Good day, ladies and gentlemen, and welcome to the Second Quarter 2011 DiamondRock Hospitality Company Earnings Conference Call. My name is Stacy, and I'll be your conference moderator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, to Mr. Mark Brugger, Chief Executive Officer. Please proceed.

Thanks, Stacy. Good afternoon, everyone, and welcome to DiamondRock Second Quarter 2011 Earnings Conference Call. Today I'm joined by John Williams, our President and Chief Operating Officer; as well as Sean Mahoney, our Chief Financial Officer. As usual, before we begin, I would just like to remind everyone many of our comments today are not historical facts and are considered forward-looking statements under federal securities law. They may not be updated in the future. These statements are subject to numerous risks and uncertainties described in our Securities filings. Moreover, as we discuss certain non-GAAP financial measures, it may be helpful to review the reconciliation to GAAP in our earnings press release. Let me start the call today by saying that the lodging recovery is going well. As the industry is coming off six consecutive quarters of demand growth, we continue to be very optimistic about the future of the travel business. With recent mix, macroeconomic indicators and headline news, it's understandable that some investors have grown more cautious. However, based on the trends we are seeing in our portfolio and the industry, comparison to trough results and constrained new hotel supply, it is our strong belief that we are setting up for a significant multi-year recovery in lodging. In particular, we are very optimistic about DiamondRock during this cycle. Despite some unevenness in the first half of the year, working pace and transient trends support a stronger second half of 2011. More importantly, we expect our portfolio to perform very well in 2012 due to several factors including: One, strong city-wide calendars in Chicago and Boston, our 2 largest group markets; two, a renovated and repositioned Frenchman's Reef back online; three, increased exposure to New York City; and four, strong growth from Salt Lake City Marriott due to the opening…

Thanks, Mark. For the second quarter, DiamondRock's pro forma RevPAR, excluding Frenchman's Reef, increased 6.4% to just over $124. Our RevPAR growth was driven by a 4.2% increase in ADR and a 1.5 percentage point gain in occupancy. We're pleased with the portfolio of room revenue performance, especially in light of the group challenges Mark mentioned in Boston and Chicago. Our RevPAR growth was propelled by a 9.3% increase in business transient revenue, which represents our most profitable segment. Our business transient revenue increased to 31% of total room revenue for the quarter, which is up from 29% in 2010. We're still below our historic business transient mix of 35% of total revenue. We're encouraged by the continuing demand growth from this segment, as this is a segment that is most susceptible to negative economic news. Leisure revenue was flat due to selling 5,400 fewer room nights or 2.7% of total portfolio leisure rooms, as a result of displacement from the renovation of Frenchman’s Reef. As Mark mentioned, our second quarter group room night production was lower than 2010. We sold 9,100 or 3.5% fewer group rooms than last year, primarily as a result of difficult comps and city-wide challenges in Chicago, Boston and our 2 Texas properties. The lower rooms sold negatively impacted our high-margin banquet sales for the quarter. These 4 hotels accounted for 100% of the portfolio of banquet and AV sales shortfall to Q2 2010. It's encouraging that the portfolio group pace indicates a stronger second half of 2011 and a very good 2012. For the second half of the year, group booking pace by revenue is up about 2.7%, with Boston Westin pacing impressively at up over 15%. Most encouraging, 2012 booking pace is up a robust 10% compared to the same time last year…

