DiamondRock Hospitality Company has acquired the fee-simple interest in the Chico Hot Springs Resort, a lifestyle resort in Paradise Valley, Montana close to Yellowstone National Park. The purchase price for the resort and adjacent ranch is $33 million. Chico was acquired from an individual owner-operator and is an independent resort with no brand or management agreements. Other terms were not disclosed.
The $27 million purchase price for the 117-room, 153-acre resort represents an 8.1 percent capitalization rate on 2022 net operating income. Year-to-date comparable growth in revenue per available room through the second quarter 2023 was 8.7 percent. The adjacent ranch, a 595-acre parcel purchased for approximately $6 million, provides extensive on-site trails for hiking and horseback riding as well as potential for future expansion of the Resort or residential lot sales. DiamondRock expects Chico will generate a 10.5 percent net operating income yield on the total $33 million purchase price upon stabilization. The acquisition was funded from corporate cash on hand.
Chico Hot Springs Resort is a western-style resort in Montana's Paradise Valley and convenient to the only year-round vehicle entrance to Yellowstone National Park. Situated at the base of Emigrant Peak, the four-season, full-service resort has trails for hiking, mountain biking, horseback riding as well as expeditions for fly fishing, dog sledding, rock climbing and cross-country skiing. There also are two open-air natural mineral hot springs.
The resort has a variety of accommodation options ranging from the historic lodge to cabins and chalets to glamping opportunities overlooking Paradise Valley. The resort has three dining outlets, including the authentic Chico Saloon and fine dining in the Historic Dining Room.
The resort and adjacent ranch, in total, comprise 748 acres of land. DiamondRock officials said there is a significant opportunity to enhance revenues, implement yield management and broaden distribution channels. The company has installed a professional management company to execute its operating plan as well as to pursue many high return-on-investment opportunities including additional rooms and glamping, affordable workforce housing and renewable power.