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What changed in DiamondRock Hospitality Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of DiamondRock Hospitality Co's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+315 added−319 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-24)

Top changes in DiamondRock Hospitality Co's 2023 10-K

315 paragraphs added · 319 removed · 243 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeIn December 2022, we published our most recent annual Corporate Responsibility Report, which includes ESG policies, environmental and social programs, historic results and performance targets. The annual Corporate Responsibility Report is prepared in accordance with relevant international standards and best practices, including the Sustainable Accounting Standards Board (“SASB”) (now The Value Reporting Foundation) for the Real Estate Sector.
Biggest changeThe annual Corporate Responsibility Report is prepared in accordance with relevant international standards and best practices, including standards developed for the real estate sector by the International Financial Reporting Standards (“IFRS”) Foundation, which was formerly known as the Sustainable Accounting Standards Board.
Specifically, we believe that lower leverage benefits us in the following ways: • provides capacity to fund attractive acquisitions; • enhances our ability to maintain a sustainable dividend; • enables us to opportunistically repurchase shares during periods of stock price dislocation; and • provides capacity to fund late-cycle capital needs.
Specifically, we believe that lower leverage benefits us in the following ways: • it provides capacity to fund attractive acquisitions; • it enhances our ability to maintain a sustainable dividend; • it enables us to opportunistically repurchase shares during periods of stock price dislocation; and • it provides capacity to fund late-cycle capital needs.
The markets that we target are those that we believe align with our strategic objectives, which include investing in assets in destination markets with constrained supply trends, geographic diversity relative to our existing portfolio, and those markets that are considered to have high growth potential.
The markets that we target are those that we believe align with our strategic objectives, which include investing in assets in destination markets with constrained supply trends, those that provide geographic diversity relative to our existing portfolio, and those markets that are considered to have high growth potential.
The following charts display our Total Energy Consumption and Total Water Consumption for 2020 and 2021, the last fiscal year for which data is available. These metrics relate to our hotels owned for the entire year presented.
The following charts display our Total Energy Consumption and Total Water Consumption for 2020, 2021 and 2022, the last fiscal year for which data is available. These metrics relate to our hotels owned for the entire year presented.
The new Treasury Regulations also provide new guidance regarding qualified foreign pension funds. Accordingly, the second paragraph under the heading “Material U.S. Federal Income Tax Considerations—Taxation of Non-U.S.
The final Treasury Regulations also provide new guidance regarding qualified foreign pension funds. Accordingly, the second paragraph under the heading “Material U.S. Federal Income Tax Considerations—Taxation of Non-U.S.
For purposes of FIRPTA Withholding under clause (iii), whether a capital gain dividend is attributable to the sale or exchange of a United States real property interest is determined taking into account the general exception from FIRPTA distribution treatment for distributions paid to certain non-U.S. stockholders under which any distribution paid by us to a non-U.S. stockholder with respect to any class of stock which is regularly traded on an established securities market located in the United States is not treated as gain -12- Tabl e of Contents recognized from the sale or exchange of a United States real property interest if such non-U.S. stockholder did not own more than 10% of such class of stock at any time during the one-year period ending on the date of such distribution.
For purposes of FIRPTA Withholding under clause (iii), whether a capital gain dividend is attributable to the sale or exchange of a United States real property interest is determined taking into account the general exception from FIRPTA distribution treatment for distributions paid to certain non-U.S. stockholders under which any distribution paid by us to a non-U.S. stockholder with respect to any class of stock which is regularly traded on an established securities market located in the United States is not treated as gain -12- Table of Contents recognized from the sale or exchange of a United States real property interest if such non-U.S. stockholder did not own more than 10% of such class of stock at any time during the one-year period ending on the date of such distribution.
Treasury Regulations also provide that a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships, may certify its status as such and will not be treated as a foreign person for purposes of withholding under Section 1445 of the Code (and Section 1446 of the Code, as applicable). -13- Tabl e of Contents Distributions that are attributable to gain from the sales of United States real property interests received by a qualified foreign pension fund or a qualified controlled entity that satisfies the requirements to be a qualified holder will not be subject to U.S. federal income or withholding tax.
Treasury Regulations also provide that a foreign partnership all of the interests of which are held by qualified holders, including through one or more partnerships, may certify its status as such and will not be treated as a foreign person for purposes of withholding under Section 1445 of the Code (and Section 1446 of the Code, as applicable). -13- Table of Contents Distributions that are attributable to gain from the sales of United States real property interests received by a qualified foreign pension fund or a qualified controlled entity that satisfies the requirements to be a qualified holder will not be subject to U.S. federal income or withholding tax.
We believe that properties flagged with a Marriott, Hilton or IHG brand will enjoy the competitive advantages associated with their operations under such brand.
We believe that properties flagged with a Marriott, Hilton or IHG-affiliated brand will enjoy the competitive advantages associated with their operations under such brand.
We make our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), -11- Tabl e of Contents available on our website free of charge as soon as reasonably practicable after such reports and amendments are electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
We make our proxy statements, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), -11- Table of Contents available on our website free of charge as soon as reasonably practicable after such reports and amendments are electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).
As of December 31, 2022, our outstanding debt consists of a combination of unsecured term loans and fixed-rate property-specific mortgage debt. We prefer that a significant portion of our portfolio remain unencumbered by debt in order to provide maximum balance sheet flexibility.
As of December 31, 2023, our outstanding debt consists of a combination of unsecured term loans and fixed-rate property-specific mortgage debt. We prefer that a significant portion of our portfolio remain unencumbered by debt in order to provide maximum balance sheet flexibility.
In turn, our TRS lessees must engage a third-party management company to manage the hotels. As of December 31, 2022, we leased all of our hotels to TRS lessees, except for one hotel that is directly owned by a TRS.
In turn, our TRS lessees must engage a third-party management company to manage the hotels. As of December 31, 2023, we leased all of our hotels to TRS lessees, except for one hotel that is directly owned by a TRS.
This competition may reduce the number of suitable investment opportunities offered to us and increase the cost of acquiring our targeted hotel investments. Seasonality -10- Tabl e of Contents The periods during which our hotels experience higher revenues vary from property to property, depending principally upon location and the customer base served. Accordingly, we expect some seasonality in our business.
This competition may reduce the number of suitable investment opportunities offered to us and increase the cost of acquiring our targeted hotel investments. Seasonality -10- Table of Contents The periods during which our hotels experience higher revenues vary from property to property, depending principally upon location and the customer base served. Accordingly, we expect some seasonality in our business.
In 2020, total consumption of both energy and water was significantly reduced due to the historically low occupancy levels at our hotels as a result of COVID-19 pandemic. -8- Tabl e of Contents We display key metrics, documents, programs and policies through the Global Reporting Initiative (“GRI”) Index, and in accordance with the GRI framework.
In 2020 and 2021, total consumption of both energy and water was significantly reduced due to the historically low occupancy levels at our hotels as a result of the COVID-19 pandemic. -8- Table of Contents We display key metrics, documents, programs and policies through the Global Reporting Initiative (“GRI”) Index, and in accordance with the GRI framework.
If our cost of capital is attractive, we expect to: • pursue strategic acquisitions in line with our target asset type; • consider opportunistically raising equity; and -6- Tabl e of Contents • evaluate opportunities to dispose of non-core hotels.
If our cost of capital is attractive, we expect to: • pursue strategic acquisitions in line with our target asset type; • consider opportunistically raising equity; and -6- Table of Contents • evaluate opportunities to dispose of non-core hotels.
High-Quality Urban and Destination Resort Hotels As of December 31, 2022, we owned 35 premium hotels and resorts throughout the United States. Our hotels and resorts are primarily categorized as luxury and upper upscale as defined by STR, Inc. and are generally located in high barrier-to-entry markets with multiple demand generators.
High-Quality Urban and Destination Resort Hotels As of December 31, 2023, we owned 36 premium hotels and resorts throughout the United States. Our hotels and resorts are primarily categorized as luxury and upper upscale as defined by STR, Inc. and are generally located in high barrier-to-entry markets with multiple demand generators.
Our Business Strategy Our strategy is to apply aggressive asset management, conservative leverage, and disciplined capital allocation to high quality lodging properties in North American urban and resort markets with superior growth prospects and high barriers-to-entry. We plan to strategically allocate capital in order to create value depending on our cost of capital.
Our Business Strategy Our strategy is to apply aggressive asset management, prudent financial strategy, and disciplined capital allocation to high quality lodging properties in North American urban and resort markets with superior growth prospects and high barriers-to-entry. We plan to strategically allocate capital in order to create value depending on our cost of capital.
Accounting metrics and disclosures for the real estate industry are provided by the SASB, which publishes the Real Estate Sustainability Accounting Standard. This standard advises that total energy consumed (“Total Energy Consumption”) and total water withdrawn (“Total Water Consumption”) are the metrics that best correspond with the real estate industry.
Accounting metrics and disclosures for the real estate industry are provided by the IFRS Foundation, which publishes the Real Estate Sustainability Accounting Standard. This standard advises that total energy consumed (“Total Energy Consumption”) and total water withdrawn (“Total Water Consumption”) are the metrics that best correspond with the real estate industry.
The following chart shows our corporate structure as of the date of this report: -9- Tabl e of Contents Competition The hotel industry is highly competitive and our hotels are subject to competition from other hotels for guests.
The following chart shows our corporate structure as of the date of this report: -9- Table of Contents Competition The hotel industry is highly competitive and our hotels are subject to competition from other hotels for guests.
The employees of our hotel managers at the Courtyard New York Manhattan/Fifth Avenue, Courtyard New York Manhattan/Midtown East, Hilton Garden Inn New York/Times Square Central, Westin Boston Seaport District and Hilton Boston Downtown/Faneuil Hall are currently represented by labor unions and are subject to collective bargaining agreements.
The employees of our hotel managers at the Courtyard New York Manhattan/Fifth Avenue, Courtyard New York Manhattan/Midtown East, Hilton Garden Inn New York/Times Square Central, Westin Boston Seaport District and The Dagny Boston are currently represented by labor unions and are subject to collective bargaining agreements.
Our senior management team has established a broad network of hotel industry contacts and relationships, including relationships with hotel owners, financiers, operators, project managers and contractors and other key industry participants. We -7- Tabl e of Contents use our broad network of hotel industry contacts and relationships to maximize the value of our hotels.
Our senior management team has established a broad network of hotel industry contacts and relationships, including relationships with hotel owners, financiers, operators, project managers and contractors and other key industry participants. We use our broad network of hotel industry contacts and relationships to maximize the value of our hotels.
We currently employ a conservative debt profile with prudent leverage. We maintain balance sheet flexibility with our existing corporate cash, limited near-term debt maturities , capacity under our senior unsecured credit facility and 31 of our 35 hotels unencumbered by mortgage debt as of December 31, 2022.
We currently employ a conservative debt profile with prudent leverage. We maintain balance sheet flexibility with our existing corporate cash, limited near-term debt maturities , capacity under our senior unsecured credit facility and 32 of our 36 hotels unencumbered by mortgage debt as of December 31, 2023.
Our primary business is to acquire, own, renovate and asset manage premium hotel properties in the United States. Our portfolio is concentrated in major urban market cities and destination resort locations. All of our hotels are managed by a third party—either an independent operator or a brand operator, such as Marriott International, Inc. (“Marriott”).
Our primary business is to acquire, own, renovate and asset manage premium hotel properties in the United States. Our portfolio is concentrated in major urban markets and destination resort locations. All of our hotels are managed by a third party—either an independent operator or a brand operator, such as Marriott.
Item 1. Business Overview DiamondRock Hospitality Company is a lodging-focused Maryland corporation operating as a REIT for U.S. federal income tax purposes. As of December 31, 2022, we owned a portfolio of 35 premium hotels and resorts that contain 9,607 guest rooms located in 24 different markets in the United States.
Item 1. Business Overview DiamondRock Hospitality Company is a lodging-focused Maryland corporation operating as a REIT for U.S. federal income tax purposes. As of December 31, 2023, we owned a portfolio of 36 premium hotels and resorts that contain 9,746 guest rooms located in 25 different markets in the United States.
We cooperatively partner with our hotel managers in an attempt to increase operating results and long-term asset values at our hotels.
We cooperatively partner with our hotel managers in an attempt to increase -7- Table of Contents operating results and long-term asset values at our hotels.
As of December 31, 2022, limited partners held 719,542 common OP units. In the future, we may issue additional common OP units from time to time in connection with acquiring hotel properties, financing, compensation, or other reasons.
As of December 31, 2023, limited partners held 723,166 common OP units. In the future, we may issue additional common OP units from time to time in connection with acquiring hotel properties, financing, compensation, or other reasons.
We also maintain a portion of our hotels as independent lifestyle hotels. We believe that premier global hotel brands create significant value for certain hotels as a result of each brand's ability to produce incremental revenue through their strong reservation and rewards systems and sales organizations.
We believe that premier global hotel brands create significant value for certain hotels as a result of each brand's ability to produce incremental revenue through their strong reservation and loyalty rewards systems and sales organizations.
Our Company We commenced operations in July 2004 and became a public reporting company in May 2005. Our common stock and Series A Preferred Stock are traded on the New York Stock Exchange (the “NYSE”) under the symbols “DRH” and “DRH Pr A”, respectively. We have historically been successful in acquiring, financing and managing our hotels.
Our Company We commenced operations in July 2004 and became a public reporting company in May 2005. Our common stock and Series A Preferred Stock are traded on the New York Stock Exchange (the “NYSE”) under the symbols “DRH” and “DRH Pr A”, respectively.
Innovative Asset Management We believe that we can create significant value in our portfolio through innovative asset management strategies such as rebranding, renovating and repositioning our hotels. We completed rebrandings at four of our hotels in 2021 and 2022 and are currently completing rebrandings and renovations at two additional hotels.
Innovative Asset Management We believe that we can create significant value in our portfolio through innovative asset management strategies such as rebranding, renovating and repositioning our hotels. We completed rebrandings at five of our hotels since 2021 and are currently completing rebrandings and repositionings at three additional hotels.
Employees and Human Capital As of December 31, 2022, we employed 30 full-time employees. We believe that our relations with our employees are good. None of our employees is a member of any union. During 2022, all employees involved in the day-to-day operation of our hotels were employed by third-party management companies engaged pursuant to hotel management agreements.
Employees and Human Capital As of December 31, 2023, we employed 33 full-time employees. None of our employees is a member of any union. During 2023, all employees involved in the day-to-day operation of our hotels were employed by third-party management companies engaged pursuant to hotel management agreements.
We evaluate each hotel in our portfolio to assess the optimal brand and management strategy for the individual hotel and market. We leverage the leading global hotel brands at many of our hotels, which are flagged under a brand owned by Marriott, Hilton Worldwide Holdings, Inc. (“Hilton”) or IHG Hotels & Resorts (“IHG”).
We evaluate each hotel in our portfolio to assess the optimal brand and management strategy for the individual hotel and market. We leverage the leading global hotel brands at many of our hotels, which are flagged under a brand owned by Marriott, Hilton or IHG. We also maintain a portion of our hotels as independent lifestyle hotels.
In 2022, as a result of our commitment to sustainability, we were ranked first in sustainability performance as the America’s Regional Sector Leader for Hotels by the GRESB Real Estate Assessment. We are committed to transparent reporting of our environmental, social, and governance (“ESG”) initiatives.
In 2023, as a result of our commitment to sustainability, we were ranked first in sustainability performance as the America’s Regional Listed Sector Leader for Hotels for the fifth consecutive year by the GRESB Real Estate Assessment for the Standing Investments Benchmark. We are committed to transparent reporting of our environmental, social, and governance (“ESG”) initiati ves.
These global brands' reservation systems and national advertising, marketing and promotional services combined with strong management by third-party operators enable our properties to perform favorably in terms of both occupancy and room rates relative to other brands and non-branded hotels. The guest loyalty programs operated by these global brands generate repeat guest business that might otherwise go to competing hotels.
We believe these global brands' reservation systems and national advertising, marketing and promotional services combined with strong management by third-party operators enable our properties to perform favorably in terms of both occupancy and room rates relative to other brands and non-branded hotels.
We have enhanced our hotel portfolio over the past several years by recycling capital from non-core hotels, located in slower growth markets, to higher quality hotels located primarily in urban and destination resort markets. We have repositioned our portfolio through the acquisition of urban and resort hotels that align with our strategic goals while disposing of non-core hotels.
We have enhanced our hotel portfolio over the past several years by recycling capital from non-core hotels, located in slower growth markets, to higher quality hotels located primarily in urban and destination resort markets that align with our strategic goals. Over 97% of revenues for the year ended December 31, 2023 was derived from core urban and resort destination hotels.
We will continue to evaluate our portfolio for opportunities to upgrade our portfolio by considering strategic acquisitions and opportunistic non-core hotel dispositions. Our acquisition strategy focuses primarily on hotels that we believe present unique value-add opportunities.
We are highly sensitive to our cost of capital and may pursue acquisitions that create value in the near term. We will continue to evaluate our portfolio for opportunities to upgrade our portfolio by considering strategic acquisitions and opportunistic non-core hotel dispositions. Our acquisition strategy focuses primarily on hotels that we believe present unique value-add opportunities.
In addition, we have repositioned certain of our hotels through a change in brand, comprehensive renovation and/or change in third-party hotel manager to a more efficient operator. This focus has helped us achieve the strategic goals of improving our portfolio's brand and management diversity.
Our capital recycling program has also achieved several other important strategic portfolio goals that include improving our portfolio’s geographic, climate, operator and brand diversity. In addition, we have repositioned certain of our hotels through a change in brand, comprehensive renovation and/or change in third-party hotel manager to a more efficient operator, which further improved our portfolio's brand and management diversity.
Removed
Our exposure to resorts and urban lifestyle hotels continued to increase in 2022 with acquisitions in locations such as Marathon, Florida, Fort Lauderdale, Florida and Austin, Texas. Over 98% of revenues for the year ended December 31, 2022 is derived from core urban and resort destination hotels.
Added
In January 2024, we published our most recent annual Corporate Responsibility Report, which includes ESG policies, environmental and social programs, historic results and performance targets.
Removed
Our capital recycling program has also achieved several other important strategic portfolio goals that include improving our portfolio’s geographic, climate, operator and brand diversity. We are highly sensitive to our cost of capital and may pursue acquisitions that create value in the near term.
Added
The guest loyalty programs operated by these global brands generate repeat guest business that might otherwise go to competing hotels.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRefinanced debt could reduce the amounts available for distribution to our stockholders, as well as reduce funds available for our operations, future investment opportunities or other purposes. Increases in interest rates may increase our interest expense.
Biggest changeIf we violate covenants in our future indebtedness agreements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on favorable terms, if at all. -26- Table of Contents Refinanced debt could reduce the amounts available for distribution to our stockholders, as well as reduce funds available for our operations, future investment opportunities or other purposes.
