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Diamondrock Hospitality Co (NYSE:DRH)
Q1 2019 Earnings Call
May. 9, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to DiamondRock Hospitality Company's First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the call over to Sean Kensil, Director of Finance. Sir, please begin.

Sean Kensil -- Director of Financial Planning & Analysis

Thank you, Norma. Good morning, everyone, and welcome to DiamondRock's first quarter 2019 earnings call and webcast.

Before we begin, I would like to remind participants that many of our comments today are considered forward-looking statements under Federal Securities Laws, and may not be a historical fact. These statements are subject to risks and uncertainties as described in the company's SEC filings.

In addition, as management discusses certain non-GAAP financial measures it may be helpful to review the reconciliations to GAAP set forth in our earnings press release.

This morning, Mark Brugger, our President and Chief Executive Officer, will provide a brief overview of our first quarter results as well as discuss the company's 2019 outlook. Jay Johnson, our Chief Financial Officer, will then provide greater detail on our first quarter performance and discuss our balance sheet. Following remarks, we will open the line for questions.

With that, I'm pleased to turn the call over to Mark.

Mark Brugger -- President and Chief Executive Officer

Good morning, everyone, and thank you for joining us. There are four key takeaways from our first quarter results. One, total revenues were modestly ahead of internal expectations as asset management team in concert with operators adjusted to market conditions and successfully traded a little average room rate for higher profit group business that led to 2% total RevPAR expansion with robust F&B growth of over 8%.

Two, this strategy resulted in adjusted EBITDA and adjusted FFO coming in just ahead of our expectations for the quarter.

Three, the company, as previously announced, repurchased 3.1 million shares in the quarter at an average price of $9.52 per share. That price represents a substantial discount to our current trading price and a 33% discount to the midpoint of our NAV estimates.

And the fourth and final takeaway from today's release, the company continues to execute on a number of exciting repositionings within the portfolio, including completing the Emblem Viceroy in San Francisco and ramping up Havana Cabana in Key West. There are several other high ROI repositionings in the pipeline as well, like the repositioning of The Lodge at Sonoma and the Vail Ski Resort.

Okay. Let's look a little closer at first quarter results. Pro forma portfolio RevPAR contracted 80 basis points, but total RevPAR increased 2%. Results are even better if we take out our two renovation hotels in the quarter. Without the JW Marriott Denver and the Marriott Salt Lake City, portfolio RevPAR was up 1% and total RevPAR increased a very strong 4.2%.

Profit margins were about 20 basis points better than our internal forecast with adjusted EBITDA margins contracting 143 basis points. Again, if you take out the two under-renovation hotels, adjusted EBITDA margins in the quarter only contracted 53 basis points.

Now, let's look at how we did in the various markets. Resorts were a bright spot. RevPAR increased 2%, but the real story is the success of our asset management team lead programs that drove other revenue streams at the resorts. These programs allowed our resorts to deliver total RevPAR growth of 4.4%. Within our resort portfolio, we saw particularly impressive results in Key West, Sausalito and Lake Tahoe.

Among urban markets, the San Francisco market was strongest among the major MSAs. While results were good for hotels in the Bay Area, the Emblem Viceroy's results were held back because it opened in stages over the first six weeks of the year. But now fully opened Emblem is off to a great start and has a 5.0 rating on TripAdvisor. It has moved up an amazing 100 spots on TripAdvisor post-reinvention and has already had of two of the three other Viceroy's in the market on TripAdvisor. We are extremely bullish on this hotel's future.

In Chicago, we are proud of the relative performance of our two hotels. They generated 60 basis points of RevPAR growth, beating the market by roughly 500 basis points. This is an offcycle citywide here in Chicago and it was great to see our proactive asset management strategies for in-house group payoff. The Chicago Marriott's total RevPAR was up 25%, due to strong self-contained group.

The Gwen's RevPAR was flat, but gained 7 points of share. The Gwen remains a repositioning success story for DiamondRock with its increased profits, top 10 ranking on TripAdvisor, and, this week, won the Marriott's Distinctive Luxury Hotel of the year.

