fort Lauderdale?
Sure. I mean, so I can give you. Let me give you numbers and kind of how it's working. When we bought the Kimpton Fort Lauderdale, we brought in the switch managers and brought in the same management company that we have at the Westin Fort Lauderdale, which is HEI, which is doing a great job for us. We'll cross-complex sales, engineering, we'll be able to have staff move between them. On that, you know, on that acquisition, which, you know, is only 96 rooms, we'll probably have $200,000-$300,000 of synergies and cost savings, which really made us the best buyer in the market for an asset like that, even though it was off market. You know, we're looking more and more in synergistic deals.
I would say in our pipeline, that's probably at the top of the list for us because we think it really gives us a unique advantage as we look at those kind of assets.
Great. Thanks for the time.
Thanks, Austin.
Your next question comes from Gregory Miller with Truist Securities. Your line is open.
Thanks. Good morning. I'd like to ask you about the Margaritaville conversion, how that's progressing so far, particularly outside the room spend and flow to margins.
Like we set up that question.
Yeah, I was gonna say. Yeah. Have you seen the two-story bar that was built down there? It's doing quite well.
I haven't been down there yet, but.
Yeah. I mean, that deal, it's a home run and far exceeding our expectations and having Jimmy Buffett go there earlier this year created a lot of social media and a lot of buzz at the property. I mean, they're almost embarrassingly good numbers. Compared to 2019, RevPAR at that property is up over 80%. And F&B revenues are up something similar. You know, they're just off the charts, and it's gonna end up several million dollars ahead of our underwriting in 2022 versus the benefit we thought we'd get from the conversion. It's been a home run for us. Yeah, I mean, just to give you another kind of data point. We bought that hotel in 2019.
I was just looking at the NAV. It looks like we're up almost 100% NAV at that one. We're up about $80 million or $90 million in NAV versus our total investment. It's clearly been one of our top deals.
Yeah, actually.
Great.
One other point I'd make, Greg, yeah, I think F&B revenues there are on pace to be about triple what they were at 2019.
Great. Thanks very much for all the color. My follow-up, going on a different topic, may have missed it a little bit in the prepared remarks. Excuse me. I was wondering if you could provide a little bit more detail on what you're seeing so far in the second quarter in terms of the business transient recovery in the urban markets. Are you seeing any major differences in the recovery between Sun Belt markets such as Worthington and Fort Worth or Alpharetta versus what you're seeing in Chicago or D.C. or San Francisco? You know, have you seen trends in business transient pretty similar across the country or are you seeing some differences depending on geography?
As you saw in my comments on the midweek occupancy, it's been growing pretty steadily. I think, you know, a lot of it ultimately comes down to, you know, who your demand generators are. We have some, you know, significant employers, for example, in Alpharetta that are, you know, significant contributors to that hotel, and it's been building nicely. I would say pretty much across the board, our hotels have been performing well. I can't think of any off the top of my head that are real sort of standouts. No, I would say broadly, they're performing quite well, and I think we've seen occupancy at just about all of our hotels grow. You know, the contribution from BT has been growing pretty robustly as we move from January to February.
As I mentioned, what we saw in April and our next four weeks, it's been very encouraging.
Yeah. I'm not sure we're a bellwether, but just a couple of data points. In April, our three-pack in that market was higher than it was in 2019. I would say in Boston, we've seen. We're surprised on the uptick of group as much as transient, but really group short-term in our Westin in Boston was ahead of expectations, and we had some really nice last-minute wins. Chicago's been more a story of group as well as we've kind of been able to book group into the big Marriott there. Then on The Gwen, it's really been good.
In Chicago, on the high-end consultants, we're the first to return, and that's kind of the dominant hotel in the market for that kind of business. I would say the other markets, you know, San Francisco, our hotels gained a lot of market share, but that's a market that clearly is lagging. D.C. was lagging earlier in the year, although the last three weeks have been surprisingly strong in D.C. I think we'll have a lot more data points as we move forward. As I look at our forecast for Q2, we are expecting the urban portfolio overall to accelerate versus 2019 in gaining momentum. Things seem like they're coming together.
Thank you both.
Your next question comes from Bill Crow with Raymond James. Your line is open.
Good morning. Hey, Mark, the positive commentary on urban and group, does that change what I thought was a pretty clear strategy that you wanted to shrink your exposure, especially to larger group hotels in urban markets?
No. I mean, we continue to have, I think, a pretty clear strategy of what I call midsize and smaller hotels, more leisure-oriented, more experiential. That's gonna continue to be the way we orient the company. We do have good exposure with, you know, nice group hotels as well, that I think are gonna benefit us over the next year or two. We may use that momentum to monetize some of those assets over the next 24 months. I think we have particular expertise in all segments, but the resorts and leisure are really up our alley, and we've created a tremendous amount of value with those kind of assets. You'll see us continue to try to distinguish our story from others.
You know, it's nice to have a diversified portfolio at this time as other segments are roaring back as well.
Okay. It sounds a little like a little bit of a deferment, maybe of portfolio change. Hey, Jeff, going back to Dori's question about the resort and the urban versus 2019, was it 2018 or 2019 that y'all had all the hurricane disruption?
I believe it was actually late 2017 that we had the disruption that went through for what was then Frenchman's Reef.
