Good day, ladies and gentlemen. And welcome to the DiamondRock Hospitality Company Q4 2016 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 follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to introduce your host for today's conference, [Sean Kelso], you can please go ahead.

Thank you, Charlotte. Good morning everyone and welcome to DiamondRock's fourth quarter 2016 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 law. And may not be historical facts. They may not be updated in the future. 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. With me on today's call is Mark Brugger, our President and Chief Executive Officer; Sean Mahoney, our Chief Financial Officer; Tom Healy, our Chief Operating Officer; and Troy Furbay, our Chief Investment Officer. This morning, Mark will provide a brief overview of our fourth quarter results as well as discussed the company's outlook for 2017. Sean will then provide greater detail on our fourth quarter performance and discuss our recent capital markets activity. Following their remarks, we will open the line for question. With that, I'm pleased to turn the call over to Mark.

Good morning, everyone. And thank you, for joining us today. DiamondRock had another successful year in 2016 as we navigated an environment of decelerating growth in lodging demand and high in volatility of the capital markets. As that generated a total return of 25.8%. Looking forward, we believe that the company is well positioned and we will provide our detailed 2017 outlook later on the call. We'd start this morning by taking a look at the current operating environment. Macro fundamentals have been mixed, but the overall assessment is for continued growth, albeit at a modest rate in 2017. The most important demand core GDP growth in 2016 was the slowest in five years at 1.6%. But importantly it was stronger in the second half with 3.5% growth in the third quarter and 1.9% growth in the fourth quarter. More encouraging unemployment rates remain at historic lows, employments are up, consumer spending is rising and consumer confidence recently hit a 15 year high. Additionally while not built into our guidance, post-election economic optimism is benefitting from proposed simulative policy action on tax reform, deregulation and infrastructure spending. We're also watchful other items that may not favor travel, such as the stronger dollar and restrictive visa policies. It is worth noting that supply ticked up in 2016 to 1.6% and will be around 2% this year. But the four year compounded average supply growth is only around 1% and still looks good compared to the long term average of 2%. Overall, despite some uncertainty, the current picture for 2017 lodging fundamentals points to modest growth. Turning to the fourth quarter, lodging fundamentals were positive with industry RevPAR up 3.2% as demand outpace supply by 60 basis points. The top 25 markets continue to lag the broader US with 1.6% growth and…

Thanks, Mark. Before discussing our fourth quarter results, please note the comparable RevPAR, hotel adjusted EBITDA margin and other portfolio statistics are presented to include the Shorebreak hotel and Sheraton Suites Key West and exclude the three hotels sold earlier this year for all periods presented. Our hotels perform slightly ahead of expectations in the fourth quarter. RevPAR was uneven during the quarter with 3.2% contraction in October, 3.7% growth in November and 0.6% contraction in December. As expected, October was impacted by the shift in the timing of the Jewish holidays. Fourth quarter RevPAR declined 0.3% due to a 1.1% points decrease in occupancy, partially offset by a 1% increase in average rates. Our asset management initiatives drove a solid 49% profit flow through in the quarter. Our asset managers worked with our operators to implement tight cost controls that led to a remarkable 1.6% reduction in total hotel expenses and held hotel adjusted EBITDA margin contraction to only 16 basis points. For the full-year, the company reported a comparable RevPAR decline of 0.2%, which was a result of a 0.6% increase in the average rate offset by a 0.6% point decline in occupancy. Despite the RevPAR contraction, margins continue to outperform expectation. With full-year hotel adjusted EBITDA margins expanding 15 basis points. The margin expansion was made possible by our asset management initiatives resulting in a slight reduction of 2016 operating cost. For January 2017, our RevPAR grew approximately 1% which was in line with expectation. Our first quarter results will be positively impacted by the Chicago Marriott which will benefit from last year's renovation and the Washington DC Westin, which will benefit from the Presidential inauguration and the Woman's March. These tail winds will be partially offset by the first quarter renovation of the Sonoma Renaissance, Charleston…