In DC, despite the federal government shutdown holding back growth, our two hotels collectively grew RevPAR 2.4%, largely from the renovation comparison at the Bethesda Suites Hotel.

Our hotels in Boston grew RevPAR 1.3%. The Boston Hilton was a star in the first quarter with nearly 4% RevPAR growth. The Hilton brand continues to deliver for us in Boston and drove an impressive 75% contribution.

Our New York City hotels outperformed the market by 700 basis points in the quarter with essentially flat RevPAR change. While the Easter shift was particularly impactful to March results in New York, we are encouraged by the 5% RevPAR growth for our New York City hotels in April and still expect modestly positive RevPAR change for the full year.

In Atlanta, our Marriott grew total RevPAR by over 9% as the Super Bowl benefited that market.

In Phoenix, our hotel substantially outperformed the market with over 12% total RevPAR growth, as our asset management initiatives implemented shortly after last year's acquisition really took hold.

Denver: Denver was a good market overall, but it was our toughest major market as the renovation at the JW Marriott Denver as expected displaced substantial business and the Courtyard Denver had a tough comp to last year. Collectively, these hotels experienced double-digit RevPAR contraction.

Also, as expected, Salt Lake City has a difficult citywide calendar in the first half of 2019. However, the back half of the year looks very solid. Our hotel underperformed the market, because of its renovation in the first quarter. The combination of market conditions in Salt Lake and our renovation led to double-digit RevPAR contraction in the first quarter for our hotel. Again, the setup for the back half of the year is much stronger in Salt Lake.

On a very positive note, our three acquisitions in 2018 performed extremely well and bolstered first quarter results. Collectively, the Kimpton Palomar Phoenix, The Landing Lake Tahoe, and Cavallo Point in Sausalito delivered RevPAR growth of over 7%.

Switching gears. We have received a number of questions about impacts from various Marriott initiatives on our hotels. We remain big believers in the power of Marriott brands and their ability to drive results. However, there has been a lot to digest with Marriott. As you will recall from last year's quarterly updates, the Marriott/Starwood merger integration was uneven among markets in its rollout for our hotels, most negatively at the Boston Westin.

Things have stabilized, but in the first quarter of 2019 we were still 1,400 basis points behind the market share as compared to the first quarter of 2017, which was before the integration. I guess the positive is that this lower base should enable us to outperform going forward, given the high quality and excellent location of our hotel. Encouragingly, the Boston Westin's group pace is up 20% for 2020 and should beat the market next year.

We are also seeing a number of real positives from Marriott on the cost side. For example, we expect a meaningful reductions in allocated cost under the new program services fee. This is projected to save a $700,000 in 2019 alone. We have also seen substantial savings in costs for the rewards program and continued to benefit from lower credit card commissions and other programs as the Starwood Hotels came onto the Marriott system.

Additionally, in some markets, we are actually benefiting on the revenue side from the Starwood merger. The Chicago Marriott is a good example, as it is clearly gaining share. As new initiatives have rolled out like the changes to the redemption program where the new brand standard for free breakfast at resorts for leads, we are continuing in active discussions with our partners and Marriott and know that they are committed to working with us define positive and fair outcomes.

Turning to capital. We spent approximately $21 million on our hotels in the first quarter, and we have spent a total of $125 million this year. We are already seeing the benefits of completed projects like the Emblem and Havana Cabana. During 2019, we will also complete a major ROI repositioning, reconcepting of our other Key West resorts and our Lodge at Sonoma, where we will add a Michael Mina restaurant, upgrade the spa and possibly up brand the hotel.

We are also under way with Phase 2 of our Vail luxury upgrade plan. We are excited about all of these projects.

Please note that for 2019, the renovation disruption is still expected to impact portfolio RevPAR growth by 60 basis points, and adjusted hotel EBITDA by $3 million to $4 million. Of course, our largest capital project remains the rebuilding and reimagining of the Frenchman's Reef Resort.