Thanks. As John noted, we remain constructive on lodging fundamentals. Demand continues to improve. Supply remains fairly limited, dropping below 1% in the second quarter. Accordingly, our outlook for the lodging industry is for full-service hotels to generate RevPAR increases in 2011 of 6% to 8%. We expect DiamondRock's portfolio to deliver RevPAR growth in the range of 6% to 8% as well, with our current operator forecast around the middle of that range. Adjusted EBITDA is expected to be $172 million to $177 million. This range incorporates both the incremental $1 million disruption in Frenchman's Reef and the incremental $1 million in property taxes at the Westin Boston. Based on our EBITDA expectation, adjusted FFO per share will range from $0.66 to $0.69 for 2011. In concluding the prepared remarks, let me say that DiamondRock is well positioned to deliver shareholder value for several key reasons. One, our portfolio has tremendous upside in this recovery. As hotel EBITDA returns just to prior peak, EBITDA at DiamondRock's comparable hotels will increase more than 45% over 2010. Two, our acquisitions are creating shareholder value. DiamondRock not only bought at attractive prices with assets that have value-add opportunities, these deals have improved our portfolio quality and position the company for even higher growth going forward. Three, there are numerous value-add opportunities to be mined within our existing portfolio. We've demonstrated our ability to create value with repositionings, rebrandings, parking initiatives, cost containment efforts and energy programs. Going forward, we have significant upside opportunities the include the Frenchman’s Reef reposition, the energy project that is under way, the repositioning and rebranding opportunities at the Lexington Hotel and the Conrad Chicago, and the expansion parcel lot at our Westin Boston. Lastly, we believe that our capital structure continues to distinguish DiamondRock from many of its peers, with our conservative debt level, no preferred equity issuance and a significant and well-covered dividend. With that, we would now like to open up the call for any questions you might have.

[Operator Instructions] Your first question comes from the line of Will Marks with JMP Securities.

The first question, I just want to ask a clarification. So that change in guidance, the $1 million from Frenchman’s Reef already has taken place and the $1 million property tax has not yet, is that correct?

Substantially, the $1 million property tax is the back half for the year. We just got that assessment, so that will kick in starting in July. And most of the incremental $1 million in disruption was in the second quarter.

And then in terms of the second quarter, what else came as a surprise to you, if anything?

Well, I think the group F&D[ph] contribution was lower than we anticipated. And we mentioned particularly at the Boston Westin and Chicago Marriott. So we would have anticipated -- we originally anticipated that the group spend of the groups coming to the hotels was going to be stronger than what actually came through.

Few other things, one, you mentioned that the 3 recent acquisitions in the 2012 multiples individually and in an aggregate. Can you give us a sense of what kind of growth assumptions you have for those?

Let me try to do the math. I don't have it on a consolidated basis. I'll have to get back to you on that one.

On a couple of other things. Just in clarity of the margins in the press release, it looks like the 3 hotels with maybe the most negative performance, Austin, Fort Worth and Vail, any sense -- was there anything going on in any of those 3 markets that stands out?

Will, this is John. Yes. In Austin, there's been a tremendous increase in the number of rooms in downtown Austin. So where we used to get compression on a fairly common basis from citywide conventions, we no longer get that because of the increase in supply, and there's more coming. So the hotel has had to do much more in-house booking, which was a little bit of an adjustment in their marketing efforts. We think they're making progress. Their 2012 pace is very good, and -- very, very good, and the back half of the year, I think, has promise. In Fort Worth, as you know, the city subsidized the Omni to be built next to the Convention Center. That's kind of thinned things out for everyone, and the hotels is still adjusting to that and the Omni is still in the stabilization process. In Vail, we had a first quarter issue. We had new supply in the market to the tune of about 38% of the Vail supply. It was a new Four Seasons and it was rebranding of a hotel, The Sebastian, which also added rooms. That created -- that and the typical demand generators on the East Coast and Dallas were not as strong as the hotel had anticipated. So we didn't have a big enough group base, so we lost some business there.

Just one final question. Can you explain the issue with the Conrad? You had a great quarter, and just what's going on exactly there?

The Conrad is having a great -- had a great second quarter. And a lot of that has to do with the fact that it is closer on to the luxury segment than the big Marriott. And of course, they went down harder than the downtown Marriott, so their comeback is a little stronger. Also, the hotel has focused very effectively on corporate transient and small group. And so they've done a very good job in the last several months of booking small groups and thereby, compressing the hotel and getting better rates on the corporate transient.

