BETHESDA, Md. ( TheStreet) -- Shares of DiamondRock Hospitality ( DRH) fell several points in early morning trading Tuesday after the lodging real estate investment trust posted weaker-than-expected third-quarter results.

DiamondRock shares fell 0.2%, off earlier lows, after the lodging REIT booked a third-quarter loss of $3.5 million, or 2 cents per share, compared with year-earlier earnings of $800,000, or a penny per share. Analysts expected the firm to book earnings of $900,000.

Despite the disappointing net loss, CEO Mark W. Brugger was optimistic about strengthening trends in the lodging industry.

"The positive third quarter results reaffirm our conviction that a sustainable lodging recovery continues to build momentum," he said.

Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, in the recent quarter were $33 million, up from $27.5 million in the third quarter last year.

Adjusted funds from operations, or FFO, grew 6.7% to $22.4 million, or 15 cents per share, from $21 million, or 19 cents per share, in the year-earlier period. FFO is a performance figure generally used by REITs to define cash flow from operations.

Revenue per available room, known as RevPAR and a key hotel industry metric, increased 5% to $113.38 on a pro forma basis in the quarter ended Sept. 10, assuming DiamondRock owned all of its 23 hotels for the entire third quarters of 2010 and 2009.

Including new acquisitions only for the company's 2010 ownership period, third-quarter RevPAR increased 4.4 percent $111.94 from $107.25, driven by a 1.5% increase in occupancy to 75% from 73.5% and a 2.3% increase in the average daily rate to $149.35 from $145.93.

DiamondRock management was so optimistic it raised its outlook.

The operator of premium hotels in North America now expects revPAR growth of 5% to 7.5% in the fourth quarter. Adjusted EBITDA is expected to be in a range of $47 million to $50 million. Adjusted FFO is expected in a range of $30 million to $32 million, or 19 cents to 21 cents per share.

For fiscal 2010, DiamondRock increased its guidance, expecting revPAR growth between 3% and 5%, adjusted EBITDA of $135 million to $138 million, and adjusted FFO of $88 million to $90 million, or 61 cents to 62 cents per share.

Analysts' consensus call is for fourth-quarter EBITDA of $46 million and FFO of 20 cents per share. For the fiscal year analysts expect EBITDA of $134 million and FFO of 60 cents per share.

In the recent quarter, DiamondRock acquired the Hilton Garden Inn Chelsea, a 169-room hotel property in New York City, for $69 million. It also acquired the Renaissance Charleston, a 166-room property in Charleston, S.C., for $40 million. In the previous quarter the company acquired the 821-room Hilton Minneapolis for $157 million.

DiamondRock amended its $200 million senior unsecured revolving credit facility in the recent quarter, which now matures in 2014, including a one year extension option.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

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