Thanks Sean. Now I’ll transition the call over to a more detailed overview of our 2017 outlook. As previously noted, large demand came in under original expectations for the industry during 2016. A more modest GDP growth, and some lately hesitancy by corporate America pre-election. Post election, the outlook for U.S. lodging fundamentals improved as earlier concerns related to economic and political uncertainties were replaced but the optimism from the prospect of lower taxes, reduced government regulations, and infrastructure spending. These measures if enacted would likely lead to better GDP growth in late 2017 and for 2018. Despite this optimism, we believe that it is premature to factor this upside scenario into our 2017 outlook as we have not seen any material change in demand over the past few months. We are hearing that some of our corporate customers are moving forward on projects previously put on hold. But they are not fundamentally changing travel practices just yet. If demand actually benefits from enactment of positive policy changes, that could lead to better result that reflected in our current guidance. Supply expectations are built into our guidance and will continue to have an impact on overall RevPAR growth numbers in the U.S. Many of the most desirable markets in the U.S. have seen new development starts. The top 25 markets in particular will see supply impact its growth and consequently we expect the top 25 markets to continue to trail the RevPAR growth of the broader U.S. industry by 100 to 200 basis points in 2017. Since our portfolio has investments in many of these top markets, this will have some impact on our portfolio's performance. That being said, we feel that our portfolio is well positioned compared to many of our peers with our relatively stronger geographic footprint for…

[Operator Instruction] Our first question comes from a line of Smedes Rose from Citi. Your line is now open.

Hi, good morning. I wanted to just ask you a little bit more about the sort of cadence of your group business where you said you are looking for to be kind of flat over the first half of '17 and picking up in the back half. This side really just reflects the convention calendars in the markets for your more exposed group business or is that something is that more reflecting some of the renovation disruption that you are looking for in the first half or maybe just a little more color around that?

Yes, this is Mark. I think it's a combination of all that. Obviously the convention calendars are better in Chicago and Washington DC or of two significant hotels. Boston had some tough comparisons with the fourth quarter, so it's a little better in the back half given that tough comparisons we had this year in 2016. So, it's combination. Obviously, we are benefiting from stronger convention calendars in our markets.

Okay, thanks. And then Sean you mentioned, sorry I just I came down for a second but you mentioned an uptake in contract business that you guys signed during the quarter is that correct. Would you talk about that a little more?

Sure. As part of our defensive revenue management strategies that we put in place at the beginning of the fourth quarter we increased contract business in a couple of our hotels. The largest impact was at Lexington as well as the Gwen where we signed pretty significant our latest contracts at both of these hotels which had a strong impact on our contract business in the fourth quarter.

So, is that way on results that those properties over the course of '17 or is that shorter term business or?

It should not. We expect that to continue within the hotel. The feedback we got from both of those crews have been very positive on both hotels.

All right. Thank you.

Thank you. Our next question comes from the line of Rich Hightower from Evercore. Your line is now open.

Hey, good morning guys.

Good morning, Rich.

I want to dig into the RevPAR guidance range a little bit here. So, it sounds like with the range of negative one to plus one, I think you guys made pretty clear you are not baking in any post election optimism into those figures. I mean, would you say then that the range currently reflects the pre-election pessimism or I mean is there any sort of nod towards the better macro environment in 2017. It sounds like you guys are being very conservative despite the fact that you might believe that things will get better you are not seeing in the business yet. I am just trying to dig into that a little bit to figure it out.

Sure Rich, this is Mark. So, we based our guidance on the trends that we were seeing in the current trends. People don't change their habit overnight but we are not seeing increase. Right, January was up a little bit but we are not seeing fundamental change in trial. So, we don't think it's appropriate to build that in the guidance now. We are trying to explain to investors that our guidance we think will be consistent with what the top 25 will do in 2017 based on our expectations. We did say if we, if pass the policy is enacted, then it should lead the better results what's in our current guidance.

Okay. And then, I think you guys have made reference also in the recent past to when you talk about potential stabilization in New York, part of that is reduction in Air B&B inventory. Is any of that factored in the full-year guidance as well?

It’s a tricky question. So, I think we saw better trends in November, December and frankly in January in New York that we have previously anticipated. So, we are seeing some encouraging signs whether it can directly attribute to changes in policies against the legal hotels, it's hard to draw that direct correlation. But I think New York has shown some green shoots lately and we are encouraged by that.

Okay. Thank you, Mark.

Thank you. Our next question comes from the line of Anthony Powell from Barclays Capital. Your line is now open.

Hi, good morning guys. It's a question on I guess leisure travel. One of the large brands there in the fourth quarter that what they call their retail chain, it was up 5%. It seems like you reach, your leisure was a bit blow back. Can you comment on current leisure trends and if your results are impacted by the market you are in?