This is Mark. Just to add on the brand itself, Hilton failed its performance test under the management agreement. So they're operating currently under a 90-day -- a 30-day management agreement at our option. So we're currently evaluating talking to Hilton and another global operator about the best way forward for that hotel. Well, just a look back on, I know you dropped off your question earlier on the acquisitions, that assuming an 18% EBIT increase in 2012 over 2011? And also I'd note, the 2 Denver deals both were renovated in Q1 of 2011, so that's an easy comp in part for them.

Your next question comes from the line of Sule Laypan with Barclays Capital.

Hi, it's Sule. I just was wondering, as you think about future acquisitions, which markets are most attractive right now in terms of pricing? And on the flip side, are there any markets that are not obviously are getting too pricy?

Let's see. I think at this point, the cap rates that we have seen in 2011 versus 2010 have been materially lower this year. I think everyone's focused on the coastal cities, and I think that's compressing cap rates. We had looked at a couple of deals recently, where the pricing just got out of our range. So if that sort of thing continues, then cap rates will continue to compress. But I think what we're seeing, with stock prices doing what they're doing, I think we're going to see a slowdown in the price escalation for the short term anyway. In terms of markets where pricing is attractive, they tend to be markets that we're really not looking at because they're lower-growth markets.

And just I noticed that the Courtyard on Fifth Avenue underperformed the other in New York City hotels by a bit. I'm just wondering if there is anything specific driving that?

Yes, they had some comp set issues. The Algonquin Hotel close to the Fifth Avenue Courtyard became an Autograph Collection, a Marriott Autograph Collection, and that impacted the hotel somewhat. The Hotel Tudor became a Hilton-affiliated hotel, and that also had a bit of an impact.

Your next question comes from the line of Eli Hackel with Goldman Sachs.

Just a few questions, to shoot them off, first just kind of going on the Allerton,, can you just talk about maybe a third option such as maybe selling the loan, maybe just don't want to deal with it for the next 6 to 12 months, if that is an option. And then with the loan, it seems like you've collected a little over $1 million year-to-date, but you still expect to receive $3 million by the end of the year, is there seasonality with that?

Sure, this is Mark. As far as what we're going to do with the note, our current plan is to pursue the process. We're the secured creditor in bankruptcy. We have a series of hearings scheduled over the next several months, and that's the current course. Would we consider selling the note if we got a par offer? I think we've always indicated that we would be sellers of the note or we'd be fine being satisfied if the note close to its face amount. So those options remain. As far as the collectability, what we're getting paid on the interest, I'll let Sean answer that.

Sure. Eli, with respect to seasonality of Chicago, Chicago was a very seasonal market. The first quarter is a very slow quarter. So the Allerton is cash flow negative. During that quarter -- during the first quarter, rather, so we really didn't collect much of any interest. As we head into late spring and summer and the fall, the cash flows are much more positive with the hotel, which generates cash sufficient to pay us our interest.

And then just -- you then touched on a little bit on in the prepared remarks, but just on sales transformation, it sounds like you've made a lot of headway with Marriott there. Do you think there's more to be done? Or are the issues with the program behind it? Or what's your latest thought on the sales transformation?

This is John, again, Eli. The sales transformation process is in different stages in different markets. So while in Chicago, we hope that we've gone a long way towards solving the problem. We're not finished working on that yet. So we'll continue that in some of the newly introduced hotels into the system. And we have a little better understanding of what some of the pitfalls are, and we're trying to work with Marriott to minimize those pitfalls. But I would say -- and then in established markets, they're also making some adjustments. Even where the hotels have been in for a period of time and have shown RevPAR index increases, they're still trying to refine the program and make it better. If you look at sales transformation in general, it was a huge program that required huge adjustments, not only in sort of strategy but also just in the jobs of individual salespeople, it created a lot of uncertainty. And so everyone knew it was not going to be a simple transformation, and it's proven to be as difficult as everyone thought. But I think as we refine it and as we get more experience with it, I think everyone will be more comfortable with it. And we have every expectation that the program will be very successful.