Even if we successfully complete hotel acquisitions, there can be no assurance that we will be able to successfully integrate the hotels we acquire into our existing operations or otherwise realize the expected benefits of these acquisitions.
Even if we successfully complete hotel acquisitions, there can be no assurance that we will be able to successfully integrate the hotels we acquire into our existing operations or otherwise realize the expected benefits of these acquisitions.
Consequently, if market recognition or the positive perception of Marriott or Hilton is reduced or compromised, the goodwill associated with the Marriott- and Hilton-branded hotels in our portfolio may be adversely affected, which may have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
Consequently, if market recognition or the positive perception of Marriott, Hilton or IHG is reduced or compromised, the goodwill associated with the Marriott-, Hilton- and IHG-branded hotels in our portfolio may be adversely affected, which may have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
Certain of our loan agreements contain, and future mortgage debt agreements may contain, cash trap provisions that may be triggered if the performance of the affected hotel or hotels declines to a certain level.
All of our loan agreements contain, and future mortgage debt agreements may contain, cash trap provisions that may be triggered if the performance of the affected hotel or hotels declines to a certain level.
Item 1A. Risk Factors Set forth below are the risks that we believe are material to our investors and should be carefully considered. Those risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur.
Item 1A. Risk Factors Set forth below are the risks that we believe are material to our investors and should be carefully considered. These risks are not all of the risks we face and other factors not presently known to us or that we currently believe are immaterial may also affect our business if they occur.
Increasing use of these alternative facilities could materially adversely affect the occupancy at our hotels and could put downward pressure on average rates and revenues. -15- Tabl e of Contents The rise of social media review platforms, including, but not limited to Tripadvisor.com, could impact our occupancy levels and operating results as people might be more inclined to write about their dissatisfaction rather than satisfaction with a hotel stay.
Increasing use of these alternative facilities could materially adversely affect the occupancy at our hotels and could put downward pressure on average rates and revenues. -15- Table of Contents The rise of social media review platforms, including, but not limited to Tripadvisor.com, could impact our occupancy levels and operating results as people might be more inclined to write about their dissatisfaction rather than satisfaction with a hotel stay.
These facts and any others that would impede our ability to respond to adverse changes in the performance of our hotel properties could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to our stockholders. -16- Tabl e of Contents Due to restrictions in our hotel management agreements, franchise agreements, mortgage agreements and ground leases, we may not be able to sell our hotels at the highest possible price, or at all.
These facts and any others that would impede our ability to respond to adverse changes in the performance of our hotel properties could have a material adverse effect on our operating results and financial condition, as well as our ability to make distributions to our stockholders. -16- Table of Contents Due to restrictions in our hotel management agreements, franchise agreements, mortgage agreements and ground leases, we may not be able to sell our hotels at the highest possible price, or at all.
The full extent to which COVID-19, or any future pandemic, epidemic or outbreak of any other highly infectious disease, impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available COVID-19 vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.
The full extent to which any future pandemic, epidemic or outbreak of any highly infectious disease impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of such pandemic, the emergence and characteristics of new variants, the actions taken to contain the pandemic or mitigate its impact, including the adoption, administration and effectiveness of available vaccines, and the direct and indirect economic effects of the pandemic and containment measures, among others.
As a result, our success is dependent in part on the continued success of Marriott and Hilton and their respective brands.
As a result, our success is dependent in part on the continued success of Marriott, Hilton and IHG and their respective brands.
We believe that we are qualified to be taxed as a REIT for U.S. federal income tax purposes for our taxable year ended December 31, 2022, and we expect to continue to qualify as a REIT for future taxable years, but we cannot assure you that we have qualified, or will remain qualified, as a REIT.
We believe that we are qualified to be taxed as a REIT for U.S. federal income tax purposes for our taxable year ended December 31, 2023, and we expect to continue to qualify as a REIT for future taxable years, but we cannot assure you that we have qualified, or will remain qualified, as a REIT.
In addition, the total amount of costs and expenses that may be incurred with respect to the unknown or contingent liabilities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which could materially and adversely affect our operating results and cash flows. -17- Tabl e of Contents We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing for such expenditures.
In addition, the total amount of costs and expenses that may be incurred with respect to the unknown or contingent liabilities may exceed our expectations, and we may experience other unanticipated adverse effects, all of which could materially and adversely affect our operating results and cash flows. -17- Table of Contents We are subject to risks associated with our ongoing need for renovations and capital improvements as well as financing for such expenditures.
As of December 31, 2022, 4,760,000 shares of our Series A Preferred Stock were issued and outstanding. The aggregate liquidation preference with respect to the outstanding preferred stock is approximately $119.0 million and aggregate annual dividends on these shares are approximately $9.8 million.
As of December 31, 2023, 4,760,000 shares of our Series A Preferred Stock were issued and outstanding. The aggregate liquidation preference with respect to the outstanding preferred stock is approximately $119.0 million and aggregate annual dividends on these shares are approximately $9.8 million.
COVID-19 has materially and adversely affected, and COVID-19 or any future pandemic, epidemic or outbreak of any other highly infectious disease may continue to materially and adversely affect, our business, financial condition and results of operations, and our ability to pay dividends, and may also have the effect of heightening many of the risks described below and within this “Risk Factors” section, including: • a complete or partial closure or re-closure of, or other operational issues at, one or more of our hotels resulting from government, third-party hotel manager or franchisor action, which has materially adversely affected, and could continue to materially adversely affect, our operations; • the postponement or cancellation of conferences, conventions, festivals, sporting events, public events and other group business that would have otherwise brought individuals to the cities in which our hotels are located, which has caused, and could continue to cause, a decrease in occupancy rates over a prolonged period of time and exacerbated the seasonal volatility at our hotels; -18- Tabl e of Contents • a general decline of in-person business meetings and an increase in the use of teleconferencing and video-conference technology, which could cause a sustained shift away from business-related travel and have a material adverse effect on the overall demand for hotel rooms; and • a decrease in individuals’ willingness to travel as a result of the public health risks and social impacts of such outbreak or a decrease in consumer spending, which could affect the ability of our hotels to generate sufficient revenues to meet operating and other expenses in the short- and long-term.
COVID-19 materially and adversely affected, and COVID-19 or any future pandemic, epidemic or outbreak of any other highly infectious disease may materially and adversely affect, our business, financial condition and results of operations, and our ability to pay dividends, and may also have the effect of heightening many of the risks described below and within this “Risk Factors” section, including: • a complete or partial closure or re-closure of, or other operational issues at, one or more of our hotels resulting from government, third-party hotel manager or franchisor action, which could materially adversely affect our operations; • the postponement or cancellation of conferences, conventions, festivals, sporting events, public events and other group business that would have otherwise brought individuals to the cities in which our hotels are located, which could cause a decrease in occupancy rates over a prolonged period of time and exacerbate the seasonal volatility at our hotels; • a general decline of in-person business meetings and an increase in the use of teleconferencing and video-conference technology, which could cause a sustained shift away from business-related travel and have a material adverse effect on the overall demand for hotel rooms; and -18- Table of Contents • a decrease in individuals’ willingness to travel as a result of the public health risks and social impacts of such outbreak or a decrease in consumer spending, which could affect the ability of our hotels to generate sufficient revenues to meet operating and other expenses in the short- and long-term.
We are subject to franchise agreements at certain of our properties, with remaining terms of up to 28 years, inclusive of renewal periods that are exercisable at the option of the franchisor. See Item 2, Properties, for hotel management and franchise agreement details.
We are subject to franchise agreements at certain of our properties, with remaining terms of up to 27 years, inclusive of renewal periods that are exercisable at the option of the franchisor. See Item 2, Properties, for hotel management and franchise agreement details.
In periods of weak demand, profitability is negatively affected by the relatively high fixed costs of operating premium full-service hotels as compared to other classes of hotels. -14- Tabl e of Contents The occurrence of any of the foregoing factors could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
In periods of weak demand, profitability is negatively affected by the relatively high fixed costs of operating premium full-service hotels as compared to other classes of hotels. -14- Table of Contents The occurrence of any of the foregoing factors could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
In the event that we need to replace any of our hotel management companies pursuant to termination for cause or performance, we may experience significant disruptions at the affected properties and the new management companies may not meet our performance expectations, which may have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
In the event that we need to replace any of our hotel management companies pursuant to termination for cause or performance, we -20- Table of Contents may experience significant disruptions at the affected properties and the new management companies may not meet our performance expectations, which may have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay qualified dividend income, which could adversely affect the value of the stock of REITs, including our common stock and Series A Preferred Stock.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay qualified dividend income, which could adversely affect the value of the stock of REITs, including our -30- Table of Contents common stock and Series A Preferred Stock.
As of December 31, 2022, 4,760,000 shares of our Series A Preferred Stock were outstanding and could be converted, upon the occurrence of limited specified change in control transactions, into shares of our common stock.
As of December 31, 2023, 4,760,000 shares of our Series A Preferred Stock were outstanding and could be converted, upon the occurrence of limited specified change in control transactions, into shares of our common stock.
If market interest rates increase, prospective purchasers of REIT common shares and preferred shares may seek to achieve a higher distribution yield, which we may not be able to, or may choose not to, provide.
As market interest rates increase, prospective purchasers of REIT common shares and preferred shares may seek to achieve a higher distribution yield, which we may not be able to, or may choose not to, provide.
Given that our hotels are concentrated in major urban market cities and destination resort locations in the U.S., our business may be particularly sensitive to changes in foreign exchange rates or a negative international perception of the U.S. arising from its political or other positions.
Given that our hotels are concentrated in major urban markets and destination resort locations in the U.S., our business may be particularly sensitive to changes in foreign exchange rates or a negative international perception of the U.S. arising from its political or other positions.
In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured and/or adversely impact our ability to attract officers and directors.
In addition, certain litigation or the resolution of certain litigation may affect the availability or cost of -33- Table of Contents some of our insurance coverage, which could adversely impact our results of operations and cash flows, expose us to increased risks that would be uninsured and/or adversely impact our ability to attract officers and directors.
We could be responsible for the costs associated with a contaminated property, including the costs to clean up a contaminated property or to defend against a claim, and such costs could have a material adverse effect on our results of operations and financial condition and our ability to pay dividends to our stockholders.
We could be responsible for the costs associated with a contaminated property, including the costs to clean up a contaminated property or to defend against a claim, and such costs could have a material adverse effect on our results of -27- Table of Contents operations and financial condition and our ability to pay dividends to our stockholders.
In addition to fluctuations related to our business model, our hotels are, and will continue to be, subject to various long-term operating risks common to the hotel industry, many of which are beyond our control, including: • dependence on business and commercial travelers and tourism, both of which vary with consumer and business confidence in the strength of the economy; • decreases in the frequency of business travel that may result from alternatives to in-person meetings, particularly in light of the continuing impact of COVID-19; • competition from other hotels and alternative lodging channels located in the markets in which we own properties; • competition from third-party internet travel intermediaries; • an over-supply or over-building of hotels in the markets in which we own properties, which could adversely affect occupancy rates, revenues and profits at our hotels; • increases in energy and transportation costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists; • increases in operating costs due to inflation and other factors that may not be offset by increased room rates; and • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance.
In addition to fluctuations related to our business model, our hotels are, and will continue to be, subject to various long-term operating risks common to the hotel industry, many of which are beyond our control, including: • dependence on business and commercial travelers and tourism, both of which vary with consumer and business confidence in the strength of the economy; • decreases in the frequency of business travel that may result from alternatives to in-person meetings, including as post-COVID-19 pandemic norms continue to evolve; • competition from other hotels and alternative lodging channels located in the markets in which we own properties; • competition from third-party internet travel intermediaries; • an over-supply or over-building of hotels in the markets in which we own properties, which could adversely affect occupancy rates, revenues and profits at our hotels; • increases in energy and transportation costs and other expenses affecting travel, which may affect travel patterns and reduce the number of business and commercial travelers and tourists; • increases in operating costs due to inflation and other factors that may not be offset by increased room rates; and • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance.
Certain of our current hotel management and franchise agreements are long-term. All but four of our hotel management agreements are terminable at our option. The remaining four hotel management agreements have remaining terms ranging from approximately five years to 36 years, inclusive of renewal periods that are exercisable at the option of the property manager.
Certain of our current hotel management and franchise agreements are long-term. All but four of our hotel management agreements are terminable at our option. The remaining four hotel management agreements have remaining terms ranging from approximately four years to 35 years, inclusive of renewal periods that are exercisable at the option of the property manager.
In addition, the acquisition and subsequent integration of the additional hotels into our existing portfolio may require significant time and focus from our management team and may divert attention from the day-to-day operations of our business, which could delay the achievement of our strategic objectives.
In addition, the acquisition and subsequent integration of the additional hotels into our existing portfolio may require significant -23- Table of Contents time and focus from our management team and may divert attention from the day-to-day operations of our business, which could delay the achievement of our strategic objectives.
Eleven of our hotels are located in metropolitan markets that have been, or may in the future be, targets of actual or threatened terrorist attacks or active shooter attacks, including New York City, Chicago, Boston, San Francisco and Washington, D.C. These hotels are material to our financial results, having constituted 75% of our total revenues in 2022.
Eleven of our hotels are located in metropolitan markets that have been, or may in the future be, targets of actual or threatened terrorist attacks or active shooter attacks, including New York City, Chicago, Boston, San Francisco and Washington, D.C. These hotels are material to our financial results, having constituted 73% of our total revenues in 2023.
The costs to us to eliminate or alleviate cybersecurity incidents or cyber-attacks could be significant and may increase as the number, intensity and sophistication of such attacks increases.
The costs to us to eliminate or alleviate cybersecurity incidents could be significant and may increase as the number, intensity and sophistication of such incidents increases.
Nine of our hotels (Havana Cabana Key West, Margaritaville Beach House Key West, Westin Fort Lauderdale Beach Resort, Henderson Park Inn, Henderson Beach Resort, Bourbon Orleans Hotel, Renaissance Charleston Historic District Hotel, Tranquility Bay Beachfront Resort and Kimpton Shorebreak Fort Lauderdale Beach Resort) are located in areas that have experienced, and will continue to experience, many hurricanes.
Nine of our hotels (Havana Cabana Key West, Margaritaville Beach House Key West, Westin Fort Lauderdale Beach Resort, Henderson Park Inn, Henderson Beach Resort, Bourbon Orleans Hotel, The Lindy Renaissance Charleston Hotel, Tranquility Bay Beachfront Resort and Kimpton Shorebreak Fort Lauderdale Beach Resort) are located in areas that have experienced, and will continue to experience, many hurricanes.
Many of our existing mortgage debt agreements contain, and future mortgage debt agreements may contain, “cash trap” provisions that could limit our ability to make distributions to our stockholders.
All of our existing mortgage debt agreements contain, and future mortgage debt agreements may contain, “cash trap” provisions that could limit our ability to make distributions to our stockholders.
In addition, the real estate market is affected by many factors that are beyond our control, including: • adverse changes in international, national, regional and local economic and market conditions; • changes in supply of competitive hotels; • changes in interest rates and in the availability, cost and terms of debt financing; • changes in tax laws and property tax rates, or an increase in the assessed valuation of a property for real estate tax purposes; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; • fluctuations in foreign currency exchange rates; • the ongoing need for capital improvements, particularly in older structures; • changes in operating expenses; and • pandemics and the outbreak of diseases, federal, state and local government shutdowns, airline strikes, civil unrest, active shooter attacks, acts of God, including earthquakes, floods, wildfires, hurricanes and other natural disasters and acts of war or terrorism, including the consequences of terrorist acts such as those that occurred on September 11, 2001, which may result in uninsured losses.
In addition, the real estate market is affected by many factors that are beyond our control, including: • adverse changes in international, national, regional and local economic and market conditions; • changes in supply of competitive hotels; • changes in interest rates and in the availability, cost and terms of debt financing; • changes in tax laws and property tax rates, or an increase in the assessed valuation of a property for real estate tax purposes; • changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances; • fluctuations in foreign currency exchange rates; • the ongoing need for capital improvements, particularly in older structures; • changes in operating expenses; and • pandemics and the outbreak of diseases, federal, state and local government shutdowns, airline strikes, civil unrest, active shooter attacks, acts of God, including earthquakes, floods, wildfires, hurricanes and other natural disasters and acts of war or terrorism and their consequences, which may result in uninsured losses.
Additionally, even in the absence of direct physical damage to our hotels, the occurrence of any natural disasters, terrorist attacks, significant military actions, a changing climate in the area of any of our hotels, outbreaks of pandemics or diseases, such as Zika, Ebola, COVID-19, H1N1 or other similar viruses, or other casualty events, will likely have a material adverse effect on business and commercial travelers and tourists, the economy generally and the hotel and tourism industries in particular.
Additionally, even in the absence of direct physical damage to our hotels, the occurrence of any natural disasters, terrorist attacks, significant military actions, outbreaks of pandemics or diseases, such as Zika, Ebola, COVID-19, H1N1 or other similar viruses, or severe weather, extreme temperatures or a changing climate in the area of any of our hotels, will likely have a material adverse effect on business and commercial travelers and tourists, the economy generally and the hotel and tourism industries in particular.
This type of litigation could result in substantial costs and divert our management’s attention and resources. -32- Tabl e of Contents Future issuances of our common stock, Series A Preferred Stock or our operating partnership’s common OP units, may depress the market price of our common stock and have a dilutive effect on our existing stockholders.
This type of litigation could result in substantial costs and divert our management’s attention and resources. Future issuances of our common stock, Series A Preferred Stock or our operating partnership’s common OP units, may depress the market price of our common stock and have a dilutive effect on our existing stockholders.
Any delay or failure on our part to operate acquired properties to meet our -22- Tabl e of Contents financial expectations could impede our growth and have an adverse effect on us, including our financial condition, results of operations, cash flow. Actions by organized labor could have a material adverse effect on our business.
Any delay or failure on our part to operate acquired properties to meet our financial expectations could impede our growth and have an adverse effect on us, including our financial condition, results of operations, cash flow. Actions by organized labor could have a material adverse effect on our business.
Many of our hotel managers carry cyber insurance policies to protect and offset a portion of potential costs that may be incurred from a security breach. Additionally, we currently have cyber insurance policies to provide supplemental coverage above the coverage carried by our third-party managers.
Many of our hotel managers carry cyber insurance policies to protect and offset a portion of potential costs that may be incurred from a cybersecurity incident. Additionally, we currently have cyber insurance policies to provide supplemental coverage above the coverage carried by our third-party managers.
Our Florida hotels (Havana Cabana Key West, Margaritaville Beach House Key West, Westin Fort Lauderdale Beach Resort, Henderson Park Inn, Henderson Beach Resort, Tranquility Bay Beachfront Resort and Kimpton Shorebreak Fort Lauderdale Beach Resort) each have a deductible of 5% of total insured value for a named storm and the Renaissance Charleston Historic District Hotel and Bourbon Orleans Hotel each has a deductible of 2% of total insured value.
