DiamondRock Hospitality CoDRH
DiamondRock Hospitality Co Stock Compensation Disclosure
Equity Incentive Plan
We are authorized to issue up to 7,900,000 shares of our common stock under our 2024 Equity Incentive Plan (the “2024 Plan”), of which we have issued or committed to issue 2,513,353 shares as of December 31, 2025. Shares underlying awards that are granted under the 2024 Plan that are forfeited, cancelled, reacquired prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than by exercise), including shares tendered or held back upon settlement of an award, other than a stock option or stock appreciation right, to cover the tax withholding will be added back to the shares available for issuance under the 2024 Plan
Restricted Stock Awards
Restricted stock awards issued to our officers and employees generally vest over a to five year period from the date of the grant based on continued employment. We measure compensation expense for the restricted stock awards based upon the
fair market value of our common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying consolidated statements of operations and comprehensive income. A summary of our restricted stock awards from January 1, 2023 to December 31, 2025 is as follows:
| Number of Shares | Weighted- Average Grant Date Fair Value | ||||||||||
| Unvested balance at January 1, 2023 | 1,356,937 | $ | 9.47 | ||||||||
| Granted | 247,762 | 8.94 | |||||||||
| Forfeited | (21,184) | 9.13 | |||||||||
| Vested | (382,822) | 9.60 | |||||||||
| Unvested balance at December 31, 2023 | 1,200,693 | 9.33 | |||||||||
| Granted | 361,920 | 8.66 | |||||||||
| Vested | (941,018) | 9.35 | |||||||||
| Unvested balance at December 31, 2024 | 621,595 | 8.90 | |||||||||
| Granted | 478,098 | 8.21 | |||||||||
| Forfeited | (608) | 8.23 | |||||||||
| Vested | (257,980) | 8.97 | |||||||||
| Unvested balance at December 31, 2025 | 841,105 | $ | 8.49 | ||||||||
The total unvested restricted stock awards as of December 31, 2025 are expected to vest as follows: 257,980 during 2025, 400,989 during 2026, 271,720 during 2027, 167,135 during 2028, and 1,261 during 2029. As of December 31, 2025, the unrecognized compensation cost related to restricted stock awards was $4.2 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 22 months. For the years ended December 31, 2025, 2024, and 2023, we recorded $3.1 million, $5.1 million and $4.2 million, respectively, of compensation expense net of forfeitures related to restricted stock awards. The compensation expense recorded for the year ended December 31, 2024 included $2.0 million of accelerated compensation expense related to restricted stock awards for the departures of our former Chief Executive Officer and Chief Investment Officer. The accelerated compensation expense is recorded as severance costs in corporate expenses within the consolidated statements of operations and comprehensive income.
Performance Stock Units
Performance stock units (“PSUs”) are restricted stock units that generally vest three years from the date of grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). For PSUs granted in 2025, the actual number of shares of common stock issued to each executive officer is based on the Company's achievement of certain levels of total stockholder return relative to the total stockholder return of a peer group of publicly-traded lodging REITs measured over a three-year performance period. There is no payout of shares of our common stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the peer group. The maximum number of shares of common stock issued to an executive officer is equal to 300% of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the 90th percentile of the total stockholder returns of the peer group. There are limitations on the number of PSUs earned if the Company's total stockholder return is negative for the performance period.