And then just finally on the Radisson, it sounds like you're getting close to making a decision. Do you know when you'll have something buying[ph]? Also it sounded like you were planning on at least putting some more money into it. Are you definitely -- are you going to go ahead with some temporary branding or maybe you'll upgrade the rooms but won't do any type of rebranding? And then that's it.

Okay. We haven't made that branding decision yet. We're right in the middle of that process. It's a master planning process. It's an investment analysis process. And then it's, of course, a pro forma process. So we're doing all of those things as we speak. We anticipate that by late fall, we'll make an internal decision as to what to do. And then we'll finalize the planning process to get it done by spring or soon thereafter.

This is Mark. Our original underwriting on the deal has about $25 million of capital over the first several years, for not only a rooms redo but just a general upgrade and repositioning of the hotel itself. So that's in our original underwriting. We've engaged designers and have a team of architects and project managers currently working on different options for the hotel. And we're engaged in discussions, detailed discussions, with several brands about what's going to be the best ROI for our investment at the hotel. So we'll get through that over the next several months. And as John indicated, we'll hopefully have something to announce perhaps as early as the fourth quarter.

Your next question comes from the line of Josh Attie with Citigroup.

Can you talk about your RevPAR growth assumptions for the back half of the year? It seems like the first half, the portfolio is running about 5.5%. And that in order to achieve the higher end of your guidance of 7% to 8%, you'd probably need to do 10% to 12% in the fourth quarter. And I heard your comments on group bookings accelerating in Boston and Chicago, but is that the magnitude of the ramp that you're anticipating?

Josh, this is Sean. No. For the back half of the year, to hit the low end of our guidance, we need 6.3% RevPAR growth; at midpoint, approximately 8%; and the high end, a little under 10% RevPAR growth. And the reason why the math is a little different as to you, is because the weighting of our year. It's so weighted towards the fourth quarter, that that time is just that much more impactful.

I mean, it seems like, and I know you didn't give specific third and fourth quarter guidance, but it seems like most companies are guiding to kind of a weaker third quarter and a stronger fourth quarter. So it seems like toward the high end, you probably would be over 10% in the fourth quarter, if the third quarter was a little lighter.

Yes, although we're not -- we don't give specific quarterly guidance, we would expect the trends to accelerate as the year progresses.

And can you clarify, did you say the portfolio is 45% below peak?

The 2010 EBITDA, if we return prior peak, you'd have to increase the 2010 hotel EBITDA by 45%.

Versus 2010.

Right.

And how did you get -- when you did that analysis, I guess for the hotels that you owned, did you use 2007 EBITDA? And how did you treat the hotel there already operating close to that number?

We did the same thing. So we took all the hotels, and it was either 2007 or 2008 was their prior peak. So we took those, whatever the prior peak level was. Whether it was good or bad, it didn't matter, we're consistent throughout the portfolio, and then just averaged out.

Your next question comes from the line of Dennis Forst with KeyBanc.

I had a few kind of unrelated questions. First of all, the Marriott Cherry Creek, who's the manager of that property?

Sage, out of Denver, is the manager of the property.

Were they the manager prior to acquiring it?

Yes, they've been the manager since its opening in 2001.

Okay, great. And then what was the available room nights at Frenchman’s Reef during the quarter?

We'll look that up. Do you have another question, Dennis?

I'm trying to come up with what the actual RevPAR was for the quarter.

The available rooms, Dennis, were at Frenchman's Reef was 34,614 for the second quarter.

3-4-6-1-4?

Yes.

And then lastly, you were talking -- I think maybe it was John talking about the business transient business, was up 9.3% and composed 31% of room revenue. I wonder if you could give us the same numbers for leisure and group.

Sure. For the second quarter, group revenue was up. Excluding Frenchman's Reef, group revenue was up 1.1%. Leisure and discounts was up 5%. And other was up 47.6%, which makes them, as a percentage of total revenue, I'll have to get you that number -- oh, here it is. I'll have to get you that number.