Most of you are familiar with the story. Frenchman's is a spectacularly well located resort in the US Virgin Islands. It was significantly impacted closed by sequential hurricanes in 2017. The company has comprehensive insurance and has commenced rebuilding the resort with a projected reopening in 2020. Once complete, Frenchman's Reef will be the most important resort in the Virgin Islands. It's projected to generate stabilized EBITDA of more than $25 million. The claim process has not been easy as our excess insurance carrier has been difficult. We are doing everything possible to ensure that we receive the full amount we are appropriately entitled to under our insurance policy. We are currently in litigation with the court date in early 2020. The trial will be held in the US Virgin Islands Superior Court.

With regard to business interruption insurance, we are entitled to all lost profits. Last year, we booked business interruption income of $16.1 million and believe we are entitled to at least that amount in 2019. The insurance company has agreed to $8.8 million through April 2019. But given the litigation, it is unlikely that they will pay us the balance of the more than $16.1 million that we believe we are owed for this year until the overall claim is settled or adjudicated, potentially extending into early 2020.

I'll now turn the call over to Jay to delve into the quarter a little deeper and discuss the balance sheet.

Jay Lecoryelle Johnson -- Executive Vice President and Chief Financial Officer

Thanks, Mark. Before I discuss details of our first quarter results, I would like to remind everyone that comparable RevPAR, hotel adjusted EBITDA margins and other portfolio metrics are pro forma and include our recent acquisitions; Cavallo Point, The Landing, and The Palomar Phoenix. Additionally, comparable results exclude Frenchman's Reef and Havana Cabana Key West.

First quarter results were in line to modestly ahead of our internal expectations from an adjusted EBITDA and adjusted FFO perspective. Total revenue growth of 2% for the portfolio was ahead of expectations. These results were positive, despite being held back by performance at the JW Cherry Creek and our Salt Lake City Marriott, which both have ongoing renovation work.

Portfolio RevPAR contracted 80 basis points, partially as a result of displacing transient for higher profit grew with better total spend.

Total revenue was bolstered by our food and beverage results this quarter with F&B revenues up 8.1% and F&B profits up an impressive 16%, while F&B margins were up almost 240 basis points. The Chicago Marriott and Bethesda Suites Marriott had impressive F&B results with revenue up 83% and 47%, respectively, as these hotels were under renovation in Q1 of last year.

Additionally, the Westin Fort Lauderdale's new restaurant La Quinta has been a huge success for us, and it's halo effect continues to drive business at the hotel. F&B revenue at the Westin was up $1.5 million or 30% quarter-over-quarter. Well, it currently ranks among the top five restaurants in Fort Lauderdale and is number one among Mexican inspired restaurants. Transformational concepts like NANA (ph) drive customer preference and help close incremental group business with meeting planners. These types of initiatives are a core competency for us.

Hotel adjusted EBITDA results exceeded operator budgets by over $0.5 million, despite the federal government shutdown and offcycle citywide patterns in some of our markets. Please note, as expected, the company recognized $8.8 million of business interruption income from Frenchman's Reef.

Profit margins contracted 143 basis points during the quarter, over 20 basis points better than budget and are forecasted to improve going forward. The midpoint of our guidance implies slightly negative EBITDA margins for the full year and we anticipate margin expansion in the second and third quarters as RevPAR accelerates throughout the year.

As always, Tom and our asset management team remain laser focused on keeping cost contained. The cost environment continues to be a difficult one at this point in the economic cycle. We do expect the expenses to remain elevated this year. However, Tom and his team have a variety of initiatives they're deploying to mitigate rising expenses.

Now let me highlight one particular area of focus, food cost. Our food costs improved by 170 basis points in the first quarter. We expect these savings to continue as we complete the rollout of Tom's program across our portfolio. Most of our non-Marriott managed hotels have implemented the program and we see enormous opportunity among our brand managed hotels as well.

In addition, by the end of the second quarter, our new labor management system will be in place across our entire portfolio. We are excited about this initiative and continue to see improvement in productivity, as our hotels adjust to the new system and new labor standards.

Now, let me spend a couple of minutes discussing quarterly results and trends in our three significant segments. Please note, all segmentation metrics exclude Havana Cabana Key West and the JW Marriott Cherry Creek. Business transient was flat for the quarter. Boston was our strongest performing market, up nearly 10% combined in business transient revenue. Meanwhile, our New York hotels were able to outperform the broader market with business transient growth of 1%. Salt Lake City's business transient revenue experienced a steep decline due to renovation and citywide weakness.