Sure, Anthony, it's Mark. So I think, with stepping back we think leisure is strong and good trend that will continue through 2017. Obviously, it's going to correlate with consumer sentiments which is very high and consumer spending which is also elevated right now. So, we are encouraged by the strength. I wouldn't extrapolate too much from what our kind of small portfolio is doing any one quarter, sometimes Q4 is not necessarily our strongest leisure quarter but we are encouraged by leisure overall. We do think leisure will hold up in 2017.

And Anthony to add to that this is Sean. During our fourth quarter, the impact of hurricane Matthew which impacted two of our leisure markets in Charleston and Fort Lauderdale did have an impact on our overall leisure performance for the quarter which caused the deviation from national trends.

Got it, thanks. And just on margins, obviously there was big part of the 2016 story. Could you just drive in '17, were you seeing incremental cost pressure and labor property taxes and if you've already got a lot of the low hanging fruit out of the in terms of margin expansion and so making harder to increase margins in '17?

Sure. Within our 2017 guidance, the math will indicate at mid-point, margin contraction of approximately a 100 basis points and which compares obviously to positive margins for 2016. Within our 2017, the assumptions that are built into that guidance is a labor and benefits to be up between 2.5% and 3% across our portfolio as well as we have some property tax headwinds within our portfolio. We have about $5 million of incremental year-over-year property tax growth which compares to roughly flat in 2016. The real big drivers of that change, $3.5 million of the $5 million increase relates to wins in 2016 which we have reversing in 2017. The balance is really Boston and New York increases. And so, when you look at what we've guided to for property taxes we assume that we don't win any property tax appeals and obviously we are fighting a lot of property taxes and hopefully we will but that's not baked in the guidance. And that $5 million alone is between 50 and 60 basis points on our total margins for the portfolio. And so that's the material color within what we expect to go on our within our portfolio in 2017.

All right, thanks a lot.

Thank you. Our next question comes from the line of Michael Bellisario from Baird. Your line is now open.

Good morning, guys. I just wanted to circle back on your comments regarding acquisitions first just kind of a higher level question, is what gives you the confidence that 2017 is an appropriate time and the cycle to be deploying capital towards additional acquisitions?

Yes Michael, this is Mark. That's a great question. I think we're trying to be very selective in the type of acquisitions we are looking at. It is a little later in cycle, so we are underwriting kind of very modest growth. If we can get things, depends on we find some exciting opportunities. The deal we referenced is kind of benchmark deal with the Westin and Fort Lauderdale deal, where we're able to buy it and take $5 million of cost out within the first year. Those kind of opportunities and other opportunities where we find unique value creation, I think regardless of where we are in the cycle assuming that our stock repurchase isn’t a much better option, we should be looking at this opportunities. We are obviously sitting in a lot of investment capacity that we built last year through asset sales. So, it puts us in a position to be active if we can find the right deals.

Got it. And then, kind of building off your comment on how do you reconcile your current portfolio expectations, I know it's a little bit more skewed toward top 25 markets, flat rate pay rolls, contracting margins, how are you underwriting deals and how are you getting to your return hurdles or even exceeding those return hurdles in today's slow growth environment. I guess what levers do you have to pull once you acquire property to get to those 9% 10% 11% unlevered returns that you might be targeting?

Sure. That's a great question. So, if you looked at our pipeline today, there are several off market deals. So, one piece is buying it right initially. We are looking for deals where there is the ability to substantially move operations. So, where we think that the cost or revenue management is has a lot of potential. Those are the kind of opportunities. It would be very difficult where our cost of capital is divided a good hotel and good market without some kind of special sauce to create incremental value at that property.

That's helpful. Thanks.

Thank you, Michael.

Thank you. Our next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets. Your line is now open.

Yes hi, good morning. Sticking along the lines of acquisitions, I was just curious how much of the dry powder you guys will be willing to deploy today and if you consider selling any additional assets in order to maintain your existing dry powder; I think you said 450 million was the number.

Sure Austin, this is Mark. As we said in the prepared remarks, we think that '17 has potentially be a volatile year. We are generally targeting assets acquisitions between $50 million and a $100 million. So, I think throughout the year if we find one or two deals we obviously won't use all of the 450 but I think we take it one quarter at a time and continue to re-evaluate the environment that we are in. So, we are comfortable deploying several $100 million on acquisitions if we find the right deals. But I think we are going to focus on smaller deals again in the $50 million to $100 million range and we will have the ability to continue reassess every quarter on the right capital allocation strategy for 2017. As far as your question on dispositions, we're really happy with the portfolio we have today; our 26 hotels. So, there is nothing obvious that we would want ourselves in this environment. We are everything obviously it's for sale at any time for the right price. But we are not actively engaged in selling anything at the moment.