Okay. The numbers for all 3 of those components?

Yes.

So that it adds up to 100?

[Indiscernible].

Your next question comes from the line of Enrique Torres with Green Street Advisors.

I wanted to see if you can give us kind of more color on the booking window. I know you had mentioned the group pace. Are you seeing -- last quarter, I mean one of the trends you mentioned was in the Quarter 4, the quarter booking was also increasing. Are you continuing to see that? Or would also categorize like the booking window as lengthening?

Enrique, this is Mark. In the Quarter 4, the quarter obviously we had some issues in Chicago and Boston given what the citywide trends were at those 2 hotels. What we are seeing is a lengthening out of some of the group bookings. Particularly, we're seeing in 2012, very good pace in groups. So we are seeing that window get a little wider. I wouldn't say it's back to anywhere near normal. But we are seeing positive trends in that it's lengthening now.

And then I wonder if you could provide also what the RevPAR growth was for the calendar quarter? Was there a big difference versus your reporting numbers?

It was roughly the same, Enrique. Dennis, in response to you -- I know you're off, but in response to your question, the room segmentation and this is without Frenchman’s Reef, group is this quarter, 38% of total. Last year, same quarter, it was 40%. Business transient, 33%, against last year's 32%, again, this is without Frenchman's. But it's a little different from the 31% we gave you with Frenchman. The leisure and discount, 25% in both years. Contract and other, 4% this year, 3% last year. Hopefully, those total 100%.

[Operator Instructions] Your next question comes from the line of Ryan Meliker with Morgan Stanley.

Just a couple of quick questions here. First, it sounds like from what John, you just mentioned with regards to the group segment that volumes were down about 3.5%, but revenues were up about 1.1%, indicating that you've had group rates up 4.5%. Does that sound correct? Did I understand that correctly?

Let's see, rates in groups were up about 3.1%.

3.1%, okay . And out of the 2.7% growth you have for the back half of the year and the 10% for '12, can you break that down between room nights and room rates for the group segment, that is?

Yes, just a second. For the -- I can break it down for the balance of this year. For the third quarter rates, excluding Frenchman's, are up about 3.8%, and they're down slightly in the fourth quarter. For 2012, the rates are -- the ADR for next year on the books is about 4.3% up.

Great, that's helpful. And then as you guys think about the group segment a little bit and some of the challenges that you've have encountered, with SalesForce One this year and probably in the last couple of years, I'm wondering do you have any properties that SalesForce One has not yet rolled out into? And are being proactive to make sure that you don't encounter the same kind of start-up challenges that you encountered in Chicago this quarter?

Yes. We have hotels in Texas and some others that just got implemented in June of this year. And that's the last batch. We are trying very hard to adjust the sales resources and the focus of the group sales effort to make sure that we don't encounter some of the problems. But some of the problems are a little bit intractable in that so many people are changing jobs. They're going from the property level to the regional level. That is very difficult to get immediate focus. Hopefully, the training process and -- the training process have been more effective in the recent rollouts.

Okay. And then one last question as I look at Austin being down 4% this quarter. And we've seen in the press over past couple of weeks that it seems like both convention center hotels are breaking ground and planning to go ahead. Is that a property that you're still interested? Is that still considered a good market that you want to stay in? Or does it make sense to exit that property before those properties ramp up?

Well, the impact of the new supply in downtown has already been felt. We get virtually no compression out of downtown Austin. So the impact of the citywide convention loss of compression has already been felt at the hotel. It really can't get any worse. What the new hotels and the existing supply -- where they'll challenge us is the in-house bookings when there aren't citywides. And so inevitably, there will be some impact. Austin is a great growth market. There's no question about that. But it's clearly a hotel that faces some challenges coming in the near future -- in the distant future.