Leisure contract and other revenues were up 2.5% in the first quarter, excluding the JW Cherry Creek. Several markets saw double-digit RevPAR growth in this segment, including Alpharetta, the Palomar Phoenix, and the Chicago Gwen. Our resorts continue to perform well for leisure with Vail, Shorebreak and The Landing having the strongest leisure growth in the first quarter.

Group revenue was down 2.8% for the quarter, which was in line with expectations. Citywide calendars in Boston, San Diego and Washington DC are not as favorable in 2019 and impacted our hotels in those market significantly.

Notably, our group pace for 2019 improved 160 basis points since our last call and now it's down in the low-single-digits year-over-year. In the quarter bookings for the balance of the year were very encouraging, as Mark mentioned, and 2020 is setting up well. Given the challenging citywide layoff in 2019 in many of our major markets, we are very encouraged by this improvement in pace. The asset management team also has a good strategy to offset weakness in group by backfilling with BT and self-contained small group business. We saw this strategy payoff in hotels like The Chicago Marriott in the first quarter.

Group pace in the quarter for the remainder of the year was up 21% and we continue to improve our full year group pace as well.

As we look forward, we are optimistic about 2020. Our pace for 2020 remained strong and is up 15%. Notably, pace was up nearly 30% for our Chicago hotels. Our combined Boston was up 20%, and DC is up nearly 30%. We are encouraged by the broad strength of our markets throughout 2020 as our renovated portfolio should be able to take advantage of a rebound in demand in many of these markets.

I will now transition to an overview of our balance sheet and capital structure for the quarter. We continue to have one of the strongest balance sheets among our lodging REIT peers. Net debt-to-EBITDA ticked up slightly this quarter to 3.8 times, but remains at the lower-end of our peer group. Given the timing of cash flows and insurance proceeds received relate to Frenchman's Reef, we expect our leverage to increase modestly but will remain within our stated range throughout 2019. We continue to have a significant unencumbered asset pool totaling 23 hotels with a conservative leverage ratio of 29% and a well-laddered debt maturity schedule. We plan to refinance our credit facility late in the second quarter to enhance our borrowing capacity, as well as terms and financial flexibility, and we will likely have an update on the second quarter call regarding the proposed transaction.

With that, I will now turn the call back over to Mark.

Mark Brugger -- President and Chief Executive Officer

Thank you, Jay. Let's turn to guidance and outlook for the balance of the year. The company's guidance remains unchanged with full year RevPAR growth of 0.5% to 2.5%; adjusted EBITDA of $256 million and $268 million; and adjusted FFO per share of $1 to $1.04.

For the second quarter, we expect RevPAR to accelerate from strong performance within our resort portfolio and California hotels. We also expect to have much stronger group setup in the second quarter. Group pace is up 2.7% for the second quarter as compared to down 4% in the first quarter. Group pace is also significantly improved by 360 basis points for the second through fourth quarter of 2019 as the result of good bookings in the first quarter for the balance of the year.

Additionally, our hotel in Phoenix, The Palomar, which was acquired last year is expected to deliver our strongest urban results with the high-single-digit RevPAR increase.

In the back half of the year, we will benefit from some easy comparisons, including a comparison to prior year renovation periods for the Vail Marriott and Westin Fort Lauderdale Beach Resort as well as the union strike period at the Boston Westin. As we look forward into 2020, we are very encouraged by our group revenue booking pace, which is up a healthy 15% as our two most important group markets, Boston, Chicago, are pacing up double digits.

With that, we are now open for any questions you might have.

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Michael Bellisario with Baird. Your line is open.

Michael Bellisario -- Robert W. Baird & Co. Inc. -- Analyst

Good morning, everyone.

Mark Brugger -- President and Chief Executive Officer

Good morning.

Jay Lecoryelle Johnson -- Executive Vice President and Chief Financial Officer

Good morning.