Our Florida hotels (Havana Cabana Key West, Margaritaville Beach House Key West, Westin Fort Lauderdale Beach Resort, Henderson Park Inn, Henderson Beach Resort, Tranquility Bay Beachfront Resort and Kimpton Shorebreak Fort Lauderdale Beach Resort), the Bourbon Orleans Hotel and The Lindy Renaissance Charleston Hotel each have a deductible of 5% of total insured value for a named storm.
To the extent that such technologies, or new technologies, play an increased role in day-to-day business interactions and the necessity for business-related travel decreases, demand for hotel rooms may decrease and our hotels could be materially and adversely affected.
To the extent that such technologies, or new technologies, continue to play a role in day-to-day business interactions and the necessity for business-related travel decreases, demand for hotel rooms may decrease and our hotels could be materially and adversely affected.
We may be unable to generate sufficient cash flows from our operations to make distributions to our stockholders at expected levels, and we cannot assure you of our ability to make distributions in the future. -31- Tabl e of Contents We intend to pay quarterly dividends that represent at least 90% of our REIT taxable income.
We may be unable to generate sufficient cash flows from our operations to make distributions to our stockholders at expected levels, and we cannot assure you of our ability to make distributions in the future. -32- Table of Contents We intend to pay quarterly dividends that represent at least 90% of our REIT taxable income.
Therefore, the amount of property taxes we pay in the future may increase substantially from -29- Tabl e of Contents what we have paid in the past and such increases may not be offset by increased room rates at our hotels.
Therefore, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past and such increases may not be offset by increased room rates at our hotels.
In addition, exposure to -27- Tabl e of Contents mold by our guests or employees, management company employees or others could expose us to liability if property damage or adverse health concerns arise. Risks Related to Our Status as a REIT We cannot assure you that we will remain qualified as a REIT.
In addition, exposure to mold by our guests or employees, management company employees or others could expose us to liability if property damage or adverse health concerns arise. Risks Related to Our Status as a REIT We cannot assure you that we will remain qualified as a REIT.
Seven of our hotels (The Lodge at Sonoma Resort, Westin San Diego Bayview, Hotel Emblem San Francisco, Renaissance Charleston Historic District Hotel, Kimpton Shorebreak Resort, The Landing Lake Tahoe Resort & Spa, and Cavallo Point) are located in areas that are seismically active.
Seven of our hotels (The Lodge at Sonoma Resort, Westin San Diego Bayview, Hotel Emblem San Francisco, The Lindy Renaissance Charleston Hotel, Kimpton Shorebreak Huntington Beach Resort, The Landing Lake Tahoe Resort & Spa, and Cavallo Point) are located in areas that are seismically active.
Tax protection agreements may make it economically prohibitive to sell any properties that are subject to such agreements. In addition, we may be required to maintain a minimum level of indebtedness throughout the term of any tax protection agreement regardless of whether such debt levels are otherwise required to operate our business.
Tax protection agreements may make it economically prohibitive to sell any properties that are subject to such agreements. In addition, we may be required to maintain a minimum level of indebtedness throughout the term of any tax protection agreement regardless of whether such debt levels are otherwise required to operate our business. Item 1B. Unresolved Staff Comments None.
Additionally, competition for qualified employees may require us to pay meaningfully higher wages to attract enough employees than has historically been the case, and continued tightness in labor markets could result in continued escalation of labor costs.
Additionally, competition for qualified employees may require us or our third party managers to pay meaningfully higher wages to attract enough employees than has historically been the case, and continued tightness in labor markets could result in continued escalation of labor costs.
In addition, each of our California hotels (Westin San Diego Bayview, Hotel Emblem San Francisco, Kimpton Shorebreak Resort, The Lodge at Sonoma Resort, and Cavallo Point) have a deductible of 5% of total insured value for damage due to an earthquake.
In addition, each of our California hotels (Westin San Diego Bayview, Hotel Emblem San Francisco, Kimpton Shorebreak Huntington Beach Resort, The Lodge at Sonoma Resort, The Landing Lake Tahoe Resort & Spa and Cavallo Point) have a deductible of 5% of total insured value for damage due to an earthquake.
The increased use of Zoom video conferencing, Microsoft Teams and other teleconferencing and video-conference technology by businesses could result in decreased business travel as companies increase the use of technologies that allow multiple parties from different locations to participate in virtual meetings without traveling to a centralized meeting location, such as our hotels.
The increased use of Zoom video conferencing, Microsoft Teams and other teleconferencing and video-conference technology by businesses has resulted in decreased business travel as companies have leveraged the use of technologies that allow multiple parties from different locations to participate in virtual meetings without traveling to a centralized meeting location, such as our hotels.
Several of our hotels are operated under franchise agreements and we are subject to the risks associated with the franchise brand and the costs associated with maintaining the franchise license. As of the date of this report, 20 of our 35 hotels operate under Marriott or Hilton franchise agreements.
Several of our hotels are operated under franchise agreements and we are subject to the risks associated with the franchise brand and the costs associated with maintaining the franchise license. As of the date of this report, 22 of our 36 hotels operate under Marriott, Hilton or IHG franchise agreements.
In recent years, a significant percentage of hotel loans were made by lenders who sold such loans to securitized lending vehicles, such as commercial -23- Tabl e of Contents mortgage backed security (“CMBS”) pools.
In recent years, a significant percentage of hotel loans were made by lenders who sold such loans to securitized lending vehicles, such as commercial -24- Table of Contents mortgage backed security (“CMBS”) pools.
COVID-19, including the emergence of additional variants, has caused, and COVID-19 or any future pandemic, epidemic or outbreak of any other highly infectious disease could continue to cause, widespread disruptions to the U.S. and global economy and has contributed to significant volatility and negative pressure in financial markets.
Any future pandemic, epidemic or outbreak of any highly infectious disease, including the emergence of additional COVID-19 variants, could cause widespread disruptions to the U.S. and global economy and volatility and negative pressure in financial markets.
If our future earnings or cash distributions are less than expected, it is likely that the market price of our common stock will diminish. In addition, interest rates were at historically low levels for an extended period of time but increased during the year ending December 31, 2022 and may continue to increase in the near term.
If our future earnings or cash distributions are less than expected, it is likely that the market price of our common stock will diminish. In addition, interest rates were at historically low levels for an extended period of time but increased significantly in recent years and may continue to increase in the near term.
Thus, higher market interest rates could cause the returns on investment in our common stock and Series A Preferred Stock to be relatively less attractive to our investors and the market price of our common stock and Series A Preferred Stock to decline. Additionally, higher market interest rates may adversely impact the market values of our hotels.
Thus, higher market interest rates could cause the returns on investment in our common stock and Series A Preferred Stock to be relatively less attractive to our investors and the market price of our common stock and Series A Preferred Stock to decline.
If the leases of our hotels to our TRS lessees are not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT.
If our leases are not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT.
Disruptions in service, system shutdowns and security breaches in either the information technologies and systems of our hotel managers, our third-party vendors or our own information technologies and -34- Tabl e of Contents systems, including unauthorized disclosure of confidential information, could have a material adverse effect on our business operations and results, our financial and compliance reporting and our reputation.
Disruptions in service, system shutdowns and cybersecurity incidents affecting either the information technologies and systems of our hotel managers, our third-party vendors or our own information technologies and systems, including unauthorized disclosure of confidential information, could have a material adverse effect on our business operations and results, our financial and compliance reporting and our reputation.
Although we and our hotel managers believe that we have taken commercially reasonable steps to protect the security of these systems, there can be no assurance that such security measures will prevent failures, inadequacies or interruptions in system services, or that system security will not be breached through physical or electronic break-ins, computer viruses, social engineering attacks and cyber-attacks.
Although we and our hotel managers have taken steps to protect the security of these systems, there can be no assurance that such security measures will prevent failures, inadequacies or interruptions in system services, or that system security will not be breached through physical or electronic break-ins, computer viruses, or other cybersecurity incidents.
In February 2014, however, we amended our charter to prohibit us from dividing directors into classes unless such action is first approved by the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors.
In February 2014, however, we amended our charter to prohibit us from dividing directors into classes unless such action is first approved by the affirmative vote of a majority of the votes cast on the matter by stockholders entitled to vote generally in the election of directors. Stockholders have limited control over any changes that we make to our policies.
We hold a leasehold or subleasehold interest in all or a portion of the land underlying eight of our hotels owned as of December 31, 2022 (Embassy Suites by Hilton Bethesda, Courtyard New York Manhattan/Fifth Avenue, Salt Lake City Marriott Downtown at City Creek, Westin Boston Seaport District, Hotel Clio (formerly JW Marriott Denver Cherry Creek), Orchards Inn Sedona, Hotel Palomar Phoenix, and Cavallo Point), and the parking areas at two of our hotels (Worthington Renaissance Fort Worth Hotel and Bourbon Orleans Hotel).
We hold a leasehold or subleasehold interest in all or a portion of the land underlying eight of our hotels owned as of December 31, 2023 (Embassy Suites by Hilton Bethesda, Courtyard New York Manhattan/Fifth Avenue, Salt Lake City Marriott Downtown at City Creek, Westin Boston Seaport District, Hotel Clio, Orchards Inn Sedona, Hotel Palomar Phoenix, and Cavallo Point), and a parking area near the Bourbon Orleans Hotel.
In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the U.S. federal income tax laws to include certain entities) during the last half of any taxable year.
You may be restricted from transferring our common stock and Series A Preferred Stock. -29- Table of Contents In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the U.S. federal income tax laws to include certain entities) during the last half of any taxable year.
If we were to lose a brand license at one or more of our hotels, the value of the affected hotels could decline significantly and we could incur significant costs to obtain new franchise licenses, which could materially and adversely affect our results of operations and profitability as well as limit or slow our future growth.
An adverse result in any of these proceedings could materially and adversely affect our revenues and profitability. -21- Table of Contents If we were to lose a brand license at one or more of our hotels, the value of the affected hotels could decline significantly and we could incur significant costs to obtain new franchise licenses, which could materially and adversely affect our results of operations and profitability as well as limit or slow our future growth.
COVID-19 has caused, and COVID-19 or any future pandemic, epidemic or outbreak of any other highly infectious disease could continue to cause, severe disruptions in the U.S., regional and global economies, travel and the hospitality industry and could materially and adversely impact our business, financial condition and results of operations.
Any future pandemic, epidemic or outbreak of any highly infectious disease could cause widespread disruptions in the U.S., regional and global economies, travel and the hospitality industry and could materially and adversely impact our business, financial condition and results of operations.
Our existing debt, and any additional debt borrowed in the future could subject us to many risks, including the risks that: • our cash flow from operations will be insufficient to make required payments of principal and interest or to make cash distributions necessary to maintain our tax status as a REIT; • we may be vulnerable to adverse economic and industry conditions; • we may be required to dedicate a substantial portion of our cash flow from operations to the repayment of our debt, thereby reducing the cash available for distribution to our stockholders, operations and capital expenditures, future investment opportunities or other purposes; • the terms of any refinancing might not be as favorable as the terms of the debt being refinanced; and • the use of leverage could adversely affect our stock price and our ability to make distributions to our stockholders. -25- Tabl e of Contents If we violate covenants in our future indebtedness agreements, we could be required to repay all or a portion of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on favorable terms, if at all.
Our existing debt, and any additional debt borrowed in the future could subject us to many risks, including the risks that: • our cash flow from operations will be insufficient to make required payments of principal and interest or to make cash distributions necessary to maintain our tax status as a REIT; • we may be vulnerable to adverse economic and industry conditions; • we may be required to dedicate a substantial portion of our cash flow from operations to the repayment of our debt, thereby reducing the cash available for distribution to our stockholders, operations and capital expenditures, future investment opportunities or other purposes; • the terms of any refinancing might not be as favorable as the terms of the debt being refinanced; and • the use of leverage could adversely affect our stock price and our ability to make distributions to our stockholders.
For these reasons, we and our hotel managers are subject to risks associated with security breaches, whether through cyber-attacks or online fraud schemes, spoofed e-mails and social engineering efforts by hackers aimed at obtaining confidential information.
For these reasons, we and our hotel managers are subject to risks associated with cybersecurity incidents, whether through cyber-attacks such as ransomware or online fraud schemes, spoofed e-mails and social engineering efforts by bad actors aimed at obtaining confidential information.
General Risk Factors Our success depends on senior executive officers whose continued service is not guaranteed, and changes in our senior executive officers may adversely affect the operation of our business. We depend on the efforts and expertise of our senior executive officers to manage our day-to-day operations and strategic business direction.
Our success depends on senior executive officers whose continued service is not guaranteed, and changes in our senior executive officers may adversely affect the operation of our business. We depend on the efforts and expertise of our senior executive officers to manage our day-to-day operations and strategic business direction. Finding suitable replacements for senior executive officers could be difficult.
We believe Marriott may use this leverage when negotiating for property improvement plans upon the acquisition of a hotel in cases where the franchisor or hotel brand requires renovations to bring the physical condition of a hotel into compliance with the specifications and standards each franchisor or hotel brand has developed.
We believe this could provide the major brand companies with leverage when negotiating for property improvement plans where the franchisor or hotel brand requires renovations to bring the physical condition of a hotel into compliance with the specifications and standards each franchisor or hotel brand has developed.
Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Preferred stock and debt, if issued, could have a preference on liquidating distributions or a preference on dividend or interest payments that could limit our ability to make distributions to the holders of our common stock.
Preferred stock and debt, if issued, could have a preference on liquidating distributions or a preference on dividend or interest payments that could limit our ability to make distributions to the holders of our common stock.
The existence or use of our share repurchase program may cause our stock price to be higher than it would otherwise be, and could potentially reduce the market liquidity for our stock.
In addition, repurchases of our common stock pursuant to our share repurchase program could affect our stock price and increase its volatility. The existence or use of our share repurchase program may cause our stock price to be higher than it would otherwise be, and could potentially reduce the market liquidity for our stock.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.
Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our common stock and diluting their interest.
Finding suitable replacements for senior executive officers could be difficult. The loss of any of their services could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
The loss of any of their services could have a material adverse effect on our business, financial condition, results of operations and our ability to make distributions to our stockholders.
Furthermore, unless we purchase a fee simple interest in the land and improvements subject to our ground leases, we will not have any economic interest in the land or improvements at the expiration of our ground leases and therefore we generally will not share in any increase in value of the land or improvements beyond the term of a ground lease, notwithstanding our capital outlay to purchase our interest in the hotel or fund improvements thereon, and will lose our right to use the hotel.
Furthermore, unless we purchase a fee simple interest in the land and improvements subject to our ground leases, we will not have any economic interest in the land or improvements at the expiration of our ground leases and therefore we generally will not share in any increase in value of the land or improvements beyond the term of a ground lease, notwithstanding our capital outlay to purchase our interest in the hotel or fund improvements thereon, and will lose our right to use the hotel. -22- Table of Contents The failure of tenants to make rent payments under our retail and restaurant leases may adversely affect our results of operation.
Issuances of additional shares of stock may have the effect of delaying, deferring or preventing a transaction or a change in control of our company that might involve a premium to the market price of our common stock or otherwise be in our stockholders’ best interests.
Issuances of additional shares of stock may have the effect of delaying, deferring or preventing a transaction or a change in control of our company that might involve a premium to the market price of our common stock or otherwise be in our stockholders’ best interests. -31- Table of Contents Certain advance notice provisions of our bylaws may limit the ability of a third party to acquire control of our company.
Our TRS lessees may not operate these hotel properties and, therefore, they must enter into third-party hotel management agreements with one or more eligible independent contractors. Thus, third-party hotel management companies that enter into management contracts with our TRS lessees control the daily operations of our hotel properties.
In order to qualify as a REIT, we cannot operate our hotel properties or control the daily operations of our hotel properties. Our TRS lessees may not operate these hotel properties and, therefore, they must enter into third-party hotel management agreements with one or more eligible independent contractors.
Risks Related to Our Organization and Structure Provisions of our charter may limit the ability of a third party to acquire control of our company. -30- Tabl e of Contents Our charter provides that no person may beneficially own more than 9.8% of the aggregate outstanding shares of our common stock, more than 9.8% of the aggregate outstanding shares of our Series A Preferred Stock, or more than 9.8% of the value of the aggregate outstanding shares of our capital stock, except certain “look-through entities,” such as mutual funds, which may beneficially own up to 15% of the aggregate outstanding shares of our common stock, up to 15% of the aggregate outstanding shares of our Series A Preferred Stock, or up to 15% of the value of the aggregate outstanding shares of our capital stock.
Our charter provides that no person may beneficially own more than 9.8% of the aggregate outstanding shares of our common stock, more than 9.8% of the aggregate outstanding shares of our Series A Preferred Stock, or more than 9.8% of the value of the aggregate outstanding shares of our capital stock, except certain “look-through entities,” such as mutual funds, which may beneficially own up to 15% of the aggregate outstanding shares of our common stock, up to 15% of the aggregate outstanding shares of our Series A Preferred Stock, or up to 15% of the value of the aggregate outstanding shares of our capital stock.
Also, we would not be allowed a deduction for dividends paid to our stockholders in computing our taxable income and we would no longer be compelled to make distributions under the Code.
We might need to borrow money or sell assets in order to pay any such tax. Also, we would not be allowed a deduction for dividends paid to our stockholders in computing our taxable income and we would no longer be compelled to make distributions under the Code.
We are not aware of any cyber incidents that we believe to be material or that could have a material adverse effect on our business, financial condition and results of operations.
We are not aware of any cybersecurity incidents that we believe to be material or that could have a material adverse effect on our business, financial condition and results of operations. Our results of operations are highly dependent on the management of our hotel properties by third-party hotel management companies.
You have limited control as a stockholder regarding any changes that we make to our policies. Our board of directors determines our major policies, including policies related to our investment objectives, leverage, financing, growth and distributions to our stockholders. Our board of directors may amend or revise these policies without a vote of our stockholders.
Our board of directors determines our major policies, including policies related to our investment objectives, leverage, financing, growth and distributions to our stockholders. Our board of directors may amend or revise these policies without a vote of our stockholders.
The failure of tenants to make rent payments under our retail and restaurant leases may adversely affect our results of operation. On occasion, retail and restaurant tenants at our hotel properties may fail to make rent payments when due.
On occasion, retail and restaurant tenants at our hotel properties may fail to make rent payments when due.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies.
Increases in interest rates may increase our interest expense. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies. For instance, during 2022 and 2023 the U.S.
Risks Related to Regulation and the Environment Noncompliance with governmental regulations could adversely affect our operating results. Environmental matters. Our hotels are, and the hotels that we acquire in the future will be, subject to various federal, state and local environmental laws and regulations relating to environmental protection.