Your next question comes from the line of David Katz with Jefferies. David Katz - Jefferies & Company, Inc.: I wanted to ask, how soon, what kind of timing would you expect to get back to what your normal group mix of 40% of revenues is? I mean, is that something you think is maybe a next year dynamic or beyond?

David, it's different by market and hotel. I think if we look at the overall portfolio, it's probably closer to 2013 till we get to the normalized levels of segmentation, still ramping up on the group particularly. David Katz - Jefferies & Company, Inc.: And how aggressive, the scale of 1 to 10 or in some other subjective measure, do you feel rates are being pushed? And I ask the question, I guess, specifically related to Marriott. Quite frankly there's been a lot of discussion in the investment community about that and about them being aggressive in terms of pushing rates at this stage.

Dave, this is Mark. They've been very aggressive about pushing rates and we've encouraged them to do that. It hasn't always worked out immediately. Chicago Marriott for instance, they pushed too hard early in the year and we lost some business. In the 2 New York Courtyards, Marriott pushed rate early in Q1 without having -- and let them hold anticipating that the strength would be there to allow them to do that. We're encouraging them to continue to take those chances, because we think it's important to the industry and our properties that we have price integrity and that we move the rates forward. They are clearly trying to be a market leader in that segment, though, in pushing rates. David Katz - Jefferies & Company, Inc.: And if I can just go back to SalesForce One briefly, am I hearing correctly, John, that we are sort of past whatever issues or challenges the implementation has brought with it? Or do we perhaps have another quarter or so where it will still be a point of discussion?

It's hard to tell, David, exactly how effectively they will do in this most recent round of implementations. We -- as I said, we have tried to focus hard on what we learned in the earlier rounds. And I would just have to say, time will tell. It may very well continue to be an issue in some markets, because there is a lot of disruption for people in the program. I mean, salespeople are completely changing their responsibilities and it's kind of a "somebody moved my cheese" type of phenomenon. They have to get used to the new environment. And as I said, there's been a lot of work going into training and into sales resources. But time will tell. I wouldn't make the prediction that the problems are all solved at this point. David Katz - Jefferies & Company, Inc.: And if I can just follow that up quickly. I mean, it sounded from your commentary that most of the cheese was in Chicago. But is that -- is there lesser amounts elsewhere? Or did I mischaracterize what your comment was?

No. I would not say most of it was in Chicago. Chicago was an immediate problem we're facing in the second quarter. As we pointed out, the balance of the year, next year, look pretty good. The problem in Chicago was a pull-through problem. It was conversion problem. So the leads are great, but there was an issue with converting the leads into definite room nights. Again, I think we've made great progress towards correcting that. That's inevitably going to be a problem to the extent we haven't effectively addressed it at the new properties. But I think we have effectively addressed it. But it's not unique to Chicago. Chicago had a particular problem with its stage in the turnover. And it was, literally, it was a conversion. The funnel is great and looks great throughout the portfolio. It's converting those tentatives to definites, which has to be back to prior averages.

Your next question comes from the line of Shaun Kelley with Bank of America Merrill Lynch.

I just wanted to, I guess, well, beat the dead horse a little bit more on SalesForce One. But just specifically, we've heard mixed views from people as to whether or not Marriott and some of the bigger properties is allowing additional people to be added back at the property level. Is that something that you guys -- I mean, when you talked about some of the adjustments that they've worked on, specifically like at the Chicago Marriott, at an important property like that, are they adding people back to the sales effort at the hotel level?

We are not, at Chicago Marriott, because it's a very -- I'm not going to give you the long answer, all right. I'm going to -- we have made adjustments at the sales office level. So there's not a Chicago land, as it's called, sales force that is addressing only the Chicago land hotels. And you have to keep in mind that the SalesForce One is a program that's set up to book less than 300 room-night on peak groups. The over-300 room nights on peak are still handled at the property level. So the performance of the Chicago Marriott at above 300 peak room nights has been very, very good. It's been improved -- it's been an improvement over the last year. It's been the sub-300. The problem was, as I said, conversion. So we had to get specific resources at the sales office to address the conversion problems. The other advantage that a big hotel has that is potentially a problem at a smaller hotel, is a big hotel has event planners that service the group once they're booked. And as they project the group spend, they make sure that the meeting space is properly allocated. They make sure that they're available to make changes that the group may have. These are resources that big hotels have that small hotels don't. And so in a small hotel, the problem is a different set of problems, I should say, than the big hotels. And so on-property resources becomes very important in smaller hotels, less so at the big hotels that have the resources to handle some of the pull-through issues.