Michael Bellisario -- Robert W. Baird & Co. Inc. -- Analyst

Can you just talk a little bit about Cavallo Point and the 6% RevPAR during the quarter. I know it's just one quarter and it's your first full quarter there, but how should we think about compression coming to that property when there is strength in San Francisco like there was in the first quarter and kind of help us understand the general dynamic at that property? What's going on relative to the CBD in San Francisco?

Mark Brugger -- President and Chief Executive Officer

Yes, I'll start, then I'll turn it over to Tom. So this is Mark. It -- we closed in December on the property. Yeah, the first quarter was really similar, I would do the analogy of The Palomar where we took it slow, but we got all of our systems, programs implemented and now we're seeing enormous increases at The Palomar. Cavallo Point's can be a little bit the same where we've gone in there, we're working with the team to implement a lot of our best practices in the first quarter. We do expect Cavallo Point to experience pressure from the city. It clearly did in the first quarter, probably had we bought it six months earlier you would have seen even more dynamic RevPAR growth at the hotel, but we really just at the very tip of putting in all of our best practices. Tom, do you want to add to that?

Thomas Healy -- Executive Vice President of Asset Management and Chief Operating Officer

Hi, Mike. We're still in the evaluation period, especially the revenue management piece, looking at the tools adding different technology on to maximize premium room sales and looking at rate pricing and rate gap switching room types weekend and midweek price points. So there is -- we've identified a fair amount of opportunity and we're pretty excited about it and then this hotel is the benefactor of compression in San Francisco and certainly in Palo Alto.

The Palo Alto market is very compressed that -- I'm familiar with it from my previous life, having the Four Seasons and the Ritz and Half Moon Bay. And the benefit of Palo Alto being compressed with limited room nights on the group side, a lot of it gets pushed out and it doesn't want to go into San Francisco. And so what we found at Cavallo Point is, we're seeing a lot of mid-week group into that market and it really has to be -- it has to be evaluated, it has to be layered appropriately so you don't spike up one day and I think the team -- we've identified a host of opportunities to really improve group revenues, group rate, and certainly transient ADR.

The property, we're still looking at labor efficiencies and looking at laundry and a host of other cost initiatives as well. So this is going to be a slow process, because just the nature of the property, the nature of the location and certainly the tight labor market, so we have to really be thoughtful about this and do it methodically, but this asset is a home run for -- there's so much opportunity here long time to come.

Michael Bellisario -- Robert W. Baird & Co. Inc. -- Analyst

Got it. That's helpful. And then just sticking with revenue management. Have you guys continued the rate trade-off for higher rated group strategy into April and May? And any color you can provide there about recent trends?

Jay Lecoryelle Johnson -- Executive Vice President and Chief Financial Officer

Sure. So we've estimated in New York, which is really a transient strategy there, RevPAR was up 5% in April. And so that's not a group strategy, that's a transient strategy in April and benefiting from the Easter shift really in that particular city. In April, the real strength in our group, if you look month-by-month and the pace is in May and June. So it really depends on what the citywide is. So Tom's team looks at each market in evaluating the strategy per quarter and evaluate it. We would expect good group results and good F&B results in the second quarter as well.

Michael Bellisario -- Robert W. Baird & Co. Inc. -- Analyst

Thank you.

Operator

Thank you. And our next question comes from Chris Woronka of Deutsche Bank. Your line is open.

Chris Woronka -- Deutsche Bank -- Analyst

Hey. Good morning, guys. I wanted to ask you on the insurance with St. Thomas. Is there the reason why the negotiate -- why they're combining the BI with the other proceeds and, in other words, is that some kind of contractual situation where they're not going to negotiate on the usual BI until the whole thing is settled. Can you just maybe give us a little bit more color on how those are combined?