Our hotels are, and the hotels that we acquire in the future will be, subject to various federal, state and local environmental laws and regulations relating to environmental protection.
The maintenance of the franchise licenses for branded hotel properties is subject to the franchisors’ operating standards and other terms and conditions set forth in the applicable franchise agreement.
The maintenance of the franchise licenses for branded hotel properties is subject to the franchisors’ operating standards and other terms and conditions set forth in the applicable franchise agreement. Franchisors periodically inspect hotel properties to ensure that we, our TRS lessees and management companies follow their brand standards.
A substantial number of our hotels operate under a brand owned by Marriott or Hilton; therefore, we are subject to risks associated with concentrating our portfolio in two brands. As of the date of this report, 16 of our 35 hotels operate under brands owned by Marriott and four of our hotels operate under brands owned by Hilton.
A substantial number of our hotels operate under a brand owned by Marriott, Hilton or IHG; therefore, we are subject to risks associated with concentrating our portfolio in three hotel chains.
Franchisors periodically inspect hotel properties to ensure that we, our TRS lessees and management companies follow their brand standards. -20- Tabl e of Contents If we fail to maintain these required standards, then the brand may terminate its agreement with us and assert a claim for damages for any liability we may have caused, which could include liquidated damages.
If we fail to maintain these required standards, then the brand may terminate its agreement with us and assert a claim for damages for any liability we may have caused, which could include liquidated damages.
Additionally, following the completion of a merger of companies, the costs to integrate the companies may be absorbed by our impacted hotel or hotels and adversely affect our financial condition and results of operations. -21- Tabl e of Contents Our ownership of properties through ground leases exposes us to the risks that we may have difficulty financing such properties, be forced to sell such properties for a lower price, are unable to extend the ground leases at maturity or lose such properties upon breach or termination of the ground leases.
Our ownership of properties through ground leases exposes us to the risks that we may have difficulty financing such properties, be forced to sell such properties for a lower price, are unable to extend the ground leases at maturity or lose such properties upon breach or termination of the ground leases.
Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings could significantly dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both.
Upon -34- Table of Contents liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock.

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Item 2. Properties

Properties — owned and leased real estate

18 edited+1 added−2 removed4 unchanged
Biggest changeBaker Management LLC At will with fee 6/2023 One five-year period Chicago Marriott Downtown Magnificent Mile Marriott No 12/2038 Two ten-year periods Courtyard Denver Downtown Sage Hospitality At will with fee 7/2026 One five-year period Courtyard New York Manhattan/Fifth Avenue Highgate Hotels At will with no fee 10/2025 None Courtyard New York Manhattan/Midtown East HEI Hotels & Resorts At will with fee 8/2027 None The Gwen Hotel HEI Hotels & Resorts At will with fee 6/2026 None Havana Cabana Key West EOS Hospitality At will with fee until 5/2023; at will with no fee thereafter 5/2032 Month-to-month Henderson Beach Resort Aimbridge Hospitality At will with fee until 2/2023; at will with no fee thereafter 2/2032 Month-to-month Henderson Park Inn Aimbridge Hospitality At will with no fee 7/2026 Month-to-month Hilton Boston Downtown/Faneuil Hall Aimbridge Hospitality At will with no fee 7/2025 None Hilton Burlington Lake Champlain Aimbridge Hospitality At will with no fee N/A Month-to-month Hilton Garden Inn New York/Times Square Central Highgate Hotels No 12/2024 One five-year period (2) Hotel Clio (formerly JW Marriott Denver Cherry Creek) Sage Hospitality At will with fee 5/2026 One five-year period Hotel Emblem San Francisco Viceroy Hotels & Resorts At will with fee 12/2027 One five-year period Hotel Palomar Phoenix Kimpton Hotel & Restaurant Group 2023 upon sale with no fee 12/2027 One five-year period (3) The Hythe Vail Vail Resorts At will with fee 1/2024 None Kimpton Shorebreak Fort Lauderdale Beach Resort HEI Hotels & Resorts At will with fee until 3/2023; at will with no fee thereafter 3/2028 None Kimpton Shorebreak Resort Kimpton Hotel & Restaurant Group At will with fee 2/2025 None Lake Austin Spa Resort EOS Hospitality At will with fee until 11/2023; at will with no fee thereafter 11/2032 Month-to-month The Landing Lake Tahoe Resort & Spa Evolution Hospitality At will with fee 9/2024 One five-year period L'Auberge de Sedona Evolution Hospitality At will with fee 10/2024 One five-year period The Lodge at Sonoma Resort Sage Hospitality At will with fee 9/2025 None Margaritaville Beach House Key West Ocean Properties No 7/2027 None Orchards Inn Sedona Evolution Hospitality At will with fee 10/2024 One five-year period Renaissance Charleston Historic District Hotel Aimbridge Hospitality At will with no fee 9/2025 None Salt Lake City Marriott Downtown at City Creek HEI Hotels & Resorts At will with no fee 9/2025 None Tranquility Bay Beachfront Resort EOS Hospitality At will with fee until 3/2023; at will with no fee thereafter 4/2032 Month-to-month Westin Boston Seaport District Aimbridge Hospitality At will with fee 1/2025 None Westin Fort Lauderdale Beach Resort HEI Hotels & Resorts At will with no fee 12/2024 None Westin San Diego Bayview Aimbridge Hospitality At will with no fee N/A Month-to-month Westin Washington D.C.
Biggest changeProperty Manager Terminable Expiration Date of Current Term Number of Remaining Renewal Terms at Manager's Exclusive Option (1) Atlanta Marriott Alpharetta Aimbridge Hospitality At will with no fee 9/2025 None Bourbon Orleans Hotel Evolution Hospitality At will with no fee 7/2026 Month-to-month Cavallo Point, The Lodge at the Golden Gate Passport Resorts At will with fee 6/2028 None Chicago Marriott Downtown Magnificent Mile Marriott No 12/2038 Two ten-year periods Chico Hot Springs Resort & Day Spa EOS Hospitality At will with fee until 8/2024; at will with no fee thereafter 8/2033 Month-to-month Courtyard Denver Downtown Sage Hospitality At will with fee 7/2026 One five-year period Courtyard New York Manhattan/Fifth Avenue Highgate Hotels At will with no fee 10/2025 None Courtyard New York Manhattan/Midtown East HEI Hotels & Resorts At will with fee 8/2027 None Embassy Suites by Hilton Bethesda Sage Hospitality At will with no fee 2/2027 One five-year period The Gwen HEI Hotels & Resorts At will with fee 6/2026 None Havana Cabana Key West EOS Hospitality At will with no fee 5/2032 Month-to-month Henderson Beach Resort Aimbridge Hospitality At will with no fee 2/2032 Month-to-month Henderson Park Inn Aimbridge Hospitality At will with no fee 7/2026 Month-to-month The Dagny Boston (formerly Hilton Boston Downtown/Faneuil Hall) Aimbridge Hospitality At will with no fee 7/2025 None Hilton Burlington Lake Champlain Aimbridge Hospitality At will with no fee N/A Month-to-month Hilton Garden Inn New York/Times Square Central Highgate Hotels No 12/2024 One five-year period (2) Hotel Clio Sage Hospitality At will with fee 5/2026 One five-year period Hotel Emblem San Francisco Pacifica Hotels At will fee until 3/2025; at will with no fee thereafter 3/2028 T Two five-year periods Hotel Palomar Phoenix Kimpton Hotel & Restaurant Group At will with no fee 12/2028 One five-year period (3) The Hythe Vail Vail Resorts At will with fee 7/2024 None Kimpton Shorebreak Fort Lauderdale Beach Resort HEI Hotels & Resorts At will with no fee 3/2028 None Kimpton Shorebreak Huntington Beach Resort Kimpton Hotel & Restaurant Group At will with fee 2/2025 None Lake Austin Spa Resort EOS Hospitality At will with no fee 11/2032 Month-to-month The Landing Lake Tahoe Resort & Spa Evolution Hospitality At will with fee 9/2024 One five-year period L'Auberge de Sedona Evolution Hospitality At will with fee 10/2024 One five-year period The Lodge at Sonoma Resort Sage Hospitality At will with fee 9/2025 None Margaritaville Beach House Key West Ocean Properties No 7/2027 None Orchards Inn Sedona Evolution Hospitality At will with fee 10/2024 One five-year period The Lindy Renaissance Charleston Hotel Aimbridge Hospitality At will with no fee 9/2025 None Salt Lake City Marriott Downtown at City Creek HEI Hotels & Resorts At will with no fee 9/2025 None Tranquility Bay Beachfront Resort EOS Hospitality At will with no fee 4/2032 Month-to-month Westin Boston Seaport District Aimbridge Hospitality At will with no fee 1/2025 None Westin Fort Lauderdale Beach Resort HEI Hotels & Resorts At will with no fee 12/2027 None Westin San Diego Bayview Aimbridge Hospitality At will with no fee N/A Month-to-month Westin Washington D.C.
City Center 1.5% (4) 10% 4% Worthington Renaissance Fort Worth Hotel 3% 25% 5% ______________ (1) As a percentage of gross revenues. (2) As a percentage of hotel operating profits above a specified return on our invested capital or specified operating profit thresholds. (3) Total incentive management fees are capped at 1% of gross revenues.
City Center 1.5% (5) 10% Worthington Renaissance Fort Worth Hotel 3% 25% ______________ (1) As a percentage of gross revenues. (2) As a percentage of hotel operating profits above a specified return on our invested capital or specified operating profit thresholds. (3) Total incentive management fees are capped at 1% of gross revenues.
The manager did not earn an incentive management fee in 2022. Under our hotel management agreements, the hotel manager receives a base management fee and, if certain financial thresholds are met or exceeded, an incentive management fee. The base management fee is generally payable as a percentage of gross hotel revenues for each fiscal year.
The manager did not earn an incentive management fee in 2023. Under our hotel management agreements, the hotel manager receives a base management fee and, if certain financial thresholds are met or exceeded, an incentive management fee. The base management fee is generally payable as a percentage of gross hotel revenues for each fiscal year.
The following table sets forth the expiration date of the current term, the terms of termination of the manager by the Company, and the number of remaining renewal terms at the manager's option under the respective hotel management agreements for each of our hotels as of December 31, 2022.
The following table sets forth the expiration date of the current term, the terms of termination of the manager by the Company, and the number of remaining renewal terms at the manager's option under the respective hotel management agreements for each of our hotels as of December 31, 2023.
Properties The following table sets forth certain information for each of our hotels owned as of December 31, 2022. -36- Tabl e of Contents Hotel City State Chain Scale Segment (1) Service Category Rooms Manager Chicago Marriott Downtown Magnificent Mile Chicago Illinois Upper Upscale Full Service 1,200 Marriott Westin Boston Seaport District Boston Massachusetts Upper Upscale Full Service 793 Aimbridge Hospitality Salt Lake City Marriott Downtown at City Creek Salt Lake City Utah Upper Upscale Full Service 510 HEI Hotels & Resorts Worthington Renaissance Fort Worth Hotel Fort Worth Texas Upper Upscale Full Service 504 Marriott Westin San Diego Bayview San Diego California Upper Upscale Full Service 436 Aimbridge Hospitality Westin Fort Lauderdale Beach Resort Fort Lauderdale Florida Upper Upscale Full Service 433 HEI Hotels & Resorts Westin Washington D.C.
Properties The following table sets forth certain information for each of our hotels owned as of December 31, 2023. -37- Table of Contents Hotel City State Chain Scale Segment (1) Service Category Rooms Manager Chicago Marriott Downtown Magnificent Mile Chicago Illinois Upper Upscale Full Service 1,200 Marriott Westin Boston Seaport District Boston Massachusetts Upper Upscale Full Service 793 Aimbridge Hospitality Salt Lake City Marriott Downtown at City Creek Salt Lake City Utah Upper Upscale Full Service 510 HEI Hotels & Resorts Worthington Renaissance Fort Worth Hotel Fort Worth Texas Upper Upscale Full Service 504 Marriott Westin San Diego Bayview San Diego California Upper Upscale Full Service 436 Aimbridge Hospitality Westin Fort Lauderdale Beach Resort Fort Lauderdale Florida Upper Upscale Full Service 433 HEI Hotels & Resorts Westin Washington D.C.
Franchise Agreements The following table sets forth the terms of the hotel franchise agreements for our 20 franchised hotels as of December 31, 2022: Franchised Hotels Expiration Date of Agreement Franchise Fee Atlanta Marriott Alpharetta 9/2040 (1) 6% of gross room sales and 3% of gross food and beverage sales Embassy Suites by Hilton Bethesda 2/2037 3.5% of gross room sales; program fee of 4% of gross room sales (2) Courtyard Denver Downtown 10/2027 5.5% of gross room sales Courtyard New York Manhattan/Fifth Avenue 12/2035 6% of gross room sales Courtyard New York Manhattan/Midtown East 8/2042 6% of gross room sales The Gwen Hotel 9/2035 5% of gross room sales Hilton Boston Downtown/Faneuil Hall 7/2023 5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales Hilton Burlington Lake Champlain 7/2032 (3) 5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales (3) Hilton Garden Inn New York/Times Square Central 6/2033 5% of gross room sales; program fee of 4.3% of gross room sales Hotel Clio (formerly JW Marriott Denver Cherry Creek) 10/2036 6% of gross room sales and 3% of gross food and beverage sales (4) The Hythe Vail 12/2041 4% of gross room sales and 1% of gross food and beverage sales (5) Kimpton Shorebreak Fort Lauderdale Beach Resort 4/2041 6% of gross room sales and 2% of gross food and beverage sales The Lodge at Sonoma Resort 12/2035 5% of gross room sales Margaritaville Beach House Key West 4/2041 5% of gross revenues Renaissance Charleston Historic District Hotel 12/2031 5% of gross room sales Salt Lake City Marriott Downtown at City Creek 9/2040 (1) 6% of gross room sales and 3% of gross food and beverage sales Westin Boston Seaport District 12/2026 5% of gross room sales and 1% of gross food and beverage sales (6) Westin Fort Lauderdale Beach Resort 12/2034 6% of gross room sales and 2% of gross food and beverage sales Westin San Diego Bayview 12/2040 7% of gross room sales and 3% of gross food and beverage sales Westin Washington D.C.
Franchise Agreements The following table sets forth the terms of the hotel franchise agreements for our 19 franchised hotels as of December 31, 2023: Franchised Hotels Expiration Date of Agreement Franchise Fee Atlanta Marriott Alpharetta 9/2040 (1) 6% of gross room sales and 3% of gross food and beverage sales Embassy Suites by Hilton Bethesda 2/2037 3.5% of gross room sales; program fee of 4% of gross room sales (2) Courtyard Denver Downtown 10/2027 5.5% of gross room sales Courtyard New York Manhattan/Fifth Avenue 12/2035 6% of gross room sales Courtyard New York Manhattan/Midtown East 8/2042 6% of gross room sales The Gwen 9/2035 5% of gross room sales Hilton Burlington Lake Champlain 7/2032 (3) 5% of gross room sales and 3% of gross food and beverage sales; program fee of 4% of gross room sales (3) Hilton Garden Inn New York/Times Square Central 6/2033 5% of gross room sales; program fee of 4.3% of gross room sales Hotel Clio 10/2036 6% of gross room sales and 3% of gross food and beverage sales (4) The Hythe Vail 12/2041 5% of gross room sales and 2% of gross food and beverage sales Kimpton Shorebreak Fort Lauderdale Beach Resort 4/2041 6% of gross room sales and 2% of gross food and beverage sales The Lodge at Sonoma Resort 12/2035 5% of gross room sales Margaritaville Beach House Key West 4/2041 5% of gross revenues The Lindy Renaissance Charleston Hotel 12/2031 5% of gross room sales Salt Lake City Marriott Downtown at City Creek 9/2040 (1) 6% of gross room sales and 3% of gross food and beverage sales Westin Boston Seaport District 12/2026 6% of gross room sales and 2% of gross food and beverage sales (5) Westin Fort Lauderdale Beach Resort 12/2034 6% of gross room sales and 2% of gross food and beverage sales Westin San Diego Bayview 12/2040 7% of gross room sales and 3% of gross food and beverage sales Westin Washington D.C.
The incentive management fee is generally based on hotel operating profits, but the -39- Tabl e of Contents fee only applies to that portion of hotel operating profits above a negotiated return on our invested capital, which we refer to as the owner's priority.
The incentive management fee is generally based on hotel operating profits, but the fee only applies to that portion of hotel operating profits above a negotiated return on our invested capital, which we refer to as the owner's priority.
(2) Hotel manager is entitled to one five-year extension option upon achievement of a certain level of net operating income, which is significantly above current net operating income at the hotel. (3) Hotel manager is entitled to one five-year extension option if the manager earns an incentive management fee in both 2026 and 2027.
(2) Hotel manager is entitled to one five-year extension option upon achievement of a certain level of net operating income, which is significantly above current net operating income at the hotel. -39- Table of Contents (3) Hotel manager is entitled to one five-year extension option if the manager earns an incentive management fee in both 2027 and 2028.
We refer to this excess of operating profits over the owner's priority as “available cash flow.” The following table sets forth the base management fee, incentive management fee and furniture, fixture and equipment (“FF&E”) reserve contribution, generally due and payable each fiscal year, for each of our hotels as of December 31, 2022: Property Base Management Fee (1) Incentive Management Fee (2) FF&E Reserve Contribution (1) Atlanta Marriott Alpharetta 2% 15% (3) 4% Embassy Suites by Hilton Bethesda 1.5% (4) 10% 4% Bourbon Orleans Hotel 1% (5) 15% (3) 4% Cavallo Point, The Lodge at the Golden Gate 2.5% 20% 4% Chicago Marriott Downtown Magnificent Mile 3% 15% (6) 5% Courtyard Denver Downtown 1.5% (4) 10% 4% Courtyard New York Manhattan/Fifth Avenue 2.5% (7) 15% (3) None Courtyard New York Manhattan/Midtown East 1.75% 15% 4% The Gwen Hotel 2.25% 15% 4% Havana Cabana Key West 2.5% 15% (3) (8) 1% Henderson Beach Resort 2.25% 15% (3) 4% Henderson Park Inn 2.5% 15% (3) 4% Hilton Boston Downtown/Faneuil Hall 1.25% 15% (3) 4% Hilton Burlington Lake Champlain 1.5% (9) 10% 4% Hilton Garden Inn New York/Times Square Central 3% 20% 4% Hotel Clio (formerly JW Marriott Denver Cherry Creek) 2% 15% (3) 4% Hotel Emblem San Francisco 2.75% 15% 4% Hotel Palomar Phoenix 3.5% 20% 4% The Hythe Vail 2% 15% (3) 4% Kimpton Shorebreak Fort Lauderdale Beach Resort 2% 15% (3) 4% Kimpton Shorebreak Resort 2.5% 15% 4% Lake Austin Spa Resort 2.5% 15% (3) (8) 1% The Landing Lake Tahoe Resort & Spa 1.25% 15% 4% L'Auberge de Sedona 2.25% 15% 4% The Lodge at Sonoma Resort 2% 15% (3) 4% Margaritaville Beach House Key West 3% 10% 4% Orchards Inn Sedona 2.25% 15% 4% Renaissance Charleston Historic District Hotel 2% 15% (3) 4% Salt Lake City Marriott Downtown at City Creek 2% 15% (3) 4% Tranquility Bay Beachfront Resort 2.5% 15% (3) (8) 1% Westin Boston Seaport District 1% 15% (3) 4% Westin Fort Lauderdale Beach Resort 2% 15% 4% Westin San Diego Bayview 1.5% (9) 10% 4% Westin Washington D.C.