Thanks, that's very helpful. As far as New York City, you mentioned that you're starting to look into a potential stabilization and fundamentals. And I'm just curious what is that you would look for first I guess as an indication that things perhaps has started to stabilize and do you think there is any potential that fundamentals could accelerate it all into 2018?

So, Austin I don't want to, let me be clear on our comments. So, we have seen a couple of months that were a little better than expected in New York City. We are still budgeting and what's on our forecast is low-single digit RevPAR, negative RevPAR in New York City for 2017. So, we are not building a bullish case into our guidance for New York City. What we would look for is increased demand and little bit of pricing power. And frankly, it's just going to be several months of continued growth within the city as it absorb supply. When you look out it is getting more difficult to get construction financing, we do see supply tapering off after 2018 but what to get through the supply increases this year and next year in New York City.

Okay. Thanks, Mark. And then last one from me. Just on the Vail Marriott been a strong contributor over the last several quarters and I think you mentioned last quarter that there is a hotel that were shut down nearby which is benefited. So, 1) I was just curious is there an expectation that reopens at some point in 2017 and when and then 2) what are you thinking about in terms of the timing of a potential renovation at the Vail Marriott?

Yes, I'll take. So, there is one competitive hotel in the marketplace that's been closed that we referenced in last call called the Cascade. We anticipate that that hotel will be closed for the ski season this year, which obviously is the most profitable time of the year for us. We do expect it will reopen as a new product post key season and we will have to compete with it going forward.

Anything on the -- yes?

The time? Yes. As we said in the prepared remarks, we are evaluating it right now. We anticipate that we will put capital into it and re-position the hotel starting in 2018.

Okay.

The nice thing about Vail and renovations is we have two very slow seasons every year to get renovation done with very little impact on profits.

Okay. Appreciate the details, Mark.

Thanks, Austin.

Thank you. Our next question comes from the line of Bill Crow from Raymond James. Your line is now open.

Hey, good morning guys. Two quick questions for you. First of all, you talked about your ability to maintain wage and benefit growth at 2.5% or 3%, is there enough labor out there to how you'd really get away with that?

Sure Bill, its Sean. We feel comfortable within our market and that's very achievable result. And we did better than that frankly during 2016 and so we are assuming some wage pressure within our '17 budget but we are very comfortable with those assumptions.

You haven't really experienced any labor shortages or inability to hire labor at this point?

Yes it's not labor, it's not so much an FTE issue as much it is. We are continuing to implement our asset management initiatives, labor management studies etcetera which is getting more out of the folks that are on with their own property today and so staffing has not be an issue for us. This is getting as much productivity as we can.

I will add to that. Just on scarcity factor, our hotels they are good jobs. We are talking about run by the best in class managers in the business, the Marriott's of the world. People want to work at these kind of hotels. So, we have not had a problem getting people generally to want to work at our properties. We are not anticipating that in 2017.

Okay, great. Yes, it wasn't as much as DiamondRock question, it's just an industry question. And that was helpful. Any other break spots from a supply perspective as you look across your market? You mentioned New York, '17 and '18 and then we are on the downhill side, anything else that you can point to that says the end of the peak of supply delivery is near?

It's an analytic question. Look, there has been some privacy, Chicago had despite its tapering down a little bit but still it still swallowing some increased supply. I think the more anecdotal evidence is from the constructional lenders that we communicate with and they have certainly tightened their belt on their appetite to finance new hotel constructions in many of the markets. Now, that will play out more in 2018 and '19 than it will in '17 since those deals are already financed. But we are not calling the end. I think the likely peak is over the next 18 to 24 months and then should subside based on the constructional lending trends.

Yes Bill, this is Sean. Our base case assumptions for supply are it's going to be above particularly for top 25 markets will be above historical averages for both 2017 and 2018. And for both of those years, the supply is pretty well baked and pretty well understood at this point. The Mark's point as you look further out that's where some of those positive trends should be able to help the supply.

Great, thank you guys, appreciate it.

Okay.

