UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported):

October 15, 2008

DiamondRock Hospitality Company

(Exact name of registrant as specified in charter)

6903 Rockledge Drive, Suite 800
Bethesda,  MD 20817
(Address of Principal Executive Offices)  (Zip Code)

(240) 744-1150
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.  Results of Operations and Financial Condition

The information in this Current Report on Form 8-K is furnished under Item 2.02 - “Results of Operations and Financial Condition.” Such information, including the exhibits attached hereto, shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

On October 15, 2008, DiamondRock Hospitality Company (the “Company”) issued a press release announcing its financial results for its third fiscal quarter. The text of the press release is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

ITEM 9.01.  Financial Statements and Exhibits.

(d)       Exhibits.

See Index to Exhibits attached hereto.

2

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

3

EXHIBIT INDEX

4

Exhibit 99.1

COMPANY CONTACT

Chris King

(240) 744-1150

FOR IMMEDIATE RELEASE

WEDNESDAY, OCTOBER 15, 2008

DIAMONDROCK HOSPITALITY COMPANY REPORTS THIRD QUARTER RESULTS AND MEETS GUIDANCE

BETHESDA, Maryland, Wednesday October 15, 2008 – DiamondRock Hospitality Company (the “Company”) (NYSE: DRH) today announced results of operations for its third fiscal quarter 2008, which ended on September 5, 2008.  The Company is a lodging focused real estate investment trust that owns twenty premium hotels in North America.

Third Quarter 2008 Highlights

·                  RevPAR: The Company’s same-store RevPAR decreased 3.0 percent compared to the same period in 2007.

·                  Hotel Adjusted EBITDA Margins: The Company’s same-store Hotel Adjusted EBITDA margins decreased 207 basis points compared to the same period in 2007.

·                  Adjusted EBITDA: The Company’s Adjusted EBITDA was $40.5 million.

·                  Adjusted FFO: The Company’s adjusted funds from operations (“Adjusted FFO”) was $31.8 million and Adjusted FFO per diluted share was $0.34.

·                  Dividend: The Company paid a quarterly dividend of $0.25 per share during the third quarter.

“In light of the challenging economic trends and their related impact on the travel industry, we are pleased to report quarterly results that met our expectations and prior guidance.  We expect fundamentals to remain difficult over the next several quarters and are managing the business accordingly.  The management team is intensely focused on revenue enhancement strategies and cost containment measures in order to maximize hotel profits,” stated Mark W. Brugger, Chief Executive Officer of DiamondRock Hospitality Company.

1

Operating Results

Please see “Certain Definitions” and “Non-GAAP Financial Measures” attached to this press release for an explanation of the terms “EBITDA,” “Adjusted EBITDA,” “Hotel Adjusted EBITDA Margins,” “FFO,” “Adjusted FFO” and “same-store.”

For the third quarter ended September 5, 2008, the Company reported the following:

·                  Revenues of $161.4 million compared to $168.0 million for the comparable period in 2007.

·                  Adjusted EBITDA of $40.5 million compared to $45.8 million for the comparable period in 2007.

·                  Adjusted FFO and Adjusted FFO per diluted share of $31.8 million and $0.34, respectively, compared to $34.4 million and $0.36, respectively, for the comparable period in 2007.

·                  Net income of $12.2 million (or $0.13 per diluted share) compared to $15.9 million (or $0.17 per diluted share) for the comparable period in 2007.

Same-store RevPAR for the third quarter decreased 3.0 percent to $129.33 from $133.27 for the comparable period in 2007, driven by a 1.9 percentage point decrease in occupancy (from 78.4 percent to 76.5 percent) and a 0.6 percent decrease in the average daily rate (from $169.97 to $169.00).  Same-store Hotel Adjusted EBITDA margins for its hotels decreased 207 basis points from the comparable period in the prior year.