Jay Lecoryelle Johnson -- Executive Vice President and Chief Financial Officer

Sure. So we have a big insurance policy with $360 million limit. We're -- yeah, the first, the weather syndicate works is the -- the first $100 million was held by a variety of different folks, mostly related to London participants. They pretty much have all paid out pretty readily and then one -- primarily one excess carrier has the risk above the $100 million mark, kind of between that $100 million and $360 million limit. And they didn't -- frankly, they were only paid a couple of hundred thousand dollars for that risk and they're just -- they're being very difficult in the process where we believe we are clearly entitled to all these moneys under our insurance policy and they're taking a difficult stance and what do we need to do is to make sure we recover for our shareholders what they're entitled to. There's nothing in the contract that says they shouldn't pay us. It's just they're taking, we think, an unreasonable position at the moment and it's our job to get them to the right place.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. Fair enough. And then you mentioned potential repositionings, upbrandings in Sheraton Key West and Sonoma. Will those both stay within the Marriott brand family?

Mark Brugger -- President and Chief Executive Officer

So a little different situation. Sonoma, we have a long-term management agreement currently with the Renaissance brand. So we are looking at that situation. If you compare the rate that we're getting versus the luxury, Tom said, within that market, there is a $145 delta. So we think if we can get into some of our luxury channels that we can close some of that $145, then it would be a very strong return for us.

So the conversations we're having with Marriott is, given the fact they will put in Michael Mina restaurant and upgrade the spa, and it's a beautiful little resort, are there other brands within the Marriott brand family that may be more appropriate for the resort and also allow us to capture more of that luxury rate. So that's kind of the set up there, and we're in active conversations about trying to figure out what the right solution is with them.

The Sheraton, it is a franchise agreement which could be terminated. Yeah, we at least have that option, but we're in discussions with them too about -- yeah, we think that given the quality and the size of those rooms and the fact that's on the beach in Key West that it would be better either as a lifestyle brand within Marriott family or even potentially independent. We just see a lot of upside at that particular property. So we're trying to make sure we get the right brand or right strategy matched up with the quality of the asset.

Chris Woronka -- Deutsche Bank -- Analyst

Okay. Very good. Thanks, Mark.

Operator

Thank you. Our next question comes from Stephen Grambling of Goldman Sachs. Your line is open.

Stephen Grambling -- Goldman Sachs Group -- Analyst

Hey, good morning. One broad one. I guess with the consolidation in the space, how do you assess any impact of the competitive environment from those actions? Does -- I guess, if you didn't think about the benefits or lack thereof and you think about your own positioning going forward?

Mark Brugger -- President and Chief Executive Officer

It's a complicated question. So, this is Mark. I'll take that one. So, we're a fan of activity within the space. We're a fan of people making statements about valuation, we believe that activity within the space adds interest and in some ways having one less similar size peer out there is probably advantageous to us. And, frankly, if someone has a higher multiple, it adds value for shareholders. We think that that's the right thing to do and people should be active on that front.

I think there's probably -- investors are going to make distinctions about very big lodging REITs and then, what I call, midsize REITs and there's pros and cons to both of those strategies. There clearly it's harder to move the needle, but probably have some advantages on cost of capital and the debt side and liquidity and then the advantage we have at our size being (technical difficulty) assets is much easier to move the needle. So I think investors will have to make some decisions about which today, I think, will deliver better returns over the next several years, but I think stepping back where we like the activity, we think it's good for our valuation, I think we like to see more of it.

Stephen Grambling -- Goldman Sachs Group -- Analyst

That's good color. And final follow up to Chris's question. Do you find that the math in evaluating the benefits of being branded versus independents have evolved within your portfolio, whether it actually the distribution cost, capital requirements or otherwise?

Mark Brugger -- President and Chief Executive Officer

I think everyone's -- it's own business case. So we've seen a case where we bought independent hotel in New York, but the Koryo (ph) brand and literally the rate went up $50 the next week. And then other markets like Key West, where the market runs over 80% occupancy and it's a resort destination people like to really Phoenix experience. The brand proposition probably is not as strong. So I'm not sure it's evolved or that it's just more focused on the individual market and the individual assets to make sure you're matching up with the right strategy.

Stephen Grambling -- Goldman Sachs Group -- Analyst

And maybe one last quick one, if I could sneak it in. I know you talked about the impact from Starwood and Marriott, the integration there. I don't think I caught anything on the Bonvoy launch specifically, are you anticipating any revenue impact rather surprising changes as that is being rolled out in market now?