We refer to this excess of operating profits over the owner's priority as “available cash flow.” The following table sets forth the base management fee and incentive management fee generally due and payable each fiscal year, for each of our hotels as of December 31, 2023: Property Base Management Fee (1) Incentive Management Fee (2) Atlanta Marriott Alpharetta 2% 15% (3) (4) Bourbon Orleans Hotel 1% (6) 15% (3) (4) Cavallo Point, The Lodge at the Golden Gate 2.5% 20% Chicago Marriott Downtown Magnificent Mile 3% 15% (7) Chico Hot Springs Resort & Day Spa 2.5% 15% (3) (8) Courtyard Denver Downtown 1.5% (5) 10% Courtyard New York Manhattan/Fifth Avenue 2.25% 15% (3) Courtyard New York Manhattan/Midtown East 1.75% 15% (3) Embassy Suites by Hilton Bethesda 1.5% (5) 10% The Gwen 2.25% (9) 15% Havana Cabana Key West 2.5% 15% (3) (8) Henderson Beach Resort 2.25% 15% (3) (4) Henderson Park Inn 2.5% 15% (3) (4) The Dagny Boston (formerly Hilton Boston Downtown/Faneuil Hall) 1.25% 15% (3) (4) Hilton Burlington Lake Champlain 1.5% (10) 10% (4) Hilton Garden Inn New York/Times Square Central 3% 20% (3) Hotel Clio 2% 15% (3) Hotel Emblem San Francisco 3% 10% (3) Hotel Palomar Phoenix 3.5% 20% The Hythe Vail 2% 15% (3) Kimpton Shorebreak Fort Lauderdale Beach Resort 2% 15% (3) Kimpton Shorebreak Huntington Beach Resort 2.5% 15% Lake Austin Spa Resort 2.5% 15% (3) (8) The Landing Lake Tahoe Resort & Spa 1.25% 15% (4) L'Auberge de Sedona 2.25% 15% (4) The Lodge at Sonoma Resort 2% 15% (3) Margaritaville Beach House Key West 3% 10% Orchards Inn Sedona 2.25% 15% (4) The Lindy Renaissance Charleston Hotel 2% 15% (3) (4) Salt Lake City Marriott Downtown at City Creek 2% 15% (3) Tranquility Bay Beachfront Resort 2.5% 15% (3) (8) Westin Boston Seaport District 1% (11) 15% (3) (4) Westin Fort Lauderdale Beach Resort 2% 15% (3) Westin San Diego Bayview 1.5% (10) 10% (4) Westin Washington D.C.
(4) In January 2030, the franchise fees will decrease to 5% of gross room sales and 2% of gross food and beverage sales. (5) In November 2023, the franchise fees will increase to 5% of gross room sales and 2% of gross food and beverage sales through the remainder of the term.
(4) In January 2030, the franchise fees will decrease to 5% of gross room sales and 2% of gross food and beverage sales. (5) In January 2026, the franchise fees will increase to 7% of gross room sales and 3% of gross food and beverage sales through the remainder of the term.
City Center Washington District of Columbia Upper Upscale Full Service 410 Sage Hospitality Hilton Boston Downtown/Faneuil Hall Boston Massachusetts Upper Upscale Full Service 403 Aimbridge Hospitality The Hythe Vail Vail Colorado Upper Upscale Full Service 344 Vail Resorts Courtyard New York Manhattan/Midtown East New York New York Upscale Select Service 321 HEI Hotels & Resorts Atlanta Marriott Alpharetta Atlanta Georgia Upper Upscale Full Service 318 Aimbridge Hospitality The Gwen Hotel Chicago Illinois Luxury Full Service 311 HEI Hotels & Resorts Hilton Garden Inn New York/Times Square Central New York New York Upscale Select Service 282 Highgate Hotels Embassy Suites by Hilton Bethesda Bethesda Maryland Upper Upscale Full Service 272 Sage Hospitality Hilton Burlington Lake Champlain Burlington Vermont Upper Upscale Full Service 258 Aimbridge Hospitality Hotel Palomar Phoenix Phoenix Arizona Upper Upscale Full Service 242 Kimpton Hotels & Restaurants Henderson Beach Resort Destin Florida Luxury Full Service 233 Aimbridge Hospitality Bourbon Orleans Hotel New Orleans Louisiana Luxury Full Service 220 Aimbridge Hospitality Hotel Clio (formerly JW Marriott Denver Cherry Creek) Denver Colorado Luxury Full Service 199 Sage Hospitality Courtyard New York Manhattan/Fifth Avenue New York New York Upscale Select Service 189 Highgate Hotels Margaritaville Beach House Key West Key West Florida Upper Upscale Full Service 186 Ocean Properties The Lodge at Sonoma Resort Sonoma California Upper Upscale Full Service 182 Sage Hospitality Courtyard Denver Downtown Denver Colorado Upscale Select Service 177 Sage Hospitality Renaissance Charleston Historic District Hotel Charleston South Carolina Upper Upscale Full Service 167 Aimbridge Hospitality Kimpton Shorebreak Resort Huntington Beach California Upper Upscale Full Service 157 Kimpton Hotels & Restaurants Cavallo Point, The Lodge at the Golden Gate Sausalito California Luxury Full Service 142 Passport Resorts Havana Cabana Key West Key West Florida Upscale Select Service 106 EOS Hospitality Tranquility Bay Beachfront Resort Marathon Florida Luxury Full Service 103 EOS Hospitality Hotel Emblem San Francisco San Francisco California Upper Upscale Full Service 96 Viceroy Hotels & Resorts Kimpton Shorebreak Fort Lauderdale Beach Resort Fort Lauderdale Florida Upper Upscale Full Service 96 HEI Hotels & Resorts L'Auberge de Sedona Sedona Arizona Luxury Full Service 88 Evolution Hospitality The Landing Lake Tahoe Resort & Spa South Lake Tahoe California Luxury Full Service 82 Evolution Hospitality Orchards Inn Sedona Sedona Arizona Upscale Full Service 70 Evolution Hospitality Lake Austin Spa Resort Austin Texas Luxury Full Service 40 EOS Hospitality Henderson Park Inn Destin Florida Upper Midscale Full Service 37 Aimbridge Hospitality Total 9,607 -37- Tabl e of Contents _____________ (1) As defined by STR, Inc.
City Center Washington District of Columbia Upper Upscale Full Service 410 Sage Hospitality The Dagny Boston (formerly Hilton Boston Downtown/Faneuil Hall) Boston Massachusetts Upper Upscale Full Service 403 Aimbridge Hospitality The Hythe Vail Vail Colorado Luxury Full Service 344 Vail Resorts Courtyard New York Manhattan/Midtown East New York New York Upscale Select Service 321 HEI Hotels & Resorts Atlanta Marriott Alpharetta Atlanta Georgia Upper Upscale Full Service 318 Aimbridge Hospitality The Gwen Chicago Illinois Luxury Full Service 311 HEI Hotels & Resorts Hilton Garden Inn New York/Times Square Central New York New York Upscale Select Service 282 Highgate Hotels Embassy Suites by Hilton Bethesda Bethesda Maryland Upper Upscale Full Service 272 Sage Hospitality Hilton Burlington Lake Champlain Burlington Vermont Upper Upscale Full Service 258 Aimbridge Hospitality Henderson Beach Resort Destin Florida Luxury Full Service 255 Aimbridge Hospitality Kimpton Hotel Palomar Phoenix Phoenix Arizona Upper Upscale Full Service 242 Kimpton Hotels & Restaurants Bourbon Orleans Hotel New Orleans Louisiana Luxury Full Service 220 Evolution Hospitality Hotel Clio Denver Colorado Luxury Full Service 199 Sage Hospitality Courtyard New York Manhattan/Fifth Avenue New York New York Upscale Select Service 189 Highgate Hotels Margaritaville Beach House Key West Key West Florida Upper Upscale Full Service 186 Ocean Properties The Lodge at Sonoma Resort Sonoma California Upper Upscale Full Service 182 Sage Hospitality Courtyard Denver Downtown Denver Colorado Upscale Select Service 177 Sage Hospitality The Lindy Renaissance Charleston Hotel Charleston South Carolina Upper Upscale Full Service 167 Aimbridge Hospitality Kimpton Shorebreak Huntington Beach Resort Huntington Beach California Upper Upscale Full Service 157 Kimpton Hotels & Restaurants Cavallo Point, The Lodge at the Golden Gate Sausalito California Luxury Full Service 142 Passport Resorts Chico Hot Springs Resort & Day Spa Pray Montana Economy Full Service 117 EOS Hospitality Havana Cabana Key West Key West Florida Upscale Full Service 106 EOS Hospitality Tranquility Bay Beachfront Resort Marathon Florida Luxury Full Service 103 EOS Hospitality Hotel Emblem San Francisco San Francisco California Upper Upscale Full Service 96 Pacifica Hotels Kimpton Shorebreak Fort Lauderdale Beach Resort Fort Lauderdale Florida Upper Upscale Full Service 96 HEI Hotels & Resorts L'Auberge de Sedona Sedona Arizona Luxury Full Service 88 Evolution Hospitality The Landing Lake Tahoe Resort & Spa South Lake Tahoe California Luxury Full Service 82 Evolution Hospitality Orchards Inn Sedona Sedona Arizona Upscale Full Service 70 Evolution Hospitality Lake Austin Spa Resort Austin Texas Luxury Full Service 40 EOS Hospitality Henderson Park Inn Destin Florida Luxury Full Service 37 Aimbridge Hospitality Total 9,746 _____________ (1) As defined by STR, Inc. -38- Table of Contents Hotel Management Agreements We are party to hotel management agreements for each hotel we own.
Additional information regarding fees incurred under franchise agreements can be found in Note 12 to our accompanying consolidated financial statements. Mortgage Debt Four of our hotels are encumbered by mortgage debt. Additional information regarding such hotels can be found in Note 8 to our accompanying consolidated financial statements.
Additional information regarding fees incurred under franchise agreements can be found in Note 13 to our accompanying consolidated financial statements. Mortgage Debt -41- Table of Contents Four of our hotels are encumbered by mortgage debt. Additional information regarding such hotels can be found in Note 5 to our accompanying consolidated financial statements.
Ground Leases -41- Tabl e of Contents Eight of our hotels and two parking areas are subject to ground lease agreements. Additional information regarding our hotels that are subject to ground leases can be found in Notes 4 and 13 to our accompanying consolidated financial statements. -42- Tabl e of Contents
Ground Leases Eight of our hotels and one parking area are subject to ground lease agreements. Additional information regarding our hotels that are subject to ground leases can be found in Note 8 to our accompanying consolidated financial statements. -42- Table of Contents
Additional information regarding fees incurred under hotel management agreements can be found in Note 12 to our accompanying consolidated financial statements.
Base management fees for the year ended December 31, 2023 were decreased to 0.5% of gross revenues. Additional information regarding fees incurred under hotel management agreements can be found in Note 13 to our accompanying consolidated financial statements.
The base management fee increased back to 2% beginning January 2023 for the remainder of the term. (6) Calculated as 15% of net operating income. There is no owner's priority; however, the Company's contribution to the hotel's recent multi-year property renovation is treated as a deduction in calculating net operating income.
There is no owner's priority; however, the Company's contribution to the hotel's recent multi-year property renovation is treated as a deduction in calculating net operating income. (8) The incentive management fee increases to 1.5% of gross revenues if the gross operating profit exceeds a specified amount plus any owner's priority.
(4) The base management fee is the sum of 1.5% of gross revenues and 1.5% gross operating profit. Total management fees are capped at 3% of gross revenues. (5) The base management fee decreased to 2% (from 2.5%) of gross revenues in July 2022 and further decreased to 1% for the period of September 2022 through December 2022.
Total management fees are capped at 3% of gross revenues. -40- Table of Contents (6) The base management fee was 2% from January 2023 through August 2023 and decreased to 1% for the remainder of the year. (7) Calculated as 15% of net operating income.
(7) Beginning January 2023, the base management fee decreases to 2.25% of gross revenues. (8) The incentive management fee increases to 1.5% of gross revenues if the gross operating profit exceeds a specified amount plus any owner's priority. -40- Tabl e of Contents (9) Total management fees are capped at 2.5% of gross revenues.
(9) The incentive management fee is capped at 0.75% of gross revenues. (10) Total management fees are capped at 2.5% of gross revenues. (11) The base management fee decreases to 0.5% of gross revenues if the annual gross operating profit is less than $36 million.
Generally, the term of the hotel management agreements, if applicable, renew automatically for a negotiated number of consecutive periods upon the expiration of the initial term unless the manager gives notice to us of its election not to renew the hotel management agreement. -38- Tabl e of Contents Property Manager Terminable Expiration Date of Current Term Number of Remaining Renewal Terms at Manager's Exclusive Option (1) Atlanta Marriott Alpharetta Aimbridge Hospitality At will with no fee 9/2025 None Embassy Suites by Hilton Bethesda Sage Hospitality At will with no fee 2/2027 One five-year period Bourbon Orleans Hotel Aimbridge Hospitality At will with no fee 7/2026 Month-to-month Cavallo Point, The Lodge at the Golden Gate Ft.
Generally, the term of the hotel management agreements, if applicable, renew automatically for a negotiated number of consecutive periods upon the expiration of the initial term unless the manager gives notice to us of its election not to renew the hotel management agreement.
Removed
Hotel Management Agreements We are party to hotel management agreements for each hotel we own.
Added
(4) The property will not individually earn their incentive fee unless a collective owner's priority threshold is met. (5) The base management fee is the sum of 1.5% of gross revenues and 1.5% gross operating profit.
Removed
(6) In January 2023, the franchise fees increased to 6% of gross room sales and 2% of gross food and beverage sales. In January 2026, the franchise fees will increase to 7% of gross room sales and 3% of gross food and beverage sales through the remainder of the term.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeThe outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties.
Biggest changeThe outcome of claims, lawsuits and legal proceedings brought against the Company, however, is subject to significant uncertainties. Item 4. Mine Safety Disclosures Not applicable. -43- Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe generally pay quarterly cash dividends to common stockholders at the discretion of our board of directors. Our board of directors suspended our quarterly common dividend commencing with the quarterly dividend that would have been paid in April 2020 and resumed quarterly common dividends beginning in the third quarter of 2022.
Biggest changeWe generally pay quarterly cash dividends to common stockholders at the discretion of our board of directors.
The Share Repurchase Program does not obligate the Company to acquire any particular amount of shares, and may be suspended or discontinued at any time at the Company’s discretion. The Share Repurchase Program expires on February 28, 2025. Fourth Quarter 2022 Sales of Unregistered Securities None. Item 6. Reserved Not applicable.
The Share Repurchase Program does not obligate the Company to acquire any particular amount of shares, and may be suspended or discontinued at any time at the Company’s discretion. The Share Repurchase Program expires on February 28, 2025. Fourth Quarter 2023 Sales of Unregistered Securities None. Item 6. Reserved Not applicable.
Dividend Information -44- Tabl e of Contents In order to maintain our qualification as a REIT, we must make distributions to our stockholders each year in an amount equal to at least: • 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains, plus • 90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code, minus • any excess non-cash income.
Dividend Information -44- Table of Contents In order to maintain our qualification as a REIT, we must make distributions to our stockholders each year in an amount equal to at least: • 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains, plus • 90% of the excess of our net income from foreclosure property over the tax imposed on such income by the Code, minus • any excess non-cash income.
Equity Compensation Plan Information The following table provides information as of December 31, 2022 regarding shares of common stock that may be issued under the Company’s equity compensation plans.
Equity Compensation Plan Information The following table provides information as of December 31, 2023 regarding shares of common stock that may be issued under the Company’s equity compensation plans.
The graph assumes an initial investment on December 31, 2017 of $100 in our common stock in each of the indices and also assumes the reinvestment of dividends.
The graph assumes an initial investment on December 31, 2018 of $100 in our common stock in each of the indices and also assumes the reinvestment of dividends.
Stockholder Information As of February 21, 2023, there were 14 record holders of our common stock and we believe we have more than one thousand beneficial holders. As of February 21, 2023, there were 11 holders of common OP units (in addition to the Company and executive officers of the Company).
Stockholder Information As of February 23, 2024, there were 13 record holders of our common stock and we believe we have more than one thousand beneficial holders. As of February 23, 2024, there were 11 holders of common OP units (in addition to the Company and executive officers of the Company).
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders 2,908,956 (1) — (2) 947,469 Equity compensation plans not approved by security holders — — — Total 2,908,956 — 947,469 ______________ (1) Includes 1,958,303 shares of common stock issuable pursuant to our deferred compensation plan and 950,653 shares of common stock issuable upon the achievement of certain performance conditions.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders 2,903,835 (1) — (2) — Equity compensation plans not approved by security holders — — — Total 2,903,835 — — ______________ (1) Includes 1,871,539 shares of common stock issuable pursuant to our deferred compensation plan and 1,032,296 shares of common stock issuable upon the achievement of certain performance conditions.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NYSE under the symbol “DRH”. The closing price of our common stock on the NYSE on December 31, 2022 was $8.19 per share.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the NYSE under the symbol “DRH”. The closing price of our common stock on the NYSE on December 29, 2023 was $9.39 per share.
Fourth Quarter 2022 Repurchases of Equity Securities -45- Tabl e of Contents Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (1) October 1 - October 31, 2022 1,569,687 $ 7.81 1,569,687 $ 187,744 November 1 - November 30, 2022 — $ — — $ — December 1 - December 31, 2022 — $ — — $ — ______________ (1) Represents amounts available under the Company's $200.0 million share repurchase program approved by the board of directors on September 29, 2022 (the “Share Repurchase Program”).
(2) Performance stock units and deferred stock units do not have any exercise price. -45- Table of Contents Fourth Quarter 2023 Repurchases of Equity Securities Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) (1) October 1 - October 31, 2023 — $ — — $ 185,324 November 1 - November 30, 2023 — $ — — $ 185,324 December 1 - December 31, 2023 — $ — — $ 185,324 ______________ (1) Represents amounts available under the Company's $200.0 million share repurchase program approved by the board of directors on September 29, 2022 (the “Share Repurchase Program”).