For the period from January 1, 2008 to September 5, 2008, the Company reported the following:

·                  Revenues of $475.3 million compared to $481.3 million for the comparable period in 2007.

·                  Adjusted EBITDA of $124.2 million compared to $134.4 million for the comparable period in 2007.

·                  Adjusted FFO and Adjusted FFO per diluted share of $96.3 million and $1.02, respectively, compared to $98.2 million and $1.05, respectively, for the comparable period in 2007.

·                  Net income of $39.1 million (or $0.41 per diluted share) compared to $43.2 million (or $0.46 per diluted share) for the comparable period in 2007.

Same-store RevPAR for year-to-date decreased 0.4 percent to $130.12 from $130.60 for the comparable period in 2007, driven by a 1.4 percentage point decrease in occupancy (from 75.2 percent to 73.8 percent) partially offset by a 1.5 percent increase in the average daily rate (from $173.67 to $176.35). Year-to-date, same-store Hotel Adjusted EBITDA margins for its hotels decreased 142 basis points from the comparable period in the prior year.

Operating Results Compared to Prior Guidance

The following is a chart showing actual third quarter 2008 results compared to guidance for the third quarter 2008:

2

Share Repurchases

In the beginning of this year, the Board of Directors authorized the Company to repurchase up to 4.8 million shares of its common stock.  During the third quarter, the Company completed the share repurchase program at an average price of $10.15 per share.

Balance Sheet

As of the end of the third quarter, the Company had total assets of approximately $2.1 billion. Cash and cash equivalents were $58.7 million, including $35.0 million of restricted cash.

As of the end of the third quarter, the Company had approximately $898.6 million of total debt outstanding.  The Company’s debt has a weighted average interest rate of 5.4 percent and is comprised of limited recourse, non cross-collateralized, property-specific mortgages and $76.0 million outstanding under its $200 million senior unsecured credit facility.  The Company’s liquidity is enhanced by its strategy of keeping eight of its 20 hotels unencumbered by mortgage debt.

After the end of the third quarter, in order to manage perceived risks of some bank participants during the recent market turmoil, the Company borrowed an additional $55 million under its credit facility.  The Company currently has approximately $110 million in cash and cash equivalents, including $35 million of restricted cash.

The Company does not have any material near-term maturities coming due.  As of September 5, 2008, the Company’s debt has a weighted average maturity of 6.5 years.  In December 2009 and January 2010, two of the Company’s mortgages, representing 8% of total outstanding debt, will mature and the Company expects it will be able to refinance such debt.  After these two mortgages mature, the Company does not have any significant mortgages that mature prior to 2015.  The Company’s credit facility will expire in February 2012, including a one year extension, which is subject to the Company’s compliance with certain conditions.

As of the end of the third quarter, the Company continued to own 100% of its properties directly and has never issued operating partnership units or preferred stock.

Outlook

The Company is providing guidance, but does not undertake to update it for any developments in its business.  Achievement of the anticipated results is subject to the risks disclosed in the Company’s filings with the Securities and Exchange Commission.

The Company is reaffirming its guidance for the full year 2008.

3

·                  Same-store RevPAR to decrease 1 to 3 percent.

·                  Adjusted EBITDA of $175 to $181 million.

·                  Adjusted FFO of $136 to $140 million.

·                  Adjusted FFO per share of $1.46 to $1.51 based on 93.2 million weighted average diluted shares for the full year and 90.5 million weighted average diluted shares for the fourth quarter.

Dividends

On September 16, 2008, the Company paid a cash dividend of $0.25 per share to shareholders of record as of September 5, 2008, the last day of the third fiscal quarter.

In light of the current challenging economic conditions, the Company is evaluating the merits of reducing its future dividend payments in order to align the dividend payout with the reduced cash flow projections and to increase the ability to potentially acquire distressed assets or otherwise strategically take advantage of the market dislocation.  The Company expects to complete this evaluation and review it with its Board of Directors later this year and does not expect to make any decisions on the level of future dividends until that review is completed.