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

Thank you. Hey, good morning guys. As you think about acquisitions, how is leverage factoring into that equation?

So, how is leverage factoring in that equation? So, our underwriting the way we underwrite deals is to unleveraged hurdle rate. So, we are looking obviously accretion delusion over the couple of years but then we're targeting five and 10 year IR model that's unlevered; when we think about acquisitions. I know we think about leverage more on a corporate basis. Currently it's fairly easy to think about these. We are sitting on so much excess capacity, we think we are under levered. We are obviously sitting on over $200 million of cash and $300 million undrawn revolver. So, I would say we feel very liquid today. We feel like we are little under levered. And it doesn't not impact the deals that we do or don't do. We are really looking at those on an unlevered basis decide whether they create value enough for our shareholders.

Quick follow-up on the leverage. When we look at the investment capacity calculation that we have today, we look at that more on a long term basis and what that does to our capital structure not just for the short term but for the long and medium term. And so, from a leverage perspective when we get the $450 million capacity is looking at what our leverage is at the next stop, and we assume comparable down turns to what the last two down turns are which we believe is relatively conservative. And even at those conservative levels are net debt EBITDA maxes out at between 5 and 5.5 times and so with that level we are very comfortable deploying that $450 million because we believe that's a very readable amount of leverage at the draw, relative to historical averages in our business model.

So, you're saying if you use the $450 million of capacity even if we have another down turn like last two, you get to 5.5 times that EBITDA to draw, is that what it is, to understand that?

Exactly.

Okay. And then in terms of Fort Lauderdale, with the airport shooting there in the first quarter, is that impacting the market at all?

No, the larger impact on Fort Lauderdale for the market was there were two things. The first is hurricane Matthew impacting October was about a $0.5 million at the hotel and then the other issue the market itself was down about 10%. We actually gained a little bit of share during the fourth quarter but it was primarily a market issue. What we saw was Miami actually did a little better in the fourth quarter as they as some of the demand was enticed by discounting on Miami market and so we saw a little bit of occupancy sweep during the fourth quarter.

Okay. And then the first quarter there has been no impact from the shooting there?

No, I mean our first of the ground and looking at employments, we haven't seen any material impact from the shooting.

Okay. Thank you.

Thank you. Our next question comes from the line of Chris Woronka from Deutsche Bank. Your line is now open.

Hey, good morning guys. I wanted to revisit capital allocation but from the share repurchase standpoint I think what you did buy in '16 was about $9 and your stocks quite higher than that now. And given your comments about going after acquisitions, is it do you feel like it's some kind of either or you have to buy or you have to buy hotels or you have to repurchase stock, you just don’t want to sit on a bunch of cash and if that's true I mean what point where does stock become more attractive to you? A – Mark Brugger: Chris, this is Mark. So, I'll take that. It's not in either or I guess if you are buying hotels you are probably not buying stock and if you are buying stock you are probably not buying hotels when you are cost of capital any moment in time. I think what we are trying to convey to investors is we're prepared to do either depending on how the market shake out over 2017. As we mentioned, we are probably going to buy smaller assets, so it's not like we're going to use up all our capacity on one or two deals. So, we have the ability let's say we bought a deal in the first quarter and then things there is volatility in second quarter, we'd certainly be prepared to defend the stock, take advantage of any market dislocation. So, our thought is to be very nimble in 2017 and prepared to execute on kind of both ends with the capital allocation strategy.

Okay, that's helpful. And then, just on the commentary about the fundamentals maybe not really inflecting yet on the demand side, maybe some green shoots certain markets but is there anything more broadly you look at in terms of booking windows, lengthening or in the quarter pick up and in the quarter for the quarter group businesses. Any of that coming to fruition or is it still kind of tentative? A – Mark Brugger: Yes. We are looking at number of data points every day and every week, right transient demand trends. We are looking at in the quarter for the quarter group, we're looking at leisure pickup but what we said on the prepared remarks is that we are just sitting here just getting into 2017. We haven't seen things where things are fundamentally different than the trends we saw as the year ended in 2016.

Okay, very good. Thanks, Mark.

Okay.

Thank you. Our next question comes from the line of Ryan Meliker from Canaccord Genuity. Your line is now open.