Yeah.
In September of.
I'm thinking about the Keys and South Florida as well, I think.
Same storm.
Yeah. Okay.
Same storm.
Time flies. All right. I just wanna make sure we're copying the good numbers. Terrific. Thank you.
You're welcome. Thanks, Bill.
Thank you. Your next question comes from Anthony Powell with Barclays.
Hi, good morning. Anything to follow up on that question. Obviously, the resorts have been very strong and you're very positive on group. What's your kind of long-term view on business transient as a segment? You know, it's coming back now, but do you expect that to be kind of a less profitable segment than it was pre-COVID? You know, longer term, what's your kind of view on short-term business travel or business transient demand?
Yeah, I think our view is it's coming back. I mean, you've heard very positive commentary from the big brands on their confidence level, and they, you know, obviously have a lot of data points. It's short-term, so unlike, you know, resorts or group where we can kind of give you longer data points, BT is always, you know, it's a short-term game in booking windows. You know, there's clearly been the evolution of business travel. There's been some that's I think gonna be displaced. There's gonna be a lot of return to normal, and there's probably the evolution of some other business travel that we are probably having trouble imagining right now because it hasn't occurred before. Our general baseline assumption is it gets back to where it was.
I think the timing, you know, there are some people that are very bullish, it gets there by the end of this year. It could take another year. We have greater confidence in the leisure demand trend lines and the predictability of those, and group, frankly, than the BT. We're still convinced that ultimately we get back there. I think it's just hard to figure out the exact timeline on that.
Got it. Thanks. Maybe one on Henderson Beach Resort. You had good growth there, but OCC was like 44%, which was surprising, I guess. Is there something seasonal in that resort that makes it lower occupancy in the first quarter, or is that just how it was run previously? I'm just curious if some more detail there would be great.
Yeah. It's you know, Destin Beach is Northern Florida, so it's cooler in the winter, so it is seasonal. Looking at our two Destin properties that we acquired in the last you know, in the last 10 months, it's looking like we'll do about 8.5% NOI yield our first full year of ownership, you know, 2022, first fiscal year. They're tracking ahead of underwriting, but that seasonality even is exactly what we expected. You know, the OCC in the second quarter is gonna be 80%-90%.
Okay. Thank you.
As a reminder, ladies and gentlemen, to ask a question, simply press star one on your telephone.
Next question is from Michael Bellisario with Baird.
Thanks. Good morning, everyone.
Good morning, Michael.
Just wanted to kind of drill in on your mix of business. Can you, high level, not looking for exact numbers, but maybe in March, April, how much was BT? How much was leisure? How much was group? How you see those three segments progressing and shifting, the year unfolds?
You know, we can circle back with you on the monthly breakdown, but I would tell you that on the quarterly breakdown, when I just think about the revenue production of our, I'll call it our urban versus resorts hotels. In Q1, I think resorts are about 60% of our revenues, you know, urban the balance at 40%. But when you move into Q2, that flips almost precisely in favor of urban. You will see that shift, and that a lot of that happens over that March, April timeframe as you bridge the quarter. I can circle back with you offline, and that's something, some disclosure that we can put into our upcoming slide presentations as well as how our guest mix shifts as well.
Yeah, no, that would be helpful. I think, you know, as we've talked about before, everyone's focused on all the undercurrents of shifting customer mix and market mix and trying to figure out, you know, is nominal RevPAR higher, nominal rates higher or, you know, relative to 2019, and it's different for different customer segments. Just trying to understand, you know, how more urban demand and more group demand and maybe less leisure in 2Q and 3Q is gonna impact the headline figures that you report. Any additional disclosure there would be helpful. Then just one follow-up there, you mentioned next 12 months occupancy on the books. How much occupancy today is actually on the books?
I don't think you mentioned where group room night pace was, or you mentioned where rate was, but not volume.
Yeah, let me get the page.
Michael, as Jeff still has some of the numbers. On group, we expect, despite the January Omicron impact, doing about 85% of room nights that we did in 2019. And that's how we're pacing right now. That's well ahead of what our expectations were entering this year. That's a great result. Then, referring back to your initial comment on momentum and mix shift, I can tell you based on our forecast, we continue versus 2019 to build momentum quarter-over-quarter versus 2019. Both leisure, resorts and urban look like they're really accelerating. We would expect on our next earnings call to tell you that sequentially versus 2019, we saw an acceleration in really all segments, not a slowing in anything.
Yeah, and I think on your question on booking pace for group revenues, I think this year we're about 85% of what we did in 2019 is already on the books. I think given what we typically pick up in a year, we're in very good position on that front.
Thank you.
Thanks.
Thank you. This concludes our Q&A session. I will turn the call back to Mark Brugger for final remarks.
Thank you very much. I appreciate that. Let me just conclude by thanking the entire team at DiamondRock and all the people that are in the field for delivering what is a very strong quarter. It's setting up for a very strong year. I know it's the culmination of a lot of hours, a lot of hard work from really several thousand people. So I just wanna express my gratitude to them. Appreciate everyone that tuned in for this call. We appreciate your support and your interest in our company, and look forward to another quarter of good results for you. Take care.
This concludes today's conference call. Thank you for participating, and you may now disconnect.