We measure compensation expense for the PSUs based upon the fair market value of the award at the grant date. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying consolidated statements of operations and comprehensive income. The grant date fair value is determined using a Monte Carlo simulation performed by a third-party valuation firm. The determination of the grant-date fair values of our PSUs included the following assumptions:
| Award Grant Date | Volatility | Risk-Free Rate | Total Stockholder Return PSUs | Hotel Market Share PSUs | ||||||||||||||||||||||
| March 2, 2021 | 68.8 | % | 0.26 | % | $ | 9.28 | $ | 9.40 | ||||||||||||||||||
| February 22, 2022 | 71.4 | % | 1.74 | % | $ | 9.84 | $ | 9.56 | ||||||||||||||||||
| August 9, 2022 | 73.3 | % | 3.20 | % | $ | 9.65 | $ | 9.32 | ||||||||||||||||||
| February 23, 2023 | 74.5 | % | 4.40 | % | $ | 9.22 | $ | 8.94 | ||||||||||||||||||
| May 7, 2024 | 36.5 | % | 4.64 | % | $ | 8.03 | $ | 8.72 | ||||||||||||||||||
| March 3, 2025 | 32.0 | % | 3.93 | % | $ | 10.53 | $ | — | ||||||||||||||||||
A summary of our PSUs from January 1, 2023 to December 31, 2025 is as follows:
| Number of Units | Weighted- Average Grant Date Fair Value | ||||||||||
| Unvested balance at January 1, 2023 | 950,653 | $ | 9.35 | ||||||||
| Granted | 363,523 | 9.08 | |||||||||
| Additional units from dividends | 17,886 | 8.35 | |||||||||
Vested (1) | (299,766) | 9.01 | |||||||||
| Unvested balance at December 31, 2023 | 1,032,296 | 9.34 | |||||||||
| Granted | 364,799 | 8.36 | |||||||||
| Additional units from dividends | 13,340 | 8.93 | |||||||||
Vested (2) | (301,861) | 9.32 | |||||||||
| Unvested balance at December 31, 2024 | 1,108,574 | 9.02 | |||||||||
| Granted | 607,533 | 10.16 | |||||||||
| Additional units from dividends | 93,346 | 8.30 | |||||||||
Vested (3) | (342,042) | 9.62 | |||||||||
| Unvested balance at December 31, 2025 | 1,467,411 | $ | 9.31 | ||||||||
______________________
(1)The number of shares of common stock earned for the PSUs vested in 2023 was equal to 103.36% of the PSU Target Award.
(2)The number of shares of common stock earned for the PSUs vested in 2024 was equal to 95.56% of the PSU Target Award.
(3)The number of shares of common stock earned for the PSUs vested in 2025 was equal to 101.26% of the PSU Target Award.
The remaining unvested PSUs expected to vest are as follows: 399,570 during 2026, 432,835 in 2027 and 635,006 during 2028. As of December 31, 2025, the unrecognized compensation cost related to the PSUs was $5.2 million and is expected to be recognized on a straight-line basis over a period of 23 months. For the years ended December 31, 2025, 2024, and 2023, we recorded approximately $3.0 million, $4.2 million, and $3.0 million, respectively, of compensation expense net of forfeitures related to the PSUs. The compensation expense recorded for the year ended December 31, 2025 included $1.8 million of accelerated compensation expense related to PSUs for the departures of our former Chief Executive Officer and Chief Investment Officer. The accelerated compensation expense is recorded as severance costs in corporate expenses within the consolidated statements of operations and comprehensive income. These awards will vest at 100% of the PSU Target Award based on their original vesting schedule.
LTIP Units
A summary of our LTIP units from January 1, 2023 to December 31, 2025 is as follows:
| Number of Units | Weighted- Average Grant Date Fair Value | ||||||||||
| Unvested balance at January 1, 2023 | 98,050 | $ | 9.39 | ||||||||
| Granted | 257,270 | 8.94 | |||||||||
Vested (1) | (41,183) | 9.49 | |||||||||
| Unvested balance at December 31, 2023 | 314,137 | 9.01 | |||||||||
| Granted | 97,477 | 8.72 | |||||||||
Vested (1) | (271,487) | 8.94 | |||||||||
| Unvested balance at December 31, 2024 | 140,127 | 8.90 | |||||||||
Vested (1) | (46,709) | 8.90 | |||||||||
| Unvested balance at December 31, 2025 | 93,418 | $ | 8.90 | ||||||||
______________________
(1)As of December 31, 2025, all vested LTIP units have achieved economic parity with common OP units and have been converted to common OP units.
The remaining unvested LTIP units are expected to vest as follows: 46,709 during both 2026 and 2027. As of December 31, 2025, the unrecognized compensation cost related to LTIP unit awards was $0.5 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 16 months. For the years ended December 31, 2025, 2024, and 2023, we recorded $0.4 million, $2.0 million, and $0.8 million, respectively, of compensation expense related to LTIP unit awards. The compensation expense recorded for the year ended December 31, 2024 included $1.2 million of accelerated compensation expense related to LTIPs for the departures of our former Chief Executive Officer and Chief Investment Officer. The accelerated compensation expense is recorded as severance costs in corporate expenses within the consolidated statements of operations and comprehensive income.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.