My second question was just on the group side. It looked like -- and I apologize if I don't have the exact right numbers here, but it looks like your group pace is actually pretty similar right now as it was last quarter. So I guess what I'm just kind of wondering academically was most of the delta, the expectation, for this quarter anyway, was it driven primarily by just in the quarter, for the quarter that didn't materialize? Is it as simple as that, given particularly Boston and Chicago? Or was there anything else that we should think about? And the reason I'm asking is I'm just trying to think about the visibility or confidence level that you have, that we should have in the back half.

That's a great question. And it's something we watch really carefully. For probably 8 quarters consecutively, in the quarter, for the quarter, group bookings have improved. And they did again on a revenue basis this quarter. We were up, I think, about 9% in total revenue booked in the quarter, for the quarter. But it was really a rate-driven game. Room rates were up mid-20s, whereas the room nights were down fairly substantially in the quarter, for the quarter. You can read that 2 ways, and we're in the process of analyzing it. That can be great news, because they could be more selective in the groups that they book, because they had a good base of business. And at 76% occupancy, they have a pretty good load. So that could be one answer. The other answer could be that the volume of groups was down, but they were able to charge more money for the groups. We're in the process of trying to understand that. But in general, it was a good -- we take it as good news, that rate was so effectively increased in the quarter, for the quarter.

And Shaun, this is Sean. The other issue on the group side of the business was the food and beverage contribution for the groups was not as high this quarter as it would have been in the past and was a little below our expectation, which also impacted our quarter.

And then I guess my third question is just thinking about how the acquisitions are kind of layering into the portfolio. And just to kind of think about it this way, at the beginning of the year, your RevPAR expectation was up 6% to 8%. But you've added in some hotels, particularly the Denver JW and now the Denver Courtyard in markets that seem to be outperforming the average. So my question is, would still be at 6% to 8% if you excluded the acquisitions? Or is the core portfolio doing a little less well than you would have expected? And any specific call-out to why that might be the case if so?

Shaun, this is Mark. If you look at our acquisitions, the 2 Denver deals both had renovations in Q1. So their full year numbers aren't going to be above the -- substantially above the portfolio average. The Lexington Hotel in New York had the Q1 New York issue, like all of New York, which wasn't that strong. So it's not going to move the average substantially, either. So those are the 3. I don't think it's going to be a material difference with or without the acquisitions in the full year RevPAR numbers.

Your next question comes from the line of Michael Salinsky with RBC Capital Markets.

Most of my questions have been answers. Just had a couple of quick follow-ups here. John, in your comments, you talked about planning for it seem like a lot of renovations. Do you have any idea in terms of what the spend can look like for '12 at this point relative to 2011?

Well, we're right in the middle of that, I would say, for the existing portfolio. It will be on par with the last couple of years, maybe a little bit higher. For the acquisitions, particularly the Lexington. There won't be anything in the Denver properties abnormal. But in the Lexington property, there will be significant capital probably going in -- certainly going in next year. So that will impact the overall spend.

Also in your comments, you talked about expecting to outperform the industry from a RevPAR standpoint next year, because of Frenchman’s Reef. If you take Frenchman’s Reef out just to make sure we're comparing apples to apples, is that still the case?

It's hard to know with all the properties with the visibilty we have now. We know that Chicago and Boston have excellent citywide calendars, and the group pace for the whole portfolio looks very strong for next year. So we're very encouraged for 2012.