Major Capital Expenditures

DiamondRock has made significant capital investments in its hotels.  In 2008, the Company plans to commence or complete approximately $70 to $80 million of capital improvements at its hotels.  The Company spent $49.7 million on capital improvements at its hotels from January 1, 2008 to September 5, 2008, of which approximately 40% was paid from corporate funds.  The most significant capital projects for 2008 are as follows:

·                  Chicago Marriott Downtown:  The Company completed a $35 million renovation of the hotel.  Approximately $10 million was paid from corporate funds, with the balance coming from the hotel’s escrow funds and a contribution from Marriott International.  The project included a complete renovation of all the meeting and ballrooms, adding 17,000 square feet of new meeting space, reconcepting and relocating the restaurant, expanding the lobby bar and creating a Marriott “great room” in the lobby.  The project began during the third quarter of 2007 and was substantially completed in April 2008.  The estimated disruption of approximately $2 million to Hotel Adjusted EBITDA, mainly associated with the ballroom renovations, primarily impacted the first quarter of 2008.

·                  Westin Boston Waterfront: The Company completed the construction of additional meeting rooms in the building attached to the hotel.  The $19 million project included the creation of over 37,000 square feet of meeting and exhibition space.  The project began in the third quarter of 2007 and was substantially completed in the first quarter of 2008.

4

·                  Chicago Conrad: The Company completed its renovation of the guestrooms and corridors during the first quarter and the upgrade of the front entrance repositioning during the third quarter of 2008.

·                  Salt Lake City Marriott: The Company plans to significantly renovate the guestrooms at the hotel beginning in the fourth quarter of 2008, almost all of which will be funded by the hotel’s escrow funds.

Earnings Call

The Company will host a conference call to discuss its third quarter 2008 results and its 2008 guidance on Wednesday, October 15, 2008, at 10:00 am Eastern Time (ET).  To participate in the live call, investors are invited to dial 1-888-680-0892 (for domestic callers) or 617-213-4858 (for international callers).  The participant passcode is 29065294. A live webcast of the call will be available via the investor relations section of DiamondRock Hospitality Company’s website at www.drhc.com. A replay of the webcast will also be archived on the website for one year.

About the Company

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of premium hotel properties.  DiamondRock owns 20 hotels with approximately 9,600 guestrooms.  For further information, please visit DiamondRock Hospitality Company’s website at www.drhc.com.

This press release contains forward-looking statements within the meaning of federal securities laws and regulations. These forward-looking statements are identified by their use of terms and phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “continue” and other similar terms and phrases, including references to assumptions and forecasts of future results.  Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made.  These risks include, but are not limited to: national and local economic and business conditions that will affect occupancy rates at our hotels and the demand for hotel products and services; operating risks associated with the hotel business; risks associated with the level of our indebtedness and our ability to meet covenants in our debt agreements; relationships with property managers; our ability to maintain our properties in a first-class manner, including meeting capital expenditure requirements; our ability to complete planned renovation on budget; our ability to compete effectively in areas such as access, location, quality of accommodations and room rate structures; changes in travel patterns, taxes and government regulations which influence or determine wages, prices, construction procedures and costs; our ability to complete acquisitions; our ability to raise equity capital; the performance of acquired properties after they are acquired; necessary capital expenditures on the acquired properties; and our ability to continue to satisfy complex rules in order for us to qualify as a REIT for federal income tax purposes; and other risks and uncertainties associated with our business described from time to time in our filings with the Securities and Exchange Commission.  Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be

5

attained or that any deviation will not be material. All information in this release is as of the date of this release, and we undertake no obligation to update any forward-looking statement to conform the statement to actual results or changes in our expectations.