Hotel Hotels Total Return $100.00 $83.21 $91.28 $60.95 $72.44 $67.72 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing by us under the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such filing.
Hotel Hotels Total Return $100.00 $109.70 $73.24 $87.06 $81.38 $99.96 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing by us under the Securities Act of 1933, as amended (the “Securities Act”), except as shall be expressly set forth by specific reference in such filing.
The total return values do not include dividends declared, but not paid, during the period. 2017 2018 2019 2020 2021 2022 DiamondRock Hospitality Company Total Return $100.00 $83.10 $107.75 $80.23 $93.45 $80.55 S&P 500 Total Return $100.00 $95.62 $125.72 $148.85 $191.58 $156.88 Dow Jones U.S.
The total return values do not include dividends declared, but not paid, during the period. 2018 2019 2020 2021 2022 2023 DiamondRock Hospitality Company Total Return $100.00 $129.66 $96.55 $112.46 $96.94 $112.76 S&P 500 Total Return $100.00 $131.49 $155.68 $200.37 $164.08 $207.21 Dow Jones U.S.
Removed
(2) Performance stock units and deferred stock units do not have any exercise price.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCity Center Washington, D.C. 410 60.1 % 214.53 128.87 190.6 % Hilton Boston Downtown/Faneuil Hall Boston, Massachusetts 403 77.7 % 293.11 227.79 85.2 % The Hythe Vail Vail, Colorado 344 53.2 % 431.18 229.35 42.3 % Courtyard New York Manhattan/Midtown East New York, New York 321 83.8 % 328.22 275.05 77.3 % Atlanta Marriott Alpharetta Atlanta, Georgia 318 56.0 % 150.24 84.16 64.6 % The Gwen Hotel Chicago, Illinois 311 73.0 % 297.88 217.59 59.2 % Hilton Garden Inn New York/Times Square Central New York, New York 282 93.2 % 276.71 257.91 121.4 % Embassy Suites by Hilton Bethesda Bethesda, Maryland 272 52.2 % 143.75 75.01 90.5 % Hilton Burlington Lake Champlain Burlington, Vermont 258 73.7 % 245.87 181.23 26.0 % Hotel Palomar Phoenix Phoenix, Arizona 242 65.8 % 221.10 145.48 45.9 % Henderson Beach Resort Destin, Florida 233 61.8 % 473.56 292.87 3.2 % Bourbon Orleans Hotel New Orleans, Louisiana 220 67.1 % 236.79 158.86 131.7 % Hotel Clio Denver, Colorado 199 69.7 % 304.01 211.87 27.0 % Courtyard New York Manhattan/Fifth Avenue New York, New York 189 93.3 % 277.34 258.80 124.9 % Margaritaville Beach House Key West Key West, Florida 186 79.8 % 449.79 358.95 10.3 % The Lodge at Sonoma Resort Sonoma, California 182 62.6 % 462.85 289.59 35.8 % Courtyard Denver Downtown Denver, Colorado 177 74.2 % 204.49 151.80 61.5 % Renaissance Charleston Historic District Hotel Charleston, South Carolina 167 85.4 % 360.02 307.37 22.3 % Kimpton Shorebreak Resort Huntington Beach, California 157 80.7 % 345.17 278.42 33.8 % Cavallo Point, The Lodge at the Golden Gate Sausalito, California 142 51.1 % 700.56 358.26 20.6 % Havana Cabana Key West Key West, Florida 106 85.3 % 327.22 279.15 8.3 % Tranquility Bay Beachfront Resort (1) Marathon, Florida 103 73.3 % 742.42 544.46 3.4 % Hotel Emblem San Francisco San Francisco, California 96 72.4 % 223.96 162.14 130.4 % Kimpton Shorebreak Fort Lauderdale Beach Resort (2) Fort Lauderdale, Florida 96 62.8 % 207.24 130.24 18.8 % L'Auberge de Sedona Sedona, Arizona 88 71.4 % 995.34 710.81 (3.5) % The Landing Lake Tahoe Resort & Spa South Lake Tahoe, California 82 49.0 % 509.26 249.63 14.6 % Orchards Inn Sedona Sedona, Arizona 70 66.5 % 303.69 201.95 (7.7) % Lake Austin Spa Resort (3) Austin, Texas 40 49.0 % 1,367.03 670.18 (3.0) % Henderson Park Inn Destin, Florida 37 73.1 % 642.69 469.90 4.3 % TOTAL/WEIGHTED AVERAGE 9,607 68.3 % $ 286.50 $ 195.69 51.5 % ________________ (1) The operating statistics reflect our ownership period from January 6, 2022 to December 31, 2022 and the comparable period of 2021.
Biggest changeCity Center Washington, D.C. 410 73.0 % 219.08 159.99 24.1 % The Dagny Boston (formerly Hilton Boston Downtown) Boston, Massachusetts 403 77.8 % 278.65 216.90 (4.8) % The Hythe Vail Vail, Colorado 344 56.4 % 436.67 246.16 7.3 % Courtyard New York Manhattan/Midtown East New York, New York 321 90.9 % 342.30 311.13 13.1 % Atlanta Marriott Alpharetta Atlanta, Georgia 318 65.7 % 155.55 102.21 21.4 % The Gwen Chicago, Illinois 311 74.5 % 297.18 221.33 1.7 % Hilton Garden Inn New York/Times Square Central New York, New York 282 91.4 % 275.67 251.93 (2.3) % Embassy Suites by Hilton Bethesda Bethesda, Maryland 272 71.0 % 163.92 116.45 55.2 % Hilton Burlington Lake Champlain Burlington, Vermont 258 75.7 % 248.79 188.22 3.9 % Henderson Beach Resort Destin, Florida 255 55.4 % 432.60 239.49 (18.2) % Kimpton Hotel Palomar Phoenix Phoenix, Arizona 242 76.0 % 222.03 168.84 16.1 % Bourbon Orleans Hotel New Orleans, Louisiana 220 75.6 % 241.00 182.23 14.7 % Hotel Clio Denver, Colorado 199 71.9 % 313.75 225.52 6.4 % Courtyard New York Manhattan/Fifth Avenue New York, New York 189 95.3 % 289.73 276.15 6.7 % Margaritaville Beach House Key West Key West, Florida 186 82.7 % 398.18 329.19 (8.3) % The Lodge at Sonoma Resort Sonoma, California 182 60.2 % 451.90 272.13 (6.0) % Courtyard Denver Downtown Denver, Colorado 177 75.2 % 216.78 163.04 7.4 % The Lindy Renaissance Charleston Hotel Charleston, South Carolina 167 88.7 % 347.26 307.88 0.2 % Kimpton Shorebreak Huntington Beach Resort Huntington Beach, California 157 81.9 % 322.69 264.35 (5.1) % Cavallo Point, The Lodge at the Golden Gate Sausalito, California 142 55.4 % 591.89 327.66 (8.5) % Chico Hot Springs Resort & Day Spa Pray, Montana 117 67.0 % 183.46 122.97 5.1 % Havana Cabana Key West Key West, Florida 106 83.2 % 300.60 250.01 (10.4) % Tranquility Bay Beachfront Resort Marathon, Florida 103 76.8 % 630.39 484.26 (11.4) % Hotel Emblem San Francisco San Francisco, California 96 65.8 % 234.34 154.14 (4.9) % Kimpton Shorebreak Fort Lauderdale Beach Resort Fort Lauderdale, Florida 96 67.7 % 211.05 142.94 (6.0) % L'Auberge de Sedona Sedona, Arizona 88 62.8 % 926.89 581.76 (18.2) % The Landing Lake Tahoe Resort & Spa South Lake Tahoe, California 82 51.4 % 448.48 230.43 (7.7) % Orchards Inn Sedona Sedona, Arizona 70 59.9 % 293.83 176.08 (12.8) % Lake Austin Spa Resort Austin, Texas 40 58.5 % 1,065.76 623.11 (17.1) % Henderson Park Inn Destin, Florida 37 68.9 % 595.38 410.13 (12.7) % TOTAL/WEIGHTED AVERAGE 9,746 72.1 % $ 282.11 $ 203.32 2.9 % ________________ (1) The percentage change from 2022 RevPAR reflects the comparable period in 2022 to our 2023 ownership period.
Use and Limitations of Non-GAAP Financial Measures Our management and Board of Directors use EBITDA, EBITDA re , Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies.
Use and Limitations of Non-GAAP Financial Measures Our management and Board of Directors use EBITDA, EBITDA re , Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO to evaluate the performance of our hotels and to facilitate comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital intensive companies.
Loss on early extinguishment of debt. On September 27, 2022, we refinanced our senior unsecured credit facility and unsecured term loans. As a result, we recognized a $9.7 million loss on early extinguishment of debt related to the write-off of certain unamortized debt issuance costs and fees paid to the lenders in consideration for our refinancing.
Loss on early extinguishment of debt. In September 2022, we refinanced our senior unsecured credit facility and unsecured term loans. As a result, we recognized a $9.7 million loss on early extinguishment of debt related to the write-off of certain unamortized debt issuance costs and fees paid to the lenders in consideration for our refinancing.
Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic factors such as U.S. economic conditions generally, increasing inflation, rising interest rates, regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of our competitors.
Our ADR, occupancy percentage and RevPAR performance may be impacted by macroeconomic factors such as U.S. economic conditions generally, inflation, interest rates, regional and local employment growth, personal income and corporate earnings, office vacancy rates and business relocation decisions, airport and other business and leisure travel, increased use of lodging alternatives, new hotel construction and the pricing strategies of our competitors.
Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels, renovations and other capital expenditures that need to be made periodically to our hotels, scheduled debt payments, debt maturities, certain redemptions of limited operating partnership units (“common OP units”), ground lease payments, and making distributions to our common and preferred stockholders.
Our long-term liquidity requirements consist primarily of funds necessary to pay for the costs of acquiring additional hotels, renovations and other capital expenditures that need to be made periodically to our hotels, scheduled debt payments, debt maturities, certain redemptions of limited operating partnership units (“common OP units”), ground lease payments, share repurchases, and making distributions to our common and preferred stockholders.
We exclude these non-cash items because they do not reflect the actual cash amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period. • Cumulative Effect of a Change in Accounting Principle : The Financial Accounting Standards Board promulgates new accounting standards that require or permit the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle.
We exclude these non-cash items because they do not reflect the actual cash amounts due to the respective lessors in the current period and they are of lesser significance in evaluating our actual performance for that period. • Cumulative Effect of a Change in Accounting Principle : The Financial Accounting Standards Board promulgates new accounting standards that require or permit the consolidated statement of operations and comprehensive income to reflect the cumulative effect of a change in accounting principle.
Liquidity and Capital Resources Our short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt service, operating expenses, ground lease payments, capital expenditures directly associated with our hotels, any share repurchases, distributions to our common and preferred stockholders, and the cost of acquiring additional hotels.
Liquidity and Capital Resources Our short-term liquidity requirements consist primarily of funds necessary to pay our scheduled debt service, near term debt maturities, operating expenses, ground lease payments, capital expenditures directly associated with our hotels, any share repurchases, distributions to our common and preferred stockholders, and the cost of acquiring additional hotels.
In addition, our ADR, occupancy percentage and RevPAR performance is dependent on the continued success of our hotels' global brands. We also use EBITDA, EBITDA re , Adjusted EBITDA, FFO and Adjusted FFO as measures of the financial performance of our business. See “Non-GAAP Financial Measures” for further discussion on these financial measures.
In addition, our ADR, occupancy percentage and RevPAR performance is dependent on the continued success of our hotels' global brands. We also use EBITDA, EBITDA re , Adjusted EBITDA, Hotel Adjusted EBTIDA, FFO and Adjusted FFO as measures of the financial performance of our business. See “Non-GAAP Financial Measures” for further discussion on these financial measures.
We currently anticipate our significant sources of cash for the year ending December 31, 2023 will be the net cash flow from hotel operations and any potential hotel dispositions.
We currently anticipate our significant sources of cash for the year ending December 31, 2024 will be the net cash flow from hotel operations and any potential hotel dispositions.
We exclude the effect of these adjustments, which include the accounting impact from prior periods, because they do not reflect the Company’s actual underlying performance for the current period. • Gains or Losses from Early Extinguishment of Debt : We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels. • Hotel Acquisition Costs : We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels. • Severance Costs : We exclude corporate severance costs, or reversals thereof, incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels. • Hotel Manager Transition Items : We exclude the transition items associated with a change in hotel manager because we believe these items do not reflect the ongoing performance of the Company or our hotels. • Other Items : From time to time we incur costs or realize gains that we consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels.
We exclude the effect of these adjustments, which include the accounting impact from prior periods, because they do not reflect the Company’s actual underlying performance for the current period. • Gains or Losses from Early Extinguishment of Debt : We exclude the effect of gains or losses recorded on the early extinguishment of debt because these gains or losses result from transaction activity related to the Company’s capital structure that we believe are not indicative of the ongoing operating performance of the Company or our hotels. • Hotel Acquisition Costs : We exclude hotel acquisition costs expensed during the period because we believe these transaction costs are not reflective of the ongoing performance of the Company or our hotels. • Severance Costs : We exclude corporate severance costs, or reversals thereof, incurred with the termination of corporate-level employees and severance costs incurred at our hotels related to lease terminations or structured severance programs because we believe these costs do not reflect the ongoing performance of the Company or our hotels. • Hotel Manager Transition Items : We exclude the transition items associated with a change in hotel manager because we believe these items do not reflect the ongoing performance of the Company or our hotels. -56- Table of Contents • Hotel Pre-Opening Costs: We exclude the pre-opening costs associated with the redevelopment or rebranding of a hotel because we believe these items do not reflect the ongoing performance of the Company or our hotels. • Other Items : From time to time we incur costs or realize gains that we consider outside the ordinary course of business and that we do not believe reflect the ongoing performance of the Company or our hotels.
(2) Represents pre-opening costs and professional fees relate to the reopening of Frenchman's Reef, as well as legal an other costs incurred at Frenchman's Reef as a result of Hurricane Irma that are not covered by insurance. (3) Represents costs incurred at the Bourbon Orleans Hotel as a result of Hurricane Ida that were not recovered by insurance.
(2) Represents pre-opening costs and professional fees related to the reopening of Frenchman's Reef, as well as legal and other costs incurred at Frenchman's Reef as a result of Hurricane Irma that are not covered by insurance. (3) Represents costs incurred at the Bourbon Orleans Hotel as a result of Hurricane Ida that were not recovered by insurance.
(2) Represents pre-opening costs and professional fees relate to the reopening of Frenchman's Reef, as well as legal an other costs incurred at Frenchman's Reef as a result of Hurricane Irma that are not covered by insurance. (3) Represents costs incurred at the Bourbon Orleans Hotel as a result of Hurricane Ida that were not recovered by insurance.
(2) Represents pre-opening costs and professional fees related to the reopening of Frenchman's Reef, as well as legal and other costs incurred at Frenchman's Reef as a result of Hurricane Irma that are not covered by insurance. (3) Represents costs incurred at the Bourbon Orleans Hotel as a result of Hurricane Ida that were not recovered by insurance.
Dividend Policy -56- Tabl e of Contents We intend to distribute to our stockholders dividends at least equal to our REIT taxable income to avoid paying corporate income tax and excise tax on our earnings (other than the earnings of our taxable REIT subsidiaries, which are all subject to tax at regular corporate rates) and to qualify for the tax benefits afforded to REITs under the Code.
Dividend Policy We intend to distribute to our stockholders dividends at least equal to our REIT taxable income to avoid paying corporate income tax and excise tax on our earnings (other than the earnings of our taxable REIT subsidiaries, which are all subject to tax at regular corporate rates) and to qualify for the tax benefits afforded to REITs under the Code.
We anticipate industry profitability will be challenged by a short booking window and emerging and shifting travel patterns, as well as pressures on property taxes, insurance and overall labor costs. We continue to work closely with our hotel managers to maximize revenue and identify operating efficiencies.
We anticipate industry profitability will be challenged by elevated interest rates and pressures on labor costs, insurance and property taxes as well as a short booking window and emerging and shifting travel patterns. We continue to work closely with our hotel managers to maximize revenue and identify operating efficiencies.
GAAP net income, EBITDA re and FFO, is beneficial to an investor's complete understanding of our consolidated operating performance.
GAAP net income, EBITDA re and FFO, is beneficial to an investor's complete understanding of our consolidated and property-level operating performance.
The 2022 income tax expense was incurred on the $11.6 million pre-tax income of our TRSs. The 2022 income tax provision includes a change in our valuation allowance of $3.9 million. The 2021 income tax provision includes a change in our valuation allowance of $1.4 million.
The 2022 income tax expense was incurred on the $11.6 million pre-tax income of our TRSs. The 2022 income tax provision includes a change in our valuation allowance of $3.9 million.
Information about our financing activities is available in Note 8 to the accompanying consolidated financial statements. ATM Program In August 2021, we implemented an “at-the-market” equity offering program (the “ATM Program”), pursuant to which we may issue and sell shares of our common stock from time to time, having an aggregate offering price of up to $200.0 million.
Information about our financing activities is available in Note 5 to the accompanying consolidated financial statements. ATM Program We maintain an “at-the-market” equity offering program (the “ATM Program”), pursuant to which we may issue and sell shares of our common stock from time to time, having an aggregate offering price of up to $200.0 million.
Such items may include, but are not limited to the following: pre-opening costs incurred with newly developed hotels; lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; costs incurred related to natural disasters; and gains on property insurance claim settlements, other than income related to business interruption insurance.
Such items may include, but are not limited to the following: lease preparation costs incurred to prepare vacant space for marketing; management or franchise contract termination fees; gains or losses from legal settlements; costs incurred related to natural disasters; and gains on property insurance claim settlements, other than income related to business interruption insurance.
Room revenue comprised approximately 68% of our total revenues for the year ended December 31, 2022 and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms.
Room revenue comprised approximately 67% of our total revenues for the year ended December 31, 2023 and is dictated by demand, as measured by occupancy percentage, pricing, as measured by ADR, and our available supply of hotel rooms.
We have a preference to maintain a significant portion of our portfolio as unencumbered assets in -54- Tabl e of Contents order to provide balance sheet flexibility. We expect that our strategy will enable us to maintain a balance sheet with an appropriate amount of debt throughout all phases of the lodging cycle.
We have a preference to maintain a significant portion of our portfolio as unencumbered in order to provide balance sheet flexibility. We expect that our strategy will enable us to maintain a balance sheet with an appropriate amount of debt throughout all phases of the lodging cycle.
Events or circumstances that may cause us to perform a review include, but are not limited to, adverse changes in the demand for lodging at our properties, current or projected losses from operations, and an expectation that the property is more likely than not to be sold significantly before the end of its previously estimated useful life.