And finally, not to leave you out, Sean, a quick question in terms of capacity here for the second half, just as you guys are looking in investment opportunities, would the plan be at this point to lock in a mortgage on an additional property, if you see acquisition opportunities that meet your underwriting standards?

Sure, that's one of the capital sources that we would look at. We also still have capacity on our line of credit. And as Mark mentioned in his prepared remarks, there is still the possibility over, and this is more long term, to recycle some capital within our portfolio through dispositions. So all of those options are available to us.

Your next question comes from the line of Josh Attie with Citigroup.

If I could just follow up on that question, can you talk about what you think your financial capacity is today, the size of the acquisition pipeline? And also, eventually, how you plan to turn out the revolver, if you're considering issuing preferred stock or you want to incur more mortgage debt at this point.

Josh, this is Mark. I'm sure happy to answer your question. I think our investing capacity today, we would be comfortable with perhaps another $100 million in acquisitions. As far as the line of credit, we have about $150 million outstanding on today. We don't view that -- although it's very expensive, we don't view that as long-term financing. So the most likely outcome is that we'd explore doing permanent financing on the Lexington Hotel. But we'd have to -- we want to make sure we determine the brand and the capital plan before we proceed along that path. Again, we keep our options open as obviously the market changes every day.

Have you given more thought to adding preferred stock to the capital structure?

That's one of the options we have. We have a preference towards a very simple capital structure for a number of reasons. So that's still on the table, but that's probably not at the top of the list right now.

Your final question comes from the line of Bill Crow with Raymond James. William Crow - Raymond James & Associates, Inc.: Three quick questions for you. Can you help me understand the failure to convert the leads? Is that the loss of market share? Or are those meetings that never came to the market at all?

Those were meetings that had been put in the tentative funnel, if you will, that the property didn't effectively or the sales team didn't effectively convert to definite room nights. It could be in any number of issues, but it tends to be -- the problems we've seen have tended to be lack of focus on the conversion process, and that... William Crow - Raymond James & Associates, Inc.: So they still come to the market, they just didn't come to that hotel, likely?

They may or may not have come to the market. They may have been looking at multiple cities and went somewhere else or they went somewhere else within the market. William Crow - Raymond James & Associates, Inc.: And then the disappointment in the food and beverage in the group business, is that a sales transformation issue? Is that specific to the groups that were there in the second quarter? Or is there something we should read into the economy and the willingness of groups to spend at this point in the cycle?

Yes, it's really hard to explain that one because we were seeing the opposite trend last year. So I would say that it was unique to the groups that were in the hotel this year is our hope. However, this quarter -- excuse me, is our hope. We had to do a better job of what we call qualifying the groups ahead of time, so that it gets into our forecast rather than getting into our final numbers as a -- at lower numbers than we anticipated. So there are a number of steps that we can take to minimize the effect if, in fact, it is not a unique thing to our couple of hotels. But I'd tend to think that trends would tell us that it was unique to the quarter and to our hotels.

Bill, this is Sean. The lack of F&B was really felt in 4 hotels across our portfolio. It wasn't system-wide across the entire portfolio. So I think that would answer the question whether we think it's systemic or whether it's just specific to those markets.

A big chunk of it was at Frenchman’s Reef, obviously, because of the disruption. William Crow - Raymond James & Associates, Inc.: So that's included in that food -- that $1 million food and beverage area, okay. And then specific to Frenchman’s Reef, when you put that back into your RevPAR statistics, when you start reporting this, is that going to be excluded throughout next year?

The plan though is we report it both ways currently, and we'll continue to report it both ways next year as well.

And at this time, I'd like to turn the call back to Mr. Brugger for closing remarks.

Thank you, Stacy. To everyone on this call, we'd like to express our continued appreciation for your interest in DiamondRock and look forward to updating you next quarter. Enjoy the rest of your summer.

We thank you for your participation in today's conference. This does conclude your presentation. You may now disconnect, and have a great day.