Reporting Periods for Statement of Operations

The results reported in the Company’s consolidated statements of operations are based on results of its hotels reported by hotel managers. The Company’s hotel managers use different reporting periods. Marriott International, the manager of most of the Company’s properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen weeks for the fourth quarter of the year for its domestic managed hotels. In contrast, Marriott International for its non-domestic hotels (including Frenchman’s Reef), Noble Management Group, LLC, manager of the Westin Atlanta North, Vail Resorts, manager of the Vail Marriott, Hilton Hotels Corporation, manager of the Conrad Chicago, and Westin Hotel Management, L.P., manager of the Westin Boston Waterfront report results on a monthly basis. Additionally, the Company, as a REIT, is required by U.S. federal tax laws to report results on a calendar year basis. As a result, the Company has adopted the reporting periods used by Marriott International for its domestic hotels, except that the fiscal year always ends on December 31 to comply with REIT rules. The first three fiscal quarters end on the same day as Marriott International’s fiscal quarters but the fourth quarter ends on December 31 and full year results, as reported in the statement of operations, always include the same number of days as the calendar year.

Two consequences of the reporting cycle the Company has adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) the first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years.

While the reporting calendar the Company adopted is more closely aligned with the reporting calendar used by the manager of most of its properties, one final consequence of the calendar is the Company is unable to report any results for Frenchman’s Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, or the Westin Boston Waterfront for the month of operations that ends after its fiscal quarter-end because neither Vail Resorts, Noble Management Group, LLC, Hilton Hotels Corporation, Westin Hotel Management, L.P., nor Marriott International make mid-month results available. As a result, the quarterly results of operations include results from Frenchman’s Reef, Westin Atlanta North, Vail Marriott, Conrad Chicago, and the Westin Boston Waterfront as follows: first quarter (January and February), second quarter (March to May), third quarter (June to August) and fourth quarter (September to December). While this does not affect full-year results, it does affect the reporting of quarterly results.

Ground Leases

Four of the Company’s hotels are subject to ground leases: Bethesda Marriott Suites, Courtyard Manhattan Fifth Avenue, Salt Lake City Downtown Marriott, and the Westin Boston Waterfront.  In addition, part of a parking structure at a fifth hotel and two golf courses at two additional hotels are also subject to ground leases.  In accordance with GAAP, the Company records rent expense on a straight-line basis for ground leases that provide minimal rental payments that

6

increase in pre-established amounts over the remaining term of the ground lease.  For the third fiscal quarter 2008, contractual cash rent payable on the ground leases totaled $0.5 million and the Company recorded approximately $2.3 million in ground rent expense.  The non-cash portion of ground rent expense recorded for the third fiscal quarter 2008 was $1.8 million.

7

DIAMONDROCK HOSPITALITY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

8

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Fiscal Quarters Ended September 5, 2008 and September 7, 2007 and
the Periods from January 1, 2008 to September 5, 2008 and January 1, 2007 to September 7, 2007
(in thousands, except per share amounts)

9

DIAMONDROCK HOSPITALITY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Periods from January 1, 2008 to September 5, 2008 and January 1, 2007 to September 7, 2007
(in thousands)

10

DIAMONDROCK HOSPITALITY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For the Periods from January 1, 2008 to September 5, 2008 and January 1, 2007 to September 7, 2007

(in thousands)

11

Non-GAAP Financial Measures

We use the following four non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: (1) EBITDA, (2) Adjusted EBITDA, (3) FFO and (4) Adjusted FFO.

EBITDA represents net income excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization. We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortization) from our operating results. We also use EBITDA as one measure in determining the value of hotel acquisitions and dispositions.

(1)               Includes $0.1 million of income tax benefit included in discontinued operations for the fiscal quarter ended September 7, 2007.

(2)               Includes $0.3 million of depreciation expense included in discontinued operations for the fiscal quarter ended September 7, 2007.

(1)               Includes $0.2 million of income tax benefit included in discontinued operations for the period from January 1, 2007 to September 7, 2007.

