DiamondRock Hospitality Company (NYSE: DRH) last week announced that it has acquired The Landing Resort & Spa in Lake Tahoe, California, for $42 million, or $545,000 per key. The acquisition represents a 7% yield on 2017 Hotel Adjusted EBITDA.
The Landing Resort & Spa is a premier luxury resort with one of the best locations in Lake Tahoe. The Landing was ranked as a TripAdvisor Traveler’s Choice Award Top 20 Hotel in the US and Condé Nast Readers’ Choice Award #1 resort in Northern California in 2016. The Landing boasts 77 guest rooms, each with stone fireplaces, private balconies and spectacular views of Lake Tahoe and the Sierra Nevada mountains. The resort’s amenity package includes a state-of-the-art spa and fitness center, indoor and outdoor function space, rooftop deck, outdoor pool and hot tub, and an award-winning restaurant. The Landing occupies the best lakeside location in South Lake Tahoe and is within easy walking distance to nightlife, casinos, dining, shopping, Heavenly Village and the Heavenly Mountain Ski Resort gondola.
“We are excited to announce our acquisition of The Landing, an iconic, luxury lakefront resort, in one of the premier destinations in the Western United States,” said Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company. “This acquisition is well-aligned with our capital allocation strategy and increases our portfolio’s exposure to resorts, West Coast markets, and independent operators. Furthermore, we see numerous opportunities to enhance performance through the implementation of our asset management best practices and our ROI capital plan.”
The Resort has numerous value-add and asset management opportunities. The Company has engaged Two Roads Hospitality, who currently operates the Company’s L’Auberge de Sedona and Orchards Inn hotels, to replace the current owner-operator. Additionally, the Company expects to increase the Resort’s key count.
Lake Tahoe is famous for its pristine beaches, boating and water sports, world-class skiing, mountain biking and hiking terrain, golf, culinary scene and vibrant Vegas-style casino nightlife. The Lake Tahoe region boasts one of the largest offerings of ski areas in North America, with 16 ski resorts surrounding the lake, producing incredible conditions, amazing views and un-paralleled snowfall.
Because of its proximity to San Francisco, Silicon Valley, San Jose and Sacramento, Lake Tahoe has consistently attracted a loyal, high net-worth regional clientele and established a strong foothold with luxury international travelers. In addition to having over 12 million people within a four hour drive, the recent $24 million expansion of Reno/Tahoe International Airport has improved accessibility to Lake Tahoe, providing over 120 daily flights.
The wide variety of year-round demand generators produce consistently strong hotel demand, making Lake Tahoe one of the top resort markets in the country. With limited lodging inventory and significant constraints on future supply, Lake Tahoe has high barriers to entry. This has helped propel the South Lake Tahoe market to achieve average annual RevPAR growth of 9.2% over the past four years, significantly outperforming all but one of the Top 25 U.S. urban markets over the same period.
The transaction closed on March 1, 2018. The Company funded the acquisition with existing corporate cash.