Mark Brugger -- President and Chief Executive Officer

Well, so they're rolling out a lot of them and they're -- you would you hope that your brand partners are being proactive in thinking about the future and -- but they're moving fast on, boy, probably a dozen different fronts. So on the Bonvoy and rewards program, they've made some changes and like you would expect when they were on new programs, for some of their hotels, it's been really good and some we need to make adjustments with the new program.

So, I would say, our rewards cost in Bonvoy are down across our system, which has been good. Some of the contributions in some hotels are up and frankly some are down. And so, we're working with them and they are agreeable to make adjustments where it's fair to make adjustments. I'd say the one that we're -- we have been a little bit focused on is they -- what -- on your Bonvoy, they've given the leads who are their premium folks, free breakfast at resorts and they compensate us I think $7 a breakfast. But that's one that in some markets make sense and in some markets probably is it's too expensive. So that would be one that under the Bonvoy program we're working with them on solutions to be equitable.

Stephen Grambling -- Goldman Sachs Group -- Analyst

Great. Thank you so much for the color.

Operator

Thank you. Our next question comes from Lukas Hartwich of Green Street Advisors. Your line is open.

Lukas Hartwich -- Green Street Advisors -- Analyst

Thanks. Hey, guys, I just have one. It sounds like the booking pace looks pretty good. I'm just curious what the prospects are for translating that into EBITDA growth?

Mark Brugger -- President and Chief Executive Officer

So stepping back, I think we are very encouraged about the -- in the quarter for the balance of the year bookings, but we started given our citywide footprint for this year, which full up next year, but it's still -- we're still slightly negative on booking pace for the full year. So we're still implementing various strategies in our backfill (ph) with transient and really being careful about how we're thinking about luring the new group in there. So It's up 2.7 second quarter, which is good and pace has picked up, but next year is really that the group's story for DiamondRock in 2020.

Lukas Hartwich -- Green Street Advisors -- Analyst

And I guess maybe my question is more directed to 2020 in terms of the EBITDA growth potential there?

Mark Brugger -- President and Chief Executive Officer

Yeah. So we'll have a very strong set up in 2020 on the group side. So I think from that, we would expect substantial F&B flow through with banquet business, it's associated with that, but that's just represents a little over a-third of our business and they will still depend on the general economy and the transient outlook will still play into our 2020 results and frankly sitting here today it's a little early to say what those trends will look like.

Lukas Hartwich -- Green Street Advisors -- Analyst

Great. Thank you.

Operator

Thank you. And our next question comes from Patrick Charles SunTrust. Your line is open.

Charles Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Hi. Good morning.

Mark Brugger -- President and Chief Executive Officer

Good morning, Patrick.

Charles Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Mark, I got a couple of questions for you. First is, percentage wise, where do you stand at group as a percentage of your total business and where would you ideally like to see that in the next one to two years?

Mark Brugger -- President and Chief Executive Officer

We're just over 30%, so we're between 30% and 33% depending how you measure it in group. We kind of like where that is. Yeah, we try to stay relatively balanced between business transient, group and then leisure and other. We'll probably increase leisure and other as we move more into resorts. But, as you know, different segments performed differently depending where you are in the cycle. So we want to be relatively balanced just as kind of good capital allocators and make sure that we're not going to have uneven results throughout the cycle by being over-emphasized in one versus the other. I think we had to pick -- we pick a little bit more on leisure for the full cycle. But we like where our group is. I think, over time, we'll probably -- we're unlikely to do another convention center hotel. I think -- well, let's continue to have a more diversified platform on that front.

Charles Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. Thank you. And then, perhaps, a modeling question here. I'm curious why adjusted FFO per share isn't going up after you had some pretty significant share repurchases in 1Q, but keeping the dollar amount of FFO unchanged?

Mark Brugger -- President and Chief Executive Officer

Yeah. So on full year basis, Pat, when we think about it, it's going to be the weightage -- the weighted shares -- weighted average shares outstanding for the full year. So you'll see that impact a little more as we flow through out the full year and that's why you didn't see that significant impact that you're looking for.

Charles Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. Thank you.

Operator

Thank you. (Operator Instructions) Our next question comes from Anthony Powell of Barclays. Your line is open.