Hey, good morning guys. I just, I had a couple of quick questions. First of all I guess on the RevPAR guide, I think you guys gave some really good detailed color. So, thank you, I think that's helpful. But I wondered, I was wondering if you might be able to dig in a little bit. You talked about the top 25 market with higher supply relative expected to underperform the broader industry and I think that makes sense. Can you give us some color where do you think you are going to stack up relative to the broader top 25 markets? I know you've got some tailwinds in Chicago from renovations and you got commission counters that look strong in DC and Boston. You don't have the exposure to Miami and San Francisco and Huston that you highlighted. Do you expect to generally outperform those top 25 markets or are there other things going across your portfolio that you are going to offset some of those advantages?

Sure, thanks Ryan. So, I think broadly speaking when we guided this year, our guidance was based on as we articulated on the call, assumptions what we're seeing today and so relative to the top 25 markets we believe that zero to two feels right for the overall industry and as Mark mentioned, we think that it's a 100 to 150 basis points below that for top 25 markets and so that would imply anywhere from 1.5 down to slightly positive. When you look at our portfolio you are correct, we feel good about Worthington, we feel bullish or strong about Chicago market, we feel pretty good about Boston. We have some renovation headwinds particularly in the first half of the year at Sonoma; and Charleston; at Gwen; that should pick up in the back half of the year. But generally speaking, we think we should be in line to slightly above the national averages for top 25 markets. There are a handful of incremental headwinds within our portfolio. Denver is a market that we don't spend a lot of time talking about. We have about 400 rooms there. We think that Denver will likely underperform in 2017. Key West has another market where we have two hotels. We expect out hotels to continue to absorb the supply of its four hotels added to the Key West market early last year. We expect that to be about two year absorption period. We are in the second year of that so we expect our Key West hotels to underperform national averages. But all things being equal, we still feel pretty good about our relative positioning as we articulate this.

Great. That's helpful and that's what I was I want to make sure I understood. Nothing had changed on that front. And then the second question I had was just on margins. You guys again did a phenomenal job controlling cost in the fourth quarter. Tom welcome, seems like you got pretty big shoes to fill as margins have been so strong. Is there much juice left for you guys are able to really drive operating cost controls or is more of the margin growth and assets management opportunities is going to come from things like ROI CapEx like what you discussed with Vail?

I think it's a combination of all three. I think as you still think there is some meat left on the bone from a labor standpoint productivity. In certain assets right, the bigger ones I think there is more moving parts and there is some opportunity. I do think there is opportunity on the food cost beverage cost side. Some of the things that we did it strategic, we are looking to it implement here. I think that will prove to have some positive impact. There is a host of different programs all the different leverage from all the operating cost to kind of take a look at so I think there is opportunity there. Another piece of it certainly is on the pricing side, the revenue management side. You look in markets like New York that are running over 90%, there is clearly headwinds but the markets are still active and then it's looking at pricing, it's looking at rate indexes, it's looking at lead time by room type by segment and identifying opportunities to ramp it up just a dollar here a dollar there. When you look at the portfolio, we have 3.7 million rooms opportunity to sell a room. We sold 2.9 million units last year. If you get a dollar in rate across the portfolio, it represents significant amount of profit to obviously the shareholders. And then looking at all the different models and factors, if your rate index is 105 penetration of the set then everything really else in your building should be at a 105. So facility fees, looking at pricing and parking across the board, you have to evaluate all the pricing price points and opportunities. So, I think we'll look at RevPAR, we'll look at cost. I think there is still opportunity to drive cost as you drive up revenue, your margin's obviously cost margins go down as a percentage and then the master plan I think there is certainly opportunity to redeploy capital in an appropriate way. We'll look at it in a very structured format. We'll look at it by not in the macro sense but by at the profit level by pieces and we will break down all the different projects that we think add value. It will all be tied to marketing and how to drive the messaging and how to add value and make the hotel more relevant and that will hopefully drive that dollar and rate that drives the profit. So, I think it's not just one effect, it's multitude of all of them and together that make the difference. And from a historical standpoint lot of the things we did strategic will start to implement here and I think my expectation is that it will have a positive impact.

All right. That was very detailed and helpful. Glad to hear that there is still some meat left on the bone. I'll go before. Thanks, guys. I appreciate all the added insights.

Thank you, Ryan.

Thank you. Our next question comes from the line of Thomas Allen from Morgan Stanley. Your line is now open.

Hey, just quick numbers clarification. I think in the prepared remarks you said that the three assets you sold did an annualized EBITDA about $26 million. How should we think about comparing the actual results in 2016 versus the guidance how much will actually be asking in the timing of sales?