Indicators of impairment that may cause a review include, but are not limited to, adverse changes in the demand for lodging at the properties, current or projected losses from operations, and an expectation that the property is more likely than not to be sold significantly before the end of its useful life.
The Company computes EBITDA re in accordance with the National Association of Real Estate Investment Trusts (“Nareit”) guidelines, as defined in its September 2017 white paper “Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate.” EBITDA re represents net income (calculated in accordance with U.S.
The Company computes EBITDA re in accordance with the National Association of Real Estate Investment Trusts ("Nareit") guidelines, as -55- Table of Contents defined in its September 2017 white paper "Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate." EBITDA re represents net income (calculated in accordance with U.S.
We expect our estimated uses of cash for the year ending December 31, 2023 will be scheduled debt service payments, capital expenditures, distributions to preferred and common stockholders, corporate expenses and potential hotel acquisitions.
We expect our estimated uses of cash for the year ending December 31, 2024 will be scheduled debt service and maturity payments, capital expenditures, distributions to preferred and common stockholders, corporate expenses and potential share repurchases.
For the years ended December 31, 2022 and 2021, we recognized $0.5 million and $0.7 million, respectively, of business interruption insurance income related to the Caldor wildfires at The Landing Lake Tahoe Resort & Spa, which caused the hotel to be closed for 21 days in 2021. Interest expense.
During the year ended December 31, 2022, we recognized $0.5 million of business interruption insurance income related to the impact of the Caldor wildfire at The Landing Lake Tahoe Resort & Spa, which caused the hotel to be closed for 21 days in 2021. Interest expense.
Contributions to the property improvement fund are calculated as a percentage of hotel revenues. In addition, we may be required to pay for the cost of certain additional improvements that are not permitted to be funded from the property improvement reserves under the applicable management or franchise agreement.
In addition, we may be required to pay for the cost of certain additional improvements that are not permitted to be funded from the property improvement reserves under the applicable management or franchise agreement.
In addition, to derive Adjusted FFO we exclude any unrealized fair value adjustments to interest rate swaps. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company. The following table is a reconciliation of our U.S.
In addition, to derive Adjusted FFO we exclude any unrealized fair value adjustments to interest rate swaps. We exclude these non-cash amounts because they do not reflect the underlying performance of the Company.
As of December 31, 2022, we had $67.6 million of unrestricted corporate cash and $39.6 million of restricted cash, and no outstanding borrowings on our senior unsecured credit facility. Our net cash provided by operations was $206.2 million for the year ended December 31, 2022.
As of December 31, 2023, we had $121.6 million of unrestricted corporate cash and $45.6 million of restricted cash, and no outstanding borrowings on our senior unsecured credit facility. Our net cash provided by operations was $237.6 million for the year ended December 31, 2023.
Inflation Operators of hotels, in general, possess the ability to adjust room rates daily to reflect the effects of inflation. Generally, our management companies may adjust room rates daily, excluding previous contractually committed reservations. However, competitive pressures or other factors may limit the ability of our management companies to raise room rates.
Generally, our management companies may adjust room rates daily, excluding previous contractually committed reservations. However, competitive pressures or other factors may limit the ability of our management companies to raise room rates.
Additional information about the credit agreements, including a summary of significant covenants, can be found in Note 8 to the accompanying consolidated financial statements.
Additional information about the credit and term loan facilities, including a summary of significant covenants, can be found in Note 5 to the accompanying consolidated financial statements.
Inflation may -61- Tabl e of Contents also affect our expenses and cost of capital improvements, including, without limitation, by increasing the costs of labor, employee-related benefits, food, commodities and other materials, taxes, property and casualty insurance and utilities. Inflation has increased recently to levels not seen in years.
Inflation may also affect our expenses and cost of capital improvements, including, without limitation, by increasing the costs of labor, employee-related benefits, food, commodities and other materials, taxes, property and casualty insurance and utilities. Inflation has increased recently to levels not seen in years. The United States Federal Reserve has raised interest rates in response to concerns about inflation.
We also recognized $0.1 million of loss on early extinguishment of debt related to the write-off of certain unamortized debt issues costs related to the payoff of four mortgage loans during the year ended December 31, 2022. Income taxes. We recorded income tax expense of $2.6 million in 2022 and $3.3 million in 2021.
We also recognized $0.1 million of loss on early extinguishment of debt related to the write-off of certain unamortized debt issues costs related to the payoff of four mortgage loans during the year ended December 31, 2022. No loss on early extinguishment of debt was recorded for the year ended December 31, 2023. Income taxes.
GAAP net income to FFO, FFO available to common stock and unit holders, and Adjusted FFO available to common stock and unit holders (in thousands): Year Ended December 31, 2022 2021 2020 (in thousands) Net income (loss) $ 109,705 $ (195,405) $ (396,027) Real estate related depreciation and amortization 108,849 102,963 114,716 Impairment losses, net of tax 2,843 127,282 174,120 Loss on sale of hotel properties (1) 1,659 — — FFO 223,056 34,840 (107,191) Distributions to preferred stockholders (9,817) (9,817) (3,300) FFO available to common stock and unit holders 213,239 25,023 (110,491) Non-cash lease expense and other amortization 6,226 6,673 6,910 Professional fees and pre-opening costs related to Frenchman's Reef (2) — 1,388 1,012 Uninsured costs related to natural disasters (3) — 298 — Loss on early extinguishment of debt 9,766 — — Hotel manager transition items 1,164 651 (434) Gain on property insurance settlement, net of income tax — — — Severance costs (4) (532) (37) 7,648 Fair value adjustments to interest rate swaps (13,914) (7,690) 10,072 Adjusted FFO available to common stock and unit holders $ 215,949 $ 26,306 $ (85,283) -60- Tabl e of Contents _______________ (1) During the year ended December 31, 2022, we recognized an incremental loss of $1.7 million due to post-closing adjustments related to hotels sold in 2021.
GAAP net income to FFO and Adjusted FFO (in thousands): Year Ended December 31, 2023 2022 2021 Net income (loss) $ 86,635 $ 109,705 $ (195,405) Real estate related depreciation and amortization 111,302 108,849 102,963 Impairment losses 941 2,843 127,282 Loss on sale of hotel properties (1) — 1,659 — FFO 198,878 223,056 34,840 Distributions to preferred stockholders (9,817) (9,817) (9,817) FFO available to common stock and unit holders 189,061 213,239 25,023 Non-cash lease expense and other amortization 6,156 6,226 6,673 Professional fees and pre-opening costs related to Frenchman's Reef (2) — — 1,388 Uninsured costs related to natural disasters (3) — — 298 Loss on early extinguishment of debt — 9,766 — Hotel pre-opening costs 1,246 — — Hotel manager transition items — 1,164 651 Severance costs (4) — (532) (37) Fair value adjustments to interest rate swaps 2,033 (13,914) (7,690) Adjusted FFO available to common stock and unit holders $ 198,496 $ 215,949 $ 26,306 _______________ (1) During the year ended December 31, 2022, we recognized an incremental loss of $1.7 million due to post-closing adjustments related to hotels sold in 2021.
We may extend the maturity date of the revolving credit facility for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions. We also have the right to increase the aggregate amount of the facilities to $1.4 billion upon the satisfaction of certain standard conditions.
The maturity date of the $300 million term loan may be extended for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions. We have the right to increase the aggregate amount of the facilities to $1.4 billion upon the satisfaction of certain standard conditions.
During the year ended December 31, 2022, we repurchased 1.6 million shares of common stock at an average price of $7.81 per share for an aggregate purchase price of $12.3 million. Information about our share repurchase program is in Note 5 to the accompanying consolidated financial statements.
During the year ended December 31, 2023, we repurchased 318,454 shares of common stock at an average price of $7.60 per share for an aggregate purchase price of $2.4 million. Information about our share repurchase program is in Note 9 to the accompanying consolidated financial statements.
The United States Federal Reserve has raised, and may contine to raise, interest rates in response to concerns about inflation. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty, and increasing the cost of new indebtedness and servicing our outstanding variable rate debt.
Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may have the effect of further increasing economic uncertainty, and increasing the cost of new indebtedness and servicing our outstanding variable rate debt.
The term loan facilities consist of a $500 million term loan that matures on January 3, 2028 and a $300 million term loan that matures January 3, 2025. The maturity date of the $300 million term loan may be extended for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions.
The revolving credit facility matures on September 27, 2026, which we may extend for an additional year upon the payment of applicable fees and satisfaction of certain standard conditions. The term loan facilities consist of a $500 million term loan that matures on January 3, 2028 and a $300 million term loan that matures on January 3, 2025.
Our depreciation and amortization expense increased $5.9 million from the year ended December 31, 2021 primarily due to our 2021/2022 Acquisitions, as well as the renovations and rebrandings that were completed in 2021 and 2022. Impairment losses.
Our depreciation and -50- Table of Contents amortization expense increased $2.5 million from the year ended December 31, 2022 primarily due to the properties acquired during 2022 and 2023, as well as the renovations and rebrandings that were completed in 2022 and 2023. Impairment losses.
These key indicators include: • Occupancy percentage; • Average Daily Rate (or ADR); • Rooms Revenue per Available Room (or RevPAR); -46- Tabl e of Contents • Earnings Before Interest, Income Taxes, Depreciation and Amortization (or EBITDA), Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate (or EBITDA re) , and Adjusted EBITDA; and • Funds From Operations (or FFO) and Adjusted FFO.
These key indicators include: • Occupancy percentage; • Average Daily Rate (“ADR”); • Rooms Revenue per Available Room (“RevPAR”); • Earnings Before Interest, Income Taxes, Depreciation and Amortization (“EBITDA”), Earnings Before Interest, Income Taxes, Depreciation and Amortization for real estate (“EBITDA re ” ) , Adjusted EBITDA, and Hotel Adjusted EBITDA; and • Funds From Operations (“FFO”) and Adjusted FFO.
As of December 31, 2022, we have set aside $30.6 million for capital projects in property improvement funds, which are included in restricted cash. We invested approximately $67.7 million in capital improvements at our hotels during the year ended December 31, 2022.
As of December 31, 2023, we have set aside $39.7 million for capital projects in property improvement funds, which are included in restricted cash on our consolidated balance sheets. -54- Table of Contents We invested approximately $86.3 million in capital improvements at our hotels during the year ended December 31, 2023.
GAAP financial measures, and our consolidated statements of operations and cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S.
GAAP financial measures, and our consolidated statements of operations and comprehensive income and consolidated statements of cash flows, include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures.
GAAP net income to EBITDA, EBITDA re and Adjusted EBITDA (in thousands): -59- Tabl e of Contents Year Ended December 31, 2022 2021 2020 (in thousands) Net income (loss) $ 109,705 $ (195,405) $ (396,027) Interest expense 38,283 37,043 53,995 Income tax expense (benefit) 2,607 3,267 (26,452) Real estate related depreciation and amortization 108,849 102,963 114,716 EBITDA 259,444 (52,132) (253,768) Impairment losses 2,843 126,697 174,120 Loss on sale of hotel properties (1) 1,659 — — EBITDA re 263,946 74,565 (79,648) Non-cash lease expense and other amortization 6,226 6,673 6,910 Professional fees and pre-opening costs related to Frenchman's Reef (2) — 1,388 1,012 Uninsured costs related to natural disasters (3) — 298 — Loss on early extinguishment of debt 9,766 — — Hotel manager transition items 1,164 651 (434) Severance costs (4) (532) (37) 7,648 Adjusted EBITDA $ 280,570 $ 83,538 $ (64,512) _______________ (1) During the year ended December 31, 2022, we recognized an incremental loss of $1.7 million due to post-closing adjustments related to hotels sold in 2021.
GAAP net income to EBITDA, EBITDA re, Adjusted EBITDA and Hotel Adjusted EBITDA (in thousands): Year Ended December 31, 2023 2022 2021 Net income (loss) $ 86,635 $ 109,705 $ (195,405) Interest expense 65,072 38,283 37,043 Income tax expense 317 2,607 3,267 Real estate related depreciation and amortization 111,302 108,849 102,963 EBITDA 263,326 259,444 (52,132) Impairment losses 941 2,843 126,697 Loss on sale of hotel properties (1) — 1,659 — EBITDA re 264,267 263,946 74,565 Non-cash lease expense and other amortization 6,156 6,226 6,673 Professional fees and pre-opening costs related to Frenchman's Reef (2) — — 1,388 Uninsured costs related to natural disasters (3) — — 298 Loss on early extinguishment of debt — 9,766 — Hotel pre-opening costs 1,246 — — Hotel manager transition items — 1,164 651 Severance costs (4) — (532) (37) Adjusted EBITDA $ 271,669 $ 280,570 $ 83,538 Corporate expenses 32,048 31,790 32,552 Interest (income) and other (income) expense, net (2,561) (255) (947) Hotel Adjusted EBITDA $ 301,156 $ 312,105 $ 115,143 _______________ -57- Table of Contents (1) During the year ended December 31, 2022, we recognized an incremental loss of $1.7 million due to post-closing adjustments related to hotels sold in 2021.
We also use EBITDA and EBITDA re as measures in determining the value of hotel acquisitions and dispositions. -58- Tabl e of Contents The Company computes FFO in accordance with standards established by the Nareit, which defines FFO as net income determined in accordance with U.S.
In addition, covenants included in our debt agreements use EBITDA as a measure of financial compliance. We also use EBITDA and EBITDA re as measures in determining the value of hotel acquisitions and dispositions. FFO The Company computes FFO in accordance with standards established by Nareit, which defines FFO as net income (calculated in accordance with U.S.
Key Indicators of Financial Condition and Operating Performance We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
See Note 9 for additional disclosures related to common OP units. Key Indicators of Financial Condition and Operating Performance We use a variety of operating and other information to evaluate the financial condition and operating performance of our business. These key indicators include financial information that is prepared in accordance with U.S.
Income taxes. We recorded income tax expense of $3.3 million in 2021 and income tax benefit of $26.5 million in 2020. The 2021 income tax expense was incurred on the $39.5 million pre-tax income of our TRSs. The 2021 income tax provision includes a valuation allowance of $1.4 million.
We recorded an income tax expense of $0.3 million in 2023 and income tax expense of $2.6 million in 2022. The 2023 income tax expense was incurred on the $4.3 million pre-tax income of our TRSs. The 2023 income tax provision includes a change in our valuation allowance of $1.0 million.
On September 27, 2022, we entered into an amended and restated credit agreement that provides for a $400 million senior unsecured revolving credit facility and two term loan facilities in the aggregate amount of $800 million.
Senior Unsecured Credit Facility and Unsecured Term Loans We are party to a Sixth Amended and Restated Credit Agreement that provides us with a $400 million senior unsecured revolving credit facility and two term loan facilities in the aggregate amount of $800 million.
We have not sold any shares under the ATM Program. Share Repurchase Program On September 29, 2022, our board of directors approved a share repurchase program authorizing us to repurchase up to $200.0 million of our common stock through February 28, 2025.
We have not sold any shares under the ATM Program during the years ended December 31, 2023 and 2022. Share Repurchase Program Our board of directors has authorized a share repurchase program pursuant to which we are authorized to repurchase up to $200.0 million of our common stock through February 28, 2025.
We expect the expansion of corporate travel demand will enable the industry to improve profits in 2023 and we enter the year with several favorable factors, including: (1) ownership of a high-quality portfolio, with a meaningful concentration of experiential destination resorts, (2) internal growth from five recent and two pending hotel upbrandings, (3) internal growth from the continuation of our asset management initiatives and return on investment projects, (4) expense savings from the conversion of six formerly Marriott-managed contracts to Marriott franchises, (5) conservative debt capital structure with limited near-term debt maturities, and (6) liquidity of over $550 million as of December 31, 2022.
We expect the expansion of corporate travel demand will enable the industry to improve profits in 2024 and we enter the year with several favorable factors, including: (1) ownership of a high-quality portfolio, with a strong group revenue pace for 2024, based on group bookings to date (2) internal growth from five recent and three additional in process hotel rebranding or repositionings, (3) internal growth from the continuation of our asset management initiatives and return on investment projects, (4) conservative debt capital structure with limited near-term debt maturities, and (5) liquidity of $623.5million as of December 31, 2023.
Depreciation and amortization is recorded on our hotel buildings over 40 years for the periods subsequent to acquisition. Depreciable lives of hotel furniture, fixtures and equipment are estimated as the time period between the acquisition date and the date that the hotel furniture, fixtures and equipment will be replaced.
Depreciable lives of hotel furniture, fixtures and equipment are estimated as the time period between the acquisition date and the date that the hotel furniture, fixtures and equipment will be replaced.
GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by U.S. GAAP. These non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our U.S. GAAP results and the reconciliations to the corresponding U.S.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S. GAAP. They should not be considered as alternatives to operating profit, cash flow from operations, or any other operating performance measure prescribed by U.S. GAAP.
Overview DiamondRock Hospitality Company is a lodging-focused real estate company operating as a REIT for U.S. federal income tax purposes that owns a portfolio of premium hotels and resorts. As of December 31, 2022, we owned a portfolio of 35 premium hotels and resorts that contain 9,607 guest rooms located in 24 different markets in the United States.
Overview DiamondRock Hospitality Company (the “Company” or “we”) is a lodging-focused real estate company that owns a portfolio of premium hotels and resorts. As of December 31, 2023, we owned 36 hotels with 9,746 rooms located in 25 different markets in the United States.
GAAP”), as well as other financial information that is not prepared in accordance with U.S. GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data. We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole.
Generally Accepted -46- Table of Contents Accounting Principles (“U.S. GAAP”), as well as other financial information that is not prepared in accordance with U.S. GAAP. In addition, we use other information that may not be financial in nature, including statistical information and comparative data.
These measures should not be considered in isolation or as a substitute for measures of performance in accordance with U.S. GAAP. EBITDA, EBITDA re , Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.
EBITDA, EBITDA re , Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO, as calculated by us, may not be comparable to other companies that do not define such terms exactly as the Company.
Our portfolio is composed primarily of luxury and upper-upscale resorts and hotels located in popular leisure destinations and major urban markets. Our destination resorts have outperformed the recovery of the broader U.S. hospitality market and, depending on the macroeconomic environment, we expect the strong consumer preference for drive-to destinations will support strong sales and profits at our resorts in 2023.
Our destination resorts have outperformed the recovery of the broader U.S. lodging industry and, depending on the macroeconomic environment, we expect the strong consumer preference for drive-to destinations will support resilient revenues and profits at our resorts in 2024.
Our cash from operations generally consists of the net cash flow from hotel operations, offset by cash paid for corporate expenses and other working capital changes.
Our cash from operations generally consists of the net cash flow from hotel operations, offset by cash paid for corporate expenses, interest payments, and -53- Table of Contents other working capital changes. The increase in cash provided by operations was primarily driven by timing differences related to collections from our hotel managers.