Anthony Powell -- Barclays Capital -- Analyst

Hi, good morning. And the question on Frenchman's Reef and sorry if you have -- and if you've gone over this already. Can you remind us what the total proceeds have gotten so far from insurer have been? What the current, I guess, rebuild will cost? And let's say you get a negative outcome in the negotiations, how does that change your underwriting or just open a project or your expectations there?

Mark Brugger -- President and Chief Executive Officer

Okay. So there is a lot there. So we tried to get back a little bit. So we're fully committed to rebuilding the resort, it's under way, there is a 100 people probably on site this week and we'll ramp up by end of June, we'll have 300 people in site rebuilding that resort. We're going fast, we're very excited about the time, we're very excited about, I think, what that hotel potential is for that resort, which we continue to get good news on that front as we reposition and get the F&B, et cetera, setup. So that's going full-bore.

We probably received -- so the first $100 million of syndicate, we've received almost all of that money, so $92 million, $93 million at least of that first $100 million. Above the hundreds mostly, one excess carrier and they are the ones that we're currently in dispute with. The total rebuild cost of the resort, including the owner elective, will be over quarter of a billion dollars, including the money we've already spent on it. And we anticipate that it will reopen in the middle of 2020. We don't anticipate -- I mean, inevitably these things get negotiated, if we settle or if we go to juries, there will be things that we dispute, but we feel fairly confident in our legal position and in our interpretation of the insurance policy.

Anthony Powell -- Barclays Capital -- Analyst

Got it. Okay. And I think there was -- you have some USVI guarantees and some, I guess, propose, I guess, brand investment, how much would those total?

Mark Brugger -- President and Chief Executive Officer

So the -- we did an RFP process for the brand and we got several proposals with more than $20 million of key money. So that's a reasonable anticipation by our investors, expectations to be more in that. And then we're working with the USVI government partly to rebuild the infrastructure to a hurricane proof level and also to build on our site a hurricane shelter, and so they would help pay for the infrastructure and the shelter on-site, which we think is the right thing to do not only for the resort but also for the people of the Virgin islands and that could become to nightflowers (ph) till that's been finalized now.

Anthony Powell -- Barclays Capital -- Analyst

Thanks. Okay. And what you comment or what you read on the Marriott/Expedia deal and how that's turned up owners and I think there are some provision in that deal about transient bookings and short-term bookings, so if you talk about that opportunity that would be great?

Mark Brugger -- President and Chief Executive Officer

Yeah. I think we're excited that they reached the deal, because we think that as long as there is control of the deal and we have more ability to yield out their OTAs when we want to yield amount, which was really the problem we had before. We think that's a win for owners. Frankly, there is many details of the agreement that they did not yet shared, so obviously lower commission, but the control of the data -- we're still learning about exactly what that means. But clearly having the ability to yield out the Expedia business when we don't want it is a real win for us.

Anthony Powell -- Barclays Capital -- Analyst

All right. Great. Thank you.

Mark Brugger -- President and Chief Executive Officer

Thank you.

Operator

Thank you. And, at this time, I have no other questions in the queue. I'd like to turn the call back over to Mark Brugger for closing comments.

Mark Brugger -- President and Chief Executive Officer

Thank you, Norma. Well, everyone on the call today, thank you very much for your interest and support of DiamondRock and we look forward to updating you next quarter. Take care.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.

Duration: 44 minutes

Call participants:

Sean Kensil -- Director of Financial Planning & Analysis

Mark Brugger -- President and Chief Executive Officer

Jay Lecoryelle Johnson -- Executive Vice President and Chief Financial Officer

Thomas Healy -- Executive Vice President of Asset Management and Chief Operating Officer

Michael Bellisario -- Robert W. Baird & Co. Inc. -- Analyst

Chris Woronka -- Deutsche Bank -- Analyst

Stephen Grambling -- Goldman Sachs Group -- Analyst

Lukas Hartwich -- Green Street Advisors -- Analyst

Charles Patrick Scholes -- SunTrust Robinson Humphrey, Inc. -- Analyst

Anthony Powell -- Barclays Capital -- Analyst

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