Sure. Thomas, this is Sean. There is two bridge items if you will year-over-year from '16 to '17. The sold hotels is about $11.5 million of EBITDA that was that is in our 2016 numbers that will obviously not repeat. And then there is about $1.5 million of incremental G&A as a result of some forfeiture credit if you will to our G&A that were booked during 2016 as well as we didn't have a chief operating officer for the last several months of 2016. Those are the two big items that impact year-over-year comparability.

Okay helpful, thanks. And then just a big picture question on RevPAR and I know you have been asked like 100 different ways but I feel like your business transient business outperformed in the fourth quarter and that was the first time in a very long time, I mean I guess why not more optimism given that dynamic.

Yes, Thomas. One of the drivers or the primary driver of our fourth quarter outperformance of business transient, it was all demand. And so the relationship between our BT performance and our group performance is real. And so when you look at how the portfolio performed in the fourth quarter, our group was down 4.5% and that was over 5% from a reduction of demand. So, what we did was we were able to replace a lot of that demand with business transient rate. And so, I wouldn't read too much into the outperformance. Obviously, we are happy that we did it. We benefited our two big group hotels had very strong business transient fourth quarters. At the Marriott we were up double digit, I think it was 13% on the BT and that was frankly because of the -- they caused about serious run and then at the Boston Westin we were up once again mid teen on the business transient. A lot of that is just a change in the local marketplace with GE moving right around the corner from the hotel and incremental demand pickup there. But it was all demand.

And then the January I think you guys said RevPAR was at 1% is that was that relative in line with your expectations?

It was, it was right in line.

Great. Thank you.

Thank you. Our next question comes from the line of Shaun Kelley from Bank of America. Your line is now open.

Hi guys, good morning. Just two specific ones from me. First one is on as we are going to the market color I just wanted to be very clear on Boston and Chicago, do you guys just directionally give them what you see with demand and supply, do you expect Boston and Chicago to be outperformers relative to the top 25 or underperformers. Could you just specifically speak to those two?

Sure Shaun, this is Mark. So, for both Boston and Chicago we kind of expect them to be market perform. Certainly the city wise in Chicago is little better in 2017 than they were in '16. They look really good for 2018. Boston, while the counter is up, it's still little bit more hind focused than its BCEC, but we expect Boston to be a decent market in 2017.

Perfect, thanks Mark. And then my other question is sort of a high level one but just obviously you guys have a ton of exposure to sort of the combined Marriott Starwood complex, so as an owner could you just give us your high level view on the merger integration and how that's going from an owner standpoint so far?

Sure. So, I would say the overarching comment is we think it's great and that the combined system will be the largest essentially the largest systems in the world. When you think about the power the brand, right, its' the size of the reservation system and the power of the point system the reward system and no one will be able to match what the new Marriott's can provide on this two very important front. As far as what we are seeing so far, it's still in process. So, it's still a matter of combining sales, sales operations and clusters and that's all underway in 2017. We expect that a more material change to occur in '18 when at our Starwood properties or foremost our properties we'd expect some reduction on shared service cost which will help on the margin side. But the bigger impact will be one they put the two systems together into one reservation system and combined the point system at which time you'll really hopefully see the power of that larger system impact or hotels. And we would hope particularly benefit our former Starwood hotels to be able to gain share.

Great. And just since you called the Vail Marriott and Sheraton Key West. I guess being part of the Marriott family give you brand flexibility within those brands. Is that the way you are thinking about those two properties or is that too much regional really just like well relative to market we can change the indexing of those and not necessarily within the Marriott family?

Good question. So, I think Marriott as a kind of over-arching position doesn't really want to move things laterally among brands without a compelling reason. If there is a ability to re position and up brand our property, they probably are receptive to that kind of proposal. Does it make sense for them and makes sense for us. That at Vail that's a more likely scenario, as Sheraton Key West, we're really evaluating whether it makes sense to say within the system or given the high occupancy levels in that market whether we couldn't have a higher level of profitability without a brand and that's really the analysis we need to complete this year.

Perfect. Thank you very much, guys.

Thanks, Shaun.

Thank you. At this time I am not showing any further questions. I would like to turn the call back over to Mark Brugger for any closing remarks.

Thank you Charlotte. Everyone on this call we appreciate your continued interest in DiamondRock and look forward to updating you with our first quarter results.

Ladies and gentlemen thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a great day.