(2)               Includes $0.8 million of depreciation expense included in discontinued operations for the period from January 1, 2007 to September 7, 2007.

We also evaluate our performance by reviewing Adjusted EBITDA because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:

·                  Non-Cash Ground Rent: We exclude the non-cash expense incurred from straight lining the rent from our ground lease obligations and the non-cash amortization of our favorable lease assets.

·                  The impact of the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with our acquisitions of the Bethesda Marriott Suites and the Chicago Marriott Downtown.  The

12

amortization of the unfavorable contract liabilities does not reflect the underlying performance of the Company.

·                  Cumulative effect of a change in accounting principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle.  We exclude these one-time adjustments because they do not reflect our actual performance for that period.

·                  Gains from Early Extinguishment of Debt: We exclude the effect of gains recorded on the early extinguishment of debt because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets.

·                  Impairment Losses and Gains or Losses on Dispositions: We exclude the effect of impairment losses and gains or losses on dispositions recorded because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets.  In addition, we believe that impairment charges are similar to depreciation expense, which is also excluded from EBITDA.

We compute FFO in accordance with standards established by NAREIT (which defines FFO as net income determined in accordance with GAAP), excluding gains (losses) from sales of property, plus depreciation and amortization. We believe that the presentation of FFO provides useful information to investors regarding our operating performance because it is a measure of our operations without regard to specified non-cash items, such as real estate depreciation and amortization and gain or loss on sale of assets. We also use FFO as one measure in assessing our results.

13

(1)               Includes $0.3 million of depreciation expense included in discontinued operations for the fiscal quarter ended September 7, 2007.

(1)               Includes $0.8 million of depreciation expense included in discontinued operations for the period from January 1, 2007 to September 7, 2007.

We also evaluate our performance by reviewing Adjusted FFO because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information regarding our ongoing operating performance and that the presentation of Adjusted FFO, when combined with the primary GAAP presentation of net income, is beneficial to a complete understanding of our operating performance. We adjust FFO for the following items, which may occur in any period, and refer to this measure as Adjusted FFO:

·                  Non-Cash Ground Rent: We exclude the non-cash expense incurred from straight lining the rent from our ground lease obligations and the non-cash amortization of our favorable lease assets.

·                  The impact of the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with our acquisitions of the Bethesda Marriott Suites and the Chicago Marriott Downtown.  The amortization of the unfavorable contract liabilities does not reflect the underlying performance of the Company.

·                  Cumulative effect of a change in accounting principle: Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle.  We exclude these one-time adjustments because they do not reflect our actual performance for that period.

·                  Gains from Early Extinguishment of Debt: We exclude the effect of gains recorded on the early extinguishment of debt because we believe that including them in FFO is not consistent with reflecting the ongoing performance of our remaining assets.

·                  Impairment Losses: We exclude the effect of impairment losses recorded because we believe that including them in FFO is not consistent with reflecting the ongoing performance of our remaining assets.  In addition, we believe that impairment charges are similar to gains or losses on dispositions and depreciation expense, both of which are also excluded from FFO.

14

Certain Definitions

In this release, when we discuss “Hotel Adjusted EBITDA,” we exclude from Hotel EBITDA the non-cash expense incurred by the hotels due to the straight lining of the rent from our ground lease obligations, the non-cash amortization of our favorable lease assets, and the non-cash amortization of the unfavorable contract liabilities recorded in conjunction with the acquisitions of the Bethesda Marriott Suites and the Chicago Marriott Downtown. Hotel EBITDA represents hotel net income excluding: (1) interest expense; (2) income taxes; and (3) depreciation and amortization. Hotel Adjusted EBITDA margins are calculated as Hotel Adjusted EBITDA divided by total hotel revenues.

Market Capitalization as of September 5, 2008
(in thousands, except per share data)

15

Debt Summary as of September 5, 2008

(dollars in thousands)

16

Pro Forma Operating Statistics