During the year ended December 31, 2022, we recorded impairment losses of $2.8 million on the right-to-manage intangible asset related to the rental management agreements acquired as part of our acquisition of Tranquility Bay Beachfront Resort. This impairment was a result of the purchase of four third-party owned units subsequent to the purchase of the hotel.
During the year ended December 31, 2022, we recorded an impairment loss of $2.8 million on the right-to-manage intangible asset related to the rental management agreements at Tranquility Bay Beachfront Resort upon our acquisition of four third-party owned units. Corporate expenses. Corporate expenses principally consist of employee-related costs, including base payroll, bonus, restricted stock and severance.
As an owner, rather than an operator of lodging properties, we receive all of the operating profits or losses generated by our hotels after the payment of fees due to hotel managers and hotel brands, which are calculated based on the revenues and profitability of each hotel.
As an owner, we receive all of the operating profits or losses generated by our hotels after we pay fees to the hotel managers and hotel brands, which are based on the revenues and profitability of the hotels. We are a real estate investment trust ("REIT") for United States ("U.S.") federal income tax purposes.
Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees, increased $16.1 million from the year ended December 31, 2020, primarily due to an increase in resort fees and parking. Hotel operating expenses.
The remaining increase of $17.7 million was primarily due to increases in both banquet revenues and outlet revenues. Other revenues, which primarily represent spa, parking, resort fees and attrition and cancellation fees, increased $15.7 million from the year ended December 31, 2022 to the year ended December 31, 2023, $11.1 million of which was due to non-comparable properties.
We believe that we maintain a reasonable amount of debt. As of December 31, 2022, we had $1.2 billion of debt outstanding with a weighted average interest rate of 4.83% and a weighted average maturity date of approximately 3.4 years. We have limited near-term mortgage debt maturities and 31 of our 35 hotels are unencumbered by mortgage debt.
We believe that we maintain a reasonable amount of debt. As of December 31, 2023, we had $1.2 billion of debt outstanding with a weighted average interest rate of 5.22% and a weighted average maturity date of approximately 2.7 years, assuming all extension options available in our debt agreements are exercised.
Corporate expenses. Corporate expenses principally consist of employee-related costs, including base payroll, bonus and restricted stock. Corporate expenses also include corporate operating costs, professional fees and directors’ fees. Our corporate expenses increased $5.2 million, from $27.4 million for the year ended December 31, 2020 to $32.6 million for the year ended December 31, 2021.
Corporate expenses also include corporate operating costs, professional fees and directors’ fees. Our corporate expenses increased $0.2 million, from $31.8 million for the year ended December 31, 2022 to $32.0 million for the year ended December 31, 2023, primarily due to increases in employee-related costs.
Our net cash provided by financing activities was $74.0 million for the year ended December 31, 2022, which consisted of proceeds of $800.0 million from unsecured term loans, offset by net repayments of $90.0 million on our senior unsecured credit facility, $400.0 million of repayments of unsecured term loans, $178.1 million of repayments of mortgage loans, $14.6 million of scheduled mortgage debt principal payments, $13.8 million of financing costs related to the amendment and restatement of our credit agreements and the extension of the Salt Lake City Marriott Downtown at City Center mortgage loan, $12.3 million paid to repurchase shares under our share repurchase program, $0.8 million paid to repurchase shares upon the vesting of restricted stock for the payment of tax withholdings obligations, $6.4 million of distributions paid to holders of common stock and common units, and $9.8 million of distributions paid to holders of preferred stock.
Our net cash used in financing activities was $56.7 million for the year ended December 31, 2023, which consisted of $31.9 million of distributions paid to holders of common stock and common units, $9.8 million of distributions paid to holders of preferred stock, $9.5 million of scheduled mortgage debt principal payments, $3.0 million paid to repurchase shares upon the vesting of restricted stock for the payment of tax withholdings obligations, and $2.4 million paid to repurchase shares under our share repurchase program.
The following are key hotel operating statistics for the years ended December 31, 2022 and 2021. The 2021 operating statistics reflect the period in 2021 comparable to our ownership period in 2022 for our 2021/2022 Acquisitions.
The 2022 operating statistics reflect the period in 2022 comparable to our ownership period in 2023 for hotels acquired in 2023 and 2022.
In 2023, we expect to spend $100 million to $115 million on capital improvements at our hotels.
We expect to spend approximately $100 million in capital improvements at our hotels in 2024, which includes the completion of certain projects that commenced in 2023.
Our interest expense increased $1.3 million from $37.0 million for the year ended December 31, 2021 to $38.3 million for the year ended December 31, 2022, and was comprised of the following (in millions): -51- Tabl e of Contents Year Ended December 31, 2022 2021 Mortgage debt interest $ 23.3 $ 24.9 Term loan interest 21.2 14.8 Credit facility interest and unused fees 5.3 2.4 Amortization of debt issuance costs and debt premium 2.4 2.6 Interest rate swap mark-to-market (13.9) (7.7) $ 38.3 $ 37.0 The increase in interest expense is primarily related to the increase in term loan interest due to rising interest rates, partially offset by the mark-to-market of our interest rate swaps.
Our interest expense increased $26.8 million from $38.3 million for the year ended December 31, 2022 to $65.1 million for the year ended December 31, 2023, and was comprised of the following (in millions): Year Ended December 31, Change 2023 2022 $ % Mortgage debt interest $ 16,436 $ 23,276 $ (6,840) (29.4) % Term loan interest 43,294 21,153 $ 22,141 104.7 Credit facility interest and unused fees 1,256 5,279 $ (4,023) (76.2) Amortization of debt issuance costs and debt premium 2,053 2,489 $ (436) (17.5) Interest rate swap mark-to-market 2,033 (13,914) $ 15,947 (114.6) $ 65,072 $ 38,283 $ 26,789 70.0 % The increase in interest expense is primarily related to rising interest rates on our variable rate unsecured term loans and the change in the fair value of certain of our interest rate swaps not designated as cash flow hedges, which were designated as cash flow hedges as of April 1, 2023, partially offset by a decrease in mortgage debt interest related to the payoff of four mortgage loans in 2022.
GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure. EBITDA, EBITDA re and FFO EBITDA represents net income (calculated in accordance with U.S.
We strongly encourage investors to review our financial information in its entirety and not to rely on a single financial measure. EBITDA and EBITDA re EBITDA represents net income (calculated in accordance with U.S. GAAP) excluding: (1) interest expense; (2) provision for income taxes, including income taxes applicable to sale of assets; and (3) depreciation and amortization.
The repositioning is expected to be completed in early 2023 and includes a new restaurant concept by a well-known and award-winning chef. Non-GAAP Financial Measures We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, EBITDA re , Adjusted EBITDA, FFO and Adjusted FFO.
Non-GAAP Financial Measures We use the following non-GAAP financial measures that we believe are useful to investors as key measures of our operating performance: EBITDA, EBITDA re , Adjusted EBITDA, Hotel Adjusted EBITDA, FFO and Adjusted FFO. These measures should not be considered in isolation or as a substitute for measures of performance in accordance with U.S. GAAP.
The following represent certain critical accounting policies that require us to exercise our business judgment or make significant estimates: Investment in Hotels Investment purchases of hotel properties, land, land improvements, building and furniture, fixtures and equipment, lease assets and liabilities, and identifiable intangible assets that are not businesses are accounted for as asset acquisitions and recorded at relative fair value based upon total accumulated cost of the acquisition.
The following represent certain critical accounting policies that require us to exercise our business judgment or make significant estimates: Investment in Hotels Property and equipment are recorded at cost.
We periodically compare historical information to our internal budgets as well as industry-wide information.
We use this information to measure the performance of individual hotels, groups of hotels and/or our business as a whole. We periodically compare historical information to our internal budgets as well as industry-wide information.
Significant projects in 2023 are expected to include the following: • Hilton Boston Downtown/Faneuil Hall: We have commenced a comprehensive renovation in the fourth quarter of 2022 to reposition the hotel as an experiential lifestyle property with completion expected in mid-2023. • Hilton Burlington Lake Champlain: We have commenced a repositioning of the hotel to rebrand it as a Curio Collection hotel.
Significant projects in 2024 include the following: • Westin San Diego Bayview: In late 2023, we commenced a comprehensive renovation of the hotel's guestrooms, which is expected to be completed in the second quarter of 2024. • Hilton Burlington Lake Champlain: In 2023, we commenced a repositioning of the hotel to rebrand it as a Curio Collection by Hilton hotel.
The table indicates the operating status of each hotel and the occupancy percentage, ADR and RevPAR for each hotel for the portion of the year ended December 31, 2022 that the hotel was owned by the Company. -48- Tabl e of Contents Property Location Number of Rooms Occupancy (%) ADR ($) RevPAR($) % Change from 2021 RevPAR Chicago Marriott Downtown Magnificent Mile Chicago, Illinois 1,200 54.6 % $ 242.34 $ 132.20 114.9 % Westin Boston Seaport District Boston, Massachusetts 793 75.3 % 240.49 181.09 106.9 % Salt Lake City Marriott Downtown at City Creek Salt Lake City, Utah 510 59.4 % 176.24 104.70 66.1 % Worthington Renaissance Fort Worth Hotel Fort Worth, Texas 504 68.9 % 188.68 129.95 55.9 % Westin San Diego Bayview San Diego, California 436 72.8 % 201.64 146.88 75.9 % Westin Fort Lauderdale Beach Resort Fort Lauderdale, Florida 433 75.9 % 269.09 204.22 39.9 % Westin Washington D.C.
Our Hotels The following table sets forth certain operating information for the year ended December 31, 2023 for each of the hotels we owned during 2023. -47- Table of Contents Property Location Number of Rooms Occupancy (%) ADR ($) RevPAR($) % Change from 2022 RevPAR (1) Chicago Marriott Downtown Magnificent Mile Chicago, Illinois 1,200 59.5 % $ 246.73 $ 146.76 11.0 % Westin Boston Seaport District Boston, Massachusetts 793 81.9 % 246.93 202.17 11.6 % Salt Lake City Marriott Downtown at City Creek Salt Lake City, Utah 510 62.6 % 186.86 116.96 11.7 % Worthington Renaissance Fort Worth Hotel Fort Worth, Texas 504 73.3 % 197.52 144.86 11.5 % Westin San Diego Bayview San Diego, California 436 76.1 % 217.02 165.18 12.5 % Westin Fort Lauderdale Beach Resort Fort Lauderdale, Florida 433 74.2 % 264.71 196.48 (3.8) % Westin Washington D.C.
Revenue consists primarily of the room, food and beverage and other operating revenues from our hotels, as follows (in millions): -49- Tabl e of Contents Year Ended December 31, 2022 2021 % Change Rooms $ 681.3 $ 399.1 70.7 % Food and beverage 238.2 117.7 102.4 Other 82.0 50.3 63.0 Total revenues $ 1,001.5 $ 567.1 76.6 % Our total revenues increased $434.4 million from $567.1 million for the year ended December 31, 2021 to $1.0 billion for the year ended December 31, 2022.
Revenue consists of the following (in thousands): -49- Table of Contents Year Ended December 31, Change 2023 2022 $ % Rooms $ 717,447 $ 681,269 $ 36,178 5.3 % Food and beverage 259,757 238,234 21,523 9.0 Other 97,663 82,000 15,663 19.1 Total revenues $ 1,074,867 $ 1,001,503 $ 73,364 7.3 % Our total revenues increased $73.4 million from $1,001.5 million for the year ended December 31, 2022 to $1,074.9 million for the year ended December 31, 2023.
Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of December 31, 2022, we had $2.9 million held in cash traps, which is included within the restricted cash on the accompanying consolidated balance sheet. We do not expect that such cash traps will affect our ability to satisfy our short-term liquidity requirements.
Such provisions do not allow the lender the right to accelerate repayment of the underlying debt. As of December 31, 2023, we had no cash traps in place.
If such events or circumstances are identified, management performs an analysis to compare the estimated undiscounted future cash flows from operations and the net proceeds from the ultimate disposition of a hotel to the carrying amount of the asset.
When such indicators exist, we perform an analysis to determine the recoverability of the asset group by comparing the estimated undiscounted future cash flows, including the proceeds from the ultimate disposition of a hotel, less costs to sell, to the net carrying value of the asset group.
Travel demand is highly sensitive to changes in macroeconomic factors and the threat of even a mild recession creates a backdrop of uncertainty for the hospitality industry. The effect is compounded because the industry experienced a disproportionate impact from the COVID-19 pandemic and the subsequent recovery has been uneven across markets and customer segments.
However, the ultimate timing and impacts of these monetary policy changes and related impacts on the economy are unknown. Travel demand is highly sensitive to changes in macroeconomic factors and the threat of even a mild recession or slowdown creates a backdrop of uncertainty for the hospitality industry.
Rooms revenues increased by $282.2 million from the year ended December 31, 2021 to the year ended December 31, 2022 primarily due to increases in occupancy and ADR primarily at our resort hotels.
Rooms revenues increased by $36.2 million from the year ended December 31, 2022 to the year ended December 31, 2023, $12.7 million of which was due to the acquisition of the non-comparable properties.
The increase is primarily due to an increase in employee-related compensation and other employee-related expenses. Business interruption insurance income. For the year ended December 31, 2021, we recognized $0.7 million of business interruption insurance income related to the Caldor wildfires at The Landing Lake Tahoe Resort & Spa, which caused the hotel to be closed for 21 days.
For the year ended December 31, 2023, we recognized $0.5 million of business interruption insurance income related to an electrical fire at the Hilton Garden Inn New York/Times Square Central that caused the hotel to be closed for seven days and $0.1 million related to an insurance claim at the Worthington Renaissance Fort Worth Hotel.
We have paid the following dividends to holders of our common stock and distributions to holders of common OP units and LTIP units during 2022 and 2021: Payment Date Record Date Dividend per Share October 12, 2022 September 30, 2022 $ 0.03 January 12, 2023 December 30, 2022 $ 0.06 We have paid the following dividends to holders of our Series A Preferred Stock during 2020 and 2021, and through the date of this report: Payment Date Record Date Dividend per Share March 31, 2021 March 18, 2021 $ 0.515625 June 30, 2021 June 18, 2021 $ 0.515625 September 30, 2021 September 17, 2021 $ 0.515625 December 31, 2021 December 20, 2021 $ 0.515625 March 31, 2022 March 18, 2022 $ 0.515625 June 30, 2022 June 17, 2022 $ 0.515625 September 30, 2022 September 16, 2022 $ 0.515625 December 30, 2022 December 19, 2022 $ 0.515625 Capital Expenditures The management and franchise agreements for each of our hotels provide for the establishment of separate property improvement reserves to cover, among other things, the cost of replacing and repairing furniture, fixtures and equipment at our hotels and other routine capital expenditures.
Capital Expenditures The management and franchise agreements for each of our hotels provide for the establishment of separate property improvement reserves to cover, among other things, the cost of replacing and repairing furniture, fixtures and equipment at our hotels and other routine capital expenditures. Contributions to the property improvement fund are calculated as a percentage of hotel revenues.
Year Ended December 31, 2022 2021 % Change Occupancy % 68.3 % 51.5 % 16.8 % ADR $ 286.50 $ 250.73 14.3 % RevPAR $ 195.69 $ 129.18 51.5 % Food and beverage revenues increased $120.5 million from the year ended December 31, 2021 to the year ended December 31, 2022, primarily due to increases in occupancy which resulted in an increase in outside the room spend at our hotels.
Year Ended December 31, 2023 2022 % Change Occupancy % 72.1 % 68.3 % 3.8 % ADR $ 282.11 $ 289.07 (2.4) % RevPAR $ 203.32 $ 197.50 2.9 % Food and beverage revenues increased $21.5 million from the year ended December 31, 2022 to the year ended December 31, 2023, of which $3.8 million was due to the acquisition of non-comparable properties.
Additionally, our 2021/2022 Acquisitions contributed to $58.2 million of the increase in hotel operating expenses. The increase in hotel operating expenses was partially offset by a $5.6 million decrease due to our dispositions of Frenchman's Reef & Morning Star Marriott Beach Resort in April 2021 and The Lexington Hotel in June 2021. Depreciation and amortization.
The remaining increase of $4.6 million was primarily due to increases in resort fees and parking revenues, partially offset by a decline in attrition and cancellation fees. Hotel operating expenses.
Urban hotels comprise the majority of our portfolio and we believe these hotels are well positioned for outsized growth in 2023 as employers encourage return-to-office and business travel for their employees.
More than 60% of our profits come from our urban hotels, and we believe they are well positioned for outsized growth in 2024. Americans have transitioned back to the office but are not expected to return to a full five-day schedule as seen prior to the pandemic.
Removed
COVID-19 Pandemic COVID-19 has had and continues to have a significant effect on our industry in general and our business in particular. The demand for lodging materially decreased beginning in March 2020 and remained low throughout 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf market rates of interest on our variable rate debt fluctuate by 100 basis points, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows, by $5.8 million annually. We expect that all LIBOR settings relevant to us will cease to be published or will no longer be representative after June 30, 2023.
Biggest changeIf market rates of interest on our unhedged variable rate debt fluctuate by 100 basis points, interest expense would increase or decrease, depending on rate movement, future earnings and cash flows, by $4.8 million annually. Item 8. Financial Statements and Supplementary Data See Index to the Financial Statements on page F-1. Item 9.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk -59- Table of Contents Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments.
In pursuing our business strategies, the primary market risk to which we are currently exposed, and, to which we expect to be exposed in the future, is interest rate risk. The face amount of our outstanding debt as of December 31, 2022 was $1.2 billion, of which $575.0 million was variable rate.
In pursuing our business strategies, the primary market risk to which we are currently exposed, and, to which we expect to be exposed in the future, is interest rate risk. The face amount of our outstanding debt as of December 31, 2023 was $1.2 billion, of which $0.8 billion had a variable interest rate.
Removed
The discontinuation of LIBOR will not affect our ability to borrow or maintain already outstanding borrowings or swaps, but if our contracts indexed to LIBOR, including contracts governing our interest rate swaps, are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest or hedging costs that are higher than if LIBOR remained available.
Added
Our primary sensitivity in 2023 was to changes in one-month Secured Overnight Financing Rate (“SOFR”), as the interest rates on our variable-rate indebtedness were based on this benchmark rate. We use interest rate swaps in order to maintain what we believe to be an appropriate level of exposure to interest rate variability.
Removed
Additionally, although SOFR is the recommended replacement rate, it is also possible that lenders may instead choose alternative replacements that may differ from LIBOR in ways similar to SOFR or in ways that would result in higher interest or hedging costs for us.
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As of December 31, 2023, we held interest rate swaps related to $325 million of our variable-rate indebtedness, through which we receive one-month term SOFR and pay a fixed rate.
Removed
As of December 31, 2022, all of our variable rate debt and interest rate swaps have been transitioned to SOFR. Item 8. Financial Statements and Supplementary Data See Index to the Financial Statements on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.

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